02a TOM Labor Law Bar Reviewer - Pages

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371
TOM Bar Reviewer on Labor Law I

COVERAGE (click the numbers, not the letters, for a detailed hyperlinked coverage)
I. Fundamental Principles and Policies 2
A. Legal Basis 3
B. Construction in favor or labor 13
C. Social Justice 15
D. Overview of Labor Law 17
E. Agrarian Reform Law (added by TOM) 21
II. Recruitment and Placement 25
A. Illegal Recruitment 28
B. Regulation of Recruitment and Placement Activities 44
C. Employment of Non-Resident Aliens** 52
D. Training and Employment of Special Workers 60
III. Labor Standards 74
A. Conditions of Employment 77
B. Wages 124
C. Leaves 146
D. Special Groups of Employees 155
IV. Post-Employment 189
A. Employer-employee relationship (EER) 191
B. Termination of Employment 249
Rules on separation pay****** 301
C. Retirement 340
V. Management Prerogative 348
A. Discipline 355
B. Transfer of Employees 357
C. Productivity Standard 362
D. Bonus 363
E. Change of Working Hours 366
F. Marriage Between Employees of Competitor-Employers 368
G. Post-Employment Ban 368
Guide to these notes:

1. Key ideas are arranged in “thought units” as headings.
2. Past bar exam questions connected to the key ideas are mostly in the footnotes to illustrate the key
ideas. These are taken mainly from the past bar Q&A’s provided by the UST Faculty of Civil Law.
electi mei non laborabunt frustra 2! of !371
I. Fundamental Principles and Policies
A. Legal Basis 3
PURPOSE OF LABOR LEGISLATION (2006 Bar) 3
A1. 1987 Constitution [State Policies; Bill of Rights; Social Justice] 3
SUMMARY OF STATE POLICIES ON LABOR IN THE CONSTITUTION [Sec 3, Art XIII] 3
OTHER CONSTITUTIONAL PROVISIONS ON LABOR 5
PROTECTION TO LABOR 6
RIGHTS OF EMPLOYERS 9
BASIC RIGHTS OF WORKERS GUARANTEED BY THE CONSTITUTION 9
MORE ON DUE PROCESS IN LABOR 10
BURDEN OF PROOF IN TERMINATION CASES 11
QUANTUM OF PROOF 11
PRINCIPLE OF NON-OPPRESSION** 11
ON THE USE OF NATURAL RESOURCES [Art. XII] 12
A2. **New Civil Code [Articles 1700 & 1702] 13
B. Construction in favor or labor 13
LIBERAL APPROACH IN INTERPRETING THE LABOR CODE 13
COMPASSIONATE JUSTICE; PRIMACY OF JUSTICE 14
C. Social Justice 15
AIM OF LABOR = SOCIAL JUSTICE 15
LIMITATIONS TO PRINCIPLE OF SOCIAL JUSTICE (SJ) 15
SOCIAL JUSTICE PREVAILS OVER EQUAL PROTECTION 16
D. Overview of Labor Law 17
ON LABOR LAWS 17
THREE GENERAL CLASSIFICATION OF LABOR STATUTES 18
ADDITIONAL CLASSIFICATION OF LABORS LAWS [POQUIZ] 19
LABOR LEGISLATION vs. SOCIAL LEGISLATION 19
PURPOSE OF LABOR LEGISLATION 20
SOURCES OF LABOR LAWS 20
CONTRACT OF LABOR AS SOURCE OF LAW 20
CBA AS A SOURCE OF LAW 21
COMPANY PRACTICES AS SOURCE OF LAW 21
E. Agrarian Reform Law (added by TOM) 21
FOUNDATION OF AGRARIAN REFORM 22
BENEFICIARIES OF THE AGRARIAN REFORM LAW 22
I. Fundamental Principles and Policies
A. Legal Basis
LABOR; Definition
1. It is the exertion by human beings of physical or mental efforts, or both,
towards the production of goods and services.
PURPOSE OF LABOR LEGISLATION (2006 Bar)

* It is a concrete way of expressing the constitutional and statutory mandate of
the State:
1. To afford protection to labor,
2. To promote full employment,
3. To ensure equal work opportunities regardless of sex, race or creed and
4. To regulate the relations between workers and ERs.
5. To assure the rights of workers to self-organization, collective bargaining
(CB), security of tenure and just and humane conditions of work.
6. Ultimately, the **primordial purpose is to promote the welfare of the people
based on the latin maxim salus populi est suprema lex. 
A1. 1987 Constitution [State Policies; Bill of Rights; Social Justice]
SUMMARY OF STATE POLICIES1 ON LABOR IN THE

CONSTITUTION [Sec 3, Art XIII]
1. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare (1987 Constitution, Art. II, Sec. 18).
1 Declaration of basic policy: It is the policy of the State to:**

a. Afford full protection to labor
b. Promote full employment
c. Ensure equal work opportunities regardless of sex, race, or creed
d. Regulate the relations between employers and workers.
e. Assure the rights of workers to self-organization, collective bargaining, security of
tenure, just and humane conditions of work (LC, Art. 3).
2. Afford full protection to labor2

3. Promote full employment3
4. Ensure equal work opportunities regardless of sex, race, or creed4
5. Assure the rights of workers to self-organization, security of tenure, just
and humane conditions of work, participate in policy and decision-making
2 [] Art XIII, Section 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment opportunities for all.
[] Art II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
[] Art II, Section 20. The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments.
[] Art XIII, Section 1. The Congress shall give highest priority to the enactment of measures
that protect and enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the
common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of property
and its increments.
[] **NCC, Art. 1700. The relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes
and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.
[] NCC, Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.
3 [] Art XIII, par 1, supra.
[] Art II, Section 9. The State shall promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the people from poverty
through policies that provide adequate social services, promote full employment, a rising
standard of living, and an improved quality of life for all.
4 [] Art XIII, par 1, supra.
[] Art II, Section 14. The State recognizes the role of women in nation-building, and shall
ensure the fundamental equality before the law of women and men.
[] Art XIII, Section 14. The State shall protect working women by providing safe and
healthful working conditions, taking into account their maternal functions, and such facilities and
opportunities that will enhance their welfare and enable them to realize their full potential in the
service of the nation.
*Maternal benefits law
[] Art XIII, Section 13. The State shall establish a special agency for disabled person for their
rehabilitation, self-development, and self-reliance, and their integration into the mainstream of society.
*RA 7277 Magna Carta for Disabled Person
processes affecting their right and benefits5

6. Regulate the relations between ERs and workers (Art. XIII, Sec. 3).6
7. Promotion of Social Justice7
8. Promotion of Human Dignity and Human Rights8
OTHER CONSTITUTIONAL PROVISIONS ON LABOR

1. Under Article II (State Policies), the following are included:
a. promotion of full employment, a rising standard of living and improved
quality of life for all;9
b. promotion of social justice in all phases of national development;10
c. promotion of human dignity and full respect for human rights;11
5 [] Art XIII, Sec 3, par 2: It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions of work, and
a living wage. They shall also participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law.
Sec 3, par 2: It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions of work, and
a living wage. They shall also participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law.
Sec 3, par 3: The State shall promote the principle of shared responsibility between workers
and employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.
*these are listed below under basic rights of workers
6*These are the same as the Declarations of Basic Policy in the Labor Code [Sec 3, PD442 aa], supra
[] Art XIII, Sec 3, par 4: 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 to investments, and to expansion and growth.
7[] Art II, Section 10. The State shall promote social justice in all phases of national development.
[] Art XIII, Section 2. The promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance.
8[] Art II, Section 11. The State values the dignity of every human person and guarantees full respect
for human rights.
9Art II, Section 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through policies that
provide adequate social services, promote full employment, a rising standard of living, and an improved
quality of life for all.
10 Art. II, Section 10. The State shall promote social justice in all phases of national development.
11Art. II, Section 11. The State values the dignity of every human person and guarantees full respect
for human rights.
d. role of the youth12 and women13 in nation building;

e. labor as a primary social economic force; promotion of rights of workers
and their welfare;14
f. role of the private sector;15
2. Also, see the relevant provisions in the Bill of Rights connected to labor, as
provided in the syllabus.16
PROTECTION TO LABOR
1. [Bar 1998] What are the salient features of the protection to labor provision
of the Constitution? They are [those with two asterisks are not in the Labor
12 Art. II, Section 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate
in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs.
13Art. II, Section 14. The State recognizes the role of women in nation-building, and shall ensure the
fundamental equality before the law of women and men.
14 Art. II, Section 18. The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.
15Art. II, Section 20. The State recognizes the indispensable role of the private sector, encourages
private enterprise, and provides incentives to needed investments.
16Article III (Bill of Rights), Sections 1, 4, 7, 8, 10, 16, and 18 (2)
Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.
Section 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or
the right of the people peaceably to assemble and petition the government for redress of grievances.
Section 7. The right of the people to information on matters of public concern shall be recognized.
Access to official records, and to documents and papers pertaining to official acts, transactions, or
decisions, as well as to government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law.
Section 8. The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.
Section 10. No law impairing the obligation of contracts shall be passed.
Section 16. All persons shall have the right to a speedy disposition of their cases before all judicial,
quasi-judicial, or administrative bodies.
Section 18. (2) No involuntary servitude in any form shall exist except as a punishment for a crime
whereof the party shall have been duly convicted.
Code]:17
a. As to its extent, it provides for full protection to labor
b. As to coverage,** it provides protection both to local and overseas,
organized and unorganized labor;
c. As to employment policy, it provides for full employment and equality
of employment opportunities for all;
d. As to organization, it guarantees the right of all workers to self-
organization, collective bargaining and negotiations, and the **right to
engage in peaceful concerted activities, including the right to strike in
accordance with law.18
17 ******Art. XIII, Section 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes affecting their rights and benefits as
may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including conciliation,
and shall enforce their mutual compliance therewith to foster industrial peace.
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 to investments, and to expansion and growth.
[] Compare this with Art. 3 of the Labor Code: 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.
18 Enumerate at least four (4) policies enshrined in Section 3, Article XIII of the Constitution that
are not covered by Article 3 of the Labor Code on declaration of basic policy. (2%) (2009 Bar
Question). SUGGESTED ANSWER: Four (4) policies enshrined in Section 3, Article XIII of the 1987
Constitution which are not covered by Article 3 of the Labor Code on declaration of basic policy are:
1. All workers shall have the right to peaceful concerted activities, including the right to strike in
accordance with law.  
2. They shall be entitled to a living wage.  
3. They shall participate in policy and decision making processes affecting their rights and benefits
as may be provided by law.  
4. The state shall promote the principle of shared responsibility between workers and employers.
e. As to working conditions, it guarantees the right to security of tenure,19

humane conditions of work and a **living wage.
f. As to its relations with management, it guarantees the **right to
participate in policy and decision-making processes20 affecting their rights
and benefits as way to provide by law. It also promotes the **principle of
19 Q: In her State of the Nation Address, the President stressed the need to provide an investor-friendly
business environment so that the country can compete in the global economy that now suffers from a
crisis bordering on recession. Responding to the call, Congress passed two innovative legislative
measures, namely: (1) a law abolishing the security of tenure clause in the Labor Code; and (2) a
law allowing contractualization in all areas needed in the employer’s business operations. However,
to soften the impact of these new measures, the law requires that all employers shall obtain
mandatory unemployment insurance coverage for all their employees. The constitutionality of the
two (2) laws is challenged in court. As judge, how will you rule? (5%) (2009 Bar Question)
SUGGESTED ANSWER: The first innovative measure, on abolition of the security of tenure clause
in the Labor Code, is unconstitutional as it goes against the entitlement of workers to security of
tenure under Section 3, Article XIII of the 1987 Constitution. The second innovative measure, on a
law allowing contractualization in all areas needed in the employer’s business operations, is legal. Article
106 of the Labor Code already allows the Secretary of Labor and Employment not to make
appropriate distinction between labor-only and job contracting. This means that the Secretary
may decide, through implementing regulation, not to prohibit labor-only contacting, which is an
arrangement where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and place by such person are performing activities which are directly related to the
principal business of the employer. Hence, it would be legal for Congress to do away with the
prohibition on labor-only contracting and allow contractualization in all areas needed in the
employer’s business operations. **Assuming, of course, that contractual workers are guaranteed
their security of tenure.
20 Q: Explain the extent of the workers’ right to participate in policy and decision-making process as
provided under Article XIII, Section 3 of the Philippine Constitution. Does it include membership
in the Board of Directors of a corporation? (3%) (2008 Bar Question)
SUGGESTED ANSWER: The workers’ right to participate in policy and decision making processes of
the establishment where they are employed in so far as said processes affect their rights, benefits and
welfare as embodied in Section 3 of Article XIII of the Constitution is reiterated in Art. 255 of the
Labor Code where it is provided that for the purpose of implementing such right, workers and
employers may form labor management councils provided that the representatives of workers
in such labor management councils shall be elected by the majority of all the employees in said
establishment. It is clear from the aforementioned Article of the Labor Code that the right of workers
to participate in policy and decision making processes as provided in Article XIII, Section 3 of
the Constitution does **not include membership in the Board of Directors of a Corporation but
this could be the proper subject of a Collective Bargaining Agreement.
ANOTHER SUGGESTED ANSWER: In Manila Electric Company v. Quisumbing 302 SCRA
173[1999], the Supreme Court recognized the right of the union to participate in policy
formulation and decision-making process on matters affecting the Union members’ rights, duties
and welfare. However, the Court held that such participation of the union in committees of
employer Meralco is **not in the nature of a co-management control of the business of Meralco.
Impliedly, therefore, workers’ participatory right in policy and decision-making processes does
not include the right to put a union member in the Corporation’s Board of Directors.
shared responsibility21 between workers and employers and the preferential use
of voluntary modes in settling disputes, including conciliation, and shall
enforce their mutual compliance therewith to foster industrial peace.
Relations between workers and employers shall be regulated, recognizing labor’s
just share in the fruits of production, and at the same time the right of
enterprises to reasonable return of investments, as well as to expansion and
growth.22
RIGHTS OF EMPLOYERS23
1. Right to a reasonable return on investments,
2. Right to expansion and growth.
BASIC RIGHTS24 OF WORKERS GUARANTEED BY THE

CONSTITUTION25
1. Security of tenure26
2. Living wage
21Q: The constitution promotes the principle of shared responsibility between workers and employers,
preferring the settlement of disputes through (2011 BAR)
(A) compulsory arbitration. 
(B) collective bargaining. 
(C) voluntary modes, such as conciliation and mediation.
(D)labor-management councils.
22 What are the rights of an employer and an employee? (1996 Bar Question)
SUGGESTED ANSWER: The Constitution in Art. XIII, Section 3 provides for the following rights
of employers and employees: Employers’ Right to a reasonable return on investments, and to
expansion and growth. Employees’ right to a just share in the fruits of production; right to self
organization, collective bargaining and negotiations and peaceful concerted activities, including the
right to strike in accordance with law; To security of tenure, humane conditions of work, and a living
wage; and to participate in policy and decision-making processes affecting their rights and benefits as
may be provided by law.  
ALTERNATIVE ANSWER: In an employer-employee relationship, it is the right of the employer to
use the services of an employee who is under his (employer’s) orders as regards the employment. On
the other hand, it is the right of the employee to receive compensation for the services he renders for
the employer.
23 Bar 1996: What are the rights of an employer and an employee?
24Q: Which is not a constitutional right of the workers? (2012 Bar Question): a. The right to engage in
peaceful concerted activities; b. The right to enjoy security of tenure; c. The right to return on
investment; d. The right to receive a living wage. SUGGESTED ANSWER: c) The right to return on
investment [Art. XIII, Sec. 3, Constitution]
25 These are listed under Art XIII, Sec 3, supra.
[] Art III, Section 10. No law impairing the obligation of contracts shall be passed.
26
[] NCC, Art. 1710 - Dismissal of laborers shall be subject to the supervision of the
Government, under special laws.
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3. Just and humane working conditions27

4. (just) Share in the fruits of production
5. Self-organization28
6. Collective bargaining29
7. Collective negotiations
8. Engage in peaceful concerted activities, including the right to strike30
9. Participate in policy and decision making processes31
10. Due process; labor being a property right
MORE ON DUE PROCESS IN LABOR

1. Basis [] Art III, Section 1. No person shall be deprived of life, liberty, or
property without due process of law, nor shall any person be denied the equal
protection of the laws.
**Because right to labor is a property right, within the mantle of
constitutional protection. Hence, no person shall be deprived of labor, which is
property, without due process of law.32
2 Two aspects of DUE PROCESS as far as dismissal is concerned:
27[] Art III, Section 18 (2). No involuntary servitude in any form shall exist except as a punishment
for a crime whereof the party shall have been duly convicted.
28[] Section 8. The right of the people, including those employed in the public and private sectors, to
form unions, associations, or societies for purposes not contrary to law shall not be abridged.
*EO No. 180 s. 1987 providing guidelines for the exercise of the right to organize of
government employees, creating a Public Sector Labor Management Council and for other
purposes
29 [] NCC, Art. 1704 - In collective bargaining, the labor union or members of the board or committee
signing the contract shall be liable for non-fulfillment thereof.
30[] Art III, Section 4. No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the government for redress
of grievances.
31 [] Art III, Section 7. The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents and papers pertaining to official acts,
transactions, or decisions, as well as to government research data used as basis for policy development,
shall be afforded the citizen, subject to such limitations as may be provided by law.
32 Q: What property right is conferred upon an employee once there is an employer-employee
relationship? Discuss briefly. 5% (2006 Bar Question) SUGGESTED ANSWER: The right to
employment and the right to continue in one's employment constitute the property right conferred
upon an employee once there is an employer- employee relationship. Thus, the very important
constitutional right that "no person may be deprived of life, liberty or property without due process of
law” is violated when an employer terminates the employment of an employee without due
process of law because said employment is a property right of the latter. ANOTHER SUGGESTED
ANSWER: In Callanta. v. NLRC, 145 SCRA 270 (1986), the Court ruled: “It is a principle in American
jurisprudence which, undoubtedly, is well-recognized in this jurisdiction that one’s employment,
profession, trade or calling is a “property right," and the wrongful interference therewith is an
actionable wrong. The right is considered to be property within the protection of a constitutional
guaranty of due process of law.”
11
a. Substantive: no EE should be dismissed except for causes provided by

law: legality or illegality of the ACT of dismissal:
i. Just causes: dismissal process initiated by EE; GR: no payment of
separation pay; For non-compliance of DP requirement, the penalty imposed
against ER is payment of nominal damages which is tempered
ii. Statutory/Authorized causes: dismissal process initiated by ER;
GR: the law mandates payment of separation pay; For non-compliance of DP
requirement, the penalty imposed against ER is payment of nominal damages
which is stiffer; (NB: **partial closure is treated as retrenchment, hence,
separation pay is allowed)
iii. Resignation; NB: voluntary repatration of a seaman amounts to
voluntary resignation.
iv. Other causes, e.g., illness.
b. Procedural: legality or illegality of the MANNER of dismissal
i. Two-notice rule;
ii. Hearing, which may be dispensed with, as long as the party is given
enough opportunity to be heard.
BURDEN OF PROOF IN TERMINATION CASES

1. BOP rests on ER to show that the termination is due to a just or authorized
cause.
2. But the EE must first prove the fact of dismissal by substantial evidence. Atty.
Lumanta: it is not enough to say that the EE was not being minded in the
company—he has to show proof of termination, say, an email or letter.
QUANTUM OF PROOF
1. Quantum of Proof required in labor cases: such amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion33
PRINCIPLE OF NON-OPPRESSION**
1. Neither capital nor labor [Art 1701 NCC]:
a. act oppressively against each other or
b. impair the interest and convenience of the public.
2. The protection to labor clause in the Constitution is not designed to oppress
or destroy capital (Capili v. NLRC, March 26, 1997).
33What is the quantum of evidence required in labor case? (2012 Bar Question): a. The degree of
proof which produces the conclusion that the employee is guilty of the offense charged in an
unprejudiced mind; b. Such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion; c. That degree of proof which is greater in weight than the
opposing party’s evidence; d. Such evidence which must be highly and substantially more probable to
be true than not which convinces the trier of facts of its factuality. SUGGESTED ANSWER: b.
Suchamountofrelevantevidencewhichareasonablemindmightacceptas adequate to justify a conclusion.
[Tancirco vs. GSIS, G.R. No. 132916, Nov. 16, 2001]
12
**The law in protecting the rights of the EEs authorizes neither

oppression nor self-destruction of the ER (Pacific Mills Inc. v. Alonzo, July 26,
1991).
3. When the law tilts the scale of justice in favor of labor, it is but a recognition
of the **inherent economic inequality between labor and management. The
intent is to BALANCE THE SCALE OF JUSTICE; to put the two parties on
relatively equal positions.
*There may be cases where the circumstances warrant favoring labor over
the interests of management but **never should the scale be so tilted if the
result is an injustice to the employer. Justitia nemini neganda est (LatinL justice is
to be denied to none) (Philippine Geothermal, Inc. v. NLRC and Alvarez, September 8,
1994).
ON THE USE OF NATURAL RESOURCES [Art. XII]

1. Q: Armstrong Corporation, a foreign corporation intends to engage in the
exploration of Philippine natural resources. Mr. Antonio Reyes offered the forest
land he owns to the president of the corporation. May Armstrong Corporation
enter into a financial and technical assistance agreement (FTAA) with Mr. Reyes
to explore, develop, and utilize the land? Explain. 5% (2006 Bar Question)
SUGGESTED ANSWER: No, Armstrong Corporation may not enter into an
FTAA with Mr. Reyes for the exploration of natural resources found on his forest
land. Even assuming that Mr. Reyes could validly own forest land (like an
industrial tree plantation), all natural resources found therein are owned by
the State under the Regalian doctrine. The exploration, development and
utilization of natural resources shall be under the full supervision and control
of the State (Article XII, Sec. 2, Constitution). An FTAA for large-scale
exploration, development and exploitation of natural resources may only be
negotiated with the DENR Secretary, executed and approved by the
President.34
34 Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The State may directly
undertake such activities, or it may enter into co-production, joint venture, or production-
sharing agreements with Filipino citizens, or corporations or associations at least 60 per
centum of whose capital is owned by such citizens. […] The President may enter into
agreements with foreign-owned corporations involving either technical or financial assistance
for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral
oils according to the general terms and conditions provided by law, based on real contributions to
the economic growth and general welfare of the country. In such agreements, the State shall
promote the development and use of local scientific and technical resources.
13
A2. **New Civil Code [Articles 1700 & 1702]

1. NCC, Art. 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts
must yield to the common good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining, strikes and lockouts, closed
shop, wages, working conditions, hours of labor and similar subjects.
2. NCC, Art. 1702. In case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for the laborer.
————————————————
B. Construction in favor or labor
LIBERAL APPROACH IN INTERPRETING THE LABOR CODE

1. [Bar 2006] What is the concept of liberal approach in interpreting the Labor
Code and its Implementing Rules and Regulations in favor of labor? It means that
the workman’s welfare should be the primordial and paramount
consideration.
2. Bases for this liberal and compassionate approach:
a. Art. 4 LC:35 ******“all doubts36 in the implementation and
interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor," as
well as
b. the Constitutional mandate that the State shall afford full protection
to labor and promote full employment opportunities for all (PLOT v. NLRC,
35 Q: Clarito, an employee of Juan, was dismissed for allegedly stealing Juan’s wristwatch. In the
illegal dismissal case instituted by Clarito, the Labor Arbiter, citing Article 4 of the Labor
Code, ruled in favor of Clarito upon finding Juan’s testimony doubtful. On appeal, the NLRC
reversed the Labor Arbiter holding that Article 4 applies only when the doubt involves
“implementation and interpretation” of the Labor Code provisions. The NLRC explained that the
doubt may not necessarily be resolved in favor of labor since this case involves the application of the
Rules on Evidence, not the Labor Code. Is the NLRC correct? Reasons. (3%) (2009 Bar Question)
SUGGESTED ANSWER: The NLRC is not correct. It is a well settled doctrine that if doubts exist
between the evidence presented by the employer and the employee, the scale of justice must be
tilted in favor of the latter. It is a time honored rule that in controversies between laborer and
master, doubts necessarily arising from the evidence, or in the implementation of the agreement and
writing should be resolved in favor of the laborer.
ANOTHER SUGGESTED ANSWER: No, the NLRC is not correct. Art. 221 of the Labor Code
read: “In any proceeding before the Commission....the rules of evidence prevailing in Courts of
law....shall not be controlling and it is the spirit and intention of this Code that the Commission
and its members and the Labor Arbiters shall use every and reasonable means to ascertain the facts
in each case speedily and objectively without regard to technicalities of law and procedure, all in
the interest of due process.” The question of doubt is not important in this case.
36[] In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer (NCC, Art. 1702).
[] In case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail (NCC, Art. 10).
14
276 SCRA 1 [1997]).

3. Why such LIBERAL APPROACH?
a. to achieve their purpose of remedying evils of exploitation,
manipulation and oppression;
b. Strict adherence to the letter of labor law may result in the
oppression of labor; the spirit thereof prevails and must be given effect;
c. under the spirit of **COMPASSIONATE JUSTICE (infra).37
COMPASSIONATE JUSTICE; PRIMACY OF JUSTICE

1. The social justice policy mandates a compassionate attitude toward the
working class in its relation to management.
2. In calling for protection to labor, the Constitution does not condone wrong
doing by the EE. However, it urges a moderation of the sanctions that maybe
applied to him in the light of the many disadvantages that weigh heavily on
him like an albatross around his neck (this is an idiomatic expression which means
“an annoying burden”). Hence, rigid rules have to be avoided but rather due
weight must given to all EQUITIES of the case (cf. Gandara Mill Supply and
Milagros Sy v. NLRC and Germano, 29 December 1998).
4. JUSTICE COMES FIRST: **Compassion and mercy is SUBORDINATE to
justice for all. Before there can be an occasion for compassion, sympathy and
mercy, there must be justice for all. Otherwise, EEs will be encouraged to steal and
misappropriate in the expectation that eventually, in the name of social justice and
compassion, they will not be penalized but instead financially rewarded. These are
not the values the society cherishes; these are the habits that it abhors (SMC v.
NLRC, 29 March 2006).
5. The Employees Compensation Law (P.D. 626) operates on the principle of
social justice, but **sympathy to the workers should also be placed in a
sensible equilibrium with the stability of the ECC trust fund (Aquino v. SSS,
G.R. No. 149256, 21 July 2006). EG: An EE who was validly dismissed may still be
given severance pay.
MANAGEMENT PREROGATIVE
1. The law also recognizes that management has rights which are also entitled
37Q: In what manner do the labor laws show its solicitous compassionate policy towards the working
man? Explain your answer. SUGGESTED ANSWER: Labor laws show solicitous compassionate
policy towards the working man by providing that all doubts in the implementation and
interpretation of labor laws including its implementing rules and regulations shall be resolved
in favor of labor. Thus, among others, the Constitution recognizes that workers are entitled to
security of tenure, humane conditions of work and a living wage. Labor laws should be liberally
interpreted to ensure that the above rights are given to workers. Many times, an employee commits an
offense that is a valid ground for disciplinary action but law and jurisprudence do not automatically
provide for the termination of the guilty employee because termination may be too harsh a penalty,
his employment may, more often than not be the sole source of his means of livelihood. (Art. 4,
Labor Code; Art. XIII. Sec. 3. Constitution)
15
to respect and enforcement in the interest of fair play (St. Luke’s Medical Center EEs
Ass’n v. NLRC, 7 March 2007).
2. More on this, infra.
————————————————
C. Social Justice
AIM OF LABOR = SOCIAL JUSTICE

1. The State shall promote social justice in all phases of national development
(1987 Constitution, Art. II, Sec. 10).
2. Social justice is “neither communism, nor despotism, nor atomism, nor anarchy,” but
the humanization of laws and the equalization of social and economic force38 by the
State so that justice in its rational and objectively secular conception may at least be
approximated. Social Justice means the promotion of the welfare of all the people,
the adoption by the government of measures calculated to insure economic
stability of all the competent elements of society, through the maintenance of a
proper economic and social equilibrium in the interrelations of the members of
the community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers underlying
the existence of all governments on the time-honored principle of (Latin) salus
populi est suprema lex [Calalang v. William 2 December 1940].
3. The promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance
(1987 Constitution, Art. XIII, Sec. 2).
LIMITATIONS TO PRINCIPLE OF SOCIAL JUSTICE (SJ)

*When SJ cannot be invoked:
1. Not to undermine property rights resulting in confiscation (Guido v. Rural
Progress October 31, 1949). It should not tolerate usurpation of property, public
or private.
2. May only protect the laborers who come to court with clean hands (Phil.
Long Distance Telephone Co. v. NLRC August 23, 1988) and their motives
blameless (Gustilo v. Wyeth Phils. October 4, 2004).
3. Never result to an injustice or oppression of the employer (Phil. Geothermal
Inc. v. NLRC September 8, 1994).
4. If it is used to shield wrongdoings. It cannot be permitted to be the refuge
of scoundrels (PNCC v. NLRC Feb. 9, 1989).  
38For labor, the Constitutionally adopted policy of promoting social justice in all phases of
national development means (2011 BAR)
(A) the nationalization of the tools of production. 
(B) the periodic examination of laws for the common good. 
(C) the humanization of laws and equalization of economic forces.
(D) the revision of laws to generate greater employment.
16
SOCIAL JUSTICE PREVAILS OVER EQUAL PROTECTION39

1. GR: The State is bound under the Constitution to afford full protection to
Labor and when conflicting interests collide and they are to be weighed on the
scales of social justice, the law should accord more sympathy and
compassion to the less privileged workingman (Fuentes v. NLRC January 2,
1997).
2. XPN: social justice ceases to be an effective instrument for the “equalization of
the social and economic forces” by the State when it is used to shield
39 Q: Article 4 of the Labor Code provides that in case of doubt in the implementation and
interpretation of the provisions of the Code and its Implementing Rules and Regulations, the doubt
shall be resolved in favor of labor. Article 1702 of the Civil Code also provides that in case of doubt,
all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for
the laborer. Mica-Mara Company assails the validity of these statutes on the ground that they
violate its constitutional right to equal protection of the laws. Is the contention of Mica Mara
Company tenable? Discuss fully. (1995 Bar Question)
SUGGESTED ANSWER: No, the Constitution provides that the state shall afford full protection to
labor. Furthermore, the State affirms labor as a primary economic force. It shall protect the rights
of workers and promote their welfare.
ALTERNATIVE ANSWER: No, because a law which promotes a constitutional mandate does
not violate the equal protection clause. The constitutional mandate is for the State to afford full
protection to labor such that, when conflicting interests of labor and capital are to be weighed on the
scales of justice, the heavier influence of the latter should be counter-balanced by the sympathy the law
should accord the underprivileged. The contention of Mica-Mara Company is not tenable. The
constitutional right to equal protection of the laws is not violated by reasonable classification. Thus,
it is constitutionally possible to treat workers differently from employers. The social justice
principle embodied in the Constitution could be the basis for treating workers more favorably than
employers, in the implementation and interpretation of the provisions of the Labor Code and of its
implementing rules and regulations.
17
wrongdoing (Corazon Jamer v. NLRC, 278 SCRA 632).40

————————————————
D. Overview of Labor Law
ON LABOR LAWS
1. The law that defines State policies on labor and employment and governs the
rights and duties of the employer (ER) and employees (EEs) with respect to:
a. The terms and conditions of employment, and
b. Labor disputes arising from collective bargaining or other concerted
activity respecting such terms and conditions.
2. The term “labor law” covers the following:
a. Statutes passed by the State to promote the welfare of the workers and
EEs and regulate their relations with their ERs.
b. Judicial decisions applying and interpreting the aforesaid statutes (NCC,
Art. 8).
c. Rules and regulations issued by administrative agencies, within their
legal competence, to implement labor statutes.
40Q: May social justice as a guiding principle in labor law be so used by the courts in sympathy with
the working man if it collides with the equal protection clause of the Constitution? Explain. (2005 Bar
Question)
SUGGESTED ANSWER: Yes. The State is bound under the Constitution to afford full
protection to Labor; and when conflicting interests collide and they are to be weighed on the
scales of social justice, the law should accord more sympathy and compassion to the less
privileged workingman. (Fuentes v. NLRC. 266 SCRA 24 119971) However, it should be borne in
mind that social justice ceases to be an effective instrument for the “equalization of the
social and economic forces” by the State when it is used to shield wrongdoing. (Corazon Jamer v.
NLRC, 278 SCRA 632 [1997])
ANOTHER SUGGESTED ANSWER: No, social justice as a guiding principle in law may not be used
by the courts if it collides with the equal protection clause of the Constitution. Social justice is not
a magic wand applicable in all circumstances. Not all labor cases will be automatically decided in
favor of the worker. Management also has rights which are entitled to recognition and protection;
justice must be dispensed according to facts and law; and social justice is not designed to destroy or
oppress the employer.
Social justice as a guiding principle in Labor Law can be implemented side by side with the
equal protection clause of the Constitution.
In implementation of the principle of social justice, the Constitution commands that the
State shall afford protection to labor. Thus Labor Law may be pro-labor in the sense that labor is
given certain benefits not given to management. But this is not necessarily violative of the equal
protection clause of the Constitution because said clause allows reasonable classification.
18
THREE GENERAL CLASSIFICATION41 OF LABOR STATUTES42

1. Labor Standards Law: labor statutes that prescribe standards relating to terms
and conditions of employment for compliance by employers, like the laws on
a. hours of work, weekly rest periods, holiday pay, wages, and
b. laws dealing with women, minors, househelpers, and industrial
homeworkers.
c. Includes: 13th month pay.
2. Labor Relations Law:43 labor statutes that deal with the relations44 between
labor and management, like the laws on
a. unions,
b. collective bargaining,
41Bar 2003: How do the provisions of the law on labor relations interrelate, with the provisions
pertaining to labor standards? A: The law on Labor Relations provides for rights and
procedures by which workers may obtain from their ER benefits which are over and above the
minimum terms and conditions of employment set by labor standards law. Labor Standards law
alone does not guarantee lasting industrial peace. It is assured through Labor Relations law which
enables workers to obtain better benefits guaranteed by labor standards laws and by providing for a
mechanism to settle disputes between the ER and his EEs.
42 How do the provisions of the law on labor relations interrelate, if at all, with the provisions
pertaining to labor standards? (2005 Bar Question)
SUGGESTED ANSWER: Labor relations law focuses its provisions on the collective aspects of
employer- employee relationship. Its legal provisions deal with employees organizing unions and
how through these unions, employees are able to have collective bargaining with their employer.
On the other hand, labor standards law focuses on the terms and conditions of employment of
employees as individual employees or those legal provisions dealing with wages, hours of work and
other terms and conditions of employment. There may be instances when the provisions of labor
relations law may interrelate with provisions of labor standards law. Thus, a CBA which is dealt with
in labor relations law may have provisions that improves upon the minimum terms and
conditions of employment prescribed in labor standards law, like a CBA providing for a higher
minimum wage, or for the computation of a higher overtime pay or the payment of holiday pay not
only for regular holidays but also for certain special holidays.
43Q: Differentiate labor standards law from labor relations law. Are the two mutually exclusive? (1997
Bar Question)
SUGGESTED ANSWER: Labor standards law is that labor law which prescribes terms and conditions
of employment like in Book IV, Title I and Book VI of the Labor Code. These Books of the Labor
Code deal with working conditions, wages, working conditions for women, minors, househelpers and
home-workers, medical and dental services, occupational health and safety, termination and retirement.
On the other hand, labor relations law is that labor law which regulates the relations between employers
and workers like Book V of the Labor Code which deals with labor organizations, collective bargaining,
unfair labor practices and strikes and lockouts. Labor standards laws and labor relations laws are not
mutually exclusive; they are complement to each other. Thus, the law on strikes and lockouts which is
an example of labor relations law includes some provisions on the security of tenure of workers who
go on strike or who are locked out. These provisions are examples of labor standards law.
44 Labor Relations: defines and regulates the status, rights and duties, and the institutional
mechanisms, that govern the individual and collective interactions of ERs, EEs or their representatives.
It is concerned with the stabilization of relations between ERs and EEs and seeks to forestall
enmity and adjust the differences between them by the encouragement of collective bargaining
and the settlement of labor disputes through conciliation, mediation and arbitration. Includes:
Collective Bargaining Negotiations
19
c. unfair labor practices,

d. strikes, lockouts and picketing.
3. Social Legislation45 & Social Security Laws (also called Welfare Legislation):46
Social security laws are those labor statutes that provide protection not only to a
worker but also to members of his family in case of loss of income or when
there is need for medical care brought about by contingencies like sickness,
disability, death, and old age. Examples of social security laws are the
a. Social Security Law,
b. Revised Government Service Insurance Act,
c. the Articles of the Labor Code on Employees Compensation,
d. the State Insurance Fund, and
e. the National Health Insurance Act.
f. The Comprehensive Agrarian Reform Law (CARL)
ADDITIONAL CLASSIFICATION OF LABORS LAWS [POQUIZ]

4. Protective Legislation
5. Administrative Legislation
6. Diplomatic Legislation
LABOR LEGISLATION vs. SOCIAL LEGISLATION

LABOR LEGISLATION SOCIAL LEGISLATION
1. Refers to labor statutes like 1. Refers to Social Security Laws
Labor Relations Law and Labor 2. Those laws that provide
Standards particular kinds of protection
2. Focuses on the rights of the or benefits to society or
worker in the workplace segments thereof in furtherance
of social justice
45 Is there any distinction between labor legislation and social legislation?

SUGGESTED ANSWER: Labor legislation is sometimes distinguished from social legislation by the
former referring to labor statutes, like Labor Relations Law and Labor Standards, and the latter to
Social Security Laws. Labor legislation focuses on the rights of the worker in the workplace.
Social legislation is a broad term and may include not only laws that give social security
protection, but also those that help the worker secure housing and basic necessities. The
Comprehensive Agrarian Reform law could also be considered a social legislation.
ALTERNATIVE ANSWER: Yes. Labor Legislation is limited in scope, and deals basically with the
rights and duties of employees and employers. Social Legislation is more encompassing and
includes such subjects as agrarian relations, housing and human settlement, protection of
women and children, etc. **All labor laws are social legislation, but not all social legislation is
labor law.
46Social Legislation: all laws passed by the State to promote public welfare. It includes statutes
intended to enhance the welfare of the people **even where there is no ER-EE relationship
(EER). It provides economic benefits to workers who are at work because of the hazards of
employment. Includes: GSIS Law, SSS Law, Philhealth benefits, Agrarian Laws.
20
**NB: All labor laws are social legislations, but not all social legislations are labor
laws.
PURPOSE OF LABOR LEGISLATION

*[Bar 2006] It is a concrete way of expressing the constitutional and statutory
mandate of the State:
1. To afford protection to labor,
2. To promote full employment,
3. To ensure equal work opportunities regardless of sex, race or creed and
4. To regulate the relations between workers and ERs.
5. To assure the rights of workers to self-organization, collective bargaining
(CB), security of tenure and just and humane conditions of work.
6. Ultimately, the **primordial purpose is to promote the welfare of the people
based on the latin maxim salus populi est suprema lex.
SOURCES OF LABOR LAWS

1. Labor Code (LC) and other related special legislation [including their
respective Implementing Rules and Regulations (IRR)]
2. Contracts of labor
3. Collective Bargaining Agreement (CBA)
4. Company practice
5. Company policies
CONTRACT OF LABOR AS SOURCE OF LAW

1. It is a consensual, nominate, principal, and commutative contract whereby
one person, called the ER, compensates another, called the laborer, worker or
EE, for the latter's service.
2. It is a relationship impressed with public interest in keeping with our
constitutional policy of social justice.
3. ESSENTIAL CHARACTERISTICS of a contract of labor
a. ER freely enters into a contract with the EE;
b. ER can select who his EE will be;
c. ER can dismiss the EE; the EE in turn can quit his job;
d. ER must give remuneration (payment of wages); and
e. ER can control and supervise the conduct of the EE.
*Note than b to e are the elements of an employer-employee relationship
(EER).
4. Contracts are subject to the POLICE POWER of the State
a. To bring to life the policy enshrined in the Constitution to “afford full
protection to labor.”
b. Labor contracts are placed on a **higher plane than ordinary
contracts because they are imbued with public interest and therefore subject to
21
the police power of the State (Leyte Geothermal Power Progressive Employees Union-
ALU-TUCP v. PNOC, 30 March 2011).
c. The relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to
the common good. Therefore, such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and lock outs, closed shop,
wages, working conditions, hours of labor and similar subjects (NCC, Art.
1700).
5. PROHIBITIONS related to the contract of labor:
a. No law impairing the obligation of contracts shall be passed (1987
Constitution, Art. III, Sec. 10).
b. No involuntary servitude in any form shall exist except as a punishment
for a crime whereof the party shall have been duly convicted. (1987 Constitution,
Art. III, Sec. 18(2)).
c. No contract which practically amounts to involuntary servitude, under
any guise whatsoever, shall be valid (NCC, Art. 1703).
CBA AS A SOURCE OF LAW

1. The CBA is the norm of conduct between ER and EEs and compliance
therewith is mandated by the express policy of the law (DOLE Philippines, Inc.,
v. Pawis ng Makabayang Obrero 13 January 2003; E. Razon, Inc. v. SOLE, 13 May
1993).
COMPANY PRACTICES AS SOURCE OF LAW

Requisites before past company practices would be considered as a source of
labor law (there must be):**
1. Voluntarily institution by ER without any legal compulsion
2. A passage of time: should have been done over a long period of time, and
must be shown to have been consistent and deliberate (American Wire and Cable
Daily Rated Employees Union v. American Wire and Cable Co., Inc., 29 April 2005).
**NB: No passage of time is required for a company policy to become a
source of labor law.
3. Latest jurisprudence: two years to constitute company practice [Sevilla Trading
vs. Semana]
a. Done for a considerable period of time;
b. consistently and intentionally done;
c. not a product of erroneous interpretation of the difficult construction of
the law [Vergara vs. NLRC].
——————————————————
E. Agrarian Reform Law (added by TOM)

22
FOUNDATION OF AGRARIAN REFORM

1. The 1987 Constitution provides as one of the State polices the promotion of a
comprehensive rural development and agrarian reform program [Art. II, Sec.
21].47 in Article II as one of the state policies that “(t)he State shall promote
comprehensive rural development and agrarian reform." Under the article on
National Economy and Patrimony [Art. XII], it is provided that the State shall
promote industrialization and full full employment based on sound
agricultural development and agrarian reform.48 In the next article on Social
Justice and Human Rights [Art. XIII], it is provided that the State shall, by law,
undertake an agrarian reform program founded on the right of farmers and
regular farm-workers, who are landless, to own directly or collectively the
lands they till or in the case of other farmworkers, to receive a just share of the
fruits thereof. To this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations, and subject to the
payment of just compensation."49
2. Taken together, these provisions could be considered as the foundation of the
agrarian reform program.
BENEFICIARIES OF THE AGRARIAN REFORM LAW

1. Under the Comprehensive Agrarian Reform Law (CARL), the lands covered
by the Comprehensive Agrarian Reform Program (CARP) shall be distributed as
much as possible to landless residents of the same barangay, or in the
absence thereof, landless residents of the same municipality in the following
order of priority:
a. agricultural lessees and share tenants;
b. regular farm workers; 
c. seasonal farm workers; 
d. other farm workers;
e. actual tillers or occupants of public lands; 
47 Art. II, Section 21. The State shall promote comprehensive rural development and agrarian reform.
48Art. XII, Sec. 1, par. 2: The State shall promote industrialization and full employment based on
sound agricultural development and agrarian reform, through industries that make full of efficient use
of human and natural resources, and which are competitive in both domestic and foreign markets.
49 Art. XII, Section 4. The State shall, by law, undertake an agrarian reform program founded on the
right of farmers and regular farmworkers who are landless, to own directly or collectively the lands they
till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the
State shall encourage and undertake the just distribution of all agricultural lands, subject to such
priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small landowners. The State shall
further provide incentives for voluntary land-sharing
23
f. collectives or cooperatives of the above beneficiaries; and

g. others directly working on the land.
2. PREFERENCE:
a. The children of landowners, who are qualified to be awardees of not
more than three (3) hectares, shall be given preference in the distribution of
the land of their parents.
b. Farmers already in place and those not accommodated in the
distribution of privately- owned lands will be given preferential rights in the
distribution of lands from the public domain.
3. NON-EJECTMENT POLICY: Actual tenant-tillers in the landholding shall
not be ejected or removed therefrom.
4. QUALIFICATION-DISQUALIFICATION
a. A basic qualification of a beneficiary shall be his willingness, aptitude,
and ability to cultivate and make the land as productive as possible.50
b. Who are disqualified as CARP beneficiaries? Beneficiaries under
Presidential Decree No. 27 who have culpably sold, disposed of, or abandoned
their land.
5. WHEN LAND IS NOT SUFFICIENT: If, due to the landowner’s retention
rights or to the number of tenants, lessees, or workers on the land, there is not
enough land to accommodate any or some of them, they may be granted
ownership of other lands available for distribution under the CARL, at the
option of the beneficiaries.
Farmers already in place and those not accommodated in the
distribution of privately- owned lands will be given preferential rights in the
distribution of lands from the public domain.
JUST COMPENSATION (JC) IN the Bill of Rights vs. CARL
50The DAR shall adopt a system of monitoring the record or performance of each beneficiary, so
that any beneficiary guilty of negligence or misuse of the land or any support extended to him shall
forfeit his right to continue as such beneficiary. The DAR shall submit periodic reports on the
performance of the beneficiaries to the CARP.
24
JC IN BOR JC IN CARL
BOR: private property shall The Land Bank of the Philippines (LBP) shall compensate the
not be taken for public use landowner in such amount as may agreed upon between the landowner
without just compensation and the Department of Agrarian Reform and LBP. Compensation
(same concept under the could be in cash and in government financial instruments like LBP
agrarian reform provisions, bonds. At the option of the landowner, the compensation may be in
i.e., the person who is shares of stock in government owned and controlled corporations, or
deprived of his property in tax credits. In determining just compensation, the cost of
should be given the fair acquisition of the land, the current value of like properties, its
and full equivalent value nature, actual use of income, the sworn valuation by the owner, the
of the property that is taken tax declarations, and the assessment made by government assessors
from him). In both shall be considered. Additional factors in the valuation are: the social
situations it is the courts and economic benefits contributed by the farmers and the
which may determine farmworkers and by the Government to the property as well as the
ultimately the amount of non-payment of taxes or loans secured from any government
just compensation. financing Institution on the said land
25
II. Recruitment and Placement
EMPLOYER 27
Employee 27
WORKER 27
A. Illegal Recruitment 28
A1. Elements 28
A2. Prohibited Activities 29
A3. Types of Illegal Recruitment 31
Simple vs. Complex Illegal Recruitment 31
Illegal recruitment in large scale vs. committed by a syndicate 32
Illegal recruitment as economic sabotage 32
A4. Illegal Recruitment vs. Estafa 33
A5. Liability of local recruitment agency & Foreign employer 34
POSSIBLE ACTIONS RELATED TO ILLEGAL RECRUITMENT 37
Remedies under the Migrant Workers Act and how may they be enforced: 37
ON COMPROMISE AgreementS 38
RULE ON OVerTIME (OT) & LEAVE PAY 39
A5.a. Solidary Liability 39
A5.b. Theory of Imputed Knowledge 39
A6. Termination of contract of migrant worker without just or valid cause 40
Pre-termination of contract of migrant worker 40
PENALTIES FOR ILLEGAL RECRUITMENT 42
A7. Direct Hiring 43
B. Regulation of Recruitment and Placement Activities 44
RECRUITMENT AND PLACEMENT (R&P) 44
ESSENTIAL ELEMENTS WON ONE IS ENGAGED IN R&P 45
PERSONS **Deemed ENGAGED IN R&P (2 or more) 45
PERSONS/ENTITIES THAT MAY ENGAGE IN R&P 46
OVERSEAS EMPLOYMENT 46
PRIVATE SECTOR PARTICIPATION IN THE RECRUITMENT AND PLACEMENT OF
WORKerS 47
Fees TO BE PAID BY WORKerS 49
LICENSE VS. AUTHORITY 49
SUSPENSION OR CANCELLATION OF LICENSE OR AUTHORITY (ART. 35, LABOR
CODE) 50
C. Employment of Non-Resident Aliens** 52
RULE ON THE EMPLOYMENT PERMIT REQUIREMENT 53
26
DURATION OF EMPLOYMENT PERMIT 53

EMPLOYMENT OF ALIENS IN ENTITIES ENGAGED IN NATIONALIZED ACTIVITIES
53
REMITTANCE OF FOREIGN EXCHANGE EARNINGS 54
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA) 55
JURISDICTION OF THE LA vs. POEA 55
MINIMUM CONDITIONS/provisions of overseas employment contracts 57
ON THE DEPLOYMENT OF OFW’s 57
GuaranteeS OF THE RECEIVING COUNTRY FOR THE PROTECTION OF THE RIGHTS OF
OFW’s 58
ON THE REPATRIATION OF A WORKer 58
GROUNDS FOR DISCIPLINARY ACTION of OFWs 59
D. Training and Employment of Special Workers 60
D1. Apprentices & Learners 60
ON APPRENTICES 60
When is there no valid apprenticeship? 61
Qualifications of an apprentice 61
RELATIONS BETWEEN APPRENTICES & ERs 62
ON LEARNERS 64
Learnership vs. Apprenticeship 65
D2. Disabled Workers 66
D2.a. Equal Opportunity 66
RIGHTS OF PERSONS WITH DISABILITY***** 68
D2.b. Discrimination on Employment 71
PROHIBITION ON DISCRIMINATION AGAINST PERSONS WITH DISABILITY 71
ACTS OF DISCRIMINATION ON EMPLOYMENT 71
INCENTIVES FOR EMPLOYERS WHO EMPLOY PWDs***** 72
Persons with Disability vs. Differently Abled 73
27
II. Recruitment & Placement
EMPLOYER
1. Any person acting in the interest of an ER, directly or indirectly.
a. GR: it does not include a labor organization or any of its officers and
agents;
b. XPN: when they are acting as an ER to persons rendering services
for hire, particularly in connection with its activities for profit or gain.[LC,
Art. 212(e)].
**The mere fact that respondent is a labor union does not mean that it
cannot be considered an ER for persons who work for it. Much less should it
be exempted from labor laws (Bautista v. Inciong, March 16, 1988).
2. Any person or entity that employs the services of others; one for whom
work is done and who pays their wages or salaries;
3. Any person acting in the interest of an ER;
4. It refers to the enterprise where the labor organization operates or seeks to
operate [IRR, Book V, Rule I, Sec.1(s)].
**The term “employer” is not restricted to business owners alone
because it includes any person as long as he acts in the interest of the ER.
EMPLOYEE
1. Any person in the employ of the ER
2. Any individual whose work has ceased as a result of or in connection with any
current labor dispute or because of any unfair labor practice **if he has not
obtained any other substantially equivalent and regular employment,
3. One who has been dismissed from work **but the legality of dismissal is
being contested in a forum of appropriate jurisdiction (D.O. No. 40-03).
4. The term shall not be limited to the EEs of a particular ER unless the LC
explicitly states.
5. When shall someone be considered an EE for the purpose of membership in a
labor union? beginning on the first day of service, **whether employed for a
definite period or not [LC, Art. 277(c)].
WORKER
1. Any member of the labor force, **whether employed or unemployed [LC,
Art. 13 (a)].
28
A. Illegal Recruitment
A1. Elements
1. What is illegal recruitment? Any recruitment activities **undertaken by non-
licenses or non-holders of authority (People v. Senoron, 30 January 1997).
2. Elements of illegal recruitment**
a. Offender is a non-licensee or non-holder of authority to lawfully
engage in the recruitment/placement of workers.
b. Offender undertakes:
i. Any act of canvassing, enlisting, contracting, transporting, utilizing, hiring,
or procuring workers and includes referring, contract services, promising or advertising for
employment abroad,***whether for profit51 or not [R.A. 8042 as amended by
R.A. 10022, Art. 13(f)] ; or
ii. Any of prohibited practices under Art. 34 of the LC, supra.
*NB LPS - iii. He undertakes any activity within the meaning of “recruitment or
placement” defined under Art. 13 (b).
c. For complex illegal recruitment, an **additional element that the
offender commits the act against
i. three or more persons, individually, or as a group (PP v. Baytic, 20
February 2003) or
ii. there are three or more offenders.
3. Persons liable for illegal recruitment: any person (whether non-licensee,
non-holder of authority, licensee or holder of authority) who commits any of
the prohibited acts, shall be liable for Illegal recruitment (R.A. 8042, as amended
by R.A. 10022).
4. Kinds of illegal recruitment (IR; infra) (*NB LPS)
a. Simple Illegal Recruitment – committed by a licensee or holder of
authority against one or two persons only.
*b. Non- licensee – illegal recruitment committed by any person who is neither a
licensee nor a holder of authority.
c. Complex Illegal Recruitment; types:
i. IR in large scale
ii. IR committed by a syndicate
**It is tantamount to “economic sabotage”
5. *****How to prove illegal recruitment—essential element: It must be shown
51 Larry Domingo was accused of the crime of illegal recruitment. He argued that he issued no
receipt or document in which he acknowledged as having received any money for the promised jobs.
Hence, he should be free from liability. Was Larry engaged in recruitment activities? YES. The
**receipt of money is of no moment in recruitment. LC provides that [Art. 13(b)] that the act of
recruitment may be for profit or not. It **suffices that Larry promised or offered employment for
a fee to the complaining witnesses to warrant his conviction for illegal recruitment (People v. Domingo,
April 7, 2009).
29
that the accused gave the **distinct impression52 that he had the power or
ability to send complainants abroad for work such that the latter were
convinced to part with their money in order to be deployed (People v. Fortuna,
395 SCRA 353).
A2. Prohibited Activities

PROHIBITED PRACTICES IN RECRUITMENT or PLACEMENT
[Art 34 LC & RA 8042; R.A. 10022, Sec. 6]
1. Furnishing or publishing any false notice/information/document related to
recruitment/employment
2. **FAILURE TO FILE REPORTS required by SOLE
3. Inducing or attempting to induce a worker already employed to quit his
employment in order to offer him another **unless the transfer is designed to
liberate a worker from oppressive terms and conditions
4. Recruitment/placement of workers in jobs harmful to public health or
morality or to the dignity of the country
5. Engaging directly or indirectly in the **management of a travel agency
6. **Substituting or altering employment contracts without approval of DOLE
7. Charging or accepting any **amount greater than that specified by DOLE
or make a worker pay any amount greater than actually received by him
8. Committing any act of misrepresentation to secure a license or authority
9. Influencing or attempting to influence a person/entity **not to employ any worker who
has not applied employment through his agency
10. Obstructing or attempting to obstruct inspection by SOLE or by his
representatives
11. Withholding or denying travel documents from applicant workers before
departure for monetary considerations other than authorized by law
12. Granting a loan to an overseas Filipino worker with **interest exceeding
eight percent (8%) per annum, which will be used for payment of legal and allowable
placement fees and make the migrant worker issue, either personally or through a guarantor or
accommodation party, postdated checks in relation to the said loan
13. **Refusing to condone or renegotiate a loan incurred by an OFW after his
employment contract has been prematurely terminated through no fault of his or her own
14. For a suspended recruitment/manning agency to engage in any kind of
recruitment activity including the processing of pending worker's applications; and
15. For recruitment/manning agency or a foreign principal/ER to pass on the
OFW or deduct from his or her salary the payment of the cause of fees,
premium or other **insurance related charges, as provided under the compulsory
52Q: Which of the following is an essential element of illegal recruitment? (2011 BAR QUESTION)
(A) The recruiter demands and gets money from the recruit but issues no receipt. (B) The recruiter
gives the impression that he is able to send the recruit abroad. (C)The recruiter has insufficient
capital and has no fixed address. (D)The recruiter has no authority to recruit.
30
worker's insurance coverage

16. Imposing a compulsory and exclusive arrangement whereby an OFW is
required to:
a. Avail a loan only from specifically designated institutions, or entities or persons
b. To undergo health examinations only from specifically designated
medical, entities or persons, **except seafarers whose medical examination cost is
shouldered by the ship owner
c. To undergo training of any kind only from designated institutions,
entities or persons, **except for recommendatory trainings mandated by
principals/shipowners (R.A. 8042, Migrant Workers and Overseas Filipino Act, as
amended by R.A. 10022, Sec. 6).
[] ***NB LPS – As defined in Art. 38 LC, illegal recruitment is undertaken by a
non-licensee or non-holders of authority. This has been amended by RA 8042
which considers as illegal recruiter even a licensee or holder of authority who
commits any of the acts as enumerated in Sec. 6 of RA 8042.
PROHIBITED ACTS UNDER LC vs. OVERSEAS FILIPINOS &

MIGRANT WORKERS ACT [RA 8042 aa by RA 10022]
LC RA 8042
1. Illegal recruitment Illegal recruitment under Sec. 6 means any
Art.38 recruitment activity committed by **non-
2. Prohibited acts under licensees/ non-holders of authority or prohibited
Art.34 acts (same as Art. 34, LC)
*Illegal recruitment **Added to the following in the list of prohibited acts:
under Art. 38 means 1. Failure to actually deploy without valid reason;
any recruitment activity 2. Failure to reimburse expenses incurred by the
including prohibited worker in connection with his/her documentation and
acts under Art. 34 processing for purposes of deployment;
committed by **non- 3. To allow a non-Filipino citizen to head or
licensees or non-holders manage a licensed recruitment/ manning agency.
of authority.
31
A3. Types53 of Illegal Recruitment
Simple vs. Complex Illegal Recruitment

SIMPLE COMPLEX
violation of Arts. 13(b) and 34 violation ofArts. 13(b) and 34 of the LC involving **at least three
of the LC involving less than recruiters or victims. It may either be: 1. Committed by a syndicate; or
three recruiters or victims. 2. In large scale or qualified
53 Q: Discuss the types of illegal recruitment under the Labor Code. (2007 Bar Question)
SUGGESTED ANSWER: Under the Labor Code, as amended by Republic Act No. 8042 otherwise
known as the “Overseas Filipinos and Migrant workers Act of 1995”, there are two types of illegal
recruitment, particularly simple illegal recruitment and illegal recruitment which is considered
as an offense involving economic sabotage. Illegal recruitment as an offense involving economic
sabotage is committed under the following qualifying circumstances, to wit: When illegal recruitment is
committed by a syndicate, that is when it is carried out by a group of three (3) or more persons
conspiring and/or confederating with one another; or When illegal recruitment is committed in large
scale that is when it is committed against three (3) or more persons whether individually or as a group.
ALTERNATIVE ANSWER: Under the Labor Code, illegal recruitment refers to any recruitment
activity undertaken by non-licensees or non-holders of authority. It includes the acts of
canvassing, enlisting, contracting, transporting, utilizing, hiring, procuring, referrals, contract
services and advertising (Art. 13(b), Arts. 34 & 38, Labor Code). The following prohibited acts are
also considered acts of illegal recruitment when undertaken by non-licensees or non-holders of
authority: a. Charging or accepting directly or indirectly, any amount greater than that specified in the
schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount
greater than that actually received by him as a loan or advance; b. Furnishing or publishing any false
notice or information or document in relation to recruitment or employment; c. Giving any false
notice, testimony, information or document or commit any act of misrepresentation for the purpose of
securing a license or authority under this Code; d. Inducing or attempting to induce a worker already
employed to quit his employment in order to offer him to another unless the transfer is designed to
liberate the worker from oppressive terms and conditions of employment; e.Influencing or to
attempting to influence any person or entity not to employ any worker who has not applied for
employment through his agency; f. Engaging in the recruitment or placement of workers in jobs
harmful to public health or morality or to the dignity of the Republic of the Philippines; g. Obstructing
or attempting to obstruct inspection by the Secretary of Labor or by his duly authorized
representatives; h. Failing to file reports on the status of employment, placement vacancies, remittance
of foreign exchange earnings, separation from jobs, departures and such other matters or information
as may e required by the secretary of labor; i. Becoming an officer or member of the Board of any
corporation engaged in travel agency or to be engaged direct or indirectly in the management of a
travel agency; and j. Withholding or denying travel documents from applicant workers before departure
for monetary or financial considerations other than those authorized under this code and its
implementing rules and regulations. (RA 8042, Migrant Workers & Overseas Filipinos Act of 1995)
32
Illegal recruitment in large scale54 vs. committed by a syndicate55

IR IN LARGE SCALE IR COMMITTED BY A SYNDICATE
Committed **against three or more persons Carried out **by a group of three or more persons
individually or as a group conspiring or confederating with one another
Pertains to the number of victims Pertains to the number of recruiters
Illegal recruitment as economic sabotage56

1. When? *****when complex illegal recruitment is committed, such that:
a. It is syndicated or
b. Done in a large scale.
2. Article 38 (b) of LC, as amended by PD 2018 Art. 38 (b) Illegal recruitment
when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39
hereof.
——————————————————
54 [] Bar 2005: While her application for renewal of her license to recruit workers for overseas
employment was still pending, Maryrose recruited Alma and her 3 sisters, Ana, Joan, and Mavic,
for employment as housemates in Saudi Arabia. Maryrose represented to the sisters that she had a
license to recruit workers for overseas employment and demanded and received P30,000.00 from
each of them for her services. Her application for the renewal of her license, however, was denied,
and consequently failed to employ the four sisters in Saudi. The sisters charged Maryrose with large
scale illegal recruitment. Testifying in her defense, she declared that she acted in good faith because
she believed that her application for the renewal of her license would be approved. She adduced in
evidence the Affidavits of Desistance which the four private complainants had executed after the
prosecution rested its case. In the said affidavits, they acknowledge receipt of the refund by Maryrose
of the total amount of Php 120,000.00 and indicated that they were no longer interested to pursue
the case against her. Resolve the case with reasons: Maryrose is guilty of large scale illegal recruitment. It
is **large scale illegal recruitment when the offense is committed against 3 or more persons,
individually or as a group [LC, Art. 38(b)]. In view of the above, her **defense of good faith and
the Affidavit of Desistance as well as the refund given will not save her because R.A. 8042 is a
special law, and illegal recruitment is **malum prohibitum (PP v. Saulo, November 15, 2000).
55 Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or
more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal
transaction, enterprise or scheme defined under this first paragraph hereof. Illegal recruitment is
deemed committed in large scale if committed against three (3) or more persons individually or as a
group.
56 A. When is illegal recruitment considered a crime of economic sabotage? Explain briefly. (3%)
SUGGESTED ANSWER: A. According to Art. 28 of the Labor Code, illegal recruitment is
considered a crime of economic sabotage when committed by a syndicate or in large scale.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or
more persons conspiring and/or confederating with one another in carrying out any unlawful or
illegal transaction, enterprise or scheme which is an act of illegal recruitment. Illegal recruitment is
deemed committed in large scale if committed against three (3) or more persons individually or
as a group.
33
A4. Illegal Recruitment vs. Estafa

ILLEGAL RECRUITMENT ESTAFA
**Malum prohibitum, thus: **Malum in se, thus:

1. Criminal intent is not necessary 1. Criminal intent is necessary
2. It is a crime which involves moral 2. It is a crime which involves moral turpitude
turpitude 3. Wider in scope covering deceits not related to
3. Limited in scope recruitment activities.
It is not required that it be shown that the
recruiter wrongfully represented himself as Accused DEFRAUDED another by ABUSE OF
a licensed recruiter. It is **enough that the CONFIDENCE, or by means of DECEIT. It is
victims were DECEIVED as they relied on **essential that the false statement or fraudulent
the misrepresentation and scheme that representation constitutes the **very cause or the only
caused them to entrust their money in motive which induces the complainant to part
exchange of what they later discovered was a with the thing of value.
vain hope of obtaining employment abroad.
Illegal recruitment and estafa cases may be filed simultaneously or separately. The filing of charges
for illegal recruitment does not bar the filing of estafa, and vice versa. Double jeopardy will not set in.
*NB LPS – a person charged with illegal recruitment may be charged also with estafa (People v.
Calonzo, 27 September 1996)
*****Both may be filed simultaneously or separately. Double jeopardy will not set
in.57 Since illegal recruitment is malum prohibitum, good faith is not a defense
in illegal recruitment. Neither will an affidavit of desistance nor refund of the fees
57 [] Bugo, by means of false pretenses and fraudulent representation, convinced Dado to give the
amount of Php 120,000.00 for processing the latter's papers so that he can be deployed to Japan. Dado
later on found out that Bugo had misappropriated, misapplied and converted the money to her
own personal use and benefit. Can Dado file the cases of illegal recruitment and estafa
simultaneously? YES. Illegal recruitment and estafa cases **may be filed simultaneously or
separately. The filing of charges for illegal recruitment does **not bar the filing of estafa, and vice
versa. Bugo’s acquittal in the illegal recruitment case does not prove that she is not guilty of
estafa. Illegal recruitment and estafa are **ENTIRELY DIFFERENT OFFENSES and neither
one necessarily includes or is necessarily included in the other. A person who is convicted of
illegal recruitment may, in addition, be convicted of estafa under Art. 315, par. 2(a) of the RPC. In the
same manner, a person acquitted of illegal recruitment may be held liable for estafa. **DOUBLE
JEOPARDY WILL NOT SET IN because illegal recruitment is malum prohibitum, in which there
is no necessity to prove criminal intent, whereas estafa is malum in se, in the prosecution of which, proof of
criminal intent is necessary (Sy v. People, April 14, 2010).
34
he received allow the court to dismiss the case.58

—————————————————
A5. Liability of local recruitment agency & Foreign employer

1. Liability of the LOCAL recruitment agency: *****JOINTLY AND
SOLIDARILY liable59 with its principal or foreign-based ER60 for any
58 Q: Maryrose Ganda's application for the renewal of her license to recruit workers for overseas
employment was still pending with the Philippine Overseas Employment Administration (POEA).
Nevertheless, she recruited Alma and her three sisters. Ana. Joan and Mavic, for employment as
housemaids in Saudi Arabia. Mary-rose represented "to the sisters that she had a license to recruit
workers for overseas employment. Maryrose also demanded and received P30, 000.00 from each of
them for her services. However, Maryrose's application for the renewal of her license was
denied, and consequently falJed to employ the four sisters in Saudi Arabia. The sisters charged
Maryrose with large scale illegal recruitment. Testifying in her defense, Maryrose declared that she
acted in good faith because she believed that her application for the renewal of her license would be
approved. Maryrose adduced in evidence the Affidavits of Desistance which the four private
complainants had executed after the prosecution rested its case, In the said affidavits, they
acknowledged receipt of the refund by Maryrose of the total amount of PI20.000,00 and indicated that
they were no longer interested to pursue the case against Maryrose. Resolve the case with reasons. (5%)
(2005 Bar Question) SUGGESTED ANSWER: Maryrose is still criminally liable for large scale
illegal recruitment, Good faith is not a defense in illegal recruitment as defined in Sec, 6 of R.A.
8042. Illegal recruitment is malum prohibitum. Refund of the PI20.000.00 she received does not
likewise extinguish her criminal liability. If at all, It satisfies only her availability. The affidavit of
desistance, moreover, does not bar Maryrose's prosecution, The criminal offense is not extinguished
by such desistance. Besides, affidavit of desistance, as a rule, is frowned upon.
59[] This joint and solidary liability imposed by law against recruitment agencies and foreign ERs is
**meant to assure the aggrieved worker of IMMEDIATE AND SUFFICIENT payment of
what is due him (Becmen Service Exporter and Promotion v. Cuaresma, 7 April 2009).
60Q: A was recruited to work abroad by Speedy Recruitment Agency as a technician for a Saudi
Arabian construction firm, with a monthly salary of $650.00. When she got to the construction site,
the employer compelled her to sign another contract that referred her to another employer for a
salary of $350.00. She worked for the second employer and was paid $350.00 until her two- year
contract expired. Upon her return to the Philippines, she filed a case against the agency and the two
employers. May the agency validly raise the defense that it was not privy to the transfer of A to
the second employer? Explain. (3%) (2010 Bar Question) SUGGESTED ANSWER: NO. Speedy’s
obligation to A is joint and several with the principal employer (Sec. 10, Rep. Act No. 8042).
The liability of the principal/employer and the recruitment/placement agency for any and all claims for
money claims shall be joint and several, which undertaking shall form part of A’s employment
contract, and condition precedent for its approval. ***This liability shall continue during the
entire period or duration of the employment contract and shall not be affected by any
substitution, amendment or modification made locally or in a foreign country of said contract
(Sec. 10, Rep. Act No. 8042).
35
violation61 of the recruitment agreement and violation of contracts of

employment62 [IRR, Book I, Rule V, Sec. 10(a)(2)].
*NB: severance of relations between the local agent and foreign principal
does not affect the liability of the foreign principal.63
2. Liability of corporate officers, directors or partners if the recruitment/
placement agency is a juridical entity:64 **JOINTLY AND SOLIDARILY
liable with the corporation or partnership for the claims and damages (Becmen
Service Exporter and Promotion v. Cuaresma, 7 April 2009). NB: The agents of the
61Q: Celia, an OFW that Moonshine Agency recruited and deployed, died in Syria, her place of work.
Her death was not work-related, it appearing that she had been murdered. Insisting that she committed
suicide, the employer and the agency took no action to ascertain the cause of death and treated the
matter as a “closed case.” The worker's family sued both the employer and the agency for moral and
exemplary damages. May such damages be awarded? (2011 BAR QUESTIONS) (A)Yes, the agency
and the employer’s uncaring attitude makes them liable for such damages. (B)Yes, but only the
principal is liable for such damages since the agency had nothing to do with Celia’s death. (C)No, since
her death is not at all work-related.(D)No, since her death is not attributable to any act of the agency or
the employer.
62Q: Philworld, a POEA-licensed agency, recruited and deployed Mike with its principal, Delta
Construction Company in Dubai for a 2-year project job. After he had worked for a year, Delta and
Philworld terminated for unknown reason their agency agreement. Delta stopped paying Mike's
salary. When Mike returned to the Philippines, he sued both Philworld and Delta for unpaid salary and
damages. May Philworld, the agency, be held liable? (2011 BAR QUESTIONS) (A) No, since Philworld,
the recruitment agency, is not the employer liable for unpaid wages. (B)Yes, since the agency is
equally liable with the foreign principal despite the termination of their contract between
them. (C)Yes, since the law makes the agency liable for the principal’s malicious refusal to pay Mike’s
salary. (D)No, since Mike did not get paid only after Delta and Philworld terminated their contract.
63 Q: What is the nature of the liabilities of the local recruitment agency and its foreign principal? (2012
Bar Question): a. The local agency is jointly liable with the foreign principal; severance of relations
between the local agent and the foreign principal dissolves the liability of the local agent recruiter; b.
Local agency is solidarily liable with the foreign principal; severance of relations between the local agent
and the foreign principal dissolves the liability of the foreign principal, only; c. Local agency is
solidarily liable with the foreign principal; severance of relations between the local agent and
foreign principal does not affect the liability of the foreign principal; d. Local agency is jointly
liable with the foreign principal; severance of the relations between the local agent and the foreign
principal does not affect the liability of the local recruiter. SUGGESTED ANSWER: Local agency is
solidarily liable with the foreign principal; severance of relations between the local agent and foreign
principal does not affect the liability of the foreign principal, [Section 10, second paragraph, RA 8042]
64NB LPS – for criminal liability, in case of natural persons – principals, accomplices and accessories
may be held liable. In case of juridical persons, the officers having control, management or direction of
their business shall be liable (RA 8042, Sec. 6; Omnibus Rules and Regulations implementing Migrant Workers
and Overseas Filipino Act of 1995, sec. 11)
36
recruiting agency have to be registered with the POEA.65

3. EFFECT of absence of employment contract, special power of attorney and affidavit
of responsibility, as required by the POEA rules and regulations to the private
employment agency and the principal: Non-compliance with POEA Rules and
Regulations **cannot be utilized to relieve the agency and its principal from
liability. In fact, such non-compliance is a **GROUND for the CANCELLATION
OR SUSPENSION of their license (Hornales v. NLRC, et al., 10 September 2001).
65 Q: A was approached for possible overseas deployment to Dubai by X, an interviewer of job

applicants for Alpha Personnel Services, Inc., an overseas recruitment agency. X required A to submit
certain documents (passport, NBI clearance, medical certificate) and to pay P25,000 as processing
fee. Upon payment of the said amount to the agency cashier, A was advised to wait for his visa. After
five months, A visited the office of Alpha Personnel Services, Inc. during which X told him that he
could no longer be deployed for employment abroad. A was informed by the Philippine Overseas
Employment Administration (POEA) that while Alpha Personnel Sendees, Inc. was a licensed
agency, X was not registered as its employee, contrary to POEA Rules and Regulations. Under
POEA Rules and Regulations, the obligation to register personnel with the POEA belongs to the
officers of a recruitment agency. (2010 Bar Question) A. May X be held criminally liable for illegal
recruitment? Explain. (2%) SUGGESTED ANSWER: NO. X performed his work with the knowledge
that he works for a licensed recruitment agency. He is in no position to know that the officers of
said recruitment agency failed to register him as its personnel (People v. Chowdury, 325 SCRA
572 [20Q0] J. The fault not being attributable to him, he may be considered to have apparent
authority to represent Alpha on recruitment for overseas employment. B. May the officers having
control, management or direction of Alpha Personnel Services, Inc. be held criminally liable for
illegal recruitment? Explain. (3%) SUGGESTED ANSWER: Yes. Alpha, being a licensed
recruitment agency, still has obligations to A for processing his papers for overseas employment.
Under Section 6(m) of Rep. Act No. 8042, failure to reimburse expenses incurred by the worker in
connection with his documentation and processing for purposes of deployment, in cases where the
deployment does not actually take place without the worker’s fault, amounts to illegal recruitment.
37
POSSIBLE ACTIONS66 RELATED TO ILLEGAL RECRUITMENT

*Basis: the contract of employment has already been perfected (even if no
departure took place), hence, certain rights and obligations have been created, the
breach of which may give rise to a cause of action against the erring party:
1. ADMIN. File a complaint for Recruitment Violation for failure to deploy
the recruit within the prescribed period without any valid reason (when no
departure took place)—ground for the imposition of administrative sanctions
under Section 2, Rule I, Part V of the 2003 POEA Rules on Employment of
Seafarers.
2. CRIMINAL. File a case for illegal recruitment under Section 6(L) of Rep.
Act No. 8042 (cf: Section 11 Rule I, Part V of the 2003 POEA Rules on
Employment of Seafarers)
3. CIVIL. File a complaint for breach of contract, and claim damages before the
NLRC, despite absence of employer-employee relationship. Section 10 of
Rep. Act No. 8042 conferred jurisdiction on the Labor Arbiter not only on claims
arising out of EER, but also by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and
other forms of damages. (Santiago vs. CF Sharp Crew Management, 527 SCRA
165 [2007]).
Remedies under the Migrant Workers Act and how may they be enforced:
CRIMINAL ACTIONS
RTC
Province or city:
1.Where the offense was committed; or
2.Where the offended party actually resides at the time of the commission of the offense
66 Q: On December 12, 2008, A signed a contract to be part of the crew of ABC Cruises, Inc. through
its Philippine manning agency XYZ. Under the standard employment contract of the Philippine
Overseas Employment Administration (POEA), his employment was to commence upon his actual
departure from the port in the point of hire, Manila, from where he would take a flight to the USA to
join the cruise ship “MS Carnegie”. However, more than three months after A secured his exit
clearance from the POEA for his supposed departure on January 15,2009, XYZ still had not
deployed him for no valid reason. Is A entitled to relief ? Explain. (3%) (2010 Bar Question)
SUGGESTED ANSWER: YES. Even if no departure took place, the contract of employment has
already been perfected which creates certain rights and obligations, the breach of which may give rise to
a cause of action against the erring party: (1) A can file a complaint for Recruitment Violation for
XYZ’s failure to deploy him within the prescribed period without any valid reason, a ground for the
imposition of administrative sanctions against XYZ under Section 2, Rule I, Part V of the 2003 POEA
Rules on Employment of Seafarers. (2) At the same time, A can file a case for illegal recruitment under
Section 6(L) of Rep. Act No. 8042 (cf: Section 11 Rule I, Part V of the 2003 POEA Rules on
Employment of Seafarers) (3) A may likewise file a complaint for breach of contract, and claim
damages therefore before the NLRC, despite absence of employer-employee relationship. Section 10 of
Rep. Act No. 8042 conferred jurisdiction on the Labor Arbiter not only on claims arising out of EER,
but also by virtue of any law or contract involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of damages. (Santiago vs. CF Sharp Crew
Management, 527 SCRA 165 [2007]).
38
MONEY CLAIMS
NLRC
ORIGINAL AND EXCLUSIVE jurisdiction to hear and decide claims **arising out of an EER or
by virtue of **any law or contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.
• The liability of the principal/ER and the recruitment/placement agency for any and all claims shall be
JOINT AND SEVERAL.
• The performance bond to be filed by the recruitment/placement agency shall be answerable for
all money claims or damages that may be awarded to the workers.
• If the recruitment/placement agency is a juridical being, the corporate officers and directors
and partners as the case may be, shall themselves be JOINTLY AND SOLIDARILY liable
with the corporation or partnership for the claims and damages.
ADMINISTRATIVE ACTIONS
POEA
ORIGINAL AND EXCLUSIVE jurisdiction to hear and decide:
1. All cases which are **administrative in character, involving or arising out of **violations of
rules and regulations relating to licensing and registration of recruitment and employment agencies or entities and
2. **Disciplinary action (DA) cases and other special cases which are administrative in character,
involving ERs, principals, contracting partners and Filipino migrant workers.
a. It may be filed with the POEA Adjudication Office or the DOLE/POEA regional office
of the place where the complaint applied or was recruited at the option of the complainant. The
office with which the complaint was first filed shall take cognizance of the case.
b. **DA cases and other special cases shall be filed with POEA Adjudication Office.
*The private employment agency (recruiter) is obliged to assume joint and
solidary liability with the employer.67
ON COMPROMISE AGREEMENTS
1. Are compromise agreements on money claims allowed? YES. **Consistent
with the POLICY ENCOURAGING AMICABLE SETTLEMENT of labor
disputes, Sec. 10 of R.A. 8042 allows RESOLUTION BY COMPROMISE of
cases filed with the NLRC.
2. Requirement for validity: What is the requirement in order that a compromise
67*NB LPS - Q. Prieto, Canlilio, and Azuela were recruited by AR and Sons Corp. to work for Saudi
Services and Operating Co. for 24 months with contracts approved by the POEA. They were later on,
coerced to sign another contract reducing their salaries which was not approved by the POEA when
they arrived in the middle east. They refused and by reason of such refusal, they were not given any
work and were summarily dismissed and repatriated to the Philippines.  
a) Are the Ees in this case, entitled to pay although they did not render any service? Yes, the
principle of “no work, no pay” does not apply in this case. The fact that they did not work at
the jobsite was not of their own doing. They were justified in refusing to sign the contract lowering
their salaries in violation of their agreement as approved by the POEA. They had the right to insist on
the higher salaries agreed upon the original contract. (ALCANTARA)
b) Is AR and Sons International Corp. liable for the claims? A. Yes. A private employment
agency is obliged to assume joint and solidary liability with the Er for all the claims and liabilities that
may have arisen in connection with the implementation of the contract including but not limited to
payment of wages, health and disability compensation and repatriation (Prieto et al. v. NLRC, 10
September 1993).
39
agreement involving labor standards cases be considered duly executed? Such

compromise agreement should be*****
a. voluntarily agreed upon by the parties
b. with the assistance of the Bureau of Labor Relations or the regional
office of the Department of Labor and Employment. (Art. 227, Labor Code)
3. Period as to when any compromise/amicable settlement or voluntary
agreement on money claims inclusive of damages shall be paid: **WITHIN
FOUR MONTHS from the approval of the settlement by the appropriate authority.
RULE ON OVERTIME (OT) & LEAVE PAY

1. Are overtime and leave pay included in the computation of the monetary
award? NO. The word “salaries” in Sec. 10(5) of the LC **does not include OT
and leave pay. For seafarers, DO No. 33, series of 1996, provides a Standard
Employment Contract of Seafarers, in which
a. **salary is understood as the basic wage, exclusive of OT, leave pay
and other bonuses;
b. whereas OT pay is compensation for all work “performed” IN
EXCESS of the regular 8 hours, and
b. holiday pay is compensation for any work “performed” on designated
REST DAYS AND HOLIDAYS (Serrano v. Gallant Maritime Services, March 24,
2009).
A5.a. Solidary Liability

*provided above.
A5.b. Theory of Imputed Knowledge

1. What is the THEORY OF IMPUTED KNOWLEDGE? A **rule in insurance law
that **ANY INFORMATION MATERIAL to the transaction, either
**possessed BY THE AGENT at the time of the transaction or acquired by him before its
completion, is **DEEMED TO BE THE KNOWLEDGE OF THE PRINCIPAL, at least
so far as the transaction is concerned, **even though in fact the knowledge is not
communicated to the principal at all (Leonor v. Filipinas Compania, 48 OG 243).
2. The theory does not work the other way around—The knowledge of the
40
principal-foreign ER cannot be imputed to its agent.68

—————————————————
A6. Termination of contract of migrant worker without just or valid cause
Pre-termination of contract of migrant worker

1. BASIS in computing an employee’s compensation in case of *****premature
termination of contract: a worker dismissed from overseas employment without just,
valid or authorized cause as defined by law or contract is entitled to:69
a. FULL REIMBURSEMENT of his placement fee with interest at 12% per
annum,
b. plus his SALARY for the unexpired portion of his employment
contract.70
68 [] Sunace International Management Services deployed to Taiwan Montehermozo as a domestic

helper under a 12-month contract effective Feb. 1, 1997. The deployment was with the assistance of a
Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd. After her 12-month
contract **expired on Feb. 1, 1998, Montehermozo continued working for her Taiwanese
employer for two more years, after which she returned to the Philippines on Feb. 4, 2000. Shortly after her
return she filed before the NLRC against Sunace, one Perez, the Taiwanese broker, and the
employer-foreign principal alleging that she was jailed for three months and that she was
underpaid. Should Sunace be held liable for the underpayment for the **additional two years that she worked
for her Taiwanese employer under the theory of imputed knowledge? NO. The theory of imputed knowledge
**ascribes the knowledge of the agent, Sunace, to the principal Taiwanese ER, **NOT THE
OTHER WAY AROUND. The knowledge of the principal-foreign ER cannot, therefore, be
imputed to its agent Sunace. There being NO SUBSTANTIAL PROOF that Sunace knew of and consented
to be bound under the 2-year employment contract extension, it cannot be said to be **privy thereto. As such,
it and its owner **cannot be held solidarily liable for and of Montehermozo’s claims arising from
the 2-year employment extension (Sunace v. NLRC, January 25, 2006).
69Q: Peter worked for a Norwegian cargo vessel. He worked as a deckhand, whose primary duty was to
assist in cleaning the ship. He signed a five-year contract starting in 2009. In 2011, Peter’s employers
began treating him differently. He was often maltreated and his salary was not released on time.
These were frequently protested to by Peter. Apparently exasperated by his frequent protestations,
Peter’s employer, a once top official in China, suddenly told him that his services would be
terminated as soon as the vessel arrived at the next port, in Indonesia. Peter had enough money to
go back home, and immediately upon arriving, he filed a money claim with the NLRC against his
former employer’s local agent. Will Peter’s case prosper? (2012 Bar Question): a. Yes, he is entitled to
full reimbursement of his placement fee, with interest at 12% per annum, plus salary for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired portion,
whichever is higher; b. Yes, he is entitled to full reimbursement of his placement fee, with interest at
12% per annum, plus his salary for the unexpired portion of his employment contract for three (3)
months for every year of the unexpired portion, whichever is less; c. Yes, he is entitled to his salaries
for the unexpired portion of his employment contract, plus full reimbursement of his placement fee
with interest at 12% per annum; d. Yes, he is entitled to his salaries for three (3) months for every year
of the unexpired portion of his unemployment contract, plus full reimbursement of his placement fee
with interest at 12% per annum. SUGGESTED ANSWER: a) Yes, he is entitled to his salaries for the
unexpired portion of his employment contract, plus full reimbursement of his placement fee with
interest at 12% per annum [Serrano vs. Gallant Maritime, G.R. No. 167614, March 24, 2009]
70In the old ruling, it is “plus his SALARY for the unexpired portion of his employment contract or
for three months for every year of the unexpired term, whichever is less. (Sec. 7, R.A. 10020, 2010).”
41
[] NB: When a recruitment agency fails to deploy a recruit without valid

reason and without the recruit's fault, the agency is obligated to reimburse the
recruit's **documentary and processing expenses.71
2. Historical overview of (1)(b):
a. Old rule: SALARY for the unexpired portion of his employment contract
or for three months for every year of the unexpired term, whichever is less. (Sec. 7,
R.A. 10020, 2010).
b. In Serrano v. Gallant Maritime Services (March 24, 2009),72 the
clause “or for three months for every year of the unexpired term, whichever
is less” is declared UNCONSTITUTIONAL 73 and awarded the **ENTIRE
71 Q: When a recruitment agency fails to deploy a recruit without valid reason and without the recruit's
fault, the agency is obligated to (A) reimburse the recruit's documentary and processing expenses. (B)
reimburse the recruit’s expenses with 6% interest.(C) pay the recruit damages equivalent to one year’s
salary. (D)find another employer and deploy the recruit within 12 months.
72 Serrano, a seafarer, was hired by Gallant Maritime and Marlow Navigation Co. for 12 months as
Chief Officer. On the date of his departure, he was constrained to accept a downgraded
employment contract for the position of Second Officer, upon the assurance that he would be made Chief
Officer after a month. It was not done; hence, he refused to stay on as Second Officer and was
repatriated to the Phils. He had served only 2 months & 7 days of his contract, leaving an
unexpired portion of 9 months & 23 days. Serrano filed with the LA a Complaint against Gallant
Maritime and Marlow for constructive dismissal and for payment of his money claims. The LA
rendered a favorable decision to Serrano awarding him $8,770.00, representing his salary for 3
months of the unexpired portion of his contract of employment applying R.A. 8042, Sec 10, par. 5:
“Money Claims. - In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of 12% per annum, plus his salaries for the unexpired portion of his employment
contract or for 3 months for every year of the unexpired term, whichever is less.” Is the subject clause
constitutional? NO. The subject clause contains a SUSPECT CLASSIFICATION in that, in the
computation of the monetary benefits of fixed-term EEs who are illegally discharged, it IMPOSES A 3-
MONTH CAP on the claim of OFWs with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local workers with fixed-term employment.
The subject clause SINGLES OUT ONE CLASSIFICATION OF OFWS and burdens it with a peculiar
DISADVANTAGE. The clause is a **violation of the right of Serrano and other OFWs to
EQUAL PROTECTION and right to SUBSTANTIVE DUE PROCESS, for it DEPRIVES HIM
OF PROPERTY, consisting of monetary benefits, without any existing valid governmental purpose.
Furthermore, prior to R.A. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof,
were TREATED ALIKE in terms of the computation of their monetary benefits in case of
illegal dismissal. Their claims were subjected to a UNIFORM RULE of COMPUTATION: their
**BASIC SALARIES MULTIPLIED BY THE ENTIRE UNEXPIRED PORTION of their employment
contracts. The same applies local workers with fixed-term employment. Thus, Serrano is entitled to his salaries
for the entire unexpired period of nine months and 23 days of his employment contract,
pursuant to law and jurisprudence prior to the enactment of RA 8042 (Serrano v. Gallant Maritime
Services & Marlow Navigation Co., Inc., 24 March 2009).
73*NB LPS – Sec. 10 of RA 8042 with the provision that the salaries for the “unexpired portion of the
employment contract or three months for every year of the unexpired term” was declared
unconstitutional in Serrano. For some reason, the same provision was found in the amendatory law, Sec.
7 of RA 10022. This same provision was again declared to be unconstitutional in the case of Sameer.
42
unexpired portion74 of the employment contract to the OFW.

c. Nonetheless, Sec. 7 of R.A. 10022 amended Sec. 10 of the Migrant
Workers Act, and once again REITERATED the provision of awarding the
unexpired portion of the employment contract or three months for every year
of the unexpired term, whichever is less (Skippers United Pacific, Inc. v. Doza,
February 8, 2012).
d. Harmonization: the declaration in March 2009 of the
unconstitutionality of the clause “or for three months for every year of the
unexpired term, whichever is less” in RA 8042 shall be given RETROACTIVE
effect to the termination that occurred in January 1999 **BECAUSE AN
UNCONSTITUTIONAL CLAUSE IN THE LAW CONFERS NO RIGHTS,
IMPOSES NO DUTIES AND AFFORDS NO PROTECTION. The unconstitutional
provision is INOPERATIVE, as if it was not passed into law at all (Yap v.
Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., May 30, 2011).
PENALTIES FOR ILLEGAL RECRUITMENT

*Consequence of conviction for illegal recruitment:
PENALTIES (Under R.A. 10022)
Offender / Offense Penalty
1. Life imprisonment; 2. plus fine of P2M-P5M **Provided
Illegal recruitment as economic that maximum penalty shall be imposed if: a. person illegally
sabotage recruited is below 18 years of age or b. Illegal recruitment is
committed by a non-licensee/non-holder
Any person found guilty of illegal
12 yrs. and 1 day to 20 yrs. imprisonment; or Fine: P1M-P2M
recruitment
74 Joy was deployed to work for Taiwan Wacoal, Co. Ltd. on June 26, 1997 for 1 year. She alleged that
Sameer Overseas Agency required her to pay a placement fee of P70,000.00. On July 14, 1997,
Mr. Huwang of Wacoal informed Joy, without prior notice, that she was terminated and was given
a salary from June 26 to July 14, 1997 only. Joy filed a complaint for illegal dismissal with the NLRC.
She asked for the return of her placement fee, the withheld amount for repatriation costs,
payment of her salary for 23 months as well as moral and exemplary damages. The NLRC ruled that Joy
was illegally dismissed and awarded her three months’ worth of salary, the reimbursement of the cost of
her repatriation, and attorney’s fees. Should Joy be awarded three months’ worth of salary and
reimbursement of the cost of her repatriation? NO. Joy is **entitled to her salary for the
UNEXPIRED portion of her contract, in accordance with Section 10 of Republic Act No. 8042.
Since she started working on June 26, 1997 and was terminated on July 14, 1997, Joy is entitled to her
salary from July 15, 1997 to June 25, 1998. Furthermore, there is an IMPLIED STIPULATION in
contracts between the placement agency and the overseas worker that in case the overseas worker
is adjudged as entitled to reimbursement of his or her placement fees, the amount shall be subject to a 12%
interest per annum. This implied stipulation has the effect of removing awards for reimbursement
of placement fees from Circular No. 799’s coverage. However, **if judgment did not become final
and executory before July 1, 2013 and there was no stipulation in the contract providing for a different
interest rate, other money claims under Section 10 of Republic Act No. 8042 shall be subject to the 6%
interest per annum in accordance with Circular No. 799 (Sameer Overseas Placement Agency v. Cabiles, 5
August 2014).
43
Any person found guilty of the 6 yrs. and 1 day to 12 yrs. imprisonment; or Fine of P500K -
prohibited acts P1M
Licensee/holder of authority violates
2-5 yrs. imprisonment; or Fine: P10K - P50K; or both
provisions
Non-licensee/non-holder of authority
4-8 yrs. imprisonment; or Fine: P20K - P100K; or both
violates provisions
Corporation, partnership, association,
Penalty imposed upon **officer/s responsible for violation
or entity
Penalties prescribed under RA 10022, + **Deportation
Alien without further proceedings
AUTOMATIC REVOCATION of license or authority and all
**In every case permits and privileges of the recruitment or manning
agency, lending institutions, training school or medical clinic
PERIODS
Mandatory Period for Resolution of Illegal Recruitment Cases
The preliminary investigations of cases under R.A. 10022 shall be **terminated within a period of 30
calendar days from the date of their filing.
If the PI is conducted by a
If the PI is conducted by a judge and a prima facie
prosecution officer and a prima facie
case is found to exist
case is established
Information shall be filed in court w/in 24
Prosecution officer **within 48 hours from the date of
hours from the termination of the
receipt of the records of the case. (Sec. 11)
investigation
Prescriptive Period for Illegal Recruitment Cases
Simple Illegal Recruitment Economic Sabotage
Within **5 yrs. from the time illegal Within **20 yrs. from the time illegal recruitment has
recruitment has happened happened. (Sec. 12,R.A. 8042)
—————————————————
A7. Direct Hiring

1. What is direct hiring? When an ER hires a Filipino worker for OVERSEAS
employment WITHOUT going through the
a. POEA or
b. entities authorized by the SOLE.
2. Is there a ban on direct hiring?
44
*GR:75 An ER may only hire Filipino worker for overseas employment

through POEA or entities authorized by DOLE.
*****XPNs:
a. Direct hiring by
i. members of the diplomatic corps,
ii. international organizations and
iii. such other employers as may be allowed by the DOLE.
b. Name hires: Name hire is the term used to denote OFWs who found
jobs abroad directly **without the assistance of employment agencies. While
they are expected to bypass payment of placement fees, they are **still required
to register at the POEA office to be processed as legal OFW.
3. Purposes of the prohibition on direct hiring:
a. To ensure the best possible terms and conditions of employment for
the worker;
b. To assure the foreign ER that he hires only qualified Filipino workers;
c. To ensure FULL REGULATION of employment in order to avoid
EXPLOITATION.
—————————————————
B. Regulation of Recruitment and Placement Activities
RECRUITMENT AND PLACEMENT (R&P)

1. Any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring
workers; and
75 Q: TRUE or FALSE. As a general rule, direct hiring of Overseas Filipino Workers (OFWs) is not
allowed. (2%) (2010 Bar Question) SUGGESTED ANSWER: TRUE. Art. I5 of the Labor Code
provides that no employer may hire a Filipino worker for overseas employment except through
the Boards and entities authorized by the Department of Labor and Employment (DOLE)
except direct-hiring by members of the diplomatic corps, international organizations and such other
employers as may be allowed by the DOLE. Another exemption is ‘‘Name Hire,” which refers to a
worker who is able to secure an overseas employment opportunity with an employer without the
assistance or participation of any agency.
45
2. **Includes referrals,76 contact services, promising or advertising77 for

employment, locally or abroad, whether for profit or not [LC, Art. 13 (b)].
*NB LPS
ESSENTIAL ELEMENTS WON ONE IS ENGAGED IN R&P

It must be shown that:
1. The accused gave the complainant the **distinct impression that she had
the power or ability to send the complainant for work,
2. Such that the latter was convinced to part with his money in order to be so
employed (People v. Goce, G.R. No. 113161, 29 August 1995).
PERSONS **DEEMED ENGAGED IN R&P (2 or more)

1. Any person or entity which, in any manner, offers or promises for a fee employment
to 2 or more persons [LC, Art. 13(b)].
2. CONSTITUTION OF R&P: **Regardless of the number of persons dealt
with, recruitment and placement is still constituted. The proviso merely lays down
a rule of evidence that **where a fee is collected in consideration of a
promise or offer of employment to 2 or more prospective workers, the
individual or entity dealing with them shall be DEEMED to be engaged in the
76 Q. A, B, C, and D filed a complaint for Illegal recruitment against X. In his defense, X contends that
it was the complainants who asked him for help and that being a good neighbor that he was, he merely
referred them to the agency because he knew the owner. May X be held guilty of Illegal Recruitment?
A. Yes, the act of referring the private complainants constitutes the recruitment defined in Art. 13(b)
of the LC. Referral is “the act of passing along or forwarding of an applicant for employment after an
initial interview of a selected applicant for employment to a selected employer, placement officer or
bureau (Rodolfo v. People, GR no. 146964, 10 August 2006).
77 Q: Marino Palpak, Eddie Angeles and Jose Berdugo advertised in the Manila Bulletin the following
information: “Teachers wanted for Egypt. Apply at No. 123 Langit. Manila." Salvacion Inocente
applied and was made to pay minimal fees to cover administrative expenses and the cost of her
passport and visa. For one reason or another, Salvacion did not get the job and filed a complaint
with the POEA. Marino, Eddie and Jose admitted having no license or authority but claimed that
they are not covered by the Labor Code since they are not engaged in the recruitment and
placement for profit and, at any rate, only one prospective worker was involved. May Marino, Eddie
and Jose be prosecuted? If so, for what specific offense/s? SUGGESTED ANSWER: Marino Eddie
and Jose can be prosecuted. Recruitment and placement by persons without a license or
authority constitute illegal activities. Marino, Eddie and Jose were engaged in recruitment and
placement when they advertised that 20 teachers were wanted to Egypt. Advertising for
employment is one of the acts considered as recruitment and placement in the Labor Code. That
they were not engaged in recruitment and placement for profit does not mean that the conditions for a
person to engage in recruitment and placement found in the Labor Code are not applicable to them.
The Code applies to any recruitment or placement, whether for profit or not. The fact that only
one prospective worker was involved does not mean that they were not engaged in recruitment or
placement. They were. The reference in the Code that any person who offers employment to “two or
more persons” as being engaged in recruitment and placement does not mean that there must be at
least two persons involved. This reference is merely evidentiary. They may be prosecuted for these
specific offenses: They already charged fees even if they have not yet obtained employment for the
applicant.
46
act of recruitment and placement. The words "shall be deemed" create that
PRESUMPTION (People v. Panis, 11 July 1986).
PERSONS/ENTITIES THAT MAY ENGAGE IN R&P

1. GR: No person or entity other than the public employment offices, shall
engage in the recruitment and placement of workers.
2. XPNs:
a. Construction contractors if authorized by the DOLE and Construction
Industry Authority
b. Other persons or entities as may be authorized by the SOLE
c. Members of the diplomatic corps (but hiring must go through POEA)
d. Public employment offices
e. Private recruitment offices: It is any person or association engaged in
the recruitment and placement of workers **without charging any fee, directly
or indirectly, from the workers or ERs.
f. Private employment agencies: Any person or entity engaged in the
recruitment and placement of workers **for a fee which is charged, directly or
indirectly, from the workers or ERs or both (LC, Art. 13).78
g. POEA
h. Shipping or manning agents or representatives
i. Name hires [Omnibus Rules and Regulations implementing the Migrant
Workers and Overseas Filipinos Act of 1995 as amended by R.A. 10022, Rule II,
Sec. 1(i)]. **Name hires are individual workers who are able to secure
contracts for overseas employment opportunities with ERs without the
assistance or participation of any agency (Omnibus Rules and Regulations
implementing the Migrant Workers and Overseas Filipinos Act of 1995 as
amended by R.A. 10022, Rule II).
OVERSEAS EMPLOYMENT
1. It is the employment of a worker outside the Philippines.
2. Overseas Filipino Worker (OFW): a person who is to be engaged, is engaged
or has been engaged in a remunerated activity:
a. in a State of which he or she is not a citizen or
b. on board a vessel navigating the foreign seas other than a government ship
used for military or non-commercial purposes or
c. on an installation located offshore or on the high seas [Omnibus Rules
78 Q: Which phrase is the most accurate to complete the statement – A private employment agency is
any person or entity engaged in the recruitment and placement of workers; (2012 Bar Question) a. For
a fee, which is charged directly from the workers. b. For a fee, which is charged directly from employers.  
c. For a fee, which is charged directly or indirectly from workers, employers or both. d. For a fee,
which is charged from workers or employers, which covers both local and overseas employment.
SUGGESTED ANSWER: c) For a fee, which is charged directly or indirectly from workers, employers
or both [Art. 13 (c), Labor Code]
47
and Regulations Implementing Migrant Workers Act as amended by R.A. 10022

(2010), Rule II, Sec.1(jj)].
**The term “OFW” is to be used interchangeably with “migrant
worker” as provided in R.A. 10022.
3. SEAFARER: refers to any person who is employed or engaged in overseas
employment in any capacity on board a ship other than a government ship used for
military or non-commercial purposes.
**The definition shall include fishermen, cruise ship personnel and
those serving on mobile offshore and drilling units in the high seas. [Omnibus
Rules and Regulations Implementing Migrant Workers Act as amended by R.A.
10022 (2010), Rule II, Sec. 1(ss)]
4. EMIGRANT: any person, worker or otherwise, who emigrates to a foreign
country **by virtue of an immigrant visa or resident permit or its equivalent
in the country of destination (LC, Art. 13).
PRIVATE SECTOR PARTICIPATION IN THE RECRUITMENT AND

PLACEMENT OF WORKERS
1. Entities in the private sectors that can participate in recruitment and
placement of workers
a. Shipping or manning agents or representatives
b. Private recruitment offices
c. Public employment offices
d. Construction contractors if authorized by the DOLE and Construction
Industry Authority.
e. Persons that may be authorized by the SOLE
f. Private employment agencies (IRR of the LC, Book I, Rule VII, Sec. 1).
2. **Qualifications for participation in recruitment and placement of
workers
a. Filipino citizens, or partnerships or corporations with *****at least
75% of the authorized capital stock is owned and controlled by Filipino
79
79[] Bar 2002: Is a corporation, 70% of the authorized and voting capital of which is owned and
controlled by Filipino citizens, allowed to engage in the recruitment and placement of workers, locally
or overseas? NO. Art. 27 LC requires at least 75% :)
48
citizens; (LC, Art. 27)80

b. Capitalization
i. Single proprietorship or partnership: minimum capitalization of P2M
ii. Corporation: minimum **paid-up capital of P2M.
c. Not otherwise disqualified by law or other government regulations to
engage in the recruitment and placement of workers for overseas employment
(POEA Rules, Part II, Rule I).
d. Payment of registration fees
e. Posting of surety/cash bonds
3. Regulation of the private sector’s participation in the recruitment and overseas
placement of workers: by setting up a licensing and registration system (Sec.
14, R.A. 10022, Sec. 14).
4. Persons and entities disqualified to engage in the business of recruitment and
placement of workers*****
a. Travel agencies and sales agencies of airline companies; (LC, Art. 26).
They are prohibited from engaging in the business of recruitment and placement
of workers for overseas employment whether for profit or not. [Art 26];81
b. Officers or members of the board of any corporation or members in a
partnership engaged in the business of a travel agency;
c. Corporations and partnerships, when **any of its officers, members of
the board or partners, is also an officer, member of the board or partner of
a corporation or partnership engaged in the business of a travel agency;
d. Persons, partnerships or corporations which have **derogatory records,
such as but not limited to those:
80 A. Rocket Corporation is a domestic corporation registered with the SEC, with 30% of its
authorized capital stock owned by foreigners and 70% of its authorized capital stock owned by
Filipinos. Is Rocket Corporation allowed to engage in the recruitment and placement of workers,
locally and overseas? Briefly state the basis for your answer. (2015 Bar Question) B. When does the
recruitment of workers become an act of economic sabotage? (2015 Bar Question) SUGGESTED
ANSWER: A. No. Article 27 of the Labor Code mandates that pertinently, for a Corporation to validly
engage in recruitment and placement of workers, locally and overseas, at least seventy-five percent
(75%) of its authorized and voting capital stock must be owned and controlled by Filipino
citizens. Since only 70% of its authorized capital stock is owned by Filipinos, it consequently cannot
validly engage in recruitment and placement of workers, locally and overseas. B. Under Section 6(m) of
RA 8042, illegal recruitment is considered economic sabotage if it is committed by a syndicate or is
large scale in scope. It is syndicated illegal recruitment if the illegal recruitment is carried out by three
(3) or more conspirators; and it is large scale in scope when it is committed against three (3) more
persons, individually or as a group.
81[] Bar 2006: WTTA is a well-known travel agency and an authorized sales agent of the PAL. Since
majority of its passengers are overseas workers, WTTA applied for a license for recruitment
and placement activities. It stated in its application that its purpose is not for profit but to help
Filipinos find employment abroad. Should the application be approved? NO. It is prohibited by Art.
26 LC as well as Rule I, Part II of the POEA Rules and Regulations Governing the Recruitment and
Employment of Land-Based Workers (2002) which disqualifies any entity having common director
or owner of travel agencies and sales agencies of airlines, including any business entity from the
recruitment and placement of Filipino workers overseas, whether they derive profit or not.
49
i. Certified to have derogatory record or information by the NBI or

by the Anti-Illegal Recruitment Branch of the POEA;
ii. Against whom probable cause or prima facie finding of guilt
for illegal recruitment or other related cases exists;
iii. Convicted for illegal recruitment or other related cases and/or
crimes involving moral turpitude; and
iv. Agencies whose licenses have been previously revoked or
cancelled by the POEA for violation of R.A. 8042, P.D. 442 as amended and
their IRRs.
e. Any official or EE of the DOLE, POEA, OWWA, DFA and other
government agencies **directly involved in the implementation of R.A. 8042
and/or any of his/her relatives within the **4th civil degree82 of
consanguinity or affinity; and
f. Persons or partners, officers and directors of corporations whose
licenses have been previously cancelled or revoked for violation of
recruitment laws (2002 Rules and Regulations on the Recruitment and
Employment of Land-Based Workers, Rule I, Sec. 2).
FEES TO BE PAID BY WORKERS

1. Instances when a worker may be charged; only when:***
a. He has obtained work through recruiter's efforts,83 and
b. The worker has **actually commenced working
2. A land-based agency may charge and collect from its hired workers a
placement fee in an amount equivalent to 1 month salary, exclusive of
documentation costs (POEA Rules and Regulations, Rule V, Sec. 3). Hence,
**authorized payments that may be collected from a hired worker are:
a. PLACEMENT FEE in an amount equivalent to one month’s salary
of the worker, and
b. DOCUMENTATION COSTS (POEA Rules and Regulations, Rule V, Sec.
3).
LICENSE VS. AUTHORITY

1. How does the law regulate the business of recruitment/placement of workers?
**by requiring them to obtain license and authority.
2. License vs. Authority
82**It is unlawful for any official or EE and their relatives within the 4th civil degree of
consanguinity or affinity from engaging **directly or indirectly in the business of recruiting
migrant workers (R.A. 8042, Sec. 8).
83Q: Which of the following conditions justifies a licensed employment agency to charge and collect
fees for employment assistance? (2011 BAR QUESTION) (A) The recruit has submitted his credentials
to the employment agency. (B) The POEA has approved the agency's charges and fees.(C)The agency's
principal has interviewed the applicant for the job. (D)The worker has obtained employment
through the agency's efforts.
50
LICENSE AUTHORITY
A document issued by DOLE A document issued by the DOLE authorizing a person
authorizing a person or entity to or association to engage in recruitment and placement activities
operate a private **employment agency. as a private **recruitment entity.
3. Persons who may be issued license and authority:
a. Natural persons: must be a Filipino
b. Juridical persons: 75% of the capital and voting stock of which is owned
and controlled by Filipinos.
4. Non-licensee/non-holder of authority: any person, corporation or entity:
a. Which has not been issued a valid license or authority to engage in
recruitment and placement by the SOLE, or
b. Whose license or authority has been suspended, revoked or cancelled
by the POEA or the SOLE
5. NB: *****License or authority are NON-TRANSFERABLE84 (Art. 29, LC).
License or authority is granted on the **basis of PERSONAL qualifications of
the grantee. Thus, it is **BEYOND THE COMMERCE of man.85 Other
permits are transferrable like mining permits.
a. It may be noted that the grant of a license is a governmental act by the
DOLE based on personal qualifications, and citizenship and capitalization
requirements (LC, Arts.27-28).
b. This is why a **change of ownership or relationship of a single
proprietorship licensed to engage in overseas employment shall cause the
**AUTOMATIC REVOCATION of the license.
SUSPENSION OR CANCELLATION OF LICENSE OR AUTHORITY

(ART. 35, LABOR CODE)
1. Who can suspend or cancel license or authority? The Secretary of Labor and
Employment **(SOLE) is vested with power to suspend or cancel any license
84 [] Bar 1998: A recruitment and placement agency declared voluntary bankruptcy. Among its assets
is its license to engage in business. Is the license of the bankrupt agency an asset which can be
sold in public auction by the liquidator? NO, **because of the NON-TRANSFERABILITY of
the license to engage in recruitment and placement. LC provides that:
a. no license to engage in recruitment and placement shall be used directly or indirectly by any
person other than the one in whose favor it was issued
b. **nor may such license be transferred, conveyed or assigned to any other person or entity.
85 Q: A Recruitment and Placement Agency declared voluntary bankruptcy. Among its assets is its
license to engage in business. Is the license of the bankrupt agency an asset which can be sold in public
auction by the liquidator? [5%] (1998 Bar Question) SUGGESTED ANSWER: No, because of the
non-transferability of the license to engage in recruitment and placement. The Labor Code (in
Article 29) provides that no license to engage in recruitment and placement shall be used directly or
indirectly by any person other than the one in whose favor it was issued nor may such license be
transferred, conveyed or assigned to any other person or entity. It may be noted that the grant of a
license is a governmental act by the Department of Labor and Employment ***based on personal
qualifications, and citizenship and capitalization requirements. (Arts. 27-28, Labor Code)
51
or authority to recruit employees for overseas employment.

*NB LPS – The power to suspend or cancel any license or authority to
recruit Ees for overseas employment is *****concurrently vested with the
POEA86 and the DOLE (Trans Action Overseas Corp. v. Secretary of Labor, GR No.
109583, 5 September 1997)
2. GROUNDS for **REVOCATION of license:
a. Incurring an **accumulated 3 counts of suspension by an agency based
on **final and executory orders within the period of validity of its license;
b. Violations of the conditions of license;
c. Engaging in acts of misrepresentation for the purpose of securing a
license or renewal;
d. Engaging in the recruitment or placement of workers to jobs harmful to
the public health or morality or to the dignity of the country (Rules and
Regulations Governing Overseas Employment, Book VI, Rule I, Sec. 3).
3. GROUNDS87 for **SUSPENSION OR CANCELLATION of license
a. Commission of prohibited acts under Art. 34 of LC;
b. Publishing job announcements w/o POEA’s approval;
c. Charging a fee which may be in excess of the authorized amount
before a worker is employed;
d. Deploying workers w/o processing through POEA;
e. Recruitment in places outside its authorized area (POEA Rules, Book
IV, Rule II, Sec. 4);
86Q: The power suspend or cancel a license to recruit employees is vested on: (2012 Bar Question) a.
The Secretary of Labor and Employment; b. The POEA Administrator; c. A and B concurrently; d/
Neither of them. SUGGESTED ANSWER: b. The POEA Administrator [POEA Rules on Overseas
land-based employment {2002}]. TOM chooses (c) based on LPS’s advise :)
87 [] Bar 2004: Concerned Filipino contract workers in the Middle East reported to the DFA that
XYZ, a private recruitment and placement agency, is covertly transporting extremists to terrorist
training camps abroad. Intelligence agencies of the Government allegedly confirmed the report. Upon
being alerted by the DFA, the DOLE issued orders cancelling the licenses of XYZ, and imposing
an immediate travel ban on its recruits for the Middle East. XYZ appealed to the Office of the
President to reverse and set aside the DOLE orders, citing damages from loss of employment of
its recruits, and violations of due process including lack of notice and hearing by the DOLE. The
DOLE in its answer claimed the existence of an emergency in the Middle East which required
prompt measures to protect the life and limb of OFWs from a clear and present danger posed by
the ongoing war against terrorism. Should the DOLE orders be upheld or set aside? SET ASIDE. The
DOLE order cancelling the licenses of XYZ is **VOID because a report that an agency is covertly
transporting extremists is **NOT A VALID GROUND for cancellation of a Certificate of Registration
(LC, Art. 239) and there is FAILURE OF DUE PROCESS as NO HEARING was conducted prior to
the cancellation (LC, Art. 238) ***[More importantly, the cancellation of the license of XYZ requires
notice and hearing. Absent such notice and hearing, the order of cancellation of the Secretary of Labor
and Employment is null and void because of the denial of due process.]. However, the DOLE order
imposing the travel ban is **VALID because it is a valid exercise of **police power to protect
the national interest (Sec. 3, Art. XIII, Constitution on full protection to labor & safety of workers)
and on the **rule making authority of the SOLE (LC, Art. 5; Phil. Ass’n. of Service Exporters v.
Drilon, June 30, 1988).
52
f. If the employment agency **fails to provide the ticket or PTA (pre-paid

ticket advice) within 48 hours from receipt of the notice [R.A. 10022].
4. DEGREE OF PROOF required for suspension of license or authority:
Administrative determinations require **only SUBSTANTIAL PROOF and not
clear and convincing evidence. In proceedings for cancellation or suspension
of license or authority, **no rule requires that testimonies or complaints be
corroborated by documentary evidence, if the charge of unlawful exaction is
substantially proven.
—————————————————
C. Employment of Non-Resident Aliens**

1. Requirements in employment of non-resident aliens: any alien seeking
admission to the Philippines for employment purposes and any domestic or
foreign ER who desires to engage an alien for employment in the Philippines:
a. Shall obtain an **employment permit from the DOLE;88
b. The permit may be issued to a non-resident alien or to the applicant
ER **after a determination of the non-availability of a person in the
Philippines who is competent, able and willing at the time of application to
perform the services for which the alien is desired;89
c. For an enterprise registered in **preferred areas of investments, said
permit may be issued upon recommendation of the government agency
charged with the supervision of said registered enterprise.
2. May a NRA transfer employment after issuance of the employment permit?
NO. The **alien shall not transfer to another job or change his ER without
prior approval of the SOLE.
88Bar: DOLE issued an alien employment permit an American coach, first sports consultant and
assistant coach, then as a full-fledged coach. Can SOLE cancel his employment permit for failing to
show that there is no person in the Philippines who is competent and willing to do said services
nor that his hiring would redound to the national interest? YES. The hiring of a foreign coach is
**NOT an ER's prerogative. Under Art. 40 LC, an ER seeking employment of an alien must first
obtain an employment permit from the DOLE. The right to choose who to employ is **limited by
the statutory requirement of an employment permit (GMC v. Torres, April 22, 1991).
89Q: Phil-Norksgard Company. Inc., a domestic corporation engaged in the optics business, imported
from Sweden highly sophisticated and sensitive instruments for its laboratory. To Install the
instruments and operate them, the company intends to employ Boija Anders, a Swedish
technician sojourning as a tourist in the Philippines. As lawyer of the company, what measures will
you take to ensure the legitimate employment of Boija Anders and at the same time protect Philippine
labor. Discuss fully. (1995 Bar Question) SUGGESTED ANSWER: To ensure the legitimate
employment of Borja Anders, a non -resident alien, I will apply at the Department of Labor and
Employment for the issuance of an employment permit claiming that there is no one in the
Philippines who can do the work that Anders is being asked to do. At the same time, to protect
Philippine labor. 'I will see to it that Anders will have an understudy who will learn by working with
Anders, how to install and operate the highly sophisticated and sensitive instruments from Sweden. To
protect Philippine Labor, the Labor Code provides that the alien employee shall not transfer to
another job or change his employer without prior approval of the Secretary of Labor.
53
RULE ON THE EMPLOYMENT PERMIT REQUIREMENT

1. GR: Only non-resident aliens are required to obtain such permit;
2. XPNs:
a. Diplomatic services and foreign government officials;
b. Officers and staff of international organizations and their legitimate
spouses;
c. Members of governing board who have voting rights only;
d. Those exempted by special laws;
e. Owners and representatives of foreign principals who interview
Filipino applicants for employment abroad;
f. Aliens whose purpose is to teach, present and/or conduct research
studies;
g. Resident aliens (D.O. 75-06).
**Requirement for immigrants and resident aliens: an Alien
Employment Registration Certificate.
DURATION OF EMPLOYMENT PERMIT

1. GR: Minimum of 1 year
2. XPN: If the employment contract, consultancy services, or other modes of engagement
provides otherwise, which **in no case shall exceed 5 years [DOLE D.O.
97-09, Revised Rules for the Issuance of Employment Permits to Foreign
Nationals (2009)].
EMPLOYMENT OF ALIENS IN ENTITIES ENGAGED IN

NATIONALIZED ACTIVITIES
1. GR: Aliens may not be employed engaged in nationalized activities
2. XPNs:**
a. Secretary of Justice specifically authorizes the employment of
**technical personnel;
b. Aliens are elected members of the board of directors or governing
body of corporations or associations engaging in partially nationalized activities
shall be allowed **in PROPORTION to their allowable participation or share
in the capital of such entities [Anti-Dummy Law, as amended by P.D. 715, Sec.
2(A)]; or
c. Enterprises registered under the Omnibus Investment Code in case
of **technical, supervisory or advisory positions, but for a limited period.
54
REMITTANCE OF FOREIGN EXCHANGE EARNINGS

1. GR: It shall be **MANDATORY90 for all OFWs to remit a portion of their
foreign exchange earnings to their families, dependents, and/or beneficiaries ranging
from **50% - 80% depending on the worker's kind of job (POEA Rules,
Book III, Rule VIII).
2. XPNs:*****
a. The worker's IMMEDIATE family members, beneficiaries and
dependents are residing with him abroad;
b. Immigrants and Filipino professionals and EEs working with the UN
agencies or specialized bodies;
c. Filipino SERVICEMEN WORKING IN U.S. MILITARY INSTALLATIONS
(Resolution No. 1-83, Inter-Agency Committee for Implementation of E.O. 857).
3. EFFECT of failure to remit:**
a. Workers: shall be **SUSPENDED OR REMOVED from the list of
eligible workers for overseas employment;
b. Employers: will be EXCLUDED from the overseas employment
program. Private employment agencies (local private employment agencies) shall
face **CANCELLATION OR REVOCATION of their licenses or
authority to recruit (E.O. 857, Sec. 9).
PROHIBITED ACTIVITIES
*Prohibited practices in recruitment/ placement: cf. (R.A. 10022, Sec. 6), supra
90Q: Can an overseas worker refuse to remit his earnings to his dependents and deposit the same in
the country where he works to gain more interests? Explain. 5% (2006 Bar Question)
SUGGESTED ANSWER: No. Art. 22 of the Labor Code provides that it shall be mandatory for all
Filipino workers abroad to remit a portion of their foreign exchange earnings to their families,
dependents and/or beneficiaries in the country in accordance with rules and regulations prescribed by
the Secretary of Labor and Employment. ANOTHER SUGGESTED ANSWER: The answer must be
qualified. While Article 22 of the Labor Code provides that it shall be mandatory for all Filipino
workers abroad to remit a portion of foreign exchange earnings to beneficiaries in the Philippines, such
an imposition can be implemented “in accordance with rules and regulations prescribed by the
Secretary of Labor.” There are currently no rules issued by the Secretary pertaining to Article 22.
There was a mandatory remittance provision in the 1991 POEA Rules and Regulations, but such
provision was deleted in the 2002 POEA Rules and Regulations. The answer is likewise, “no” if the
overseas worker signs an employment contract with a mandatory remittance provision. Such is the case
of seafarers, where the standard practice is to have a provision on mandatory remittance provision
amounting to 80% of their salary. ANOTHER SUGGESTED ANSWER: No. Art. 22 of the Labor
Code provides that it shall be mandatory for all Filipino workers abroad to remit a portion of their
foreign exchange earnings to their families, dependents, and/or beneficiaries in the country in
accordance with the rules and regulations prescribed by the Secretary of Labor and Employment.
Executive Order No. 857 prescribe the percentage of foreign exchange remittance from 50% to 80%
of the basic salary, depending on the worker's kind of job. An overseas worker, therefore, cannot
refuse to remit his earnings.
55
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION

(POEA)
1. PRINCIPAL FUNCTIONS of the POEA:
a. Protection of the right of Filipino workers to fair and equitable
employment practices;
b. Regulation of private sector participation in the recruitment and
overseas placement of workers by setting up a licensing and registration system;
c. Deployment of Filipino workers through Government to Government
hiring;
d. Formulation, implementation, and monitoring of overseas
employment of Filipino workers taking into consideration their welfare and
domestic manpower requirements;
e. Shall inform migrant workers not only of their rights as workers but also
of their rights as human beings, instruct and guide the workers how to assert
their rights and provide the available mechanism to redress violation of their
rights (R.A. 10022, Sec. 14);
f. Implementation, in partnership with other law-enforcement agencies, of an
intensified program against illegal recruitment activities (R.A. 10022, Sec. 14).
2. POWER of the POEA’s to terminate or impose a ban on employment of
migrant workers: The POEA may at ANY TIME TERMINATE OR IMPOSE A
BAN on employment of migrant workers, to do so, **in consultation with the
DFA based on the ff. grounds:
a. In pursuit of the NATIONAL INTEREST; or
b. When PUBLIC WELFARE so requires (R.A. 10022, Sec. 4)
3. REGULATORY AND ADJUDICATORY functions of the POEA:
a. REGULATORY: It regulates the private sector participation in the
recruitment and overseas placement of workers through its licensing and registration system.
b. ADJUDICATORY
i. Administrative cases involving violations of licensing rules and
regulations and registration of recruitment and employment agencies or entities;
ii. Disciplinary action cases and other special cases which are
administrative in character involving employers, principals, contracting partners and
Filipino migrants.
JURISDICTION OF THE LA vs. POEA

Labor Arbiter POEA
56
Original and exclusive jurisdiction over:

Original and exclusive jurisdiction over all 1. All cases which are **administrative in character
claims arising out of **ER-EE relating to licensing and registration of
relationship or **by virtue of any law or recruitment and employment agencies
contract involving OFWs including claims 2. **Disciplinary Action cases and other special
for: 1. Actual; 2. Moral; 3. Exemplary; 4. cases, which are administrative in character,
Other forms of damages (R.A. 8042, Sec. involving EEs, principals, contracting partners and Filipino
10). migrant workers (POEA Rules, Book VII, Rule VII).
1. Matters that fall outside the jurisdiction of the POEA:
a. Foreign judgments: such claim must be brought before regular courts.
**POEA is not a court; it is an administrative agency, exercising adjudicatory or
quasi-judicial functions;
b. Torts: falls under the provisions of the Civil Code.
2. Nuances:
a. Even if there is no EER, NLRC has jurisdiction over a seafarer’s
complaint “by virtue of any law or contract” involving OFWs including claims for
damages. Hence, if the case involves an employment contract, the claims therein
are cognizable by the LA.91
b. The initial burden of proof falls on the heirs of the claimant. But once
the employer establishes his defense by substantial evidence, the burden of
91 [] A seafarer was prevented from leaving the port of Manila and refused deployment without
valid reason. His POEA-approved employment contract provides that the employer-employee
relationship (EER) shall **commence only upon the seafarer's actual departure from the port
in the point of hire. Is the seafarer entitled to relief under the Migrant Workers’ Act, in the absence
of an employer-employee relationship? YES. **Despite the absence of an EER, the NLRC has
jurisdiction over the seafarer's complaint. The jurisdiction of LAs is not limited to claims arising
from EER. Sec. 10 of the Migrant Workers Act provides that the **LAs shall have jurisdiction over
claims arising out of an EER or by virtue of **ANY LAW OR CONTRACT involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages. Since the present case involves the EMPLOYMENT CONTRACT entered into by
petitioner for overseas employment, his claims are cognizable by the LAs of the NLRC (Santiago v.
CF Sharp Crew Management, 10 July 2007).
57
evidence now falls on the heirs, say, on their counter-defense.92
MINIMUM CONDITIONS/provisions of overseas employment contracts

1. GUARANTEED WAGES for regular hours and OT, **not lower than the minimum
wage prescribed in all of the following:
a. The host country;
b. Bilateral agreements or international conventions ratified by the host country
and the Philippines;
c. The Philippines
2. FREE TRANSPORTATION to and from the worksite or offsetting benefit;
3. FREE FOOD AND ACCOMMODATION or offsetting benefit;
4. JUST/AUTHORIZED CAUSES OF TERMINATION of the contract or
services of the worker
[] NB: An agreement that DIMINISHES the EEs' pay and benefits as
contained in a POEA-approved contract is **VOID, unless such subsequent
agreement is approved by the POEA.
ON THE DEPLOYMENT OF OFW’s

*The State shall allow the deployment of OFWs:
1. Only in countries where the RIGHTS of Filipino migrant workers are protected;
2. To VESSELS navigating the foreign seas or to installations located offshore or
on high seas whose owners/ERs are compliant with international laws and
standards that protect the rights of migrant workers;
3. To companies and contractors with international operations: Provided, That
they are COMPLIANT WITH STANDARDS, CONDITIONS AND
REQUIREMENTS, as embodied in the employment contracts prescribed by the
92 [] Apolinario Siador was claiming death benefits from a local manning agent, Agile Maritime
Resources (Agile) for allegedly, his son, Dennis, fell from the vessel and died in the high seas. Siador
claims that Dennis was suffering with mental disability days prior to the incident. Agile claimed that
Dennis willfully took his life by jumping overboard. A life ring was immediately thrown into the
water by the vessel’s crew but Dennis float on his back and made no efforts to swim towards the
life ring. Under the Philippine Overseas Employment Administration Standard Employment Contract
(POEA-SEC), the employer is not liable for the compensation if the death is directly attributable to
the seafarer. Does Agile able to prove by substantial evidence that Dennis willfully took his life by jumping
overboard thus **shifting the burden on Apolinario to prove by substantial evidence that Dennis was
insane at the time of incident? YES. Unarguably, Apolinario has discharged his burden of proof.
Since Apolinario has initially discharged his burden of proof, Agile, in order to avoid liability, must
similarly establish their defense. If they are **able to establish their defense by SUBSTANTIAL
EVIDENCE, the burden now rests on Apolinario to overcome the employer's defense. In other
words, the **burden of evidence now shifts to the seafarer's heirs. Since the POEA-SEC requires
the employer to prove not only that the death is DIRECTLY ATTRIBUTABLE to the seafarer himself but
also that the seafarer willfully CAUSED HIS DEATH, evidence of insanity or mental sickness may be
presented to negate the requirement of willfulness as a matter of counter-defense. In this case,
**Agile sufficiently established that Dennis willfully caused his death while Apolinario’s evidence
fell short of substantial evidence to establish its counter-defense of insanity (Agile v. Siador, 1 October
2014).
58
POEA and in accordance with INTERNATIONALLY-ACCEPTED STANDARDS (R.A.

10022 amending R.A. 8042, Sec. 3).
GUARANTEES OF THE RECEIVING COUNTRY93 FOR THE

PROTECTION OF THE RIGHTS OF OFW’s
1. It has existing labor and social laws PROTECTING the rights of workers,
including migrant workers;
2. It is a SIGNATORY to and/or a RATIFIER of multilateral conventions,
declarations or resolutions relating to the protection of workers, including
migrant workers; and
3. It has **concluded a BILATERAL agreement or arrangement with the
government on the protection of the rights of OFWs (R.A. 10022 amending
R.A. 8042, Sec. 3).
[] Provided, that the receiving country is taking positive, concrete
measures to protect the rights of migrant workers in furtherance of any of the guarantees.
*****In the absence of a clear showing that any of the guarantees exists in
the country of destination of the migrant workers, NO PERMIT for deployment
shall be issued by the POEA.
ON THE REPATRIATION OF A WORKER

1. GR: The repatriation of the:
a. Worker and the transport of his personal belongings: shall be the
**PRIMARY RESPONSIBILITY OF THE AGENCY which recruited or
deployed the worker overseas;
b. Remains and transport of the personal belongings of a deceased worker
and ALL COSTS attendant thereto: shall be **borne by the PRINCIPAL and/
or the LOCAL AGENCY.
2. XPNs:
a. If the termination of employment is **DUE SOLELY TO THE
FAULT of the worker, the principal/ER/agency shall not be responsible for the
repatriation of the former and/or his belongings;
b. In cases of war, epidemic, disaster or calamities, NATURAL OR
MAN-MADE, and other similar event, and **where the principal or
recruitment agency cannot be identified, the Overseas Workers Welfare
Administration **(OWWA), in coordination with appropriate international agencies, shall
93 Q: The State shall allow the deployment of overseas Filipino Workers only in countries where the
rights of Filipino migrant workers are protected. Which of the following is not a guarantee, on the part
of the receiving country, for the protection of the rights of OFW’s? (2012 Bar Question): a. It has
existing labor and social laws protecting the rights of migrant workers; b. It promotes and facilitates re-
integration of migrants into the national mainstream; c. It is a signatory and/or ratifier of multilateral
conventions, declarations or resolutions relating to the protection of migrant workers; d. It has
concluded a bilateral agreement or arrangement with the government on the protection of the rights of
overseas Filipino workers. SUGGESTED ANSWER: b. It promotes and facilitates re-integration of
migrants into the national mainstream. [Sec. 4 of RA 8042 as amended by Sec. 3 of RA 10022]
59
take charge of the repatriation (R.A. 8042, Sec. 15).

3. MANDATORY REPATRIATION of **underage migrant workers: Upon
discovery or being informed of the presence of migrant workers whose ages fall
below the minimum age requirement for overseas deployment, the
RESPONSIBLE OFFICERS IN THE FOREIGN SERVICE shall
**WITHOUT DELAY repatriate said workers and advise the DFA through the
FASTEST means of communication available of such discovery and other
relevant information.
*NB: The license of a recruitment/manning agency which recruited or
deployed an underage migrant worker shall be **AUTOMATICALLY
REVOKED and shall be imposed a **fine of not less than P500,000 but not
more than P1,000,000 (Sec. 9, R.A. 10022).
GROUNDS FOR DISCIPLINARY ACTION of OFWs

*Under R.A. 8042, these are:
1. Prostitution;
2. Unjust refusal to depart for the worksite;
3. Gunrunning or possession of deadly weapons;
4. Vandalism or destroying company property;
5. Violation of the laws and sacred practices of the host country and unjustified
breach of employment contract;
6. Embezzlement of funds of the company or fellow worker **entrusted for
delivery to relatives in the Phils.
7. Creating trouble at the worksite or in the vessel;
8. Gambling;
9. Initiating or joining a strike or work stoppage where the laws of the host
country prohibits strikes or similar actions;
10. Commission of **felony punishable by Philippine laws or by the host
country;
11. Theft or robbery;
12. Drunkenness;
13. Drug addiction or possession or trafficking of prohibited drugs;
14. Desertion or abandonment
60
*Compare the prohibited acts under the POEA rules.94

—————————————————
D. Training and Employment of Special Workers

D1. Apprentices & Learners
ON APPRENTICES
1. Apprenticeship: It is practical training95 on the job supplemented by related
theoretical instruction96 involving a contract between an apprentice and an
ER on an approved apprenticeable occupation.
94 Q: Cite five grounds for disciplinary action by the Philippine Overseas Employment
Administration (POEA) against overseas workers. (2007 Bar Question) SUGGESTED ANSWER:
Under the Section 1(A) and (B), Rule III, Part VII of the 2002 POEA Rules and Regulations
Governing the Recruitment and Employment of Land-based Overseas Workers, the following are the
grounds for disciplinary action against overseas workers:
A. Pre-Employment Offenses: 1. Using, providing, or submitting false information or documents for
purposes of job application or employment; 2. Unjustified refusal to depart for the worksite after all
employment and travel documents have been duly approved by the appropriate government agency/ies.  
B. Offenses during Employment: 1. Commission of a felony o rcrime punishable by Philippine Laws
or by the laws of the host country; 2. Unjustified breach of employment contract; 3. Embezzlement of
company funds or monies and/or properties of a fellow worker entrusted for delivery to kin or
relatives in the Philippines; and 4. Violation/s of the sacred practices of the host country.
Further, under Section 1(A) and (B), Rule II Part VI of the 2003 Rules and Regulations
Governing the Recruitment and Employment of Seafarers, the following are the grounds for
disciplinary action against seafarers:
A. Pre-Employment Offenses: 1. Submission/furnishing or using false information or documents or
any form of misrepresentation for the purpose of job application or employment; 2. Unjust refusal to
join ship after all employment and travel documents have been duly approved by the appropriate
government agencies.  
B. Offenses During Employment: 1.Smuggling or violation of any custom rules and regulations of the
Philippines and foreign port; 2. Desertion; 3. Absence without leave; 4. Sleeping on post while on duty;
5. Insubordination; 6. Drunkenness; 7. Creating trouble outside the vessel’s premises; 8. Gambling; 9.
Violation of company policies and regulations; 10.Incompetency and inefficiency; 11. Inciting mutiny,
malicious destruction of ship’s; 12.property or any activity which will hamper the efficient operation of
the vessel; 13. Concerted action to breach approved contracts; 14. Any activity which tends to destroy
harmonious relationship of the company; 15. Grave abuse of authority; 16.Other gross misbehaviors
prejudicial to good order and discipline; 17. Negligence causing damage, loss, spoilage or deterioration
of vessel’s stocks and property;18.Connivance with or cuddling of stowaway; 19.Willfully making false
statements, reports, certification or spurious seafarer’s documents for personal gain with or with intent
to misled or defraud the company 20.Any other case as to cast aspersion on the good name of the
company and vessel; 21.Violation of safety and environmental rules/ regulations; and 22.Failure to
observe the drug and alcohol policy of the company.
95*NB LPS – “apprenticeship” means practical training on the job supplemented by related theoretical
instructions involving apprenticeable occupations and trades as may be approved by TESDA (LC,
Art. 58, Par. A; IRR of the LC, Book II, Rule VI, Sec. 2).
96Q: The apprenticeship program should be supplemented by theoretical instruction to be given by
(A) the apprentice's school only where the apprentice is formally enrolled as a student. (B) the
employer if the apprenticeship is done in the plant. (C) the civic organizations that sponsor the
program. (D) the Department of Labor and Employment.
61
a. PRIOR APPROVAL97 by TESDA98 (formerly DOLE) of the proposed

apprenticeship program is a **condition sine qua non. Otherwise, an apprentice
becomes a regular EE (Nitto Enterprises v. NLRC, 248 SCRA 654).
2. Apprentice: Any worker who is covered by a written apprenticeship
agreement with an individual ER or any of the entities recognized under the LC.
3. Rule on apprenticeship programs:
*GR: Apprenticeship programs shall be PRIMARILY VOLUNTARY
*XPNs: COMPULSORY Apprenticeship:
a. NATIONAL SECURITY OR ECONOMIC DEVELOPMENT so demand, the
President may require compulsory training;
b. SERVICES OF FOREIGN TECHNICIANs are utilized by private companies
in apprenticeable trades.
4. APPRENTICEABLE OCCUPATION: Any TRADE, form of employment
or occupation which **requires more than three (3) months of practical
training with theoretical instruction officially endorsed by the tripartite body and
approved for apprenticeship by the TESDA.
5. On the job training (OJT): It is **practical work experience through actual
participation in productive activities given to or acquired by an apprentice.
6. Highly technical industries: those which are engaged in the application of
advanced technology.
WHEN IS THERE NO VALID APPRENTICESHIP?

1. The agreement submitted to the TESDA was made long after the workers
started undergoing apprenticeship.
2. The work performed by the apprenticeship was different from those allegedly
approved by the TESDA.
3. The workers undergoing apprenticeship are already skilled workers; or
4. The workers were required to continue undergoing apprenticeship beyond six
months (Atlanta Industries Inc. v. Sebolino, 26 January 2011).
QUALIFICATIONS OF AN APPRENTICE
1. At least 15 years of age. Those below 18 years of age shall not work in
hazardous occupations; When occupation DEEMED HAZARDOUS:
a. Nature of work exposes worker to dangerous environmental elemental
97NB LPS - Apprenticeship program needs TESDA’s prior approval, or else the apprentice shall be
considered a regular employee if he has rendered work despite non-approval of the apprenticeship
agreement (Century Canning Corp v. CA, 17 August 2007).
98Q: What is not a prerequisite for a valid apprenticeship agreement? (2012 Bar Question): a.
Qualifications of an apprentice are met; b. A duly executed and signed apprenticeship agreement; c.
The apprenticeship program is approved by the Secretary of Labor; d. Included in the list of
apprenticeable occupation of TESDA. SUGGESTED ANSWER: c. The apprenticeship program is
approved by the Secretary of Labor. [Sec 18, RA 7796 – The apprenticeship Program of DOLE
shall be transferred to TESDA which shall implement and administer said program].
62
contaminants or work conditions;

b. Workers are engaged in construction work, logging, fire fighting, mining,
quarrying, blasting, stevedoring, deep-sea fishing, and mechanized farming
c. Workers are engaged in the manufacture or handling of explosives and
other pyrotechnic products
d. Workers use, or are exposed to heavy or power-driven machinery or
equipment.
2. Physically fit for the occupation;
3. Possess vocational aptitude and capacity;
4. Possess:
a. The ability to comprehend, and
b. Follow oral and written instructions
5. The company must have an apprenticeship program duly approved by the
DOLE.99
RELATIONS BETWEEN APPRENTICES & ERs

1. ERs of apprentices:
a. Only ERs in highly technical industries and
b. Only in apprenticeable occupations approved by SOLE
2. Employment STATUS of apprentices: They are CONTRACTUAL
WORKERS whose **length of service depends on the term provided for in
the apprenticeship agreement. Thus, the **ER is not obliged to employ the
apprentice after the completion of his training.
3. CONDITIONS FOR EMPLOYMENT of an apprentice:
a. Should be an apprenticeable trade as determined by TESDA;
b. Prior approval by the DOLE of the proposed apprenticeship program is
a condition sine qua non before an apprenticeship agreement can be validly
entered into (Nitto Enterprises v. NLRC, 248 SCRA 654).
*NB: One of the objectives of Title II (Training and Employment of
Special Workers) of the LC is to establish apprenticeship standards for the protection of
apprentices. **An apprenticeship program should first be approved by the DOLE
before an apprentice may be hired, otherwise a person hired will be considered a
regular EE. (Century Canning Corp. v. CA, 530 SCRA 501)
4. PERIOD of apprenticeship: Apprenticeship must **NOT EXCEED 6
MONTHS.
a. 2 months/400 hours: Trades or occupations which normally require 1
year or more for proficiency;
b. 1 month/200 hours: Occupations and jobs which require more than 3
months but less than 1 year for proficiency (IRR, Book II, Rule VI, Sec. 19).
5. Status of an apprentice after the lapse of the period of apprenticeship: He is
99*NB: Trade and industry associations may recommend to the SOLE appropriate educational
requirements for different occupations.
63
**DEEMED A REGULAR EE. He cannot be hired as a probationary EE

since the **apprenticeship is deemed the probationary period.
6. COMPENSATION of an apprentice
*GR: It starts at not less than 75% of the statutory minimum wage for
the 1st 6 months (except OJT); thereafter, shall be paid in full minimum wage,
including the full COLA.
*XPN: Art. 72 of the LC provides that the SOLE may authorize the hiring
of apprentices without compensation whose training on the job is required:
a. By the school or;
b. By a training program curriculum or;
c. As requisite for graduation or
d. As requisite for board examination.
7. RULES regarding apprenticeship agreements—Apprenticeship agreements,
including the wage rates of apprentices, shall:**
a. Conform to the rules issued by SOLE.
b. The period of Apprenticeship shall not exceed 6 months.
c. Apprenticeship agreements providing for wage rates below the legal
minimum wage, which in no case shall start below 75% of the applicable
minimum wage, may be entered into only in accordance with Apprenticeship
programs duly approved by the SOLE.
d. he DOLE shall develop standard model programs of Apprenticeship
(IRR, Book II, Rule VI, Sec. 18).
8. Every apprenticeship agreement shall be SIGNED BY
a. The ER or his agent, or
b. An authorized representative of any of the recognized organizations,
associations or groups, and
c. The apprentice.
9. Apprenticeship agreement with a minor—An apprenticeship agreement with a
minor shall be signed in his behalf by:
a. His parent or guardian, or if the latter is not available,
b. An authorized representative of the DOLE.
10. Rules on WORKING SCHOLARS: There is **no ER-EE relationship100
100[] Bar 1997: Padilla entered into a written agreement with Gomburza College to work for the latter
in exchange for the privilege of studying in said institution. His work was confined to keeping
clean the lavatory facilities of the school. One school day, he got into a fist fight with a classmate,
Monteverde, as a result of which the latter sustained a fractured arm. Monteverde filed a civil case for
damages against him, impleading Gomburza College due to the latter's alleged liability as his ER.
Under the circumstances, could Gomburza College be held liable by Monteverde as Padilla’s employer?
NO. Gomburza College is not liable for the acts of Padilla **because there is NO EER between
them. As provided in the IRR of the LC, "there is no EER between students on one hand, and
schools, colleges, or universities on the other, where students work with the latter in exchange for
the privilege to study free of charge, provided the students are given REAL OPPORTUNITY, including
such facilities as may be reasonable and necessary to finish their chosen courses under such
arrangement."
64
(EER) between students on one hand, and schools, where there is written
agreement between them under which the former agree to work for the latter in
exchange for the privilege to study free of charge. The student is not
considered an EE (IRR, Book III, Rule IX, Sec. 14).
11. Procedure for the termination of apprenticeship—The party terminating shall:
a. Serve a written notice on the other at least 5 days before actual
termination,
b. Stating the reason for such decision; and
c. A copy of said notice shall be furnished to the Apprenticeship Division
concerned.
12. Party which can TERMINATE an apprenticeship agreement
a. Either party may terminate an agreement after the apprenticeship period
but ONLY FOR A VALID CAUSE.
b. It may be initiated by either party upon filing a COMPLAINT or upon
DOLE’s own initiative.
13. Party which appeal the decision of the authorized agency of the DOLE: It
may be appealed by any aggrieved person to the SOLE within 5 days from
receipt of the decision.
**NB: The decision of the SOLE shall be FINAL AND EXECUTORY.
14. PRINCIPLE OF EXHAUSTION OF ADMINISTRATIVE
REMEDIES applied in case of breach of apprenticeship agreement:
Exhaustion of Administrative Remedies is a **CONDITION PRECEDENT to the
institution of an action for enforcing application of agreement.
15. Duty of the plant apprenticeship committee: The plant apprenticeship
committee shall have the **INITIAL responsibility for settling differences
arising out of Apprenticeship agreement [IRR, Book II, Rule VI, Sec. 32(b)]).
ON LEARNERS
1. Who are learners?
a. They are persons hired as TRAINEES in SEMI-SKILLED and other
industrial101 occupations;
b. Which are NON-APPRENTICEABLE and
c. Which may be learned through practical training on the job in a
RELATIVELY SHORT PERIOD of time
101 Which is a characteristic of the learner? (2012 Bar Question): a. A person is hired as a trainee in
an industrial occupation; b. Hired in a highly technical industry; c. Three (3) months practical on-the-
job training with theoretical instruction; d. At least 14 years old. SUGGESTED ANSWER: a) A person
is hired as a trainee in an industrial occupation. [Art. 73, Labor Code]
65
d. Which shall **NOT EXCEED 3 MONTHS102

e. Whether or not such practical training is supplemented by theoretical instructions
[IRR, Book II, Rule VII, Sec. 1(a)].
2. Learnership programs must be approved103 by the TESDA (RA no. 7795, Sec.
4)
3. Employment of learners—Learners may be employed when:
a. No experienced worker is available
b. It is necessary to prevent curtailment of employment opportunities; and
c. Employment does not create unfair competition in terms of labor costs
or impair or lower working standards.
4. CONTENTS of a learnership agreement—Any ER desiring to employ
learners shall enter into a learnership agreement with them, which agreement shall include:
a. The names and addresses of the learners;
b. The duration of the learnership period, which shall not exceed 3 months;
c. The wages or salary rates of the learners which shall begin at **not less
than 75% of the applicable minimum wage; and
d. A commitment to employ the learners if they so desire (the learner not
the ER), as regular EEs upon completion of the Learnership.104
5. Employment of minors as learners: A learner must be at least 15 years of age.
Those below 18 years of age shall not work in hazardous occupations.
6. Persons who may employ learners: **Only ERs in semi-skilled and other
industrial occupations which are non-apprenticeable may employ learners.
7. Pre-termination of Learnership contract; regular employment: If training is
terminated by the ER before the end of the stipulated period through no fault
of the Learners, they are **DEEMED REGULAR EES (IRR, Book II, Rule VII,
Sec. 4). Provided they have already been trained for 2 months.
LEARNERSHIP VS. APPRENTICESHIP

BASIS Learnership Apprenticeship
102Q: Both apprenticeship and learnership are government programs to provide practical on-the-job
training to new workers. How do they differ with respect to period of training? (2011 BAR) (A) In
highly technical industries, apprenticeship can exceed 6 months; learnership can exceed one year. (B)
Apprenticeship cannot exceed 6 months; learnership can. (C) Apprenticeship shall not exceed six
months; while learnership shall not exceed three months. (D) The law lets the employer and the
apprentice agree on the apprenticeship period; but the law fixes learnership period at six months in
non-technical industries.
103 *NB LPS – from the bedan redbook, it seems it is only for the purpose of inspection not of validity.
104*NB LPS – unlike in case of apprentices where the ER is given the option to hire the apprentice
even prior to the completion of the period, under TESDA circular no. 16 s. 2004, it is expressly
provided that the “enterprise is obliged to hire the learner after the learnership period.”
66
Training on the job in semi-skilled and other Training in trades which are
industrial occupation or trades which are non- apprenticeable, that is, practical
Nature apprenticeable and which may be learned thru training on the job supplemented
practical training on the job in a relatively short by related theoretical instruction
period of time. for more than 3 months.
Duration Max: 3 months Min: 3 months; Max: 6 months
Commit With commitment to employ the learner as a No commitment to hire
ment to regular EE if he desires upon completion of
employ learnership
pre- Considered a regular EE if pre-termination Worker not considered as regular

termina occurs after 2 months of training and the EE.
tion dismissal is without fault of the Learner.
Coverage Semi-skilled/Industrial occupations Highly technical industries and
only in industrial occupation
List There is a list of learnable trades by TESDA No list
Written Requires learnership agreement Requires apprenticeship
A agreement
*****RE: Although both are training programs, apprenticeship is different from
learnership in that [Bar 2011], in learnership, the employer undertakes to make
the learner a regular employee, while in apprenticeship, there is no such
undertaking.
—————————————————
D2. Disabled Workers

D2.a. Equal Opportunity
PERSONS WITH DISABILITY:105 R.A. NO. 7277, AS AMENDED BY
R.A. NO. 9442)
1. Persons with disability (PWD)106—Those whose earning capacity is impaired107
by:
105 *NB LPS – RA 9442 was enacted for purposes of changing the title of RA 7277 to read as the
Magna Carta for persons with disability and all references in the said law to “disabled persons” were
likewise amended to read as “persons with disability” or “PWD.” The term handicapped workers
therefore should no longer be used to describe persons with disability as this is no longer legally
correct (Chan, 2014 Bar Reviewer on Labor Law, p. 331).
*NB LPS – PWDs are those suffering from restriction or different disabilities, as a result of mental,
106
physical or sensory impairment, to perform an activity in the manner or within the range considered
normal for a human being (RA 7277, Sec. 4(a) as amended by RA 9442).
107Q: Ana Cruz has a low IQ. She has to be told at least three times before she understands her daily
work assignment. However, her work output is at least equal to the output of the least efficient
worker in her work section. Is Ms. Cruz a handicapped worker? Explain. (5%) (2000 Bar Question)
SUGGESTED ANSWER: No, low IQ or low efficiency does not make the worker
“handicapped” in the contemplation of law. *****Handicap means such physical or mental
infirmity that impairs capacity to work. The deficiency may also be due to age or injury. (Art. 78,
Labor Code).
67
a. Physical deficiency
b. **Age
c. Injury
d. Disease
e. Mental108 deficiency
f. Illness
2. Employment of PWD:
a. When their employment is necessary to prevent curtailment of
employment opportunities; and
b. When it will not create unfair competition in labor costs or lower working
standards (LC, Art. 79).
3. Employment period of PWD: There is no minimum or maximum duration.
It depends on the agreement but it is necessary that there is a specific duration
stated.
4. Persons with disability can be a regular EE: Persons with disability can be a
regular EE **if work is usually or necessarily desirable to the business
(Bernardo v. NLRC, July 12, 1999).109
5. Persons who may employ persons with disability: **ERs in all industries:
Provided, the disability is not such as to effectively impede the performance
of job operations in the particular occupations for which they are hired.
6. Note that **not all workers with a disability are considered disabled
workers. The mere fact that a worker has a disability does not make him a disabled
worker **because his disability may NOT IMPAIR his efficiency or the
quality of his work. If despite his disability he can still efficiently perform his
work, he would be considered a **QUALIFIED DISABLED WORKER110
108 Q: According to Article 78 of the Labor Code, a handicapped worker is one whose earning capacity
is impaired by the following, except: (2012 Bar Question): a. Age; b. Physical Deficiency; c. Mental
Deficiency; d. Psychological Deficiency. SUGGESTED ANSWER: d) Psychological Deficiency
[Art. 78, Labor Code]
109Q: A lady worker was born with a physical deformity, specifically, hard of hearing, speech
impaired and color blind. However, these deficiencies do not impair her working ability. Can the
employer classify the lady worker as a handicapped worker so that her daily wage will only be
seventy-five percent (75%) of the applicable daily minimum wage? [5%] SUGGESTED
ANSWER: No, the employer cannot classify the lady worker as a handicapped worker because
according to the facts in the question, her deficiencies do not impair her working ability. If her
earning capacity is therefore not also impaired, then she cannot be considered a handicapped
worker. Because of the above fact, the employer shall not pay her less than the applicable daily
minimum wage. (See Article 78 of the Labor Code)
110NBS LPS – disabled persons shall not be denied access to opportunities for suitable employment.
Qualified disabled employees shall be subject to the same terms and conditions of employment and
the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able-
bodied person (RA no. 7277, Sec. 5)
68
entitled to the same treatment111 as qualified able-bodied workers (Bernardo v.

NLRC, 12 July 1999)112
RIGHTS OF PERSONS WITH DISABILITY*****

1. EQUAL OPPORTUNITY for employment - No PWD shall be denied access
to opportunities for sutable employment. Five percent (5%) of all casual
emergency and contractual positions in the DSWD, Health, Education and other
government agencies, offices or corporations engaged in social development shall
be reserved for PWDs.(Section 5, Chapter 1, Title II, RA 7277).
111Q: A lady worker was born with a physical deformity, specifically, hard of hearing, speech
impaired and color blind. However, these deficiencies do not impair her working ability. Can the
employer classify the lady worker as a handicapped worker so that her daily wage will only be seventy-
five percent (75%) of the applicable daily minimum wage? [5%] SUGGESTED ANSWER: No, the
employer cannot classify the lady worker as a handicapped worker because according to the
facts in the question, her deficiencies do not impair her working ability. If her earning capacity is
therefore not also impaired, then she cannot be considered a handicapped worker. Because of the
above fact, the employer shall not pay her less than the applicable daily minimum wage. (See Article 78
of the Labor Code) ANOTHER SUGGESTED ANSWER: Yes, the employer can classify the lady
worker as a handicapped worker because her earning capacity maybe impaired by her physical
deficiencies. As such handicapped worker, the employer may enter into an employment agreement with
her whereby the rate to be paid to her may be less than the applicable legal minimum wage but not less
than 75% of such wage.
112Q: For humanitarian reasons, a bank hired several handicapped workers to count and sort out
currencies. Their employment contract was for six (6) months. The bank terminated their
employment on the ground that their contract has expired prompting them to file with the Labor
Arbiter a complaint for illegal dismissal. Will their action prosper? 5% (2006 Bar Question)
SUGGESTED ANSWER: Yes, their action will prosper. They are doing necessary or desirable jobs
and are qualified for the job, and therefore they should be treated like other qualified able-bodied
employees (Bernardo v. NLRC and Far East Bank, 310 SCRA 186 [1999]). They cannot be
terminated simply because of the expiration of the contract. The nature of their work gives them
the status of regular employees. What determines regularity is not the employment contract but
the nature of the job (A.M. Oreta and Co. Inc. v. NLRC, 176 SCRA 218 [1989]). ANOTHER
SUGGESTED ANSWER: Suggested Answer: No. An employment contract with a fixed term
terminates by its own terms at the end of such period. The same is valid if the contract was entered
into by the parties on equal footing and the period specified was not designed to circumvent
the security of tenure of the employees. (Brent School v. Zamora, 181 SCRA 702). ANOTHER
SUGGESTED ANSWER: No. their action will not prosper. The employment contract in this case is
an example of a fixed-term employment contract, i.e. one to which the parties by free choice have
assigned a specific date of termination. It is not per se illegal or against public policy. To be valid, it
must be shown that the fixed period was knowingly and voluntarily agreed upon by the parties. There
should have been no force, duress, or improper pressure brought to bear upon the employee. Neither
should there be any other circumstance that vitiates the employee’s consent. Moreover, the employer
and employee must have dealt with each other on more or less equal terms with no moral dominance
being exercised by the employer over the employee. Should the contract in the case at bar be shown to
comply with the aforementioned requirements, the action for illegal dismissal will not prosper;
otherwise, it should (Brent School v. Zamora, 181 SCRA 702 [1990]). ANOTHER SUGGESTED
ANSWER: Yes, the employer can classify the lady worker as a handicapped worker because her earning
capacity maybe impaired by her physical deficiencies. As such handicapped worker, the employer may
enter into an employment agreement with her whereby the rate to be paid to her may be les* than the
applicable legal minimum wage but not less than 75% of such wage.
69
*Constitutional basis - Sec. 3, Art. XIII – The State shall afford full
protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.
2. SHELTERED EMPLOYMENT (the Government shall endeavor to
provide them work if suitable employment for disabled persons cannot be found through
open employment);
3. APPRENTICESHIP (ALSO LEARNERSHIP) – PWD may be hired as
apprentices or learners if their disability is not such as to effectively impede
the performance of job operations in the particular occupations for which they
are hired (LC, ART. 81).113
4. VOCATIONAL REHABILITATION (means to develop the skills and
potentials of disabled workers and enable them to compete in the labor
market);
5. Vocational guidance and counselling
PRIVILEGES OF PWDS under RA 10754

*AN ACT EXPANDING THE BENEFITS AND PRIVILEGES OF
PERSONS WITH DISABILITY (PWD)
1. [] SEC. 32. Persons with disability shall be entitled to:
(a) At least twenty percent (20%)114 discount and exemption from the
value-added tax (VAT), if applicable, on the following sale of goods and
services for the exclusive use and enjoyment or availment of the PWD:
(1) On the fees and charges relative to the utilization of all services in
hotels and similar lodging establishments; restaurants and recreation centers;
(2) On admission fees charged by theaters, cinema houses, concert
halls, circuses, carnivals and other similar places of culture, leisure and
amusement;
(3) On the purchase of medicines in all drugstores;
(4) On medical and dental services including diagnostic and
laboratory fees such as, but not limited to, x-rays, computerized tomography
scans and blood tests, and professional fees of attending doctors in all
government facilities, subject to the guidelines to be issued by the Department of
113A handicapped worker may be hired as apprentice or learner, provided (2011 BAR)
(A) he waives any claim to legal minimum wage. (B) his work is limited to apprenticeable job suitable to
a handicapped worker. (C) he does not impede job performance in the operation for which he is
hired. (D) he does not demand regular status as an employee.
114 Q: Which of the following is not a privilege of a person with disability under the Magna Carta for
disabled persons? (2012 Bar Question): At least 20% discount on purchase of medicines in all
drugstores; b. Free transportation in public railways; c. Educational assistance in public and private
schools through scholarship grants; d. Aand C. SUGGESTED ANSWERS: a) At least 20% discount
on purchase of medicines in all drugstores [Magna Carta of PWDs] b) Free transportation in public
railways. c) Prohibition on discrimination against persons with disability d) Incentives for employers.
TOM’s answer is (b) because transport is not free—only with 20% discount for PWDs.
70
Health (DOH), in coordination with the Philippine Health Insurance Corporation

(PhilHealth);
(5) On medical and dental services including diagnostic and
laboratory fees, and professional fees of attending doctors in all private hospitals
and medical facilities, in accordance with the rules and regulations to be issued by
the DOH, in coordination with the PhilHealth;
(6) On fare for domestic air and sea travel;
(7) On actual fare for land transportation travel such as, but not
limited to, public utility buses or jeepneys (PUBs/PUJs), taxis, asian utility vehicles
(AUVs), shuttle services and public railways, including light Rail Transit (LRT),
Metro Rail Transit (MRT) and Philippine National Railways (PNR); and
(8) On funeral and burial services for the death of the PWD:
Provided, That the beneficiary or any person who shall shoulder the funeral
and burial expenses of the deceased PWD shall claim the discount under this
rule for the deceased PWD upon presentation of the death certificate. Such
expenses shall cover the purchase of casket or urn, embalming, hospital morgue,
transport of the body to intended burial site in the place of origin, but shall
exclude obituary publication and the cost of the memorial lot.
(b) Educational assistance to PWD, for them to pursue primary,
secondary, tertiary, post tertiary, as well as vocational or technical education,
in both public and private schools, through the provision of scholarships,
grants, financial aids, subsidies and other incentives to qualified PWD,
including support for books, learning materials, and uniform allowance to
the extent feasible: Provided, That PWD shall meet the minimum admission
requirements;
(c) To the extent practicable and feasible, the continuance of the same
benefits and privileges given by the Government Service Insurance System
(GSIS), Social Security System (SSS), and Pag-IBIG, as the case may be, as are
enjoyed by those in actual service;
(d) To the extent possible, the government may grant special discounts in
special programs for PWD on purchase of basic commodities, subject to the
guidelines to be issued for the purpose by the Department of Trade and Industry
(DTI) and the Department of Agriculture (DA); and
(e) Provision of express lanes for PWD in all commercial and government
establishments; in the absence thereof, priority shall be given to them.
[] The abovementioned privileges are available only to PWD who are Filipino
citizens upon submission of any of the following as proof of his/her
entitlement thereto:
(i) An identification card issued by the city or municipal mayor or the
barangay captain of the place where the PWD resides;
(ii) The passport of the PWD concerned; or
(iii) Transportation discount fare Identification Card (ID) issued by the
71
National Council for the Welfare of Disabled Persons (NCWDP).

The privileges may not be claimed if the PWD claims a higher
discount as may be granted by the commercial establishment and/or under other
existing laws or in combination with other discount program/s.115
2. [] SEC. 33. Incentives. – Those caring for and living with a PWD shall be
granted the following incentives:
(a) PWD, who are within the fourth civil degree of consanguinity or
affinity to the taxpayer, regardless of age, who are not gainfully employed and
chiefly dependent upon the taxpayer, shall be treated as dependents under
Section 35(b) of the NIRC of 1997, as amended, and as such, individual
taxpayers caring for them shall be accorded the privileges granted by the Code
insofar as having dependents under the same section are concerned; and
“x x x.”
——————————————————
D2.b. Discrimination on Employment
PROHIBITION ON DISCRIMINATION AGAINST PERSONS WITH

DISABILITY
1. No disabled person shall be denied access to opportunities for suitable
employment.116 A qualified disabled employee shall be subject to the same
terms and conditions of employment and the same compensation, privileges,
benefits, fringe benefits, incentives or allowances as a qualified able-bodied person.
2. NB: **5% of all casual emergency and contractual positions in the
Departments of Social Welfare and Development; Health; Education, Culture and
Sports; and other government agencies, offices or corporations engaged in social
development shall be RESERVED for disabled persons (R.A. 7277).
ACTS OF DISCRIMINATION ON EMPLOYMENT

*No entity, whether public or private, shall discriminate against a qualified
disabled person by reason of disability in regard to job application procedures, the
hiring, promotion, or discharge of employees, employee compensation, job
115 The establishments may claim the discounts granted in subsection (a), paragraphs (1), (2), (3), (5),
(6), (7), and (8) as tax deductions based on the net cost of the goods sold or services rendered:
Provided, however, That the cost of the discount shall be allowed as deduction from the gross
income for the same taxable year that the discount is granted: Provided, further, That the total amount
of the claimed tax deduction net of value-added tax, if applicable, shall be included in their gross
sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of
the National Internal Revenue Code (NIRC), as amended.”
116*NB LPS – no entity, whether public or private, shall discriminate against a qualified disabled person
by reason of disability in regard to job application procedures, hiring, promotion, or discharge of
employees, employee compensation, job training, and other terms, conditions, and privileges of
employment (Sec. 32, RA 7277)
72
training, and other terms, conditions, and privileges of employment. The

following constitute acts of discrimination:
(a) Limiting, segregating or classifying a disabled job applicant in such a
manner that adversely affects his work opportunities;
(b) Using qualification standards, employment tests or other selection criteria
that screen out or tend to screen out a disabled person unless such standards,
tests or other selection criteria are shown to be jobrelated for the position on
question and are consistent with business necessity;
(c) Utilizing standards, criteria, or methods of administration that:
1) have the effect of discrimination on the basis of disability; or
2) perpetuate the discrimination of others who are subject to common
administrative control;
(d) Providing less compensation, such as salary, wage or other forms of
remuneration and fringe benefits, to a qualified disabled employee, by reason of
his disability, than the amount to which a non-disabled person performing the
same work is entitled;
(e) Favoring a non-disabled employee over a qualified disabled employee
with respect to promotion, training opportunities, study and scholarship grants,
solely on account of the latter’s disability;
(f) Re-assigning or transferring a disabled employee to a job or position he
cannot perform by reason of his disability;
(g) Dismissing or terminating the services of a disabled employee by reason of
his disability unless the employer can prove that he impairs the satisfactory
performance of the work involve to the prejudice of the business entities;
Provided, however, That the employer first sought provide reasonable
accommodations for disabled persons;
(h) Failing to select or administer in the effective manner employment tests which
accurately reflect the skills, aptitude or other factor of the disabled applicant or
employee that such test purports to measure, rather than the impaired sensory,
manual or speaking skills of such applicant or employee, if any; and
(i) Excluding disabled persons from membership in labor unions or similar
organization (Sec. 32, RA 7277)
INCENTIVES FOR EMPLOYERS WHO EMPLOY PWDs*****

1. Entitled to an ADDITIONAL DEDUCTION, from their gross income,
73
equivalent to 25%117 of the total amount paid as salaries and wages to

disabled persons: Provided, however, That such entities present proof as certified
by the DOLE that disabled persons are under their employ: Provided further, That
the disabled EE is accredited with the DOLE and the Department of
Health as to his disability, skills and qualifications.
2. Private entities that improve or modify their physical facilities in order to
provide reasonable accommodation for disabled persons shall also be entitled
to an ADDITIONAL DEDUCTION from their net taxable income,
equivalent to **50% of the direct costs of the improvements or
modifications (R.A. 7277, Sec. 8).
PERSONS WITH DISABILITY VS. DIFFERENTLY ABLED

Persons with Disability Differently Abled
Earning capacity is impaired by age, or Refers to all suffering from restriction of different
physical or mental deficiency or injury. abilities as a result of mental, physical or sensory
impairment to perform an activity in the manner or within
range considered NORMAL for a human being.
Covers only workers. Covers all activities or endeavors.
Basis: loss/impairment of earning Basis: range of activity which is normal for a
capacity. human being.
Loss due to injury or physical or mental Restriction due to impairment of mental/physical/
defect or age. sensory defect.
If hired, entitled to 75% of minimum wage. If qualified, entitled to all terms and conditions as
Subject to definite periods of employment. qualified able-bodied person.
Employable only when necessary to prevent No restrictions on employment. Must get equal
curtailment of employment opportunity. opportunity and no unfair competition.
117Q: What is the financial incentive, if any, granted by law to SPQ Garments whose cutters and
sewers in its garments-for-export operations are 80% staffed by deaf and deaf-mute workers? (2013
Bar Questions): (A) Additional deduction from its gross income equivalent to 25% of amount
paid as salaries to persons with disability. (B) Additional deduction from its gross income
equivalent to 50% of the direct costs of the construction of facilities for the use of persons with
disability. (C) Additional deduction from its net taxable income equivalent to 5% of its total payroll (D)
Exemption from real property tax for one (1) year of the property where facilities for
persons with disability have been constructed. (E) The annual deduction under (A), plus a one-time
deduction under (B). SUGGESTED ANSWER: (A) Basis: Magna Carta for Disabled Persons.
74
III. Labor Standards
A. Conditions of Employment 77
ON WORKING CONDITIONS OF EEs 77
A1. Scope 77
GROUPS OF EEs UNDER THE LC 77
WHO ARE THE EEs COVERED BY THE CONDITIONS OF EMPLOYMENT UNDer THE
LC? 77
ON <GOVERNMENT EEs> 79
MORE ON MANAGERIAL EEs 80
ON FIELD PerSONNEL 82
ON DOMESTIC HELPerS & PerSONS IN THE PerSONAL SerVICE OF ANOTHer 82
ON WORKERS PAID BY RESULTS 83
CONTRACT FOR PIECE WORK (SEE CIVIL CODE) 83
Contract for piece of work vS. Lease of services*** 84
A2. Hours of work 84
A2.a. Principles in determining hours worked 84
A2.b. Normal hours of work 85
INSTANCES WHEN HOURS OF WORK ARE COMPENSABLE** 86
INSTANCES WHEN HOURS OF WORK ARE NOT COMPENSABLE 87
HOURS OF WORK OF HEALTH PERSONNEL (ADDED BY TOM) 88
A2.b.i. Compressed work week (CWW) 88
5. EFFECTS OF THE CWW SCHEME (*NB LPS) 90
A2.b.ii. Power interruptions/brownout** 90
A3. Meal break 90
A4. Waiting time 92
A5. Overtime work, overtime pay 94
ON UNDERTIME (UT) 99
PART-TIME WORK 100
A6. Night work (R.A. No. 10151), Night shift differential 100
RIGHTS OF NIGHT WORKERS UNDER THE LABOR CODE 101
EMPLOYABILITY OF WOMEN FOR NIGHT WORK 101
Night Shift Differential (NSD) 102
A7. Rest Periods 103
WEEKLY REST DAY 103
EMERGENCY REST DAY WORK 104
A8. Holiday pay; 13th month pay 104
COVERAGE, EXCLUSIONS 104
75
TEACHERS, PIECE WORKERS, TAKAY, SEASONAL WORKERS, SEAFARERS 105

DOUBLE HOLIDAY PAY 107
CONCEPT OF SUCCESSIVE REGULAR HOLIDAYS 108
FORMULAS TO COMPUTE ADDITIONAL PAY 108
OVERTIME PAY VS. PREMIUM PAY 108
OVERTIME PAY RATES 109
MORE ON PREMIUM PAY 110
LIST OF HOLIDAYS 110
ON MUSLIM HOLIDAYS 111
REGULAR HOLIDAY VS. SPECIAL HOLIDAY** 111
RATES OF COMPENSATION FOR RH ON EE’S REGULAR WORKDAY AND REST
DAY (SUMMARY OF FORMULAS) 112
RATES OF COMPENSATION FOR REST DAY, SUNDAY OR HOLIDAY WORK 113
MONTHLY-PAID VS. DAILY-PAID EES 113
DIVISOR 114
CONCEPT OF ABSENCES 115
EFFECT IN CASE THERE IS A TEMPORARY OR PERIODIC SHUTDOWN AND
TEMPORARY CESSATION OF WORK: 116
THIRTEENTH MONTH PAY 116
Employers covered under P.D. 851 (13th mo. pay) 118
Employees ENTITLED OR NOT TO 13th MONTH PAY 119
Commission in relation to 13th month pay 120
HOW ABOUT A 14th-MONTH PAY? 121
A9. Service charge 122
Service charge vs. Tips 123
B. Wages 124
BONUS 125
PRODUCTIVITY BONUS VS. SALES COMMISSION 126
B1. Wage vs. Salary 127
B2. Payment of Wages 127
MINIMUM WAGE DEFINED, MINIMUM WAGE SETTING 129
METHODS OF MINIMUM WAGE ADJUSTMENT 130
Two basic methods of payment 130
WORKERS PAID BY RESULTS 130
MINIMUM WAGE OF WORKERS PAID BY RESULTS 131
APPRENTICES/ LEARNERS/ PERSONS WITH DISABILITY 131
COMMISSIONS 131
DEDUCTIONS FROM WAGES 132
B3. Facilities vs. Supplements 134
76
B4. Non-diminution of Benefits 136

B5. Prohibitions Regarding Wages 137
B6. Wage Order; Wage Distortion 141
ON THE WAGE ORDER 141
ON WAGE DISTORTION 142
******PROCESS FOR CORRECTION OF WD OF ORGANIZED vs. UNORGANIZED
ESTABLISHMENTS 144
DIVISOR TO DETERMINE DAILY RATE 145
C. Leaves 146
C1. Service Incentive Leave (SIL) 146
PERSONS ENTITLED TO SIL 147
C2. Maternity Leave 149
C3. Paternity Leave 151
C4. Parental Leave for Solo Parents [R.A. No. 8972] 153
C5. Special Leave for Women Workers [Magna Carta for Women] 154
D. Special Groups of Employees 155
D1. Women 155
D1.a. Provisions against discrimination 155
Standard of reasonable test 157
D1.b. Stipulation against marriage [Art 136] 157
D1.c. Prohibited acts 160
D1.d. Anti-Sexual Harassment Act [R.A. No. 7877] 161
D2. Minors [Labor Code and R.A. No. 7678, R.A. No. 9231] 168
D3. Kasambahay 173
EMPLOYMENT OF A KASAMBAHAY 177
WAGES & BENEFITS OF A KASAMBAHAY 179
RIGHTS OF EMPLOYERS & TERMINATION 181
D4. Homeworkers 184
D5. Nightworkers 187
77
III. Labor Standards
A. Conditions of Employment
ON WORKING CONDITIONS OF EEs

1. GR: Person who determines working conditions: Generally, they are
determined by the ER, as he is usually free to regulate, according to his
discretion, all aspects of employment.
2. XPN: **Limitation on the ER's power to regulate working conditions:
a. It must be done in GOOD FAITH and
b. not for the purpose of DEFEATING OR CIRCUMVENTING
THE RIGHTS of the EEs.
3. Hence, ERs’ rights are not absolute and must be exercised with due regard
to the RIGHTS OF LABOR.
4. One’s employment, profession, trade or calling is a **PROPERTY
RIGHT and the wrongful interference therewith is an actionable wrong.
————————————————
A1. Scope
GROUPS OF EEs UNDER THE LC

1. Managerial EEs:
a. those vested with the powers or prerogatives
b. to **LAY DOWN AND EXECUTE MANAGEMENT POLICIES
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline EEs.
2. Supervisory EEs:
a. those who in the interest of the ER,
b. EFFECTIVELY RECOMMEND SUCH MANAGERIAL ACTIONS if the
exercise of such authority is not merely routinary or clerical in nature but requires the
use of **INDEPENDENT JUDGMENT.
3. Rank-and-file EEs: all EEs not falling within any of the above definitions
[LC, Art. 212(m)], i.e., those persons who are neither managerial nor
supervisory EEs.
WHO ARE THE EEs COVERED BY THE CONDITIONS OF

EMPLOYMENT UNDER THE LC?
1. GR: EEs in all establishments and undertakings **whether for profit or not.
78
2. XPNs:118
a. Government EEs;
b. Managerial EEs119 *NB LPS – and Managerial Staff;
c. **Field personnel;120
d. ER's family members who depend on him for support;
e. **Domestic helpers and persons in the personal service of another;
f. Workers who are **paid by results as determined under
118Q: The following are excluded from the coverage of Title I, Book II of Labor Code of the
Philippines (Conditions of Employment) except: (2012 Bar Question) a) Field personnel; b)
Supervisors; c) Managers; d) Employees of government-owned and controlled corporations.
SUGGESTED ANSWER: (b) Supervisors [Art. 82, Labor Code]
119Q: Ping Gabo is the Chief Engineer of the National Publishing Corp. with a monthly salary of
P3.000.00. He works over eight (8) hours daily from Monday to Saturday. In May. June and July
1991, he rendered, each month, ten (10) hours beyond his regular work schedule. Is he entitled to
overtime pay and holiday pay? Why? SUGGESTED ANSWER: The entitlement of Gabo to overtime
pay and holiday pay is dependent on whether he is a managerial employee or not. If he Is a
managerial employee, he is not entitled to overtime pay and holiday pay. The Labor Code
provides that the provisions that grant overtime pay and holiday pay shall not apply, among others, to
managerial employees. A managerial employee is defined by the Code as referring to those whose
primarily duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof, and to other officers or members of the managerial staff.
Gabo, as Chief Engineer, appears to be a managerial employee. On the other hand, his monthly
pay is rather low for a managerial employee. Despite his title, his duty may not consist of a
management of department or of a subdivision thereof.
120Q: Republic Drug Co. has 1,000 employees, including 50 managerial personnel, 90 supervisors and
150 sale representatives. The regular workday in the Company is from 8:00 a.m. to 5:00 p.m. The sales
representatives register their presence with the timekeeper at 8:00 A.M. every day before they go
to their respective sales territories. They are paid a basic salary plus commission. Sixty of the sales
representatives are members of the Republic Salesmen Union which sent to the Company a set of
bargaining proposals, including a demand for payment of overtime pay of the sales representatives for
working beyond 5:00 P.M. everyday. The Company refused to consider the bargaining proposals
and rejected the demand for overtime pay for the reason that the sales representatives are not
entitled thereto. The Union filed an unfair labor practice case against the Company for refusal to
bargain, and after complying with the legal requirements declared a strike. a) Was the Company
legally justified in rejecting the Union’s demand for overtime pay? Reason. SUGGESTED ANSWER:
The Company was legally justified. Under the Labor Code, (in Article 82). “field personnel" are
among those classes of workers who are not entitled to overtime pay, and *****the phrase “field
personnel” includes sales representatives who, like other field personnel, are non- agricultural
employee 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. ALTERNATIVE ANSWER: If the demand for overtime pay is in the nature of
a proposal made in the collective bargaining table and the only reason for rejecting such demand is that
“the sales representatives are not entitled thereto,” this is not a legal justification for rejecting outright
the Union's demand for overtime pay. It is true that under the Labor Code, field personnel - and this
phrase includes sales representatives are not entitled to overtime pay. But it is precisely as regards
benefits that are not rights under the law that collective bargaining is used by Labor to secure these
benefits that are over and above what the law gives. On the other hand, the rejection by the Company
of the Union’s demand for overtime pay is not per se illegal. The Labor Code provides that the duty to
bargain collectively does not compel any party to agree to a proposal or to make any concession.
(Article 252, Labor Code).
79
DOLE regulations (LC, Art. 82).

3. NB: The conditions of employment under the the LC will **apply ONLY if
an ER-EE relationship (EER) exists.121
ON <GOVERNMENT EEs>
1. They are EEs of the:
a. National Government;
b. Any of its political subdivisions;
c. Including those employed in GOCCs with122 original charters.123
2. Applicable law to government EEs: Civil Service Law, Rules and Regulations.
3. They are allowed to self-organize under Section 8, Article III and Section 3,
Article XIII of the Constitution which recognize the rights of all workers to
self-organization. They cannot demand, however, for better terms and
121Q: The provisions of the Labor Code on the Working Conditions and Rest Periods of employees
are inapplicable to the following employees, except: (2012 Bar Question) a. A supervisor in a fast food
chain; b. A family driver; c. A laborer without any fixed salary, but receiving a compensation  
depending upon the result of his work; d. A contractual employee. SUGGESTED ANSWER:
d. A contractual employee. TOM thinks the answer is (a).
122Q: Government employees may elect a union as their exclusive representative but this right is not
available to (2011 BAR) (A) regular employees in government instrumentalities and agencies. (B)
employees of government-owned and -controlled corporations without original charters. (C)
employees of government-owned-or-conrolled corporations with original charters. (D)
employees of provincial and local government units.
123 Q: Because of alleged “unfair labor practices" by the management of GFI System, a
government-owned and controlled financial corporation, Its employees walked out from their
jobs and refused to return to work until the management would grant their union official recognition
and start negotiations with them. The leaders of the walk-out were dismissed, and the other
participants were suspended for sixty days. In arguing their case before the Civil Service Commission,
they cited the principle of social justice for workers and the right to self- organization and
collective action, including the right to strike. They claimed that the Constitution shielded them
from any penalty because their walk-out was a concerted action pursuant to their rights guaranteed by
the basic law. Is the position taken by the walk-out leaders and participants legally correct? Reason
briefly. (5%) (2005 Bar Question) SUGGESTED ANSWER: The position taken by the walk-out
leaders and participants is not legally correct. **They are government employees, and as such, they
do not have the right to strike. According to the actual wording of Section 3 of Article XIII of the
Constitution, the State "shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities including the right to strike in
accordance with law." Thus, the last clause of the above-quoted provision of the Constitution makes
it very clear: the right to strike is not constitutional, it is statutory because the right should be "in
accordance with law”. And there is as yet no law giving government employees the right to strike.
ANOTHER SUGGESTED ANSWER: No. What Art. XIII, Sec. 3 of the 1987 Constitution
guarantees is "the right to strike in accordance with law.” Assuming that what we have is a chartered
government-owned and controlled corporation, they cannot, under EO 180 and related jurisprudence,
stage such walk-out which is basically a case of strike. Even if GFI was organized under the
corporation law, still no such walk-out is allowed without the employees’ complying with the
**requirements of a valid strike, among which is that said strike or walk-out should be validly
grounded on a (a) deadlock in collective bargaining, or (b) unfair labor practice, either of which is
not present here.
80
conditions of employment for the same are fixed by law (Art. 244, Labor Code).
Besides, their salaries are standardized by Congress (Art. 276, Labor Code).
In case of unresolved grievances, they cannot resort to strikes, walkouts,
and other temporary work stoppages to pressure the government to accede to
their demands, because the terms and conditions of government employment are
fixed by law.124
MORE ON MANAGERIAL EEs

1. Who they are:
a. those vested with the powers or prerogatives to LAY DOWN AND
EXECUTE MANAGEMENT POLICIES and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline EEs.
b. those whose primary duty consists of the MANAGEMENT of the
establishment in which they are employed or a department or subdivision
thereof, and other officers or members of the managerial staff [LC, Art.
124 Q: Philhealth is a government-owned and controlled corporation employing thousands of Filipinos.

Because of the desire of the employees of Philhealth to obtain better terms and conditions of
employment from the government, they formed the Philhealth Employees Association (PEA) and
demanded Philhealth to enter into negotiations with PEA regarding terms and conditions of
employment which are not fixed by law. (2014 Bar Question) (A) Are the employees of Philhealth
allowed to self-organize and form PEA and thereafter demand Philhealth to enter into negotiations
with PEA for better terms and conditions of employment? SUGGESTED ANSWER: Yes. Employees
of Philhealth are allowed to self-organize under Section 8, Article III and Section 3, Article XIII of the
Constitution which recognize the rights of all workers to self-organization. They cannot demand,
however, for better terms and conditions of employment for the same are fixed by law (Art. 244, Labor
Code), besides, their salaries are standardized by Congress (Art. 276, Labor Code).
(B) In case of unresolved grievances, can PEA resort to strikes, walkouts, and other temporary
work stoppages to pressure the government to accede to their demands? SUGGESTED ANSWER:
No. Since the terms and conditions of government employment are fixed by law, government workers
cannot use the same weapons employed by workers in the private sector to secure concessions from
their employers. (Blaquera vs. Alcala, G.R. Nos. 109406, 110642, 111494, 112056, 119597, September
11, 1998).
81
82(2)].125
2. They must meet all of the ffg. CONDITIONS, namely:**
a. Primary duty: MANAGEMENT of the establishment in which they are
employed or of a department or sub-division thereof;
b. Customarily or regularly DIRECT the work of **2 or more EEs;
c. Has the AUTHORITY to hire or fire other EEs of lower rank; or
their suggestions and recommendations as to the hiring and firing and as to the
promotion or any change of status of other EEs are given **PARTICULAR WEIGHT.
d. Execute under GENERAL SUPERVISION work along specialized
or technical lines requiring special training, experience, or knowledge
e. Execute under GENERAL SUPERVISION special assignment and
tasks; and
f. Do **not devote more than 20% of their hours worked to activities
which are not directly and closely related to the performance of the work described.
3. Reason **why managerial employees are not covered by the conditions of
employment under the LC: They are employed by reason of their special
training, expertise or knowledge and for positions requiring the exercise of
DISCRETION AND INDEPENDENT JUDGMENT. **Value of work
cannot be measured in terms of hours.
4. MANAGERIAL STAFF – they perform the following duties and
responsibilities
a. The primary duty consists of the performance of work directly related to
management policies of the Er.
b. Customarily and regularly exercise discretion and independent judgment
125 Distinguish managerial employees from supervisory employees. (3%) SUGGESTED ANSWER: A
managerial employee is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees. *****Supervisory employees, on the other hand, are those who in the interest
of the employer, effectively recommend such managerial actions if the exercise of such authority
is not merely routinary or clerical in nature but requires the use of independent judgment [Art.
212 (m), Labor Code] In a case, the Supreme Court said: “In the petition before us, a thorough
dissection of the job description of the concerned supervisory employees and section heads
indisputably show that they are not actually managerial but only supervisory employees since
they do not lay down company policies. PICOP’s contention that the subject section heads and unit
managers exercise the authority to hire and fire is ambiguous and quite misleading for the reason that
any authority they exercise is not supreme but merely advisory in character. Theirs is not a final
determination of the company policies inasmuch as any action taken by them on matters relative to
hiring, promotion, transfer, suspension and termination of employees is still subject to confirmation
and approval by their respective superior. [See Atlas Lithographic Services, Inc. v. Laguesma, 205
SCRA 12, 17 (1992)] Thus, where such power, which is in effect recommendatory in character, is
subject to evaluation, review and final action by the department heads and higher executives of the
company, the same, although present, is not effective and not an exercise of independent
judgment as required by law. [Philippine Appliance Corp. v. Laguesma, 226 SCRA 730, 737 (1993)
citing Franklin Baker Company of the Philippines v. Trajano, 157 SCRA 416, 422-433 (1988)]." (Paper
Industries Corp. of the Philippines v. Bienvenido E. Laguesma, 330 SCRA 295, (2000)]
*****All employees who are neither managerial or supervisory employees are considered
rank-and-file employees. (Art. 212(m) of the Labor Code)
82
and by
i. Regularly and directly assisting a proprietor or a managerial Ee
whose primary duty consists of the management of the establishment in which he
is employed or subdivision thereof; or
ii. Execute under general supervision work along specialized or
technical lines requiring special training, experience or knowledge; or
iii. Executes under general supervision, special assignments and tasks;
c. Who does not devote more than twenty (20) percent of their hours
related to the performance of the work described in par. (1), (2), and (3) above
(IRR of LC, Book III, Rule I, Sec. 2, Par. (c)).
5. Managerial EEs vs. Managerial Staff [Bar]
a. Managerial employees [Article 212(m)] are vested with the prerogatives to
lay down and execute management policies and/or to hire, fire, transfer, promote,
lay-off and discipline employees, while the managerial staff mere assist the
managers in their above-mentioned duties.
b. Managerial employees have no collective bargaining rights because
they cannot join or form any other labor organization while officers of a
managerial staff are not prohibited from joining, assisting or forming a
supervisor’s union; hence, they can bargain collectively. (Art. 245, Labor Code;
National Sugar Refineries Corp. vs. NLRC. 220 SCRA 452).
ON FIELD PERSONNEL
*They are:
1. Non-agricultural EEs;
2. Who regularly perform their duties;
3. Away from the principal place of business or branch office of the ER; and;
4.Whose **actual hours of work in the field cannot be determined with
reasonable certainty.
ON DOMESTIC HELPERS & PERSONS IN THE PERSONAL

SERVICE OF ANOTHER
*****Those who:
1. Perform services in the ER's home which are USUALLY NECESSARY
OR DESIRABLE for the maintenance or enjoyment thereof; or
2. Minister to the PERSONAL COMFORT, CONVENIENCE OR SAFETY of
the ER as well as the members of his ER's household. But if the house
personnel is employed to maintain a staff house for a company, he is considered a
regular EE of the company, not a domestic helper.126
126[] Q: A house personnel was hired by a ranking company official to maintain a staff house
provided for the official. The personnel is being paid by the company itself. Is the house personnel a
domestic servant of the company official? NO. The personnel is **not a domestic helper but a
regular EE of the company (Apex Mining v. NLRC, 22April 1991; Remington Industrial Sales Corporation v.
Castaneda, 20 November 2006).
83
ON WORKERS PAID BY RESULTS

Workers who are paid by results, including those who are paid on piece-work,
"takay," "pakiao" or task basis, and other non-time work if their output rates are in
accordance with the standards prescribed under Section 8, Rule VII, Book Three
of these regulations, or where such rates have been fixed by the Secretary of
Labor and Employment in accordance with the aforesaid Section.
CONTRACT FOR PIECE WORK (SEE CIVIL CODE)127

1. What is a contract for a piece of work? It is a contract whereby the contractor
binds himself to execute a piece of work for the ER, in price or consideration of a
certain compensation. The contractor may employ his labor, skill or also **furnish
the material.
*NB: All workers paid on piece-work shall be **entitled to receive NOT
LESS than the prescribed daily minimum wage or a proportion thereof **for
working less than 8 hours.
2. CONTRACTOR: The **worker is also called a contractor. He in turn may
obtain the services of others, who will work under him.
3. TEST to determine if one is an EE or an independent contractor: The “RIGHT
OF CONTROL” TEST** is used.
a. If the person for whom services are to be performed controls only the end to be
achieved, the worker is a CONTRACTOR;
b. if he controls not only the end but also the manner and means to be
used, the latter is an EE.
4. Things that the contractor can furnish:
a. Both material and labor, or
b. Only labor
5. DUTIES of a contractor who furnishes both work and the material. This is
equivalent to sale; therefore, these are the duties:
a. To DELIVER;
b. To transfer OWNERSHIP;
c. To **warrant against EVICTION and HIDDEN DEFECTS.
6. REMEDIES of the ER in case of defects:
a. Ask the contractor to remove the defect or to execute another work.
b. If the **contractor fails or refuses, the ER can ask another at the contractor’s
expense. If a building is involved, expenses for correction and completion may be recovered.
7. Rule on agreements **waiving or limiting the contractor’s liability:
a. In the absence of fraud, the agreement would ordinarily be VALID.
b. In the absence of prohibitory statute, the validity of a limitation is
generally upheld, with a view of obtaining COMPENSATION commensurate
to the risk assumed.
127 *NB LPS - not in the syllabus
84
8. EFFECTS when the **ER accepts the work:

a. The contractor is generally **relieved of liability.
b. If the acceptance is made without objection, the ER **may still sue
for hidden defects.
9. Place of payment:
a. Where stipulated;
b. If no stipulation, then at the **time and place of delivery.
10. Mechanic’s lien: one who executed a work on a movable property has a
**RIGHT TO RETAIN it by way of pledge until he is PAID.
[] Q: A asked B to make a radio cabinet. B bound himself to furnish the
material. Before the radio cabinet could be delivered, it was destroyed by a fortuitous
event.
a. Who suffers the loss? B suffers the loss of both the materials and the work,
**unless there was mora accipiendi. If there was mora accipiendi, it is evident that
A suffers the loss.
b. Is the contract extinguished? NO. Hence, B may be required to do the
work all over again,
i. unless there had been a prior stipulation to the contrary or
ii. unless a re-making is possible—isn’t it supposed to be
impossible??? (NCC, Art. 1717).
**NB: The law merely refers to the burden of the loss, and not to the
extinguishment of the contract.
CONTRACT FOR PIECE OF WORK VS. LEASE OF SERVICES***

CONTRACT FOR PIECE OF WORK LEASE OF SERVICES
The object is the **work done or the
The object is **services.
result of the said work.
The risk is borne by the worker before The risk is **generally borne by the ER, not by the
delivery. worker unless the latter is guilty of fault or negligence.
———————————————
A2. Hours of work

COVERAGE OF HOURS OF WORK
1. All time during which an EE is required to be:
a. On duty, or
b. At the ER's premises, or
c. At a prescribed workplace.
2. All time during which an EE IS **SUFFERED OR PERMITTED TO WORK
(IRR, Book III, Rule I, Sec. 3).
A2.a. Principles in determining hours worked

1. All hours which the EE is REQUIRED to give to his ER **regardless of
85
whether or not such hours are spent in productive labor or involve physical
or mental exertion.
2. **Rest period is EXCLUDED from hours worked, even if EE does not
leave his workplace, it being enough that:
a. He stops working;
b. May rest completely;
c. May leave his workplace, to go elsewhere, whether within or outside the
premises of the workplace
3. All time spent for work is considered hours worked if:
a. The work performed was NECESSARY;
b. If it BENEFITED the ER;
c. Or the EE could not abandon his work at the end of his normal working
hours because he had NO REPLACEMENT; Provided, the work was with the
knowledge of his ER or immediate supervisor.
4. The time during which an EE is **INACTIVE by reason of
INTERRUPTIONS in his work beyond his control shall be considered working time:
a. If the IMMINENCE of the resumption of the work **REQUIRES the
EEs PRESENCE at the place of work; or
b. If the **INTERVAL IS TOO BRIEF to be utilized effectively and gainfully in the
EEs own interest (IRR, Book III, Rule I, Sec. 4).
A2.b. Normal hours of work

1. GR: The normal hours of work of any EE shall **NOT EXCEED 8 HOURS A
DAY (LC, Art. 83).
**Rationale: not only to SAFEGUARD THE HEALTH AND WELFARE of the
EE or laborer, but ALSO IN A WAY TO **MINIMIZE UNEMPLOYMENT by
forcing ERs, in cases where more than 8-hour operation is necessary, to utilize
different SHIFTS of EEs or laborers working only for 8 hours each.
2. XPNs:**
a. Health personnel (infra);
b. Compressed workweek (infra).
3. NB: Normal hours of work may be SHORTENED OR COMPRESSED.
Neither does it follow that a person who does not observe normal hours of work
cannot be deemed an employee.
*In Cosmopolitan Funeral Homes, Inc. v. Maalat, the ER denied the existence of
an EER saying that the claimant was a "supervisor on commission basis" who
did not observe normal hours of work. The Court declared that there was an
EER, noting that "[the] supervisor, **ALTHOUGH COMPENSATED ON A
86
COMMISSION BASIS,128 [is] exempt from the observance of normal hours of

work because his compensation is measured by the number of sales he
makes" (Lazaro v. SSS, 30 July 2004).
INSTANCES WHEN HOURS OF WORK ARE COMPENSABLE**

1. EE is REQUIRED129 to be on duty;
2. EE is SUFFERED OR PERMITTED to work;
3. REST PERIODS OF SHORT DURATION during working hours;
4. Travel time, when beneficial to the ER (Rada v. NLRC, 9 January 1992):
a. Travel from home to work:
***GR: Normal travel from home to work is not working time.130
*XPNs:
i. **EMERGENCY call outside his regular working hours where he is
required to travel to his regular place of business or some other work site;
ii. Done through a **CONVEYANCE provided by the ER;
iii. Done under the SUPERVISION AND CONTROL of the ER;
iv. Done under **VEXING AND DANGEROUS circumstance.
b. Travel that is ALL IN A DAY’S WORK: time spent in travel as **part
of the EEs PRINCIPAL ACTIVITY. EG: **travel from job site to job site during
the work day, must be counted as working hours.
c. Travel away from home
*GR:
i. Travel that requires an **overnight stay on the part of the EE
when it cuts across the EEs workday is clearly working time;
ii. The time is not only hours worked on regular workdays but also during
corresponding working hours on non-working days. ***Outside of these regular
128Q: Employees-employer relationship exist under the following, except: (2012 Bar Question): a. Jean,
a guest relations officer in a nightclub and Joe the nightclub owner; b. Atty. Sin Cruz, who works part-
time as the resident in-house lawyer of X Corporation; c. Paul, who works as registered agent on
commission basis in an insurance company. d. Jack and Jill, who work in X Company, an unregistered
Association. SUGGESTED ANSWER: c) Paul, who works as registered agent on commission
basis in an insurance company. [Great Pacific Life Assurance Corp. vs. Judico, G.R. No. 73887, Dec. 21,
1989].
129Q: Pol requested Obet, a union officer and concurrently chairman of the company's Labor-
Management Council, to appeal to the company for a recomputation of Pol’s overtime pay. After 5
p.m., his usual knock-off time, Obet spent two hours at the Personnel Office, reconciling the
differing computations of Pol’s overtime. Are those two hours compensable? (2011 BAR
QUESTION): (A) Yes, because Obet performed work within the company premises. (B) No, since
Obet’s action has nothing to do with his regular work assignment. (C) No, because the matter could
have been resolved in the labor-management council of which he is the chairman. **(D)Yes, because
the time he spent on grievance meetings is considered hours worked.
Q: Which of the following is not compensable as hours worked? (2012 Bar Question): a. Travel
130
away from home; b. Travel from home to work; c. Working while on call; d. Travel that is all in a day’s
work. SUGGESTED ANSWERS: a) Travel away from home. [Art. 84, Labor Code]; b) Travel from
home to work. TOM only chooses (b).
87
working hours, travel away from home is not considered working time.
**XPN: During MEAL PERIOD or when EE IS PERMITTED TO
SLEEP in adequate facilities furnished by the ER.
[] *****Key criteria to determine compensability:131
a. COMPENSABLE: An employee who is required to remain on call in
the employer's premises or so close thereto that he cannot use the time
effectively and gainfully for his own purpose shall be considered as working
while on call.
b. NON-COMPENSABLE: An employee who is not required to leave
word at his home or with company officials where be may be reached is not working
while on call.
INSTANCES WHEN HOURS OF WORK ARE NOT COMPENSABLE

1. EE ceases to work;
2. EE may rest completely;
3. EE may leave at his will the spot where he actually stays while working to go
somewhere else (Luzon Stevedoring v. Luzon Marine, 29 April 1957);
4. When work is broken/not continuous (NDC v. CIR, 30 June 1987);
5. **ASSEMBLY TIME, routinary practice of employees, proceedings not
infected with complexities so as to deprive EEs time to attend to their personal
pursuits (Arica v. NLRC, 28 February 1989);
6. **Meal time (60 min), unless predominantly spent for the ER's benefit
7. NB: Activities before work and after work are **DEEMED PERFORMED
131Q: Gil Bates, a computer analyst and programmer of Hard Drive Company, works eight hours a
day for five days a week at the main office providing customers information technology assistance.
On Saturdays, however, the company requires him to keep his cellular phone open from 8:00
A.M. to 5:00 P.M. so that the Management could contact him in case of heavy work load or
emergency problems needing his expertise. May said hours on Saturdays be considered compensable
working hours "while on call? If so, should said compensation be reported to the Social Security
System? (5%) (2005 Bar Question) SUGGESTED ANSWER: Said hours on Saturdays should be
considered as compensable working hours “while on call". In accordance with the Rules and
Regulations Implementing the Labor Code, an employee who is not required to leave word at his
home or with company officials as to where he may be reached is not working while on call.
But in the question, Gil Bates was required to keep his cell phone open from 8:00 A.M. to 5:00 P.M.
Therefore, Bates should be considered as working while on call, if he cannot use effectively and
gainfully for his own purpose the time from 8:00 A.M. to 5:00 P.M. on Saturdays when he is required to
keep his cellphone open. The compensation actually received by Bates for working while on call on
Saturdays should be reported to the Social Security System because under the Social Security Law,
compensation means "all actual remuneration for employment.” ANOTHER SUGGESTED
ANSWER: If Gil Bates can effectively utilize the Saturdays in his own interest even "while on call",
said hours on Saturdays are not compensable. However, if during said hours on Saturdays, Bates is
actually required to attend to urgent work to the extent of leaving what he is doing, then the same are
compensable, working hours to the extent of the actual hours of work rendered by him.
The compensation paid by the company to Bates for said hours worked on Saturdays should be
reported to the SSS. This is so because the basis of computing the SSS contribution includes all actual,
remuneration, including allowances and cash value of any compensation paid in any medium other than
cash.
88
DURING WORK HOURS, where such activities are CONTROLLED OR

REQUIRED by the ER and are pursued NECESSARILY AND PRIMARILY for the
**ER’S BENEFIT.
HOURS OF WORK OF HEALTH PERSONNEL (ADDED BY TOM)

1. GR: 8 hours for 5 days (40-hour workweek), exclusive of time for meals.
2. XPN: Where the EXIGENCIES of the service require that such personnel
work for 6 days or 48 hours, they shall be entitled to an additional
compensation of **AT LEAST 30% OF THEIR REGULAR WAGE for work
on the 6th day (LC, Art. 83).
3. **Health personnel COVERED by the 40-hour workweek:
a. Those in cities and municipalities with a population of **at least 1 million; or
b. Those in hospitals and clinics with a bed capacity of **at least 100.
4. NB: Art. 83(2) of the LC does **not require hospitals to pay the EEs a full
weekly salary with paid 2 days off (San Juan de Dios EEs Assoc.-AFW et al. v.
NLRC, 28 November 1997).
5. RESIDENT PHYSICIANS to be on duty beyond the 40-hour workweek limitation
*GR: The customary practice of requiring resident physicians beyond the
40 hours of work per week is **NOT PERMISSIBLE and violates the limitation
under Art. 83.
*XPN: If there is a TRAINING AGREEMENT between the resident
physician and the hospital and the training program is **duly accredited or
approved by appropriate government agency.
A2.b.i. Compressed work week (CWW)

1. What it is: The **normal workweek is reduced to less than 6 days but the total
number of work-hours of **48 hours per week shall remain. The normal
workday is **increased to more than 8 hours but not to exceed 12 hours,
without corresponding overtime premium. The concept can be adjusted accordingly
depending on the normal workweek of the company (Department Advisory Order No. 2, Series
of 2009).
*This scheme was originally conceived for establishments wishing to
save on energy costs, promote greater work efficiency and lower the rate of employee
absenteeism, among others. Workers favor the scheme considering that it would
**mean savings on the increasing cost of transportation fares for at least one
day a week; savings on meal and snack expenses; **LONGER WEEKENDS
or an **additional 52 off-days a year that can be devoted to rest leisure, family
responsibilities, studies and other personal matters, and that it will spare them
for at least another day in a week from certain inconveniences that are the normal
incidents of employment, such as commuting to and from the workplace, travel
time spent, exposure to dust and motor vehicle fumes, dressing up for work, etc. (Bisig
Manggagawa sa Tryco v. NLRC, 15 October 2008).
89
2. **REQUISITES for the adoption of compressed workweek:

a. The ER shall NOTIFY the DOLE through the Regional Office which has
jurisdiction over the workplace, of the adoption of compressed workweek;
b. The notice shall be in REPORT FORM attached to the advisory.
c.*NB LPS – it is expressly and voluntarily supported by majority of
the employees affected. If the work is hazardous, a certification is needed from an
accredited safety organization or the firm’s safety committee that work beyond
eight (8) hours is within the limits or levels of exposure set by DOLE’s
occupational safety and health standards.
d. NB: The Regional Office shall conduct an OCULAR VISIT to validate
whether the adoption of the flexible work arrangements is in accordance with this
issuance (Department Advisory Order No. 2, Series of 2009).
3. Instance when the implementation of a compressed workweek is considered
VALID; The validity of the reduction of working hours can be upheld when the
arrangement is:
a. Temporary;
b. It is a **more HUMANE solution instead of a retrenchment of
personnel;
c. There is NOTICE AND CONSULTATIONS with the workers and supervisors;
d. A CONSENSUS is reached on how to deal with deteriorating economic
conditions; and
e. It is sufficiently proven that the company was suffering from LOSSES.
*NB: Under the Bureau of Working Conditions’ bulletin, a reduction of the
number of regular working days (RWD) is **valid where the arrangement is
resorted to by the ER to PREVENT SERIOUS LOSSES DUE to causes
beyond his control, such as when there is a **SUBSTANTIAL SLUMP in the
demand for his goods or services or when there is a LACK OF RAW MATERIALS.
*****There is one main consideration in determining the validity of reduction
of working hours: that the company was suffering from losses. A YEAR of
financial losses would NOT JUSTIFY a reduced workweek (Linton
Commercial v. Hellera, 10 October 2007).
4. [] Bar 2005: **CONDITIONS where a "compressed workweek" schedule may
be legally authorized as an exception to the "8-hour a day" requirement under
the LC (2005 Bar Question):
a. The EE voluntarily agrees to it;
b. There is NO DIMINUTION in their weekly or monthly take home
pay or fringe benefits;
c. The benefits are more than or at least commensurate or equal to
what is due to the EEs without the compressed work week;
d. OT pay will be due and demandable when they are required to work on
those days which should have ceased to be working days because of the compressed work
week schedule;
90
e. No strenuous physical exertion or that they are given adequate rest

periods;
f. It must be for a TEMPORARY DURATION as determined by the DOLE.
5. EFFECTS OF THE CWW SCHEME (*NB LPS)
a. Unless there is a more favorable practice existing in the firm, work
beyond eight (8) hours will not be compensable by overtime premium
provided the total number of hours worked per day shall not exceed twelve (12)
hours. In any case, any work performed beyond twelve (12) hours a day or
forty-eight (48) hours a week shall be subject to overtime premium.
b. Consistent with Art. 85 LC, EEs under a CWW scheme are entitled to
meal periods of not less than sixty (60) minutes. Nothing, however, shall
impair the right of Ees to rest days as well as to holiday pay, rest day or leaves
in accordance with law or applicable CBA or company practice.
c. Adoption of the CWW scheme shall in no case result in diminution
of existing benefits. Reversion to normal eight (8) hour work day shall not
constitute diminution of benefits. The reversion shall be considered as a
legitimate exercise of management prerogative provided that the Ee shall
give the Ees prior notice132 of such reversion within a reasonable time.
(CHAN, supra at 379).
A2.b.ii. Power interruptions/brownout**133

*The following are the rules on work interruption due to brownouts:
1. Brownouts not exceeding 20 minutes shall be treated as worked for
compensable hours whether used productively or not.
2. Brownouts more than 20 minutes may not be treated as hours worked provided
any of the following conditions are present:
a. The Ees can leave their workplace or go elsewhere whether within or
without the work premises;
b. The Ees can use the time effectively for their own interest (Policy
Instruction No. 36 of the DOLE)
————————————————
A3. Meal break
1. Duration of the meal period: Every ER shall give his EEs not less than 60
132NB LPS – it seems that while a CWW scheme requires consent of the EEs affected, its reversion
only requires notice and not consent.
133 (*NB LPS)
91
minutes or 1 hour time-off for regular meals.134

*GR: Non-compensability of the meal period: It is not compensable
during a time-off. EE must be COMPLETELY RELIEVED from duty.
*****XPNs: It is compensable where the lunch period or meal time:
a. Is predominantly spent for the ER’s benefit; or
b. Where it is LESS THAN 20 MIN.135 it becomes only a rest period and
is considered as work time.136 EG: coffee breaks running from 5-20 minutes
are considered as compensable working time (IRR of Labor Code, Book III, Rule
I, Sec. 7)
2. Compensability of **meal periods provided DURING OVERTIME WORK:
Meal periods provided during overtime137 work are COMPENSABLE, since
the 1 hour meal period (non-compensable) is not given during OT work because
the latter is usually for a short period and **to deduct from the same would reduce to
nothing the EE’s OT work. Thus, the 1 hour break for meals during OT
should be treated as COMPENSABLE.138
3. Instances where **meal periods are shortened are COMPENSABLE—at
the instance of ER, when: (compare these with OT work & emergency work,
134Q: The meal time (lunch break) for the dining crew in Glorious Restaurant is either from 10 a.m. to
11 a.m. or from 1:30 p.m. to 2:30 p.m., with pay. But the management wants to change the mealtime
to 11: a.m. to 12 noon or 12:30 p.m. to 1:30 p.m., without pay. Will the change be legal? (2011 BAR
QUESTION) (A) Yes, absent an agreement to the contrary, the management determines work
hours and, by law, meal break is without pay. (B) No, because lunchbreak regardless of time should
be with pay. (C)Yes, the management has control of its operations. (D)No, because existing practice
cannot be discontinued unilaterally.
*NB2: Rest periods or coffee breaks running from **5 to 20 min. shall be considered as
135
COMPENSABLE working time (IRR, Book III, Rule, Sec. 7).

136*NB: The implementing rules allow the meal time to be less than 60 minutes, under specified
cases and **in no case shorter than 20 minutes (IRR, Book III, Rule 1, Sec. 7). If the so called “meal
time” is less than 20 minutes, it BECOMES ONLY A REST PERIOD and under the same section 7, is
CONSIDERED WORKING TIME.
137The CBA between the Company and the rank –and- file Union contained the following provision:
"Section 3. MEAL ALLOWANCE. The Company agrees to grant a MEAL, ALLOWANCE of TEN
PESOS (PIO.OO) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY FIVE PESOS
(P25.00) after THREE (3) hours of actual overtime work." Dispute in the interpretation of the above
provision arose as the Company asserts that the phrase "after three (3) hours of actual overtime work "
does not mean after exactly three (3) hours of actual overtime work: it means after more than three (3)
hours of actual overtime work. The Union. On the other hand, maintained that "after three (3) hours
of actual overtime work" simply means after rendering exactly, or no less than three (3) hours of actual
overtime work. Which interpretation do you think should prevail? (5%) SUGGESTED ANSWER: The
interpretation of the union should prevail. In a Supreme Court decision, it was ruled that the
condition "after three (3) hours of actual overtime work is satisfied after exactly three (3) hours
of actual overtime work.”
138NB1: Where **during a meal period, the laborers are required to stand by for emergency work,
or where the meal hour is not one of complete rest, such is CONSIDERED OT (Pan American World v.
Pan Am EEs Association, 24 February 1961).
92
infra)
a. Work is non-manual in nature or does not involve strenuous physical
exertion;
b. **Establishment regularly operates less than 16 hours a day;
c. Work is necessary to **prevent serious loss of PERISHABLE goods;
d. Actual or impending EMERGENCY or there is URGENT WORK
to be performed on machineries and equipment to avoid serious loss which the
ER would otherwise suffer (Sec. 7, Rule I, Book III, IRR);
4. Instances where meal periods are shortened are **not compensable—EE
requested for the shorter meal time so that he can leave work earlier than the
previously established schedule. REQUISITES:
a. EEs voluntarily agree in WRITING and are willing to waive OT pay
for the shortened meal period;
b. NO DIMINUTION in the salary and other fringe benefits of the EEs which
are existing before the effectivity of the shortened meal period;
c. Work of the EEs does not involve strenuous physical exertion and
they are provided with adequate coffee breaks in the morning and afternoon;
d. Value of the BENEFITS derived by the EEs from the proposed work
arrangements is equal to or commensurate with the compensation due them for the
shortened meal period as well as the OT pay for 30 min. as determined by the EEs concerned;
e. OT pay will become due and demandable after the new time schedule;
f. Arrangement is of **temporary duration.
————————————————
A4. Waiting time

1. When waiting time considered as working time:*****
a. It is considered working time if waiting is an INTEGRAL PART of
his work, or
b. The EE is required139 or engaged by the ER to wait (*ENGAGED TO
WAIT).
*NB: The ***CONTROLLING factor is whether waiting time spent in idleness
139 *NB LPS – when the Ee is required to remain on call in the Eer’s premises or so close there that
he cannot use the time effectively and gainfully for his own purpose (IRR of LC, Book III, Rule I,
Sec. 5)
93
is so SPENT PREDOMINANTLY FOR THE ER'S BENEFIT140 or for the EE.

2. Waiting time **not considered as working time:
a. GR: when the EE IS **WAITING TO BE ENGAGED; IDLE TIME is not
working time. Hence, it is not compensable (waiting to be engaged, as compared to
“engaged to wait”). Under the law, the idle time that an EE may spend for resting
and during which he may leave the spot or place of work though not the premises
of his ER, is not counted as working time only where the work is broken or is not
continuous (National Development Co. v. CIR, 6 SCRA 763).
*Note that for seamen, who have to be in the boat 24H/day, what is
compensable is only his 8H of work.141
b. XPN: Idle time considered as working time: when the EE is idle or
inactive by reason of **INTERRUPTIONS BEYOND HIS CONTROL.
3. The following are conditions that make attendance by EE in lectures, meetings
and training programs outside working time:
a. Attendance is OUTSIDE of the EE’s regular working hours;
140 Q: Lito Kuiangkuiang and Bong Urongsulong are employed as truck drivers of Line Movers. Inc.
Usually. Lito is required by the personnel manager to just stay at the head office after office hours
because he could be called to drive the trucks. While at the head office, Lito merely waits in the
manager’s reception room. On the other hand, Bong is allowed to go home after office hours but is
required to keep his cellular phone on so that he could be contacted whenever his services as
driver becomes necessary. Would the hours that Lito and Bong are on call be considered
compensable working hours? SUGGESTED ANSWER: The hours of Lito and Bong while on call can
be considered compensable hours. The applicable rule is: "An employee who is required to remain
on call in the employer's premises or so close thereto that he cannot use the time effectively and
gainfully for his own purpose shall be considered as working while on call. An employee who is
not required to leave word at his home or with company officials where be may be reached is not
working while on call." Here, Lito is required to stay at the office after office hours so he could be
called to drive the trucks of the Company. As for Bong, he is required to keep his cellular phone so that
he could be contacted whenever his services as driver as needed. Thus, the waiting time of Lito and
Bong should be considered are compensable hours. Note: It could be argued that in the case of Bong
who is not required to stay in the office but is allowed to go home, if he is not actually asked by cellular
phone to report to the office to drive a car, he can use his time effectively and gainfully to his own
purpose, thus, the time that he is at home may mean that there are not compensable hours.
141 Q: Pedro Sisid is a seaman who was employed in 1990 by Kuhol Ocean Transport. In May 1993, he
was discharged and correspondingly paid vacation pay, terminal pay and overtime pay for the number
of hours he actually rendered service in excess of his eight (8) working hours a day. Pedro Sisid,
however, is dissatisfied with his overtime pay contending that he is on board the vessel 24 hours a
day, or even beyond his eight (8) working hours which circumstance renders him on call
whenever his service is needed. Therefore, he insists that he be paid 16 hours a day by way of overtime.
Is the contention of seaman Pedro Sisid tenable? Why? SUGGESTED ANSWER: No. The contention
of seaman Sisid is not tenable. The fact that he is on board the vessel 24 hours a day does not
mean that beyond his eight working hours, he could be also considered as working because he
is on call, and thus, is entitled to overtime pay. Because he is a seaman, this circumstance means
he is on board his vessel while at sea. But he is not thereby on call as to be entitled to overtime
pay because when it is not his working time, *****he can, if he chooses to do so, use said non-
working time effectively and gainfully for his own purpose. ALTERNATIVE ANSWER: No,
there being a record of actual overtime services rendered. An estimated period of overtime is valid as a
basis for payment of overtime, only in a case where overtime services are actually being rendered
regularly but no record of the hours were kept.
94
b. Attendance is in fact VOLUNTARY and

c. The EE does NOT PERFORM any productive work during such attendance.
4. EEs considered as **working while on call: When EE is
a. REQUIRED to remain on call142
b, in the ER's premises or so close thereto
c. that he cannot use the time effectively and gainfully for his own purpose.
*Hence, sleeping time during night shifts is considered working time
(compensable) if such does not interrupt or prejudice the performance of the
EE’s work.143
————————————————
A5. Overtime work, overtime pay

1. Concept of a WORK DAY: the 24-hour period which commences from the
time the EE regularly starts to work
a. EG: If the worker starts to work 8 am today, the workday is from 8 am
today up to 8 am tomorrow.
b. NB: Minimum normal working hours fixed by law **need not be continuous
to constitute the legal working day.
2. Overtime work: if **PERFORMED BEYOND 8 HOURS WITHIN THE
WORKER'S 24-HOUR WORKDAY.
a. NB LPS – Service rendered in excess of and in addition to eight (8)
hours on ordinary working days, which are the prescribed daily work period is OT
work (Caltex Regular Employees v. Caltex, Phils., 15 August 1995).
b. NB: Express instruction from the ER to the EE to render OT work is
NOT REQUIRED for the EE to be entitled to OT pay; it is
**SUFFICIENT that the EE is permitted or suffered to work.144 **However,
142*NB LPS – Q. X is employed as a mechanic by the Golden Taxi Cab co. working form 8am to
12noon and 1pm to 5pm. During lunch time he is required to stand by for emergency call. On many
occasions he is called for some emergency work even while taking his meals. Because he is working up
to 8pm, he files a claim for overtime pay. Is computing his overtime he includes the 1-hour allowed for
lunchtime as part of his working time. Is X correct? (1976 bar) A. Yes. An Ee who is required to
remain on call in the Er’s premises or so close thereto that he cannot use the time effectively and
gainfully for his own purpose, shall be considered as working while on call (CHAN, supra at 390)
143*NB LPS - Q. Ten (10) utility men were assigned by the supermarket supervisor to night shift from
8pm to 4am. The utility men worked for 30 minutes and slept until 1 am when a delivery of
commodities arrived. They worked again for 30 minutes and slept until 4am. Are these sleeping
time compensable working period? A. Yes. Sleeping time is compensable if the nature of the Ee’s
work allows sleeping without interrupting or prejudicing the performance of his work. In this
case, the nature of their work requires them to do the actual work only when there are deliveries.
(POQUIZ, Labor Standards Law with notes and comments, 2012, p. 181)
*NB LPS – Instruction or approval or OT work need not be made expressly by the ER as it is
144
enough that the Ee is permitted or suffered to work beyond his 8 hour normal working hours.
Moreover, if the work performed was necessary or that it benefitted the company, **the overtime is
compensable even without the approval of the company (Manila Railroad Co. v. CIR, 31 July 1952).
95
written authority after office hours **DURING REST DAYS AND HOLIDAYS are
REQUIRED for entitlement to COMPENSATION.
3. Rationale behind the overtime pay: EE is made to work LONGER THAN
WHAT IS COMMENSURATE with his agreed compensation for the
statutory fixed or voluntarily agreed hours of labor he is supposed to do (PNB
v. PEMA and CIR, July 30, 1982). **Two reasons:
a. It DISCOURAGES THE ER from REQUIRING such work THUS
PROTECTING THE HEALTH AND WELL-BEING of the WORKER,
b. and also TEND TO REMEDY UNEMPLOYMENT by
encouraging ERs to employ others workers to do what cannot be accomplished
during the normal hours of work.
4. Instances where an EE may or may not be compelled to render OT work
a. GR: An EE may not be compelled to render OT work; OT work is
VOLUNTARY.145
b. XPNs: *****COMPULSORY OT WORK in any of the following
situations:
i. URGENT WORK to be performed on machines and installations in
order to avoid serious loss or damage to the ER or some other cause of similar nature
ii. Work is NECESSARY to prevent loss or damage to perishable goods
iii. In case of IMMINENT DANGER to the public safety due to
an ACTUAL OR IMPENDING EMERGENCY in the locality caused by serious
accidents, fire, flood, typhoon,146 earthquake, epidemic or other disaster or calamity
iv. Country is at WAR;
v. Completion or continuation of the work started before the 8th
hour is necessary to prevent serious obstruction or prejudice to the business
operations of the ER;
vi. Any other national or local emergency has been DECLARED;
vii. Necessary to PREVENT LOSS of life or property. (LC, Art. 89)
*NB: There should be payment of additional compensation. EEs’
REFUSAL TO OBEY the order of the ER constitutes **INSUBORDINATION
145Q: After working from 10 a.m. to 5 p.m. on a Thursday as one of 5,000 employees in a beer factory,
A hurried home to catch the early evening news and have dinner with his family. At around 10 p.m. of
the same day, the plant manager called and ordered A to fill in for C who missed the second shift. (2010
Bar Question) A. May A validly refuse the plant manager’s directive? Explain. (2%) SUGGESTED
ANSWER: YES. A may validly refuse to fill in for C. A may not be compelled to perform overtime
work considering that the plant manager’s directive is not for an emergency overtime work, as
contemplated under Article 89 of the Labor Code. B. Assuming that A was made to work from 11 p.m.
on Thursday until 2 a.m. on Friday, may the company argue that, since he was two hours late in coming
to work on Thursday morning, he should only be paid for work rendered from 1 a.m. to 2 a.m.?
Explain. (3%) SUGGESTED ANSWER: NO. Undertime is not off-set by overtime (Art. 88, Labor
Code).
146Q: In a scenario like typhoon Ondoy, who may be required by the employer to work overtime when
necessary to prevent loss of life or property? (2011 BAR QUESTION): (A) Health personnel 
(B) Employees with first aid training (C)Security and safety personnel (D) Any employee
96
for which he may be subjected to disciplinary action.

5. Right to OT pay CANNOT BE WAIVED147
a. GR: The right to OT pay cannot be waived as it is governed by law148
and not merely by the agreement149 of the parties.
b. *****XPNs:
i. If the waiver is made in exchange for certain VALUABLE
147[] Bar 1996: Jose applied with Mercury Drug Company for the position of Sales Clerk. Mercury
Drug Company maintains a chain of drug stores that are open every day till late at night. Jose was
informed that he had to work on Sundays and holidays at night as part of the regular course of
employment. He was presented with a contract of employment setting forth his compensation on an
annual basis with an **express waiver of extra compensation for work on Sundays and holidays,
which Jose signed. Is such a waiver binding on Jose? NO. **Rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals and customs [Art 6 NCC]. The waiver in this
case is void.
148Q: TRUE or FALSE.[d] A waiver of the right to claim overtime pay is contrary to law. (2009 Bar
Question) SUGGESTED ANSWER: True. As a general rule, overtime compensation cannot be
waived, whether expressly or impliedly; and stipulation to the contrary is against the law.
(Pampanga Sugar Dev. Co., Inc. v. CIR, 114 SCRA 725 [1982].) An exception would be the adoption of
a compressed work week on voluntary basis, subject to the guidelines of Department Order No. 02,
Series of 2004.
149Q: May the employer and employee stipulate that the latter’s regular or basic salary already includes
the overtime pay, such that when the employee actually works overtime he cannot claim overtime pay?
(2012 Bar Question): a) Yes, provided there is a clear written agreement knowingly and freely entered
into by the employee; b) Yes, provided the mathematical result shows that agreed legal wage rate and
the overtime pay. Computed separately, are equal to or higher than the separate amounts legally due; c)
No, the employer and employee cannot stipulate that the latter’s regular or basic salary already includes
the overtime pay; d) A and B. SUGGESTED ANSWER: c) No, the employer and employee cannot
stipulate that the latter’s regular or basic salary includes the overtime pay. [Art. 87, Labor Code]
SUGGESTED ALTERNATIVE ANSWER: b) Yes, provided the mathematical results shows that
the agreed legal wage rate and the overtime pay, computed separately, are equal to or higher
that the separate amounts legally due.
97
benefits and privileges, which may even exceed150 the OT Pay (MERALCO
Workers Union v. MERALCO, 29 March 1959);151
ii. **Compressed workweek152 (Bisig ng Manggagawa sa Tryco, supra).
c. Nuances:
150 Q: The Overseas Construction Company, a domestic corporation with a recruitment license, hired
two thousand Filipino workers and assigned them to its construction project in Kuwait. They were
given free housing, work clothing and food. The master employment contract approved for them by
the Philippine Overseas Employment Administration (POEA) stipulated that they were to work at
the overseas jobsite for twelve (12) hours per day and that they were accordingly to be paid
wages higher than the POEA-approved schedule of pay rates. The individual employment
contracts also contained the same stipulations. And during the pre-departure briefings at the company’s
Mandaluyong plant site, the workers were told about these stipulations. By actual compu-tation, the
wages paid at the overseas jobsite were at least twenty-five percent (25%) more than the POEA-
approved rates. Moreover, the record shows that the workers did not always render the full twelve (12)
hours of work stipulated in the employment contract. Back home after completing their one-year
overseas assignment, the workers engaged your services as their lawyer to prosecute a complaint with
the POEA for recovery of unpaid overtime work. What would your advice be? SUGGESTED
ANSWER: Before I give an advise, I will first find the answer to this basic question: Were the workers
actually paid for their overtime work when they received wages that were at least twenty-five percent
(25%) more than the POEA-approved rates? The answer is No if the 25% added to the POEA-
approved rate (which we assume is a rate for a day of eight (8) hours work) is only 25% of such
POEA-approved daily wage rate. This is because what should be paid to the workers for the four (4)
hours that they work overtime in their twelve (12) hour day (a 12-hour work day is 4 hours in excess of
an 8-hour work day) should be 50% more of such POEA- approved rate. The four (4) hours of work
is 50% of the normal weight (8) hours of work a day plus 25% of such additional 50% for
purposes of paying the overtime rate. There is also the night differential pay to take into account
because a 12-hour shift will include working hours from 10:00 p.m. to 6:00 a.m. If the higher-than-
the POEA- approved rate is computed as indicated above, I will advise the workers not to sue
for they have already been paid for their overtime work. If the higher-than-the-POEA-approved
rates is not, however, computed as indicated above, the fact that the POEA-approved the contracts and
that the workers agreed to the rates they receive will not be a bar to a complaint for unpaid overtime
pay, the right to which cannot be waived. ANOTHER SUGGESTED ANSWER: The rate approved
by the POEA has built-in overtime pay. Thus, there is no basis for the claim for overtime pay.
151[] Q: Danilo Flores applied for the position of driver in the motor-pool of Gold Company, a
multinational corporation. Danilo was informed that he would frequently be working overtime as he
would have to drive for the company's executives even beyond the ordinary 8-hour work day. He
was provided with a contract of employment wherein he would be paid a monthly rate equivalent to
35 times his daily wage, regular sick and vacation leaves, 5 day-leave with pay every month and **time
off with pay when the company's executives using the cars do not need Danilo's service for more than eight hours a day,
in lieu of overtime. Are the above provisions of the contract of employment in conformity with, or
violative of, the law? A: Except for the provision that Danilo shall have time off with pay when the company's
executives using the cars do not need Danilo's service for more than 8 hours a day, in lieu of OT, the provisions of
the contract of employment of Danilo are **not violative of any labor law because they instead
improve upon the present provisions of pertinent labor laws.
152OT pay in a compressed workweek scheme: **Any work performed beyond 12 hours a day or
48 hours a week shall be subject to OT premium (Department Advisory No. 02, s. of 2004).
98
i. Payment of overtime pay applies to EEs of NGOs.153

ii. If Saturday is a regular workday of an EE, he is not entitled to
receive OT pay when he works on a Saturday.154
6. OT RATE may be subject to STIPULATION of the ER and EE
a. GR: The premium for work performed on the EE’s rest days or on
special days or regular holidays are included155 as part of the regular rate of the
EE in the computation of OT pay for any OT work rendered on said days especially if
the ER pays only the minimum OT rates prescribed by law.
b. XPN: EEs and EE may stipulate in their collective agreement the
payment of **OT RATES HIGHER than those provided by law and exclude the
premium rates in the computation of OT pay. Such agreement may be considered
**valid ONLY if the stipulated OT pay rates will yield to the EEs not less
than the minimum prescribed by law.
7. As to computations RE OT pay, see formulas under Holiday Pay, infra.
*NB LPS – entitlement to OT pay must first be established by sufficienct
proof that said OT work was actually performed before an EE may avail of the
same (Cagampan v. NLRC, 22 March 1991)
153 [] Bar 2002: Socorro is a clerk-typist in Hospicio de San Jose, a charitable institution dependent for
its existence on contributions and donations from well wishers. She renders work 11 hours a day but
has not been given OT pay since her place of work is a charitable institution. Is Socorro entitled to
overtime pay? YES. She does not fall under any of the exceptions to the coverage of Art. 82, under
the provisions of hours of work. The **LC is equally applicable to non-profit institutions. A
covered EE who works beyond 8 hours is entitled to OT compensation.
154A case against an employer company was filed charging it with having violated the prohibition
against offsetting undertime for overtime work on another day. The complainants were able to
show that, pursuant to the Collective Bargaining Agreement (CBA), employees of the union had been
required to work “overtime" on Saturday but were paid only at regular rates of pay on the thesis
that they were not required to complete, and they did not in fact complete, the eight-hour work
period daily from Monday through Friday. Given the circumstances, the employer contended that
the employees were not entitled to overtime compensation, i.e., with premium rates of pay. Decide the
controversy. (2005 Bar Question) SUGGESTED ANSWER: The employer is correct. While Art. 88 of
the Labor Code clearly provides that undertime work on any other particular day shall not be offset by
overtime work on any other day, this rule is inapplicable in this case pertaining to Saturday work
which in reality does not constitute overtime work as Saturday is stiil a working day under the
law and there is no CBA stipulation against it. ANOTHER SUGGESTED ANSWER: Art. 88 of
the Labor Code provides that undertime work on any particular day shall not be offset by overtime
work on any other day. The CBA being the law between the parties and the Union having shown that
the employees rendered overtime work on Saturday, the contention of the employer is not tenable. The
employer cannot use the undertime of Monday through Friday to offset the overtime on Saturday.
Hence, the employees are entitled to overtime compensation, i.e. premium rates of pay on Saturday.
155[] Q: The employment contract requires work for more than 8 hours a day with a fixed wage
inclusive of OT pay. Is that valid? It depends: a. When the contract of employment requires work
for more than 8 hours at specific wages per day, **without providing for a fixed hourly rate or that the daily
wages include OT pay, said wages cannot be considered as including OT compensation (Manila
Terminal Co. v. CIR, et al., 91 Phil., 625); b. However, the employment contract may provide for a
“built-in” OT pay. Because of this, non-payment of OT pay by the employer is valid (Engineering
Equipment v. Minister of Labor, September 23, 1985).
99
8. NB LPS – basis of computation for OT pay. The basis for computation of

overtime pay is the regular basic wage which include cash wage only, without
any deduction on account of facilities provided by the Er (Art. 90, LC).
*Simply stated, “regular base pay” means regular basic pay which necessarily
excludes money received in different concepts such as Christmas bonus and
other fringe benefits (Bisig ng Manggagawa ng Phil. Refining Co., v. Philippine Refining
Co., 30 September 1981)
9. NB LPS – difference between overtime work to overload work: overload
work or additional work is work performed within eight (8) hours of a
normal working day. Such overload work is considered part of the basic pay for
the purpose of computing 13th month pay. Overtime work is rendered in
excess of the eight (8) hour normal working day.
ON UNDERTIME (UT)
1. Undertime (UT) *****CANNOT OFFSET156 overtime (OT); Where a worker
incurs undertime hours during his regular daily work, said undertime hours
should not be offset against the overtime hours on the same day or on any other
156Q: A case against an employer company was filed charging it with having violated the prohibition
against offsetting undertime for overtime work on another day. The complainants were able to
show that, pursuant to the Collective Bargaining Agreement (CBA), employees of the union had been
required to work “overtime" on Saturday but were paid only at regular rates of pay on the thesis
that they were not required to complete, and they did not in fact complete, the eight-hour work
period daily from Monday through Friday. Given the circumstances, the employer contended that
the employees were not entitled to overtime compensation, i.e., with premium rates of pay. Decide the
controversy. (2005 Bar Question) SUGGESTED ANSWER: The employer is correct. While Art. 88 of
the Labor Code clearly provides that undertime work on any other particular day shall not be offset by
overtime work on any other day, this rule is inapplicable in this case pertaining to Saturday work
which in reality does not constitute overtime work as Saturday is stiil a working day under the
law and there is no CBA stipulation against it. ANOTHER SUGGESTED ANSWER: Art. 88 of
the Labor Code provides that undertime work on any particular day shall not be offset by overtime
work on any other day. The CBA being the law between the parties and the Union having shown that
the employees rendered overtime work on Saturday, the contention of the employer is not tenable. The
employer cannot use the undertime of Monday through Friday to offset the overtime on Saturday.
Hence, the employees are entitled to overtime compensation, i.e. premium rates of pay on Saturday.
electi mei non laborabunt frustra ! 100 of !371
day. It is both PROHIBITED157 by the statute158 and by jurisprudence.

2. But UT can be used to offset accrued leave credits.159
PART-TIME WORK160
1. Non-prohibition of part-time work: Part-time work is NOT PROHIBITED.
The LC merely provides for the maximum number of hours and not the
minimum. Under Art. 124, as amended by R.A. 6727, **WAGE PROPORTIONATE
TO PART-TIME WORK IS RECOGNIZED.
2. NB: The wage and benefits of a part-time worker are **IN PROPORTION
to the number of hours worked. EG: if an EE earns P300.00 for an 8-hour
work, he shall then get P150.00 for work done in 4 hours.
————————————————
A6. Night work (R.A. No. 10151), Night shift differential

1. What is night work? Any and all work rendered **between 6 pm and 6 am
(National Rice & Corn Corp. v. NARIC, 105 Phil 891).
2. Who is a night worker? Any employed person whose WORK REQUIRES
performance of a SUBSTANTIAL number of hours of night work which
exceeds a specified limit. This limit shall be fixed by the SOLE after consulting the
workers’ representatives/labor organizations and ERs (LC, Chapter V, Art. 154 as
amended by R.A. 10151).
3. Persons COVERED by the provisions on night work under R.A. 10151
a. GR: All persons who shall be employed or permitted or suffered to work
157
158 Q: A manufacturing company operates on a 6-day workweek. It employs 200 workers whose
regular workday is 8 hours. On May 1. 1990, the company and Union “M", the employees; bargaining
agent, agreed that the workday be 7 hours from Monday to Wednesday and 9 hours from
Thursday to Saturday. The agreement was ratified by all the employees. In 1991 Union “M" lost its
majority status and Union “P" was certified as bargaining representative. Union “P" filed a claim
against the Company for unpaid overtime pay of the 200 employees from May 1. 1990 when
they started working 9 hours per day, 3 days a week. Invoking the 1990 agreement, the Company
moved to dismiss the claim of Union “P". Decide with reasons. SUGGESTED ANSWER: The claim
of Union “P" is valid. The Labor Code is very clear: Undertime work on any particular day shall
not be offset by overtime work on any other day. (Article 88, Labor Code) The right arising from
the above provision, meaning, entitlement to overtime pay for one hour for working 9 hours per day, 3
days a week. (Article 87, Labor Code) cannot be considered as waived by a CBA even if the CBA
is ratified by the employees concerned. The waiver in this instance is against the law, morals, and
public policy. The law must prevail over the CBA.
159[] Q: In lieu of overtime pay, the employee was given permission to go on leave on some other day, is
that valid? NO. **Permission given to the EE to go on leave on some other day of the week shall not
exempt the ER from paying the additional compensation required because it would prejudice the
EE, for he will be deprived of the additional pay for the OT work he has rendered and which is
utilized to offset the undertime he may have incurred. **Undertime could be charged against the
EEs accrued leave.
160 *NB LPS - not in the syllabus
at night.
b. XPN: Those employed in agriculture, stock raising, fishing, maritime
transport and inland navigation, **during a period of not less than 7
CONSECUTIVE hours, including the interval from MIDNIGHT TO 5 IN THE
MORNING, to be determined by the SOLE after consulting the workers’ representatives/labor
organizations and ERs.
4. Right of the workers to undergo HEALTH ASSESSMENT to avoid health
problems associated with night work: At their request, workers shall have the
RIGHT TO UNDERGO HEALTH ASSESSMENT **WITHOUT CHARGE and to
receive advice on how to reduce or avoid health problems associated with their
work:
a. BEFORE taking up an assignment as a night worker;
b. At regular intervals DURING such an assignment; and
c. If they EXPERIENCE health problems DURING such an assignment
which are not caused by factors other than the performance of night work.
*NB: Night workers who are **CERTIFIED AS UNFIT for night work,
due to health reasons, SHALL BE TRANSFERRED, whenever practicable, to a similar job
for which they are fit to work. If such transfer to a similar job is not practicable, these
workers shall be granted the same benefits as other workers who are unable to
work, or to secure employment during such period.
RIGHTS OF NIGHT WORKERS UNDER THE LABOR CODE

1. Right to free health assessment (Art. 155);
2. Right to be transferred to a similar job which they are fit to work, whenever
practicable, if found unfit for work due to health reasons (Art. 157);
3. Right to safe and healthful working conditions and other mandatory
facilities (Art. 156);
The ERs are required under the law to provide the following, subject to
exceptions as provided by DOLE:
a. suitable first-aid facilities;
b. sleeping or resting quarters in the establishment; and
c. transportation from the work premises to the nearest point of their residence.
4. Right of pregnant women to alternatives to night work;
5. Right of pregnant women against dismissals and diminution of benefits on
account of pregnancy, child birth, and childcare responsibilities (Art. 158); and
6. Right of regular workers to be consulted before introduction of night work
(Art. 161).
EMPLOYABILITY OF WOMEN FOR NIGHT WORK

1. R.A. 10151 **repealed Arts. 130 and 131 of the LC on Night Work
prohibition with regard to women workers. However, measures shall be taken
to ensure that an alternative to night work is available to women workers who would
otherwise be called upon to perform such work:

a. Before and after childbirth, for a period of **at least 16 weeks, which
shall be divided between the time before and after childbirth;
b. For additional periods, in respect of which a MEDICAL CERTIFICATE is
produced stating that said additional periods are necessary for the health of the
mother or child:
i. During pregnancy;
ii. During a specified time beyond the period, after childbirth is
fixed pursuant to (a), the length of which shall be determined by the DOLE after consulting
the labor organizations and ERs.
2. NB: During the periods referred in Art. 158 in RA 10151:
a. A woman worker shall not be dismissed or given notice of dismissal,
except for just or authorized causes provided for in the Code that are **not
connected with pregnancy, childbirth and childcare responsibilities.
b. A woman worker shall NOT LOSE THE BENEFITS regarding her status,
seniority, and access to promotion which may attach to her regular night work position.
3. May pregnant women and nursing mothers be allowed to work at night? YES.
They are allowed **IF A COMPETENT PHYSICIAN, other than the company
physician, shall CERTIFY their fitness to render night work, and specify, in the
case of pregnant EEs, the period of the pregnancy that they can safely work.
4. **FACILITIES REQUIRED from ERs under R.A. 10151:
a. Suitable FIRST-AID facilities, including arrangements where such workers,
where necessary, can be taken immediately to a place for appropriate treatment.
b. SAFE AND HEALTHFUL WORKING CONDITIONS and ADEQUATE OR
REASONABLE FACILITIES, i.e., SLEEPING or resting QUARTERS in the
establishment, and TRANSPORTATION from the work premises to the nearest point
of their residence subject to exceptions and guidelines to be provided by the DOLE.
NIGHT SHIFT DIFFERENTIAL (NSD)

1. What it is: ADDITIONAL COMPENSATION of not less than 10% of an
EE’s regular wage for *****every hour worked between 10 pm to 6 am,161 whether
or not such period is part of the worker's regular shift.
2. NON-WAIVABILITY of NSD
a. GR: Waiver of NSD is against public policy (Mercury Drug Co., Inc. v.
Dayao, et al., September 30, 1982).
161Q: Night differential is differentiated from overtime pay in that (2011 BAR QUESTION)
(A) while overtime pay is given for overtime work done during day or night, night differential is
given only for work done between 10:00 p.m. and 6:00 a.m. (B) while overtime pay is paid to an
employee whether on day shift or night shift, night shift differential is only for employees regularly
assigned to night work. (C)while overtime pay is for work done beyond eight hours, night differential is
added to the overtime pay if the overtime work is done between 6:00 p.m. and 12 midnight. (D) while
overtime pay is 25% additional to the employee's hourly regular wage, night differential is 10% of such
hourly wage without overtime pay.
b. XPN: Waiver is **allowed if this will result to higher or better benefits

to EEs.
————————————————
A7. Rest Periods
WEEKLY REST DAY

1. RIGHT to weekly rest day (WRD): Every ER shall give his EEs a rest period of
a. not less than 24 consecutive hours**
b. after every 6162 consecutive normal work days (IRR, Book III, Rule III, Sec.
3).
2. Scope of WRD: **It shall APPLY TO ALL ERs whether operating for profit
or not,163 including public utilities operated by private persons (IRR, Book III, Rule III,
Sec. 1).
3. Person who determines the WRD
a. GR: ER shall determine and schedule the WRD of his EE.
b. XPNs:
i. CBA;
ii. Rules and regulations as the SOLE provides;
iii. Preference of EE based on **religious grounds: EE shall MAKE
KNOWN his preference IN WRITING at least 7 days before the desired
effectivity of the initial rest day so preferred [IRR, Book III, Rule III, Sec. 4(1)].
[] XPNs to XPN: ER may schedule the WRD of his choice for AT
LEAST 2 DAYS IN A MONTH if the preference of the EE will inevitably result in:**
a) SERIOUS PREJUDICE to the operations of the undertaking and
b) the ER cannot normally be expected to resort to other
remedial measures [IRR, Book III, Rule III, Sec. 4(2)].
4. RIGHT of the EEs to know the schedule of their WRDs: ER shall make
known their rest period by means of:**
162Q: Lawyer Antonio Martin recently formed a law partnership with five other lawyer-friends of his.
They hired two office secretaries, an accounting clerk - cashier, one bookkeeper, and two messengers.
You are among three associate attorneys. The workweek is Monday to Friday. There is no vacation
leave but sick leave is 15 days for every year of continuous and satisfactory service. Managing partner
Martin is preparing a set of personnel policies in terms and conditions of employment for the staff
and has asked you to give him a brief memo on the questions listed below. (a) Should the law firm
schedule a rest day for the employees, including you? Explain fully. (1987 Bar Question) SUGGESTED
ANSWER: (a) There is no need under the Labor Code to schedule a rest day. The Code (in Art. 91)
requires an employer to provide each of his employees a weekly rest day after every six consecutive
normal work days. Here, the work week is such that it is for five days. The Saturdays and Sundays
when the employees are not required to work more than satisfy the required weekly rest day.
163Q: A Ladies Dormitory run or managed by a charitable non-profit organization claims that it is
exempt from the coverage of the Weekly Rest Period provision of the Labor Code. Is the claim valid?
(5%) (1998 Bar Question) SUGGESTED ANSWER: No. The claim is not valid. The provisions on
weekly rest periods in the Labor Code cover every employer, whether operating for profit or not.
(See Article 91 of the Labor Code)
a. Written notice;
b. Posted conspicuously in the workplace;
c. At least 1 week before it becomes effective (IRR, Book III, Rule III, Sec. 5).
EMERGENCY REST DAY WORK

1. Can EE be compelled to work on his rest day?
*GR: The EE cannot be compelled by the ER to work on his rest day.
*****XPNs:
a. URGENT WORK to be performed on the machinery, equipment or
installation, to avoid serious loss which the ER would otherwise suffer;
b. NATURE OF WORK requires continuous operations for 7 days in a
week or more and stoppage of the work may result in IRREPARABLE164 INJURY OR
LOSS to the ER;
c. ABNORMAL PRESSURE of work due to special circumstances,
where the ER cannot be ordinarily expected to resort to other measures;
d. Actual or impending EMERGENCIES (serious accident, fire, flood, typhoon,
earthquake, etc.)
e. Prevent LOSS OR DAMAGE to perishable goods;
f. **ANALOGOUS or similar circumstances as determined by the SOLE;
g. Work is necessary to AVAIL OF FAVORABLE WEATHER or
environmental conditions where performance or quality of work is DEPENDENT
thereon. (LC, Art. 92)
2. Can EE volunteer to work on his rest day under other circumstances? YES. He
shall express it in WRITING subject to additional compensation [IRR, Book III, Rule
III, Sec. 6(2)].
————————————————
A8. Holiday pay; 13th month pay

1. Holiday pay is a form of premium accorded to an employee who does not
work on regular holidays. If he works on said regular holidays, he is entitled to
an additional compensation over his regular or basic remuneration known as
premium pay. (POQUIZ, supra at 199).
2. RATIONALE - The purpose of the holiday pay is to prevent diminution of
the monthly income of the workers on account of work interruptions. In other
word, although the worker is forced to take a rest, he earns what he should earn,
that is, his holiday pay (Jose Rizal College v. NLRC, 1 December 1987).
COVERAGE, EXCLUSIONS
1. Persons entitled to holiday pay
164Q: An employer may require an employee to work on the employee's rest day (2011 BAR) (A) to
avoid irreparable loss to the employer.(B) only when there is a state of calamity. (C) provided he is
paid an extra of at least 50% of his regular rate. (D)subject to 24-hour advance notice to the employee.
a. GR: All EEs are entitled (IRR, Book III, Rule IV, Sec.1).
b. XPNs:
i. Government EEs and any of its political subdivisions, including
GOCCs (with original charter)
ii. Retail165 and service166 establishments regularly employing **less
than 10 workers
iii. Domestic helpers and persons in the personal service of another
iv. EE engaged on task or contract basis or purely commission basis
v. Members of the Family of the ER who are dependent on him for support
vi. Managerial EE and other members of the managerial staff
vii. Field personnel and other EE whose time and performance are
unsupervised by the ER
viii. EE paid fixed amount for performing work irrespective of the time
consumed in the performance thereof (IRR, Book III, Rule IV, Sec.1).
TEACHERS, PIECE WORKERS, TAKAY, SEASONAL WORKERS,

SEAFARERS
Employees RULE
Private school teachers 1. RH during semestral vacations: Not entitled to holiday pay; 2. RH
(Faculty members of colleges and during Christmas vacation: Entitled to holiday pay
universities)
1. No pay on regular holidays including Christmas and semestral
vacations; 2. But with pay on special public holidays and other no-
Hourly-paid teachers class days when classes are called off or shortened on account of floods,
typhoons, rallies and the like (Jose Rizal College v. NLRC, Dec. 1, 1987).
EE paid by: 1. results or 2. Holiday pay shall not be less than his average daily earnings for
output (Piece work payment) the last 7 actual work days preceding the RH. Provided: Holiday pay shall
not be less than the statutory minimum wage rate.
May not be paid the required Holiday pay during off-season where
Seasonal Workers they are not at work.
Workers having no regular
Shall be entitled to holiday pay
work days
Seafarers Shall be entitled to holiday pay
1. Are the school faculty who according to their contracts are paid per lecture
hour entitled to unworked holiday pay?
a. If during RH: NO. Art. 94 of the LC is silent with respect to faculty
members paid by the hour who because of their teaching contracts are obliged to
work and **consent to be paid only for work actually done (except when an
*Retail establishments: engaged in the sale of goods to end users for personal or household use.
165
EG: Grocery
166*Service establishments: engaged in the sale of services to individuals for their own or household
use. EG: TV repair shop.
emergency or a fortuitous event or a national need calls for the declaration of

special holidays). Regular holiday specified as such by law are known to both
school and faculty members as "no class days" certainly the latter do not
expect payment for said unworked days, and this was clearly in their minds
when they entered into the teaching contracts (Jose Rizal College v. NLRC,
December 01, 1987).
b. If during special public holidays: YES. The law and the IRR governing
holiday pay are silent as to payment on Special Public Holidays. It is readily
apparent that the **declared purpose of the holiday pay which is the prevention
of diminution of the monthly income of the EEs on account of work
interruptions is defeated when a regular class day is cancelled on account of a special public
holiday and class hours are held on another working day to make up for time lost
in the school calendar. Otherwise stated, the faculty member, although forced to take a
rest, does not earn what he should earn for that day. Be it noted that when a
special public holiday is declared, the **faculty member paid by the hour is
deprived of expected income, and it does not matter that the school calendar is
extended in view of the days or hours lost, for their income that could be
earned from other sources is lost during the extended days. Similarly, when
classes are called off or shortened on account of typhoons, floods, rallies, and the like,
these faculty members must likewise be paid, **whether or not extensions are
ordered (Jose Rizal College v. NLRC, December 01, 1987).
2. On workers paid by results, see the two divergent views.167 It seems like not
paying them holiday and overtime pay is the older rule, while the new rule
167 Q: Nemia earns P7.00 for every manicure she does in the barber shop of a friend which has
nineteen (19) employees. At times she takes home P 175.00 a day and at other times she earns nothing.
She now claims holiday pay. Is Nemia entitled to this benefit? Explain briefly. (5%) SUGGESTED
ANSWER: No, Nemia is not entitled to holiday pay. Art. 82 of the Labor Code provides that workers
who are paid by results are, among others, not entitled to holiday pay. Nemia is a worker who is paid by
results. She earns P7.00 for every manicure she does. ANOTHER SUGGESTED ANSWER: Yes.
Nemia is entitled to holiday pay. The Supreme Court has ruled: “As to the other benefits, namely,
holiday pay, premium pay, 13m month pay, and service incentive leave which the labor arbiter
failed to rule on but which the petitioners prayed for in their complaint, we hold that petitioners are so
entitled to these benefits. Three (3) factors lead us to conclude that petitioners, although piece rate
workers, were regular employees of private respondents. First as to the nature of the petitioner’s
tasks, their job of repacking snack food was necessary or desirable in the usual business of private
respondents, who were engaged in the manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year, their employment not having been
dependent on a specific project or season; and third, the length of time that petitioners worked for
private respondents. Thus, while petitioner’s mode of compensation was on a “per piece basis” the
status and nature of their employment was that of regular employees.” [Labor Congress of the
Philippines v. NLRC, 290 SCRA 509(1998)]
provides for their payment. At any rate, they are entitled to a 13th month pay.168
DOUBLE HOLIDAY PAY

*When there are two RHs falling on the same day.169
WED Maundy Thu & Araw ng Kagitingan RATE
Present Unworked 200%
LOA w/pay Unworked 200%
LOA w/ pay Worked 300% (at least)
Authorized absence Worked 300% (at least)
Authorized absence Worked and day is Rest Day 390% (+30% of each 3 100%)
[] Bar 2005: During the open forum following your lecture before members of
various unions affiliated with a labor federation, you were asked the following
questions: (a) Araw ng Kagitingan and Good Friday are among the 10 paid regular
holidays under Article 94 of the Labor Code. How much will an employee receive
when *****both holidays fall on the same day? (4%). SUGGESTED
ANSWER:
The employee will receive 200% of his regular dally wage when both regular
holidays fall on the same day and he does not work. The law provides that he
shall receive his regular daily wage for each regular holiday. The employee will
168Q: TRX, a local shipping firm, maintains a fleet of motorized boats plying the island barangays of
AP. a coastal town. At day's end the boat operators/crew members turn over to the boat owner their
cash collections from cargo fees and passenger fares, less the expenses for diesel fuel, food, landing fees
and spare parts. Fifty percent (50%) of the monthly income or earnings derived from the operations of
the boats are given to the boatmen by way of compensation. Deducted from the individual shares of
the boatmen are their cash advance and peso value of their absences, if any. Are these boatmen entitled
to overtime pay, holiday pay, and 13th month pay? (5%) (2005 Bar Question). SUGGESTED
ANSWER: If the boatmen are considered employees, like jeepney drivers paid on a boundary system,
the boatmen are not entitled to overtime and holiday pay because they are workers who are paid by
results. Said workers, under the Labor Code are not entitled, among others, to overtime pay and holiday
pay. In accordance with the Rules and Regulations implementing the 13th month pay law, however, the
boatmen are entitled to the 13th month pay. **Workers who are paid by results are to be paid their
13th month pay. ANOTHER SUGGESTED ANSWER: No. The arrangement between the boat
owner and the boat operators/crew members partook of the nature of a joint venture. The boatmen
did not receive, fixed compensation as they shared only in the cash collections from cargo fees and
passenger fares, less expenses for fuel, food, landing fees and spare parts. It appears that there was
neither right of control nor actual exercise of such right on the part of the beat owner over the
boatmen. It is clear that there was no employer-employee relationship between the boat owner and the
boatmen. As such, these boatmen are not entitled to overtime pay, holiday pay and 13th month pay.
169 LPS: RULE IN CASE TWO REGULAR HOLIDAYS FALL ON THE SAME DAY
If two (2) regular holidays fall on the same day such as Good Friday falling on
Araw ng Kagitingan (April 9), the EEs should be paid 400% of the basic wage for
both holidays provided he worked on that day or was on leave of absence with pay
or was on authorized absence on the day prior to the regular holiday (POQUIZ,
supra at 206)
receive 100% for Araw ng Kagitingan and 100% for Good Friday. If he works on
that day, he is entitled to 400% of his regular daily wage; otherwise, there will
be diminution of benefits [Asian Transmission Corp. v. Court of Appeals, 425
SCRA 478 (2004)].
CONCEPT OF SUCCESSIVE REGULAR HOLIDAYS

WED Maundy Thu Good Fri ENTITLED TO HOLIDAY PAY
Worked RH RH Yes. Both
LOA w/pay RH RH Yes. Both
LOA w/o pay RH RH No. Both
LOA w/o pay Worked RH Yes. Only to holiday pay on Friday
1. Conditions so that an EE may be entitled to 2 successive holiday pays—On
the day immediately preceding the 1st RH, he must be:*****
a. Present (worked), or
b. On LOA with pay (IRR, Book III, Rule IV, Sec. 10).
2. If the above stated conditions are not met: He must work on the 1st RH to be
entitled to holiday pay on the 2nd RH (IRR, Book III, Rule IV, Sec. 10).
3. [] Bar 2010: A, a worker of ABC Company, was on leave with pay on March
31, 2010. He reported for work on April 1 and 2, Maundy Thursday and Good
Friday, respectively, both regular holidays. Is A entitled to holiday pay for the two
successive holidays? Explain. (3%). SUGGESTED ANSWER: YES. A is entitled
to holiday pay equivalent to two hundred percent (200%) of his regular daily
wage for the two successive holidays that he worked (Section 6[a], Rule IV, Book
III of the Omnibus Rules implementing the Labor Code).
———————————————
FORMULAS TO COMPUTE ADDITIONAL PAY
OVERTIME PAY VS. PREMIUM PAY

OVERTIME PAY PREMIUM PAY
Additional compensation for work performed within 8 hours on
Additional compensation for days when normally he should not be working (on non-working
work performed beyond 8 hours on days, such as rest days and special days). But additional
ordinary days (within the worker's compensation for work rendered in excess of 8 hours during these
24-hour workday) days is also considered OT pay.
OVERTIME PAY RATES170

OVERTIME PAY RATES
During a regular working day Additional compensation of 25% of the regular wage
During a holiday or rest day Rate of the first 8 hours worked plus at least 30% of the regular
wage (RW):
1. If done on a special holiday or rest day: 30% of 130% of RW
2. If done on a special holiday and rest day: 30% of 150% of RW
3. If done on a regular holiday: 30% of 200% of RW
*****Basis of computing the overtime pay and additional remuneration:
Regular wage which includes the cash wage only, without deduction on account of
the facilities provided by the ER (LC, Art. 90).171
[] Q: This year, National Heroes Day (August 25; regular holiday) falls on a
Sunday. Sunday is the rest day of Bonifacio whose daily rate is P500.00. A. If
Bonifacio is required by his employer to work on that day for eight (8) hours,
how much should he be paid for his work? Explain. (3%). SUGGESTED
ANSWER: A. For working on his scheduled rest day, according to Art. 93(a),
Bonifacio should be paid P500.00 (his daily rate) plus P150.00 (30% of his
daily rate) = P650.00. This amount of P650.00 should be multiplied by 2 = P1,
300.00. This is the amount that Bonifacio as employee working on his scheduled
rest day which is also a regular holiday, should receive. Art. 94(c) of the Labor
Code provides that an employee shall be paid a compensation equivalent to
twice his regular rate for work on any regular holiday. The “regular rate” of
Bonifacio on May 1, 2002 is with an additional thirty percent because the day
is also his scheduled rest day.
B. If he works for ten (10) hours on that day, how much should he receive
for his work? Explain. (2%): B. P1.300.00 which is the amount that Bonifacio is to
170Q: Work may be performed beyond eight (8) hours a day provided that: (2012 Bar Question): a)
Employee is paid for overtime work an additional compensation equivalent to his regular wage plus at
least 25% thereof; b) Employee is paid for overtime work an additional compensation equivalent to his
regular wage plus at least 30% thereof; c) Employee is paid for overtime work an additional
compensation equivalent to his regular wage plus at least 20% thereof; d) None of the above.
SUGGESTED ANSWER: (a) Employee is paid for overtime work an additional compensation
equivalent to his regular wage plus at least (25% thereof. [Art. 87, Labor Code]
171Q: Ricardo Diestro is an accounting clerk in Aqua Sport Trading Company, receiving three
thousand pesos a month as basic salary. In addition, he gets a free lunch valued at thirty pesos per
day and free uniforms. Diestro frequently worked overtime, for which the payroll clerk computed
for him his extra overtime pay on the basis of his basic monthly salary. When Diestro failed to receive a
pay increase, he started questioning the basis for computing his overtime pay. He argued that the cost
of the free lunch and the value of his t-shirts should be included. His claims having been denied,
he filed a complaint with the Regional Office of the Department of Labor. Decide. (1987 Bar
Question) SUGGESTED ANSWER: Diestro is not entitled to have his overtime pay computed not
only on the basis of his basic salary but also on the basis of the cost of the free lunch and the value of
the T- shirts given by the Company added to the basic salary. The Labor Code (in Art. 90) provides that
for purposes of computing overtime and other additional remuneration, the “regular wage” of
an employee shall include the cash wage only, without deduction on account of facilities
provided by the employer. The value of the free lunch and the t-shirts is not “cash wages.”
receive for working on May 1, 2002 should be divided by 8 to determine his

hourly rate of P162.50. This hourly rate should be multiplied by 2 (the number
of hours he worked overtime). Thus, the amount that Bonifacio is entitled to
receive for his overtime work on May 1, 2002 is P325.00.
MORE ON PREMIUM PAY

1. What is is: the additional compensation for work rendered by the EE on
days when normally he should not be working such as special holidays and
WRDs.
2. Can ER and EE agree on the rate of premium pay other than that provided by
law? YES. Nothing shall prevent the ER and his ER or their representatives
from entering into any agreement with **terms more favorable to the EEs;
**Provided, it shall not be used to diminish any benefit granted to the
EEs under existing laws, agreements and voluntary ER practices (IRR, Book III,
Rule III, Sec. 9).
LIST OF HOLIDAYS
[Proclamation 831, s. 2014]
REGULAR HOLIDAYS DATE
New Year’s Day January 1
Araw ng Kagitingan April 9
Maundy Thursday Movable date (April 2, 2015)
Good Friday Movable date (April 3, 2015)
Labor Day May 1
Independence Day June 12
National Heroes Day Last Monday of August
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30
SPECIAL (NON-WORKING) HOLIDAYS
Second new moon after the winter solstice in accordance with the
Chinese New Year Lunisolar Chinese calendar
Black Saturday Movable date (April 4, 2015)
Ninoy Aquino Day August 21
All Saints Day November 1
Additional Special (non- December 24
working) days January 2
Last day of the year December 31
SPECIAL HOLIDAY (for all schools)

EDSA Revolution February 25
ON MUSLIM HOLIDAYS
1. Muslim holidays (MH): those observed in specified Muslim areas. All private
corporations, offices, agencies and entities or establishments operating within the designated
Muslim provinces and cities are required to observe Muslim holidays.
2. Determination of eid’l fitr and/or eid’l adha: The proclamation declaring a
national holiday for the observance of Eid’l Fitr172 and/or Eid’l Adha shall be
issued:
a. After the approximate date of the Islamic holiday has been determined in
accordance with the:
i. Islamic Calendar (Hijra) or
ii. Lunar Calendar or
iii. Upon astronomical calculations
iv. Whichever is possible or convenient
b. The Office of Muslim Affairs shall inform the Office of the President on
which day the holiday shall fall [Proclamation 295, s. 2011]
3. **A Christian EE working within the Muslim area cannot be compelled to
work during muslim holiday. Also, a Muslim EE working outside the Muslim
area cannot be compelled to work during the observance of the MH
a. GR: Muslim EEs shall be excused from work during MH without
diminution of salary or wages.
b. XPN: Those who are permitted or suffered to work on MH are entitled
to at least 100% basic pay + 100% as premium of their basic pay (SMC v. CA,
January 30, 2002).
4. All workers, Muslims and Christians, working within the Muslim area are
entitled to holiday pay on Muslim holidays (SMC v. CA, January 30, 2002).
REGULAR HOLIDAY VS. SPECIAL HOLIDAY**

BASIS REGULAR HOLIDAY SPECIAL HOLIDAY
If unworked Regular pay (subject to certain conditions No Pay
for daily paid EEs)
If worked 2x regular pay (200%) + 30% premium pay of 100% RW
1. On Holiday Pay: a premium given to EEs pursuant to the law even if he has
not been suffered to work on a regular holiday. It is **limited to the 12 regular
holidays, also called legal holidays listed by law.
2. Purpose of holiday pay: To secure the payment of undiminished monthly
172Q: Which of the following is not a regular holiday? (2012 Bar Question): a. New Year’s Eve; b. Eidil
Fitr; c. Father’s Day; d. Independence Day. SUGGESTED ANSWER: c) Father’s Day [Art. 94 (c),
Labor Code]
income undisturbed by any work interruption (JRC v. NLRC, Dec. 1, 1987).

3. Compensability of Regular holidays (RH): They are compensable whether
worked or unworked subject to certain conditions. They are also called legal
holidays.
4. *****Work on RH: an ER may require an EE to work on RH but EE shall be
compensated twice his regular rate. [] Q: On orders of his superior, Efren, a
high-speed sewing machine technician, worked on May 1, Labor Day. If he
worked eight (8) hours on that day, how much should he receive if his daily rate is
P400.00? (2%). SUGGESTED ANSWER: Efren should receive P800.00. Art 92
of the Labor Code provides that the employer may require an employee to work
on any regular holiday but such employee shall be paid compensation equivalent
to twice his regular rate.
5. Important condition that should be met in order to avail/receive the single
holiday pay: The **EE should not have been absent without pay on the
working day preceeding the regular holiday.
6. Effect if a legal holiday falls on a Sunday: it creates no legal obligation for
the ER to pay extra to the EE who does not work on that day, aside from the
usual holiday pay to its monthly paid EEs (Wellington v.Trajano, July 03, 1995).
*NB LPS
RATES OF COMPENSATION FOR RH ON EE’S REGULAR

WORKDAY AND REST DAY (SUMMARY OF FORMULAS)
FORMULAS TO COMPUTE WAGES ON REGULAR HOLIDAYS (M.C.No.10, Series of 2004)
Basis RH on EE’s regular workday RH on EE’s rest day
If 100%. EG: Php 300 Regular Wage (RW) 100%. EG: Php 300 RW
unworked
If worked 200%. EG: 300(RW) + 300 = 600 Total 200% + 30% of 200%. EG: 600 (200% of
(1st 8 hours) Wage (TW) RW) x 0.3 = 180 + 600 = 780 (TW)
If worked 230% = 200% + 30% of hourly rate on 230% + 30% of hourly rate on said date
(OT)(excess said date
of 8 hours)
[] Bar 2011: When an employee works from 8 a.m. to 5 p.m. on a legal holiday
falling on his rest day, which of the following formulas do you use to compute
for his day's wage on that day? (2011 BAR): (A) His regular daily wage
multiplied by 200% plus 30% of the 200%; (B) His regular daily wage
multiplied by 200%; (C) His regular daily wage plus 200%; (D)His daily regular
wage
RATES OF COMPENSATION FOR REST DAY, SUNDAY OR

HOLIDAY WORK
INSTANCES RATES OF ADDITIONAL COMPENSATION
Work on a scheduled rest day + 30% premium pay of 100% RW (IRR, Book III, Rule
III, Sec. 7)
Work performed on Sundays and + 30% premium pay of 100% RW (IRR, Book III, Rule
Holidays by an EE who has no regular III, Sec. 7)
workdays and rest days
Work on a Sunday (If EE’s scheduled rest + 30% premium pay of 100% RW (IRR, Book III, Rule
day) III, Sec. 7)
Work performed on any Special Holiday 1st 8 hrs: + 30% PP of 100% RW
Excess of 8 hrs: + 30% of hourly rate on said date
(M.C. No. 10, Series of 2004).
Work performed on a Special Holiday 1st 8 hrs: + 50% PP of 100% RW
and same day is the scheduled rest day Excess of 8 hrs:+ 30% of hourly rate on said date (M.C.
No. 10, Series of 2004).
Work performed on a Special Working EE is only entitled to his basic rate. No PP is
Holiday required. Reason: Work performed is considered work
on ordinary working days (IRR, Book III, Rule III, Sec. 7)
1. NB: Holiday work provided under Art. 93 pertains to special holidays or
special days.
2. ***Master this sample problem (that’s why it’s not a footnote): X whose daily
rate is P300 and whose rest day falls on a Sunday, is told by his Er to work on a
National Heroes Day, which is also a Sunday.
a. Assuming that X is entitled to holiday pay and he works on National
heroes day for eight hours, what will be his total compensation for such work: X
will get 200% of his daily rate of P300, plus 30% thereof, of a total of P780
(P600+P180). This is following the rule that if the holiday work falls on the
scheduled rest day of an Ee, he shall be entitled for work not exceeding eight (8)
hours, to an additional premium pay of at least 30% of his regular holiday rate of
200% based on his regular wage rate (IRR of LC, Book III, Rule IV, Sec. 4).
b. If X works for over eight hours on National Heroes day, how much will
he get for such work? X will get, for each hour in excess of eight (8) hours, P75
which is his hourly rate for the first eight (8) hours plus thirty percent (30%)
thereof or a total of P97.50. the rules provide that for work performed in excess
of eight hours on a regular holiday rest day, the Ee shall be paid an additional
compensation for the OT Work equivalent to his regular holiday rest day rate for
the first eight (8) hours plus 30% thereof (IRR of LC, Book III, Rule IV, Sec. 5).
MONTHLY-PAID VS. DAILY-PAID EES

Monthly Paid EEs Daily Paid EEs
One whose wage or salary is being paid everyday One whose wage or salary is being paid only
of the month, including rest days, Sundays, regular or on those days he actually worked, except in
special days, although he does not regularly work on cases of regular or special days, although he does
these days. Not excluded from benefit of holiday pay. not regularly work on these days.
DIVISOR
1. The divisor assumes an important role in determining whether or not holiday
pay is already included in the monthly paid employee’s salary and in the
computation of his daily rate (Chartered Bank Employees Association v. Ople, August
28, 1985).
2. Table of applicable divisors:
If the divisor used is:
365 (days in a year) All the 12 holidays, 52 Sundays and 52 Saturdays are paid.
313 (365 – 52 = 313) 12 holidays and 52 Sundays (or Saturdays) are paid.
261 (313 – 52 = 261) All the 12 holidays are paid excluding the Saturdays and Sundays.
249 (261 – 12 = 249) The 12 holidays are not paid.
[] *****Bar: All the 30 employees of Aliw Trading, Inc., are monthly salaried, and
have been such since 1974, when the Labor Code of the Philippines took effect.
Whenever they would work overtime, the accounting department would compute
the daily equivalent of the employee’s monthly salary by using 301 days as
divisor. However, for deductions due to absences not otherwise covered by the
15-day vacation leave policy of the company, the divisor used is 313 days. The
workweek is Monday to Saturday. In 1985, the employees filed a complaint for
nonpayment of holiday pay and service incentive leave after years of
unsuccessfully trying to convince Aliw Trading management to grant holiday pay
and the five-day service incentive leave. In the past, whenever a demand for
payment of holiday pay was presented by the employees, management would
invariably deny liability but on the other hand would give a nominal salary
adjustment.
(a) If you were counsel for Aliw Trading, what defenses would you raise? As
regards holiday pay, when the Company uses 313 as the divisor in computing the
daily equivalent of an employee’s monthly salary, (in computing deductions due to
absences not covered by its 15-day vacation leave policy) the Company thereby
considers that only the 52 weekly rest days (which are Sundays) are the only
days not considered as paid; and that the regular holidays are therefore
considered as paid even if they are unworked days. So, there is no need to
again pay holiday pay. As to the 5-day service incentive leave, I will contend that
the Labor Code (in Art. 95(b) provides that the provision on service incentive
leaves shall not apply to those already enjoying the benefit, namely, those
enjoying vacation leaves with pay at leave five (5) days. The Company here
has a 15-day vacation policy and should, therefore, be already deemed as giving
the 5-day service incentive leave.

(b) If you were the labor arbiter hearing the case, how would you resolve
the issues? As the Labor Arbiter, I will rule that the Company is liable to pay
holiday pay. We will base this ruling on the ground that the Company uses 301 as
a divisor in computing the daily equivalent of an employee's monthly salary
(in computing overtime pay). Thus, the Company considers both the 52 weekly
rest days and 12 holidays as unpaid days. Thus, the Company should pay
holiday pay. As for the service incentive leave, I will rule that with its 15-day
vacation leave policy, the Company, pursuant to the Labor Code, (in Art.
94(b) is already giving the 5-day service incentive leave to its employees.
CONCEPT OF ABSENCES
LOA with pay on the day
immediately preceding RH LOA without pay on the day immediately preceding a RH.
GR: All covered EEs are GR: An EE may not be paid the required HP if he has not worked on
entitled to HP. such RH.
XPNs: Where the day immediately preceding the holiday is a: 1. Non-working
day in the establishment or 2. The scheduled rest day of the EE.
*LOA: leave of absence
RULES IN CASE OF ABSENCES (LPS)
1. All covered EEs shall be entitled to the benefit provided herein when they are
on leave of absence with pay. EEs who are on leave of absence without pay on
the day immediately preceding a regular holiday may not be paid the required
holiday pay if he has not worked on such regular holiday;
2. ERs shall grant the same percentage of the holiday pay as the benefit granted
by competent authority in the form of Ee’s compensation or social security
payment, whichever is higher, if they are not reporting for work while on such
benefits;
3. Where the day immediately preceding the holiday is a non-working day in the
establishment or the scheduled rest day of the Ee, he shall not be deemed to be
on leave of absence on that dya, in which case he shall be entitled to the holiday
pay if he worked on the day immediately preceding the non-working day or rest
day (IRR, Book III, Rule IV, Sec. 6); and
4. Where there are two (2) successive regular holidays, like Holy Thursday and
Good Friday, an employee may not be paid for both holidays if he absents himself
from work on the day immediately preceding the first holiday, unless he works on
the first holiday, in which case, he is entitled to his holiday pay on the second
holiday (IRR of LC, Book III, Rule IV, Sec. 10).
5. APPLICATION OF THE ABOVE MENTIONED RULES173
Wednesday Thursday Friday Entitled to be paid?
173 (IRR of LC, Book III, Rule IV)

Present Rest day Regular Holiday Yes

Absent w/ pay Rest day Regular Holiday Yes
Absent w/o pay Rest day Regular Holiday No
Present Special Day Regular Holiday Yes
Absent w/pay Special day Regular Holiday Yes
Absent w/o pay Special day Regular Holiday No
Present Regular Holiday Regular Holiday Yes – Both
Absent w/pay Regular Holiday Regular Holiday Yes – Both
Absent w/o pay Regular Holiday Regular Holiday No – Both
Absent w/o pay Regular Holiday/ He Regular Holiday Yes but only for holiday
worked pay on Friday
EFFECT IN CASE THERE IS A TEMPORARY OR PERIODIC

SHUTDOWN AND TEMPORARY CESSATION OF WORK:
TEMPORARY OR PERIODIC SHUTDOWN and TEMPORARY CESSATION OF
WORK
(IRR, Book III, Rule IV, Sec. 7))
Instances Rule:
1. Yearly inventory, or; 2. When the repair or cleaning RH falling within the period shall be
of machineries is undertaken compensated.
Due to business reverses (cessation as authorized by the RH may not be paid by the ER
SOLE)
1. GR: RH falling within temporary or periodic shutdown and temporary cessation of work
are compensable.**
2. XPN: However, if the temporary or periodic shutdown and cessation of work
is due to business reverses, the ER may not pay the EEs during such period.
THIRTEENTH MONTH PAY

1. 13th month pay or its equivalent: Additional income based on wage required
by P.D. 851 requiring all ERs to pay their EEs a 13th month pay which is
**EQUIVALENT TO 1/12 OF THE TOTAL BASIC SALARY174 earned by
174*NB LPS – Basic salary includes all remunerations or earning paid by an Er to an Ee for services
rendered including COLA. It does not include allowances and monetary benefits which are not
considered, or integrated, as part of the regular, or basic, salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime, premium, night differential and holiday pay. However, these
salary-related benefits should be included as part of the basic salary in the computation of the
13th month pay if, by individual or collective bargaining agreement or company practice or policy, the
same are treated as part of the basic salary of Ees (Q&A on 13th month pay, from the DOLE’s Bureau
of Working Condicitons, Official Gazette, posted 14 November 2014)
an EE within a calendar year.175

2. What if it’s not specified in the CBA? The **absence of an express provision
in the CBA obligating the ER to pay the members of a union 13th month pay is
IMMATERIAL. Notwithstanding therefore the absence of any contractual
agreement, the payment of **a 13th month pay being a STATUTORY
GRANT, compliance with the same is MANDATORY and is DEEMED
INCORPORATED in the CBA.
3. EQUIVALENT FORMS of the 13th month pay:
a. Christmas Bonus;
b. Midyear Bonus;
c. Profit Sharing Scheme;
d. Other Cash bonuses amounting to not less than 1/12 of its basic salary
*NB: It must **ALWAYS be in the form of a LEGAL TENDER.
4. Things **NOT PROPER SUBSTITUTES for 13th month pay:
a. Free rice;
b. Electricity;
c. **Cash and stock dividends;
d. Cost-of-living Allowance (P.D. 851, Sec. 3)
e. All other allowances regularly enjoyed by the EE, as well as non-monetary benefits.
5. Adjudicated claims: Non-payment of the 13th month pay provided by P.D.
851 and the rules of NLRC shall be **treated as MONEY CLAIMS cases.
NB: The civil law concept of solutio indebiti does not apply to labor law.176
175Q: In computing for 13th month pay, Balagtas Company used as basis both the employee’s regular
base pay and the cash value of his unused vacation and sick leaves. After two and a half years, it
announced that it had made a mistake and was discontinuing such practice. Is the management action
legally justified? (2011 BAR) (A) Yes, since 13th month pay should only be one-twelfth of the regular
pay. (B) No, since the erroneous computation has ripened into an established, non
withdrawable practice. (C)Yes, an error is not a deliberate decision, hence may be rectified. 
(D)No, employment benefits can be withdrawn only through a CBA negotiation. Comment on the
suggested answer: TOM does not think that two and a half years is enough to consider a
practice ‘established’
176 [] Bar 1994: Concepcion Textile Co. included the OT pay, night-shift differential pay, and the
like in the computation of its EEs’ 13th month pay. Subsequently, with the promulgation of the
decision of the SC in the case of SMC v. Inciong (103 SCRA 139) holding that these other monetary
claims should not be included in the computation of the 13th Month Pay, Concepcion Textile Co. sought to
recover under the principle of solutio indebiti the overpayment of the EEs’ 13th month pay, by
debiting against future 13th month payments whatever excess amounts it had previously made.
a. Is the Company's action tenable? NO. The principle of **solutio indebiti which is a civil law
concept is not applicable in labor law (Davao Fruits Corp. v. NLRC, August 24, 1993). After the 1981
SMC ruling, SC decided the case of Philippine Duplicators Inc. v. NLRC November 15, 1995.
Accordingly, **management may undertake to EXCLUDE sick leave, vacation leave, maternity
leave, premium pay for regular holiday, night differential pay and cost of living allowance.
b. With respect to the payment of the 13th month pay after the SMC ruling, what
arrangement, if any, must the Company make in order to exclude from the 13th month pay all earnings
and remunerations other than the basic pay? The company shall INCLUDE SALES
COMMISSIONS based on the settled rule. (Songco v. NLRC, March 23, 1990).
EMPLOYERS COVERED UNDER P.D. 851 (13TH MO. PAY)

1. GR: Payment of 13th month pay applies to all177 ERs.
2. XPNs:
a. Distressed ERs:178
i. Currently incurring substantial losses or
ii. In the case of **NON-PROFIT institutions and organizations,
where their income, whether from donations, contributions, grants and other earnings from
any source, has **consistently declined by more than 40% of their normal
income for the last 2 years, subject to the provision of Sec. 7 of P.D. 851;
b. The Government and any of its political subdivisions, including
GOCCs, except those corporations operating essentially as private subsidiaries
of the Government;
c. ERs ALREADY PAYING their EEs 13th month pay or more in a
calendar year of its equivalent at the time of this issuance:
d. ERs of household helpers and persons in the personal service of
another in relation to such workers; and
*NB: Covered by R.A. 10361 or the “Batas Kasambahay”
e. ERs of those who are paid on a purely commission, boundary, or
task basis, and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance thereof,**except where the
workers are paid on a piece-rate basis in which case the ER shall be covered by
this issuance insofar as such workers are concerned (P.D. 851, Sec 3).
3. OPTIONS of covered ERs (When paid?)
a. Pay
i. ½ of the required 13th Month pay before the opening of the
regular school year and
ii. the other half on or before Dec. 24.
b. In any establishment where a union has been recognized or certified as
the CB agent of the EE, the periodicity or frequency of payment of the 13th
month pay may be the subject of agreement.
177Q: What would be your advice to your client, a manufacturing company, who asks for your legal
opinion on whether or not the 13th Month Pay Law (Presidential Decree No. 851) covers a casual
employee who is paid a daily wage? [5%] SUGGESTED ANSWER: I will advise the manufacturing
company to pay the casual employee 13th Month Pay ***if such casual employee has worked for at
least one (1) month during a calendar year. The law on the 13th Month Pay provides that employees
are entitled to the benefit of said law regardless of their designation or employment status. The
Supreme Court ruled in Jackson Building Condominium Corporation v. NLRC, 246 SCRA 329, (1995)
interpreting P.D. No. 851, as follows: xxx *****employees are entitled to the thirteenth-month pay
benefits regardless of their designation and irrespective of the method by which their wages are paid.
178 *NB LPS – under sec. 7 of the IRR of PD no. 851, distressed Ers shall qualify for exemption from
the requirement of the decree only upon prior authorization of the SOLE (Central Azucarera de Tarlac
v. Central Azucarera de Tarlac Labor Union, 26 July 2010).
EMPLOYEES ENTITLED OR NOT TO 13th MONTH PAY

1. Persons COVERED by P.D. 851
a. ALL RANK-AND-FILE EEs are covered by P.D. 851 regardless of
the amount of basic salary that they receive in a month, if their ERs are not
otherwise exempted from paying the 13th month pay. Such EEs are entitled to the
13th month pay **REGARDLESS of designation of employment status, and
IRRESPECTIVE of the method by which their wages are paid.
b. Provided, that they have **WORKED FOR AT LEAST 1 MONTH,179 during a
calendar year (Revised Guidelines on the Implementation of the 13th Month Pay Law).
i. Private School TEACHERS, including faculty members of universities
and colleges: Entitled regardless of the number of months they teach or are paid within a year,
**if they have rendered service for at least 1 month within a year.
c. EEs paid BY RESULTS: Entitled to 13th month pay. *EEs paid a
FIXED OR GUARANTEED WAGE PLUS COMMISSION are also entitled to
the mandated 13th-month pay, based on their total earnings during the
calendar year, i.e. on both their fixed or guaranteed wage and commission.
d. Those with MULTIPLE ERs—the following are entitled to the
required 13th month pay from all their private ERs regardless of their total
earnings from each or all their ERs.
i. Government EEs working part time in a private enterprise,
including private educational institutions,
ii. as well as EEs working in 2 or more private firms, whether full
or part time basis.
e. RESIGNED OR SEPARATED EEs: If resigned or separated from
work before the time of payment of 13th month pay, entitled to monetary
benefits in proportion to the length of time he started working during the calendar
year up to the time of resignation or termination of service (**PRO-RATED 13th
month pay). Application of pro-ration of 13th month pay
i. GR: Pro-ration of 13th month pay applies only in cases of resignation or
separation from work; computation should be **based on LENGTH OF
SERVICE and not on the actual wage earned by the worker (Honda Phils. v.
Samahan ng Manggagawasa Honda, June 15, 2005).
ii. XPN: EEs who are paid a guaranteed minimum wage or
commissions earned are entitled to 13th Month Pay **based on TOTAL
EARNINGS (Philippine Agricultural Commercial and Industrial Workers Union v.
NLRC, 14 August 1995).
2. Persons NOT COVERED by P.D. 851:
179[] Bar 1998: Is a casual EE who is paid a daily wage in a manufacturing company covered?
**YES, if such casual EE has worked for at least 1 month during a calendar year. The law on the
13th Month Pay provides that EEs are **entitled to the benefit of said law regardless of their
designation or employment status, and irrespective of the method by which their wages are paid
(Jackson Building-Condo vs. NLRC, March 14, 1996).
a. Government EEs;180
b. Household helpers
*NB: Covered by R.A. 10361 or the “Batas Kasambahay” are:
i. EEs paid purely on commission basis;
ii. EEs already receiving 13th month pay
c. Those under the “boundary system”, i.e., paid on a boundary basis.181
COMMISSION IN RELATION TO 13TH MONTH PAY

1. INCLUDED:
a. The salesman’s commissions, comprising a PRE-DETERMINED
PERCENT of the selling price of the goods sold by each salesman, were
PROPERLY INCLUDED IN THE TERM BASIC SALARY for purposes of computing their
180Q: Who among the following is not entitled to 13th month pay? (2012 Bar Question): a. Stephanle, a
probationary employee of a cooperative bank who rendered six (6) months of service during the
calendar year before filing her resignation; b. Rafael, the Secretary of a Senator; c. Selina, a cook
employed by and who lives with an old maid and who also tends the sari-sari store of the latter; d.
Roger, a house gardener who is required to report to work only thrice a week. SUGGESTED
ANSWER: b. Rafael, the secretary of a Senator [Section 3 (b), Dec. 22, 1975, Rules and Regulations
Implementing PD 851]
181 Dennis was a taxi driver who was being paid on the "boundary" system basis. He worked
tirelessly for Cabrera Transport Inc. for fourteen (14) years until he was eligible for retirement. He was
entitled to retirement benefits. During the entire duration of his service, Dennis was not given his
13th month pay or his service incentive leave pay. a. Is Dennis entitled to 13th month pay and
service leave incentive pay? Explain. (5%) (2012 BAR) Suggested Answer: No. A taxi driver paid
under the “boundary system” is not entitled to a 13th month and a SIL pay. Hence, his
retirement pay should be computed solely on the basis of his salary. Specifically, Sec. 3 (e) of the
Rules and Regulations Implementing P.D. 851 excludes from the obligation of 13th Month Pay
“Employers of those who are paid on xxx boundary basis”. On the other hand, Sec. 1 (d), Rule V,
Book III of the Omnibus Rules provides that those *****“employees whose performance is
unsupervised by the employer” are not entitled to Service Incentive Leave. A taxi driver paid
under the Boundary System is an “unsupervised” employee; b. Since he was not given his 13th month
pay and service incentive leave pay, should Dennis be paid upon retirement, in addition to the salary
equivalent to fifteen (15) days for every year of service, the additional 2.5 days representing one-
twelfth (1/12) of the 13th month pay as well as the five (5) days representing the service incentive
leave for a total of 22.5 days? Explain. (5%) (2012 BAR) Suggested Answer: No. *****Since he is not
entitled to 13th month pay and SIL, his retirement pay should be computed solely on the basis of
his salary. [R&E Transport v. Latag, G.R. No. 155214, February 13, 2004].
13th month pay.182

b. Sales commissions that are an integral to the salary of the EE, infra 2b**
2. EXCLUDED:
a. The so-called commission paid to or received by medical
representatives of BoieTakeda Chemicals or by the rank-and-file EEs of Phil. Fuji
Xerox were **excluded from the term basic salary because these were PAID AS
PRODUCTIVITY BONUSES. Such bonuses CLOSELY RESEMBLE PROFIT
SHARING, payments and have no clear, direct, necessary relation to the
amount of work actually done by each individual EE.
b. Earnings and remuneration which are closely akin to fringe benefits,
overtime pay or profit-sharing payments are excluded in computing 13th
month pay.
**INCLUDED: However, sales commissions which are
effectively an integral portion of the basic salary structure of an employee shall
be included in determining his 13th month pay. (Philippine Duplicators, Inc. v.
NLRC, G.R. No. 110068, 15 February 1995).
3. NB: separation pay and retirement pay are under “IV. Termination”
HOW ABOUT A 14th-MONTH PAY?

1. GR: 14th month pay NOT legally demandable: The granting of 14th month
pay is a MANAGEMENT PREROGATIVE and is not legally
demandable.183 Characteristics:
a. It is basically a BONUS and
b. is GRATUITOUS in nature (Kamaya Point Hotel v. NLRC, August 31,
182 [] Bar 1994: Concepcion Textile Co. included the OT pay, night-shift differential pay, and the
like in the computation of its EEs’ 13th month pay. Subsequently, with the promulgation of the
decision of the SC in the case of SMC v. Inciong (103 SCRA 139) holding that these other monetary
claims should not be included in the computation of the 13th Month Pay, Concepcion Textile Co. sought to
recover under the principle of solutio indebiti the overpayment of the EEs’ 13th month pay, by
debiting against future 13th month payments whatever excess amounts it had previously made.
a. Is the Company's action tenable? NO. The principle of **solutio indebiti which is a civil law
concept is not applicable in labor law (Davao Fruits Corp. v. NLRC, August 24, 1993). After the 1981
SMC ruling, SC decided the case of Philippine Duplicators Inc. v. NLRC November 15, 1995.
Accordingly, **management may undertake to EXCLUDE sick leave, vacation leave, maternity
leave, premium pay for regular holiday, night differential pay and cost of living allowance.
b. With respect to the payment of the 13th month pay after the SMC ruling, what
arrangement, if any, must the Company make in order to exclude from the 13th month pay all earnings
and remunerations other than the basic pay? The company shall INCLUDE SALES
COMMISSIONS based on the settled rule. (Songco v. NLRC, March 23, 1990).
183 Q: X Company’s CBA grants each employee a 14th month year-end bonus. Because the company is
in financial difficulty, its head wants to negotiate the discontinuance of such bonus. Would such
proposal violate the “nondiminution rule” in the Labor Code? (2011 BAR) (A) No, but it will certainly
amount to negotiating in bad faith. (B)Yes since the rule is that benefits already granted in a CBA
cannot be withdrawn or reduced. (C) No, since the law does not prohibit a negotiated
discontinuance of a CBA benefit. (D)Yes, since such discontinuance will cancel the enjoyment of
existing benefits.
1989).
2. XPN: A bonus, however, becomes a demandable or enforceable obligation
when it is MADE PART184 OF THE WAGE OR SALARY OR COMPENSATION of
the employee.
a. If it is ADDITIONAL compensation which the employer promised and
agreed to give WITHOUT ANY CONDITIONS imposed for its payment, such as
success of business or greater production or output, then it is PART OF THE WAGE.
b. But if it is paid ONLY IF PROFITS ARE REALIZED or if a certain
level of productivity is achieved, it CANNOT be considered part of the wage.
c. Where it is not payable to all but only to some employees and only
when their labor becomes more efficient or more productive, it is **only an
INDUCEMENT FOR EFFICIENCY, a prize therefore, not a part of the
wage. [Metro Transit Organization, Inc. v. National Labor Relations Commission (1995)]
————————————————
A9. Service charge

1. Service charges: These are charges collected by hotels, restaurants and similar
establishments at the rate of
a. 85% for covered EEs equally distributed among them, and
184 [] Q: ETPI (company) entered into a CBA with ETEU (union). A side agreement of the said CBA
provided that company confirms that the 14th, 15th and 16th month bonuses (other than 13th month
pay) are granted. The company then planned to defer the payment of the 14th, 15th and 16th month
bonuses due continuing deterioration of company’s financial position. The union opposed and
filed a preventive mediation complaint before the NCMB. May the company validly postpone the
payment of said bonuses? NO. A reading of the provision reveals that the same **provides for the
giving of 14th, 15th and 16th month bonuses WITHOUT QUALIFICATION. There were no
conditions specified in the CBA Side Agreements for the grant of the benefits contrary to the claim
of ETPI that the same is justified only when there are profits earned by the company. Terse and clear,
a. the said provision does not state that the subject bonuses shall be made to depend on the
ETPI’s financial standing or that their payment was contingent upon the realization of profits.
b. Neither does it state that if the company derives no profits, no bonuses are to be given to
the employees.
c. In fine, the payment of these bonuses was **NOT RELATED TO THE PROFITABILITY of
business operations. Verily, by virtue of its incorporation in the CBA Side Agreements, the grant
of 14th, 15th and 16th month bonuses has become **more than just an act of generosity on the
part of ETPI BUT A CONTRACTUAL OBLIGATION it has undertaken (ETPI v. ETEU, Feb. 8,
2012).
*it only covers the EEs of the outlet185 where the charge is collected.
b. 15% for the management to answer for losses and breakages.
2. Covered employees
a. GR: All EEs are covered, regardless of their position, designation, and
employment status, **irrespective of the method by which their wages are paid.
But it applies only to hotels, restaurants and similar establishment collecting
service charges.
b. XPN: Managerial EEs (IRR, Book III, Rule VI, Sec. 2)
3. Period to distribute the share of EE: The period is not less than once every 2
weeks or twice a month at intervals not exceeding 16 days.186
SERVICE CHARGE VS. TIPS

SERVICE CHARGE TIPS
Collected by the management from the Voluntary payments made by the customers to the EEs
customers. for excellent service.
1. Rule if service charge is abolished: the share of the covered EEs shall be
considered INTEGRATED in their wages on the **BASIS of the AVERAGE
MONTHLY SHARE of each EEs for the past 12 months immediately preceding the
185 Q: Ricardo operated a successful Makati seafood restaurant patronized by a large clientele base for
its superb cuisine and impeccable service. Ricardo charged its clients a 10% service charge and
distributed 85% of the collection equally among its rank-and-file employees, 10% among
managerial employees, and 5% as reserve for losses and break ages. Because of the huge volume
of sales, the employees received sizeable shares in the collected service charges. As part of his business
development efforts, Ricardo opened a branch in Cebu where he maintained the same practice in
the collection and distribution of service charges. The Cebu branch, however, did not attract the
forecasted clientele; hence, the Cebu employees received lesser service charge benefits than those
enjoyed by the Makati-based employees. As a result, the Cebu branch employees demanded
equalization of benefits and filed a case with the NLRC for discrimination when Ricardo refused
their demand. Will the case prosper? (2013 Bar Questions) (A) Yes, because the employees are not
receiving equal treatment in the distribution of service charge benefits. (B) Yes, because the law
provides that the 85% employees' share in the service charge collection should be equally divided
among all the employees, in this case, among the Cebu and Makati employees alike. (C) No, because the
employees in Makati are not similarly situated as the Cebu employees with respect to cost of living and
conditions of work. (D) No, because the service charge benefit attaches to the outlet where
service charges are earned and should be distributed exclusively among the employees
providing service in the outlet. (E) No, because the market and the clientele the two branches are
serving, are different.
186Q: How often should the collected service charges be distributed to employees in hotels and
restaurants? (2011 BAR) (A) Every end of the month (B) Every two weeks (C)Every week (D) At the
end of each work day
abolition. Otherwise, it will be tantamount to diminution of benefits.187

2. NB: Service charges **FORM PART OF THE AWARD in illegal dismissal cases.
———————————————————————————————
B. Wages
1. What are wages? The REMUNERATION or earnings, **HOWEVER
DESIGNATED, capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece, or commission basis, or other method of calculating the same, payable
by an ER to an EE under a written or unwritten contract of employment:
a. For work done or to be done, or for services rendered or to be rendered; and
includes
b. Fair and reasonable value of board, lodging, or other facilities customarily
furnished by the ER to the EE as determined by SOLE.
**NB: Fair and reasonable value means it shall NOT INCLUDE ANY PROFIT
to the ER or to any person affiliated with the ER.
2. BASIS of payment: “No Work, No Pay” Principle (***FAIR DAY’S WAGE
FOR A FAIR DAY’S LABOR). 
*GR: If there is no work performed by the EE, without the fault of the
ER, there can be no wage or pay.
*XPNs: The laborer was able, willing and ready to work but was:
a. Prevented by management;
b. Illegally locked out;
c. Illegally suspended;
d. Illegally dismissed;
e. Illegally prevented from working (Aklan Electric Coop. v. NLRC, January
10, 2000).
3. APPLICABILITY of the term wages
*GR: It applies to all EEs.
*XPNs:
a. Farm tenancy or leasehold;
b. Household or domestic helpers, including family drivers and persons working in the
187Q: In order to improve the Cebu service and sales, Ricardo decided to assign some of its
Makati-based employees to Cebu to train Cebu employees and expose them to the Makati
standard of service. A chef and three waiters were assigned to Cebu for the task. While in Cebu, the
assigned personnel shared in the Cebu service charge collection and thus received service charge
benefits lesser than what they were receiving in Makati. If you were the lawyer for the assigned
personnel, what would you advice them to do? (2013 Bar Questions) (A) I would advise them to file
a complaint for unlawful diminution of service charge benefits and for payment of
differentials. (B) I would advise them to file a complaint for illegal transfer because work in Cebu is
highly prejudicial to them in terms of convenience and service charge benefits. (C) I would advise them
to file a complaint for discrimination in the grant of service charge benefits. (D) I would advise them to
accept their Cebu training assignment as an exercise of the company's management prerogative. (E) I
would advise them to demand the continuation of their Makati-based benefits and to file a complaint
under (B) above if the demand is not heeded.
personal service of another;

c. Home workers engaged in needlework or in any cottage industry duly
registered in accordance with law;
d. Workers in any duly registered cooperatives188 when so recommended by
the Bureau of Cooperative Development and upon approval of the SOLE;
e. Workers of a **barangay micro business enterprise (R.A. 9178);
f. **Retail and service establishments regularly employing not more than 10189
workers (RA 6727, Sec. 4);
*NB: Retail and service establishments must file an application for
exemption with the duly appropriate Regional Board.190
5. *****“EQUAL PAY FOR EQUAL WORK” PRINCIPLE: Persons who
work with **SUBSTANTIALLY EQUAL QUALIFICATIONS, skill, effort and
responsibility, under similar conditions, should be **PAID SIMILAR
SALARIES (International School Alliance of Educators v. Quisumbing, June 01, 2000).
BONUS
1. Definition: Refers to the payment in excess of regular or guaranteed
188 Q: The following are exempt from the rules on minimum wages, except: (2012 Bar Question): a.
Household or domestic helpers; b. Homeworkers engaged in needle work; c. Workers’ in duly registered
establishment in the cottage industry; d. Workers in the duly registered cooperative. SUGGESTED
ANSWER: b) Workers in the duly registered cooperative. [Sec. 3 (d), Rule VII, Book III of Omnibus
Rules requires recommendations of Bureau of Cooperative Development and approval of DOLE
Secretary – matters that are not in the suggested answer]. TOM thinks it should be (c) because it’s not
in the list in the main text.
189 Q: As a tireman in a gasoline station, open twenty four (24) hours a day 'with only five (5)
employees, Goma worked from 10:00 P.M. until 7:00 A.M. of the following day. He claims he is
entitled to night shift differential. Is he correct? Explain briefly. (3%) SUGESTED ANSWER: Yes.
Under Art. 86 of the Labor Code, night shift differential shall be paid to every employee for work
performed between 10:00 o’clock in the evening to six o’clock in the morning. Therefore, Goma Is
entitled to night shift differential for work performed from 10:00 pm until 6:00 am of the day
following, but not from 6:00 am to 7:00 am of the same day. The Omnibus Rules Implementing the
Labor Code (In Book ill, Rule lI dealing with night shift differential) provides that its provisions on
night shift differential shall NOT apply to employees of “retail and service establishments
regularly employing not more than five (5) workers”. Because of this provision, Goma is not
entitled to night shift differential because the gasoline station where he works has only five
employees.
190 Q: Z owns and operates a carinderia. His regular employees are his wife, his two (2) children, the
family maid, a cook, two (2) waiters, a dishwasher and a janitor. The family driver occasionally works
for him during store hours to make deliveries. On April 09, the dishwasher did not report for work.
The employer did not give his pay for that day is the employer correct? (2012 Bar Question): a) No,
because employees have a right to receive their regular daily wage during regular holidays; b) Yes,
because April 09 is not a regular holiday; c) Yes, because of the principle of “a fair day’s wage for a fair
day’s work; d) Yes, because he employs less than ten (10) employees. SUGGESTED ANSWER:
(a) No legal employees have a right to receive their regular daily wage during regular holiday [Art. 94,
Labor Code, and a carinderia is not in the category of an excluded or service establishment].
SUGGESTED ALTERNATIVE ANSWER: (d) Yes, because he employs less than ten (10) employees
[i.e. if we are to consider a carinderia as a retail or service establishment].
wages. It is granted to an employee for his tangible contribution to the success of

the employer’s business, without which the employer may not realize bigger
profits. The contribution may be in the form of an employee’s commitment to the
job, his industry and loyalty. (Metro Transit Org., Inc. v. NLRC, G.R. No. 116008, 11
July 1995)
2. GR: The payment of bonus is a management function, not a demandable
and enforceable obligation, which cannot be enforced 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. (Philippine National
Construction Corporation v. NLRC, G.R. No. 128345, 18 May 1999)
3. XPN: Bonuses can be demanded as a matter of right if:
a. given without any condition; hence, part of the wage or salary (Atok Big
Wedge Mining Co., Inc. v. Atok Big Wedge Mutual Benefit Assn., 92 Phil. 754);
b. grant thereof is a result of an agreement such as the CBA (Gery v. Insular
Lumber, 93 Phil. 807);
c. given on account of company policy or practice  
(Claparols v. CIR, 65 SCRA 613);
d. grant is mandated by law  
4. BONUS TREATED AS NOT PART OF WAGES: Bonus is not considered
part of wages if it is paid only upon realization of profits or amount of
production or output. (Atok Big Wedge Mining Co., Inc. v. Atok Big Wedge Mutual
Benefit Assn., 92 Phil. 754). Where the bonus is not payable to all but only to some
employees and only when their labor becomes more efficient or more productive,
it is only an inducement for efficiency, a prize therefor, not a part of the wage.
(Poquiz, 2012)
PRODUCTIVITY BONUS VS. SALES COMMISSION

Productivity Bonus Sales Commission
Generally tied to the productivity or profit Paid upon the specific results achieved by a
generation of the employer corporation salesman-employee
Not directly dependent on the extent an Intimately related to or directly proportional to
individual employee exerts himself the extent or energy of an employee’s endeavors
Something extra for which no specific additional A percentage of the sales closed by a salesman
services are rendered by a particular employee; and operates as an integral part of such
hence, not legally demandable, absent a salesman’s basic pay
contractual undertaking to pay it
B1. Wage191 vs. Salary192

WAGE SALARY
Compensation for manual labor (**skilled or Paid to “WHITE COLLARED workers” and
unskilled) also known as “BLUE COLLARED denotes a higher degree of employment or a
workers,” paid at stated times and measured by superior grade of services and implies a
the day, week, month or season. POSITION in the office.
Considerable pay for a lower and less responsible Suggestive of a **larger and more permanent
character of employment. or fixed compensation for more important service.
GR: Not subject to execution. XPN: Debts incurred **Subject to execution.
for food, shelter, clothing and medical attendance.
————————————————
B2. Payment of Wages

1. Forms of payment:
*GR: The laborer's wages shall be paid in LEGAL CURRENCY (NCC,
Art. 1705). No employer shall pay the wages of an employee by means of
promissory notes, vouchers, coupons, tokens, tickets, chits, or any object
1911) Distinguish “salary" from “wages.”; 2) Are these subject to attachment and execution?
SUGGESTED ANSWER: The term “wages" applies to compensation for manual labor, skilled or
unskilled, while salary denotes a compensation for a higher degree of employment. (Goa vs. Court
of Appeals. 140 SCRA 304). ALTERNATIVE ANSWER: 1) “Wages" are those paid to any employee
as his remuneration or earnings payable by an employer for work done or to be done, or for services
rendered or to be rendered. On the other hand, “salary" is used in the law that provides for a 13th-
month pay. In this law, basic salary includes all remuneration or earnings paid by an employer to his
employees for services rendered, but does not include allowances or monetary benefits which are not
considered or integrated as part of the regular or basic salary. (Art. 97(f). Labor Code; Sec. 2(b), P.D.
No. 851); 2) Under Article 1708 of the Civil Code, only “wages" are exempt from attachment or
execution. Salaries are not exempt from attachment or execution. (Goa vs. Court of Appeals, 140
SCRA 304).
192 (GAA v.CA, G.R. No. 44169, 3 Dec.ember 1985)
other than legal tender,193 **even when expressly requested by the employee
(LC, Art. 102).
*XPNs:
a. Check
b. Money order
**NB: When such manner of payment is:
i. Customary on the date of effectivity of the code
ii. Necessary because of special circumstances
iii. Stipulated in a collective bargaining agreement (LC, Art. 102).
2. Time of payment: It shall be paid:
a. **at least once every two weeks or
b. twice a month at intervals not exceeding 16 days (LC, Art. 103).
3. Payment of wages of employees engaged to perform a task which cannot be
completed in two weeks:
a. Payments are to be made at intervals **not exceeding 16 days, IN
PROPORTION to the amount of work completed;
b. Final settlement is made UPON COMPLETION of work.
**NB: It is applicable in the absence of a collective bargaining agreement or
arbitration award.
**No employer shall make payment with less frequency than once a month.
4. Place of payment:
*GR: Payment of wages shall be made AT OR NEAR THE PLACE OF
UNDERTAKING (LC, Art. 104).
*XPN: Payment may be made through BANKS:**
a. All private establishments, companies, businesses, and other entities
b. With **25 or more employees;
c. Located within 1 km radius to a commercial, savings or rural bank;
193 Q: Benito is the owner of an eponymous clothing brand that is a top seller. He employs a number
of male and female models who wear Benito's clothes in promotional shoots and videos. His deal
with the models is that Benito will pay them with 3 sets of free clothes per week. Is this
arrangement allowed? (2015 Bar Question) SUGGESTED ANSWER: No. The arrangement is not
allowed. The models are Benito’s employees. As such, their services require compensation in legal
tender (Art. 102, Labor Code). The three sets of clothes, regardless of value, are in kind; hence, the
former’s compensation is not in the form prescribed by law. ANOTHER SUGGESTED ANSWER:
Under Article 102 of the Labor Code, wages of an employee are to be paid only in legal tender, even
when expressly requested bv the employee. Hence, no lawful deal in this regard can be entered into
by and between Benito and his models. SUGGESTED ALTERNATIVE ANSWER: The models are
not employees. Therefore, Art. 102 of the Labor Code applies. The payment does not have to be in
legal tender. But even if they are employees, the wage arrangement between Benito and the
models is allowed by Art. 97(f) of the Labor Code which defines wage as the remuneration or
earning paid to an employee, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered. It
includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging or
other facilities customarily furnished by the employer to the employee.
d. Upon WRITTEN PERMISSION of the MAJORITY of the employees

(RA 6727, Sec. 7).
MINIMUM WAGE DEFINED, MINIMUM WAGE SETTING

1. STATUTORY MINIMUM WAGE is the **LOWEST194 WAGE RATE FIXED
by LAW that an ER can pay his workers. ******It’s Php512 [and Php475] starting
5 October 2017.195
2. PURPOSE of the minimum wage law: The COMPULSORY PAYMENT of
a fair statutory wage is **a PREVENTIVE ACTION, NOT REMEDIAL, for it settles
the wage rates before industrial disputes arise thereby foreclosing the eruption of
social and economic disquietude.
*The purpose of minimum wage law is “to SET A **BARRIER below
which wages may NOT FALL, in order to develop competition on a high level of
efficient rather than competition (sic) on a low level of wages.” The establishment
of a minimum wage ENCOURAGES COMPETITION above the lower
limits set by the law. The minimum wage law discourages the sweat-shop
operators from exploiting their workers. (Poquiz, Vol. I)
3. STANDARDS OR CRITERIA for minimum wage setting: In the
determination of such regional minimum wages, the Regional Board shall,
among other relevant factors consider the following:
a. The demand for living wages;
b. Wage adjustment vis-a-vis the consumer price index;
c. The cost of living and changes or increases therein;
d. The needs of workers and their families;
e. The need to induce industries to invest in the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return on the capital invested and CAPACITY TO PAY by ERs;
i. Effects on employment generation and family income;
j. The **EQUITABLE DISTRIBUTION of income and wealth along the
imperatives of economic and social development (LC, Art. 124).
4. Persons **EXEMPTED FROM THE COVERAGE of fixing a minimum wage:
194Q: Can an employer and an employee enter into an agreement reducing or increasing the
minimum percentage provided for night differential pay, overtime pay, and premium pay? 5% (2006 Bar
Question) SUGGESTED ANSWER: An employer and employee can enter into a contract
increasing night differential pay, overtime pay, and premium pay benefits, as this is beneficial to the
worker and no fraud or vice of consent could be inferred from it. An employer and employee could
not, however, enter into a contract reducing the minimum pay for the above-stated benefits, as these
would be against public policy and therefore void ab initio.
195[] Statutory minimum wage in NCR as of 5 October 2017 is Php512 for the non-agricultural sector
(including Private Hospitals with bed capacity of 100 or less), and Php475 for the agricultural sector
(plantation and non-plantation), Retail/Service Establishments employing 15 workers or less and
Manufacturing Establishments regularly employing less than 10 workers.
a. Household or domestic helpers, including family drivers and persons in

the personal service of another;
b. Homeworkers engaged in needle-work;
c. Workers employed in any establishment duly registered with the National
Cottage Industries and Development Authority, provided that such workers perform
the work in their respective homes;
d. Workers in a duly-registered cooperative when so recommended by the
Bureau of Cooperative Development and upon approval of the SOLE (IRR of LC,
Book III, Rule VII, Sec. 2).
e. Workers of a barangay micro business enterprise (R.A. 9178).
5. It is economically feasible?
a. From ER's standpoint: a minimum wage is economically feasible if it will
not prevent the industry from operating efficiently and prosperously over the long run
(Dir. Harry Kantor’s analysis of Senate Bill No. 202 and House Bill No. 1732);
b. From EE’s standpoint: an economically feasible minimum wage should
be as NEARLY ADEQUATE to maintain the MINIMUM standard of
living necessary for the health, efficiency and general well-being of employees.
5. NB: **Minimum wage in NCR is P481.00 (P466 basic wage + 15 COLA).
Effective April 4, 2015.
METHODS OF MINIMUM WAGE ADJUSTMENT

1. SALARY CEILING Method: A method whereby the wage adjustment is
applied to EEs receiving a certain denominated salary ceiling. In other
words, **workers already being paid more than the existing minimum wage are
ALSO TO BE GIVEN A WAGE INCREASE (ECOP v. NWCP, September 24, 1991).
2. FLOOR WAGE Method: It involves the fixing of a DETERMINATE
amount to be added to the prevailing statutory minimum wage rates.
TWO BASIC METHODS OF PAYMENT

1. TIME WAGES: refer to pay by the hour, day or month, without specifying the
amount of work to be done;
2. PRODUCTION wages: refer to pay related to the amount of work the
individual or group performs REGARDLESS OF THE TIME involved in its
performance. This applies to workers paid by result (Beal and Wickersham,
The Practice of Collective Bargaining; Poquiz, Vol. I).
WORKERS PAID BY RESULTS

1. Who are workers paid by results? They are:**
a. Paid based on the work COMPLETED; and
b. NOT on the TIME spent in working;
c. Including those who are PAID ON PIECEWORK, “TAKAY”, “PAKIAW”, OR
TASK BASIS if their output rates are in accordance with the standards prescribed.
2. Application of wage orders to workers paid by results: All workers paid by

result, including those who are paid on piece work, “takay” or task basis, shall be
**ENTITLED TO RECEIVE NOT LESS THAN THE PRESCRIBED
DAILY MINIMUM wage or a proportion thereof for working less than 8 hours.
MINIMUM WAGE OF WORKERS PAID BY RESULTS

1. Those who are paid PIECE RATES which are prescribed in Piece Rate Orders196
issued by DOLE : Wages or earnings are determined by simply multiplying the
number of pieces produced by the rate per piece.
2. Those who are paid OUTPUT RATES which are prescribed by the ER and
are not yet approved by the DOLE: The number of pieces produced is multiplied by
the rate per piece as determined by the ER.**
a. If resulting amount is **EQUIVALENT to or MORE than the applicable
statutory minimum rate in relation to the number of hours worked: Worker will
receive such amount;
b. If the amount is **LESS than the applicable legal rate: ER is required
by law to pay the difference between the resulting amount and the applicable legal
minimum rate.
APPRENTICES/ LEARNERS/ PERSONS WITH DISABILITY

*Minimum wage rate for apprentices/learners and persons with disability: The wage or
salary rate shall **NOT BE LESS THAN 75%197 OF THE APPLICABLE
MINIMUM wage.
COMMISSIONS
1. What is a Commission? A fee paid **based on a PERCENTAGE of the
sale made by an EE or agent, as **distinguished from regular payments of wages or
196 Q: “Piece rate employees” are those who are paid by results or other non-time basis. As such they
are NOT entitled to overtime pay for work done beyond eight hours if (2011 BAR) (A) their workplace
is away from the company's principal place of work. (B) they fail to fill up time sheets. (C) the product
pieces they do are not countable. (D) the piece rate formula accords with the labor department’s
approved rates.
197Q: The minimum wage prescribed by law for persons with disability is __________. (2013 Bar
Questions) (A) 50% of the applicable minimum wage; (B) 75% of the applicable minimum wage;
(C) 100% of the applicable minimum wage; (D) the wage that the parties agree upon, depending on the
capability of the disabled. (E) the wage that the parties agree upon, depending on the capability of the
disabled, but not less than 50% of the applicable minimum wage SUGGESTED ANSWER: (B) 
Note: This is the general rule. As an exception, if the employee is qualified to work and the
disability has nothing to do with the work, the employee is entitled to 100%.
salary.198
2. Commissions included or not included in the computation of the basic salary:
a. INCLUDED in the basic salary: If the commission is comprised of a
**PRE-DETERMINED percentage of the selling price of the goods;
b. EXCLUDED from basic salary: If the commission were paid as productivity
bonuses or closely resemble **profit-sharing, or when it has **no clear, direct or
necessary relation to the amount of work actually done by each individual EE.
DEDUCTIONS FROM WAGES

1. Rule on wage deductions:
*GR: No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees (LC, Art. 113).
*****XPNs:
a. Deductions under Art. 113 of the LC for INSURANCE premiums;
b. UNION DUES in cases where the right of the worker or his union TO
CHECK OFF has been recognized by the ER or authorized in writing by the
individual worker concerned (LC, Art. 113).
c. In cases where the employer is authorized by law or regulations issued by
the Secretary of Labor.
*NB: Art. 241(o) of the LC provides that **SPECIAL ASSESSMENTS
may be validly checked-off provided that there is an individual written
198 Q: A, a driver for a bus company, sued his employer for non-payment of commutable service
incentive leave credits upon his resignation after five years of employment. The bus company
argued that A was not entitled to service incentive leave since he was considered a field personnel
and was paid on commission basis and that, in any event, his claim had prescribed. If you were the
Labor Arbiter, how would you rule? Explain. (6%) (2010 Bar Question) SUGGESTED ANSWER: I
will grant the prayer of A. ***Payment on commission basis alone does not prove that A is a field
personnel. There must be proof that A is left to perform his work unsupervised by his employer.
Otherwise, he is not a field personnel, thus entitled to commutable service incentive leave (SIL)
credits [Auto Bus v. Bautista, 458 SCRA 578 [2005]). His action has not yet prescribed. In Auto Bus v.
Bautista (supra.), the Supreme Court recognized that SIL is such a unique labor standard benefit,
because it is commutable. An employee may claim his accrued SIL throughout the years of his
service with the company upon his resignation, retirement, or termination. Therefore, when A resigned
after five years, his right of action to claim ALL of his SIL benefits *****accrued at the time when
the employer refused to pay him his rightful SIL benefits. (Art. 291, Labor Code).
ALTERNATIVE ANSWER: The money claim as cause of action has prescribed because the claim was
filed after five (5) years from date of negotiation. Art. 291 of the Labor Code provides that all money
claims arising from employer- employee relations occurring during the effectivity of the Code shall be
filed within three (3) years from that time the cause of action has accrued, otherwise, they shall be
forever barred.
authorization duly signed by every EE.199

2. Allowed deductions:
a. Deductions for SSS, PhilHealth and Pag-ibig premiums;
b. Taxes withheld pursuant to the Tax Code;
c. Deductions under Art. 114 of the LC for **loss or damage to tools,
materials or equipment200 supplied by the employer when the latter is engaged in such trades,
occupations or businesses where the practice of making deductions or requiring
deposits is a **recognized one or is necessary or desirable as determined by SOLE;
d. Deductions made with the written authorization of the EE for payment to
199 Q: In accordance with the provisions of the collective bargaining agreement, the Republic Labor
Union (RLU) submitted to the Zenith Drug Company a union board resolution authorizing the
deduction from the wage of each of the union’s two thousand members a special assessment
in the sum of twenty pesos to help pay for the expenses of the RLU president during his
observation tour of New Zealand. When the company honored the authorization and implemented
the deductions, more than a thousand of the employees complained and sought your assistance. What
legal advice would you give and what action would you take on behalf of the employees?
SUGGESTED ANSWER: I will advise the complaining employees that they should file a complaint
against the Company for making the illegal deductions of P20.00 from their wages. According to
the Labor Code (in Art. 113) of the legal deductions that an employer may make from the wages
of his employees are: (a) In cases where the worker is insured with his consent by the employer, and
the deduction is to recompense the employer for the amount paid by him as premium on the
insurance; (b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker concerned; and (c)
In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
The deductions made by the employer are not for union dues. ANOTHER SUGGESTED ANSWER:
I will advise the complaining employees that they should file a complaint against the members of the
union board of directors for violating the rights and conditions of membership in a labor organization
by levying a special assessment without its being authorized by a written resolution of majority
of all union members at a general membership meeting called for the purpose. (Art. 241 (2).
200 Which of the following is not a valid wage deduction? (2012 Bar Question): a. Where the worker
was insured with his consent by the employer, and the deduction is allowed to recompense the
employer for the amount paid by him as the premium of the insurance; b. When the wage is subject of
execution or attachment, but only for debts incurred for food, shelter, clothing and medical attendance;
c. Payment for lost or damaged equipment provided the deduction does not exceed 25% of the
employee’s salary for a week; d. Union dues. SUGGESTED ANSWER: c) ***Payment for lost or
damaged equipment provided the deduction does not exceed 25% of the employee’s salary for a
week. [Implementing Rules Book III, Rule VIII, Section 11: 20% of employee’s salary in a week,
not 25%]
a third person201 (IRR, Book III, Rule VIII, Sec 13).

e. Deductions as **disciplinary measures for habitual TARDINESS
(Opinion dated March 10, 1975 of the Labor Secretary).
f. AGENCY FEES under Art. 248(e)of the LC
g. Deductions for VALUE OF MEALS AND FACILITIES freely agreed upon
h. In case where the EE is indebted to the ER where such indebtedness has
become **due and demandable (NCC, Art. 1706).
i. **In court awards, wages may be subject of execution or attachment, but
only for debts incurred for food, shelter, clothing, and medical attendance (NCC, Art.
1703).
j. Salary deduction of a member of a legally established **cooperative
(R.A. 6938; LC, Art. 59).
3. NB: **Deductions for absences are allowed. Deductions for unpaid absences
are allowed. If the EE is paid monthly, the equivalent daily rate should be
determined first before making the deduction.
————————————————
B3. Facilities vs. Supplements

BASIS FACILITIES SUPPLEMENT
Definition Items of expenses necessary for the laborer's Extra remuneration or special
and his family’s existence and subsistence. privileges or benefits given to or
Does not include tools of trade or articles / received by the laborers over and above
services primarily for the benefit of the ER their ordinary earnings or wages [Atok
or necessary to the conduct of the ER's Mining v. Atok Mutual Benefit Assoc.
business. July 19, 1955).
Inclusion Forms part of the wage Independent of wage
Deduction Deductible from wage Not wage deductible
To whose **For the benefit of the worker and his family. **Granted for the convenience of the
benefit ER.
1. CRITERION in determining whether an item is a supplement or facility: The
criterion is not so much with the kind of the benefit or item (food, lodging, bonus
201Q: Robert, an employee of ABC Company, is married to Wanda. One day, Wanda visited the
company office with her three (3) emaciated minor children, and narrated to the Manager that Robert
had been squandering his earnings on his mistress, leaving only a paltry sum for the support of their
children. Wanda tearfully pleaded with the Manager to let her have one half of Robert's pay
every payday to ensure that her children would at least have food on the table. To support her
plea, Wanda presented a Kasulatan signed by Robert giving her one half of his salary, on the
condition that she would not complain if he stayed with his mistress on weekends. If you were the
Manager, would you release one half of Robert's salary to Wanda? (2013 Bar Questions) (A) No,
because an employer is prohibited from interfering with the freedom of its employees to dispose of
their wages. (B) Yes, because of Robert's signed authorization to give Wanda one half of his salary. (C)
No, because there is no written authorization for ABC Company to release Robert's salary to Wanda.
(D) Yes, because it is Robert's duty to financially support his minor children. (E) No, because Robert's
Kasulatan is based on an illegal consideration and is of doubtful legal validity. SUGGESTED
ANSWER: (A); SUGGESTED ALTERNATIVE ANSWER: (C)
or sick leave) given, but its **PURPOSE (State Marine v. Cebu Seamen’s Ass’n.,
G.R. No. L-12444, February 28, 1963).
2. Cost of facilities furnished by the ER may be charged against an EE—In
order that the cost be charged against the EE, his/her acceptance of such
facilities must be VOLUNTARY. Requirements202 for deducting values for
facilities:*****203
a. PROOF must be shown that such facilities are CUSTOMARILY
furnished by the trade;
b. The provision of deductible facilities must be **VOLUNTARILY accepted
in WRITING;
c. The Facilities must be charged at FAIR AND REASONABLE value
(Mabeza v. NLRC, April 18, 1997).
3. Status of food and lodging, or the electricity and water consumed by a
**hotel worker: These are SUPPLEMENTS. Considering, therefore, that hotel
workers are required to work different shifts and are expected to be available at
various odd hours, their READY AVAILABILITY is a necessary matter in the
operations of a small hotel. Furthermore, granting that meals and lodging were
202Q: A worked as a roomboy in La Mallorca Hotel. He sued for underpayment of wages before the
NLRC, alleging that he was paid below the minimum wage. The employer denied any
underpayment, arguing that based on long standing, unwritten policy, the Hotel provided food
and lodging to its housekeeping employees, the costs of which were partly shouldered by it and the
balance was charged to the employees. The employees’ corresponding share in the costs was thus
deducted from their wages. The employer concluded that such valid deduction naturally resulted in the
payment of wages below the prescribed minimum. If you were the Labor Arbiter, how would you rule?
Explain. (3%) (2010 Bar Question) SUGGESTED ANSWER: I will rule in favor of A. Even if food
and lodging were provided and considered as facilities by the employer, the employer could not
deduct such facilities from its workers’ wages without compliance with law (Mayon Hotel &
Restaurant v. Adana, 458 SCRA 609 [2005]). In Mabeza v. NLRC (271 SCRA 670 [1997]), the Supreme
Court held that the employer simply cannot deduct the value from the employee’s wages without
satisfying the following: (a) proof that such facilities are customarily furnished by the trade; (b) the
provision of deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities
are charged at fair and reasonable value.
203Q: Gamma Company pays its regular employees P350.00 a day, and houses them in a dormitory
inside its factory compound in Manila. Gamma Company also provides them with three full meals a
day. In the course of a routine inspection, a Department of Labor and Employment (DOLE)
Inspector noted that the workers' pay is below the prescribed minimum wage of P426.00 plus
P30.00 allowance, and thus required Gamma Company to pay wage differentials. Gamma Company
denies any liability, explaining that after the market value of the company-provided board and lodging
are added to the employees' P350 cash daily wage, the employees' effective daily rate would be way
above the minimum pay required by law. The company counsel further points out that the employees
are aware that their food and lodging form part of their salary, and have long accepted the
arrangement. Is the company's position legally correct? (2013 Bar Questions) SUGGESTED
ANSWER: No. The following requisites were not complied with: (a) proof that such facilities are
customarily furnished by the trade (b) the provision of deductible facilities is voluntarily accepted by
the employee (c) the facilities are charged at the fair and reasonable value. **Mere availment is not  
sufficient to allow deduction from employee’s wages. (Mayon Hotel & Restaurant v. Adarna, 485
SCRA 609 [2005]) SUGGESTED ALTERNATIVE ANSWER: No. RULE 78, Section 4 provides that
there must be a written authorization.
provided and indeed constituted facilities, such facilities could not be deducted without
the ER complying first with certain legal requirements (Mabeza v. NLRC, April
18, 1997).
————————————————
B4. Non-diminution of Benefits

1. GR: Benefits being given to EEs cannot be taken back or reduced
unilaterally by the ER because the benefit has BECOME PART OF THE
EMPLOYMENT CONTRACT, *****whether written or unwritten.204 However, an
agreement reducing certain labor standards benefits such as overtime and premium
pay violates Art. 100. **Provisions of existing laws are deemed part of a
contract. (Republic Planters Bank v. NLRC, 266 SCRA 142).
2. *****XPN: When diminution of benefits is DONE TO CORRECT AN ERROR.
NB: If the ERROR is not corrected205 in a reasonable time, it RIPENS INTO
A COMPANY POLICY and EEs can demand it as a MATTER OF RIGHT.
3. Instances when non-diminution of benefits is applicable—It is applicable if it
is shown that the grant of benefit:**
a. Is based on an EXPRESS POLICY of the law; or
204Q: Lolong Law Firm (LLF), which employs around 50 lawyers and 100 regular staff, suffered losses
for the first time in its history. The management informed its employees that it could no longer afford
to provide them free lunch. Consequently, it announced that a nominal fee would henceforth be
charged. Was LLF justified in withdrawing this benefit which it had unilaterally been providing to its
employees? (2014 Bar Question) (A) Yes, because it is suffering losses for the first time. (B) Yes,
because this is a management prerogative which is not due to any legal or contractual obligation. (C)
No, because this amounts to a diminution of benefits which is prohibited by the Labor Code. (D) No,
because it is a fringe benefit that has already ripened into a demandable right. SUGGESTED
ANSWER: (C)
205Q: In computing for 13th month pay, Balagtas Company used as basis both the employee’s
regular base pay and the cash value of his unused vacation and sick leaves. After two and a half
years, it announced that it had made a mistake and was discontinuing such practice. Is the
management action legally justified? (2011 BAR) (A) Yes, since 13th month pay should only be one-
twelfth of the regular pay. (B)No, since the erroneous computation has ripened into an
established, non withdrawable practice. (C)Yes, an error is not a deliberate decision, hence may be
rectified. (D)No, employment benefits can be withdrawn only through a CBA negotiation. Comment
on the suggested answer: TOM does not think that two and a half years is enough to consider
a practice ‘established’
b. Has RIPENED206 INTO PRACTICE over a long period of time and

the practice is CONSISTENT AND DELIBERATE and is **NOT DUE TO AN
ERROR in the construction/application of a doubtful or difficult question of
law.
4. Vergara vs NLRC: There is diminution of benefits when the following
requisites are present:*****
(1) the grant or benefit is founded on a policy or has ripened into a
practice over a long period of time;
(2) the practice is consistent and deliberate;
(3) the practice is not due to error in the construction or application of
a doubtful or difficult question of law; and
(4) the diminution or discontinuance is done unilaterally by the employer
————————————————
B5. Prohibitions Regarding Wages

1. CIVIL CODE provisions:
a. Withholding of the wages, **except for a debt due, shall not be made
by the employer (Art. 1706).
b. The laborer's wages shall be a LIEN on the goods manufactured or
the work done (Art. 1707).
[] Special vs. Ordinary Preferred Credit: ***Mortgage credit is a
special preferred credit (It creates a real right which is enforceable against the
whole world, hence, it is a lien on the identified real property) under the Civil
Code, whereas the preference as regards the unpaid wages of workers when not
206 Q: R was employed as an instructor of Cruz College located in Santiago City, Isabela. Pursuant to a
stipulation in R’s employment contract that the college has the prerogative to assign R in any of its
branches or tie-up schools as the necessity demands, the college proposed to transfer him to Ilagan,
a nearby town. R filed a complaint alleging constructive dismissal since his re-assignment will entail
an indirect reduction of his salary or diminution of pay considering that additional allowance will not
be given to cover for board and lodging expenses. R, however, failed to prove that allowances were
given in similar instances in the past. Is R’s contention that he will suffer constructive dismissal in
view of the alleged diminution of benefit correct? (2012 Bar Question): a. Yes, such transfer should
require an automatic additional allowance; the non-granting of said allowance amounts to a diminution
of benefit; b. No, R failed to present evidence that the college committed to provide the additional
allowance or that they were consistently granting such benefit as to have ripened into a practice which
cannot be peremptorily withdrawn. Hence, there is no violation of the rule against diminution of pay;
c. No, R’s re assignment did not amount to constructive dismissal because the college has the right to
transfer R based on contractual stipulation; d. B and C. SUGGESTED ANSWER: b) SUGGESTED
ALTERNATIVE ANSWER: c) [Management prerogative, Morales vs. Harbour Centre Port Terminal,
Inc., G.R. No. 174208, January 25, 2012]
attached to any specific property is an ordinary preferred credit.207

[] Art. 110 of the Labor Code establishes not a lien but a
preference of credit in favor of employees. Unlike a lien, a preference of credit
does not create a charge upon any particular property of the debtor208 —[] Art.
110. ***Worker preference in case of bankruptcy. In the event of
207 Q: Distinguish the mortgage created under the Civil Code from the right of first preference created
by the Labor Code as regards the unpaid wages of workers. Explain. (1995 Bar Question)
SUGGESTED ANSWER: A mortgage directly subjects the property upon which it is imposed,
whoever the possessor may be. to the fulfillment of the obligation for which it was constituted.
It creates a real right which is enforceable against the whole world. It is therefore a lien on an identified
real property. Mortgage credit is a special preferred credit under the Civil Code in the classification of
credits. The preference given by the Labor Code when not attached to any specific property, is an
ordinary preferred credit. ALTERNATIVE ANSWER: If the asset of an employer which has become
bankrupt or has been liquidated has been mortgaged, the proceeds of the sale of said mortgaged asset
is first subject to the lien of the person to whom the property is mortgaged. Said lien is superior to the
first preference enjoyed by the workers pursuant to the Labor Code.
208Q: Premiere Bank, a banking corporation, being the creditor - mortgagee of XYZ & Co., a
garment firm, foreclosed the hypothecated assets of the latter. Despite the foreclosure, XYZ & Co.
continued its business operations. A year later, the bank took possession of the foreclosed property.
The garment firm’s business operations ceased without a declaration of bankruptcy. Jose Gaspar,
an employee of XYZ & Co., was dismissed from employment due to the cessation of business of
the firm. He filed a complaint against XYZ & Co. and the bank. The Labor Arbiter, after hearing, so
found the company liable, as claimed by Jose Gaspar, for separation pay. Premiere Bank was
additionally found subsidiarily liable upon the thesis that the satisfaction of labor benefits due to
the employee is superior to the right of a mortgagee of property. Was the Labor Arbiter correct in
his decision? (2005 Bar Question) SUGGESTED ANSWER: No. The preference of credits established
in Art. 110 of the Labor Code cannot be invoked in the absence of any insolvency proceedings,
declaration of bankruptcy, or judicial liquidation. (DBP v. Santos. 171 SCRA 138 [19891] ).
SUGGESTED ANSWER 2: No. What Art. 110 of the Labor Code establishes is not a lien but a
preference of credit in favor of employees. Unlike a lien, a preference of credit does not create a
charge upon any particular property of the debtor. (Development Bank of the Philippines v.
Secretary of Labor, 179 SCRA 630 f1989]). SUGGESTED ANSWER 3: The Decision of the Labor
Arbiter holding Premiere Bank (as foreclosing mortgagee- creditor) subsidiarily liable for a money
obligation of XYZ & Co, (as mortgagor) to Gaspar, its employee, has no legal basis: 1. There is no
privity of relationship between the Bank and Gaspar. The relationship, upon which the obligation to
pay a sum of money is based, is between XYZ (the mortgagor) and Gaspar as its employee arising
from the Labor Code provision requiring an employer to pay separation pay, re: other causes of
employment; 2. At both times- Labor Arbiter Decision to pay separation pay and foreclosure-XYZ&
Co. was an existing business entity and neither bankrupt or in liquidation, although its business
operations after the foreclosure ceased; 3. The decision of the Labor Arbiter for XYZ & Co. to pay a
sum of money to Gaspar was based on an action in personam, not in rem, enforceable against any
party. (Sundowner Corporation vs. Drilon, 180 SCRA 14 f19891); 4. The reference in the Decision to
“labor benefits due to an employee is superior to the right of a mortgagee of property” is misplaced.
The preferential claim rule has no basis and runs contrary to law and jurisprudence. TOM’s choice is
Suggested Answer Number 2.
bankruptcy209 or liquidation of an employer’s business, his workers shall enjoy

first preference as regards their wages and other monetary claims, any
provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and
other creditors may be paid. (As amended by Section 1, Republic Act No. 6715,
March 21, 1989). This does not apply to insolvent debtors.210 And the property
has to be owned by the ER, i.e., the first preference of the workers can only be
enforced against the judgement debtor, not against another company who has
acquired the mortgaged property of the ER during foreclosure proceedings.211
c. The laborer's wages shall **not be subject to EXECUTION or
ATTACHMENT, except for debts incurred for food, shelter, clothing and
209Q: XYZ Company filed a petition for bankruptcy before a Regional Trial Court. Among the list of
creditors are the Philippine National Bank (PNB), various suppliers, the Bureau of Internal Revenue
(BIR) for payment of back taxes and the Union in representation of the employees for unpaid wages,
leaves and bonuses. a. With regards to the other creditors, particularly the PNB and BIR, what is the
standing of the employees claims? b. Would it make any difference if there is no judicial declaration of
bankruptcy? SUGGESTED ANSWER: a. In Republic v. Peralta, the claims of the 'Government, like
the taxes that should be paid to the BIR, should first be paid before the money claims of the workers.
But if, the question is now resolved under Rep. Act No. 6715, it is now provided that “unpaid wages
and monetary claims (of workers) shall be paid in full before the claims of the Government
and the other creditors may be paid; b. If there is no judicial declaration of bankruptcy, the claim
of the Union in representation of the employees for unpaid wages, leaves and bonuses will be given
preference after there is a finding by a Labor Arbiter, hearing the case as a money claim, that an
employer is bankrupt.
210 Q: Under the Labor Code, is the right of first preference a lien on the property of the insolvent
debtor in favor of the workers? Explain. (1995 Bar Question) SUGGESTED ANSWER: The right of
first preference in favor of workers is not a lien on the property of the insolvent debtor. The
preference could be exercised only in the event of bankruptcy or liquidation of an employer's
business. ALTERNATIVE ANSWER: A preference does not attach to specific properties. Lien
creates charges on a particular property. The right of first preference as regards unpaid wages
recognized by the Labor Code does not constitute a lien on the property of the Insolvent debtor In
favor of the workers. It is but a preference of credit in their favor, a preference in application. The
Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property owned by their employer.
211Q: The Independence Bank of the Philippines (IBP) is the mortgage creditor of San Juan Trading
Company (SJTC). For failure of SJTC to pay its obligations, IBP foreclosed the former’s
mortgaged properties and in the bidding acquired the properties as the highest bidder. SJTC’s
workers, whose claims for separation pay, unpaid wages and other benefits could not be satisfied, filed
an action against IBP to enforce their claims, contending that they enjoyed preference in respect of
separation pay, wages and other benefits due them prior to the cessation of SJTC's operations. Will the
action of the workers against IBP prosper? Explain. Suggested Answer: The action of the workers
against IBP will not prosper. It is true that the Labor Code provides: In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as regards their wages and
other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claim shall be paid in full before claims of the government and other creditors may be paid.
But, here, the mortgaged property is no longer owned by SJTC. The first preference of the
workers can only be enforced against the judgement debtor, meaning SJTC, and not against IBC who
now owns the mortgaged property which has been foreclosed. (Development Dank of the
Philippines vs. Minister of Labor and Employment, et al. G.R. No. 75801, March 20,1991)
medical attendance (Art. 1708).

d. The employer shall **neither seize nor RETAIN any tool or other articles
belonging to the laborer (Art. 1709).
2. LABOR CODE provisions
a. No employer shall limit or otherwise interfere with the **FREEDOM
of any employee to dispose of his wages. He shall not in any manner force,
compel, or oblige his employees to purchase merchandise, commodities or
other property from any other person, or otherwise make use of any store or
services of such employer or any other person (Art. 112).
b. It shall be unlawful for any person, directly or indirectly, to
**WITHHOLD212 any amount from the wages of a worker or induce him to
give up any part of his wages by force, stealth, intimidation, threat or by any
other means whatsoever without the worker's CONSENT (Art. 116).213
c. It shall be unlawful to **make any DEDUCTION from the wages of
any employee for the benefit of the employer or his representative or
intermediary as CONSIDERATION of a promise of employment or
retention in employment (Art. 117).
d. It shall be unlawful for an employer to refuse to pay or REDUCE the
wages and benefits, discharge or in any manner **DISCRIMINATE against any
employee who has filed any complaint or instituted any proceeding under this
Title or has testified or is about to testify in such proceedings (Art. 118).
———————————————
212[] Lutgardo is working as an assistant sales manager in the Special Steel Products, Inc. He obtained a
car loan from the Bank of Commerce with the Special Steel Products, Inc. as surety. The company
withheld Lutgardo’s thirteen month pay and earned vacation and sick leave as a lien to protect its
right as a surety. Can Special Steel Products, Inc. validly do so? NO. It **may only protect its right as
surety by instituting an ACTION TO DEMAND SECURITY. It may not take the law into his
own hands. Indeed, it shall be **unlawful for any person, directly or indirectly, to withhold any amount
from the wages of a worker. Furthermore, Lutgardo is not indebted to the company. Thus, Special
Steel cannot offset its claim against Lutgardo’s monetary benefits (Special Steel Products v. Villareal, July
08, 2004).
213 Q: Corporation X is owned by L’s family. L is the President. M, L’s wife, occasionally gives
loans to employees of Corporation X. It was customary that loan payments were paid to M by
directly deducting from the employees’ monthly salary. Is this practice of directly deducting
payments of debts from the employee’s wages allowed? (2012 Bar Question) a) Yes, because where the
employee is indebted to the employer, it is sanctioned by the law on compensation under Article 1706
of the Civil Code; b) Yes, because it has already become customary such that no express authorization
is required; c) No, because an employee’s payment of obligation to a third person is deductible from
the employee’s wages if the deduction is authorized in writing; d) No, because Article 116 of the
Labor Code absolutely prohibits the withholding of wages and kickbacks. Article 116 provides for no
exception. SUGGESTED ANSWER: d) No, because Article 116 of the Labor Code absolutely
prohibits the withholding of wages and kickbacks. Article 116 provides for no exception.
SUGGESTED ALTERNATIVE ANSWER: a) Yes, because where the employee is indebted to the
employer, it is sanctioned by the law on compensation under Article 1706 of the Civil Code
B6. Wage Order; Wage Distortion
ON THE WAGE ORDER

1. A wage order may be reviewed on appeal by the National Wages and
Productivity Commission under the following grounds:214
a. Grave abuse of discretion;
b. Non-conformity with prescribed procedure;
c. Questions of law;
2. Q: The Regional Wage Board of Region II issued a Wage Order granting all
EEs in the private sector throughout the region an across-the-board increase
of P15.00 daily. Is this Wage Order valid? It depends.
a. The Wage Order is VALID insofar as the mandated increase
**applies to EEs earning the prevailing minimum wage rate at the time of
the passage of the Wage Order and
b. VOID with respect to its application to **EEs receiving more than
the prevailing minimum wage rate at the time of the passage of the Wage
Order.
c. The Regional Wage granted an across-the-board wage increase of
P150.00 to all EEs in the region. It did not set a wage level nor a range to which
a wage adjustment or increase shall be added. In doing so, the Regional Wage Board
**exceeded its authority by extending the coverage of the Wage Order to
wage earners receiving more than the prevailing minimum wage rate, **without
a denominated salary ceiling. The Wage Order granted additional benefits not
contemplated by R.A. No. 6727 (MBTC v. NWPC Commission, February 06,
2007).
3. *****Since the Wage Order was declared VOID with respect to its
application to employees receiving MORE than the prevailing minimum wage rate
at the time of the passage of the Wage Order, should these EEs refund the wage
increase received by them? NO. The **EEs should not refund the wage increase
since they received it in GOOD FAITH, in the HONEST BELIEF that they are
entitled to such wage increase and without any knowledge that there was no legal basis
214Q: A wage order may be reviewed on appeal by the National Wages and Productivity Commission
under these grounds, except: (2012 Bar Question) a. Grave abuse of discretion; b. Non-conformity
with prescribed procedure; c. Questions of law; d. Gross under or over-valuation. SUGGESTED
ANSWER: d) Gross under or over-valuation
for the same (MBTC v. NWPC Commission, February 06, 2007).215
ON WAGE DISTORTION
1. Concept of <Wage Distortion> (WD): A situation where an increase in
(prescribed) wage (rates) results in
a. the *****ELIMINATION or SEVERE CONTRACTION of
INTENTIONAL QUANTITATIVE DIFFERENCES in wage or salary rates
between and among the EE-groups in an establishment
b. as to effectively **OBLITERATE THE DISTINCTIONS embodied
in such WAGE STRUCTURE based on skills, length of service or other logical bases of
differentiation (LC, Art. 124).
[] iow, if the pay advantage of a position over another is removed or
significantly reduced by a pay adjustment required by a wage order, such pay
advantage should somehow be restored [Azucena 2015]. NB: the increase is
due to a wage order, unless it’s due to a CBA provision.
2. It is the DISAPPEARANCE or VIRTUAL DISAPPEARANCE of pay
differentials between lower and higher positions in an enterprise because of
compliance with a wage order (P.I. Manufacturing v. P.I. Manufacturing Supervisors
and Foreman, 4 February 2008).
*The ER and union shall correct the distortion.
3. ELEMENTS of WD:216*****
a. An existing hierarchy of positions with corresponding salary rates.
b. A significant change or increase in the salary rate of a LOWER pay class
WITHOUT A CORRESPONDING INCREASE in the salary rate of a HIGHER one;
c. The ELIMINATION OF THE DISTINCTION between the 2 groups or classes; and
d. The WD exists in the SAME REGION of the country (Alliance Trade
215Q: The CBA for the period January 2007 to December 2009 granted the employees a P40 per day
increase with the understanding that it is creditable as compliance to any future wage order.
Subsequently, the regional wage board increased by P20 the minimum wage in the employer’s area
beginning January 2008. The management claims that the CBA increase may be considered compliance
even if the Wage Order itself said that “CBA increase is not creditable as compliance to the Wage
Order.” Is the management's claim valid? (2011 BAR) (A)Yes, since creditability of the CBA
increase is the free and deliberate agreement and intention of the parties. (B)Yes, since the Wage
Order cannot prejudice the management’s vested interest in the provisions of the CBA. (C) No,
disallowing creditability of CBA pay increase is within the wage board's authority. (D)No, the CBA
increase and the Wage Order are essentially different and are to be complied with separately.
216 Q: When is there a wage distortion? (2006 Bar Question) SUGGESTED ANSWER: There is wage
distortion where an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation. ANOTHER SUGGESTED
ANSWER: Wage distortion arises when (4) essential elements are present: a. An existing hierarchy of
positions with corresponding salary rates; b. A significant change or increase in the salary rate of a
lower pay class without a corresponding increase in the salary of a higher one; c. The elimination of the
distinction between two groups or classes; and d. The distortion exists in the same region of the
country (Prubankers Association v. Prudential Bank and Trust Co., 302 SCRA 74 [1999]).
Unions v. NLRC, 17 February 2004).

4. BASIC PRINCIPLES in WD
a. The concept of WD assumes an EXISTING group or classification of
EES which establishes distinctions among such EEs on some relevant or
legitimate basis. This classification is reflected in a differing wage rate for each of
the classes of EEs.
b. **Often results from GOVERNMENT decreed increases in minimum
wages.
c. Should a WD exist, there is NO legal requirement that, in the
rectification of that distortion by a RE-ADJUSTMENT of the wage rates of
the differing classes of EEs, the gap which had previously or historically existed
be restored in precisely the same amount. In other words, **correction of a
WD may be done by RE-ESTABLISHING A SUBSTANTIAL OR SIGNIFICANT GAP
(as distinguished from the historical gap) between the wage rates of the differing
classes of EEs.
d. The re-establishment of a significant difference in wage rates may be
the result of the **resort to grievance procedures or CB negotiations (Metro
Transit Org., Inc. v. NLRC, 20 July 1995).
*NB: In mandating an adjustment, the law did not require that there be an
ELIMINATION OR TOTAL ABROGATION of quantitative wage or salary differences;
**a SEVERE CONTRACTION is enough (Metrobank v. NLRC, 10 September 1993).
5. Situation when WD does not take place: Wage distortion does not arise when a
wage order gives employees in **one branch of a bank higher compensation
than that given to their counterparts in other regions occupying the same pay scale
who are not covered by said wage order. In short, **the implementation of
wage orders in one region but not in others does not in itself necessarily
result in wage distortion (Prubankers Association v. Prudential Bank & Trust
Company, 25 January 1999).
******PROCESS217 FOR CORRECTION OF WD OF ORGANIZED vs.

UNORGANIZED218 ESTABLISHMENTS219
Organized Establishment Unorganized Establishment
(with union) (without union)
The ER and the union shall negotiate to The ER and the workers shall endeavor to correct
correct distortion (follow the grievance the distortion (through the aid of the NCMB, and
procedure in the CBA) to NLRC for compulsory arbitration if they fail.)
Any dispute shall be resolved through a Any dispute shall be settled through the NCMB.
grievance procedure under the CBA.
If it remains unresolved, it shall be dealt with If it remains unresolved within 10 days it shall be
through voluntary arbitration. referred to the NLRC.
The dispute will be resolved within 10 days The NLRC shall conduct continuous hearings and
from the time the dispute was referred to voluntary decide the dispute within 20 days from the time the
arbitration. same was referred.
1. DUTY of the ER and the union/worker if there is WD: The ER and the union
217 Q: How should a wage distortion be settled? (2006 Bar Question) SUGGESTED ANSWER: Any
dispute arising from wage distortion shall be resolved through the grievance procedure as provided in
the applicable collective bargaining agreement and, if the dispute remains unresolved, then through
voluntary arbitration. In cases where there are no collective bargaining agreements or recognized
labor unions, the employers and workers shall endeavor to correct such wage distortions. Any dispute
arising therefrom shall be settled through the National Conciliation and Mediation Board and, if it
remains unresolved after ten (10) calendar days of conciliation, the issue of wage distortion shall be
referred to the appropriate branch of the National Labor Relations Commission (NLRC).
218Q: Which is not a procedural requirement for the correction of wage distortion in an unorganized
establishment? (2012 Bar Question): a. Both employer and employee will attempt to correct the
distortion; b. Settlement of the dispute through National Conciliation and Mediation  
Board (NCMB); c. Settlement of the dispute through voluntary arbitration in case of failure to  
resolve dispute through CBA dispute mechanism; d. A and B. SUGGESTED ANSWER: c. Settlement
of the dispute through voluntary arbitration in case of failure to resolve dispute through CBA dispute
mechanism. [Art. 124, Labor Code]
219Q: What procedural remedies are open to workers who seek correction of wage distortion? (2%)
(2009 Bar Question) SUGGESTED ANSWER: The Procedural Remedies of Wage Distortion disputes
are provided in Art. 242 of the Labor Code, as follows: *****Organized establishment - follow the
grievance procedure as provided for in the CBA, and if the dispute remains unresolved, then
through voluntary arbitration; 2. Unorganized establishments - employer and workers, with the aid
of the NCMB shall endeavor to correct the wage distortion, and if they fail, to submit the issue to
the NLRC for compulsory arbitration.
[] Q: In what instances do labor arbiters have jurisdiction over wage distortion cases? (2012
Bar Question): a. When jurisdiction is invoked by the employer and employees in organized
establishments; b. When the case is unresolved by Grievance Committee; c. After the panel of
voluntarily arbitrators has made a decision and the same is contested by either party; d. In unorganized
establishments when the same is not voluntarily resolved by the parties before the NCMM.
SUGGESTED ANSWER: d) In unorganized establishments when the same is not voluntarily
resolved by the parties before the NCMB. [Art. 124, Labor Code].
shall NEGOTIATE to CORRECT the distortions.220 If there is no union, the ER

and the workers shall ENDEAVOR TO CORRECT such distinctions. (cf. table)
2. NON-STRIKEABLITY OF WD: *****WD is non-strikeable221 (Ilaw at
Buklod ng Manggagawa v. NLRC, June 27, 1991).222 WD is neither a deadlock in
collective bargaining nor ULP.
DIVISOR TO DETERMINE DAILY RATE223

*Ways for the computation of the estimated equivalent monthly rate (EEMR)
of DAILY-PAID EES
1. For those who are required to work every day including Sundays or rest days,
special days and regular holidays.
EEMR = (Applicable daily rate x 393.50 days)/12
Where 393.50:
= 298 ordinary working days
= 24 for 12 regular holidays x 200%
= 67.60 for 52 rest days x 130%; and
220 [] Q: Bankard, Inc. approved a New Salary Scale which increased the hiring rates of new
employees. The Bankard Employees Union pressed the company for the increase in the salary of
its old, regular employees. The company refused to do so. The union filed a Notice of Strike on the
ground of discrimination for it claimed that a wage distortion exists and the company refused to
negotiate to correct the distortions. Is there a wage distortion brought about by the New Salary Scale?
NO. The **union cannot legally obligate the Bankard to correct the alleged “wage distortion” as the
increase in the wages and salaries of the newly-hired was **NOT DUE TO A PRESCRIBED LAW OR
WAGE ORDER. If the compulsory mandate under Art. 124 to correct wage distortion is applied to
voluntary and unilateral increases by the employer in **fixing hiring rates which is INHERENTLY A
BUSINESS JUDGMENT PREROGATIVE, then the hands of the employer would be
completely tied even in cases where an increase in wages of a particular group is justified due to a
re-evaluation of the high productivity of a particular group or the need to increase the
competitiveness of Bankard’s hiring rate. An employer would be discouraged from adjusting the
salary rates of a particular group of employees for fear that it would result to a demand by all
employees for a similar increase, especially if the financial conditions of the business cannot address an across-
the-board increase (Bankard Employees Union-WTU v. NLRC, 17 February 2004).
221 Q: What is wage distortion? Can a labor union invoke wage distortion as a valid ground to go on
strike? Explain. (2%) (2009 Bar Question) SUGGESTED ANSWER: Wage distortion refers to a
situation where an increase in the prescribed wage rates results in the elimination or severe
contraction of intentional quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service and other logical bases of differentiation. (Art. 124, Labor
Code) No. the existence of wage distortion is not a valid ground for staging a strike because Art.
124 of the Labor Code provides for a specific method or procedure for correcting wage distortion.
In Ilaw at Buklod ng Manggagawa vs. NLRC, (198 SCRA 586, 594-5 [1991]), the Court said.
222Q: Can the issue of wage distortion be raised in a notice of strike? Explain. 10% (2006 Bar
Question) SUGGESTED ANSWER: In Ilaw ng Manggagawa v. NLRC, 198 SCRA 586 (1991), the
Supreme Court held that any issue involving wage distortion shall not be a ground for a strike or
lockout. *****The legislative intent is to solve wage distortion problems through voluntary
negotiation or arbitration.
223 (*NB LPS – not in the syllabus)
= 3.90 for 3 special days x 130%

2. For those who do not work and are not considered paid on Sundays or rest
days.
EEMR = (Applicable daily rate x 313 days)/12
Where 313:
= 12 regular holidays; and
= 3 special holidays
3. For those who do not work and are not considered paid on Saturdays and
Sundays or rest days
EEMR = (Applicable daily rate x 261 days)/12
Where 261:
= 12 regular holidays; and
= 3 special holidays
———————————————————————————————
C. Leaves
C1. Service Incentive Leave (SIL)
1. What is SIL? It is 5-DAYS LEAVE WITH PAY for every EE who has
RENDERED AT LEAST 1 YEAR OF SERVICE (Art. 95, LC)
2. It is **COMMUTABLE224 TO ITS MONEY EQUIVALENT if not used
or exhausted at the end of the year.
a. Purpose: It is aimed primarily at encouraging workers to work
continuously and with dedication to the company.
b. Basis for cash conversion: The basis shall be the SALARY RATE at the
date of commutation. The availment and commutation of the SIL may be on a
**PRO-RATA BASIS225 [No. VI(c), DOLE Handbook on Worker's Statutory
Monetary Benefit, No. VI(c)].
3. Meaning of “At least 1 year of service”: Service for **NOT LESS THAN 12
MONTHS, whether **CONTINUOUS OR BROKEN reckoned from the date
the EE started working, including authorized absences and paid regular holidays unless
the working days in the establishment as a matter of practice or policy, or that
provided in the employment contract is less than 12 months, **in which case
224Q: If not used by the end of the year, the service incentive leave shall be (2011 BAR) (A) carried
over to the next year. (B) converted to its money equivalent. (C) forfeited. (D)converted to cash and
paid when the employee resigns or retires.
225ILLUSTRATION: An Ee who is hired on 1 January 2008 and resigned on 1 March 2009,
assuming he has not used or commuted any of his accrued SIL, is entitled upon his resignation to the
commutation of his accrued SIL as follows:
SIL earned as of 31 December 2008 – Five (5) days
Proportionate SIL for Jan to Feb 2009 (2/12 x 5 days) – 0.833 days
Total accrued SIL as of March 2009 – 5.833 days
said period shall be considered as one year (Sec. 3, Rule V, Book III, IRR).
PERSONS ENTITLED TO SIL

1. Rule on persons entitled to SIL
*GR: Applies to every226 EE who has rendered at least 1 year of service
(LC, Art. 95[a]).
*XPNs:
a. Government EEs and any of its political subdivisions including GOCCs
b. Those already enjoying the benefit
c. Domestic helpers and persons in the personal services of another
d. Those already227 enjoying vacation leave with pay of at least 5 days228
e. **Managerial EEs and members of the managerial staff
f. Field personnel and other **EEs whose performance is unsupervised
by the ER
g. Employed in **establishments regularly employing less than 10 workers
h. Exempt establishments
i. Engaged with a task or contract basis, purely commission basis, or
those who are paid in a fixed amount of performing work irrespective of the time
consumed in the performance thereof [LC, Art. 95(b)].
**This refers to FIELD PERSONNEL, which refers "to non-
agricultural EEs who regularly perform their duties away from the principal
place of business or branch office of the ER and whose actual hours of work in
the field cannot be determined with reasonable certainty”
2. Special cases on the applicability of SIL:
a. Are TEACHERS of private schools on CONTRACT BASIS entitled to
SIL? YES. The phrase "those who are engaged on task or contract basis"
Q: Which type of employee is entitled to a service incentive leave? (2012 Bar Question): a.
226
Managerial employees; b. Field personnel; c. Government workers; d. Part-time workers.

SUGGESTED ANSWER: d) Part-time workers [Art. 82, Labor Code]
227Q: The members of the administrative staff of Zeta, a construction company, enjoy ten (10) days
of vacation leave with pay and ten (10) days of sick leave with pay, annually. The workers' union,
Bukluran, demands that Zeta grant its workers service incentive leave of five (5) days in compliance
with the Labor Code. Is the union demand meritorious? (2013 Bar Questions) (A) Yes, because non-
compliance with the law will result in the diminution of employee benefits. (B) Yes, because service
incentive leave is a benefit expressly provided under and required by the Labor Code. (C) No, because
Zeta already complies with the law.( D) No, because service incentive leave is a Labor Code benefit
that does not apply in the construction industry. (E) Yes, because Labor Code benefits are separate
from those voluntarily granted by the company. SUGGESTED ANSWER: (C) Basis: Article 95 of the
Labor Code. The employee is already given vacation leave of 10 days. This is deemed compliance with
the requirement of service incentive leave under the law.
228 Q: Which of the following grounds exempts an enterprise from the service incentive leave law? (A)
The employees already enjoy 15 days vacation leave with pay. (B) The employer's business has
been suffering losses in the past three years. (C)The employer regularly employs seven employees or
less. (D)The company is located in a special economic zone.
should, however, be **related to "field personnel" applying the rule on

EJUSDEM GENERIS that those general and unlimited terms are restrained
and limited by the particular terms that they follow. Clearly, Cebu Institute of
Technology **teaching personnel cannot be deemed as field personnel.(Par. 3,
Art. 82, LC); (CIT v. Ople, 18 December 1987).
b. How about PART-TIME workers? YES. They are entitled to the full
benefit of the yearly 5-day service incentive leave, **whether the service within 12
months is continuous or broken or where the working days in the employment
contract as a matter of practice or policy is less than 12 months. The availment
and commutation of the same can be proportionate to the daily work
rendered and the regular daily salary. (DOLE’s explanatory Bulletin on Part-time
Employment, 2 January 1996).
c. How about PIECE-RATE workers? YES. They are entitled to the full
benefit of the yearly 5-day SIL. Under P.D. 851 or the SIL Law, the **EXCLUSION
from its coverage of workers who are paid on a purely commission basis
is ONLY with respect to field personnel. *****EEs engaged on task or
contract basis or paid on purely commission basis are NOT AUTOMATICALLY
EXEMPTED from the grant of SIL, unless, they fall under the classification of
field personnel (Serrano v. Severino Santos, 9 August 2010).
d. Are EEs with SALARIES ABOVE MINIMUM wage entitled to SIL?
YES. **The difference between the minimum wage and the actual salary received by the
EEs cannot be deemed as their 13th month pay and SIL pay as such difference
is not equivalent to or of the same import as the said benefits contemplated by
law (JPL Marketing Promotions v. CA, 8 July 2005).
e. How about TERMINATED EES? It depend:
i. ILLEGALLY DISMISSED EEs: YES, entitled to SIL until actual
reinstatement (Integrated Contractor and Plumbing Works v. NLRC, August 09, 2005).
ii. LEGALLY DISMISSED EEs: the EE who had not been paid of SIL
from the outset of employment is entitled only of such pay after a year from
commencement of service until termination of employment or contract (JPL
Marketing Promotions v. CA, 8 July 2005).
3. Establishments EXEMPT from the application of the SIL Law:
**Establishments EMPLOYING LESS THAN 10 EEs are exempted by the LC
and the Implementing Rules from paying SIL. The clear policy of the LC is to
include all establishments, except a few classes, under the coverage of the
provision granting SIL to workers (Murillo v. Sun Valley Realty, Inc, 30 June 1988).
4. *NB LPS – SIL is COMMUTABLE to its money equivalent if not used or
exhausted at the end of the year based on the salary rate at the date of
commutation (IRR of LC, Book III, Rule V, Sec. 5).
————————————————
C2. Maternity Leave

1. Maternity leave benefit: a covered female EE, **REGARDLESS OF HER
CIVIL STATUS,229 is entitled to a DAILY maternity benefit
a. equivalent to 100% of her present basic salary, allowances and other benefits or
b. the CASH EQUIVALENT of such benefits for
i. 60 days
ii. or 78 days in case of caesarean delivery.
2. CONDITIONS for availment of maternity leave benefit:**
a. The EE shall have NOTIFIED her ER of her pregnancy and the
probable date of her childbirth which notice shall be transmitted to the SSS;
b. The payment shall be **ADVANCED BY the ER230 in 2 equal
installments within 30 days from the filing of the maternity leave application;
c. In case of caesarean delivery, the EE shall be paid the daily maternity
benefit for 78 days;
d. Payment of daily maternity benefits shall be a **BAR TO THE
RECOVERY OF SICKNESS BENEFITS for the same compensable
period of 60 days for the same childbirth, abortion, or miscarriage;
e. The maternity benefits provided under Sec. 14-A shall be paid ***only
for the FIRST FOUR231 deliveries; (TOM: this has to be revised! why limit
when each newborn child is a potential contributor to the economy: one mouth to
feed but two hands, two feet and a great mind to work!!!)
f. The SSS shall immediately REIMBURSE the ER of 100% of the
amount of maternity benefits advanced to the ER by the ER upon receipt of
229*NB LPS – Q. Ms. Sara Mira Is an unwed mother with three children from three different
fathers. In 1999, she became a member of the Social Security System. In August 2000, she suffered a
miscarriage, also out of wedlock, and again by a different father. Can Ms. Mira claim maternity
benefits under the Social Security Act of 1997? Reason. (2000 Bar). A. Yes, she can claim maternity
benefit. Entitlement thereto is not dependent on the claimant's being legally married. (Sec. 14-A, Social
Security Act of 1997).
230Q. Thess, a self-employed, suffered miscarriage in January 2014. Can Thess claim maternity
benefits under SSS Act of 1997? A. No. Voluntary or self-employed members of the SSS are not
entitled to maternity leave benefits because the law requires the corresponding maternity
contributions to be paid by the ERs. Voluntary or self-employed members have no ERs to remit
such contributions (RA 8282, Sec. 14-A).
231Q: AB, single and living-in with CD (a married man), is pregnant with her fifth child. She applied
for maternity leave but her employer refused the application because she is not married. Who is
right? Decide (2007 Bar Question) SUGGESTED ANSWER: AB is right. The Social Security Law,
which administers the Maternity Benefit Program, does not require that the relationship between the
father and the mother of the child be legitimate. The law is compensating the female worker because
of her maternal function and resultant loss of compensation. The law is morality free.
ALTERNATIVE ANSWER: Neither party is correct. The employer cannot refuse the application on
the ground that she is only living with CD, as a legitimate marriage is not a precondition for the grant
of maternity leave. Neither is AB correct, since maternity leave is only available for the first four
deliveries or miscarriages. [Based on the law, TOM thinks the alternative answer is better, but see his
comment, supra]
satisfactory proof of such payment and legality thereof; and

g. If an EE should give birth or suffer abortion or miscarriage without the
required contributions having been remitted for her by her ER to the SSS, or
without the latter having been previously notified by the ER of the time of the
pregnancy, the **ER shall pay to the SSS damages equivalent to the benefits
which said EE would otherwise have been entitled to, and the SSS shall in turn pay
such amount to the EE concerned.
3. REQUIREMENTS***** in order that maternity benefits may be claimed
a. There is childbirth, abortion or miscarriage
b. She has paid at least three232 monthly contributions in the twelve
(12) month period immediately preceding the semester of her childbirth or
miscarriage.
4. NB: It shall be unlawful for any employer to discharge (a) woman (employee)
on account of her pregnancy, or while on leave or in confinement due to her
pregnancy.233
————————————————
232 Q: Mans Weto had been an employee of Nopolt Assurance Company for the last ten (10) years. His
wife of six (6) years died last year. They had four (4) children. He then fell in love with Jovy, his co-
employee and they got married. In October this year, Weto's new wife is expected to give birth to her
first child. He has accordingly filed his application for paternity leave, conformably with the provisions
of the Paternity Leave Law which took effect in 1996. The HRD manager of the assurance firm denied
his application, on the ground that Weto had already used up his entitlement under that law. Weto
argued that he has a new wife who will be giving birth for the first time, therefore, his
entitlement to paternity leave benefits would begin to run anew. xxx (b) Is Jovy entitled to
maternity leave benefits? (6%) SUGGESTED ANSWER: (b) Yes, if Jovy, as a female employee, has
paid at least three (3) monthly contributions in the twelve-month period immediately preceding the
semester of her childbirth (Sec, 14-A, R.A. 1161, as amended); otherwise; she is not entitled to the
benefit.
233Q: Lydia Cancio was on her sixth and last month as a probationary employee of the Banco
Seguridad when she was confirmed to be pregnant. Being unmarried and wanting to become a regular
employee, she initially kept her pregnancy a secret from her employer. She was subsequently
appointed a regular employee on the first month of her pregnancy. Because of morning sickness,
however, Lydia frequently absented herself from work. After two more months, the personnel
manager told her that her habitual absences had become so intolerable that she would have to
go. Replying that her absences were caused by her pregnancy, Lydia asked for a leave of absence,
which was denied. She nevertheless went on leave and was dismissed for going on leave without prior
permission. Lydia filed a complaint for illegal dismissal, praying that she be reinstated. The Bank
contested the complaint on the ground that she was not dismissed because of her pregnancy but
because of her absence without leave. Decide. (1987 Bar Question) SUGGESTED ANSWER: The
dismissal is illegal. The Labor Code (in Art. 137(2) very clearly provides: It shall be unlawful for any
employer to discharge (a) woman (employee) on account of her pregnancy, or while on leave or in
confinement due to her pregnancy. Of course, in the case, the woman employee asked for leave of
absence because of her pregnancy but this request was denied and she went on leave anyway. The
employer should have granted her request for leave, the request being made because of her
pregnancy. Dismissal after she went on leave without prior permission is too harsh a punishment for
the pregnant woman who was absent without leave.
C3. Paternity Leave

1. Paternity leave: refers to the benefits granted to a MARRIED MALE EE
allowing him not to report for work for 7 days but continues to earn the
compensation therefore, on the CONDITION that his SPOUSE HAS
DELIVERED A CHILD OR SUFFERED A MISCARRIAGE; **NB: Delivery shall
include childbirth or any miscarriage. How about abortion? Unlike in
maternity leave, it is not specifically mentioned.
2. PURPOSES: to enable him to EFFECTIVELY LEND SUPPORT to his wife in
her period of recovery and/or in the nursing of the newly-born child.
3. Take it or leave it: In the event it is not availed of, such leave is **NOT
CONVERTIBLE TO CASH.
4. Concept of paternity leave BENEFITS: Every married male EE in
the PRIVATE AND PUBLIC SECTORS shall be entitled to a paternity leave of
a. 7 days with full pay234
b. for the first 4 deliveries of the LEGITIMATE SPOUSE with whom
he is COHABITING. (again, we should not limit it to 4!) *****NB LPS – thus
a person who remarried having 4 children by his previous marriage may still
avail this benefit upon pregnancy of his subsequent spouse. The law used
“legitimate spouse with whom he is cohabiting” and did not distinguish prior
234 Q: Because of the stress in caring for her four (4) growing children, Tammy suffered a miscarriage
late in her pregnancy and had to undergo an operation. In the course of the operation, her obstetrician
further discovered a suspicious- looking mass that required the subsequent removal of her uterus
(hysterectomy). After surgery, her physician advised Tammy to be on full bed rest for six (6)
weeks. Meanwhile, the biopsy of the sample tissue taken from the mass in Tammy's uterus showed a
beginning malignancy that required an immediate series of chemotherapy once a week for four (4)
weeks. (B) What can Roger, Tammy’s 2nd husband, and the father of her two (2) younger children -
claim as benefits under the circumstances? (2013 Bar Questions) SUGGESTED ANSWER:
Under RA 8187 or the Paternity Leave Act of 1996, Roger can claim paternity leave of seven (7)
days with full pay if he is lawfully married to Tammy and cohabiting with her at the time of the
miscarriage.
and subsequent marriages.235

5. CONDITIONS for entitlement to paternity leave—The male EE is:
a. ***LEGALLY MARRIED to, and is COHABITING236 with the
woman who delivers the baby; 
b. EE of private or public sector;237
c. Maybe availed of only for the first 4 deliveries238 of the legitimate
spouse with whom he is cohabiting; and
235 Q: Mans Weto had been an employee of Nopolt Assurance Company for the last ten (10) years. His
wife of six (6) years died last year. They had four (4) children. He then fell in love with Jovy, his co-
employee and they got married. In October this year, Weto's new wife is expected to give birth to her
first child. He has accordingly filed his application for paternity leave, conformably with the provisions
of the Paternity Leave Law which took effect in 1996. The HRD manager of the assurance firm denied
his application, on the ground that Weto had already used up his entitlement under that law. Weto
argued that he has a new wife who will be giving birth for the first time, therefore, his
entitlement to paternity leave benefits would begin to run anew. xxx Whose contention is correct,
Weto or the HRD manager? SUGGESTED ANSWER: (a) The contention of Weto is correct. The law
provides that every married male is entitled to a paternity leave of seven (7) days for the first four (4)
deliveries of the legitimate spouse with whom he is cohabiting (Section 2, RA6187). Jovy is Weto's
legitimate spouse with whom he is cohabiting. The fact that Jovy is his second wife and that Weto had 4
children with his first wife is beside the point. **The important fact is that this is the first child of
Jovy with Weto. The law did not distinguish and we should therefore not distinguish. The
paternity leave was intended to enable the husband to effectively lend support to his wife in her
period of recovery and/or in the nursing of the newly born child (Sec. 3, RA 8187). To deny Weto
this benefit would be to defeat the rationale of the law. ANOTHER SUGGESTED ANSWER: The
HRD manager is correct. Since it is conceded that Weto earlier availed of four (4) paternity leaves when
his first wife gave birth to their four (4) children, he clearly "already used up his entitlement under the
law". His new wife's giving birth for the first time would not, matter as the benefit given by. Section 2
of R.A. 8187 is an exhaustible benefit granted to a father "for the first four (4) deliveries of the
legitimate spouse with whom he is cohabiting".
236Q: H files for a seven-day paternity leave for the purpose of lending support for his wife, W, who
suffered a miscarriage through intentional abortion. W also filed for maternity leave for five weeks.
H and W are legally married but the latter is with her parents, which is a few blocks away from H’s
house. Which of the following statements is the most accurate? (2012 Bar Question): a. Paternity leave
shall be denied because it does not cover aborted babies; b. Paternity leave shall be denied because W is
with her parents; c. Maternity leave shall be denied because it does not cover aborted babies; d.
Maternity leave shall be denied because grant of paternity leave bars claim for maternity leave.
SUGGESTED ANSWER: b) Paternity leave shall be denied because W is with her parents [RA 8187,
Section 2]
237Q: Which of the following is NOT a requisite for entitlement to paternity leave? (2011 BAR)
(A) The employee is cohabiting with his wife when she gave birth or had a miscarriage. (B) The
employee is a regular or permanent employee. (C)The wife has given birth or suffered a
miscarriage. (D) The employee is lawfully married to his wife.
238 [] Q: Ron is a bank employee of BPI. He is cohabiting with Michelle for five straight years with
whom he has four children. In the fifth year of their cohabitation, Michelle had her miscarriage.
Ron is availing himself of his paternity leave. Is he entitled to paternity leave? NO. Ron is **not
entitled to paternity leave because he is ONLY COHABITING with Michelle. The law expressly
provides that THE MALE MUST BE LEGALLY MARRIED to the woman with whom he is cohabiting as a
condition for entitlement of paternity leave. Even assuming that Ron is legally married to Michelle, he cannot
avail also of the paternity leave because the law **LIMITS the deliveries only to four which include
childbirth or miscarriage. Based on the facts, it is already the 5th delivery of the woman.
d. NOTIFY his ER of the pregnancy of his legitimate spouse and the

expected date of such delivery within reasonable period prior to the
expected delivery.
5. NB LPS: PROCEDURE TO BE ENTITLED TO PATERNITY LEAVE
a. Notification – a married male Ee shall be entitled to paternity leave by
filing the requisite leave application form within reasonable period239 prior to
the expected delivery; The IRR provides that the availment should not be later
than 60240 days from the time of delivery/miscarriage.
b. Availment – the paternity benefits may be enjoyed by the qualified male
Ee on the days immediately before, during and after the childbirth or
miscarriage of his legitimate spouse; and
c. Validation requirement – any Ee availing the paternity benefits may be
required to furnish the necessary documents eg. Marriage certificate, birth
certificate of the newly born child, medical certificate etc. (IRR of the Paternity
Leave Act of 1996, Sec. 3, 4, and 5).
————————————————
C4. Parental Leave for Solo Parents [R.A. No. 8972]

1. Parental leave: Leave benefits granted to a **SOLO PARENT to enable him/
her to perform parental duties and responsibilities, where PHYSICAL
PRESENCE is required.
2. Benefits: In addition to leave privileges under existing laws, parental leave of
**NOT MORE THAN 7 WORKING DAYS EVERY YEAR shall be granted
to any solo parent EE who has **rendered service of at least 1 year. (Sec. 8)
3. CONDITIONS for entitlement of parental leave:***
a. He or she must fall among those referred to as a SOLO parent;
b. Must have the **ACTUAL and physical custody of the child or
children
c. Must have at least rendered service of ONE year to his or her employer
d. He or she must REMAIN a solo parent.
*NB: A change in the status or circumstance of the parent claiming benefits
under this Act, such that he/she is **no longer left alone with the responsibility of
239Q: To avail himself of paternity leave with pay, when must the male employee file his application for
leave? (2011 BAR) (A) Within one week from the expected date of delivery by the wife. (B) Not later
than one week after his wife’s delivery or miscarriage (C) Within a reasonable time from the
expected deliver date of his wife. (D)When a physician has already ascertained the date the wife will
give birth.
240Q: How many times may a male employee go on Paternity Leave? Can he avail himself of this
benefit, for example, 50 days after the first delivery by his wife? (3%) SUGGESTED ANSWER:
A male employee may go on Paternity Leave up to four (4) children. (Sec. 2, RA 8187) On the
question of whether or not he can avail himself of this benefit 50 days after the delivery of his wife,
the answer is: Yes, he can because the Rules Implementing Paternity Leave Act says that the availment
should not be later than 60 days after the date of delivery.
parenthood, shall terminate his/her eligibility for these benefits. (Sec.3)

4. Persons considered a SOLO parent entitled to parental leave—Any individual
who falls under any of the ff. categories:
a. A woman who gives BIRTH as a result of rape and other crimes
against chastity even without a final conviction of the offender; Provided, That the
mother keeps and raises the child;
b. Parent LEFT solo or alone with the responsibility of parenthood due to:
i. Death of spouse;
ii. Detention or service of sentence of spouse for a criminal conviction
for at least 1 yr;
iii. Physical and/or mental incapacity of spouse
iv. Legal separation or de facto separation from spouse for at least 1
year **as long as he/she is entrusted with the custody of the children;
v. Nullity or annulment of marriage as decreed by a court **or by a
church as long as he/she is entrusted with the custody of the children;
vi. **Abandonment of spouse for at least 1 yr;241
c. UNMARRIED mother/father who has preferred to keep and rear his or
her child/children instead of:
i. having others care for them or
ii. give them up to a welfare institution;
d. **Any other person who SOLELY provides:
i. parental care and
ii. support to a child or children.
e. Any **family member who assumes the responsibility of head of
family as a result of the:
i. death,
ii. abandonment,
iii. disappearance or
iv. **prolonged absence of the parents or solo parent.
————————————————
C5. Special Leave for Women Workers [Magna Carta for Women]
1. A WOMAN EE having rendered *****CONTINUOUS AGGREGATE
employment service of at least 6 months for the last 12 months shall be entitled
241Q: Of the four definitions below, which one does NOT fit the definition of “solo parent” under
the Solo Parents Welfare Act? (2011 BAR QUESTION) (A) Solo parenthood while the other parent
serves sentence for at least one year. (B) A woman who gives birth as a result of rape.(C) Solo
parenthood due to death of spouse. (D) Solo parenthood where the spouse left for abroad and
fails to give support for more than a year.
to a special leave benefit of 2 months242 with full pay based on her gross monthly
compensation following surgery caused by GYNAECOLOGICAL
DISORDERS243 (Sec. 18, R.A. 9710, Magna Carta of Women).
2. Under RA 9262, A FEMALE EE who is a victim of violence (physical, sexual,
or psychological) is entitled to a **paid leave of 10244 days in ADDITION to
other paid leaves (R.A. 9262, Anti-VAWC Act). This is known as the
**BATTERED WOMAN LEAVE.
———————————————————————————————
D. Special Groups of Employees

D1. Women
D1.a. Provisions against discrimination
1. STATE POLICY on non-discrimination against women:
a. The State condemns discrimination against women in all its forms
b. and pursues by all appropriate means and without delay the policy of
eliminating discrimination against women in keeping with the Convention on
the Elimination of All Forms of Discrimination Against Women (CEDAW) and
242 Q: Because of the stress in caring for her four (4) growing children, Tammy suffered a miscarriage
late in her pregnancy and had to undergo an operation. In the course of the operation, her obstetrician
further discovered a suspicious- looking mass that required the subsequent removal of her uterus
(hysterectomy). After surgery, her physician advised Tammy to be on full bed rest for six (6)
weeks. Meanwhile, the biopsy of the sample tissue taken from the mass in Tammy's uterus showed a
beginning malignancy that required an immediate series of chemotherapy once a week for four (4)
weeks. (A) What benefits can Tammy claim under existing social legislation? (2013 Bar Questions)
SUGGESTED ANSWER: Assuming she is employed, Tammy is entitled to a special leave benefit of
two months with full pay (Gynecological Leave) pursuant to RA 9710 or the Magna Carta of Women.
She can also claim Sickness Leave Benefit in accordance with the SSS Law.
243*NB LPS - GYNECOLOGICAL DISORDERS refers to disorders that would require surgical
procedures such as dilatation and curettage and those involving female reproductive organs such as
vagina, cervix, uterus, fallopian tubes, ovaries, breast, adnexa and pelvic floor. Gynecological surgeries
shall also include hysterectomy, ovariectomy, and mastectomy (DO no. 112-11, Sec. 1 (b), s. 2011)
244Q: Melissa, a coffee shop worker of 5 months, requested her employer for 5 days' leave with pay
to attend to the case that she filed against her husband for physical assault two weeks earlier.
May the employer deny her request for leave with pay? (2011 BAR) (A)Yes, the reason being purely
personal, approval depends on the employer’s discretion and is without pay. (B) No, as victim of
physical violence of her husband, she is entitled to five days paid leave to attend to her action
against him. (C) No, the employer must grant the request but the leave will be without pay. (D) Yes,
since she is not yet a permanent employee.
other international instruments consistent with Philippine law.245

c. The State shall accord women the rights, protection, and
opportunities available to every member of society (R.A. 9710 or the Magna Carta
of Women, Sec. 2).
d. The State shall take steps to review and, when necessary, amend and/or
repeal existing laws that are discriminatory to women within 3 years from the
effectivity of this Act (R.A. 9710, Sec. 12).
2. DISCRIMINATORY acts against women EE
a. Discrimination with respect to the TERMS AND CONDITIONs of
employment solely on account of sex
i. Discrimination in PAY: Payment of a lesser compensation
including wage, salary or other forms of remuneration and fringe benefits, to a
female EE as against a male EE;
ii. Discrimination in employment opportunity: favoring a male EE
over a female EE with respect to promotion, assignment, transfer, training opportunities, study
and scholarship grants SOLELY in account or their sexes;
iii. Discrimination in HIRING:246 favoring a male applicant with
respect to hiring where the particular job can equally be handled by a woman;
iv. Discrimination in DISMISSAL – favoring a male EE over a female
245 Bar 2003: Can an individual, the sole proprietor of a business enterprise, be said to have violated the
Anti-Sexual Harassment Act of 1995 if he clearly discriminates against women in the adoption of
policy standards for employment and promotions in the enterprise? NO. When an ER discriminates
against women in the adoption of policy standards for employment and promotion in his enterprise, he
is **not guilty of Sexual Harassment. Instead, the ER is guilty of discrimination against women
EEs which is declared to be UNLAWFUL by the LC. For an ER to commit Sexual Harassment, he—
as a person of authority, influence or moral ascendancy—should have demanded, requested or
otherwise required a sexual favor from his EE whether the demand, request or requirement for submission is
accepted by the object of said act.
246 Q: At any given time, approximately ninety percent (90%) of the production workforce of a
semi-conductor company are females. Seventy-five percent (75%) of the female workers are
married and of child-bearing years. It is imperative that the Company must operate with a minimum
number of absences to meet strict delivery schedules. In view of the very high number of lost working
hours due to absences for family reasons and maternity leaves, the Company adopted a policy that it
will employ married women as production workers only if they are at least thirty-five (35) years of age.
Is the policy violative of any law? [5%] (1998 Bar Question) SUGGESTED ANSWER: Yes, it is
violative of Article 140 of the Labor Code which provides that no employer shall discriminate
against any person in respect to terms and conditions of employment on account of his age.
ANOTHER SUGGESTED ANSWER: The policy of the company to employ married women as
production workers only if they are at least thirty-five (35) years of age is valid. There is no prohibition
in the Labor Code for such an employer to exercise this management function. There is a justifiable
basis for the company policy, i.e., the need for continuity of production with minimum absences
because of the peculiar business conditions and needs of the company, i.e., very tight delivery
schedules. The company respects the institution of marriage as shown by the fact that it employs
married women. There is no violation of the stipulation against marriage (Art. 136), and prohibited acts
(Art. 137) of the Labor Code. STILL ANOTHER SUGGESTED ANSWER: It may be noted that the
policy is directed only to married women. This may violate the spirit of Article 136 of the Labor Code
which provides that it shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman shall not get married.
EE with respect to dismissal of personnel or the application of the last in/first

out principle or other retrenchment policy of the ER. (POQUIZ)
b. STIPULATING, whether as a condition for employment or continuation of
employment:
i. That a woman EE shall not get married, or
ii. That upon marriage, such woman EE shall be deemed resigned
or separated (LC, Art. 136).
c. Dismissing, discriminating or otherwise PREJUDICE a woman EE by
reason of her being married (LC, Art. 136).
3. NB: Discrimination in any form from pre-employment to post employment,
including hiring, promotion or assignment, based on the actual, perceived or
suspected HIV status of an individual is UNLAWFUL (Philippine AIDS
Prevention and Control Act of 1998, R.A. 8504).
STANDARD OF REASONABLE TEST

1. Under the standard reasonable test which is **parallel to the concept of a
BONA-FIDE OCCUPATIONAL QUALIFICATION TEST (BFOQT) in
American jurisdictions, the **ER has the burden of proof to prove the
existence of a REASONABLE BUSINESS NECESSITY that would justify an
employment policy (Star Paper Corp. v. Simbol, 12 April 2006).
2. May a woman worker be dismissed on the ground of dishonesty for having
written ‘’single” on the space for civil status on the application sheet, contrary
to the fact that she was married? Art. 136 of the LC, **explicitly prohibits
discrimination merely by reason of marriage of a female EE. The policy of not
accepting or disqualifying from work any woman worker who contracts
marriage is afoul of the right against discrimination provided to all women
workers by our labor laws and by our Constitution (PT&T Co. v. NLRC, 23 May
1997).
D1.b. Stipulation against marriage [Art 136]

1. [] Art. 136. Stipulation against marriage. It shall be unlawful for an employer to
require as a condition of employment or continuation of employment
a. that a woman employee shall not get married,247

b. or to stipulate expressly or tacitly that upon getting married, a woman
employee shall be deemed resigned or separated,
c. or to actually dismiss, discharge, discriminate or otherwise
247 Q: Dinna Ignacio was hired by Stag Karaoke Club as a guest relations officer. Dinna was also
required to sing and dance with guests of the club. In Dinna Ignacio’s employment contract, which she
signed, the following stipulations appeared: Compensation: Tips and commissions coming from
guests shall be subjected to 15% deduction; Hours of work: 5 P.M. up to 2 AM. daily Including
Sundays and Holidays. Other conditions: Must maintain a body weight of 95 lbs., remain single.
Marriage or pregnancy will be considered as a valid ground for a termination of employment. A
year later. Dinna Ignacio requested to go on leave because she would be getting married to one of the
club's regular guests. The management of the club dismissed her. Dinna filed a complaint for illegal
dismissal, night shift differential pay, backwages, overtime pay and holiday pay. Discuss the merits of
Dinna’s complaint. SUGGESTED ANSWER: The first issue to be resolved is: Is Dinna Ignacio an
employee of the Star Karaoke Club? Yes, she is an employee per the provision of the Labor Code that
states: "Any woman who is permitted or suffered to work, with or without compensation, in any night
club, cocktail lounge, massage clinic, bar or similar establishment, under the effective control
or supervision of the employer for a substantial period shall be considered an employee of such
establishment for purposes of labor and social legislation"(Art. 138). In Dinna’s conditions of
employment have all the aforesaid characteristics. She has been illegally dismissed. The Labor Code
expressly provides, that "It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee shall not get married, or
to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage." (Art. 136). Because of her illegal dismissal, she is
entitled to backwages from the time her compensation was withheld from her to the time of her
actual reinstatement. Dinna is not entitled to night differential pay, overtime pay and holiday pay
because she belongs to one of those classes of employees who are not covered by the provision
of the Labor Code providing for these benefits. She is a worker paid by results, since her compensation
is determined by the tips and commission that she receives from her guests.
prejudice248 a woman employee merely by reason of her marriage.

2. What is a NO-SPOUSE EMPLOYMENT POLICY: It is a policy banning
spouses from working in the same company. It may or may not violate
provisions of the LC:
a. GR: It may NOT FACIALLY VIOLATE Art. 136 of the LC but it
creates a DISPROPORTIONATE EFFECT and the **only way it could pass judicial
scrutiny is by showing that it is REASONABLE despite the discriminatory
and disproportionate effect.
b. XPN: BONA FIDE OCCUPATIONAL QUALIFICATION RULE
(BFOQR): There **must be a finding of any BFOQ TO JUSTIFY an ER's no
spouse employment rule. There must be a **COMPELLING BUSINESS
NECESSITY for which NO ALTERNATIVE EXISTS other than the
discriminating practice. To justify a BFOQ, the ER must prove two factors:
i. That the employment qualification is REASONABLY RELATED to
the essential operation of the job involved; and
248 Q: Fil-Aire Aviation Company (FIL-AIRE) is a new airline company recruiting flight attendants for
its domestic flights. It requires that the applicant be single, not more than 24 years old attractive,
and familiar with three (3) major Visayan dialects, viz: Ilongo, Cebuano and Waray. Lourdes. 23 years
old was accepted as she possessed all the qualifications. After passing the probationary period.
Lourdes disclosed that she got married when she was 18 years old but the marriage was already
in the process of being annulled on the ground that her husband was afflicted with a sexually
transmissible disease at the time of the celebration of their marriage. As a result of this revelation.
Lourdes was not hired as a regular flight attendant. Consequently, she filed a complaint against
FIL- AIRE alleging that the pre-employment qualifications violate relevant provisions of the Labor
Code and are against public policy. Is the contention of Lourdes tenable? Discuss fully. (1995 Bar
Question) SUGGESTED ANSWER: The contention of Lourdes is tenable. When she was not hired
as a regular flight attendant by FIL-AIRE because she disclosed that she got married when
she was 18 years old, the airline company violated the provision of the Labor Code which states: “It
shall be unlawful for an employer to require as a condition of employment or continuation of
employment that a woman employee shall not get married, or to stipulate expressly or tacitly that
upon getting married a woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.”
[] Mam-manu Aviation Company (Mam-manu) is a new airline company recruiting flight
attendants for its domestic flights. It requires that the applicant be single, not more than 24 years old,
attractive, and familiar with three (3) dialects, viz: llonggo, Cebuano and Kapampangan. lngga, 23 years
old, was accepted as she possesses all the qualifications. After passing the probationary period,
lngga disclosed that she got married when she was 18 years old but the marriage was already in
the process of being annulled on the ground that her husband was afflicted with a sexually
transmissible disease at the time of the celebration of their marriage. As a result of this revelation,
lngga was not hired as a regular flight attendant. Consequently, she filed a complaint against Mam-manu
alleging that the pre-employment qualifications violate relevant provisions of the Labor Code and are
against public policy. Is the contention of lngga tenable? Why? (5%) (2012 BAR) Suggested Answer:
Yes. Man-manu’s pre-employment requirement cannot be justified as a “bona fide occupational
qualification,” where the particular requirements of the job would justify it. The said
requirement is not valid because it does not reflect an inherent quality that is reasonably necessary
for a satisfactory job performance. [PT&T vs. NRLC, G.R. No. 118978, May 23, 1997 citing 45A
Am. Jur. 2d, Job Discrimination, Sec. 506, p.468) Another Suggested Answer: Yes, Ingga’s contention is
tenable considering Art. 136 of the Labor Code which prohibits discrimination against married women.
ii. That there is a FACTUAL BASIS for believing that all or

substantially all persons meeting the qualification would be unable to properly
perform the duties of the job (Star Paper v. Simbol, 12 April 2006).
c. IMPORTANCE of the BFOQR**
i. To ensure that the EE can effectively perform his work
ii. So that the no-spouse employment rule will NOT IMPOSE ANY
DANGER TO BUSINESS.249
D1.c. Prohibited acts

1. Prohibited acts under Art.137 of the LC- It shall be unlawful for any ER to:
a. Deny any woman EE benefits provided by law.
b. Discharge any woman for the purpose of preventing her from
enjoying any of the benefits provided by law.
c. Discharge such woman on account of her pregnancy, or while on leave or
in confinement due to her pregnancy.250
d. Discharge or refuse the admission of such woman upon returning to
249 [] Q: Glaxo, a company which has a policy against employees having relationships with the
employees of its competitors, employed Tecson as a medical representative. Tecson married
Bettsy, a Branch coordinator in one of Glaxo’s competitors. Tecson was then transferred to another
area but he did not accept such transfer. Is the policy of Glaxo valid and reasonable so as to constitute the
act of Tecson as willful disobedience? YES. The **prohibition against personal or marital
relationships with EEs of competitor companies upon Glaxo’s EEs is REASONABLE under the
circumstances because relationships of that nature might COMPROMISE THE INTEREST of
the company. Glaxo does not impose an absolute prohibition against relationships between its EEs
and those of competitor companies. Its EEs are free to cultivate relationships with and marry
persons of their own choosing. What the company merely seeks to avoid is a **conflict of interest between
the EE and the company that may arise out of such relationships. Furthermore, the prohibition **forms
part of the employment contract and Tecson was aware of such restrictions when he entered into
a relationship with Bettsy (Duncan Assoc. of Detailman-PTGWO v. GlaxoWellcome Phil. Inc., 17 September
2004).
250a) An exclusive school for girls, run by a religious order, has a policy of not employing unwed
mothers, women with live-in partners, and lesbians. Is the policy violative of any provision of the
Labor Code on employment of women? (3%); b) The same school dismissed two female faculty
members on account of pregnancy out of wedlock. Did the school violate any provision of the
Labor Code on employment of women? (3%) SUGGESTED ANSWER: a) No, the policy does not
violate the Labor Code. The practice is a valid exercise of management function. Considering the
nature and reason for existence of the school, It may adopt such policy as will advance its
laudable objectives. In fact, the policy accords with the constitutional precept of inculcating
ethical and moral values in schools. The school policy does not discriminate against women
solely on account of sex (Art. 135, Labor Code) nor are the acts prohibited under Art. 137 of the
Labor Code. b) The school violated Art. 137 (2) of the Labor Code which states that: “It shall be
unlawful for any employer to discharge such woman on account of pregnancy". The pregnancy
here could obviously have resulted from love and such only lends substance to the saying that “the
heart has reasons of its own which reason does not know", a matter that cannot “be so casually
equated with immorality". [Chua-Qua v. Clave, 189 SCRA 117(1990)] ALTERNATIVE ANSWER:
No, because to tolerate pregnancy out of wedlock will be a blatant contradiction of the school’s
laudable mission which, as already stated, accords with high constitutional precepts. This answer does
not contradict the ruling in Chua- Qua where the teacher merely fell in love with a bachelor student and
the teacher, also single, did not get pregnant out of wedlock.
her work for fear that she may again be pregnant.

*insert others from IRR
2. Persons COVERED under the classification of certain women workers—Any
women who is permitted or suffered to work:*****
a. With or without compensation
b. In any night club, cocktail lounge, massage clinic, bar or similar
establishment
c. Under the effective control or supervision of the ER for a substantial
period of time
d. Shall be considered as an EE251 of such establishment for purposes of
labor and social legislation.
3. NB: Discrimination on the basis of age is also prohibited.252
D1.d. Anti-Sexual Harassment Act [R.A. No. 7877]

1. State policy in enacting the Anti-Sexual Harassment Law—The State shall:
a. Value the dignity of every individual
b. Enhance the development of its human resources
c. Guarantee full respect for human rights, and
d. Uphold the dignity of workers, EEs, applicants for employment,
students or those undergoing training, instruction or education (R.A. 7877, Sec. 2).
2. Persons who may be held liable for sexual harassment—In a work, education
251Juicy Bar and Night Club allowed by tolerance fifty (50) Guest Relations Officers (GROs) to
work without compensation in its establishment under the direct supervision of its Manager from
8:00 P.M. To 4:00 A.M. everyday, including Sundays and holidays. The GROs, however, were free to
ply their trade elsewhere at anytime, but once they enter the premises of the night club, they
were required to stay up to closing time. The GROs earned their keep exclusively from
commissions for food and drinks, and tips from generous customers. In time, the GROs formed the
Solar Ugnayan ng mga Kababaihang lnaapi (SUKI), a labor union duly registered with DOLE.
Subsequently, SUKI filed a petition for Certification Election in order to be recognized as the
exclusive bargaining agent of its members. Juicy Bar and Night Club opposed the petition for
Certification Election on the singular ground of absence of employer-employee relationship
between the GROs on one hand and the night club on the other hand. May the GROs form SUKI as a
labor organization for purposes of collective bargaining? Explain briefly. (5%) (2012 BAR)
Suggested Answer: Yes. The GROs worked under the direct supervision of the Nite Club Manager
for a substantial period of time. Hence, under Art. 138, with or without compensation, the GROs
are to be deemed employees. As such, they are entitled to all the rights and benefits granted to
employees/workers under the Constitution and other pieces of labor legislation including the right to
form labor organizations for purposes of collective bargaining. [Const., Art. XIII, Sec. 3; Labor
Code, Art. 243).
252 [] Bar 1998: At any given time, approximately 90% of the production workforce of a
semiconductor company are females. 75% of the female workers are married and of child-bearing
years. It is imperative that the Company must operate with a minimum number of absences to meet
strict delivery schedules. In view of the very high number of lost working hours due to absences for
family reasons and maternity leaves, the company adopted a policy that it will employ married
women as production workers only if they are at least 35 years old. Is the policy in violation of
any law? YES. It violates Art. 140 of the LC which provides that **no ER shall discriminate against
any person with respect to the terms and conditions of employment on account of his AGE.
or training-related environment Sexual Harassment may be committed by an:

a. ER
b. Manager
c. Supervisor
d. Agent of the ER
e. Teacher, instructor, professor
f. Coach, trainer, or
g. *****Any other person who, having authority, influence or moral
ASCENDANCY over another in a work or training or education environment:253
i. Demands
ii. Requests or
iii. Requires
*any SEXUAL FAVOR from the other, regardless of whether the
demand, request or requirement for submission is accepted by the object of R.A.
7877 (R.A. 7877, Sec. 3), even if the two persons are of the same sex.254
3. ACTS of sexual harassment
a. Generally, sexual harassment is committed when a person demands,
requests, or otherwise requires any sexual favor from another, regardless of
whether the demand, request or requirement for submission is accepted by the
253Q: Can an individual, the sole proprietor of a business enterprise, be said to have violated the Anti-
Sexual Harassment Act of 1995 if he clearly discriminates against women in the adoption of
policy standards for employment and promotions in the enterprise? Explain. (2005 Bar Question)
SUGGESTED ANSWER: When an employer discriminates against women in the adoption of policy
standards for employment and promotion in his enterprise, he is not guilty of sexual harassment.
Instead, the employer is guilty of discrimination against women employees which is declared to
be unlawful by the Labor Code. *****For an employer to commit sexual harassment, he - as a
person of authority, influence or moral ascendancy - should have demanded, requested or
otherwise required a sexual favor from his employee whether the demand, request or
requirement for submission is accepted by the object of said act. In the question, no such act was
committed by the sole proprietor.
254[] Bar 2000: Pedrito Masculado, a college graduate from the province, tried his luck in the city and
landed a job as a utility/maintenance man at the warehouse of a big shopping mall. After working as a
casual employee for 6 months, he signed a contract for probationary employment for 6 months. Being
well-built and physically attractive, his supervisor, Mr. Hercules Barak, took special interest to
befriend him. When his probationary period was about to expire, he was surprised when one afternoon
after working hours, Mr. Barak followed him to the men’s comfort room. After seeing that no one else
was around, Mr. Barak placed his arm over Pedrito’s shoulder and softly said: “You have great potential
to become a regular EE and I think I can give you a favorable recommendation. Can you come over to
my condo unit on Saturday evening so we can have a little drink? I’m alone, and I’m sure you want to
stay longer with the company.” Is Mr. Barak liable for Sexual Harassment committed in a work-related
or employment environment? YES. The elements of Sexual Harassment are all present. The act of Mr.
Barak was **committed in a workplace. Mr. Barak, as supervisor of Pedrito Masculado, has
authority, influence and moral ascendancy over Masculado. Given the specific circumstances
mentioned in the question like Mr. Barak following Masculado to the comfort room, etc. Mr. Barak was
requesting a sexual favor from Masculado for a favorable recommendation regarding the latter's
employment. It is **not impossible for a male, who is a homosexual, to ask for a sexual favor from
another male.
latter.
b. The definition of sexual harassment does **not require a categorical
demand or request for sexual favor
c. While the provision states that there must be a “demand, request or
requirement of a sexual favor.” It is *****not necessary that the demand, request
or requirement of a sexual favor be articulated in a categorical manner.255 It
may be discerned, with equal certitude, from the acts of the offender.
d. Likewise, it is *****not essential that the demand, request or
requirement be made as a condition256 for continued employment or for
promotion to a higher position. It is enough that the respondent’s acts result in
255Q: A Personnel Manager, while interviewing an attractive female applicant for employment, stared
directly at her for prolonged periods, albeit in a friendly manner.’ After the interview, the manager
accompanied the applicant to the door, shook her hand and patted her on the shoulder. He also
asked the applicant if he could invite her for dinner and dancing at some future time. Did the
Personnel Manager, by the above acts, commit sexual harassment? Reason. (3%) (2000 Bar Question)
SUGGESTED ANSWER: Yes, because the Personnel Manager, a man, is in a position to grant or
not to grant a favor (a job) to the applicant. Under the circumstances, inviting the applicant for
dinner or dancing creates a situation hostile or unfriendly to the applicant’s chances for a job if
she turns down the invitation. (Sec. 3 (a) (3), R.A. No. 7877, Anti-Sexual Harassment Act].
ALTERNATIVE ANSWER: There is no sexual harassment because there was no solicitation of sexual
favor in exchange of employment. Neither was there any intimidating, hostile or offensive environment
for the applicant.
256Q: Atty. Renan, a CPA-lawyer and Managing Partner of an accounting firm, conducted the
orientation seminar for newly-hired employees of the firm, among them, Miss Maganda. After the
seminar, Renan requested Maganda to stay, purportedly to discuss some work assignment. Left alone
in the training room, Renan asked Maganda to go out with him for dinner and ballroom
dancing. Thereafter, he persuaded her to accompany him to the mountain highway in Antipolo for
sight-seeing. During all these, Renan told Maganda that most, if not all, of the lady supervisors in the
firm are where they are now, in very productive and lucrative posts, because of his favorable
endorsement. [a] Did Renan commit acts of sexual harassment in a work-related or employment
environment? Reasons. (3%) SUGGESTED ANSWER: Atty. Renan is guilty of sexual harassment.
This conclusion is predicated upon the following consideration: 1. Atty. Renan has authority,
influence or moral ascendancy over Miss Maganda; 2. While the law calls for a demand, request or
requirement of a sexual favor, it is not necessary that the demand, request or requirement of a
sexual favor be articulated in a categorical oral or written statement. It may be discerned, with equal
certitude from the acts of the offender. (Domingo vs. Rayala, 546 SCRA 90 [2008]); 3. The acts of
Atty. Renan towards Miss Maganda resound with deafening clarity the unspoken request for a sexual
favor, regardless of whether it is accepted or not by Miss Maganda; 4. In sexual harassment, it is not
essential that the demand, request or requirement be made as a condition for continued
employment or promotion to a higher position. It is enough that Atty. Renan’s act result in creating
an intimidating, hostile or offensive environment for Miss Maganda.
creating an INTIMIDATING, HOSTILE OR OFFENSIVE257

environment for the employee (Domingo v. Rayala, 18 February 2008).
4. PLACES where sexual harassment are committed—Specifically:
a. In a WORK-RELATED258 or employment environment:
i. The sexual favor is made as a condition in the hiring or in the
257 [] Bar 2000: A Personnel Manager, while interviewing an attractive female applicant for
employment, stared directly at her for prolonged periods, albeit in a friendly manner. After the
interview, the manager accompanied the applicant to the door, shook her hand and patted her on the
shoulder. He also asked the applicant if he could invite her for dinner and dancing at some future
time. Did the Personnel Manager, by the above acts, commit Sexual Harassment? YES. The Personnel
Manager, is **in a position to grant or not to grant a favor (a job) to the applicant. Under the
circumstances, **inviting the applicant for dinner or dancing creates a situation hostile or
unfriendly to the applicant's CHANCES for a job if she turns down the invitation [R.A. No. 7877,
Anti-Sexual Harassment Act, Sec. 3 (a) (3)].
[] In the course of an interview, another female applicant inquired from the same Personnel
Manager if she had the physical attributes required for the position she applied for. The Personnel
Manager replied: "You will be more attractive if you will wear micro-mini dresses without the
undergarments that ladies normally wear." Did the Personnel Manager, by the above reply, commit an
act of sexual harassment? YES. The **remarks would result in an offensive or hostile environment
for the EE. Moreover, the remarks did not give due regard to the applicant’s feelings and it is a
CHAUVINISTIC DISDAIN of her honor, justifying the finding of Sexual Harassment (Villarama v.
NLRC, 2 September 1994). NB: This was the SUGGESTED ANSWER: No, the Personnel Managers
reply to the applicant's question whether she qualifies for the position she is applying for does not
constitute sexual harassment. The Personnel Manager did not ask for or insinuate a request for a sexual
favor in return for a favorable action on her application for a job. But the Manager’s statement may be
offensive if attire or physical look is not a criterion for the job being applied for.
258As a condition for her employment. Josephine signed an agreement with her employer that she
will not get married, otherwise, she will be considered resigned or separated from the service.
Josephine got married. She asked Owen, the personnel manager, if the company can reconsider the
agreement. He told Josephine he can do something about it, insinuating some sexual favors. She
complained to higher authorities but to no avail. She hires you as her counsel. What action or actions
will you take? Explain. 5%. (2006 Bar Question) SUGGESTED ANSWER: As counsel for Josephine, I
will file a complaint for work-related sexual harassment which, as in the case at bar, occurs when a
person who has authority, influence or moral ascendancy over another demands, requests or otherwise
requires any sexual favor from the latter as a condition for, inter alia, the continued employment of said
individual (Sec. 3, RA 7877). I will likewise file a complaint for illegal dismissal citing Art. 136 of the
Labor Code which provides that it is unlawful for an employer to require as a condition of
continued employment or continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be
deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her marriage. ANOTHER SUGGESTED ANSWER: I shall
advise my client to file a complaint with the grievance machinery (if the establishment is organized)
or with the company’s Committee on Decorum and Investigation (organized or unorganized) tasked to
investigate sexual harassment cases. The personnel manager Owen can definitely be held
administratively liable for his action. I shall also advise my client to file a criminal case for sexual
harassment pursuant to Republic Act No. 7877. ANOTHER SUGGESTED ANSWER: I will not
take any action at all because “insinuating some sexual favor" is not an act of sexual harassment which
require “demands, requests, or otherwise require any sexual favor from the other. (Sec. 3, R.A. No. 7877).
employment, re-employment or continued employment259 of said individual, or

in granting said individual favorable compensation, terms, conditions, promotions,
or privileges; or the refusal to grant the sexual favor results in limiting,
segregating or classifying the EE which in a way would discriminate, deprive
or diminish employment opportunities or otherwise adversely affect said EE
(**QUID PRO QUO sexual harassment);
ii. The above acts would impair the EEs’ rights or privileges under
existing labor laws; or
iii. The above acts would result in an INTIMIDATING, HOSTILE, OR
OFFENSIVE ENVIRONMENt260 for the EE.
b. In an education or training environment sexual harassment is employed:
i. Against one who is under the care, custody or supervision of the
offender;
ii. Against one whose education, training, apprenticeship or tutorship is
entrusted to the offender;
iii. When sexual favor is made a condition to the giving of a
passing grade, or the granting of honors and scholarships, or the payment of a
259Q: In a work-related environment, sexual harassment is committed when (2011 BAR) (A )the
offender has authority, influence, or moral ascendancy over his subordinate victim. (B) the victim’s
continued employment is conditioned on sexual favor from her. (C) the female victim grants the
demand for sexual favor against her will. (D)the victim is not hired because she turned down the
demand for sexual favor.
260 Q: Carissa. a comely bank teller, was due for her performance evaluation which is conducted every
six months. A rating of "outstanding" is rewarded with a merit increase. She was given a "below
average" rating in the last two periods. According to the bank's personnel policy, a, third rating of
"below average" will result in termination. Mr. Perry Winkle called Carissa into his office a few days
before submitting her performance ratings. He entitled her to spend the night with him in his rest
house. She politely declined. Undaunted, Mr. Winkle renewed his invitation, and Carissa again
declined. He then warned her to "watch out" because she might regret, it later on. A few days
later, Carissa found that her third and last rating was again "below average." Carissa then filed a
complaint for sexual harassment against Mr. Winkle with the Department of Labor and Employment,
in his counter-affidavit, he claimed that he was enamored with Carissa. He denied having demanded,
much less received any sexual favors from her in consideration of giving her an "outstanding' rating.
He also alleged that the complaint was premature because Carissa failed to refer the matter to the
Committee on Decorum and Discipline for investigation and resolution before the case against him
was filed. In her reply affidavit, Carissa claimed that there was no need for a prior referral to the
Committee on Decorum and Discipline of her complaint. Resolve the case with reasons. (5%) (2005
Bar Question) SUGGESTED ANSWER: I will hold Mr. Perry Winkle guilty of sexual harassment.
This resolution is predicated mainly upon the following considerations: 1) Mr. Perry Winkle exercises
authority, Influence or moral ascendancy over Carissa; 2) Mr. Winkle's insistence in inviting Carissa
"to spend the night with him in his rest house" is pregnant with sexual meaning as to imply the
request or demand for a sexual favor; 3) My. Winkle’s warning of "watch out" clearly manifests that
the refusal of such sexual favor would jeopardize Carissa's continued employment; and 4) Mr. Winkle's
invitation for such sexual favor will clearly result in an intimidating, hostile, or otherwise
offensive working environment for Carissa, Carissa is correct in stating that ***there was no need
for a prior referral of her complaint to the Committee on Decorum and Discipline, because
nothing in the law shall preclude the victim of sexual harassment from instituting a separate
and independent action for damages and other affirmative relief (Section 6, R.A. No. 7877).
stipend, allowance or other benefits, privileges, or considerations; or

iv. When sexual advances result in an intimidating, hostile or
offensive environment for the student, trainee or apprentice.
5. DUTIES of the ER or head of office in a work-related, education or training
environment
a. Prevent or deter the commission of acts of Sexual Harassment, and
b. Provide the procedures for the resolution, settlement or prosecution of
acts of Sexual Harassment.
*Towards this end, the ER or head of office shall
a. Promulgate appropriate rules and regulations in consultation with and
jointly approved by the EEs or students or trainees, through their duly designated
representatives, prescribing the PROCEDURE for the investigation or Sexual
Harassment cases and the administrative sanctions therefore (Sec. 4, R.A. 7877).
**NB: Administrative sanctions shall not be a bar to prosecution in the
proper courts for unlawful acts of Sexual Harassment.
*The said rules and regulations issued shall include, among others,
guidelines on proper DECORUM in the workplace and educational or training
institutions.
a. Create a committee on decorum and investigation of cases on Sexual
Harassment.
b. The ER or head of office, education or training institution shall
disseminate or post a copy of this R.A. 7877 for the information of all
concerned
6. LIABILITY of the ER, head of office, educational or training institution—ER
shall be **SOLIDARILY LIABLE for damages arising from the acts of Sexual
Harassment committed in the employment, education or training
environment provided:
a. The ER or head of office, educational or training institution is
INFORMED of such acts by the offended party; and
b. No immediate action is taken thereon (R.A. 7877, Sec. 5).
7. **An independent action for damages may be filed: Nothing under R.A.
7877 shall preclude the victim of work, education or training-related Sexual
Harassment from instituting a separate and independent action for damages
and other affirmative relief (Sec. 6).
8. THREE-FOLD LIABILITY RULE261 in sexual harassment cases: An act of

Sexual Harassment may give rise to **CIVIL, CRIMINAL AND ADMINISTRATIVE
liability on the part of the offender, each proceeding independently of the others.
9. Prescription of action: The civil, criminal and administrative action shall
**prescribe in 3 years.
————————————————
261 This is not about sexual harassment but it’s about the three-fold liability rule: Rico has a temper
and, in his work as Division Manager of Mata tag Insurance, frequently loses his temper with his staff.
One day, he physically assaults his staff member by slapping him. The staff member sues him for
physical injuries. Matatag Insurance decides to terminate Rico, after notice and hearing, on the
ground of loss of trust and confidence. Rico claims that he is entitled to the presumption of
innocence because he has not yet been convicted. Comment on Matatag's action in relation to
Rico's argument. (2015 Bar Question) SUGGESTED ANSWER: Matatag Insurance does not have
to await the result of the criminal case before exercising its prerogative to dismiss.
*****Dismissal is not affected by a criminal case. Under the Three-fold Liability Rule, a single
act may result in three liabilities, two of which are criminal and administrative. To establish them,
the evidence of the crime must amount to proof beyond reasonable doubt; whereas, the evidence
of the ground for dismissal is substantial evidence only. In this regard, the company has some basis
already for withholding the trust it has reposed on its manager. Hence, Rico’s conviction need not
precede the employee’s dismissal.
D2. Minors [Labor Code and R.A. No. 7678, R.A. No. 9231]
1. Rules on employment of minor workers262
*GR: a. No person under 18263 years of age will be allowed to be employed
in an undertaking which is HAZARDOUS OR DELETERIOUS in nature; b.
No ER shall discriminate against any person in respect to terms and conditions
of employment on account of his age.
262 Q: Discuss the statutory restrictions on the employment of minors? (2007 Bar Question)
SUGGESTED ANSWER: Article 140 of the Labor Code provides that employers shall not
discriminate against any person in respect to terms and conditions of employment on account of his
age. The employer is duty-bound to submit a report to DOLE of all children under his employ,
with a separate report on children found to be handicapped after a conduct of medical examination.
Moreover, an employer in any commercial, industrial, or agricultural establishment or enterprise is
required to keep a register of all children under his employ, indicating therein their respective dates of
birth; and a separate file on written consent of their respective parents/guardians, another file for their
educational and medical certificates, and a separate file for special work permits issued by Secretary of
DOLE. For children employed as domestic, the head of the family shall give the domestic an
opportunity to complete at least elementary education. (Arts. 110, 108, and 109, PD 603 of the Revised
Penal Code).
Art. 272 provides that no person shall retain a minor in service against his will, in
payment of a debt incurred by an ascendant, guardian or person entrusted with the custody of the
said minor. Art. 278 enumerates various acts of exploitations of minors prohibited under the law, to
wit: 1. Any person who shall cause any boy or girl under 16 years of age to perform any dangerous
feat of balancing physical strength or contortion. 2. Any person who, being an acrobat, gymnast,
rope-walker, diver, wild animal tamer or circus manager or engaged in a similar calling, shall
employ in exhibitions of these kinds of children under 16 years of age who are not his children or
descendants. 3. Any person engaged in any of the callings enumerated in the next paragraph who shall
employ any descendant of his under 12 years of age in such dangerous exhibitions. 4. Any ascendant,
guardian, teacher or person entrusted in any capacity with the care of a child under 16 years of age,
who shall deliver such child graciously to any person following any of the callings enumerated in par. 2
hereof, or to any habitual vagrant or beggar.  
PD 603: Child and Youth Welfare Code. Art. 107 of Child and Youth Welfare Code provides
that children below 16 years of age may only be employed to perform light work which is not
harmful to their safety, health or normal development, and which is not prejudicial to their studies.
RA 9231, amending RA 6710. RA 6710 included a provision allowing a minor below 15 years
of age to participate in public entertainment or information through cinema, theater, radio or
television, provided the contract is concluded by the child’s parents or legal guardian, with the express
agreement of the child, and approval of DOLE. The employer is charged to secure a work permit
for the child with DOLE prior to engaging the child to work. The employer is also required to: (a)
ensure the protection, health, safety, morals and normal development of the child; (b) institute
measures to prevent the child’s exploitation and discrimination taking into account the system
and level of remuneration, and the duration and arrangement of working time; and (c) formulate and
implement a continuing program for training and skills acquisition of the child.
The Department of Education is charged to promulgate a course design under its non-
formal program aimed at promoting the intellectual, moral and vocational efficiency to
working children who have not undergone or finished elementary or secondary education.
263[] Bar 2002: You were asked by a paint manufacturing company regarding the possible
employment as a mixer of a person aged 17, who shall be directly under the care of the section
supervisor. What advice would you give? The **paint manufacturing company CANNOT hire a
person who is aged 17. Art. 139(c) of the LC provides that a person below 18 years of age shall not
be allowed to work in an undertaking which is HAZARDOUS OR DELETERIOUS IN NATURE
as determined by the SOLE. Paint manufacturing has been classified by the SOLE as a hazardous
work.
*****XPN:
a. Below 15264 yrs. Old:265
i. The child works DIRECTLY under the sole RESPONSIBILITY of
his parents or legal guardian and where only members of the family are
employed, subject to the following conditions: a) Employment does not endanger
the child’s safety, health and morals; b) Employment does not impair the child’s
normal development; c) ER-parent or legal guardian provides the child with the
primary and/or secondary education prescribed by the Department of Education
ii. The child’s employment or participation in public
entertainment266 or information through cinema, theater, radio or television is
264Q: TRUE or FALSE.[b] Employment of children below fifteen (15) years of age in any public or
private establishment is absolutely prohibited. SUGGESTED ANSWER: False. Children below fifteen
(15) years of age (can be employed) “when he/she works directly under the sole responsibility of his/
her parents or guardian, and his employment does not in any way interfere with his schooling.”
265 [] Bar 2004: A spinster school teacher took pity on one of her pupils, a robust and precocious 12-
year old boy whose poor family could barely afford the cost of his schooling. She lives alone at her
house near the school after her housemaid left. In the afternoon, she lets the boy do various chores as
cleaning, fetching water and all kinds of errands after school hours. She gives him rice and Php
30.00 before the boy goes home at 7 every night. The school principal learned about it and charged her
with violating the law which prohibits the employment of children below 15 years of age. In her
defense, the teacher stated that the work performed by her pupil is not hazardous, and she invoked
the exception provided in the Department Order of DOLE for the engagement of persons in domestic and household
service. Is her defense tenable? NO. Under Art. 139 of the LC on “minimum employable age,” no child
below 15 years of age shall be employed **except when he works directly under the sole
responsibility of his parents or guardian, the provisions of the alleged department order of DOLE to the
contrary notwithstanding. A mere department order cannot prevail over the express prohibitory
provisions of the LC. NB: [Sec. 3, RA9231 allows a child below 15 years of age to work for not
more than 20 hours a week; provided, that the work shall not be more than four (4) hours at any
given day; provided. further, that he does not work between 8 o'clock in the evening and 6 o'clock
in the morning of the following day; and provided, finally, that the work is not hazardous or
deleterious to his health or morals. THIS IS A RECENT LAW APPROVED ON JULY 28, 2003]
ANOTHER SUGGESTED ANSWER: The defense is not tenable. Children below fifteen (15) years
of age shall not be employed except: 1. When a child works directly under the sole responsibility
of his/her parents or legal guardian and where only members of his/her family are employed...; or
2. Where a child’s employment or participation in public entertainment or information through
cinema, theater, radio, television or other forms of media is essential ... [ Section 12, RA 7610, as
amended by RA 9231].
266 [] Bar 2006: Determine whether the following minors should be prohibited from being hired
and from performing their respective duties indicated hereunder: b. An 11-year old boy who is an
accomplished singer and performer in different parts of the country: NO. Under Art. VIII Sec. 12(2)
of R.A. 7619 as amended by R.A. 7658, this constitutes an exception to the general prohibition against
the employment of children below 15 years of age, provided that the following requirements are
strictly complied with: i. The ER shall ensure the protection, health safety and morals of the child;
ii. The ER shall institute measures to prevent the child’s exploitation or discrimination taking into
account the system and level of remuneration, and the duration and arrangement of working time; and
iii. The ER shall formulate and implement, subject to the approval and supervision of competent
authorities, a continuing program for training and skill acquisition of the child; iv. Moreover, the
child must be directly under the sole responsibility of his parents or guardian and his employment
should not in any way interfere with his schooling.
essential provided: a) Employment contract is concluded by the child’s parents or legal

guardian, b) With the express agreement of the child concerned, if possible, and c)
The approval of DOLE, the following must be complied with: i) The
employment does not involve advertisement or commercials promoting alcoholic
beverages, intoxicating drinks, tobacco and its by-products or exhibiting
violence; ii) There is a written contract approved by DOLE; iii) The conditions
provided in the first instance are met;
b. Above 15267 but below 18: May be employed in any NON-HAZARDOUS268
work;269
c. Above 18: No prohibition.
2. Duty of the ER before engaging a minor into employment: The ER shall first
secure a WORK PERMIT from the DOLE which shall ensure observance of the
requirements (R.A. 7160, Sec. 12).
3. Rule in the issuance of work certificates/permits to children at least 15 but
below 18 years of age: The issuance of a DOLE Certificate to youth aged 15 to
below 18 years of age is **not required by law. No ER shall deny opportunity to
any such youth applying for employment merely on the basis of lack of work
permit or certificate of eligibility for employment. Any young person aged 15
to below 18 years of age may present copy of this DOLE advisory to any ER, job
provider, government authority, or his/her representative when seeking
employment or anytime during employment (DOLE Department Advisory No.
01-08).
4. Meaning of Non-hazardous work: It is any work or activity in which the EE is
not exposed to any risk which constitutes an imminent danger to his safety
267Q: Iya, 15 years old, signed up to model a clothing brand. She worked from 9am to 4 pm on
weekdays and 1pm to 6pm on Saturdays for two (2) weeks. She was issued a child working permit
under RA 9231. Which of the following statements is the most accurate? (2012 Bar Question): a.
Working permit for Iya’s employment is not required because the job is nit hazardous; b. Her work
period exceeds the required working hours for children aged 15 years old; c. TO require a 15-year old to
work without obtaining the requisites working permit is a form of child labor; d. Iya, who was
engaged in a work that is not child labor, is a working child. SUGGESTED ANSWER: d. Iya,
who was engaged in a work that is not child labor, is a working child [Sec. 12-A, 8 hours but not
beyond 40 hours].
268Q: In what situation is an employer permitted to employ a minor? (2012 Bar Question): a. 16-
year old child actor as a cast member in soap opera working 8 hours a day, 6 days a week; b. A 17-year
old in deep sea-fishing; c. A 17-year old construction worker; d. A 17-year old assistant cook in a
family restaurant. SUGGESTED ANSWER: d. A 17-year old assistant cook in a family restaurant
[Sec. 12, RA 7610, as amended by Sec. 2, RA 9231, Dec. 19, 2003]
269 [] Bar 2006: Determine whether the following minors should be prohibited from being hired
and from performing their respective duties indicated hereunder: c. A 15-year old girl working as a
library assistant in a girls' high school: NO, because the prohibition in the LC against employment of
persons below 18 years of age **merely pertains to employment in an undertaking which is
hazardous or deleterious in nature as identified in the guidelines issued by the SOLE. Working as a
library assistant is not one of undertakings identified to be hazardous under D.O. No 04 Series of
1999.
and health.
5. What are hazardous workplaces?
a. Nature of work exposes the workers to dangerous environmental
elements, contaminants or work conditions;
b. Workers are engaged in construction work, logging, fire-fighting,
mining,270 quarrying, blasting, stevedoring, dock work, deep-sea fishing,
and mechanized farming;
c. Workers are engaged in the manufacture or handling of explosives and
other pyrotechnic products;
d. Workers use or are exposed to heavy or power-driven tools.
6. Prohibitions on the employment of children in certain advertisements—
Employment of child models in all commercial advertisements promoting the
following shall be prohibited:
a. Alcoholic beverage271
b. Intoxicating drinks
c. Tobacco and its by products
d. Gambling272
e. Violence
f. Pornography
ACT AGAINST CHILD LABOR (R.A. 9231) AND CHILD ABUSE LAW
(R.A. 7610)
1. Child labor: Any work or economic activity performed by a child that subjects
him or her to any form of exploitation or is harmful to his or her health and
safety or physical, mental or psychosocial development.
2. Working child—Any child engaged as follows:
a. When the child is below 18 years of age in a work or economic activity
that is not child labor; or
270[] Bar 2006: Determine whether the following minors should be prohibited from being hired
and from performing their respective duties indicated hereunder: a. A 17-year old boy working as
miner at the Walwadi Mining Corporation: YES, because it constitutes hazardous work under D.O.
No. 04 Series of 1999. Art. 139(c) of LC expressly prohibits the employment of persons below 18 years
of age in an undertaking which is hazardous or deleterious in nature as determined by the SOLE.
and from performing their respective duties indicated hereunder: d. A 16-year old girl working as model
promoting alcoholic beverages: YES. R.A. 7610 categorically prohibits the employment of child
models in all commercials or advertisements promoting alcoholic beverages and intoxicating drinks,
among other things.
and from performing their respective duties indicated hereunder: d. A 17-year old boy working as a
dealer in a casino: YES, because Art. 140 of the LC prohibits the employment of persons below 18
years of age in an undertaking which is hazardous or deleterious in nature identified in the
guidelines issued by the SOLE. Working as a dealer in a casino is classified as hazardous under D.O.
No. 04 Series of 1999 as it exposes children to physical, psychological or sexual abuses.
b. When the child is below 15 years of age:

i. In work where he/she is directly under the responsibility of his/
her parents or legal guardian and where only members of the child’s family are
employed; or
ii. In public entertainment or information
3. Instances when the state can intervene in behalf of the child:
a. When the parent, guardian, teacher or person having care or custody of the child
fails or is unable to protect the child against abuse, exploitation and discrimination; or
b. When such acts are committed against the child by the said parent,
guardian, teacher or person having care and custody over the child.
4. Limitation on the hours of work of a working child—If the child is:
a. Below 15 years of age: **Not more than 20 hours a week and not more
than 4 hours a day; **Not allowed to work between 8:00 pm – 6:00 am
b. At least 15 years of age but below 18 years of age: shall not exceed 8
hours a day or 40 hours a week; **Not allowed to work between 10:00 pm – 6:00
am
5. WORST FORMS of labor:
a. All forms of SLAVERY (Anti-Trafficking of Persons Act of 2003) or
practices similar to slavery such as SALE AND TRAFFICKING OF CHILDREN, debt
bondage and serfdom and forced or compulsory labor, including recruitment of
children for use in armed conflict;
b. The use, procuring, offering of a child for prostitution, for the
production of pornography or for pornographic performances;
c. The use, procuring, offering or exposing of a child for illegal or illicit
activities, including the production and trafficking of dangerous drugs and
volatile substances prohibited under existing laws;
d. Employing child models in all commercials or advertisements
promoting alcoholic beverages, intoxicating drinks, tobacco and its byproducts and violence;
and
e. Work which, by its nature or circumstances in which it is carried out, is
HAZARDOUS or likely to be harmful to the health, safety or morals of children.
6. Persons who can file a complaint for unlawful acts committed against children
a. Offended party
b. Parents or guardians
c. Ascendants or collateral relatives within the **3rd degree of
consanguinity
d. Officer, social worker or representative of a licensed child-caring
institution
e. Officer or social worker of DSWD
f. Barangay chairman of the place where the violation occurred, where the
child is residing or employed
g. **At least 3 concerned, responsible citizens where the violation occurred
7. Jurisdiction over offenses punishable under R.A. 9231: The FAMILY

COURTS shall have ORIGINAL jurisdiction over all cases involving offenses
punishable under this Act.
————————————————
D3. Kasambahay
(LABOR CODE AS AMENDED BY R.A. NO. 7655, AN ACT
INCREASING THE MINIMUM WAGE OF HOUSEHELPERS; SEE
ALSO – HOUSEHOLD SERVICE UNDER THE CIVIL CODE)
1. Househelpers:273 Persons covered by R.A. 10361274 otherwise known as “Batas
kasambahay”. All kasambahay engaged in domestic work,275 whether on a live-in
or live-out arrangement, such as, but not limited to, the following:
a. General househelp
b. Nursemaid or Yaya
c. Cook
d. Gardener
e. Laundry person
f. **Working children or domestic workers 15 years and above but below
18 years of age; or
g. Any person who regularly performs domestic work in one household
on an occupational basis (**live-out arrangement) [R.A. 10361, Sec. 3(d)].
2. Persons not276 covered by the batas kasambahay—The following are not
covered:*****
a. Service providers
273Q: What is the nature of employment of househelpers? (2012 Bar Question): a. Seasonal; b. Fixed-
term; c. Regular; d. Probationary. SUGGESTED ANSWER: a) Fixed-Term [Not to exceed 2 years but
“renewable for such periods as may be agreed upon by the parties” [Art. 242, Labor Code]
274*NB LPS – provisions of the labor code under Chapter III (Employment of Househelpers) were
expressly repealed by RA 10361.
2752. Bar 2009: Albert, a 40-year old ER, asked his domestic helper, Inday, to give him a private
massage. When Inday refused, Albert showed her Art. 141 of the Labor Code, which says that one of
the duties of a domestic helper is to minister to the ER's personal comfort and convenience. Is
Inday’s refusal tenable? YES. Inday’s refusal to give her ER a “private massage” is in accordance with
law because the nature of the work of a domestic worker must be in connection with household
chores. **Massaging is not a domestic work.
276*NB LPS – the definition of a “househelper” cannot be interpreted to include househelp or
laundrywomen working in staff houses of a company, like petitioner who attends to the needs of the
company’s guest and other persons availing of said facilities (Apex Mining Company v. NLRC, 22 April
1991).
b. **Family drivers277
c. Children under foster family arrangement:278 those who are living with
a family or household of relative/s and are provided access to education and
given an allowance incidental to education, i.e., “baon,” transportation, school
projects, and school activities; provided, that the foster family and foster care
arrangements are in compliance with the procedures and requirements as
prescribed by R.A. 10165 or Foster Care Act of 2012.
d. Any other person who performs work occasionally or sporadically
and not on an occupational and regular basis. EG:
i. A janitress doing irregular laundry work for a household during rest day;
ii. A construction worker doing casual gardening job for a household; or
iii. A hospital nurse or a student doing baby-sitting job.
277 The weekly work schedule of a driver is as follows: Monday, Wednesday, Friday - drive the family car
to bring and fetch the children to and from school. Tuesday, Thursday, Saturday - drive the family van
to fetch merchandise from suppliers and deliver the same to a boutique in a mall owned by the family.
a. Is the driver a househelper?(5%)(2012BAR) Suggested Answer: Yes, insofar as concerns his work on
“Monday, Wednesday and Friday”, as he ministers to the personal comfort and enjoyment of his
employer’s family during those days. [Apex Mining Company, Inc. v. NLRC (G.R. No. 94951, April 22,
1991, 196 SCRA 251, 254-255)]. b. The same driver claims that for work performed on Tuesday,
Thursday and Saturday, he should be paid the minimum daily wage of a driver of a commercial
establishment. Is the claim of the driver valid? (5%) (2012 BAR) Suggested Answer: Yes, as during said
days, he already works not as a domestic servant but as a regular employee in his employer’s boutique in
a mall [Apex Mining Company, Inc. vs. NLRC (supra)]. NB: The Batas Kasambahay explicitly takes
away drivers from the ambit of a kasambahay.
278Q: Soledad, a widowed school teacher, takes under her wing one of her students, Kiko, 13 years
old, who was abandoned by his parents and has to do odd jobs in order to study. She allows Kiko to
live in her house, provides him with clean clothes, food, and a daily allowance of 200 pesos. In
exchange, Kiko does routine housework, consisting of cleaning the house and doing errands for
Soledad. One day, a representative of the DOLE and the DSWD came to Soledad's house and charged
her with violating the law that prohibits work by minors. Soledad objects and offers as a defense that
she was not requiring Kiko to work as the chores were not hazardous. Further, she did not give
him chores regularly but only intermittently as the need may arise. Is Soledad's defense
meritorious? (2015 Bar Question) SUGGESTED ANSWER: Soledad’s defense is meritorious. Sec. 4(d)
of the Kasambahay Law (RA 10361) provides that the term “Domestic Worker” shall not include
children who are under foster family arrangement, and are provided access to education and
given an allowance incidental to education, i.e. “baon”, transportation, school projects and school
activities.
e. regular EEs279 of companies280 doing household
279Bar 2000: NBC has a rest house and recreational facility in the highlands of Tagaytay City for the
use of its top executives and corporate clients. The rest house staff includes a caretaker, two cooks
and a laundrywoman. All of them are reported to the SSS as domestic or household EEs of the
resthouse and recreational facility and not of NBC. Can NBC legally consider the caretaker, cooks
and laundrywoman as domestic EEs of the rest house and not of NBC? NO, they are not domestic
EEs. They are the **EEs of NBC because the rest house and recreational facility are BUSINESS
FACILITIES which are for use of NBC’s top executives and clients (Traders Royal Bank v. NLRC, 22
December 1999).
280Q: Linda was employed by Sectarian University (SU) to cook for the members of a religious
order who teach and live inside the campus. While performing her assigned task, Linda accidentally
burned herself. Because of the extent of her injuries, she went on medical leave. Meanwhile, SU
engaged a replacement cook. Linda filed a complaint for illegal dismissal, but her employer SU
contended that Linda was not a regular employee but a domestic househelp. Decide. (2014 Bar
Question) SUGGESTED ANSWER: The employer's argument that Linda was not a regular employee
has no merit. The definition of domestic servant or househelper contemplates one who is employed in
the employer’s home to minister exclusively to the personal comfort and enjoyment of the
employer’s family. The Supreme Court already held that the mere fact that the househelper is
working in relation to or in connection with its business warrants the conclusion that such
househelper or domestic servant is and should be considered as a regular employee. (Apex
Mining Co., Inc. v. NLRC, G.R. No. 94951, April 22, 1991). Here, Linda was hired not to minister to
the personal comfort and enjoyment of her employer's family but to attend to other employees
who teach and live inside the campus. SUGGESTED ALTERNATIVE ANSWER: The complaint
for illegal dismissal should be dismissed. There was no showing that in hiring the replacement cook, SU
severed its employer-employee relationship with Linda. In illegal dismissal cases, an employee must first
establish, by substantial evidence, the fact of dismissal before shifting to the employer the burden of
proving the validity of such dismissal. (Grand Asian Shipping Lines, Inc., Eduardo P. Francisco and
William How v. Wilfred Galvez, et al., G.R. No. 178184, January 29, 2014). Here, Linda's dismissal was
not clearly established.
281jobs.282
3. Employable age for a kasambahay: 15 years old and above. The employment
of children 15 but below 18 years of age may be made under the following
conditions:*****
281 Q: Inday was employed by mining company X to perform laundry service at its staffhouse.
While attending to her assigned task, she slipped and hit her back on a stone. Unable to continue with
her work, she was permitted to go on leave for medication, but thereafter she was not allowed to return
to work. She filed a complaint for illegal dismissal but her employer X contended that Indav was
not a regular employee but a mere househelp. Decide. (2007 Bar Question) SUGGESTED
ANSWER: Inday is a regular employee. Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as
amended, the terms “househelper” or “domestic servant” are defined as follows: “The term
“househelper as used herein is synonymous to the term “domestic servant” and shall refer to any
person, whether male or female, who renders services in and about the employer’s home and which
services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers
exclusively to the personal comfort and enjoyment of the employer’s family.” The foregoing definition
clearly contemplates such househelper or domestic servant who is employed in the employer’s home to
minister exclusively to the personal comfort and enjoyment of the employer’s family. The definition
cannot be interpreted to include househelp or laundrywomen working in staffhouses of a company, like
Inday who attends to the needs of the company’s guest and other persons availing of said facilities. The
criteria is the personal comfort and enjoyment of the family of the employer in the home of said
employer. While it may be true that the nature of the work of a househelper, domestic servant
or laundrywoman in a home or in a company staffhouse may be similar in nature, the
difference in their circumstances is that in the former instance they are actually serving the
family while in the latter case, whether it is a corporation or a single proprietorship engaged in
business or industry or any other agricultural or similar pursuit, service is being rendered in
the staffhouses or within he premises of the business of the employer. In such instance, they are
employees of the company or employed in the business concerned entitled to the privileges of a
regular employee. The mere fact that the househelper or domestic servant is working within the
premises of the business of the employer and in relation to or in connection with its business,
as in its staffhouses for its guest or even for its officers and employees, warrants the conclusion
that such househelper or domestic servant is and should be considered as a regular employee
of the employer and not as a mere family househelper or domestic servant as contemplated in Rule
XIII, Section 1(b), Book 3 of the Labor Code, as amended. (Apex Mining Company, Inc. v. NLRC, 196
SCRA 251(1991]).
282Q: Erlinda worked as a cook, preparing the lunch and merienda of the EEs of Remington
Industrial Sales Corp. She worked at the premises of the company. When Erlinda filed an illegal
dismissal case, Mr. Tan, the managing director of Remington Corp., claimed that Erlinda was a
domestic helper and not a regular EE of the corporation. Mr. Tan argued that it is only when the
househelper or domestic servant is assigned to certain aspects of the business of the ER that such
househelper or domestic servant may be considered as such an EE. Is ERlinda a domestic or
househelper? NO. A “househelper” or “domestic servant” under the IRR of the LC is one who is
**employed in the ER's home to MINISTER EXCLUSIVELY to the personal comfort and
enjoyment of the ER's family. A househelper, domestic servant or laundrywoman in a home or in a
company staffhouse is different in the sense that in a **corporation or a single proprietorship
engaged in business or industry or any agricultural or similar pursuit, service is being rendered in the
staffhouses or within the premises of the business of the ER. In such instance, they are EEs of
the company or ER in the business concerned, **entitled to the privileges of a regular EE. The
mere fact that the househelper or domestic servant is working within the premises of the business of
the employer and in relation to or in connection with its business, as in its staffhouses for its guest or
even for its officers and EEs, warrants the conclusion that such househelper or domestic servant is and
should be considered a regular EE and not a househelper (Remington Industrial v. Castaneda, G.R. Nos.
169295-96, 20 November 2006).
a. They shall not be allowed to work for more than 8 hours a day, and in no
case beyond 40 hours a week;
b. They shall not be allowed to work between 10 p.m. to 6 a.m. of the following day;
c. They shall not be allowed to do hazardous work; and
d. They shall not be denied access to education283 and training.
**NB: The consent of the parent/guardian of working children is
required in the employment contract.
EMPLOYMENT OF A KASAMBAHAY
1. ER of a kasambahay: any person who engages and controls the services of a
kasambahay and is party to the employment contract.
2. ER's household: refers to the IMMEDIATE family members or other
occupants of the house who are directly and regularly provided services by
the kasambahay.
3. Modes of hiring a kasambahay: An ER can hire directly or through private
employment agencies registered with the DOLE regional offices. The ER,
whether the kasambahay is hired directly or through POEA, shall **shoulder the
expenses for hiring. The kasambahay shall not be charged of any cost of the
recruitment, placement, or finder's fee.
a. The ER shall pay the expenses that are directly used for the transfer
of the kasambahay from place of origin to the place of work. An ER can be
**reimbursed of the deployment expenses when the kasambahay
283 Q: Rosa Cartagena, a 14-year-old orphan, was hired as a domestic helper by Elvira Pacheco, a
friend of Rosa’s aunt, who could no longer support her. The aunt and Elvira agreed that Rosa would
serve the Pachecos for three years, with the clear understanding that the Pachecos would see her
through high school. The Pachecos never sent Rosa to high school. After two years of unfulfilled
promises for her education, Rosa went back to her aunt, who confronted Elvira about her
breach of their agreement. The aunt demanded that Rosa be paid the cash equivalent of the three
years of high school education that Rosa was denied. Elvira contended that Rosa quit before the end of
the fixed employment period and, therefore, is not entitled to anything. The aunt filed a complaint
against the Pachecos. If you were the labor arbiter, how would you decide the case? (1987 Bar
Question) SUGGESTED ANSWER: As the Labor Arbiter, assuming Rosa’s aunt as her guardian, I
will hold that Rosa’s quitting was justifiable and that the Pachecos should pay the cash equivalent of at
least two (2) years of high school education. Rosa’s quitting is justifiable. The Labor Code (in Art. 142)
provides that the original contract of domestic service shall not last for more than two (2) years. The
original contract of Rosa with the Pachecos was fixed for three (3) years. Thus, this contract should be
considered as only for two (2) years. Rosa, therefore, may not be considered as terminating the contract
before the expiration of its term. She left after two (2) years. She also left for a justifiable reason.
Her employers were not complying with what they agreed they shall do under the contract,
namely, to see her through high school. Under the Labor Code (in Art. 146), it is the legal
obligation of the employer to give to his househelper who is under the age of eighteen (18)
years (Rosa is fourteen (14) years old) an opportunity for at least elementary education. Further,
the Code (in the same Art.) provides that the cost of such education shall be part of the
househelpers compensation, unless there is a stipulation to the contrary. But what Rosa here is
claiming is the cost of high school and not just elementary education. There is no law prohibiting
the employer from obligating himself to give more than just elementary education, which the
employer did in the case. Thus, the employer should comply with what he agreed to do under the
contract he entered into.
UNREASONABLY LEAVES the ER within 6 months from the time he/she started work.
b. If a kasambahay is hired thru a Private Employment Agency, the
agency is allowed to collect SERVICE FEE from the ER.
4. PRE-EMPLOYMENT requirements: Before entering into an employment
contract, the **ER has the option to require the following from a kasambahay:
a. Medical certificate or health certificate issued by a local government health
officer;
b. Barangay and police clearance;
c. NBI clearance; and
d. Duly authenticated birth certificate or, if not available, voter's identification
card, baptismal record, or passport showing the kasambahay’s age.
*NB: Requirements are **mandatory when the employment of the
kasambahay is facilitated through a private employment agency.
*NB: It is not a requirement for a kasambahay to be trained and
certified by TESDA prior to employment. However, the kasambahay is
encouraged to undergo competency assessment and be certified by TESDA.
**Training is not a requirement for competency assessment.
5. CONTRACT between the ER and kasambahay: The ER and the kasambahay
shall enter into a CONTRACT OF EMPLOYMENT written in a language or dialect
understood by them. The contract need not be notarized. The Punong
Barangay or his/her designated officer may attest to the contract and serve as
witness to its execution.
6. Contents of the employment contract:
a. Duties and responsibilities284 of the kasambahay;
b. Period of employment;
c. Compensation;
d. Authorized deductions;
e. Hours of work and proportionate additional payment;
f. Rest days and allowable leaves;
g. Board, lodging and medical attention;
h. Agreements on deployment expenses, if any;
284Q: May a househelp be assigned to non-household work? (2007 Bar Question) SUGGESTED
ANSWER: A househelp may be assigned to non-household work' but a househelper assigned to
work in a commercial, industrial or agricultural enterprise should have a wage or salary rate
not lower than that provided for agricultural or non-agricultural workers as prescribed by law.
FIRST ALTERNATIVE ANSWER: No. Pursuant to Article 141 of the Labor Code, a househelper is
defined as a person who renders domestic or household services exclusively to a household
employer. “Domestic or household service” is defined as service in the employer’s home, which is
usually necessary or desirable for the maintenance and enjoyment thereof, and includes ministering
to the personal comfort and convenience of the members of the employer’s household, including
services of family drivers. (Rule XIII, Section 1(b), Book 3 of the Labor Code) A househelper cannot
be assigned non-household work because to do so would place that person outside the ambit
of the special Labor Code provisions on househelpers. In such a situation, terms and conditions
of employment would differ.
i. Loan agreement;
j. Termination of employment; and
k. Any other lawful condition agreed upon by both parties.
7. REGISTRATION of the kasambahay: The **ER is required to register the
kasambahay in the Registry of Domestic Workers in the barangay where the
ER resides. For this purpose, the DILG, in coordination with the DOLE, shall
formulate a registration system. The registration of the kasambahay is free of
charge.
WAGES & BENEFITS OF A KASAMBAHAY

1. MANDATORY BENEFITS of a kasambahay
a. Monthly minimum wage;
b. Daily rest period of 8 (total) hours;
c. Weekly rest period of 24 (uninterrupted) hours;
d. 5 days annual service incentive leave with pay;
e. 13th month pay;
f. SSS benefit;
g. PhilHealth benefit; and
h. Pag-IBIG benefit
2. Other RIGHTS AND PRIVILEGES of a kasambahay:
a. Freedom from ER's interference in wage disposal;
b. Standard of treatment;
c. Board, lodging, and medical attendance;
d. Right to privacy;
e. Access to outside communication;
f. Access to education and training;
g. Right to be provided a copy of the employment contract;
h. Right to Certificate of Employment;
i. **Right to form, join, or assist labor organization;
j. Right to terminate employment based on just cause; and
k. Right to exercise religious beliefs and cultural practices.
3. BASIC NECESSITIES of a kasambahay:
a. At least 3 adequate meals a day, taking into consideration the
kasambahay’s religious beliefs and cultural practices;
b. Humane sleeping condition; and
c. Appropriate rest and basic medical assistance.
*NB: Though not part of the “basic necessities” required to be provided by
the ER to the kasambahay, shampoo, soap, toothpaste etc. may be provided gratuitously.
4. MONTHLY MINIMUM wage of a kasambahay—For those employed in:
a. National Capital Region: **Php 2,500.00
b. Cities and 1st class municipalities: Php 2,000.00
c. Other municipalities: Php 1,500.00 (R.A. 10361, Sec. 24).
*NB: The law provides a mechanism for increasing the minimum wage
of the kasambahay. Initially, one year from 4 June 2013, the Regional Tripartite
Wages and Productivity Boards (RTWPB) may review, and if proper, determine
and adjust the minimum wage (Sec. 24, R.A. 10361). The RTWPB shall
coordinate with TESDA on the wage review and adjustment based on the
kasambahay’s competency level, in line with the **thrust to professionalize the
domestic service sector.
5. Payment of Wage: shall be in CASH and at least be paid once a month.
a. The ER shall at all times provide the kasambahay with a copy of the
pay slip every pay day containing the amount paid and all deductions made,
if any. The copies of the **pay slip shall be kept by the ER for a period of 3
years (R.A. 10361, Sec. 26).
b. Payment of wages by means of promissory, voucher, coupon, token, ticket, chit,
or anything other than the cash wage is prohibited.
6. Daily rest period (cf. variations for a 15 to <18 y/o, supra). The kasambahay is
entitled to a total daily rest period of at least 8 hours.
7. *****Prohibition of work beyond 16 hours:285 The ER **cannot require the
kasambahay to work beyond 16 hours at any given workday in return for an
equivalent hourly rate. The eight-hour rest period must be observed.
*NB: Kasambahays are also entitled to **at least 24 consecutive hours of
rest in a week. The ER and the kasambahay may determine the schedule of the
weekly rest period. The **ER shall respect the preferred weekly rest day of
the kasambahay on religious grounds (Sec. 21, R.A. 10361).
8. Five-day annual service incentive leave: The kasambahay can avail the five day
annual service incentive leave after 1 year of service.
**NB: If the kasambahay fails to avail of any of his/her annual SIL, it
shall be forfeited and cannot be converted to cash.
9. Other agreement that the ER and the kasambahay can enter into relative to
the kasambahay’s weekly rest day and service incentive leave:
a. Offsetting a day of absence with a particular rest day;
b. Waiving a particular rest day in return for an equivalent daily rate of pay;
c. Accumulating rest days not exceeding 5 days;
d. **Adding the accumulated rest days (maximum of 5 days) to the five-day
SIL; and
e. Waiving a particular SIL in return for an equivalent daily rate of pay.
10. *****13th- month pay: The kasambahay is entitled to 13th month pay after 1
285Q: Under the Labor Code, its provisions on working conditions, including the eight-hour work day
rule, do not apply to domestic helpers. Does it follow from this that a domestic helper's workday is not
limited by law? (2011 BAR) (A) No, since a domestic helper cannot be required to work more
than ten (TOM: now 16) hours a day. (B) Yes, since a domestic helper's hours of work depend on
the need of the household he or she works for. (C) No, because a domestic helper is legally entitled to
overtime pay after ten hours of work. (D) Yes, a domestic helper may be required to work twelve hours
a day or beyond.
month of service.286 Computation of the 13th-month pay: the total basic wage
received in a given calendar year shall be divided by 12. The amount derived shall
be paid not later than December 24.
11. SSS, PHILHEALTH, and PAG-IBIG: The kasambahay is COVERED by
SSS, PhilHealth and Pag-IBIG after 1 month of service.
a. ER's obligation to register the kasambahay in SSS, PHILHEALTH,
and PAG-IBIG: Under the SSS, PhilHealth, and PAG-IBIG laws, the ER has the
obligation to register the kasambahay and deduct and remit the required
premiums and contributions. The ER shall incur certain liabilities, including
criminal prosecution, if he fails or refuses to comply with his/her obligations.
b. Employer's liability in case the kasambahay refuses to be a member of
SSS, PHILHEALTH, and PAG-IBIG: The employer is **still liable under the
SSS, PHILHEALTH, and PAG-IBIG laws in case the kasambahay refuses
membership with those agencies, because it is mandatory and non-negotiable.
c. Person liable to pay the SSS premium, PHILHEALTH and PAG-IBIG
contributions of the kasambahay
*GR: The ER shall pay the SSS premium, and PHILHEALTH and
PAG-IBIG contributions of the kasambahay
**XPN: If the wage of the kasambahay is Php 5,000.00 or more,
the kasambahay will pay his/her share in the premiums/contributions.
RIGHTS OF EMPLOYERS & TERMINATION

1. Provisions protecting ERs of a kasambahay
a. Prohibition against privileged information
b. ER may require certain pre-employment documents prior to
engagement;
c. ERs are assured of quality services through DOLE-TESDA training,
assessment, and certification of kasambahay;
d. **Forfeiture of 15-day unpaid salary should the kasambahay leave the
residence of the ER without any justifiable reason; and
e. Right to terminate the employment on justifiable grounds.
2. GROUNDS FOR TERMINATION of contract by the kasambahay:
a. VERBAL OR EMOTIONAL ABUSE of the kasambahay by the ER or any
member of the household;
b. INHUMAN TREATMENT including physical abuse of the kasambahay by
286Hence, the suggested answer in the following bar exam question NO LONGER APPLIES: Q:
Which of the following statements is the most accurate? (2012 Bar Question): a. Domestic helpers with
monthly income of at least P3,000.00 are compulsory members of the SSS Law; b. House helpers with
monthly income of at least P2,000.00 are compulsory members of the SSS Law; c. Domestic helpers,
55 years of age and who worked for at least five (5) years, are covered by the Retirement Pay Law under
optional retirement, in the absence of a CBA; d. Domestic helpers in the personnel service of another
are not entitled to 13th month pay. SUGGESTED ANSWER: d) Domestic helpers in the personnel
service of another are not entitled to 13th month pay.
the ER or any member of the household;

c. Commission of a CRIME OR OFFENSE against the kasambahay by the ER
or any member of the household;
d. Violation by the ER of the terms and conditions of the employment
contract and other standards set forth under the law;
e. Any DISEASE PREJUDICIAL to the health of the kasambahay, the ER, or
member/s of the household; and
f. Other CAUSES ANALOGOUS to the foregoing (R.A. 10361, Sec. 33).
3. Grounds for termination of contract BY THE ER:
a. MISCONDUCT OR WILLFUL DISOBEDIENCE by the kasambahay of the
lawful order of the ER in connection with the former's work;
b. GROSS OR HABITUAL NEGLECT OR INEFFICIENCY by the kasambahay
in the performance of duties;
c. FRAUD OR WILLFUL BREACH of the trust reposed by the ER on the
kasambahay;
d. Commission of a CRIME OR OFFENSE by the kasambahay against the
person of the ER or any immediate member of the ER's family;
e. VIOLATION by the kasambahay of the terms and conditions of the
employment contract and other standards set forth under the law;
f. Any disease PREJUDICIAL to the health of the kasambahay, the ER, or
member/s of the household; and
g. Other CAUSES ANALOGOUS to the foregoing (R.A. 10361, Sec. 34).
4. More on termination of the contract:
a. **Neither the domestic worker nor the ER may terminate the contract
before the expiration of the term except for grounds 287provided for in Secs.
33 and 34 of the Batas Kasambahay.
b. The domestic worker and the ER may **MUTUALLY AGREE UPON
WRITTEN NOTICE to PRE-TERMINATE the contract of employment to end
the employment relationship (R.A. 10361, Sec. 32).
c. Termination of contract if the duration of service is not determined
in the contract: The kasambahay or the ER may terminate the contract ANYTIME
if the duration of service is not determined in the contract. Either the ER or the
kasambahay may give **NOTICE to end the working relationship 5 days before
the intended date of the termination of service.
5. Effect of UNJUST DISMISSAL by the ER: *****The kasambahay shall
receive the following if he\she is unjustly dismissed by the ER:
a. Outright payment of earned wage; and
287Q: Is it correct to say that under Philippine law a househelper has no right to security of tenure?
(2011 BAR) (A) No, since a househelper can be dismissed only for just cause or when his
agreed period of employment ends. (B) Yes, since it is the employer who determines the period of
his service. (C)Yes, since a househelper can be dismissed with or without just cause.(D)No, since a
househelper can be dismissed only for just cause, except when he has been employed for a definite
period not exceeding one year.
b. INDEMNITY BENEFIT288 in the form of wage equivalent to 15 days

work.
6. Liabilities of a kasambahay who leaves his/her ER without justifiable reason
a. Forfeiture of wage equivalent to 15 days work; and
b. Reimbursement of the deployment expenses, if the employment contract
is terminated within 6 months from employment.
7. RIGHT AGAINST INSPECTION of his belongings: The ER cannot
inspect the belongings of the kasambahay. However, the ER and the kasambahay
**CAN AGREE in their employment contract that an inspection can be made
before he/she leaves the household.
88. Kasambahay desk officer. In case of non-payment or underpayment of
wage and other labor-related concerns, the kasambahay can seek assistance to the
Kasambahay Desk Officer situated in their respective barangays or the
nearest DOLE field/provincial/regional office.
9. REPLACEMENT of a kasambahay from a private employment: The ER can
demand from a private employment agency the replacement of a kasambahay
within 1 month from the day the kasambahay reported for work on the following
cases:
a. The kasambahay is found to be suffering from an incurable or contagious
DISEASE, or mental illness as certified by a competent or government physician;
b. The kasambahay ABANDONS the job without justifiable cause,
voluntarily resigns, commits THEFT or any other analogous acts prejudicial
to the ER or his/her family; or
c. The kasambahay is PHYSICALLY OR MENTALLY INCAPABLE of
discharging the minimum requirements of the job, as specified in the employment contract.
10. Effect of failure of the private employment agency to provide a qualified
replacement: After one month from receipt of the ER's request and the private
employment agency failed to provide a qualified replacement, **the ER shall
be entitled to a refund of 75% of the fees paid to the private employment agency.
11. Responsibilities of the private employment agency under the law:
a. Ensure that the kasambahay is qualified as required by the ER;
b. Secure the best terms and conditions of employment for the kasambahay;
c. Ensure that the employment agreement between the kasambahay and
the employer stipulates the terms and conditions of employment and all the
benefits in accordance with the IRR;
d. Provide a pre-employment orientation briefing to the kasambahay and
the ER about their rights and responsibilities in accordance with this IRR;
288Q: In the case of a househelper, reinstatement is not a statutory relief for unjust dismissal
because of the confidentiality of his or her job. Instead, the househelper shall be paid (2011 BAR)
(A) an indemnity equivalent to 15 days’ pay plus compensation already earned. (B) a separation
pay equivalent to one month's pay per year of service.(C) a separation pay equivalent to one-half
month's pay per year of service. (D)15 days' pay as indemnity plus wages lost from dismissal to finality
of decision.
e. Ensure that the kasambahay is not changed or required to pay any

recruitment or placement fees;
f. Keep copies of employment contracts and agreements pertaining to
recruited kasambahay which shall be made available during inspections or
whenever required by the DOLE or local government officials;
g. Assist the kasambahay in filing his/her complaints or grievances against the ERs;
h. Cooperate with government agencies in rescue operations involving
abused or exploited kasambahay; and
i. Assume **JOINT AND SOLIDARY LIABILITY with the ER for
payment of wages, wage-related and other benefits, including monthly
contribution for SSS, PhilHealth, and Pag-IBIG membership.
12. UNLAWFUL ACTS under the Batas Kasambahay:
a. Employment of children below 15 years of age;
b. Withholding of the kasambahay’s wages;
c. Interference in the disposal of the kasambahay’s wages;
d. Requiring kasambahay to make deposits for loss or damage;
e. Placing the kasambahay under debt bondage; and
f. Charging another household for temporarily performed tasks.
*NB: Unlawful acts are punishable with an ADMINISTRATIVE FINE
ranging from Php 10,000 to Php 40,000 to be imposed by the DOLE Regional Offices.
13. REMEDIES for unlawful acts: The aggrieved party may file the appropriate
civil or criminal action before the regular courts.
14. Remedy for abused or exploited kasambahay: The law mandates the conduct
of **IMMEDIATE RESCUE of abused or exploited kasambahay by the
municipal or city social welfare officer or a social welfare officer from DSWD, in
coordination with the concerned barangay officials. The law sets out that crimes
or offenses committed under the Penal Code and other criminal laws shall be filed
with the regular courts.
————————————————
D4. Homeworkers
1. Homeworkers:289 They are those who perform in or about his own home any
processing or fabrication of goods or materials, in whole or in part, which have
289*NB LPS – one who performs, in or about his home, any processing of goods or materials in
whole or in part, which have been furnished, directly or indirectly, by an Er and thereafter to be
returned to the latter (IRR of LC, Book III, Rule XIV, Sec. 2, par. (b), as amended by DO no. 5 dated 4
February 1992).
been furnished directly or indirectly, by an ER and sold thereafter to the latter.290

*NB LPS – it is a system of production under which work for an Er or
contractor is carried out by a homeworker at his/her home. Materials may or may
not be furnished by the Ee or contractor. It differs from regular factory
production principally in that, it is a decentralized form of production291 where
290Q: In industrial homework, the homeworker does at his home the work that his employer requires
of him, using employer-supplied materials. It differs from regular factory work in the sense that
(2011 BAR): (A) the workers are not allowed to form labor organizations. (B) the workers' pay is fixed
by informal agreement between the workers and their employer. (C) the workers are under very little
supervision in the performance or method of work. (D) the workers are simply called
“homeworkers,” not “employees,” hence not covered by the social security law.
291Q: Ngipin Toothpaste Co., Inc. manufactured and sold toothpaste in the market.' It considered
labor contracting as a cost reduction move. The plan was for the company to continue
manufacturing the toothpaste in its facilities up to the stage where it was already packed in labelled
plastic tubes and capped. These would then be taken to the homes of women in a militant squatter
area near the plant. The women would be given the filled tubes and flat, die-cut cardboard pieces with
indented folds printed with the label. These “flats” cost P0.30 per piece. The women would form
the boxes, apply paste to one side so it would hold together as a box, and then put the filled tubes
into it. Management thought it was a good idea as it would give employment and help bring the women
into the money economy. The job was not hard to learn. The women would do all the work at home in
their free time. The company’s personnel staff took up the concept with the leader of the squatter
women’s group who agreed it was a good idea. They showed her how the job was to be done. She
learned the work immediately. She said that the women would be willing to accept the home work, but
they would insist on being paid in accord with the law. She also told the company’s representatives that
to help reduce their headaches in the operation, she was willing to be their main contractor and she
would sub-contract the work to her neighbors. She also said that she wants that the housewives whom
she engages be allowed to use the labor of the children in their homes to increase the number of
the boxes that they can assemble, and the tubes that they can box. Management was concerned
about boxes that would be very dirty as these would be “spoils”. They had no idea what sort of legal
problems they should resolve, and compensation arrangements they must make with the women or the
lady volunteering to be the main contractor, so they consulted you as a lawyer. (1988 Bar Question)
Management asks for your advice on the following matters: (a) Would the women who are engaged to
form the boxes and pack toothpaste tubes into them be considered employees of the company?
Reasons.(b) Can the woman workers use their children regardless of age, to help them perform their
tasks? Reasons. (c) May the company deduct spoilage costs ofT0.30 per very dirty box and the value of
tubes lost or not accounted for it is provided for in the contract for piece work? Answer: (a) The more
specific name of the women here could be “industrial homeworkers.” In here, the workers receives
articles or materials to be processed or fabricated in or about a house and thereafter, these articles
and materials are returned after they processed or fabricated. (Art. 153). ****As such industrial
homeworkers, they are not employees because their so-called employer does not have control
over those they (the industrial homeworkers) will do their work. But the Labor Code (Art. 154)
provides that regulations or orders should be issued to assure the minimum terms and
conditions of employment applicable to industrial homeworkers. (b) If the child here works directly
under the sole responsibility of his parent or guardians, and their employment does not in any
way interfere with their schooling, they could work regardless of their young age. (c) The Labor
Code (in Art. 114) provides that no employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss or damage to tools, materials or
equipment supplied by the employer, except where the employer is engaged in such trades,
occupation or business where the practice of making deduction or requiring deposits is a
recognized one or is necessary or desirable as determined by the Secretary of Labor in
appropriate rules and regulations. Thus, if the Secretary of Labor has adopted the necessary rules and
regulations mentioned above, the deduction for spoilage will be legal.
there is ordinarily very little supervision or regulation of methods of work (DO no.
05-92, 4 February 1992). Do not confuse a homeworker with a domestic helper.
2. Househelpers vs. Homeworkers [Bar 2009]*****
HOUSEHELPERS HOMEWORKERS
Minister to the personal Performs in or about his own home any processing or fabrication
needs and comfort of his ER of goods or materials, in whole or in part, which have been furnished
in the latter's home directly or indirectly, by an ER and sold thereafter to the latter.
a. [] Art. 141. - Domestic Helper - one who performs services in the
employers house which is usually necessary or desirable for the maintenance
and enjoyment thereof and includes ministering to the personal comfort and
convenience of the members of the employer’s household, including the services
of a family driver. [NB: a family driver has been taken out of the meaning of
Kasambahay, under the new Kasambahay law]
b. [] Art. 153.- Homeworker -is an industrial292 worker who works in his/
her home, processing raw materials into finished products, for an employer.
It is a decentralized form of production with very limited supervision or
regulation of methods of work.
3. ER of a homeworker—Includes any person, natural or artificial who, for his
account or benefit, or on behalf of any person residing outside the country, directly
or indirectly, or through an EE, agent contractor, subcontractor or any other
person:
a. Delivers or causes to be delivered, any goods, articles or materials to be
processed or fabricated293 in or about a home and thereafter to be returned or to
be disposed of or distributed in accordance with his directions.
b. Sells any goods, articles or materials to be processed or fabricated in or
abut a home and then rebuys them after such processing or fabrication, either by
himself or through some other person.
4. DUTY of the ER in case he contracts with another in the performance of his
work: It shall be the duty of the ER to provide in such contract that the EEs or
292Q: Mrs. Josie Juan is the confidential secretary of the Chairman of the Board of the bank. She is
presently on maternity leave. In an arrangement where the Chairman of the Board can still have access
to her services, the bank allows her to work in her residence during her leave. For this purpose, the
bank installed a fax machine in her residence, and gave her a cellphone and a beeper. Is Mrs. Juan a
homeworker under the law? Explain. (3%) (2000 Bar Question) SUGGESTED ANSWER: No, she is
actually an office worker. She is not an industrial homeworker who accepts work to be
fabricated or processed at home for a contractor, which work, when finished, will be returned to or
repurchased by said contractor. [Art. 155, Labor Code)
293Bar 2000: Josie is the confidential secretary of the Chairman of the Board of the bank. She is
presently on maternity leave. In an arrangement where the Chairman of the Board can still have access
to her services, the bank allows her to work in her residence during her leave. For this purpose, the
bank installed a fax machine in her residence, and gave her a cellphone and a beeper. Is Josie a
homeworker under the law? NO, she is actually an office worker. She is **not an industrial
homeworker who accepts work to be fabricated or processed at home for a contractor, which work,
when finished, will be returned to or repurchased by said contractor (LC, Art. 155).
homeworkers of the contractor and the latter's subcontractor shall be paid in

accordance with the LC.
5. Liability of the ER if the contractor or subcontractor fails to pay the wages or
earnings of his EEs: **ER shall be jointly and severally liable with the
contractor or sub-contractor to the workers of the latter to the extent that such
work is performed under such contract, in the same manner as if the EEs or
homeworkers were directly engaged by the ER.
6. Right of industrial homeworkers to form labor organizations: DO No. 5,
replacing Rule XIV of the IRR Book 3 of the LC, authorizes the formation and
registration of labor organization of industrial homeworkers. It also makes
explicit the **ERs duty to pay and remit SSS, PHILHEALTH and ECC
premiums.
7. **PROHIBITIONS against homework—The following shall be prohibited as
homework:
a. Explosives, fireworks and similar articles;
b. Drugs and poisons; and
c. Other articles, the processing of which requires EXPOSURE TO
TOXIC SUBSTANCES (IRR, Book III, Rule XIV, Sec. 13).
8. Prohibition of any deduction from the homeworkers earnings due to loss or
damage
*GR: The ER, contractor or subcontractor shall not make any deduction
from the homeworker's earnings for the value of materials which have been
lost, destroyed, soiled or otherwise damaged.
*XPNs: Unless the ff. conditions are met:
a. The homeworker is clearly shown to be responsible for the loss or damage;
b. The EE is given reasonable opportunity to show cause why
deductions should not be made;
c. The amount of such deduction is fair and reasonable and shall not
exceed the actual loss or damages; and
d. The deduction is made at such rate that the **amount deducted does
not exceed 20% of the homeworker's earnings in a week.
————————————————
D5. Nightworkers
*nightshift differential (supra)
———————————————————————————————
IV. Post-Employment
A. Employer-employee relationship (EER) 191

DETERMINATION OF THE EXISTENCE OF EER 191
A1. Tests to determine EER 196
FOUR-FOLD TEST TO DETERMINE THE EXISTENCE OF EER 197
THE CONTROL TEST 201
TWO-TIERED TEST 203
MORE ON THE ECONOMIC REALITY TEST 204
A2. Kinds of Employment 204
PROBATIONARY EMPLOYMENT 205
REGULAR EMPLOYMENT 212
PROJECT EMPLOYMENT 218
SEASONAL EMPLOYMENT 225
CASUAL EMPLOYMENT 227
Project EE vs. Casual EE 230
FIXED-TERM EMPLOYMENT 230
A3. Subcontracting vs. Labor-Only Contracting 233
CONTRACTING/SUB-CONTRACTING 233
ON CONTRACTUAL EMPLOYEES [DO No. 18-A] 235
Clarifying the Applicability of D.O. 18-A 236
A3.a. Elements 236
On Labor-only contracting (LOC)***** 237
Labor-only contracting vs. Job contracting 243
A3.b. Trilateral Relationship in Job Contracting 243
INDIRECT EMPLOYER (IE) 244
A3.c. Solidary Liability (LPS) 246
B. Termination of Employment 249
<SECURITY OF TENURE> 249
B1. Termination by Employee (LPS) 250
B1.a. Resignation vs. Constructive Dismissal 251
VOLUNTARY RESIGNATION (LPS) 251
<CONSTRUCTIVE DISMISSAL>****** 255
B2. Termination by Employer 259
B2.a. Just Causes 261
Serious misconduct 264
ON WILLFUL DISOBEDIENCE 269
ON Gross & HABITUAL negligence 273
Loss of trust and confidence 274

Abandonment 280
Commission of a crime or offense 282
ANALOGOUS CAUSES 283
B2.b. Authorized Causes 284
Just vs. Authorized Causes 285
ON INSTALLATION OF LABOR-SAVING DEVICES/AUTOMATION (LPS) 286
ON REDUNDANCY 286
ON RETRENCHMENT 289
Redundancy vS. Retrenchment 292
CLOSURE OF BUSINESS (LPS) 293
RULE ON TRANSFER OF EEs of CLOSED corporations 296
Closure vs. Retrenchment 299
Disease as a ground for dismissal 299
Rules on separation pay****** 301
B2.c. Due Process 308
BURDEN OF PROOF IN TERMINATION CASES 309
B2.c.i. Twin-notice Requirement 310
MORE ON DUE PROCESS ON JUST CAUSE TERMINATION 311
MORE ON DUE PROCESS FOR termination DUE TO authorized causes 313
B2.c.ii. Hearing: Ample Opportunity to be Heard 315
B3. Reliefs for Illegal Dismissal 321
1a. Reinstatement without loss of seniority rights; 321
1b. Reinstatement pending appeal. 326
1c. Instances when an illegally dismissed employee may not be reinstated. 326
2. Separation pay in lieu of reinstatement: 327
3. Full backwages 331
4. Damages, including Attorney’s fees***** 338
B4. Preventive Suspension 338
C. Retirement 340
ELIGIBILITY FOR RETIREMENT 343
COMPUTATION OF RETIREMENT BENEFITS 345
RETIREMENT PAY UNDer RA 7641 (LC) VIS-À-VIS RETIREMENT BENEFITS UNDER
SSS AND GSIS LAWS [Bar 1997] 346
RETIREMENT BENEFITS OF WORKERS PAID BY RESULTS and PART-TIME WORKERS
346
TAXABILITY OF RETIREMENT BENEFITS 347
IV. Post-Employment
A. Employer-employee relationship (EER)
DETERMINATION OF THE EXISTENCE OF EER

1. Employment relationship is **determined by law and not by contract294
(Insular Life Assurance Co. Ltd. v. NLRC, 12 March 1998).295
2. EER is a question of law
a. An employment contract which stipulates that there is no EER
between the parties is invalid. The existence of an EER is a question of law and
being such, it cannot be made the subject of agreement/stipulation296 (Tabas
v. California Manufacturing Co., 26 January 1989).
294Q: TRUE or FALSE. (5%) [a] The relations between employer and employee are purely
contractual in nature. (2%) (2010 Bar Question) SUGGESTED ANSWER: FALSE. Some aspects of
the relations between employer and employee are determined by certain labor standards.
ALTERNATIVE ANSWER: FALSE. The Constitution, Labor Code, Civil Code and other social
legislations are replete with provisions that define employment relationship even without contract,
with the intention of insuring that all the rights of labor are protected. Article 1700 of the Civil Code
provides that “[T]he relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.” In Article
106 of the Labor Code, the principal is deemed as a direct employer in labor-only contracting,
despite absence of contractual relationship between the worker and the principal reduced in writing.
Equity likewise affords the aggrieved party relief in a case where an agent was given apparent authority
by the employer to represent it to third persons, such as in a relationship between hospitals and doctors
practicing medicine in its establishment (Nogtales v. Capitol Medical Center, 511 SCRA 204 [2006]).
Taxi or jeepney drivers under the “boundary” system are EEs of the taxi or jeepney owners/
295
operators; so also the passenger bus drivers and conductors (Jardin v. NLRC and Goodman Taxi, G.R.
No. 119268, 23 February 2000).
296 Q: Banco de Manila and the Ang Husay Janitorial and Pest Control Agency entered Into an
Independent Contractor Agreement with the usual stipulations; specifically, the absence of
employer-employee relationship, and the relief from liability clauses. Can the Bank, as a client, and
the Agency, as an independent contractor, stipulate that no employer-employee relationship exists
between the Bank and the employees of the Agency who may be assigned to work in the Bank?
Reason. (5%) (2000 Bar Question) SUGGESTED ANSWER: They can so stipulate if the
relationship is indeed job contracting. Yet the stipulation cannot prevail over the facts and the
laws. The existence of employer-employee relationship is determined by facts and law and not
by stipulation of the parties. [Insular Life Assurance Co., Ltd. u. NLRC, 287 SCRA 476 (1998); Tabas
v. California Manufacturing Co.. Inc.. 169 SCRA 497 (1989)). ALTERNATIVE ANSWER: Yes, they
can stipulate provided that the contract of independent contractor is valid in accordance with
Art. 106 of the Labor Code.
b. One cannot just claim that the EE is an independent contractor;297

c. It cannot be subject to stipulation of the parties.298
3. Legal significance of a finding of EER: It gives rise to certain rights and
obligation of both employer and employee, such as SSS membership, union
membership, security of tenure, etc.299
297It is axiomatic that the existence of an EER cannot be negated by expressly repudiating it in the
management contract and providing therein that the EE is an independent contractor when the
terms of the agreement clearly show otherwise. For the EMPLOYMENT STATUS OF A
PERSON IS DEFINED AND PRESCRIBED BY LAW and not by what the parties say it
should be. In determining the status of the management contract, the "four-fold test" on
employment has to be applied (Insular Life Assurance Co.. Ltd. v. NLRC, 12 March 1998).
298 Q: A bank and janitorial service agency entered into an Independent Contractor Agreement with the
usual stipulations specifically, the absence of EER and relief from liability clauses. Can the bank, as a
client, and the agency, as an independent contractor, stipulate that no EER exists between the bank and
the employees of the agency? YES, provided that the relationship is job contracting. However, the
stipulation cannot prevail over the facts and the laws. The existence of ER-EE relationship is
determined by facts and law and not by stipulation of the parties.
299 Q: Metro Grocery Inc. arranged with Mr. Juan Dado, a Barangay Chairman, to provide the grocery
with workers who will work as cashiers, bag boys, shelf counter helpers and sanitation
workers. The grocery will pay Mr. Dado an amount equivalent to the direct and hidden costs of the
wages of each worker assigned, plus ten percent (10%) to cover the administrative costs related to their
arrangement. Mr. Dado, in turn, will pay directly the workers their wages. As far as the workers
are concerned, Mr. Dado is their employer. A group of concerned workers consulted you if Mr.
Dado is really under the law their employer. a) How will you analyze the problem in order to formulate
your answer? (3%) b) What is the legal significance, if any, of the question of the concerned workers
as to who is their employer? (3%) (2000 Bar Question) SUGGESTED ANSWER: a) I will analyze the
problem by applying the four-fold test of employer-employee relationship. I will examine if Mr. Dado
exercises power of control or supervision over the workers’ manner and method of doing their work.
Control is the most important factor in examining employer-employee relationship. The other factors
are hiring, payment of wages, and power to dismiss. I will also examine whether there was job
contracting or labor-only contracting. ALTERNATIVE ANSWER: a) My analytical framework will be
an analysis of the law on Independent contractor and labor only contracting. If there is a valid
independent contractor situation, Mr. Dado will be the direct employer, and the Metro Grocery will be
the Indirect employer. If there is a labor-contractor only relationship, the Metro Grocery will be the
employer as it directly hired the employees. SUGGESTED ANSWER: b) The legal significance is the
determination of employee-employer relationship, which gives rise to certain rights and obligation of
both employer and employee, such as SSS membership, union membership, security of tenure, etc.
4. EER & CORPORATE FICTION:300 ******The EE can only run after his ER,
not on another corporation because of the doctrine of separate personality of
each corporation. But this separate and distinct personality of a corporation is
merely a fiction created by law for convenience and to promote justice. So,
when the notion of separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or is used as a
device to defeat the labor laws, this separate personality of the corporation
300 Teofilo Lacson was one of more than one hundred (100) employees who were terminated from
employment due to the closure of LBM Construction Corporation (LBM). LBM was a sister
company of Lastimoso Construction. Inc. and RL Realty & Development Corporation. All
three (3) entitles formed what came to be known as the Lastimoso Group of Companies. The three
(3) corporations were owned and controlled by members of the Lastimoso Family: their
incorporators and directors all belonged to the Lastimoso family. The three (3) corporations were
engaged in the same line of business, under one management, and used the same equipment including
manpower services. Teofilo Lacson and his co-employees filed a complaint with the Labor Arbiter
against LBM. RL Realty and Lastimoso Construction to hold them jointly and severally liable for
backwages and separation pay. Lastimoso Construction. Inc. and RL Realty & Development
Corporation interposed a Motion to dismiss contending that they are juridical entities with distinct and
separate personalities from LBM Construct ion Corporation and therefore, they cannot be held jointly
and severally liable for the money claims of workers who are not their employees. Rule on the Motion
to Dismiss. Should it be granted or denied? Why? (5%) (1999 Bar Question) SUGGESTED ANSWER:
It is very clear that even If LBM Construction Company, Lastimoso Construction Company,
Inc. and RL Realty & Development Corporation all belong to the Lastimoso family and are
engaged In the same line of business under one management and used the same equipment
including manpower services, these corporations were separate juridical entities. Thus, only the
LBM Construction Corporation is the employer of Teofilo Lacson. The other corporation do
not have any employer-employee relations with Lacson. The case in question does not include any
fact that would justify piercing the veil of corporate fiction of the other corporations in order to
protect the rights of workers. In a case (Concept Builders, Inc. v. NLRC, 257 SCRA 149), the Supreme
Court ruled that it is a fundamental principle of corporation law that a corporation is an entity
separate and distinct from its stockholders and from other corporations to which it maybe
connected. But this separate and distinct personality of a corporation is merely a fiction created by law
for convenience and to promote justice. So, when the notion of separate juridical personality is
used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a
device to defeat the labor laws, this separate personality of the corporation may be disregarded or the
veil of corporate fiction pierced. ALTERNATIVE ANSWER: Motion to Dismiss should be denied. In
the case at bar, the Labor Arbiter would be justified in piercing the corporate veil and considering the
three (3) corporations as one and the same entity as the employer of Teofilo Lacson because based on
the facts "the three corporations were owned and controlled by members of the Lastimoso family; their
incorporators and directors all belonged to the Lastimoso family. The three (3) corporations were
engaged in the same line of business, under one management and used the same equipment
including manpower services.” The facts show that "the notion of legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, the law will regard the
corporation as an association of persons, or in the case of two corporations, will merge them into one."
maybe disregarded or the veil301 of corporate fiction302 pierced.
301X was one of more than one hundred (100) employees who were terminated from employment due
to the closure of Construction Corporation A. The Cruz family owned Construction Company A.
Upon the closure of Construction Company A, the Cruzes established Construction Company
B. Both corporations had the same president, the same board of directors, the same corporate
officers, and all the same subscribers. From the General Information Sheet filed by both
companies, it also showed that they shared the same address and/or premises. Both companies also
hired the same accountant who prepared the books for both companies. X and his co-employees
amended their Complaint with the Labor Arbiter to hold Construction Corporation 8 joint and
severally liable with Construction Company A for illegal dismissal, backwages and separation pay.
Construction Company 8 interposed a Motion to Dismiss contending that they are juridical entities
with distinct and separate personalities from Construction Corporation A and therefore, they cannot be
held jointly and severally liable for the money claims of workers who are not their employees. Rule on
the Motion to Dismiss. Should it be granted or denied? Why? (5%) (2012 BAR) Suggested Answer:
Denied. The factual circumstances – that the businesses of Construction Company A and
Construction Company B are related, that all of the employees of Company A are the same persons
manning and providing for auxiliary services to units of Company B, and that the physical plants,
offices and facilities are situated in the same compound – justify the piercing of the corporate veil
of Company B. [Indophil Textile Mill Workers Union vs. Calica, 205 SCRA 697 (1992)]. The fiction of
the corporate entity can be disregarded when it is used to justify wrong or protect fraud.
[Complex Electronics Association v. NLRC, G.R. No. 121315 & 122136, July 19, 1999)].
302 Q: Porfirio, Estela, Crisostomo, Marita, and Jose Ramirez were brothers and sisters. All were
stockholders, directors, and officers of the Pagaspas Marketing Co., Inc. *(PMCI). PMCI sold office
machines and supplies. It employed 20 sales persons, 10 delivery men, 20 service personnel, and 10
administrative employees. On December 10, 1987, 45 rank and file workers of the company formed
and registered a labor union. They sent a letter to Pagaspas demanding recognition as bargaining agent
of all workers, enclosing check off authorization forms of the union members, and a set of economic
demands. PMCI refused to recognize the union. The union president went to you, as labor adviser of
the federation which they were planning to affiliate with. xxx After complying with the legal
requirements for a lawful strike, the union filed a notice of strike. Conciliation produced no agreement.
The workers struck and picketed the company’s stores for 3 months with no results. During the
strike, the Ramirezes formed a new corporation, Maharlika Distributors, Inc. It leased a new
store site, bought stocks from PMCI, and hired the 15 workers who did not join the strike and 6 new
workers. Later without filing an application to close PMCI, it ceased operations. The union filed a case
for unfair labor practice, demanded the reinstatement of all workers with backwages and sued PMCI
and the members of the Ramirez family as individual respondents for damages. The Ramirezes moved
to dismiss the case against them as PMCI was a corporate entity, so their inclusion as respondents in
their personal capacities violated the theory of independent corporate personality since there was no
basis for “piercing the corporate veil.” If you were Counsel for the union, what arguments would you
use in your Opposition to the Motion to Dismiss? (1988Bar Question) SUGGESTED ANSWER: The
Ramirezes could be held personally liable because as members of the same family, they were
organizing another corporation to evade the liability that PMCI will have by virtue of its
commission of a ULP, i.e. refusing to bargain collectively with the union which was the bargaining
representatives of the employees. The act of Ramirezes is evidence of bad faith on their part which
in turn is a justification for piercing the corporate veil” to prevent injustice. (A.C. Ransom Case).
303
5. Compare also with a partnership: [] Articles 1767 of the Civil Code states that
in a contract of partnership two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of
dividing the profits among themselves.304
303 What if there are three inter-related companies (A, B & C) and Teofilo was illegal dismissed by A.
Can he run after B & C? NO. Teofilo can only run after A, his ER. The other corporation do not have
any EER with him. The case does not include any fact that would justify piercing the veil of corporate
fiction of the other corporations in order to protect the rights of workers. It is a fundamental
principle of corporation law that a corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be connected. But this separate and distinct
personality of a corporation is merely a fiction created by law for convenience and to promote
justice. So, when the notion of separate juridical personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, this
separate personality of the corporation maybe disregarded or the veil of corporate fiction pierced.
(Concept Builders, Inc. v. NLRC, 29 May 1996)
304Inggu, an electronics technician, worked within the premises of Pit Stop, an auto accessory shop.
He filed a Complaint for illegal dismissal, overtime pay and other benefits against Pit Stop. Pit
Stop refused to pay his claims on the ground that lnggu was not its employee but was an independent
contractor . . It was common practice for shops like Pit Stop to collect the service fees from
customers and pay the same to the independent contractors at the end of each week. The auto shop
explained that lnggu was like a partner who worked within its premises, using parts provided by the
shop, but otherwise lnggu was free to render service in the other auto shops. On the other hand, lnggu
insisted that he still was entitled to the benefits because he was loyal to Pit Stop, it being a fact that he
did not perform work for anyone else. Is lnggu correct? Explain briefly. (5%) (2012 BAR) Suggested
Answer: Yes. Inggu is an employee of the Pit Stop. Articles 1767 of the Civil Code states that in a
contract of partnership two or more persons bind themselves to contribute money, property or
industry to a common fund, with the intention of dividing the profits among themselves. Not one of
these circumstances is present in this case. No written agreement exists to prove the partnership
between the parties. Inggu did not contribute money, property and industry for the purpose of
engaging in the supposed business. There is no proof that he was receiving a share in the profits
as a matter of course. Neither is there any proof that he had actively participated in the
management, administration and adoption of policies of the business. [Sy, et. al. v. Court of Appeals
G.R. No 142293, February 27, 2003].
A1. Tests to determine EER305
305Q: Malyn Vartan is a well-known radio-N talk show host. She signed a contract with XYZ
Entertainment Network to host a one -hour daily talk show where she interviews various celebrities on
topical subjects that she herself selects. She was paid a monthly remuneration of P300.000.00. The
program had been airing for almost two years when sponsors' advertising revenues dwindled,
constraining the network to cancel the show upon the expiration of its latest contract with Ms. Vartan.
The talk-show host protested the discontinuance of her monthly talent fee, claiming that it was
tantamount to her illegal dismissal from the network since she has already attained the status of a
regular employee. (2005 Bar Question) (a) As the network's legal counsel, how would you justify its
decision to cancel Ms. Vartan's program which in effect terminated her services in the process?
SUGGESTED ANSWER: (a) As the network's legal counsel, I will argue that no employer
employee relationship exists between the network and Ms. Vartan. Reference has to be made to the
terms and conditions provided under the contract and the parties shall be governed by the provisions
of the New Civil Code. In the case of Jay Sonza v. ABS-CBN, 431 SCRA583 (2004) it was held that a
TV and radio talent is not an employee of the network company. Similarly in this case, Ms. Vartan
cannot be considered an employee of the network. Under the control test, the network had no
control on the manner and means through which Ms. Vartan will perform her work. She herself
selects the topical subjects in her interviews. She is also paid an extraordinary huge amount of
P300,000 for her to be considered a mere employee. (b) As counsel for the-talk-show host, how
would you argue your case? (6%) SUGGESTED ANSWER: (b) As counsel for Ms, Vartan, I will argue
that an employer-employee relationship exists, and that she is a regular employee of the
Network because of the nature of her work in relation to the nature of the business of the Network.
Her' work is usually necessary or desirable in the usual, trade or business of the employer (Art. 280,
Labor Code). I will invoke the four-fold test of employer- employee relationship, i.e. (1) selection and
engagement of employee: (2) payment of wages; (3) power to dismiss; and (4) power of control.
FOUR-FOLD306 TEST TO DETERMINE THE EXISTENCE OF EER307
306 Q: When does an employer-employee relationship exist? (1996 Bar Question) SUGGESTED
ANSWER: The Supreme Court, in a long line of decisions has consistently ruled that the following are
the elements of an employer-employee relationship: a. Selection and engagement of the employee: b.
Payment of wages; c. Power of discipline and dismissal; and d. Power to control the employee’s
conduct as regards his employment. ALTERNATIVE ANSWER: An employer-employee relationship
exists when a person (an employer) who carries on a business, trade, industry, undertaking, or activity
of any kind uses the services of another person (an employee) who, receiving compensation, is under
the employer's orders as regards the employment. The receiver could be considered the “employer” of
GFC’s workers. According to the Labor Code (in Art. 212(c) an “employer” includes any person acting
in the interest of an employer, directly or indirectly.” The receiver here is acting in the interest of GFC.
307On security guards: As a general rule, the security guards of a private security guard agency
are the EEs of the latter and not of the hotel that has entered into a contract with the agency for
security services. But if it appears that it is the hotel itself who hired the security guards, paid their
wages, have the power to promote, suspend or dismiss the security guards and the power of control
over them, in other words, the security guards were under orders of the hotel as regard their
employment, then the hotel is the ER of the security guards.
[] Assuming that the agency is the ER, is it lawful for it to place the security guards on "floating
status”? YES, if it has no assignment to give to said security guards. But if the security guards are
placed on a "floating status" for more than 6 months, the security guards may consider
themselves as having been dismissed.
*****Called by SC as “INDICIA OF DETERMINATION”308 according to Dean P.

1. The manner of selection and engagement 309 of the putative employee;
308Q: Pandoy, an electronics technician, worked within the premises of Perfect Triangle, an auto
accessory shop. He filed a complaint for illegal dismissal, overtime pay and other benefits against
Perfect Triangle, which refused to pay his claims on the ground that Pandoy was not its employee
but was an independent contractor. It was common practice for shops like Perfect Triangle to collect
the service fees from customers and pay the same to the independent contractors at the end of each
week. The auto shop explained that Pandoy was like a partner who worked within its premises,
using parts provided by the shop, but otherwise Pandoy was free to render service in the other auto
shops. On the other hand, Pandoy insisted that he still was entitled to the benefits because he
was loyal to Perfect Triangle-, it being a fact that he did not perform work for anyone else. Is Pandoy
correct? Explain briefly. (5%) SUGGESTED ANSWER: Pandoy Is not correct. He is not an
employee because he does not meet the fourfold test for him to be an employee of Perfect
Triangle. All that he could claim is: he worked within the premises of Perfect Triangle. Pandoy was
NOT engaged as an employee by Perfect Triangle. He was NOT paid wages by Perfect Triangle. Perfect
Triangle does NOT have the power to dismiss him although Perfect Triangle may not continue to allow
him to work within its premises. And most important of all, Pandoy was NOT under the control
of Perfect Triangle as regards the work he performs for customers. The Supreme Court has ruled: “In
stark contrast to the Company’s regular employees, there are independent, free-lance operators who
are permitted by the Company to position themselves proximate to the Company premises.
These independent operators are allowed by the Company to wait on Company customers who
would be requiring their services. In exchange for the privileges of favorable recommendation by
the Company and immediate access to the customers in need of their services, these independent
operators allow the Company to collect their service fee from the customer and this fee is given
back to the independent operator at the end of the week. In effect, they do not earn fixed wages
from the Company as their variable fees are earned by them from the customers of the Company. The
Company has no control over and does not restrict the methodology or the means and manner
by which these operators perform their work. These operators are not supervised by any employee of
the Company since the results of their work is controlled by the customers who hire them. Likewise,
the Company has no control as an employer over these operators. They are not subject to the regular
hours and days of work and may come and go as they wish. They are not subject to any disciplinary
measures from the Company, save merely for the inherent rules of general behavior and good
conduct.” [Ushio Marketing v. NLRC, 294 SCRA 673(1998)]
309Q: Richie, a driver-mechanic, was recruited by Supreme Recruiters (SR) and its principal,
Mideast Recruitment Agency (MRA), to work in Qatar for a period of two (2) years. However,
soon after the contract was approved by POEA, MRA advised SR to forego Richie’s deployment
because it had already hired another Filipino driver-mechanic, who had just completed his contract
in Qatar. Aggrieved, Richie filed with the NLRC a complaint against SR and MRA for damages
corresponding to his two years’ salary under the POEA- approved contract. SR and MRA traversed
Richie’s complaint, raising the following arguments: x x x [b] Because Richie was not able to leave for
Qatar, no employer-employee relationship was established between them; (2%) and xxx Rule on the
validity of the foregoing arguments with reasons. SUGGESTED ANSWER: ****An employer-
employee relationship already existed between Richie and MRA. MRA and SR, as an agent of MRA,
already approved and selected and engaged the services of Richie.
2. The mode of payment of wages;310

3. The presence or absence of the power of dismissal;311 and
310 Q: Don Jose, a widower, owns a big house with a large garden. One day, his househelper and
gardener left after they were scolded. For days, Don Jose, who lives alone in compound to look for
someone who could water the plants in the garden and clean the house. He chanced upon Mang
Kiko on the street and asked him to water the plants and clean the house. Without asking any
question. Mang Kiko attended to the plants in the garden and cleaned the house. He finished the work
in two days. a) Is there an employer-employee relationship between Don Jose and Mang Kiko?
xxx SUGGESTED ANSWER: There is an employer-employee relationship between Don Jose and
Mang Kiko because Mang Kiko, assuming payment of compensation, was rendering services
for Don Jose and was under the orders of Don Jose as regards employment.
311Bar 2008: PizCorp and RSC entered into a "service agreement" where RSC in consideration of
service fees will exclusively supply PizCorp with a group of RSC motorcycle-owning cooperative
members who will perform PizCorp's pizza delivery service. RSC assumes full obligation for the
payment of the salaries and other statutory monetary benefits of its members deployed to PizCorp.
The parties stipulated that there shall be no EER between PizCorp and the RSC members. However,
if PizCorp is materially prejudiced by any act of the delivery crew that violates PizCorp’s directives and
orders, PizCorp can directly impose disciplinary actions on, including the power to dismiss, the
ERring RSC member/s.
a. Is the contractual stipulation that there is no EER binding on labor officials? No. It is not
binding on labor officials because what determines the existence or non-existence of employer-
employee relationship is the actual factual situation between PizCorp and RSC members and
not what is stipulated in the contract. Moreover, the test of EER is based on the law and
not the agreement between the parties.
b. Based on the tests for EER, determine the issue of who is the ER of the RSC members: Using
the control test, the ER of the RSC members is PizCorp. The RSC members are supposed to
make their deliveries in accordance with PizCorp directives and orders. In addition, the
PizCorp can directly impose disciplinary sanction, including the power to dismiss the
RSC members.
4. The presence or absence of a power to control312 the putative employee’s

conduct (Hijos De F. Escano, Inc. v. NLRC, 22April 1991I). Cf. Control Test,
infra.
312 Q: Zapato Custom-made Shoes, Inc. (ZaCSI) made shoes to customer specification and repaired
them. As a service to customers, a shoe shine stand was operated on its premises. There were 10
shoe shine boys at the stand. They owned their shoe shine boxes with cleaning agent polish,
brushes, and rags. Walk- in customers willing to wait were led by the shoe shine boys to a seat at the
stand where he waited while the boy shined the shoes. After the shoes were cleaned, the boy asked
the customer to pay to the receptionist. Customers not willing to wait left the shoes with the stand’s
receptionist who gave a receipt with the price for the service and pick-up date and time indicated. The
boys were free to get shoes to be shined from the receptionist when there were no waiting walk-
ins. For each pair shined, the boys got markers corresponding to the price for their service.
ZaCSI’s staff did not interfere with, nor supervise, how the boys went about their tasks. At day’s
end, the markers held by each boy were tallied and paid for. The boys signed a receipt to acknowledge
full payment for work done. A labor federation organized ZaCSI and filed a petition for a consent
election. The boys, sympathizing with the workers, joined the union. At the pre-election conference, the
lawyer for ZaCSI moved to exclude the boys as voters. (a) As Med-Arbiter handling the case, rule on
the objection. (b) Would your ruling be different if in this case, ZaCSI provided the boys with the shoe
shine boxes and their contents? Explain. (1988 Bar Question) Answer: (a) As Med-arbiter, I will rule
that the shoe shine boys should be excluded as voters in the consent election. The shoe shine boy
are not employees of ZaCSI and thus could not be considered as employees belonging to bargaining
unit who will designate or select a bargaining representative. They are not empoloyees of ZACSI
because according to the given facts, they are not under the control of ZaCSI which is an
essential element for the existence of employer-employee relationship. In the statement of facts, it is
said that “ZaCSI’s staff did not interfere with, nor supervise how the boys went about their task.”
(b) My ruling will not be different even if ZaCSI provided the boys with the shoe shine boxes
and their contents. ZaCSI, by this act, is not yet exercising control over them. It is the existence or
non-existence of control that is determinative of the existence of employer-employee
relationship.
THE CONTROL TEST313

1. This assumes PRIMACY314 in the overall consideration of the existence of an
313Q: "X' is a bona fide service contractor providing manpower services to various companies,
possessing the necessary capital and equipment needed to effectively carry out its commitments. "Y” is
an employee of "X" and assigned to work as a janitor in Company "Z". In the course of Y’s
assignment, Z's supervisors and employees would give verbal instructions to Y as to how and
where to perform his work. X pays Y salary. Subsequently, Y’s services were terminated by X. Y
sued Z for illegal dismissal. May Y’s case against Z prosper? Why? (2%). (2001 Bar Question)
SUGGESTED ANSWER: Y’s case against Z will not prosper, because Z is not the employer of Y.
The employer of "Y" is "X". "Y" would be an employee of "Z" if "X" here is a labor-only
contractor but X is not a labor-only contractor. He possesses the necessary capital and equipment
needed to effectively carry out its commitment as a service contractor. *****Applying the control test,
the fact that "Z's" supervisors and employees give verbal instructions to Y as to how and where
to perform his work does not necessarily mean that thereby he is under the control of Z as
regards his employment as long as X, as service contractor, actually directs the work of Y. It should
also be noted that X pays the salary of Y as the employee of the former. ANOTHER
SUGGESTED ANSWER: Yes, Y’s case against Company "Z" will prosper. Company "Z" will be
deemed the direct employer because the Company directly and specifically controlled the manner by
which the work should be done and, and by doing so also the result/ (See Traders Royal Bank vs.
NLRC, December 2, 1999). The presence of the element or factor of control, which is the most
important factor in determining the existence of an employer-employee relationship is present. In
Religious of the Virgin Mary vs. NLRC, G.R. No. 103606, October 13, 1999, the Supreme Court, ruled:
As this Court has consistently ruled, the power of control is the most decisive factor in determining the
existence of employer- employee relationship.
314 Q: Ador is a student working on his master's degree in horticulture. To make ends meet, he
takes on jobs to come up with flower arrangements for friends. His neighbor, Nico, is about to get
married to Lucia and needs a floral arranger. Ador offers his services and Nico agrees. They shake
hands on it, agreeing that Nico will pay Ador :P20,000.00 for his services but that Ador will take care
of everything. As Ador sets about to decorate the venue, Nico changes all of Ador's plans and
ends up designing the arrangements himself with Ador simply executing Nico's instructions.
(a) Is there an employer-employee relationship between Nico and Ador? (2015 Bar Question) (b) Will
Nico need to register Ador with the Social Security System (SSS)? (2015 Bar Question) SUGGESTED
ANSWER: (a) Yes. With Ador’s simply executing Nico’s instruction, Nico, who now has control
over Ador’s work, has become the employer of Ador. In Royale Homes Marketing Corp. v. Fidel
Alcantara (G.R. No. 195190, July 28, 2014) the Supreme Court held that control is the most
important determinant of employer-employee relationship. (b) Yes, as under Section 9 of the Social
Security Law (Art. 1161 as amended), coverage in the SSS shall be compulsory upon all employees
not over sixty (60) years of age and their employers. ANOTHER SUGGESTED ANSWER:
(b) If Ador is a purely casual employee: No. Casual employees are not subject to the compulsory
coverage of the SSS by express provision of law. (Section 8(5) (3), RA 1161, as amended)
SUGGESTED ALTERNATIVE ANSWER: (a) There is no employer-employee relationship. The case
at hand pertains to a civil law arrangement. There is no business undertaken by Lucia; what the
parties have is a contract for a specific service.
EER, i.e., the right to control:315

a. not only the end achieved
b. but also the manner and means316 used to achieve that end (Television and
Production Exponents Inc. v. Servana, 28 January 2008).317
2. Kind of control: not every form of control establishes EER. A demarcation
line should be drawn between:
(a) rules that merely serve as guidelines which only promote the result, and
• no EER here
(b) rules that fix the methodology and bind or restrict the party hired to
the use of such means or methods.
• There is EER here (Insular life v. NLRC, 179 SCRA 439; Consulta v.
CA, 18 March 2005).
**NB LPS – the control test calls merely for the “existence” of the right to
315 Q: Reach-All, a marketing firm with operating capital of P100,000, supplied sales persons to
pharmaceutical companies to promote their products in hospitals and doctors' offices. Reach-All
trained these sales persons in the art of selling but it is the client companies that taught them the
pharmacological qualities of their products. Reach-All’s roving supervisors monitored, assessed, and
supervised their work performance. Reach-All directly paid their salaries out of contractor's fees
it received. Under the circumstances, can the sales persons demand that they be absorbed as
employees of the pharmaceutical firms? (2011 BAR) (A)No, they are Reach-All’s employees
since it has control over their work performance. (B) Yes, since they receive training from the
pharmaceutical companies regarding the products they will promote. (C)No, since they are bound by
the agency agreement between Reach-All and the pharmaceutical companies. (D)Yes, since Reach-All
does does not qualify as independent contractor employer, its clients being the source of the
employees’ salaries.
316Q: Don Luis, a widower, lived alone in a house with a large garden. One day, he noticed that the
plants in his garden needed trimming. He remembered that Lando, a 17-year old out-of-school youth,
had contacted him in church the other day looking for work. He contacted Lando who immediately
attended to Don Luis’s garden and finished the job in three days. (2014 Bar Question) (A) Is
there an employer-employee relationship between Don Luis and Lando? SUGGESTED ANSWER:
Yes. All the elements of employer-employee relationship are present, viz: 1. the selection and
engagement of the employee; 2. the power of dismissal; 3. the payment of wages; and 4. the power to
control the employee's conduct. There was also no showing that Lando has his own tools, or
equipment so as to qualify him as an independent contractor. SUGGESTED ALTERNATIVE
ANSWER: None. Lando is an independent contractor for Don Luis does not exercise control over
Lando's means and method in tending to the former's garden. (B) Does Don Luis need to register
Lando with the Social Security System (SSS)? SUGGESTED ANSWER: Yes. Coverage in the SSS shall
be compulsory upon all employees not over sixty (60) years of age. SUGGESTED ALTERNATIVE
ANSWER: No. Lando is not an employee of Don Luis. What the parties have is a contract for a piece
of work which, while allowed by Article 1713 of the Civil Code, does not make Lando an employee
under the Labor Code and Social Security Act.
317Q: The most important factor in determining the existence of an employer- employee relationship is
the: (2012 Bar Question): a. Power to control the method by which employees are hired and selected; b.
Power to control the manner by which employees are transferred from one job site to another; c. Power
to control the results achieved by giving guidelines to the employees; d. Power to control the results to
be achieved and the employee’s method of achieving the task. SUGGESTED ANSWER: d. Power to
control the results to be achieved and the employee’s method of achieving the task [Abante vs.
La Madrid Bearing Part Corp., 430 SCRA 368 (2004]
control and not the “actual exercise” of the right (Zanotte Shoes v. NLRC, 13
February 1995).
3. However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. The better
approach is to adopt the two-tiered test, infra (Francisco v. NLRC, August 31,
2006).
5. Note, however, that in principal-agent relationships,318 there could be
some control, without resulting in an EER. The law obligates the agent to
render an account; in this sense, the principal may impose on the agent
specific instructions on how an account shall be made, particularly on the
matter of expenses and reimbursements. To these extents, control can be
imposed through rules and regulations without intruding into the labor law
concept of control for purposes of employment.
TWO-TIERED TEST
1. Elements
a. The putative ER's power to control the EE with respect to the means
and methods by which the work is to be accomplished (CONTROL TEST of the
Four-fold test);
b. The underlying economic realities of the activity or relationship
(ECONOMIC REALITY TEST).
[] Hence, the first tier is the four-fold test. The second tier is the
economics of the relationship test. But the latter test is used if and only if
318 EG: Genesis entered into a CareeR's Agent Agreement with EmoLife Insurance, which provides
that the agent is an independent contractor and nothing therein shall be construed or interpreted as creating
an EER. It further provides that the agent must comply with three requirements: (1) compliance with the
regulations and requirements of the company; (2) maintenance of a level of knowledge of the company's
products that is satisfactory to the company; and (3) compliance with a quota of new businesses.
However, EmoLife terminated Genesis’ services. He filed an illegal dismissal complaint alleging therein
that an EER exists and that he was illegally dismissed. Is he an employee of the Insurance Company?
NO. Genesis is not an EE of EmoLife Insurance Company. Generally, the determinative element is
the control exercised over the one rendering the service. The concept of “control” in LC has to be
compared and distinguished with “control” that must necessarily exist in a principal-agent
relationship. The ER controls the EE both in the results and in the means and manner of achieving
this result. The principal in an agency relationship, e.g. insurance agent, on the other hand, also has the
prerogative to exercise control over the agent in undertaking the assigned task based on the parameters
outlined in the pertinent laws. In the present case, the Agreement fully serves as grant of authority to
Genesis as EmoLife’s insurance agent. This agreement is supplemented by the company’s agency
practices and usages, duly accepted by the agent in carrying out the agency. Foremost among these are
the directives that the principal may impose on the agent to achieve the assigned tasks, to the extent
that they do not involve the means and manner of undertaking these tasks. The law likewise
obligates the agent to render an account; in this sense, the principal may impose on the agent
specific instructions on how an account shall be made, particularly on the matter of expenses and
reimbursements. To these extents, control can be imposed through rules and regulations without
intruding into the labor law concept of control for purposes of employment (Tongko v.
ManuLife Insurance, 29 June 2010).
there is going to be harshness in the results because of the strict application of

the four-fold test (Francisco v. NLRC, 31 August 2006).
2. This test provides a framework of analysis, which would take into consideration
the TOTALITY of circumstances surrounding the true nature of the
relationship between the parties.
3. This is especially appropriate cases where
a. there is no written agreement or terms of reference to base the
relationship on and
b. due to the complexity of the relationship based on the various positions
and responsibilities given to the worker over the period of the latter's employment
(Francisco v. NLRC, 31 August 2006).
MORE ON THE ECONOMIC REALITY TEST

1. To bolster the payment of wages and control test, the existing economic
conditions PREVAILING between the parties, like [POQUIZ, supra]:
a. the inclusion of the EE in the payrolls (Sevilla v. CA, G.R. Nos. 44182-3,
15 April 1988),
b. submission of his name with the SSS, PAG-IBIG, PhilHealth, otherwise
2. Proper standard for economic dependence: whether the worker is dependent
on the alleged ER for his continued employment in that line of business.
3. The determination of the relationship between ER and EE depends upon the
circumstances of the whole economic activity, such as:
a. The extent to which the services performed are an integral part of the
ER's business
b. The extent of the worker's investment in equipment and facilities;
c. The nature and degree of control exercised by the ER;
d. The worker's opportunity for profit and loss;
e. The amount of initiative, skill, judgment, or foresight required for the
success of the claimed independent enterprise;
f. The permanency and duration of the relationship between the worker
and ER; and
g. The degree of dependency of the worker upon the ER for his
continued employment in that line of business (Francisco v. NLRC, 31 August
2006).
————————————————
A2. Kinds of Employment

1. Important codal provision: [] Art. 280…an employment shall be deemed to be
REGULAR where the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the
employer, except
a. where 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 or
b. where the work or service to be performed is SEASONAL in nature and
the employment is for the duration of the season.
c. 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 is continuous or broken, shall be
CONSIDERED A REGULAR employee with respect to the activity in which
he is employed and his employment shall continue while such activity exists.
2. Hence, we have the following types of employment, infra.
PROBATIONARY EMPLOYMENT
1. Employment where the EE, upon his engagement:
a. Is made to undergo a trial period;
b. During which the ER determines his FITNESS to qualify for regular
employment,
c. Based on **REASONABLE STANDARDS made known to the EE at
the time of engagement (IRR, Book VI, Rule I, Sec 6).
2. PURPOSE of the probation period: to afford the ER an OPPORTUNITY TO
OBSERVE THE FITNESS of a probationary EE at work.
3. CHARACTERISTICS of probationary employment:
a. It is an employment for a trial period;
b. It is a temporary employment status prior to regular employment;
c. It arises through a contract with the following elements:
i. The EE must learn and work at a particular type of work;
ii. Such work calls for certain qualifications
iii. The probation is fixed;
iv. The ER reserves the power to terminate during or at the end of the
trial period;
v. And if the EE has learned the job to the satisfaction of the ER,
he becomes a regular EE.
4. RULES on probationary employment:**
a. ER shall MAKE KNOWN to the EE at the time he is hired, the
STANDARDS by which he will qualify as a regular EE;
b. An EE allowed to CONTINUE work after the probationary period shall
be CONSIDERED a regular EE;319

c. During the probationary period, the EE enjoys SECURITY of TENURE; his
services can only be terminated for just or authorized causes.
d. If the EE is under constant supervision of the ER while in the
performance of his work, as in drivers, the latter are regular EEs, not field
workers.320
[] More on OBLIGATION of the ER to his probationary EEs: There is
obligation on the part of ER to inform the EE of the STANDARDS FOR
REGULARIZATION at the time of engagement. *****The failure to inform has
this effect: upon the expiry of the probationary employment, ***with or without the
319 Q: On January 3, 1988, Sea Breeze Restaurant, Inc. (SBRI) hired Juan Reyes as a probationary
kitchen helper. He received and cleaned food ingredients delivered by suppliers and stored them in
freezers, cleaned kitchenware and utensils, and kept the kitchen tidy. On July 1, 1988, he was sent to
the company’s doctor for a complete medical examination. Thereafter, he continued working. On
July 8, 1988, the doctor submitted his report finding Juan to have minimal pulmonary tuberculosis
(TB). The manager consults you as the labor adviser of the company, and asks if Juan’s employment
can be terminated as his presence was a hazard to the health of other workers and customers of the
restaurant. (a) Within the time frame of the problem, was there any change in Juan’s  
employment status? (b) When did the change occur? (c) Why did it occur? (d) Can the company still
terminate Juan as a probationer? (e) Under what conditions may Juan be terminated considering his
health? (f) Based on your analysis of the factual and legal situation, what course of action would you
advise the company to take? SUGGESTED ANSWER: (a) There was a change in the employment
status of Juan, from probationary to regular employment. (b) July 4,1988, after his six-month
probationary period. (c) The Labor Code (Art. 281) provides that “an employee who is allowed to
work after a probationary period shall be considered a regular employee. (d) The company can
terminate Juan, but no longer as a probationary employee, but as a regular employee since his six
(6) month probationary period has expired. (e) Juan may be terminated considering the fact that
he has minimal pulmonary tuberculosis. The Labor Code (Art. 284) provides that an employer may
terminate the services of an employee who has been found to be suffering from any disease and whose
continued employment is prohibited by law or is prejudicial to his health as well his co-
employees.” (f) Based on my analysis outlined above, I will advise the Company to dismiss the
employee but pursuant to the Rules and Regulations implementing the Labor Code, ****the
Company should not terminate the employment of its employee on the ground of his disease
unless there is a certification by a competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period of six (6) months even with proper
medical treatment.
320 Do bus drivers-conductors fall within the term regular employees? YES. It is of **judicial notice
that along the routes that are plied by these bus companies, there are its INSPECTORS assigned at
strategic places who board the bus and inspect the passengers, the punched tickets, and the
conductor’s reports. They must be at specific place at specified time as they generally observe
prompt departure and arrival from their point of origin to their point of destination. In each and every
depot, there is always the DISPATCHER whose function is precisely to see to it that the bus and its
crew leave the premises at specific times and arrive at the estimated proper time. The **DRIVERS ARE
UNDER CONSTANT SUPERVISION while in the performance of their work. They cannot be considered as
field personnel but REGULAR employees (Auto Bus Transport Systems v. Antonio Bautista, 16 May
2005).
period provided for in the contract, the worker is DEEMED321 TO BE REGULAR.322

5. PERIOD of probationary employment
*GR: It shall not exceed 6 months. Period of probation shall be reckoned
from the date the EE ACTUALLY STARTED working [IRR, Book VI, Rule I, Sec.
6(b)]. Probationary EEs may be dismissed for cause before end of the probationary
period. NB: After the lapse of the probationary period (6 months), EE becomes
321Q: The services of an employee were terminated upon the completion of the probationary period
of employment for failure to quality for the position. The employee filed a complaint for Illegal
Dismissal on the ground that the employer failed to inform him in writing the reasonable
standards for regular employment. Will the complaint for Illegal Dismissal prosper? [5%] (1998 Bar
Question) SUGGESTED ANSWER:Yes, the Complaint for Illegal Dismissal will prosper. The Labor
Code provides: Art. 281. Probationary employment. - xxx The services of an employee who has been
engaged on 8 probationary basis may be terminated xxx when he falls to qualify as a regular
employee in accordance with reasonable standards made known to the employee at the time of
his engagement. The Supreme Court in A.M. Greta and Co., Inc. v. NLRC, 176 SCRA 218 (1989),
ruled: The law is clear to the effect that in all cases involving employees engaged on probationary basis,
the employer shall make known to the employee at the time he is hired, the standards by which
he will qualify as a regular employee. The failure of the employer to inform the employee of the
qualification for regularization is fatal. The failure violates the rules of fair play which is a cherished
concept in labor law. ANOTHER SUGGESTED ANSWER: The complaint for illegal dismissal will
prosper. The Labor Code (in Article 281) provides that a probationary employee may be terminated
when he fails to qualify as a regular employee in accordance with reasonable standards made known by
the employer to the employee at the time of the latter’s engagement. In the question, the probationary
employee was not informed of such reasonable standards at the time he was employed. Thus, if he is
to be legally terminated, it should be because of gross and habitual neglect of duties.
322[] Q: Michelle Miclat was employed on a probationary basis as marketing assistant by Clarion Printing
House but during her employment she was not informed of the standards that would qualify her as a
regular EE. 30 days after, Clarion informed Miclat that her employment contract had been terminated
without any reason. Miclat was informed that her termination was part of Clarion’s cost-cutting
measures. Is Miclat considered as a regular EE and hence entitled to its benefits? YES. In **all
cases of probationary employment, the ER shall make known to the EE the standards under which
he will qualify as a regular EE at the time of his engagement. Where no standards are made known
to the EE at that time, he shall be DEEMED A REGULAR EE. In the case at bar, she was **deemed to
have been hired from day one as a regular EE (Clarion Printing House Inc., v. NLRC, 27 June 2005).
regular.323
*****XPNs:
a. Covered by an Apprenticeship or Learnership agreement stipulating a
different period;
b. Voluntary agreement of parties (especially when the nature of work
requires a longer period);
c. The ER gives the EE a second chance to pass the standards set. Such an
EXTENSION may be lawfully agreed upon, despite the restrictive language
of Art. 281. It constitutes a lawful exception to the statutory limit. By voluntarily
agreeing to such an extension, the EE waived any benefit attaching to the
completion of the period if he still failed to make the grade during the period of extension
(Mariwasa Mfg. Inc. v. Hon. Leogardo, 26 January 1989).324
323Q: Julius Lagat, a truck driver, was hired by Merdeka Trucking Company which is engaged in the
business of hauling farm produce, fertilizer and other cargo for an agribusiness company on a non-
seasonal and continuing basis. Lagat’s contract stipulated that it was effective for six months from
date of execution, renewable for the same period. Upon expiration of the renewed contract. Lagat
was advised by Merdeka that his services were terminated. Lagat filed a complaint for illegal dismissal
against Merdeka which contended that Lagat had no cause of action as his employment was for a
definite and specific period. You are the Labor Arbiter. Decide with reasons. SUGGESTED
ANSWER: As Labor Arbiter, I will decide in favor of Lagat. From the circumstances of the case, it is
apparent, that the six month period was imposed to preclude the employee from acquiring security of
tenure. The contract that Merdeka had with Lagat can be considered as circumventing the law
that gives to a worker the right to security of tenure, considering that Lagat was a truck driver in a
business that was not seasonal and was on a continuing basis. If the work was seasonal, then he would
have been legally employed for a specific period, namely, per season. (Cielo vs. NLRC. 193 SCRA 410)
This should also be noted. Lagat’s contract was a renewed contract. This means that at the very least,
he was already employed for six months after which the contract was renewed. So, if the first six
months period was considered a probationary period, Lagat has now worked after the probationary
period. Thus, he is now a regular employee and clearly with the right to security of tenure.
(Article 281. Labor Code)
324Q: Mr. X was hired by Y Company on probation for six months as general utility worker. On
the expiration of the probationary period, Mr. X was informed by Y Co. that his work was
unsatisfactory and failed to meet the required standard. To give him a chance to improve his
performance, Y Co. instead of terminating Mr. X’s services, extended, with X’s written
consent, the probation period for another three months. This extension notwithstanding, his
performance did not improve, on account of which, Y Co. terminated Mr. X's services at the end of
the extended period. Mr. X filed a case for illegal dismissal contending that he was already regular at the
time of his dismissal pursuant to Art. 281 of the Labor Code, the particular portion of which provides:
“xxx. An employee who is allowed to work after a probationary period shall be considered a regular
employee." Therefore, he could not have been lawfully dismissed for failure to meet company standards
as a probationary worker. Decide with reason. SUGGESTED ANSWER: Mr. X could not argue that
because his probationary period was extended beyond six months he was now a regular employee and
thus could no longer be terminated except for Just cause or when authorized by law. The fact is that
the probationary period of Mr. X was extended beyond six months with his consent. It was to
give him an opportunity to improve his performance. Thus, it was legal for Y Company to
terminate Mr. X for his failure to meet company standard as a probationary worker. The Labor Code
provides that probationary employment shall not exceed six (6) months. But the Supreme
Court has ruled that said probationary period could be extended with the consent of the
probationary employee lo give him an opportunity to improve his performance. (Art. 281. Labor
Code)
d. When the same is required by the nature of the work, e.g. the
probationary period set for professors, instructors and teachers is **3
consecutive325 years of satisfactory service pursuant to DOLE Manual of Regulations
for Private Schools. *Period of probationary employment of private school
teachers (academic teaching personnel): shall **not be more than a period of 6
consecutive semesters or 9 consecutive trimesters of satisfactory service, as
the case may be (The Manual of Regulations for Private Higher Education, Sec.
117). An academic teaching personnel, who does not possess the minimum
academic qualifications under Section 35 and 36 of the Manual of Regulations for
Private Higher Education shall be **considered as a part-time EE, and
therefore can not avail of the status and privileges of a probationary
employment. A part-time EE CANNOT ACQUIRE A REGULAR PERMANENT
status, and hence, **may be terminated when a qualified teacher becomes
available (Manual of Regulations for Provate Higher Education).
e. When the same is established by company policy.
6. Instances when EXTENSION of probationary period is allowed—only when:
a. Nature of the job requires extensive training, or
b. If it is a company policy that the period of probationary employment
should be an extended period
c. by agreement between the ER & EE to allow EE to have a second chance
to pass the standards set, supra.
*NB: The extension of period should always be reasonable, i.e., the
NATURE of the work so requires and that it is the AMOUNT OF TIME REQUIRED
for an ordinary worker to learn the job.
7. COMPUTATION of the 6-month period—two opinions:
a. Opinion 1: From the date of appointment up to the same calendar date
of the 6th month following such appointment, i.e., the number of days in each
325 Note the word “consecutive”, hence, the three years should be intermittent [] Colegio de San
Agustin (CSA) hired Gela Jose as a grade school classroom teacher on a probationary basis for SY ‘84 –
‘85. Her contract was renewed for SY’s ‘85-‘86 and ‘86-‘87. On Mar. 24, ‘87, the CSA wrote the Gela
that "it would be in the best interest of the students and their families that she seek employment in
another school or business concern for next school year." Notwithstanding the said notice, the CSA
still paid Gela her salary for April 15 to May 15, 1987. On April 6, ‘87, Gela wrote the CSA and sought
reconsideration but she received no reply. Thereafter, she filed a complaint for illegal dismissal. Was
Gela illegally dismissed? NO. The Faculty Manual of CSA underscores the completion of three years
of continuous service at CSA before a probationary teacher acquires tenure. Hence, **Gela cannot claim
any vested right to a permanent appointment since she had not yet achieved the prerequisite 3-year period under
the Manual of Regulation for Private Schools and the Faculty Manual of CSA. In the instant case
where the CSA did not wish to renew the contract of employment for the next school year, Gela has
no ground to protest. She was not illegally dismissed. **Her contract merely expired (CSA v.
NLRC, 6 September 1991).
particular month is irrelevant.326

b. Opinion 2: However, in the same month and year,327 SC said that 6
months consists in 180 days applying Art. 13 NCC.
c. How to resolve the conflict between the Alcira and Mitsubishi:
i. Statutory Construction: The latter case prevails (Mitsubishi Motors);
ii. Rule more favorable to the EE: Use the computation which
would amount to granting the subject EE regular employment status (based on
Constitutional and statutory provisions for the liberal interpretation of labor laws)
8. Summary of instances when a probationary EE is deemed to be a regular EE
a. If he is allowed to work after a probationary period (LC, Art. 281).
b. If no standards, under which he will qualify as a regular EE, are made
known to him at the time of his engagement [IRR, Book VI, Rule I, Sec. 6(d)].
9. Essence of the **PROHIBITION ON DOUBLE OR SUCCESSIVE
PROBATION: The evil sought to be prevented is to DISCOURAGE SCHEMING
ERS from using the system of double or successive probation to CIRCUMVENT
the mandate of the LAW ON REGULARIZATION and make it easier for them to
dismiss their EEs (Holiday Inn Manila v. NLRC, 14 September 2003).
10. GROUNDS FOR TERMINATING a probationary employment:*****
326Middleby Phils. Corp. hired Alcira as engineering support services supervisor on a probationary
basis for six months. Apparently unhappy with Alcira’s performance, Middleby terminated his
services. Alcira contends that he was already a regular EE when his employment was terminated.
According to Alcira’s computation, since Art. 13 of the NCC provides that 1 month is composed of 30
days, 6 months totaling 180 days, then his 180th day would fall on Nov. 16, 1996 making him a regular
EE before his termination. Is the contention of the petitioner in the computation of six months
correct? NO. The computation of the 6-month probationary period is **RECKONED FROM THE
DATE OF APPOINTMENT up to the same calendar date of the 6th month following. In short,
since the number of days in each particular month was IRRELEVANT, Alcira was still a
probationary EE when Middleby opted not to “regularize” him on Nov. 20, 1996 (Alcira v. NLRC, 9
June 2004).
327Mitsubishi Motors v. ChrySOLEr Phils. Labor Union, June 29, 2004: “Applying Art. 13 of the NCC,
the probationary period of 6-months consists of 180 days. This is in conformity with Art. 13(1) of the
NCC. The number of months in the probationary period (6) should then be multiplied by the number
of days within a month, 30; hence, the period of 180 days. As clearly provided for the in last par. of
Art. 13, in computing a period, the first day shall be excluded and the last day included. Thus, the 180
days commenced on May 27, 1996, and ended on Nov. 23, 1996. The termination letter dated Nov. 25,
1996 was served on Paras only on Nov. 26, 1996. He was, by then already a regular EE of the
company under Art. 281 of the LC.”
a. Just/authorized causes;328
b. When he fails to qualify as a regular EE in accordance with
REASONABLE STANDARDS made known by the ER to the EE at the time of
his engagement (ICMC v. NLRC, 30 January 1989; LC, Art. 281).
*NB: If Pre-termination of probationary contract is due to the valid causes,
the **ER is not liable to pay the monetary value of the unexpired portion of
the employment.
11. Is there Security of tenure (SOT) among probies? YES.329 While probationary
EEs do not enjoy permanent status, they are **afforded the SECURITY OF
TENURE protection of the Constitution. Consequently, they cannot be removed
from their positions unless for cause. Such constitutional protection, however,
ends upon the expiration of the period stated in their probationary contract of
employment. **Thereafter, the parties are FREE to renew the contract or not
(CSA v. NLRC, 6 September 1991).
12. LIMITATIONS on the ER's POWER TO TERMINATE a probationary
employment contract:
a. The power must be exercised in accordance with the specific
requirements of the contract;
b. If a particular time is prescribed, the termination must be within such time
328Q: Aleta Quiros was a faculty member at BM Institute, a private educational institution. She was
hired on a year-to-year basis under the probationary employment period provision of the Manual
of Regulations for Private Schools. The terms and conditions of her engagement were defined under
her renewable yearly contract. For reasons of its own, BM Institute no longer wanted to continue with
Aleta's teaching services. Thus, after the contract for her second year expired, BM Institute
advised Aleta that her contract would no longer be renewed. This advice prompted Aleta to file a
complaint for illegal dismissal against BM Institute. Will the complaint prosper? (2013 Bar Questions)
(A) Yes, because no just or authorized cause existed for the termination of her probationary
employment. (B) Yes, because under the Labor Code, Aleta became a regular employee after 6 months
and she may now only be dismissed for cause. (C) No, because there was no dismissal to speak of. Her
employment was automatically terminated upon the expiration of her year-to-year fixed term
employment. (D) No, because BM Institute may dismiss its faculty members at will in the exercise of its
academic freedom. (E) No, because Aleta was still on probationary employment. SUGGESTED
ANSWER: (A) (Yolanda Mercado v. AMA Computer College, G.R. No. 183572 [2010])
329 [] Q: Ron Cruz was employed as gardener by Manila Hotel on “probation status” effective Sept.
22, 1976. The appointment signed by Cruz provided for a 6 month probationary period. On Mar. 20,
1977, or a day before the expiration of the probationary period, Cruz was promoted to lead
gardener position. On the same day, Cruz’ position was “abolished” by Manila Hotel allegedly due to
economic reverses or business recession, and to salvage the enterprise from imminent danger of collapse. Was
Cruz illegally dismissed? YES. There is no dispute that as a probationary EE, Cruz had but
limited tenure. Although on probationary basis, however, Cruz still enjoys the constitutional
protection on security of tenure. During his tenure of employment, therefore, or before his contract
expires, Cruz cannot be removed except for cause as provided for by law. What makes Cruz’ dismissal
highly suspicious is that it took place at a time when he **needs only but a day to be eligible as a
regular EE. That he is competent finds support in his being promoted to a lead gardener in so short
span of less than 6 months. By terminating his employment or abolishing his position with but
**only one day remaining in his probationary appointment, the hotel DEPRIVED Cruz of
QUALIFYING as a regular EE with its concomitant rights and privileges (Manila Hotel Corp. v. NLRC,
22 January 1986).
and if formal notice is required, then that form must be used (DACODECO v.
Pasawa, 9 Juy 2009);
c. The ER's dissatisfaction330 must be real and in good faith, not
feigned so as to circumvent the contract or the law; and
d. There must be NO UNLAWFUL DISCRIMINATION in the dismissal (Univac
Development Inc. v. Soriano, 19 June 2013).
*NB: The probationary EE is **entitled to procedural DUE PROCESS prior
to dismissal from service.331
——————————————
REGULAR EMPLOYMENT
1. Types of regular employment:
330 Q: During their probationary employment, eight (8) employees were berated and insulted by
their supervisor. In protest, they walked out. The supervisor shouted at them to go home and never
to report back to work. Later, the personnel manager required them to explain why they should not be
dismissed from employment for abandonment and failure to qualify for the positions applied for. They
filed a complaint for illegal dismissal against their employer. As a Labor Arbiter, how will you
resolve the case? 10% (2006 Bar Question) SUGGESTED ANSWER: I will rule in favor of
management. First of all, there was no abandonment because there was no intention not to
return to work. It was just that the 8 employees were berated and insulted and even told never to
report back to work. It was but natural for them to feel demoralized, but there was never an indication
to abandon their employment. The probationary workers could, however, be terminated for
failing to meet probationary standards. If the reasons for the supervisor’s berating and insulting
behavior were poor or substandard performance on the part of the workers, their probationary
employment could be legally terminated. ANOTHER SUGGESTED ANSWER: I will rule against the
employer. The probationary employees are entitled to security of tenure and may not be
dismissed except for cause, and are entitled to be hired as regular employees if they are
qualified for the position. There is no abandonment, because the absence of the employees has valid
and justifiable cause, and they did not intend of severe employment or lose the intention to return to
work. [TOM prefers this answer]. ANOTHER SUGGESTED ANSWER: As Labor Arbiter, I will rule
that the complaint for illegal dismissal is premature. What the supervisor did - he told the eight (8)
employees to go home and never to report back to work - did not have the effect of terminating the
employment of said employees. As supervisor, he is not a managerial employee with the power, among
others, to discharge employees.
331Bar 2006: During their probationary employment, eight employees were berated and insulted by
their supervisor. In protest, they walked out. The supervisor shouted at them to go home and never
to report back to work. Later, the personnel manager required them to explain why they should
not be dismissed from employment for abandonment and failure to qualify for the positions applied
for. They filed a complaint for illegal dismissal against their ER. As the Labor Arbiter, how will you
resolve the case? Resolve the case in favor of the 8 probationary EEs due to the following:
a. Probationary EEs also **enjoy security of tenure (Biboso v. Victoria Milling, 31 March 1977).
b. In all cases involving EEs on probationary status, the ER shall make known to the EE at
the time he is hired, the standards by which he will qualify for the positions applied for.
c. The **filing of the complaint for illegal dismissal EFFECTIVELY NEGATES the ER's theory of
abandonment (Rizada v. NLRC, 21 September 1999).
d. The order to go home and not to return to work constitutes dismissal from employment.
e. The 8 probationary EEs employment were **terminated without just cause and without
due process.
In view of the foregoing, order their REINSTATEMENT to their former positions without
loss of seniority rights with full back wages, plus damages and attorney’s fees.
a. NATURE OF WORK:332 An employment shall be **DEEMED TO BE

REGULAR where the EE has been engaged to perform activities which are
USUALLY NECESSARY333 OR DESIRABLE IN THE USUAL
BUSINESS OR TRADE of the ER, the provisions of written agreements to the
contrary notwithstanding and regardless of the oral agreements of the parties
[IRR, Book VI, Rule I, Sec. 5 (a)]. NB: repeated re-hiring334 is a manifestation of
332Metromedia Times Corp. entered, for the fifth time, into an agreement with Efren Paguio,
appointing him to be an account executive of the firm. He was to solicit advertisements for “The
Manila Times.” The written contract between the parties provided that, “You are not an employee of
the Metromedia Times Corp. nor does the company have neither any obligations towards anyone you
may employ, nor any responsibility for your operating expenses or for any liability you may incur. The
only rights and obligations between us are those set forth in this agreement. This agreement
cannot be amended or modified in any way except with the duly authorized consent in writing of
both parties.” Is Efren Paguio a regular EE of Metromedia Times Corporation? YES. He performed
activities which were **necessary and desirable to the business of the ER, and that the same went on
for more than a year. He was an account executive in soliciting advertisements, clearly necessary
and desirable, for the survival and continued operation of the business of the corp. The
**corporation cannot seek refuge under the terms of the agreement it has entered into with Efren
Paguio. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the
terms of their written or oral contract, but also on the basis of the NATURE of the work of Efren
has been called upon to perform. A **stipulation in an agreement can be IGNORED as and when it is
utilized to DEPRIVE the EE of his SECURITY OF TENURE (Paguio v. NLRC, 9 May 2003).
333A total of 43 EEs who are deaf-mutes were hired and re-hired on various periods by Far East
Bank and Trust Co. as money sorters and counters through a uniformly worded agreement called
“Employment Contract for Handicapped Workers.” The company disclaimed that these EEs were
regular EEs and maintained among others that they are a special class of workers, who were hired
temporarily under a special employment arrangement which was a result of overtures made by some
civic and political personalities to the Bank. Should the deaf-mute EEs be considered as regular
EEs? YES. The **RENEWAL of the contracts of the handicapped workers and the hiring of
others leads to the conclusion that their tasks were beneficial and necessary to the bank. It also
shows that they were qualified to perform the responsibilities of their positions; their DISABILITY
did not render them unqualified or unfit for the tasks assigned to them. The Magna Carta for Disabled
Persons mandates that a qualified disabled EE should be given the **same terms and conditions of
employment as a qualified able-bodied person. The fact that the EEs were qualified disabled
persons necessarily removes the employment contracts from the ambit of Art. 80. Since the Magna
Carta accords them the rights of qualified able-bodied persons, they are thus covered by Art. 280 of
the LC (Bernardo v. NLRC, 12 July 1999).
334Coca-Cola Bottlers Phils, Inc., (CCBPI) engaged the services of the workers as “sales route
helpers” for a period of 5 months. After 5 months, the workers were employed by the company on a
day-to-day basis. According to the company, the workers were hired to substitute for regular route
helpers whenever the latter would be unavailable or when there would be an unexpected shortage of
manpower in any of its work places or an unusually high volume of work. The practice was for the
workers to wait every morning outside the gates of the sales office of the company, if thus hired, the
workers would then be paid their wages at the end of the day. Should the workers be considered as
regular EEs of CCBPI? YES. The **REPEATED REHIRING of the workers and the continuing
need for their services clearly attest to the NECESSITY OR DESIRABILITY of their services in the
regular conduct of the business or trade of the company. The fact that the workers have agreed to
be employed on such basis and to forego the protection given to them on their security of tenure,
demonstrate nothing more than the serious problem of impoverishment of so many of our people
and the resulting unevenness between labor and capital (Magsalin & Coca-Cola v. N.O.W.M., 9 May
2003).
the necessity of the EE’s activity in the usual business of the ER.335
b. YEARS OF SERVICE: Any EE who has **rendered at least one
year336 of service, whether such service is continuous or broken, shall be
considered a regular EE with respect to the activity in which he is employed and his
employment shall continue while such activity exists [IRR, Book VI, Rule I, Sec. 5 (b)]
c. **NB: Regularization is NOT A MANAGEMENT PREROGATIVE; rather,
335Q: Kitchie Tempo was one of approximately 500 production operators at HlTEC
Semiconductors, Inc., an export-oriented enterprise whose business depended on orders for computer
chips from overseas. She was hired as a contractual employee four years ago. Her contracts would be
for a duration of five (5) months at a time usually after a one-month interval. Her re-hiring was
contingent on her performance for the immediately preceding contract. Six months after the
expiration of her last contract, Kitchie went to HITEC's personnel department to inquire why
she was not yet being recalled for another temporary contract. She was told that her performance
during her last stint was "below average." Since there was no union to represent her. Kitchie seeks your
advice as labor lawyer about her chances of getting her job back. What will our advice be? (5%) (2005
Bar Question) SUGGESTED ANSWER: Kitchie’s "below average" rating will not matter. She
was a regular employee from day 1 of her service as her work was evidently usually necessary or
desirable to HITEC's usual business. Under par. 1of Art. 280, Kitchie is a regular (not casual)
employee. Also, Kitchie obtained permanent regular employment when she was repeatedly re-
hired by HITEC. As a permanent regular employee, working for an indefinite period, Kitchie is,
entitled to the reliefs of reinstatement and full backwages as mandated in Art. 279 of the Labor
Code. A "below average" rating would matter if Kitchie was made to undergo probationary
employment, or was a probationary employee under Art. 281 of the Code. She was not obviously,
she was a qualified and competent production operator; She would not have been repeatedly re-
hired if she were not that qualified and competent. I will thus, advise her to sue for illegal
dismissal, with prayer for regularization in addition to the reliefs of reinstatement and full
backwages provided for in Art. 279 of the Labor Code.
336 Bar 2008: Super Comfort Hotel employed a regular pool of “extra waiters” who are asked to
report for duty when the Hotel’s volume of business is beyond the capacity of the regularly employed
waiters to undertake. Pedro has been an “extra waiter” for more than 10 years. He is also called upon
to work on weekends, on holidays and when there are big affairs at the hotel. What is Pedro’s status as
an EE under the LC? Pedro has acquired the status of a regular EE. Pedro was engaged to perform
activities which are necessary or desirable in the usual business or trade of the ER. Moreover, Pedro
has been **“extra waiter” for more than 10 years. Under the law, any EE who has rendered service
for at least one year, whether such service is continuous or broken, shall be considered a regular EE
with respect to the activity in which he is employed and his employment shall continue while such
activity exists (LC, Art. 280). Alternative Answer: Pedro is a regular, but seasonal worker. He is regular
because as waiter, he was engaged to perform activities which are usually necessary or desirable in the
usual business or trade of employer Super Comfort Hotel. However, his security of tenure is
coterminous with the seasonal need for which he was hired [LC, Art. 280(1)].
it is the NATURE337 of employment that DETERMINES it, as shown in the

entirety of the activities performed by the EE. It is a MANDATE of the law
(PAL v. Pascua, 15 August 2003).
2. Regular employment **DOES NOT MEAN PERMANENT employment. A
probationary EE becomes a regular EE after 6 months. The service of a
regular EE may only be terminated for just/authorized causes. The practice
of entering into employment contracts which would prevent the workers from
becoming regular should be struck down as contrary to public policy and
morals (Universal Robina Corp. v. Catapang, 14 October 2005).
3. TESTS338 to determine regular employment:**
a. Reasonable Connection Rule: The primary standard of determining
regular employment is the **REASONABLE CONNECTION between the
particular activity performed by the EE to the usual trade or business of the
ER. The test is whether the former is USUALLY NECESSARY OR
DESIRABLE in the usual business or trade of the ER (De Leon v. NLRC, G.R.
337 Moises was employed by La Tondeña at the maintenance section of its Engineering Department
paid on a daily basis through petty cash vouchers. His work consisted mainly of painting company
building and equipment and other odd jobs relating to maintenance. After a service of more than 1
year, Moises requested that he be included in the payroll of regular workers, instead of being paid through petty
cash vouchers. Instead, La Tondeña dismissed Moises and claimed that Moises was contracted on
a casual basis specifically to paint certain company buildings and that its completion terminated Moises’
employment. Can Moises be considered as a regular EE? YES. The law demands that the **NATURE
AND ENTIRETY of the activities performed by the EE be considered. Here, the painting and
maintenance work given to Moises manifests a treatment consistent with a maintenance man and
not just a painter, for if his job was only to paint a building there would be no basis for giving him other work
assignments in-between painting activities. It is not tenable to argue that the painting and maintenance work
of Moises are not necessary in La Tondeña’s business of manufacturing liquors; otherwise, there would be
no need for the regular maintenance section of the company’s engineering department (De Leon v. NLRC, G.R. No.
70705, 21 August 1989).
338*NB LPS – PRIMARY STANDARD IN DETERMINING REGULAR EMPLOYMENT. The
primary standard of determining a regular employment is the reasonable connection between the
particular activity performed by the EE in relation to the usual business or trade of the ER. The
connection can be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. Also, if the EE has been performing the job
for at least one year, even if the performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance as sufficient evidence of the necessity
if not indispensability of that activity to the business. Hence, the employment is also considered
regular, but only with respect to such activity and while such activity exists (Gapayao v. Fulo, 13
June 2013)
No. 70705, 21 August 1989).339

*NB: The connection can be determined by considering the nature of
the work performed and its relation to the scheme of the particular business or
trade in its entirety (Highway Copra Traders v. NLRC, 30 July 1998).340
b. Length of service341 —One-year Rule:342 Also, the performance of a job
for AT LEAST A YEAR is sufficient evidence of the JOB’S NECESSITY if
not indispensability to the business. This is the rule **even if its performance
is not continuous and merely intermittent. The employment is considered
339 Q: Don Don is hired as a contractual employee of CALLHELP, a call center. His contract is
expressly for a term of 4 months. Don Don is hired for 3 straight contracts of 4 months each but
at 2-week intervals between contracts. After the third contract ended, Don Don is told that he will no
longer be given another contract because of "poor performance." Don Don files a suit for
"regularization" and for illegal dismissal, claiming that he is a regular employee of CALLHELP and
that he was dismissed without cause. You are the Labor Arbiter. How would you decide the case? (2015
Bar Question) SUGGESTED ANSWER: As Labor Arbiter, I will decide the case in favor of Don
Don. Given the nature of Don Don’s work, which consist of activities usually or desirable in
the usual business of CALLHELP, Don Don should be considered a regular employee.
CALLHELP’s termination of Don Don’s service in the guise of “poor performance” is not
valid. Whether for a probationary or regular employee, the requisites of dismissal on that ground
do not appear to have been complied with by the employer here.
340Q: Mr. Ortanez has been in the building construction business for several years. He asks you, as his
new labor counsel, for the rules he must observe in considering regular employment in the
construction industry. You clarify that an employee, project or non-project, will acquire regular status if
__________. (2013 Bar Questions) (A) he has been continuously employed for more than one year (B)
his contract of employment has been repeatedly renewed, from project to project, for several years (C)
he performs work necessary and desirable to the business, without a fixed period and without
reference to any specific project or undertaking (D) he has lived up to the company's regularization
standards (E) All of the above. SUGGESTED ANSWER: (C) Note by the provider of suggested
answers: With all due respect to the examiner, the questions is ambiguous since it mentions, project or
non-project. This is confusing since the criteria in the determination of regular status for project and
non-project employees are different.
341Honorio Dagui was hired by Doña Aurora Suntay Tanjangco in 1953 to take charge of the
maintenance and repair of the Tanjangco apartments and residential bldgs. He was to perform
carpentry, plumbing, electrical and masonry work. Upon the death of Doña Aurora Tanjangco in
1982, her daughter, Teresita Tanjangco Quazon, took over the administration of all the Tanjangco
properties, and dismissed Dagui. Is Honorio Dagui a regular EE? YES. The **jobs assigned to Dagui
as maintenance man, carpenter, plumber, electrician and mason were directly related to the business
of the Tanjangco’s as lessors of residential and apartment bldgs. Moreover, such a continuing need
for his services by the Tanjangcos is sufficient evidence of the necessity and INDISPENSABILITY
of his services to their business or trade. Dagui should likewise be considered a regular EE by the
mere fact that he rendered service for the Tanjangcos for MORE THAN ONE YEAR, that is,
beginning 1953 until 1982, under Doña Aurora; and then from 1982 up to June 8, 1991 under the
daughter, for a total of 29 and 9 years respectively. Owing to Dagui's **LENGTH OF SERVICE, he
became a regular EE, by OPERATION OF LAW, one year after he was employed in 1953 and
subsequently in 1982 (Aurora Land Projects Corp. v. NLRC, G.R. No. 114733, 2 January 1997).
342*NB: The status of regular employment **attaches to the casual EE on the DAY IMMEDIATELY
AFTER the end of his first year of service. The law does not provide the qualification that the EE
must first be issued a regular appointment or must first be formally declared as such before he can
acquire a regular status (Aurora Land Projects Corp. v. NLRC, January 2, 1997).
**regular, but only with respect to such activity and while such activity
exists (Universal Robina Corp. v. Catapang, 14 October 2005).
*The tests apply to part-time EEs.343
4. *****Mode of compensation is NOT DETERMINATIVE of regular
employment: While the EEs mode of compensation was on a **“per piece basis” the
status and nature of their employment was that of regular EEs (Labor
Congress of the Phils v. NLRC, 21 May 1998).344
5. Those who are not regular EEs:
a. In case of OFWs, Art 280 of the LC does not apply.
b. <SEAFARERS> cannot be considered as regular EEs. Their
employment is governed by the contracts they sign every time they are hired and
their employment terminates when the contract expires. Their employment is
fixed for a certain period of time (Ravago v. Esso Eastern Maritime Ltd., 15 March
2005).345
6. Summary on how one can become a regular EE (LPS):***
Regular EE by When an Ee has been engaged to perform activities which are usually necessary
Nature of work or desirable in the usual business or trade of the Er (Art. 294, LC)
Casual to When an Ee has rendered at least one (1) year of service, whether such service
Regular is continuous or broken, with respect to the activity in which he is employe
(Art. 294, LC). The status of regular employment under this category attaches to
the casual worker on the day immediately after the end of his first year of
service as such casual employee (Kay Products Inc. v. CA, 28 July 2005).
Project to When the project Ee is continuously rehired even after cessation of a project
Regular and the tasks performed by the alleged “project Ee” are vital, necessary and
indispensable to the usual business or trade of the Er, the Ee is deemed regular
(Maraguinot v. NLRC, 22 January 1998)
343*NB LPS – May part-time Ee be deemed regular? Yes. An Ee worked on a part-time basis does
not mean that he is not a regular Ee. One’s regularity of employment is not determined by the number
of hour’s one works but by the nature and by the length of time one has been in that particular job
(Perpetual Help Credit Cooperative Inc. v . Faburada, 8 October 2001).
344Q: The workers worked as cargadors at the warehouse and ricemills of farm A for several years. As
cargadors, they loaded, unloaded and piled sacks of rice from the warehouse to the cargo trucks for
delivery to different places. They were paid by Farm A on a piece-rate basis. Are the workers
considered regular employee? (2012 Bar Question): a) Yes, because Farm A paid wages directly to
these workers without the intervention of any third party independent contractor; b) Yes, their
work is directly related, necessary and vital to the operations of the farm; c) No, because Farm
A did not have the power to control the workers with respect to the means and methods by which the
work is to be accomplished; d) A and B. SUGGESTED ANSWERS: d) A and B
345Q: TRUE or FALSE. Seafarers who have worked for twenty (20) years on board the same vessel
are regular employees. (2009 Bar Question) SUGGESTED ANSWER: FALSE. *****Seafarers as
overseas Filipino workers are fixed-term employees whose continued rehiring should not be
interpreted as a basis for regularization but rather as a series of contract renewals sanctioned
under the doctrine set by Millares vs. NLRC (Gu- Miro v. Adorable, 437 SCRA 162 [2004]).
Contractual to The repeated rehiring and continuing need for the services of a contractual
regular are sufficient evidence of the necessity and indispensability of his services to the
Er’s business or trade (Baguio Country Club Corp. v. NLRC, 28 February 1992)
Seasonal to When an Ee is engaged in work or services seasonal in nature and the
Regular employment is for more than one season (Hacienda Fatima v. National Federation
of Sugarcane Workers, 28 January 2003)
Apprentice to When the apprenticeship program is not approved by the DOLE (Nitto
Regular Enterprises v. NLRC, 29 September 1995)
Probationary to a. When the probationary Ee is engaged to work beyond the probationary
Regular period of six months (TOM: or reasonable time agreed upon), as provided
under Art. 287 of the LC (Dusit Hotel Nikko v. Gatbonton, 5 May 2006);
b. When a probationary Ee is repeatedly rehired after her first six-month
probationary period (Octavio v. NLRC, 3 October 1991);
c. When the Er extended a regular or permanent appointment to an Ee
once he finds the Ee is qualified for regular employment even before the
expiration of the probationary period; and
d. When the Er did not apprise the probationary Ee of the standards by
which he will qualify as a regular Ee (A.M. Oreta and Co. Inc. v. 10 August 1989)
——————————————
PROJECT EMPLOYMENT
1. A "project" has reference to a PARTICULAR job or undertaking that MAY OR
MAY NOT BE within the regular or usual business of the ER. In either case, the
project must be
a. distinct, separate and identifiable from the main business of the ER, and
b. its duration must be **DETERMINED OR DETERMINABLE (PAL v.
NLRC, 9 November 1998). NB: a project EE’s work is co-terminus with that of the
project itself.346
2. Project employment: employment that has been FIXED for a SPECIFIC
project or undertaking the COMPLETION for which has been **determined at
the time of engagement of the EE [IRR, Book VI, Rule I, Sec. 5(a)].347
*****NB: The period is NOT the determining factor, so that even if the
period is more than 1 year, the EE does not necessarily become regular.348 But where
the employment of a project EE is **extended long after the supposed project
has been finished, the EEs are removed from the scope of project EEs and
CONSIDERED AS REGULAR EES. Why? Repeated hiring on a project-to-
project basis is CONSIDERED NECESSARY AND DESIRABLE to the business of the
346Q: Aldrich Zamora, a welder, was hired on February 1972 by Asian Contractors Corporation (ACC)
for a project. He was made to sign a contract stipulating that his services were being hired for
the completion of the project, but not later than December 30, 1972, whichever comes first.
After December 1972, Zamora, being a man of many talents, was hired for different projects of ACC
in various capacities, such as carpenter, electrician and plumber. In all of these engagements. Zamora
signed a contract similar to his first contract except for the estimated completion dates of the project
for which he was hired. What is Zamora's status with ACC? is he a contract worker, a project
employee, a temporary or a regular employee? State your reason. SUGGESTED ANSWER: Zamora
could be a project employee if his work is coterminous with the project for which he was hired.
But in the case, Zamora was rehired after the completion of every project throughout the period of
his employment with the company which ranged for quite a long time. Thus, he should be considered
a regular employee. (Philippine National Construction Corporation vs. National Labor Relations
Commission, et aL, G.R No. 95816, 27 October 1972. J. Grino-Aquino) ALTERNATIVE ANSWER:
a) Zamora is a regular employee because he was engaged to work in various projects of ACC for a
considerable length of time, on an activity that is usually necessary desirable in the usual business or
trade of ACC. (Mehitabel Furniture vs. NLRC, 220 SpRA 602) b) Zamora is a regular employee. Article
280 of the Labor Code declares with unmistakable clarity: “THE PROVISIONS OF WRITTEN
AGREEMENT TO THE CONTRARY NOTWITHSTANDING, xxx an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer.” He is not a CONTRACT or
TEMPORARY WORKER because even the provisions of the simulated contracts were not followed
when his job was used continuously. He is not a project employee, as the term is understood in Art. 280
or under Policy Instruction No. 20.
347Q: Distinguish the project employees from regular employees. (1996 Bar Question) SUGGESTED
ANSWER: A regular employee is one engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer. On the other hand, a project employee is
one whose employment is 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. (See
Art. 280 of the Labor Code)
348Q: Martillo and other similarly-situated project workers demanded that the increases be extended to
them, inasmuch as they should now be considered regular employees and members of the bargaining
unit. (2006 Bar Question) If you were ABC's legal counsel, how would you respond to this demand?
SUGGESTED ANSWER: As legal counsel for ABC, I would argue that the employment of Martillo
was fixed for a specific project or undertaking, the completion or termination of which has been
determined at the time of his engagement. Rendering 14 months of work does not make him a
regular employee, when to begin with, he was employed for a specific project, i.e., which is the
construction of a particular 40-storey building. *****The rule on more than 1 year of service
making the employment regular applies only to casual employees, hence, Mariano does not
belong to the bargaining unit of regular employees.
ER. The EE is regular (Maraguinot v. NLRC, 22 July 1998).

[] Compare it with this one:349 Compliance with the reportorial
requirements confirm that the person is a project EE. The MERE REHIRING
of Puente on a project-to-project basis did not confer upon him regular
employment status. The practice was dictated by the practical consideration that
experienced construction workers are more preferred. It does not change
349Roger Puente was hired by Filsystems, Inc., initially as an installer and eventually promoted to
mobile crane operator, and was stationed at the company’s premises. Puente claimed in his complaint
for illegal dismissal, that his work was continuous and without interruption for 10 years, and that
he was dismissed from his employment without any cause. Filsystems on its part averred that Puente
was a project EE in the company’s various projects, and that after the completion of each project,
his employment was terminated, and such was reported to the DOLE. Is Roger Puente a regular
EE? NO. Puente is a project EE. The contracts of employment of Puente attest to the fact that he was
hired for specific projects. His employment was **COTERMINOUS with the completion of the
projects for which he had been hired. Those contracts 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 company regularly submitted reports to the labor of the
termination of services of project workers. **Such compliance with the reportorial requirement
confirms that Puente was a project EE. The **MERE REHIRING of Puente on a project-to-project
basis did not confer upon him regular employment status. “The practice was dictated by the practical
consideration that experienced construction workers are more preferred.” It did not change his
status as a project EE [Filipinas Pre-Fabricated Building Systems (FILSYSTEMS), Inc. v. Puente, 18 March
2005]
his status as a project EE.350

3. INDICATORS of project employment—Either one or more of the following
circumstances, among others, may be considered as indicators that an EE is a
project EE (Hanjin v. Ibañez, 26 June 2008):
a. The DURATION of the specific/identified undertaking for which the
worker is engaged is reasonably determinable;
b. Such duration, as well as the specific work/service to be performed, is
DEFINED in an employment agreement and is MADE CLEAR to the EE
at the time of hiring; NB: **Absent any other proof that the project EEs were informed
350 Q: A Construction Group hired Engineer "A" as a Project Engineer in 1987. He was assigned to
five (5) successive separate projects. All five (5) Contracts of Employment he signed, specified the
name of the project, its duration, and the temporary-project nature of the engagement of his services.
Upon completion of the fifth (5th) project in August 1998, his services were terminated. He
worked for a total of ten (10) years (1987-1998) in the five (5) separate projects. Six months after his
separation, the Group won a bid for a large construction project. The Group did not engage the
services of Engineer "A" as a Project Engineer for this new project: Instead, it engaged the services of
Engineer "B". Engineer “A" claims that by virtue of the nature of his functions, i.e.. Engineer in a
Construction Group, and his long years of service he had rendered to the Group, he is a regular
employee and not a project engineer at the time he was first hired. Furthermore, the hiring of Engineer
“B" showed that there is a continuing need for his services. Is the claim of Engineer “A" correct? [5%]
(1998 Bar Question) SUGGESTED ANSWER: The claim of Engineer "A” that he is a regular
employee and not a project, employee is not correct. The Labor Code provides: Art. 280. Regular and
casual employment. - An employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except, 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 employee, In all the
five (5) successive contracts of employment of Engineer "A” the name of the project, its
duration, and the temporary project nature of the engagement of his services are clearly
stated; hence, Engineer “A” falls within the exemption of Art. 280. The Supreme Court has ruled as
follows: Manansag v. NLRC, 218 SCRA 722 (1993)—The fact that the petitioners worked for
several projects of private respondent company is no basis to consider them as regular
employees. By the very nature of their employer's business, they will always remain project empl03'ees
regardless of the number of projects in which they have worked. De Ocampo v. NLRC, 186 SCRA 361
(1990) [Project employees] are not considered regular employees, their services, being needed
only when there are projects to be undertaken. The rationale for this rule, is that if a project has
already been completed, it would be unjust to require the employer to maintain them in the payroll
while they are doing absolutely nothing except waiting for another project. ANOTHER SUGGESTED
ANSWER: The claim of Engineer “A” is not correct. The fact that he has been working for
Construction Group for a total of ten (10) years does not make him a regular employee when it is
very clear from the Contracts of Employment he signed that he was always being engaged as a
project employee. The tenure of a project employee is co-terminus with the project in connection
with which his services were engaged. Thus, after the end of the project, the employer- employee
relationship ceases to exist. Such project employee has no legal right to insist that he should be
employed by the Construction Group for a subsequent project of said Group.
of their status as such, it will be PRESUMED that they are regular EEs.351
c. The work/service performed by the EE is in connection with the
particular project/ undertaking for which he is engaged;
d. The EE, while not employed and awaiting engagement, is **FREE to offer his
services to any other ER;
e. The TERMINATION of his employment in the particular project/
undertaking is reported to the DOLE Regional Office having jurisdiction over the
workplace within 30 days352 FOLLOWING the date of his separation from work,
using the prescribed form on EE’s termination, dismissal or suspensions;
351 Q: Design Consultants, Inc. was engaged by the PNCC to supervise the construction of the South
Expressway Extension. Design Consultants, Inc. hired Omar as a driver for two (2) years. After his
two-year contract expired, he was extended another contract for nine (9) months. These contracts
were entered into during the various stages and before the completion of the extension project. Omar
claims that because of these repeated contracts, he is now a regular employee of Design Consultants,
Inc. Is he correct? Explain briefly. (5%) SUGGESTED ANSWER: Yes. The principal test for
determining whether a particular employee is a “project employee” as distinguished from a “regular
employee” is whether or not the “project employee” was assigned to carry out a “specific project or
undertaking,” the duration and scope of which were specified at the time the employee was engaged
for the projects. ***In the problem given, there is no showing that Omar was informed that he was
to be assigned to a “specific project or undertaking.” Neither has it been established that he
was informed of the duration and scope of such project or undertaking at the time of his
engagement. [Philex Mining Corp. v. NLRC, 312 SCRA 119 (1999)] Moreover, the re-hiring of Omar
is sufficient evidence of the necessity or the indispensability of his services to the company’s business.
[Aurora Land Projects Corp v. NLRC, 266 SCRA 48(1997)] Hence, Omar is correct in claiming that he
is a regular employee of Design Consultants, Inc. ANOTHER SUGGESTED ANSWER: Omar is not
correct. Omar is a project employee as defined by Art. 280 of Labor Code. He was hired for a specific
project with fixed periods of employment, specifically: two (2) years for the first contract, and nine (9)
months for the second contract. A project employee who is hired for a specific project only is not a
regular employee notwithstanding an extension of the project provided that the contract of project
employment clearly specifies the project and the duration thereof. [Palomares v. NLRC, 277 SCRA 439
(1997))
352 Q: Diosdado, a carpenter, was hired by Building Industries Corporation (BIC), and assigned to
build a small house in Alabang. His contract of employment specifically referred to him as a “project
employee,” although it did not provide any particular date of completion of the project. Is the
completion of the house a valid cause for the termination of Diosdado’s employment? If so, what are
the due process requirements that the BIC must satisfy? If not, why not? (3%) (2009 Bar Question)
SUGGESTED ANSWER: The completion of the house should be valid cause for termination of
Diosdado’s employment. Although the employment contract may not state a particular date, but
if it did specify that the termination of the parties* employment relationship was to be on a “day
certain” - the day when the phase of work would be completed - the employee cannot be considered
to have been a regular employee (Filipinos Pre-Fabricated Building systems v. Puente, 453 SCRA 820
[2005]). To satisfy due process requirement, under DOLE Department Order No. 19, series of 1993,
the employer is required to report to the relevant DOLE Regional Office the fact of termination
of project employees as a result of the completion of the project or any phase thereof in which
one is employed. ANOTHER SUGGESTED ANSWER: No. The completion of the house is not a
valid cause for termination of employment of Diosdado, because of the failure of the BIC to state
“the specific project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee.” (Labor Code, Art. 280). There being no valid
termination of employment, there is no need to comply with the requirements of procedural due
process.
f. An undertaking in the employment contract by the ER to pay

COMPLETION BONUS to the project EE as practiced by most construction companies
(DO no. 93-19)
4. REQUISITES in determining whether an EE is a project EE:*****
a. The project EE was assigned to carry out a SPECIFIC353 project or
undertaking, and
b. The DURATION AND SCOPE of which were specified at the time
the EE was engaged for that project (Imbuido v. NLRC, 31 May 2000).
c. The EE must have been dismissed EVERY AFTER completion of
his project or phase;
d. **REPORT to the DOLE of EE’s dismissal on account of
completion of contract [Policy Inst. No. 20; D.O. 19 (1997)].354
5. “DAY CERTAIN” RULE: It states that a project employment that ends on a
certain date does not end on an exact date but UPON THE
COMPLETION of the project.
*TOM: Although the employment contract may not state a particular date, but it
could be understood from the nature of the work to be done that it will be
completed on a certain day, say, the building of a house (which cannot go
forever), the EE cannot be considered to have been a regular EE. He remains
to be a project EE as his work is limited to that project alone (Filipinas Pre-
353*NB LPS – an employment is deemed non-project, where the Ees are employed by a construction
company without reference to any particular project or a phase thereof (Alcatel Phils. Inc. v. Relos, 3 July
2009).
354 [] The ER hires the EEs whereby their employment would automatically expire upon the
completion of a project. When the employer ER proceeded to serve notices of termination of
employment when the project was about to be completed, the EEs filed a notice of strike for mass
termination. Is the action of the EEs correct? NO. The litmus test to determine whether an individual
is a project EE lies in setting a fixed period of employment involving a specific undertaking which
completion or termination has been determined at the time of the particular EE’s engagement. In this
case, as previously adverted to, the officers and the members of the Union were specifically hired as
project EEs for Leyte Geothermal Power Project. Consequently, upon the completion of the project
or substantial phase thereof, the officers and the members of the Union could be validly terminated
(Leyte Geothermal Power Progressive Employees Union v. Philippine National Oil Company, 30 March 2011).
Fabricated Building Systems, supra).355

6. REQUISITES to acquire regular EE status of project EE or a MEMBER OF
WORK POOL—The following must CONCUR to acquire a status of a regular EE
status:*****
a. There is a CONTINUOUS REHIRING of project EE’s even after
cessation of a project; and
b. The tasks performed by the alleged “project EE” are VITAL,
NECESSARY AND INDISPENSABLE to the USUAL BUSINESS OR TRADE
of the ER (D.M. Consunji, Inc. v. JAMIN, 18 April 2012).356
*NB: The **length of time during which the EE was continuously re-
hired is NOT CONTROLLING, but merely serves as a badge of regular
355 [] Bar 2009: Diosdado, a carpenter, was hired by Building Industries Corporation (BIC), and
assigned to build a small house in Alabang. His contract of employment specifically referred to him
as a "project employee," although it did not provide any particular date of completion of the
project. Is the completion of the house a valid cause for the termination of Diosdado’s employment? YES.
**Although the employment contract may not state a particular date, but if it did not specify that the
termination of the parties’ employment relationship was to be on a “day certain” – the day when
the phase of work would be completed – the EE cannot be considered to have been a regular EE
(Filipinas Pre-Fabricated Building Systems, v. Puente, 18 March 2005). To **satisfy due process
requirements, under DOLE Department Order No. 19, Series of 1993, the employer is required to
report to the relevant DOLE Regional Office the fact of termination of project EEs as a result of
the completion of the project or any phase thereof in which one is employed. *Alternative answer:
No. The completion of the house is not a valid cause for termination of employment of Diosdado,
because of the failure of the BIC to state the “specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the EE” (LC, Art. 280).
There being no valid termination of employment, there is no need to comply with requirements of
procedural due process.
356Q: Borloloy & Co. is engaged in the construction business which hired the services of Ispongklong
as mason and Agaton as carpenter in 1977. Every time their services are needed, Ispongklong and
Agaton are issued notices of employment by Borloloy & Co. in the following tenor: “This is to inform
you that you have been hired at Lahar Bldg., as mason and carpenter respectively at a monthly salary/
daily or hourly of PI2.40. Your employment shall be deemed automatically terminated either at the
completion of the project or upon the completion of the work requiring your respective services to
start May 12, 1977. ACCEPTED: Such an arrangement continued wherein both Agaton and
Ispongklong became members of a work pool from where Borloloy & Co. draws manpower to work
on various projects. After each project they have been assigned to is completed, Borloloy & Co.
reported the names of Ispongklong and Agaton to the Social Security System for registration.
In 1987 (or after ten years of service) they received a notice from Borloloy & Co. informing them
that their services are no longer needed. Ispongklong and Agaton immediately filed a case for illegal
dismissal alleging that they are regular and permanent workers of Borloloy & Co. having worked for it
for ten (10) years hence prayed for reinstatement and back wages. Borloloy & Co. on the other
hand, claims that Agaton and Ispongklong are project employees whereby their employment is
automatically terminated either at the completion of the phase of work requiring their respective
service as stated in their respective Notice of Employment the sample test of which is quoted above. If
you are the Labor Arbiter assigned to the case, how will you decide the controversy? SUGGESTED
ANSWER: As Labor Arbiter, I will promulgate a decision finding the dismissal of Agaton and
Ispongklong illegal. *****Ispongklong and Agaton ceased to be project employees when they
became members of a work pool from where their employer draws manpower to work on various
projects. Thus, as regular employees, they can be terminated only if there is just cause or
otherwise authorized by law. (Art. 280, Labor Code)
employment. Enero and Maraguinot have been employed for a period of not
less than 2 years and have been involved in at least 18 projects. These facts are
the bases in considering them as regular EEs of the company. A **work pool
may exist although the workers in the pool do NOT RECEIVE SALARIES and
are FREE TO SEEK OTHER employment during temporary breaks in the business,
provided that the worker shall be AVAILABLE when called to report for a
project. Although **primarily applicable to regular seasonal workers, this set-
up can likewise be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the ER and EE for it
**prevents the unjust situation of “coddling labor at the expense of capital”
and at the same time enables the workers to attain the status of regular EEs (Maraguinot
v. NLRC, 22 January 1998).
7. Entitlement to SEPARATION PAY
*GR: Project EEs are not entitled to separation pay if their services are
terminated as a result of the completion of project.
*XPN: If the projects they are working on have not yet been completed
when their services are terminated; NB: project EEs also **enjoy security of
tenure during the limited time of their employment (De Ocampo v. NLRC, 6 June 1990).
SEASONAL EMPLOYMENT
1. What it is: Employment where the job, work or service to be performed is
**SEASONAL IN NATURE and the employment is for the DURATION of
the season [IRR, Book VI, Rule I, Sec.5 (a)].
*An employment arrangement where an EE is engaged to work during a
particular season **on an activity that is usually necessary or desirable in the usual
business or trade of the ER.
2. End of employment: For Seasonal EEs, their **employment legally ends
upon COMPLETION of the project or the season. The termination of their
employment cannot and should not constitute an illegal dismissal (Mercado v.
NLRC, G.R. No. 79869, 5 September 1991).
a. Compared to casual EEs: One year duration on the job is pertinent in
deciding whether a casual EE has become regular or not, but it is not
pertinent to a Seasonal or Project EE. **PASSAGE OF TIME DOES NOT MAKE
A SEASONAL WORKER REGULAR OR PERMANENT (Mercado v. NLRC, 5 September
1991).
3. Entitlement to separation pay: When the business establishment is **SOLD
which effectively terminates the employment of the seasonal EEs, the latter
would be ENTITLED TO SEPARATION PAY.
4. **SEASONAL EES CAN BE CONSIDERED REGULAR EES.357 The

fact that Seasonal EEs do not work continuously for one whole year but only for
the duration of the season does not detract from considering them in regular
employment. Seasonal workers who are called to work from time to time and are
temporarily laid off during off-season are NOT SEPARATED FROM SERVICE in
that period, but **MERELY CONSIDERED ON LEAVE UNTIL RE-
EMPLOYED. If the EE has been performing the job for at least a year, even
if the performance is not continuous and merely intermittent, the law deems REPEATED
AND CONTINUING NEED for its performance as sufficient evidence of the
NECESSITY IF NOT INDISPENSABILITY of that activity to the business. Hence,
the employment is considered **REGULAR, but only with respect to such activity and
while such activity exists (Benares v. Pancho, 29 April 2005).358
[] OFF-SEASON: **During OFF-SEASON, the relationship of ER-EE
is NOT SEVERED; the Seasonal EE is **merely considered on LOA without
pay. Seasonal workers who are **repeatedly engaged from season to season
performing the same tasks are DEEMED to have acquired REGULAR
357Q: Super Comfort Hotel employed a regular pool of “extra waiters” who are called or asked to
report for duty when the Hotel’s volume of business is beyond the capacity of he regularly employed
waiters to undertake. Pedro has been an “extra waiter” for more than 10 years. He is also called upon
to work on weekends, on holidays and when there are big affairs at the hotel. What is Pedro’s status as
an employee under the Labor Code? Why? Explain your answer fully. (6%) (2008 Bar Question)
SUGGESTED ANSWER: Pedro has acquired the status of a regular employee. Pedro was engaged to
perform activities which are necessary or desirable in the usual business or trade of the employer.
Moreover, Pedro has been “extra waiter” for more than 10 years. Under the law, any employee who has
rendered service at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists (Art. 280, Labor Code). ANOTHER SUGGESTED
ANSWER: Pedro is a regular, but seasonal worker. He is regular because as waiter, he was
engaged to perform activities which are usually necessary or desirable in the usual business or
trade of employer Super Comfort Hotel. However, his security of tenure is coterminous with the
seasonal need for which he was hired (Art. 280, 1st par., Labor Code).
358 Q: A was hired in a sugar plantation performing such tasks as weeding, cutting and loading canes,
planting cane points, fertilizing and cleaning the drainage. Because his daily presence in the field
was not required, A also worked as a houseboy at the house of the plantation owner. For the next
planting season, the owner decided not to hire A as a plantation worker but as a houseboy
instead. Furious, A filed a case for illegal dismissal against the plantation owner. Decide with reason.
(3%) (2010 Bar Question) SUGGESTED ANSWER: A is a regular seasonal employee. Therefore, he
cannot be dismissed without just or valid cause. The primary standard for determining regular
employment is the reasonable connection between the particular activity performed by the employee
in relation to the usual trade or business of the employer (Pier 8 Arrastre & Stevedoring Services, Inc.,
et al. v. Jeff B. Boclot, 534 SCRA 431 [2007]). *****Considering that A, as plantation worker,
performs work that is necessary and desirable to the usual business of the plantation owner, he is
therefore a regular seasonal employee and is entitled to reinstatement upon onset of the next
season unless he was hired for the duration of only one season (Hacienda Bino v. Cuenca, 456 SCRA 300
[2005]). Converting A to a mere houseboy at the house of the plantation owner amounts to an act of
severing his employment relations as its plantation worker (Angeles v. Fernandez, 513 SCRA 378
[2007]). ALTERNATIVE ANSWER: It is management prerogative to determine what kind of
worker is needed by the plantation. Of course, if the prerogative is exercised and results in
redundancy, there must be payment of separation pay under Article 283 of the Labor Code.
employment (Hacienda Fatima v. National Federation of Sugarcane Workers-Food and

General Trade, 28 January 2003).
[] Q: Carlito Codilan and Maximo Docena had been working for the rice
mill for 25 years, while Eugenio Go, Teofilo Trangria and Reynaldo Tulin have
been working for 22, 15, and 6 years respectively. The operations of the rice mill
continue to operate and do business throughout the year even if there are
only two or three harvest seasons within the year. This seasonal harvesting is
the reason why the company considers the workers as seasonal employees. Is the
company correct in considering the EEs as seasonal EEs? NO. The fact is that
big rice mills such as the one owned by the company CONTINUE to operate
and do business throughout the year even if there are only two or three harvest seasons
within the year. It is a **COMMON PRACTICE among farmers and rice
dealers to store their palay and to have the same milled as the need arises. Thus,
the **MILLING OPERATIONS ARE NOT SEASONAL. Finally, considering the
number of years that they have worked, the lowest being 6 years, the workers
have long attained the status of regular EEs as defined under Art. 280 (Tacloban
Sagkahan Rice Mill v. NLRC, G.R. No. 73806, 21 March 1990).
——————————————
CASUAL EMPLOYMENT
1. What is casual employment?
a. It is an employment where the EE is engaged in an activity which is
**NOT USUALLY NECESSARY OR DESIRABLE in the usual business or trade of
the ER, Provided: such employment is NEITHER PROJECT NOR SEASONAL (LC,
Art. 281). He performs only an INCIDENTAL job in relation to the
principal activity of the ER.
*NB: But **despite the distinction between regular and casual
employment, every EE shall be entitled to the SAME rights and privileges,
and shall be subject to the SAME duties as may be granted by law to regular EEs
DURING the period of their ACTUAL employment.
b. An EE is engaged to perform a job, work or service which is MERELY
INCIDENTAL to the business of the ER, and such job, work or service is **for
a DEFINITE period MADE KNOWN to the EE AT THE TIME of
engagement [IRR, Book Vi, Rule I, Sec. 5 (b)].359

2. Casual EE BECOMING A REGULAR EE: If he has **rendered at least 1
year of service, whether such service is CONTINUOUS OR BROKEN, he is considered
as regular EE with respect to the activity in which he is employed and his
359 Q: How is a project worker different from a casual or contractual worker? Briefly explain your
answers, (6% ) SUGGESTED ANSWER: A project worker is employed for a specific project or
undertaking the completion or termination of which is determined at the time of his engagement. His
work need not be incidental to the business of the employer. His employment may exceed 1 year
without necessarily making him a regular employee. A casual employee is engaged to perform a
job, work, or service which is incidental to the business of the employer; moreover, the definite period
of his employment is made known to him at the time of his engagement, His continued
employment after the lapse of one year makes him a regular employee. *****Under the Social
Security Law, employment that is purely casual and not for the purpose of occupation or
business of the employer is not under the coverage of the aforesaid law. A "project worker", on the
other hand, is a specific term used to designate workers in the construction industry hired to perform a
specific undertaking for a fixed period which is co-terminus with a project or phase thereof determined
at the time of the engagement of the employee (Policy Instruction No, 19. DOLE), and it is
mandatorily required that a termination report be submitted to the nearest public employment
office upon the completion of the construction project [Aurora Land Projects Corp. v. NLRC. 266
SCRA 48 (Jan, 2. 1997)]; There is no such requirement for an ordinary contractual worker.
employment shall continue while such activity exists.360

a. *****A casual EE is only casual for 1 year,361 and it is the PASSAGE OF
TIME that GIVES HIM A REGULAR status (KASAMMA-CCO v. CA, 19 April
360 Q: Savoy Department Store (SDS) adopted a policy of hiring salesladies on five- month cycles.
At the end of a saleslady’s five-month term, another person is hired as replacement. Salesladies attend
to store customers, wear SDS uniforms, report at specified hours, and are subject to SDS workplace
rules and regulations. Those who refuse the 5-month employment contract are not hired. The day after
the expiration of her 5-month engagement, Lina wore her SDS white and blue uniform and reported
for work but was denied entry into the store premises. Agitated, she went on a hunger strike and
stationed herself in front of one of the gates of SDS. Soon thereafter, other employees whose 5-
month term had also elapsed joined Lina’s hunger strike. (2008 Bar Question) Lina and 20 other
salesladies filed a complaint for illegal dismissal, contending that they are SDS’ regular employees as
they performed activities usually necessary or desirable in the usual business or trade of SDS and thus,
their constitutional right to security of tenure was violated when they were dismissed without a valid,
just or authorized cause. SDS, in defense, argued that Lina, et al. agreed- prior to engagement – to a
fixed period employment and thus waived their right to a full-term tenure. Decide the dispute (4%)
SUGGESTED ANSWER: I would rule in favor of Lina, et al. In Pure Foods Corporation v. NLRC
(283 SCRA 135(1997]), the scheme of the employer in hiring workers on a uniformly fixed
contract basis of 5 months and replacing them upon the expiration of their contracts with
other workers with the same employment status was found to have been designed to prevent
“casual” employees from attaining the status of a regular employee. ANOTHER SUGGESTED
ANSWER: The Complaint of Lina and 20 other employees should be dismissed. Under existing
jurisprudence, there is no dismissal to speak of when the term of fixed-period employments expires.
As such, there is no violation of the right to security of tenure of these fixed-period employees even if
they performed activities usually necessary or desirable in the usual trade of business, because they
knew beforehand that their contract is to expire after five (5) months. ANOTHER SUGGESTED
ANSWER: I will resolve the illegal dismissal case in favor of SDS. In Brent, the Supreme Court En
Banc held that while fixed term employment has already been repealed by the various amendments to
the Labor Code, the Civil Code still allows fixed term employment. Such kind of employment is valid
as long as it is established that: (1) the fixed period of employment was knowingly and voluntarily
agreed upon by the parties, without any force, duress or improper pressure being brought to bear upon
the employee and absent any other circumstance vitiating his consent; and (2) the employer and
employee dealt with each other on more or less equal terms with no moral dominance on the latter.
Since admittedly, Lina, et al. agreed, prior to their engagement, to the fixed term employment, and It
appearing that their consent was not vitiated, and considering further that it has not been argued that
the parties dealt with each other on less equal terms, it then follows that Lina, et al’s fixed term
employment is valid. No illegal dismissal can take place upon expiration of such fixed term
employment.
361Q: Yakult Phils. is engaged in the manufacture of cultured milk. The workers were hired to cut
cogon grass and weeds at the back of the factory building used by Yakult. They were not required to
work on fixed schedule and they worked on any day of the week on their own discretion and
convenience. The services of the workers were terminated by Yakult before the expiration of the
1 year period. May casual or temporary EEs be dismissed by the ER before the expiration of the 1-year
period of employment? YES. The usual business or trade of Yakult Phils. is the manufacture of
cultured milk. The cutting of the cogon grasses in the premises of its factory is hardly necessary or
desirable in the usual business of the Yakult. The workers are casual EEs. Nevertheless, they may be
**considered regular EEs if they have rendered services for at least 1 year. When, as in this case,
they were dismissed from their employment before the expiration of the 1-year period they cannot
lawfully claim that their dismissal was illegal (Capule, et al. v. NLRC, 12 November 1990).
2006).362
b. The PURPOSE is to give meaning to the constitutional guarantees of
i. security of tenure and
ii. right to self-organization (Mercado v. NLRC, 5 September 1991).
PROJECT EE VS. CASUAL EE

PROJECT EE CASUAL EE
Employed for a specific project or undertaking the Engaged to perform a job, work or service which
completion or termination of which is is incidental to the business of the ER and
determined at the time of his engagement. the definite period of his employment is made
known to him at the time of his engagement.
His work **need not be incidental to the business His **continued employment after the lapse one
of the ER and his employment **may exceed one year makes him a regular EE.
year without necessarily making him a regular EE.
Job is coterminous with a specific project or phase No termination report required.
thereof. It is required that a termination report be
submitted at the nearest employment office upon
completion of the project or phase.
FIXED-TERM EMPLOYMENT
1. Term employment: A contract of employment for a definite period
**TERMINATES BY ITS OWN TERMS AT THE END OF SUCH
PERIOD (Brent School v. Zamora, 5 February 1990).
*NB: Term employment is NOT A CIRCUMVENTION of the law on
security of tenure if it follows the requisites laid down by the Brent ruling (Romares
v. NLRC, 19 August 1998).
362 Q: A Carpenter is employed by a private university in Manila. Is the carpenter a regular or a casual
employee? Discuss fully. (2007 Bar Question) SUGGESTED ANSWER: If the employment of the
carpenter is sporadic and brief in nature or occasional, his employment is casual especially
because the work he is performing is not in the usual course of the school’s trade or business.
However, if the carpenter has rendered services for at least one year, whether continuous or
broken, he becomes a regular employee by operation by law, with respect to the activity in which he
is employed and his employment shall continue while such activity exists. (Article 280, Labor
Code; See also Philippine Geothermal, Inc. v. NLRC, 189 SCRA 211 [1990]); Kimberly Independent
Labor Union, etc. v. Drilon, 185 SCRA 190 [1990]). ALTERNATIVE ANSWER: A carpenter
employed by a university is a casual employee. The carpenter is engaged to perform a job, work or
service which is mostly incidental to the business of the employer, and such job, work or service is for a
definite period made known to the employee at the time of engagement: Provided, that any employee
who has rendered at least one year of service, whether such service is continuous or not, shall be
considered a regular employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.
2. *****DECISIVE DETERMINANT363 in term employment: It is the DAY

CERTAIN agreed upon by the parties for the commencement and the
termination of their employment relation.364
3. Fixed term employment (requisites for it validity)—It is an employment where a
FIXED PERIOD of employment was agreed upon:*****
a. KNOWINGLY AND VOLUNTARILY by the parties,
b. WITHOUT ANY FORCE, DURESS OR IMPROPER PRESSURE being
brought to bear upon the EE and business of ER (Philips Semiconductor v. Fadriquela,
14 April 2004).
c. *NB LPS – it satisfactorily appears that the Ee and Er dealt with each
other on more or less equal terms with no moral dominance exercised by the
363 [] Q: Darrell was hired as an athletic director in Amorita School for a period of five years. As
such, he oversees the work of coaches and related staff involved in intercollegiate or interscholastic
athletic programs. However, he was not rehired upon the expiration of said period. Darrell questions
his termination alleging that he was a regular EE and could not be dismissed without valid cause.
a. Is he a regular EE? NO. Darrell was not a regular EE but an EE under a fixed-term
contract. While it can be said that the services he rendered were usually necessary and desirable to the
business of the school, it cannot also be denied that his **employment was for a fixed term of
five years. The DECISIVE DETERMINANT in fixed- term employment should not be the
activities that the employee is called upon to perform, BUT THE DAY CERTAIN agreed upon by the
parties for the commencement and termination of their employment relation (Brent School Inc. v. Zamora,
G.R. No. 48494, 5 February 1990).
b. Will he automatically become a regular EE if he is rehired by the school for another definite
period of employment? NO. The DECISIVE DETERMINANT in term employment is the DAY
CERTAIN agreed upon by the parties for the commencement and termination of their employment
relationship, a day certain being understood to be **THAT WHICH MUST NECESSARILY COME, although
it may not be known when and not whether the work is usually necessary and desirable to the business
of the ER.
364Q: Albert and four others signed employment contracts with Reign Publishers from January 1 to
March 31, 2011 to help clear up encoding backlogs. By first week of April 2011, however, they
remained at work. On June 30 Reign’s manager notified them that their work would end that day. Do
they have valid reason to complain? (2011 BAR) (A) No, since fixed term employment, to which they
agreed, is allowed. (B)Yes, their job was necessary and desirable to the employer’s business and,
therefore, they are regular employees. (C) Yes, when they worked beyond March without an
extended fixed term employment contract, they became regular employees. (D)No, since the 3-
month extension is allowed in such employment.
or latter (Brent school, supra)365

4. Does the “Reasonable Connection Rule” apply in fixed term employment for
a fixed-term EE to be eventually classified as a regular EE? NO. FT employment
**takes no account366 at all of the nature of the duties of the EE. It has
absolutely no relevance to the character of his duties as being usually necessary
and desirable to the usual business of the ER, or not.
5. Seamen, although continually re-hired, by the nature of their work, are fixed-
term employees.367
————————————————
365 Q: Lucy was one of approximately 500 call center agents at Hambergis, Inc. She was hired as a
contractual employee four years ago. Her contracts would be for a duration of five (5) months at
a time, usually after a one-month interval. Her rehiring was contingent on her performance for
the immediately preceding contract. Six (6) months after the expiration of her last contract, Lucy went
to Hambergis personnel department to inquire why she was not yet being recalled to work. She was
told that her performance during her last contract was “below average.” Lucy seeks your legal advice
about her chances of getting her job back. What will your advice be? (2014 Bar Question)
SUGGESTED ANSWER: Lucy cannot get her job back. She is a fixed-term employee and as such, her
employment terminates upon the expiration of her contract. (Rowell Industrial Corporation v. Court of
Appeals, 517 SCRA 691 [2007]). ALTERNATIVE ANSWER: I will advise Lucy that she can get her
job back if she files a case for illegal dismissal where, as a general rule, the twin reliefs of backwages
and reinstatement are available. In the instant case, Lucy is a regular employee because the
employment contracts of five (5) months at a time, for four (4) years are obviously intended to
circumvent an employee's security of tenure, and are therefore void. *****As a regular employee,
Lucy may only be dismissed from service based on just and authorized causes enumerated under
the Labor Code, and after observance of procedural due process prescribed under said law.
(Magsalin, et al. v. NOWM, G.R. No. 148492, May 9, 2003).
366[] Q: Dean Jose and other EEs are holding administrative positions as dean, department heads
and institute secretaries. In the implementation of the Reorganization, Retrenchment and
Restructuring program effective Jan. 1, 1984, Dean Jose and other EEs were retired but subsequently
rehired. Their appointment to their administrative positions as dean, department heads and institute
secretaries had been extended by the company from time to time until the expiration of their last
appointment on May 31, 1988. Were Dean Jose and other EEs illegally dismissed? NO. Petitioners were
**DISMISSED BY REASON OF THE EXPIRATION of their contracts of employment. Petitioners'
appointments as dean, department heads and institute secretaries were for fixed terms of definite
periods as shown by their respective contracts of employment, which all expired on the same date,
May 31, 1988. The validity of employment for a fixed period has been acknowledged and affirmed by
the SC (Blancaflor v. NLRC, 2 February 1993).
367Q: Lina has been working as a steward with a Miami, U.S.A.-based Loyal Cruise Lines for the past
15 years. She was recruited by a local manning agency, Macapagal Shipping, and was made to sign a 10-
month employment contract everytime she left for Miami. Macapagal Shipping paid for Lina’s
round-trip travel expenses from Manila to Miami. Because of a food poisoning incident which
happened during her last cruise assignment, Lina was not re-hired. Lina claims she has been illegally
terminated and seeks separation pay. If you were the Labor Arbiter handling the case, how would you
decide? (2014 Bar Question) SUGGESTED ANSWER: I will dismiss Lina's complaint. Lina is a
contractual employee and the length of her employment is determined by the contracts she
entered into. Here, her employment was terminated at the the expiration of the contract (Millares, et al.
v. NLRC, 385 SCRA 306, 318 [2002]).
A3. Subcontracting vs. Labor-Only Contracting

(independent contracting/subcontracting)
CONTRACTING/SUB-CONTRACTING
1. ”Contracting" or "subcontracting" is 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 (DO 18-A).368
2. CONDITIONS in order to be considered as LEGITIMATE job contracting or
subcontracting:369
a. The contractor must be REGISTERED in accordance with these Rules
and carries a DISTINCT AND INDEPENDENT business and undertakes
to perform the job, work or service on its OWN RESPONSIBILITY,
according to its OWN MANNER AND METHOD, and FREE FROM CONTROL AND
DIRECTION OF THE PRINCIPAL in all matters connected with the performance
of the work EXCEPT AS TO THE RESULTS thereof;
*NB LPS – lack of registration raises the disputable presumption
that the contractor is a labor-only contractor (Aklan Et. Al v. San Miguel Corp, 11
December 2008; San Miguel v. Semillan, 5 July 2010).
b. The contractor has SUBSTANTIAL capital and/or investment; and
i. It refers to PAID-UP capital stocks/shares of at least Three
Million Pesos (Php 3,000,000.00) in the case of corporations, partnerships and
368Q: Luningning Foods engaged the services of Lamitan Manpower, Inc., a bona fide
independent contractor, to provide “tasters” that will check on food quality. Subsequently, these
“tasters” joined the union of rank-and-file employees of Luningning and demanded that they
be made regular employees of the latter as they are performing functions necessary and desirable to
operate the company’s business. Luningning rejected the demand for regularization. On behalf of the
“tasters”, the union then filed a notice of strike with the Department of Labor and Employment
(DOLE). In response, Luningning sought a restraining order from the Regional Trial Court
(RTC) arguing that the DOLE does not have jurisdiction over the case since it does not have an
employer-employee relationship with the employees of an independent contractor. If you were the
RTC judge, would you issue a restraining order against the union? (2014 Bar Question) SUGGESTED
ANSWER: Yes. There is no labor dispute in the instant case. Since Lamitan Manpower is a
bona fide independent contractor, there is no employee-employer relationship between the
Luningning and the tasters. ALTERNATIVE ANSWER: No. Article 254 of the Labor Code is clear
that no temporary or permanent injunction or restraining order in any case involving or growing out of
labor disputes shall be issued by any court or other entity, except as provided in Article 218 and 264 of
the same Code.
369Q: What is not an element of legitimate contracting? (2012 Bar Question): a. The contract calls for
the performance of a specific job, work or service; b. It is stipulated that the performance of a specific
job, work or service must be within a definite predetermined period; c. The performance of a specific
job, work or service has to completed either within or outside the premises of the principal; d. The
principal has control over the performance of a specific job, work or service. SUGGESTED
ANSWER: d. The principal has control over the performance of a specific job, work or service.
[Art. 106, Labor Code]
cooperatives;
ii. In the case of single proprietorship, a NET WORTH of at least
Three Million Pesos (Php 3,000,000.00) (D.O. 18-A).
iii. NB: The law does **NOT REQUIRE BOTH substantial capital
and investment in the form of TEMPO: tools, equipment, machineries, etc. This is clear
from the use of conjunction “or”.370
c. The Service Agreement ensures COMPLIANCE with all the rights
and benefits under Labor Laws (DO 18-A, Sec. 4).
3. CONDITIONS of permissible job contracting
a. The labor contractor must be DULY LICENSED by the appropriate
Regional Office of the DOLE;
b. There should be a WRITTEN CONTRACT between the labor
contractor and his client-ER that will assure the EEs at least the minimum
labor standards and benefits provided by existing laws.
*NB: The EEs of the contractor or subcontractor shall be paid in
accordance with the provisions of the LC (LC, Art. 106).
4. PARTIES in contracting and subcontracting:
a. CONTRACTOR/subcontractor: Any person or entity, including a
cooperative, engaged in a legitimate contracting or subcontracting arrangement.
b. CONTRACTUAL EE: One who is employed by a contractor or
subcontractor to perform or complete a job, work, or service pursuant to a service
agreement with a principal (D.O. 18-A).
c. PRINCIPAL: Any ER who PUTS OUT OR FARMS OUT a job, service, or work
to a contractor or subcontractor.
5. RELATIONSHIP arising from contractual arrangements: There is a
TRILATERAL RELATIONSHIP among the principal, contractor and EE. There
exists a CONTRACTUAL RELATIONSHIP between the principal and the contractor
or subcontractor to its EEs.
6. Grounds for CANCELLATION OF REGISTRATION of contractors or
subcontractors [DO No. 18-A]
a. Misrepresentation of facts in the application;
b. Submission of a falsified or tampered application or supporting
documents to the application for registration;
c. Non-submission of Service Agreement between the principal and the
contractor when required to do so;
d. Non-submission of the required semi-annual report;
e. Findings through arbitration that the contractor has engaged in labor-
only contracting and/or the prohibited activities;
f. Non-compliance with labor standards and working conditions;
g. Findings of violation of Sec. 8 (Rights of Contractor's Employees) or
370 If the contention was to require the contractor to prove that he has both capital and requisite
investment, then the conjunction “and” should have been used (Virginia Neri v. NLRC, 23 July 1993).
Sec. 9 (Required Contracts of DO 18-A)

h. Non-compliance with SSS, the HDMF, Pag-ibig, Philhealth, and ECC laws;
i. Collecting any fees not authorized by law and other applicable rules
and regulations (DO 18-A, Sec. 23).
ON CONTRACTUAL EMPLOYEES [DO No. 18-A]

1. RIGHTS of a contractual EE—They shall be entitled to all the rights and
privileges as provided for in the LC, as amended, to include the following:
a. Safe and healthful working conditions;
b. SIL, rest days, OT pay, holiday pay, 13th month pay and separation pay;
c. Retirement benefits under SSS or retirement plans of the contractor;
d. Social security and welfare benefits;
e. Self-organization, CBA and peaceful concerted actions; and
f. Security of tenure (DO 18-A, Sec. 8)
2. EFFECTS OF TERMINATION of contractual EE to separation pay and
other benefits [DO No. 18-A]:
a. If caused by the pre-termination of the Service Agreement not due to
authorized causes under Art. 283 of LC: The right of EE to unpaid wages and
other unpaid benefits including unremitted legal mandatory contributions
shall be borne by the party at fault, without prejudice to the SOLIDARY LIABILITY of
the parties to the Service Agreement.
b. If the termination results from the expiration371 of the service
agreement or completion of the phase of the job: The EE may opt for payment
of separation benefits as may be provided by law or the Service Agreement,
without prejudice to his/her entitlement to the completion bonuses or other
emoluments, including retirement benefits whenever applicable.
3. PRINCIPAL AS THE ER of the contractual EE [DO No. 18-A]—When:
a. There is labor-only contracting;
b. The contracting arrangement falls within the prohibited acts
4. Liability of the principal: The principal shall be SOLIDARILY LIABLE
with the contractor in the event of ANY VIOLATION of any provision of the LC,
including the failure to pay wages. This will not prevent the principal from
claiming REIMBURSEMENT from the contractor.
*NB: Furnishing a BOND FOR WAGES due to the EEs in case the
371Q: Lina has been working as a steward with a Miami, U.S.A.-based Loyal Cruise Lines for the past
15 years. She was recruited by a local manning agency, Macapagal Shipping, and was made to sign a 10-
month employment contract everytime she left for Miami. Macapagal Shipping paid for Lina’s
round-trip travel expenses from Manila to Miami. Because of a food poisoning incident which
happened during her last cruise assignment, Lina was not re-hired. Lina claims she has been illegally
terminated and seeks separation pay. If you were the Labor Arbiter handling the case, how would you
decide? (2014 Bar Question) SUGGESTED ANSWER: I will dismiss Lina's complaint. Lina is a
contractual employee and the length of her employment is determined by the contracts she
entered into. Here, her employment was terminated at the the expiration of the contract (Millares, et al.
v. NLRC, 385 SCRA 306, 318 [2002]).
contractor or subcontractor fails to pay the same: The ER or indirect ER may

require the contractor or subcontractor to furnish a BOND EQUAL to the
cost of labor under contract to answer for the wages due to EEs in case the
contractor or subcontractor fails to pay the same
CLARIFYING the Applicability of D.O. 18-A

* DEPARTMENT CIRCULAR NO. 01-12
1. Are the rules provided under D.O. No. 18-A (Rules Implementing Art. 106 to 109
of the LC as amended) applicable to companies or firms in:
a. Business Process Outsourcing (BPO) or Knowledge Process Outsourcing
(KPO): NO. D.O. 18-A contemplates generic or focused singular activity in
one contract between the principal and the contractor and **does NOT
CONTEMPLATE INFORMATION-TECHNOLOGY ENABLED SERVICES
involving entire business processes. These companies engaged in business
processes may hire EEs in accordance with the applicable laws and maintain
these employees based on business requirements, which may or may not be for
different clients of the BPO’s at different periods of the EE’s employment [Department
Circular No. 01-12, 3.2].
b. Construction Industries: NO. Licensing and the exercise of the
regulatory powers over the construction industry is **lodged with the
Philippine Contractors Accreditation Board (PCAB) under the Construction
Industry Authority of the Philippines (CIAP) pursuant to P.D. 1746 and not with the
DOLE or any of its regional offices [Department Circular No. 01-12, 4.1].
——————————————
A3.a. Elements
ON LABOR-ONLY CONTRACTING (LOC)*****

1. There is labor-only contracting when—two factors372:
372 [] Q: SMC and Sunflower Cooperative entered into a 1-yr Contract of Services, to be renewed on
a month to month basis until terminated by either party. Pursuant to the contract, Sunflower engaged
Prospero, Bonny and Edwin to render services at SMC’s Bacolod Shrimp Processing Plant. The contract was
deemed renewed by the parties every month after its expiration on Jan. 1, 1994 and the three
continued to perform their tasks until Sep. 11, 1995. In July 1995, Prospero, Bonny and Edwin filed a
complaint before the NLRC, praying to be declared as regular EEs of SMC, with claims for
recovery of all benefits and privileges enjoyed by SMC rank and file EEs. The former subsequently
filed an Amended Complaint to include illegal dismissal as additional cause of action following
SMC’s closure of its Bacolod Shrimp Processing Plant on which resulted in the termination of
their services. SMC filed a Motion for Leave to File Attached Third Party Complaint to implead
Sunflower as 3rd-Party Defendant. SMC argues that Sunflower could not have been issued a
certificate of registration as a cooperative if it had no substantial capital. Are Prospero, Bonny and
Edwin EEs of the independent cooperative contractor (Sunflower) or of the SMC? They are EEs of
SMC. **Using the “SUBSTANTIAL CAPITAL” DOCTRINE AND THE “RIGHT OF
CONTROL TEST,” Sunflower had no substantial capital in the form of tools, equipment, machineries,
work premises and other materials to qualify itself as an independent contractor. The lot, building,
machineries and all other working tools utilized by private respondents in carrying out their tasks were
owned and provided by SMC. In addition, the **shrimp processing company was found to have
control of the manner and method on how the work was done. Thus, Prospero, Bonny and Edwin were
deemed EEs not of the cooperative but of the shrimp processing company. Since the former
who were engaged in shrimp processing performed tasks usually necessary or desirable in the
aquaculture business of SMC, they should be deemed regular EEs of the latter and as such are entitled
to all the benefits and rights appurtenant to regular employment (SMC v. Prospero Aballa, et al., 28
June 2005).
a. As to the contractor and his EEs:373
373XYZ Manpower Services (XYZ) was sued by its employees together with its client, ABC
Polyester Manufacturing Company (ABC). ABC is one of the many clients of XYZ. During the
proceedings before the Labor Arbiter, XYZ was able to prove that it had substantial capital of
Three Million Pesos. The Labor Arbiter ruled in favor of the employees because it deemed XYZ as a
labor only contractor. XYZ was not able to prove that it had invested in tools, equipment, etc. Is the
Labor Arbiter's ruling valid? Explain. (5%) (2012 BAR) Suggested Answer: Yes. *****The
presumption is that a contractor is a labor-only contractor unless it is shown that it has
substantial capital and substantial investment in the form of tools, equipment, machineries,
work premises and the like [Sy, et al. vs. Fairland Knitcraft Co., Inc., G.R. Nos. 182915 & 189658,
December 12, 2011]. Besides, what Art. 106 of the Code defines is Labor-Only Contracting and
not Job-Contracting. In mandating that “(t)here is ‘labor-only’ contracting where the person
supplying workers to an employer does not have substantial capital OR investment in the form
of tools, equipment, machineries, work premises, among others”, the law is therefore clear that the
presence of either handicap – “substantial capital OR (substantial) investment in the form of
tools, equipment, (etc.)” – is enough basis to classify one as a labor-only contractor. Another
Suggested Answer: a) No, the Labor Arbiter’s ruling is not valid. Art. 106 of the Labor Code provides
that the contractor has “substantial capital or investment.” The law did not say substantial capital
and investment. Hence, it is in the alternative; it is sufficient if the contractor has one of the
other, i.e., either the substantial capital or the investment. And under Department Order No. 18-
A, Series of 2011, the amount of P3 million paid-up capital for the company is substantial capital.
b. Does the performance by a contractual employee, supplied by a legitimate contractor, of
activities directly related to the main business of the principal make him a regular employee of the
principal? Explain. (5%) (2012 BAR) Suggested Answer: No. The element of an employee’s
“performing activities which are directly related to the principal business of such employer”
does not actually matter for such is allowed by Art. 107 of the Labor Code. An “independent
contractor for the performance of any work, task, job or project” such as Security and Janitorial
Agencies, naturally hire employees whose tasks are not directly related to the principal business
of ” the company hiring them. Yet, they can be labor-only contractors if they suffer from either of
the twin handicaps of “substantial capital”. “OR” “substantial investment in the form of tools”, and
the like. Conversely, therefore, the performance by a job-contractor’s employee of activities that are
directly related to the main business of the principal does not make said employee a regular employee
of the principal.
i. The contractor does **not have SUBSTANTIAL capital374 or

investments in the form of tools, equipment, machineries, work premises,
among others, (TEMPO)375
ii. and the EEs recruited and placed are performing activities
which are USUALLY NECESSARY OR DESIRABLE to the operation of the
company, or DIRECTLY RELATED TO THE MAIN BUSINESS OF THE PRINCIPAL
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; or
374 [] Bar 2008: PizCorp and RSC entered into a "service agreement" where RSC in consideration of
service fees will exclusively supply PizCorp with a group of RSC motorcycle-owning cooperative
members who will perform PizCorp's pizza delivery service. RSC assumes full obligation for the
payment of the salaries and other statutory monetary benefits of its members deployed to PizCorp.
The parties stipulated that there shall be no EER between PizCorp and the RSC members. However,
if PizCorp is materially prejudiced by any act of the delivery crew that violates PizCorp’s directives and
orders, PizCorp can directly impose disciplinary actions on, including the power to dismiss, the
erring RSC member/s. Assume that RSC has a paid-up capitalization of P1,000.000.00. Is RSC
engaged in "labor-only" contracting, “permissible job contracting” or simply, “recruitment”?
Recruitment. Even if the RSC has a paid up capitalization of P1, 000,000.00 it is not engaged in
labor-only contracting, nor in permissible job contracting. It is engaged simply in recruiting. RSC
merely provides PizCorp the former's motorcycle-owning members to deliver the product of
PizCorp in accordance with PizCorp’s directives and orders.
*Alternative Answer: RSC is engaged in “labor only” contracting. It is not enough to show
substantial capitalization or investment in the form of tools, equipment, machinery and word
premises. In addition, the following factors have to be considered: (a) whether the contractor is carrying
on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the term
and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f)
the control and supervision of the workers; (g) the power of ER with respect to the hiring, firing, and
payment of workers of the contractor; (h) the control and supervision of the workers; (i) the control
of the premises; (j) the mode, manner and terms of payment [Vinoya v. NLRC (2000); Osias Corporal
Sr., et al v. NLRC].
375Q: Star Crafts is a lantern maker based in Pampanga. It supplies Christmas lanterns to stores in
Luzon, Metro Manila, and parts of Visayas, with the months of August to November being the busiest
months. Its factory employs a workforce of 2,000 workers who make different lanterns daily for the
whole year. Because of increased demand, Star Crafts entered into a contractual arrangement with
People Plus, a service contractor, to supply the former with 100 workers for only 4 months,
August to November, at a rate different from what they pay their regular employees. The contract with
People Plus stipulates that all equipment and raw materials will be supplied by Star Crafts with
the express condition that the workers cannot take any of the designs home and must complete their
tasks within the premises of Star Crafts. Is there an employer-employee relationship between Star
Crafts and the 100 workers from People Plus? Explain. (2015 Bar Question) SUGGESTED ANSWER:
Yes. People Plus is a labor-only-contractor because it is not substantially capitalized. Neither
does it carry on an independent business in which it uses its own investment in the form of tools,
equipment, machineries or work premises. Hence, it is just an agent or recruiter of workers who
perform work directly related to the trade of Star Crafts. Since both the essential element and the
conforming element of labor-only contracting are present, Star Crafts becomes the employer of the
supplied worker. As principal, Star Crafts will always be an employer in relation to the workers
supplied by its contractor. Its status as employer is either direct or indirect depending on whether the
contractor is legitimate or not. Thus even if People Plus were a legitimate job contractor, still Star
Crafts will be treated as a statutory employer for purposes of paying the workers’ unpaid
wages and benefits.
b. The contractor does **NOT EXERCISE THE RIGHT TO

CONTROL over the performance of the work of the EE (DO 18-A, Sec. 6).376
2. The two factors, supra, have been translated into THREE FACTORS TEST to
determine if the business is LOC or legitimate job contracting. FACTOR TEST
is used to determine the relationship of the parties if it is independent
contracting or labor-only contracting. It considers the following:377
a. Nature of the business, supra.
b. Substantial capital, supra.
376Q: Of the four tests below, which is the most determinative of the status of a legitimate contractor-
employer? (2011 BAR) (A)The contractor performs activities not directly related to the principal's main
business. (B)The contractor has substantial investments in tools, equipment, and other devices. (C)The
contractor does not merely recruit, supply, or place workers.(D)The contractor has direct control
over the employees’ manner and method of work performance.
377 Q: The Smarly Food Company is engaged in the restaurant and catering business. Having invested
a substantial amount of money to establish its business, the company decided to avoid its legal
responsibilities in connection with the selection of employees, their social security and other labor
relations problems. To this end, the company engaged the services of Jack Perez, doing business
under the name of San Jacinto Manpower Agency, to supply it with cooks, waiters, waitresses,
dishwashers, and other workers. Jack Perez does not have a separate regular business office. He
operates his business from his own house. Under this economic arrangement, Jack Perez pays the
wages of the workers assigned to the company directly and reports said workers to the Social Security
System as his own employees. He charges the Smarty Food Company a monthly fee depending on
the number of workers serving the company. After two years, all the workers assigned by Jack
Perez to the company Joined the United Restaurant Workers Union. Soon thereafter, the labor
union sought recognition from the Smarty Food Company and requested for collective bargaining
negotiations. Thereupon, the company terminated its service contract with the San Jacinto
Manpower Agency and prevented the latter's workers from entering the company premises. To keep
its business going, the Smarly Food Company secured its manpower needs from another
service agency. The labor union then filed a complaint for unfair labor practice under Article 248(a)
of the Labor Code against the Smarty Food Company. Has the Smarty Food Company succeeded in
avoiding its labor relations obligations to the workers of San Jacinto Manpower Agency? Is the
company guilty of unfair labor practice? Give your reasons. SUGGESTED ANSWER: Smarty Food
Company has not succeeded in avoiding its labor relations obligation to the workers of San
Jacinto Manpower Agency. Under the facts of the case in the question, the cooks, waiters,
waitresses, dishwashers and other workers supplied by San Jacinto Manpower Agency are
employees of Smarty Food Company and not of the Agency because said workers are performing
activities which are directly related to the principal business of Smarty Food Company which is
engaged in the restaurant and catering business. It is also noted that the Agency does not have
substantial capital or investment in the form of tools, equipment machineries and work
premises. It does not have a separate regular business office and merely operates its business
from the house of the owner/operator of the Agency. Thus, under the above circumstances, under the
Labor Code (Art. 106) the Agency is engaged in "labor only" contracting and should therefore be
considered merely as an agent of the employer, meaning Smarty Food Company. Because of the fact
that Smarty Food Company is the employer of the cooks, waiters, waitresses, dishwashers and other
workers, the Company was guilty of unfair labor practice when it terminated their services by
terminating its service contract with the Agency. The Company thereby discriminated against its
workers to discourage membership in any labor organization which is an unfair labor practice.
The Company also committed an unfair labor practice when it violated its duty to bargain collectively
by refusing to meet with the United Workers Restaurant Workers Union which was organized by the
workers of the Company.
c. The control exercised.378

**NB: DO 18-A prohibits job contracting of functions performed by regular EEs.
FACTOR TEST INDPT CONTRACTOR LOC
Nature of The business of an independent No separate business independent
business contractor is entirely separate and and distinct from the principal. May be
distinct from the business of the a “cabo” or an in-house agency
principal prohibited under DO 18-02
Substantial capital or Has substantial capital or investment. The only investment is bringing
investment individuals to work
Control Control only as to RESULTS but not Control as to BOTH results and
the means means
Effect VALID VOID
3. Factors to consider in determining whether contractor is carrying on an
independent business:
a. Nature and extent of work
b. Skill required
c. Term and duration of the relationship
d. Right to assign the performance of specified pieces of work
e. Control and supervision of worker379
f. Power of ER to hire, fire and pay wages
g. Control of the premises
h. Duty to supply premises, tools, appliances, materials and labor
i. Mode, manner and terms of payment (Vinoya v. NLRC, G.R. No. 126586,
February 03, 2000).
[] NB: Individuals with **SPECIAL SKILLS, EXPERTISE OR
TALENT enjoy the freedom to offer their services as INDEPENDENT
CONTRACTORS. An individual like an ARTIST OR TALENT has a right to render
his services without any one controlling the means and methods by which he
performs his art or craft (Sonza v. ABS-CBN, 10 June 2004).
4. ESSENCE of the prohibition on labor-only contracting: It gives rise to
CONFUSION as to who is the real ER of the workers and who is liable to their
claims. It also **DEPRIVES workers of the OPPORTUNITY to become regular
EEs.
5. BASES of the State in prohibiting labor-only contracting [DO No. 18-A]
378Right to control: It refers to the RIGHT RESERVED to the person for whom the services of the
contractual workers are performed, to determine not only the END to be achieved, but also the
MANNER AND MEANS to be used in reaching that end (D.O. 18-A).
379Q: Mario, an expert aircon technician, owns and manages a small aircon repair shop with little
capital. He employs one full-time and two part-time technicians. When they do repair work in homes or
offices, their clients do not tell them how to do their jobs since they are experts in what they do. The
shop is shabby, merely rented, and lies in a small side street. Mario and the other technicians regard
themselves as informal partners. They receive no regular salary and only earn commissions
from service fees that clients pay. To what categories of workers do they fall? (2011 BAR) (A) Labor-
only contractors (B) Job contractors (C) Pakyaw workers (D)Manpower agency contractors
a. The CONSTITUTION, which provides that the State shall protect labor
and promote its welfare, and shall guarantee basic labor rights including just
and humane terms and conditions of employment and the right to self-
organization.
b. ART. 106 OF THE LC, which allows the SOLE to distinguish between
labor-only contracting and job contracting to prevent any violation or
circumvention of the LC.
6. Hence, a contractor is a necessary party if labor-only contracting is found to
exist if complete relief is to be had. NB: if the term indispensable party is used, it
is for “full determination” of the case, not “complete relief ” as it is with a
necessary party (cf. TOM Notes on Remedial Law).380
380Q: Is the contractor a necessary party in a case where labor contracting is the main issue and labor-
only contracting is found to exist? (2012 Bar Question): a. Yes, the contractor is necessary in the full
determination of the case as he is the purported employer of the worker; b. Yes, no full remedy can be
granted and executed without impleading the purported contractor; c. No, the contractor becomes a
mere agent of the employer-principal in labor contracting; d. No, the contractor has no standing in a
labor contracting case. SUGGESTED ANSWERS: a. Yes, the contractor is necessary in the full
determination of the case as he is the purported employer of the worker. b. Yes, no full remedy can be
granted and executed without impleading the purported contractor. TOM’s answer is only (b) based on
the definition of a necessary party under Remedial law, supra.
LABOR-ONLY CONTRACTING381 VS. JOB CONTRACTING382

LOC JOB CONTRACTING
ER is treated as direct ER of the person No EER exist between the ER and the contractor's
recruited in all instances EEs except when the contractor or
subcontractor fails to pay the wages of the EEs
Liability is limited (shall be solidarily liable Liability extends to all those provided under the
with ER only when the ER fails to comply Labor Standards law
with requirements as to unpaid wages and
other labor standards violations)
Prohibited by Law Permissible, subject only to certain conditions
Has no substantial capital or investment The contractor has substantial capital or
investment
A3.b. Trilateral Relationship in Job Contracting

(in legitimate contracting or subcontracting arrangement)
381Which is a characteristic of a labor-only contractor? (2012 Bar Question): a. Carries an

independent business different from the employer’s; b. The principal’s liability extends to all rights,
duties and liabilities under labor standards laws including the right to self-organization; c. No employer-
employee relationship; d. Has sufficient substantial capital or investment in machinery, tools or  
equipment directly or intended to be related to the job contracted. SUGGESTED ANSWER: c. No
employer-employee relationship [Art. 106, Labor Code]
382 Distinguish Labor-Only contracting and Job-Only contracting. (5%) (2012 BAR) Suggested Answer:
Labor-only contracting. The contractor does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others, and the employees of the contractor
are performing activities which are directly related to the main business of the principal. [Sy, et al.
vs. Fairland Knitcraft Co., Inc., G.R. Nos. 182915 & 189658, December 12, 2011]. Legitimate Job
Contracting. The contractor has substantial capital and investment in the form of tools, equipment,
etc. and carries a distinct and independent business and undertakes to perform the job, work or
service on its own responsibility, according to its own manner and method, and free from control and
direction of the principal in all matters connected with the performance of the work except as to the
results thereof [Escasinas vs. Shangri- la’s Mactan Island Resort, 580 SCRA 344 (2009]. Labor-Only
Contracting. Contracting is prohibited while Job Contracting is allowed by law. Another Suggested
Answer: 1. Job-Only contracting is legal; whereas, Labor-Only contracting is prohibited by law; 2. In
Job-Only contracting, the principal is only an indirect employer; whereas, in Labor-Only
contracting, the principal becomes the direct employer of the employees of the labor-only
contractor; 3. The liability of the principal in Job-Only contracting vis-à-vis employees of job-
contractor is for a limited purpose only, e.g. wages and violation of labor standards laws; whereas, the
liability of the principal in Labor-Only contracting is for a comprehensive purpose and, therefore, the
principal becomes solidarily liable with the labor-only contractor for all the rightful claims of the
employees. In Job-Only contracting, no employer-employee relationship exists between the
principal and the employees of the job contractor; whereas, in Labor-Only contracting, the law
creates an employer-employee relationship between the principal and the employees of the labor-
only contractor.
1. ER-EE relationship383 between the contractor and the EEs it engaged to

perform the specific job, work or service being contracted; and
2. Contractual relationship between the principal and the contractor (DO 18-
A, Sec. 5).
3. Thus, the relationship
a. between the principal and the contractor is governed by the NCC
b. while the relationship of the contractor and its EE is governed by the LC.
4. Numbers 1 to 3, supra, refer to job contracting. *****Thus, a finding that there
is labor only contracting is equivalent to declaring that there exist an employer -
employee relationship between the principal and the workers hired by the labor-
only contractor. The letters is considered a mere agent of the principal [Lim v.
NLRC, 303 SCRA 432, (1999); Baguio et. al. v. NLRC, 202 SCRA 465 (1991)]384
INDIRECT EMPLOYER (IE)

1. IE: A person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of
any work, task, job or project" xxx
383 Q: Antonio Antuquin, a security guard, was caught sleeping on the job while on duty at the Yosi
Cigarette Factory, As a result, he was dismissed from employment by the Wagan Security Agency, an
independent contractor. At the time of his dismissal, Antonio had been serving as a watchman in the
factory for many years, often at stretches of up to 12 hours, even on Sundays and holidays, without
overtime, nighttime and rest da~ benefits, He thereafter filed a complaint for illegal dismissal and
non-payment of benefits against Yosi Cigarette Factory, which he claimed was his actual and direct
employer. As the Labor Arbiter assigned to hear the case, how would you correctly resolve the
following: Antonio's charge of illegal dismissal; (2005 Bar Question) SUGGESTED ANSWER: This
is a case involving permissible job contracting. Antonio's charge of illegal dismissal against Yosi
Cigarette Factory will not prosper. Wagan Security Agency, an independent contractor, is Antonio's
direct employer. Yosi is only Antonio's indirect employer (Art. 109, Labor Code). By force of law,
there is in reality no employer- employee relationship between Yosi and Antonio. [Baguio, et al. v.
NLRC,et al. 202 SCRA 465 (Oct. 4, 1991)].
384Tower Placement Agency supplies manpower to Lucas Candy Factory to do work usually
necessary for work done at its factory. After working there for more than two years under the factory
manager’s supervision, the workers demanded that Lucas extend to them the same employment
benefits that their directly hired workers enjoyed. Is their demand valid? (2011 BAR) (A) Yes, since it
was Lucas that actually hired and supervised them to work at its factory. (B) No, since the agency
workers are not employees of the client factory. (C)Yes, since they have been working at the factory in
excess of two years. (D)No, since it was the placement agency that got them their jobs.
2. ***** The IE “shall be jointly and severally liable385 with his contractor or
subcontractor to such employees (of the contractor or subcontractor) to the
extent of work performed under the contract.386
[] Bar 2012: With respect to legitimate independent contracting, an
employer or one who engages the services of a bona fide independent
contractor is an indirect employer, by operation of law, of his contractor’s
employees; he becomes solidarily liable387 with the contractor only in the event
the latter fails to pay the employees’ wages and for violation of labor
385Q: Clean Manpower Inc. (CMI) had provided janitorial services to the National Economic
Development Authority (NEDA) since April 1988. Its service contract was renewed every three
months. However, in the bidding held on July 1992, CMI was disqualified and excluded. In 1993, six
janitors of CMI formerly assigned at NEDA filed a complaint for underpayment, of wages. Both
CMI and NEDA were impleaded as respondents for failure to comply with NCR Wage Orders
Nos. 01 and 02, which took effect on November 1, 1990 and January 2, 1992, respectively. Should
NEDA, a government agency subject to budgetary constraints, be held liable solidarity with
CMI for the payment of salary differentials due the complainants? Cite the legal basis of your answer.
(5%) (2005 Bar Question) SUGGESTED ANSWER: NEDA shall be held solidarity liable with
CMI for the payment of salary differentials due to the complainants, because NEDA is the indirect
employer of said complainants. The Labor Code provides that xxx (A) person, partnership, association
or corporation which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project" xxx “shall be jointly and severally liable with his
contractor or subcontractor to such employees (of the contractor or subcontractor) to the extent of
work performed under the contract xxx," (Arts. 106 and 107, Labor Code)
386 Q: K is a legitimate contractor hired by G for six (6) months. On the third month, G remitted to
K the salaries and wages of the employees. However, K absconded with the money leaving the
employees unpaid. The disgruntled employees demanded from G the payment of their salaries. Is G
liable? (2012 Bar Question): a. No, because G has already remitted the employees’ salaries to K, validly
excusing G from liability. b. Yes, because he is jointly and solidarily liable for whatever monetary claims
the employees may have against K; c. Yes, because of the principle of “a fair day’s wage for a fair day’s
work”; d. B and C. SUGGESTED ANSWER: b. Yes, because he is jointly and severally liable for
ALTERNATIVE ANSWER: c. Yes, because of the principle of “a fair day’s wage for a fair day’s work”.
387Q: Constant Builders, an independent contractor, was charged with illegal dismissal and non-
payment of wages and benefits of ten dismissed employees. The complainants impleaded as co-
respondent Able Company, Constant Builder's principal in the construction of Able's office building.
The complaint demanded that Constant and Able be held solidarily liable for the payment of their
backwages, separation pay, and all their unpaid wages and benefits. If the Labor Arbiter rules in favor
of the complainants, choose the statement that best describes the extent of the liabilities of Constant
and Able. (2013 Bar Questions) (A) Constant and Able should be held solidarily liable for the
unpaid wages and benefits, as well as backwages and separation pay, based on Article 109 of
the Labor Code which provides that "every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any provision of this
Code." (B) Constant and Able should be held solidarily liable for the unpaid wages and benefits, and
should order Constant, as the workers' direct employer, to be solely liable for the backwages and
separation pay. (C) Constant and Able should be held solidarily liable for the unpaid wages and benefits
and the backwages since these pertain to labor standard benefits for which the employer and contractor
are liable under the law, while Constant alone – as the actual employer - should be ordered to pay the
separation pay. (D) Constant and Able should be held solidarily liable for the unpaid wages and
benefits, and Constant should be held liable for their backwages and separation pay unless Able is
shown to have participated with malice or bad faith in the workers' dismissal, in which case both should
be held solidarily liable. (E) The above statements are all inaccurate.
standard laws.
*NB: even if the indirect employer is a the government, it can be asked to
pay the EE’s wages, since hiring them is a proprietary function.388
3. vs. liability of the labor-only contractor (LOC): The LOC is considered merely
as an agent of the principal, who shall be responsible to the workers hired by the
LOC in the same manner and extent as if he directly employed such workers.
See more in the next thought unit, infra.
A3.c. Solidary Liability (LPS)

*Effects of FINDING that there is labor-only contracting
1. It is equivalent to declaring that THERE IS AN ER-EE RELATIONSHIP
between the principal and the EEs of the “labor-only” contractor (Assoc. Anglo-
388Q: Linis Manpower, Inc. (LMI) had provided janitorial services to the Philippine Overseas
Employment Administration (POEA) since March 2009. Its service contract was renewed every
three months. However, in the bidding held in June 2012, LMI was disqualified and excluded. In 2013,
six janitors of LMI formerly assigned at POEA filed a complaint for underpayment of wages.
Both LMI and POEA were impleaded as respondents. Should POEA, a government agency subject to
budgetary appropriations from Congress, be held liable solidarily with LMI for the payment of salary
differentials due to the complainant? Cite the legal basis of your answer. (2014 Bar Question)
SUGGESTED ANSWER: Yes, but only to the extent of work performed under the contract. The
second paragraph of Article 106 of the Labor Code provide. Art. 106. Contractor or subcontractor. –
xxx In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him. xxx The fact that
POEA is a government agency is of no moment. In U.S.A v. Ruiz (G.R. No. L-35645, May 22,
1985), the Supreme Court ruled that the State may be sued if the contract it entered into is
pursuant to its proprietary functions.
American Tobacco Corp. v. Clave, 30 August 1990).389
389 Q: Jolli-Mac Restaurant Company (Jolli-Mac) owns and operates the largest food chain in the
country. It engaged Matiyaga Manpower Services, Inc. (MMSI), a job contractor registered with the
Department of Labor and Employment, to provide its restaurants the necessary personnel,
consisting of cashiers, motorcycle deliver}' boys and food servers, in its operations. The Service
Agreement warrants, among others, that MMSI has a paid-up capital of P2,000,000.00; that it would
train and determine the qualification and fitness of all personnel to be assigned to Jolli-Mac; that it
would provide these personnel with proper Jolli-Mac uniforms; and that it is exclusively responsible to
these personnel for their respective salaries and all other mandatory statutory benefits. After the
contract was signed, it was revealed, based on research conducted, that MMSI had no other
clients except Jolli-Mac, and one of its major owners was a member of the Board of Directors of
Jolli-Mac. (2009 Bar Question) [a] Is the Service Agreement between Jolli-Mac and MMSI legal and
valid? Why or why not? (3%) SUGGESTED ANSWER: No. It is not legal and valid because MMSI
is engaged in labor-only contracting. For one, the workers supplied by MMSI to Jolli-Mac are
performing services which are directly related to the principal business of Jolli-Mac. This is so
because the duties performed by the workers are integral steps in or aspects of the essential
operations of the principal. (Baguio, et al. v. NLRC, et al., 202 SCRA 465 [1991]; Kimberly
Independent Labor Union, etc. v. Drillon, 185 SCRA 190 [1990]. For another, MMSI was organized
by Jolli-Mac itself to supply its personnel requirements. (San Miguel Corporation v. MAERC
Integrated Services, Inc., et al., 405 SCRA 579 [2003]).
[b] If the cashiers, delivery boys and food servers are not paid their lawful salaries, including
overtime pay, holiday pay, 13,h month pay, and sendee incentive leave pay, against whom may these
workers file their claims? Explain. (2%) SUGGESTED ANSWER: They may file their claims against
Jolli-Mac. A finding that MMSI is a “labor-only” contractor is equivalent to declaring there is an
employer-employee relationship between Jolli-Mac and the workers of MMSI. (Associated
Anglo-American Tobacco Corp. v. Clave, 189 SCRA 127 [1990], Industrial Timber Corp. v. NLRC, 169
SCRA 341 [1989]). The liability of Jolli-Mac vis-a-vis the workers of MMSI is for a
comprehensive purpose, i.e., not only for the unpaid wages but for all claims under the Labor
Code and ancillary laws. (San Miguel Corp. v. Maerc Integrated Services, Inc., et al., 405 SCRA 579
[2003]). ANOTHER SUGGESTED ANSWER: The employers can file their claims against Jolli- Mac
pursuant to Art. 106 of the Labor Code which reads: “Contractor or .subcontractor—x x x In the
event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent,
that he is liable to employee directly employed by him.”
2. The PRINCIPAL IS CONSIDERED THE “DIRECT” ER390 of the contractual

EEs for purposes of enforcing the provisions of the LC and other social
legislations.
3. The contractor/subcontractor is deemed only to be the AGENT of the
principal. (Lim v. NLRC, 19 February 1999).
4. The principal is SOLIDARILY liable391 with the contractor/subcontractor in
the event of any violation of any provision of the LC, including failure to pay wages.
Hence, a legislated392 increase in wages is shouldered by the principal, even if he
has already paid the wages specified in the contract. But the principal cannot be
made liable for illegal dismissal by the LOC absent showing that he had a hand on
it.393
390 *Bar 2002: SMPC entered into a contract with Arnold for the milling of lumber as well as the
hauling of waste wood products. The company provided the equipment and tools because
Arnold had neither tools and equipment nor capital for the job. Arnold, on the other hand, hired his
friends, relatives and neighbors for the job. Their wages were paid by SMPC to Arnold, based on
their production or the number of workers and the time used in certain areas of work. All work
activities and schedules were fixed by the company.
a. Is Arnold a job contractor? NO. Arnold did not have sufficient capital or investment and
he was not free from the control and direction of SMPC because all work activities and schedules were
fixed by the company. Therefore, Arnold is not a job contractor. He is engaged in labor-only
contracting.
b. Who is liable for the claims of the workers hired by Arnold? SMPC is liable for the claims
of the workers hired by Arnold. A FINDING that Arnold is a labor-only contractor is **equivalent
to declaring that there exist an ER-EE relationship between SMPC and workers hired by Arnold.
This is so because Arnold is considered a MERE AGENT of SMPC (Lim v. NLRC, 19 February
1999).
391*NB LPS - 1. This may refer to the solidary liability of the principal under Art. 109 of the LC as
direct employer with the contractor for any violation of the LC. It may also refer to the liability of the
principal, in the same manner and extent that he/she is liable to his/her direct Ees, to the extent of the
work performed under the contract when the contractor fails to pay the wages of his/her Ees as
provided in Art. 106 LC.
392 *NB LPS - 2. Under Art. 106, in the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the employer shall be jointly and severally liable
with his contractor or subcontractor to such employees to the extent of the work performed under the
contract, in the same manner and extent that he is liable to employees directly employed by him.
a. Minimum wage was increased while there was a subsisting job contract - The indirect Er
(Principal) cannot escape liability even if he has paid the worker’s wages in accordance with
the stipulations in the contract with the contractor. Legislated wage increases are deemed
amendments to the contract. Thus, Ers cannot hide behind contracts in order to evade their or
their contractor’s liability for noncompliance with the statutory minimum wage. (Rosewood Processing
Inc. v. NLRC, 21 May 1998)
393 *NB LPS – 3. Under Art. 109 was interpreted as a qualified or limited liability. That is, in order for
a principal to be liable under this provision, there must be proof that he conspired with the contractor
in the commission of the violation of the LC. Thus liability will not attach especially when the Ee is
no longer working for or assigned (for the principal) when they were illegally dismissed.
Further separation pay and backwages is invested with a punitive character, such that an indirect Er
(Principal) should not be made liable without a finding that it had committed or conspired in
the illegal dismissal (Rosewood, supra.).
————————————————
B. Termination of Employment
<SECURITY OF TENURE>
1. [] Art. 279. Security of tenure. In cases of regular employment, the employer
shall NOT TERMINATE the services of an employee EXCEPT FOR A
JUST CAUSE OR WHEN AUTHORIZED by this Title. An employee who is
unjustly dismissed from work shall be entitled
a. to reinstatement without loss of seniority rights and other privileges and
b. to his full backwages, inclusive of allowances, and
c. to his other benefits or their monetary equivalent
*computed FROM the time his compensation was withheld from him
UP TO the time of his actual reinstatement. (As amended by Section 34, Republic
Act No. 6715, 21 March 1989)
2. In short, no worker shall be dismissed except*****
a. for a just or authorized cause provided by law and
b. after due process.
*hence, security of tenure takes precedence over management prerogative
to terminate an EE (cf. chapter on Management Prerogative).
3. Extent of the application of Security394 of Tenure (SOT):395
a. It applies to managerial and to all rank-and-file employees, including
those under probation.
b. It does not apply to: management trainees (because they are not
employees yet). TOM thinks they also have SOT up to the coverage of their
394Q: Mr. Del Carmen, unsure if his foray into business (messengerial service catering purely to law
firms) would succeed but intending to go long-term if he hurdles the first year, opted to open his
operations with one-year contracts with two law firms although he also accepts messengerial service
requests from other firms as their orders come. He started with one permanent secretary and six (6)
messengers on a one-year, fixed-term, contract. Is the arrangement legal from the perspective of labor
standards? (2013 Bar Questions) (A) No, because the arrangement will circumvent worker's right to
security of tenure.(B) No. If allowed, the arrangement will serve as starting point in weakening the
security of tenure guarantee.(C) Yes, if the messengers are hired through a contractor. (D) Yes, because
the business is temporary and the contracted undertaking is specific and time-bound.(E) No, because
the fixed term provided is invalid. SUGGESTED ANSWER: (A) ALTERNATIVE ANSWER: (E)
Reason: The employer and employee must deal with each other on more or less equal terms.
395Q: Which of the following is correct with respect to the extent of the application of security of
tenure? (2012 Bar Question): a. It applies to managerial and to all rank-and-file employees if not yet
regular, but not to management trainees; b. It applies to managerial and to all rank-and-file employees
including those under probation; c. It applies to seasonal and project employees, if they are hired
repeatedly; d. It applies to all kinds of employees except those employed on a part-time basis.
SUGGESTED ANSWERS: a. It applies to managerial and to all rank-and-file employees if not yet
regular, but not to management trainees. [Management Trainee are not employees yet]; b. It applies to
managerial and to all rank-and-file employees including those under probation
management training contract. But SOT does not apply to non-EEs.396

4. [] Bar 2009: Explain the impact of the union security clause to the employees’
right to security of tenure. SUGGESTED ANSWER: A valid union security
clause when enforced or implemented for cause affords the worker his substantive
and procedural due process rights (Alabang Country Club, Inc. v. NLRC, 545
SCRA 357 [2008]. It does not violate the employee's right to security of
tenure. Art. 248(e) of the Labor Code allows union security clauses and a
failure to comply with the same is a valid ground to terminate employment.
Union security clause are designed to strengthen unions and is a valid policy.
————————————————
B1. Termination by Employee (LPS)

1. Without just cause – by serving a written notice on the Er at least one
month in advance. The Er upon whom no such notice was served may hold the
Ee liable for damages. However, the Er upon receipt of the notice may
shorten the one month period. The period was for the benefit of the Er,
hence, he can waive it.
2. With just cause – an Ee may put an end to his employment *****without
serving any notice on the Er for any of the following circumstances:
a. Serious Insult397 by the Er or his representative on the honor and
person of the Ee.
b. Inhuman and unbearable treatment accorded the Ee by the Er or his
396 Q: Mr. Aristedes Epol was elected as President, Chief Executive Officer, and Board Chairman
of Transnational Insurance Corp. on May 31, 1988. At that time, he owned 51% of the company’s
voting stock. Under the By-Laws of the company he had a one-year term of office from June 1,
1988 to June 1, 1989. On July 15, 1988, Mr. Ramos agreed with the other stockholders to re-organize
the composition of officers by having the Board declare all positions of officers vacant, elect a new set
of officers, with himself as President and Chief Executive. Mr. Epol would be re-elected only to the
ceremonial post of Board Chairman, Mr. Epol got a Notice of Special Meeting of the Board to elect a
new set of corporate officers. He consults you as lawyer. He asks if he is covered by the Labor
Code and Constitutional guarantees of security of tenure of workers. He theorizes that since he
was elected for a fixed one-year term, he enjoys tenure for the term. (a) What is you view? Reasons.
(b) Mr. Epol, despite your opinion, observes that the Constitutional issue was not raised in those cases.
He is adamant that you seek recourse to prevent his removal as President and Chief Executive Officer
before his term expires. Where will you file the case? SUGGESTED ANSWER: (a) Mr. Epol is not
covered by the Labor Code and Constitutional guarantees of security of tenure or workers. He
is not an employee. He is a corporate officer and his tenure is subject to the Constitution and by-
laws of the corporation and of the Corporation Code. (b) I will file the case before the Securities
and Exchange Commission which has jurisdiction over the case. Whether or not Mr. Ramos and the
other stockholders legally re-organized out Mr. Epol is an intra-corporate dispute. Since it is an intra-
corporate dispute which is involved, it is the SEC which has jurisdiction. [TOM: now, intra-corporate
disputes are filed before the RTC acting as a special commercial court]
397Q: When the employer or his representative hurls serious insult on the honor or person of the
employee, the law says that the employee (2011 BAR) (A) may leave work after at least a five-day notice
to the employer. (B) may leave work at any time and file for constructive dismissal. (C) may leave
work without giving a 30-day notice to the employer. (D)may abandon his job at once.
representative
c. Commission of a crime or offense by the Er or his representative against
the person of the Ee or any of the immediate members of the his family; and
d. Other causes analogous to any of the foregoing (Art. 300, LC)
B1.a. Resignation vs. Constructive Dismissal
VOLUNTARY RESIGNATION (LPS)

1. Voluntary Resignation is the act of an Ee, who finds himself in a situation in
which he believes that personal reasons cannot be sacrificed in favor of the
exigency of the service; thus, he has no other choice but to disassociate himself
from his employment (Villaruel v. Yeo Han Guan, 1 June 2011).
2. Requisites for resignation to be effective:
a. Resignation must be unconditional and with the intent to operate as
such.
b. There must be an intention to relinquish a portion of the term of
office accompanied by an act of relinquishment (Azcor Manufacturing Inc. v. NLRC,
11 February 1999).
c. Acceptance of a resignation tendered by an ee is necessary to make the
resignation effective (Reyes v. CA, 15 August 2003). Acceptance can be verbal.398
398*NB LPS – a verbal resignation tendered by an Ee and accepted by the Er can no longer be
withdrawn as it was already “fait accompli” (POQUIZ).
3. Effects of a voluntary resignation of an employee399 – once an employee

resigns and executes a quitclaim in favor of the Er, he is thereby estopped
from filing any further money claims against the employer arising from his
employment. Such money claims may be given due course only when the
voluntariness of the execution of the quitclaim or release is put in issue, or
when it is established that there is an unwritten agreement between the Er and
the Ee entitling the latter to other remuneration or benefits upon his or her
resignation (PNCC v. NLRC, 2 October 1997)
399 International Motors Corporation (IMC) undertook a reorganization of the company and right-
sizing of its personnel complement due to the current financial crisis. The affected employees were
given the option to resign with corresponding generous benefits attending such option. The said
employees opted to resignation on account of these negotiated benefits; and after receipt of
which, they executed quitclaims in favor of IMC. Immediately thereafter, the employees voluntarily
resigned for valuable consideration and that, in any case, they have executed quitclaims in favor of
the company. The employees, however, claimed that they were forced to resign, and that they
executed the quitclaims only because of dire necessity. (1999 Bar Question): 1. Is the company guilty
of illegal dismissal? Why? (3%) SUGGESTED ANSWER: NO. The company is not guilty of illegal
dismissal since the facts clearly indicate that the “employees were given the option to resign with
corresponding generous benefits attending such option” and that these employees "opted for
resignation on account of these negotiated benefits”. Nothing in the facts indicate that their
consent to the waiver of benefits under the Labor Code was vitiated by fraud, violence, undue
influence or any other vice or defect. ALTERNATIVE ANSWER: The company is not guilty of
illegal dismissal. According to the facts of the case, the employees opted to resign voluntarily,
considering the generous benefits given to them in connection with such resignation.
Voluntary resignation cannot be considered as illegal dismissal. (Samaniego v. NLRC, 198 SCRA 111)
2. Can the quitclaim be annulled on the ground of “dire necessity”? Why? (2%)
SUGGESTED ANSWER: A quitclaim case can be annulled on the ground of its being entered
into involuntarily by employees because of “dire necessity”. Thus, if it was dire necessity that
forced a worker to sign a quitclaim even if the amount of money given to him by the employer was
very much less than what the workers was entitled to receive, then the quitclaim was not voluntary,
and thus, the said quitclaim is null and void. In a case (Veloso v. DOLE, 200 SCRA 201) the
Supreme Court held that “dire necessity" is not an acceptable ground for annulling the releases,
especially since it has not been shown that the employees had been forced to execute them. It
has not been proven that the considerations for the quitclaims were unconscionably low and that the
petitioners had been tricked into accepting them.
4. ******Requisites of a valid400 quitclaim – a quitclaim refers to release or
400 Q: Because of continuing financial constraints, XYZ, Inc. gave its employees the option to
voluntarily resign from the company. A was one of those who availed of the option. On October 5,
2007, he was paid separation benefits equivalent to seven (7) months pay for his six (6) years and
seven (7) months of service with the company and he executed a waiver and quitclaim. A week later, A
filed against XYZ, Inc. a complaint for illegal dismissal. While he admitted that he was not forced to
sign the quitclaim, he contended that he agreed to tender his voluntary resignation on the belief that
XYZ, Inc. was closing down its business. XYZ, Inc., however continued its business under a different
company name, he claimed. Rule on whether the quitclaim executed by A (Gabriel) is valid or not.
Explain. (3%) (2010 Bar Question) SUGGESTED ANSWER: The quitclaim executed by A is valid and
binding. Generally, deeds of release, waiver or quitclaims cannot bar employees from demanding
benefits to which they are legally entitled or from contesting the legality of their dismissal, since
quitclaims are looked upon with disfavor and are frowned upon as contrary to public policy.
However, where the person making the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be
recognized as being a valid and binding undertaking (Francisco Soriano, Jr. v. NLRC, et al., 530 SCRA
526 [2007]). A elected to voluntarily resign, and accepted a credible and reasonable separation
benefits package. In exchange, A executed a waiver and quitclaim. A’s resignation could not have
possibly been vitiated by any fraud or misrepresentation on the part of XYZ, Inc. The company
offered its voluntary resignation package because of continuing financial constraints, and not
preliminary to closure of business. A’s belief is not the kind of proof required that will show he was
defrauded, his consent vitiated, and therefore the termination of his employment illegal.
ALTERNATIVE ANSWER: The quitclaim is invalid. The signing of the quitclaim was based on a
wrong premise, and the employer was deceitful by not divulging full information. The subsequent re-
opening of the business under another name is an indication of bad faith and fraud.
relinquishment of a legal claim401 and requires for its validity the following:402
a. The EE executes the quitclaim voluntarily;
b. That there was no fraud or deceit on the part of any of the parties;
c. That the consideration403 for the quitclaim is credible and reasonable;
d. That the contract is not contrary to law, public order, public policy,
morals or good customs or prejudicial to a third person with a right recognized
401Q: Can a final and executory judgment be compromised under a “Release and- Quitclaim" for a
lesser amount? (3%) (1999 Bar Question) SUGGESTED ANSWER: Yes, as long as the "Release and
Quitclaim” is signed by the very same person entitled to receive whatever is to be paid under the
final and executory judgment that was the subject of the compromise agreement and that the “Release
and Quitclaim” was signed voluntarily. In Alba Patio de Makati v. NLRC: A final and executory
judgment can no longer be altered, even if the modification is meant to correct what is perceived to be
an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be
made by the court rendering it or by the highest court of the land. Moreover, a final and executory
judgment cannot be negotiated, hence, any act to subvert It is contemptuous. It was incumbent upon
the counsel for the complainant to have seen to it that the interest of all complainants was protected.
The quitclaim and the release in the preparation of which he assisted clearly worked to the grave
disadvantage of the complainants. To render the decision of this Court meaningless by paying the
backwages of the affected employees in a much lesser amount clearly manifested a willful disrespect of
the authority of this Court as the final arbiter of cases brought to it. A final and executory judgment
cannot be compromised under a “Release and Quitclaim" if said “Release and Quitclaim is
clearly to the grave disadvantage of the affected employees by paying them much lesser
amounts than what they were entitled to receive under the judgment. (See Alba Patio de Makati vs.
NLRC, 201 SCRA 355).
402Q: Deeds of release, waivers and quitclaims are always valid and binding. (2%) (2010 Bar Question)
SUGGESTED ANSWER: FALSE. Deeds of release, waivers and quitclaims are not always valid and
binding. An agreement is valid and binding only if: (a) the parties understand the terms and
conditions of their settlement; (b) it was entered into- freely and voluntarily by them; and (c) it is not
contrary to law, morals, and public policy.
ALTERNATIVE ANSWER: FALSE. Not all deeds of release, waivers and quitclaims are valid and
binding. The Supreme Court, in Periquet v. NLRC (186 SCRA 724 [1990]) and affirmed in Solgus
Corporation v. Court of Appeals (514 SCRA 522 [2007]), provided the following guideposts in
determining the validity of such release, waivers and quitclaims: “Not all waivers and quitclaims are
invalid as against public policy. If the agreement was voluntarily entered into and represents a
reasonable settlement, it is binding on the parties and may not later be disowned simply because
of a change of mind. But where it is shown that the person making the waiver did so voluntarily,
with full understanding of what he was doing, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as a valid and binding undertaking.”
403The quitclaim wherein the consideration is SCANDALOUSLY LOW AND INEQUITABLE
cannot be an obstacle to petitioner’s pursuing her legitimate claim. Equity dictates that the compromise
agreement should be voided in this instance. (Cruz v. NLRC, 28 October 1991)
by law (Sime Darby Pilipinas v. Arguilla, 8 June 2006).404
<CONSTRUCTIVE DISMISSAL>******
1. Constructive dismissal occurs when there is CESSATION OF WORK
because continued employment is **rendered IMPOSSIBLE,
UNREASONABLE, OR UNLIKELY as when there is
a. a DEMOTION in rank or
b. DIMINUTION in pay or
c. when a clear DISCRIMINATION, INSENSIBILITY, OR DISDAIN by an ER
BECOMES UNBEARABLE to the EE leaving the latter with no other
option but to quit (The University of Immaculate Conception v. NLRC, 26 January
2011).
2. **RELIEF entitled to illegally or constructively dismissed EEs: An an illegally
or constructively dismissed EE is entitled to:
(1) either reinstatement, if viable, or separation pay, if reinstatement is
no longer viable; and
(2) backwages
**These two reliefs are separate and distinct from each other and are
awarded CONJUNCTIVELY (Robinsons Galleria v. Ranchez, G.R. No.
177937, January 9, 2011).
3. What is a FLOATING STATUS? When is an EE in a floating status
considered to be constructively dismissed?******
a. NO: Pursuant to Art. 286 of the LC, the bona fide suspension of the
operation of a business undertaking for a period not exceeding 6 months, or
the fulfillment by the EE of a civic duty shall NOT TERMINATE
404Q: Pedro Tiongco was a salesman for ten years of Lakas Appliance Company (LAC). Due to
business reverses, the Company laid off Tiongco and three other salesmen and offered them
separation pay based on their monthly basic salary of P5,700.00. The three salesmen accepted their
separation pay and signed individual quitclaims stating, among others, that they have no more claims
or causes of action whatsoever against LAC. The quitclaims were duly notarized. Tiongco refused to
accept his separation pay and instead, demanded that the said pay should be computed on the
basis of his monthly basic salary and his sales commissions. Upon LAC’s rejection of Tiongco’s
demand. Tiongco filed the appropriate complaint with the Labor Arbiter. a) As Labor Arbiter, how will
you resolve Tiongco’s complaint? Reasons. SUGGESTED ANSWER: As Labor Arbiter, I will grant
the demand that Tiongco be paid his separation pay computed on the basis of his monthly basic salary
and his sales commissions. The sales commissions under the Labor Code is part of the ‘‘wage’’
that the salesmen are entitled to receive for services rendered. Wages may be fixed or ascertained
on a time, task, piece or commission basis. (Article 97. Labor Code. Songeo. el al.. vs. NLRC. G.R. No.
50999, March 23, 1990). b) If Tiongco obtains a favorable decision will the three other salesmen be
entitled to separation pay differential? Reasons. SUGGESTED ANSWER: No. If the acceptance of
their separation pay by the three other salesmen and their signing individual quitclaims that stated that
they have no more claims or causes of actions whatsoever against LAC (where the quitclaims were even
duly notarized) is voluntarily, they can no longer ask for a recomputation of their separation pay
according to the favorable decision secured by Tiongco. The salesmen signed quitclaim that are
not contrary to law morals or public policy. Not all quitclaims are invalid as against public policy if
they are voluntarily entered into and represents a reasonable settlement. (Periquel v. NLRC, 186
SCRA 724).
EMPLOYMENT. In all such cases the ER shall reinstate the EE to his former
position without loss of seniority rights if he indicates his desire to resume his
work not later than one month from the resumption of operations of his ER
or from his relief from the military or civic duty.
b. YES: Only when such a "floating status" lasts for more than 6
months405 that the EE may be considered to have been constructively
405 Asia Security & Investigation Agency (ASIA) executed a one-year contract with the Baron
Hotel (BARON) for the former to provide the latter with twenty (20) security guards to safeguard the
persons and belongings of hotel guests, among others. The security guards filled up Baron application
form and submitted the executed forms directly to the Security Department of Baron. The pay slips
of the security guards bore Baron’s logo and showed that Baron deducted therefrom the amounts
for SSS premiums, medicare contributions and withholding taxes. Assignments of security guards,
who should be on duty or on call, promotions, suspensions, dismissals and award citations for
meritorious services were all done upon approval by Baron’s chief Security officer. After the
expiration of the contract with Asia, Baron did not renew the same and instead executed another
contract for security services with another agency. Asia placed the affected security guards on “floating
status" on “no work no pay” basis. Having been displaced from work, the Asia security guards
filed a case against the Baron Hotel for illegal dismissal, overtime pay, minimum wage
differentials, vacation leave and sick leave benefits, and 13th month pay. Baron Hotel denied
liability alleging that Asia is the employer of the security guards and therefore, their complaint for illegal
dismissal and payment of money claims should be directed against Asia. Nevertheless, Baron filed a
Third Party Complaint against Asia. (1999 Bar Question) 1. Is there an employer-employee relationship
between the Baron Hotel, on one hand, and the Asia security guards, on the other hand? Explain
briefly. (3%) SUGGESTED ANSWER: As a general rule, the security guards of a private security
guard agency are the employees of the latter and not of the establishment that has entered into a
contract with the private security guard agency for security services. But under the facts in the question,
Baron Hotel appear to have hired the security guards, to have paid their wages, to have the
power to promote, suspend or dismiss the security guards and the power of control over them,
namely, the security guards were under orders of Baron Hotel as regard their employment. Because of
the above-mentioned circumstances, Baron Hotel is the employer of the security guards. 2. Assuming
that ASIA is the employer, is the act of ASIA in placing the security guards on "floating status" lawful?
Why? (2%) SUGGESTED ANSWER: It is lawful for a private security guard agency to place its
security guard on a “floating status’’ if it has no assignment to give to said security guards. But if
the security guards are placed on a “floating status” for more than six (6) months, the security
guards may consider themselves as having been dismissed.
dismissed406 (Nippon Housing Phil. Inc., v. Leynes, 3 August 2011)407

4. The TEST OF CONSTRUCTIVE DISMISSAL is whether a REASONABLE
person in the EE’s position WOULD HAVE FELT COMPELLED to give up his job
under the circumstances. To substantiate his claim of constructive dismissal,
the EE’s quantum of proof which is SUBSTANTIAL EVIDENCE, or such
relevant evidence as a reasonable mind might accept as ADEQUATE TO
406Q: An accidental fire gutted the JKL factory in Caloocan. JKL decided to suspend operations and
requested its employees to stop reporting for work. After six (6) months, JKL resumed operations
but hired a new set of employees. The old set of employees filed a case for illegal dismissal. If you
were the Labor Arbiter, how would you decide the case? (2014 Bar Question) SUGGESTED
ANSWER: I will rule in favor of the employees. JKL factory merely suspended its operations as a
result of the fire that gutted its factory. Article 286 of the Labor Code states that an employer may
bona fide suspend the operation of its business for a period not exceeding six (6) months. In
such a case, there would be no termination of the employment of the employees, but only a
temporary displacement. *****Since, the suspension of work lasted more than six months, there
is now constructive dismissal (Sebuguero v. NLRC, 245 SCRA 532 [1995]).
407Q: Southseas Garments Corporation suspended its operations and laid off its 500 workers in
December 1, 1986, after it received word that the contracts being negotiated abroad did not materialize
and the current work being done had been finished. On May 2, 1987, the company resumed
operations. Most of the workers reported for work after having been given notice to report. Clara
Libunao, a sewing machine operator, did not receive any notice but learned of the resumption of
work from a fellow worker. On May 16, 1987, she notified the company that she would like to
resume work. The company refused to accept her back, presumably because she was already 60
years old. Clara filed a complaint for illegal dismissal. Decide. (1987 Bar Question) SUGGESTED
ANSWER: Clara was illegally dismissed. In the case, the suspension of operations of the
Corporation was for a period not exceeding six (6) months. It was actually only for five (5)
months. Thus, in accordance with the Labor Code (in Art. 286), there was no termination of
employment. In such a case, the employer shall reinstate to his former position without loss of
seniority rights any employee who indicates his desire to resume his work not later than one (1)
month from the resumption of operations of his employer. Clara notified the Corporation that she
would like to resume work on May 16 or within one (1) month from the resumption of the
operations of the Corporation on May 2. ANOTHER SUGGESTED ANSWER: Clara cannot
complain that she has been illegally dismissed, if the refusal of the company to accept her back is
because she was already 60 years old. Implementing the Labor Code, the Rules and Regulation provides
that in the absence of a CBA or other applicable agreement concerning terms and conditions of
employment which provides for a retirement age at an older age, an employee may be retired upon
reaching the age of sixty (60) years. Thus, the company may consider her retired after she-became 60
years old. Therefore, there is no illegal dismissal.
SUPPORT A CONCLUSION.408
5. Nuances when there is constructive dismissal outside the concepts above:
a. NB-LPS: after the 30 day period of preventive suspension, the Ee
must be reinstated to his former position because suspension beyond the
maximum period amounts to constructive dismissal (Hyatt Taxi Services v.
Catinoy, 26 June 2001);
b. An offer for reinstatement as a new EE is tantamount to constructive
dismissal as the same is prejudicial to the EE—it means demotion in rank and
privileges, and loss of retirement benefits.409
c. Constructive dismissal does not always involve diminution in pay or rank
—it may be inferred from an act of clear discrimination, insensibility or disdain by
the an ER that makes it unbearable for the EE to continue with his
408[] Q: Reynaldo was hired by Geminilou Trucking Service (GTS) as a truck driver to haul and deliver
products of San Miguel Pure Foods Company, Inc. He was paid Php 400 per trip and made 4 trips a
day. He claimed that he was requested by GTS to sign a contract entitled “Kasunduan Sa Pag-upa ng
Serbisyo” which he refused as he found it to alter his status as a regular EE to merely contractual.
He averred that on account of his refusal to sign the Kasunduan, his services were terminated
prompting him to file a complaint before the NLRC for constructive dismissal against the GTS. Would
Reynaldo’s refusal to sign the Kasunduan adequately support his allegation of constructive dismissal?
NO. The TEST OF CONSTRUCTIVE DISMISSAL is whether a REASONABLE person in the EE’s
position WOULD HAVE FELT COMPELLED to give up his job under the circumstances. In the present
case, the records show that the **LONE PIECE OF EVIDENCE submitted by Reynaldo to
substantiate his claim of constructive dismissal is an UNSIGNED COPY of the Kasunduan. This
falls way short of the required quantum of proof which is **SUBSTANTIAL EVIDENCE, or
such relevant evidence as a reasonable mind might accept as ADEQUATE TO SUPPORT A
CONCLUSION. Reynaldo was not dismissed, but that he SIMPLY FAILED TO REPORT FOR WORK
after an altercation with a fellow driver (Madrigalejos v. Geminilou Trucking Service, December 24,
2008).
409Flores, a conductor of JAM Transportation Co., Inc., had an accident where he had to be
hospitalized for a number of days. Upon reporting back to the company he was told to wait. For several days
this continued and he was promised a route assignment which did not materialize. Upon speaking to
Personnel Manager Medrano, he was told that he will be accepted back to work but as a new EE.
Flores rejected the offer because it would mean forfeiture of his 18 years of service to the company.
Is the offer for reinstatement as a new EE a constructive dismissal? YES. Flores’ re-employment
as a new EE would be very PREJUDICIAL to him as it **WOULD MEAN A DEMOTION IN RANK
AND PRIVILEGES AND THE RETIREMENT BENEFITS for his previous 18 years of service with the
company would simply be considered as non-existent. It amounts to constructive dismissal (JAM
Transportation Co., Inc. v. Flores, G.R. No. 82829, 19 March 1993).
employment.410
6. Nuances when there is no constructive dismissal outside the concepts above:
a. There is no constructive dismissal if there is no demotion in rank or
change in place of work, nor a diminution of pay, benefits and privileges. Note
that the security of tenure of an EE does not give him a vested right to his
position in the company, otherwise, it would deprive the company of the
prerogative to change his assignment.411
————————————————
B2. Termination by Employer

*JUST vs. AUTHORIZED CAUSES OF DISMISSAL
1. A dismissal for JUST cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the employer,
i.e., the employee has committed some serious misconduct, is guilty of some
fraud against the employer, or, he has neglected his duties. Thus, it can be said
that the employee himself initiated the dismissal process.
2. On another breath, a dismissal for an AUTHORIZED cause under Article 283
does not necessarily imply delinquency or culpability on the part of the
employee. Instead, the dismissal process is initiated by the employer's exercise
of his management prerogative, i.e., when the employer opts to install labor
saving devices, when he decides to cease business operations or when… he
undertakes to implement a retrenchment program (Jaka Food v. Pacot, 28 March
2005).
3. Payment of separation pay, as a rule is not required in just cause dismissal.
However, where the employee is dismissed for causes other than serious misconduct or those
reflecting on his moral character, separation pay may be allowed as a measure of
410Sangil was a utility man/assistant steward of the passenger cruise vessel Crown odyssey under a
one-year contract. Sangil suffered head injuries after an altercation with a Greek member of the
crew. He informed the captain that he no longer intends to return aboard the vessel for fear that
further trouble may ERupt between him and the other Greek crew members of the ship. Was Sangil
constructively dismissed? YES. There is ***constructive dismissal WHERE THE ACT OF A
SEAMAN IN LEAVING SHIP WAS NOT VOLUNTARY but was IMPELLED BY A LEGITIMATE
DESIRE FOR SELF-PRESERVATION or because of FEAR FOR HIS LIFE. Constructive dismissal does
NOT ALWAYS INVOLVE DIMINUTION IN PAY OR RANK but may be INFERRED FROM AN ACT
OF CLEAR DISCRIMINATION, INSENSIBILITY OR DISDAIN by an ER may become
unbearable on the part of the EE that it could FORECLOSE ANY CHOICE by him EXCEPT TO
FOREGO HIS CONTINUED EMPLOYMENT (Sunga Ship Management Phil., Inc. v. NLRC, 14 April 1998).
411 Quinanola was transferred from the position of Executive Secretary to the Executive Vice President and
General Manager to the Production Department as Production Secretary. Quinanola rejected the
assignment and filed a complaint for illegal dismissal due to constructive dismissal. Did the transfer of
Quinanola amount to constructive dismissal? NO. Quinanola’s **TRANSFER WAS NOT
UNREASONABLE since it DID NOT INVOLVE A DEMOTION in rank or a change in her place of
work NOR A DIMINUTION IN PAY, BENEFITS AND PRIVILEGES. It did not constitute constructive dismissal.
Furthermore, an **EE’s SECURITY OF TENURE DOES NOT GIVE HIM A VESTED
RIGHT in his position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful (Philippine Japan Active Carbon Corp. v. NLRC, 8 March 1989).
social justice (POQUIZ)

————————————————
B2.a. Just Causes

*****Just Causes412 for Termination (SNB-CA)
412Q: A, B, C and D (treasurer, accountant, elementary department Principal, and secretary of the
Director, respectively), regular employees of a private educational institution, were administratively
charged for their participation in a picket held in front of the campus after office hours. Several
faculty members, non-academic stall and students joined the peaceful prayer rally organized by
disgruntled employees to protest certain alleged abuses of the incumbent School Director.
Subsequently, the rank- and-file employees succeeded in forming the first and only union of the
School. During the investigation, the administration discovered that two (2) days prior to the rally,
A, B, C and D attended the meeting of the School's employees' association which planned the
protest activity. Two well-known organizers/leaders of a national labor federation were also present.
A, B, C and D were dismissed by the School on the ground of violating the Labor Code which
prohibits managerial employees to “join, assist or form any labor organization.” Is the
contention of the School tenable? Is the dismissal of A, B, C and D valid? Explain. (5%) (2005 Bar
Question) SUGGESTED ANSWER: The dismissal of A, B, C and D on the ground that they violated
the Labor Code provision which states that managerial employees "are not eligible to join, assist or
form any labor organization" is not valid. The Labor Code does not provide for any sanction for
the aforesaid acts. These acts could not be considered as just cause for the termination of
employment, either. ANOTHER SUGGESTED ANSWER: The dismissal of the managerial
employees is invalid. The dismissal of the management employees because of union activities, no
matter how erroneous or tenous may be the basis of the exercise, is a violation of the constitutional
and statutory guaranteed rights of self-organization, and an act of unfair labor practice. (Sec. 3, Art.
XIII, Constitution; Art. 243, Labor Code. See also Art. 248 (a), Labor Code).
413
1. SERIOUS MISCONDUCT OR WILLFUL DISOBEDIENCE by the EE

of the lawful orders of his ER or representative in connection with his work;
2. GROSS AND HABITUAL NEGLECT by the EE of his duties;
3. FRAUD OR WILLFUL BREACH by the EE of the trust reposed in him by
his ER or duly organized representative;
4. Commission of a CRIME OR OFFENSE by the EE against the person of
his ER or any immediate member of his family or his duly authorized representative;
5. Other causes ANALOGOUS to the foregoing (LC, Art. 282):
a. Violation of company rules and regulations
b. Drunkenness
c. Gross inefficiency414
d. Illegally diverting ER's products
413 Q: A was an able seaman contracted by ABC Recruitment Agency for its foreign principal,
Seaworthy Shipping Company (SSC). His employment contract provided that he would serve on board
the Almieda II for eight (8) months with a monthly salary of US $450. In connection with his
employment, he signed an undertaking to observe the drug and alcohol policy which bans
possession or use of all alcoholic beverages, prohibited substances and unprescribed drugs on
board the ship. The undertaking provided that: (1) disciplinary action including dismissal would be
taken against anyone in possession of the prohibited substances or who is impaired by the use of any
of these substances, and (2) to enforce the policy, random test sampling would be done on all those
on board the ship. On his third month of service while the Almieda U was docked at a foreign port, a
random drug test was conducted on all members of the crew and A tested positive for marijuana. He
was given a copy of the drug test result. In compliance with the company’s directive, he submitted his
written explanation which the company did not find satisfactory. A month later, he was repatriated to
the Philippines. Upon arrival in the Philippines, A filed with the National Labor Relations
Commission (NLRC) a complaint against the agency and the principal for illegal dismissal
with a claim for salaries for the unexpired portion of his contract. (2010 Bar Question) a) Was A’s
dismissal valid? Explain. (3%) SUGGESTED ANSWER: NO, A’s dismissal was not valid. A was not
found to be “in possession of the prohibited substance” nor was he “impaired by the use”
thereof. Being “tested positive for marijuana” is not a ground for “disciplinary action” under the
“undertaking” he signed. ALTERNATIVE ANSWER: YES, A’s dismissal was valid. He was tested
positive for marijuana. This is in violation of the drug and alcohol policy, which bans possession,
or use of all alcoholic beverages, prohibited substances and un-prescribed drugs on board the
ship. b) Is his claim for salaries for the unexpired portion of his contract tenable? Explain. (3%)
SUGGESTED ANSWER: YES. Section 10 of Rep. Act No. 8042 (as amended by Rep. Act No. 10022)
provides that in case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, or any unauthorized deductions from the migrant worker’s salary, the
worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent
(12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three
(3) years for every year of the unexpired term, whichever is less (cf. Serrano v. Gallant Maritime, 582
SCRA 254 [2009]). ALTERNATIVE ANSWER: NO. Under Rep. Act No. 8042, money claim can be
made only if there is dismissal without just or authorized cause.
414[] Is INEFFICIENCY a just cause for dismissal? YES. Failure to observe prescribed standards
of work or to fulfill reasonable work assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either
by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory
results (Buiser v. Leogardo 1984). This ground is considered ANALOGOUS to those enumerated
under Art. 282. (Skippers United Pacific v. Magud, G.R. No. 166363, August 15, 2006).
e. **Failure to heed an order not to join an illegal picket

f. Violation of safety rules and code of discipline
6. The following are not considered valid causes for termination:
a. defamation;415
**NB: The burden of proving that the termination was for a valid or authorized
cause shall **REST ON THE ER [LC, Art. 277(b)].
SERIOUS MISCONDUCT
1. What it is: It is an improper or wrongful 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.
*To be SERIOUS within the meaning and intendment of the law, the
misconduct must be of such GRAVE AND AGGRAVATED character and NOT
MERELY TRIVIAL or unimportant (Villamor Golf Club v. Pehid, October 4, 2005).416
2. ELEMENTS of serious misconduct:*****
a. It must be serious or of such a grave and aggravated character;
b. Must relate to the performance of the EEs’ duties;
c. EE has become unfit to continue working for the ER (Philippine Aeolus
415Q: Lanz was a strict and unpopular Vice-President for Sales of Lobinsons Land. One day, Lanz
shouted invectives against Lee, a poor performing sales associate, calling him, among others, a
“brown monkey.” Hurt, Lee decided to file a criminal complaint for grave defamation against Lanz.
The prosecutor found probable cause and filed an information in court. Lobinsons decided to
terminate Lanz for committing a potential crime and other illegal acts prejudicial to business.
Can Lanz be legally terminated by the company on these grounds? (2014 Bar Question) SUGGESTED
ANSWER: No. The grounds relied upon by Lobinsons are not just causes for dismissal under the
Labor Code. Defamation is not a crime against person which is a ground to dismiss under
Article 282, now Article 295, (d) of the Labor Code.
416 Q: Atty. Renan, a CPA-lawyer and Managing Partner of an accounting firm, conducted the
orientation seminar for newly-hired employees of the firm, among them, Miss Maganda. After the
seminar, Renan requested Maganda to stay, purportedly to discuss some work assignment. Left alone in
the training room, Renan asked Maganda to go out with him for dinner and ballroom dancing.
Thereafter, he persuaded her to accompany him to the mountain highway in Antipolo for sight-seeing.
During all these, Renan told Maganda that most, if not all, of the lady supervisors in the firm are where
they are now, in very productive and lucrative posts, because of his favorable endorsement. [b] The lady
supervisors in the firm, slighted by Renan’s revelations about them, succeeded in having him
expelled from the firm. Renan then filed with the Arbitration Branch of the NLRC an illegal dismissal
case with claims for damages against the firm. Will the case prosper? Reasons. (2%) (2009 Bar
Question) SUGGESTED ANSWER: Yes, serious misconduct is a ground for termination of
employment.*****The term “misconduct” denotes intentional wrongdoing or deliberate violation
of a rule of law or standard of behavior. ANOTHER SUGGESTED ANSWER: No. The case for
illegal dismissal with damages filed in the Office of Labor Arbiter will not prosper. Renan was
terminated for serious misconduct which is a just cause under Art. 282 of the Labor Code. The act of
Renan is grave and aggravated in character, and committed in connection with his work (Echaverria v.
Venutek Media, 516 SCRA 72 [2007], and indicates that he has become unfit to continue working for
his employer. (Torreda v. Toshiba Info. Equipment, Inc. Phils., 515 SCRA 133 [20007]).
Automotive United Corp. v. NLRC, 28 April 2000).417

3. EXAMPLES of serious misconduct:
a. Sexual Harassment
b. Fighting within the company premises
c. Uttering obscene, insulting or offensive words against a superior
417 Q: Marimar is a teacher in Santibanez High School. She is the class adviser of the senior batch
where Sergio is enrolled. Since it is the policy of the school to extend remedial instructions to its
students, Sergio is imparted such Instructions in school by Marimar after regular class hours. In the
course thereof. Marimar and Sergio fell in love with each other and shortly after got married.
Marimar is 31 years old while Sergio is only 16. Santibanez High School thereafter seeks to terminate
the employment of Marimar for abusive and unethical conduct unbecoming of a dignified
school teacher and that her continued employment is inimical to the best interest and would
downgrade the high moral values of the school. Marimar, according to the school, recklessly took
advantage of her position as a teacher by luring a graduating student under her advisory section
and 15 years her junior into an amorous relationship, in violation of the Code of Ethics for teachers
which states, among others, that a “school official or teacher should never take advantage of his/her
position to court a pupil or student." While no one directly saw Marimar and Sergio doing any
intimate acts inside the classroom, the school nonetheless maintains that the marriage between the
two is the best proof which confirms the suspicion that Marimar and Sergio indulged in amorous
relations inside the classroom after class hours. Marimar, on the other hand, contends that there is
nothing wrong with a teacher falling in love with her pupil and consequently, contracting marriage with
him. How would you decide the case. Explain. (1996 Bar Question) SUGGESTED ANSWER: The
fact that Marimar and Sergio got married is not by itself sufficient proof that Marimar, as a 31 year
old teacher, took advantage of her position to court Sergio, a 16- year old student, whom she was
tutoring after regular class hours. Thus, Marimar could not be considered as violating the school’s
Code of Ethics which could have been a valid cause for her termination. ***Marimar’s falling in
love with her student cannot be considered serious misconduct which is a Just cause for
termination of employment. Of course, if it is proven that Marimar and Sergio indulged in amorous
relations inside the classroom after class hours, this would constitute serious misconduct on the part of
Marimar as a teacher and could be just cause for the termination of her employment. The case should
be decided in favor of Marimar, the school teacher. The school failed to adduce evidence in
support of its claim of immoral conduct on the part of Marimar; hence, its claim “that the
marriage between the two (teacher and student) is best proof which confirm the suspicion that
Marimar and Sergio indulged in amorous relations inside the classroom after office hours" is a
gratuitous statement. Furthermore, marriage between two parties of disparate ages, even as between an
older teacher and a younger student is not an immoral act. In Chua Qua v. Clave, 189 SCRA 117 (1990)
a case which is exactly similar to the problem, the Supreme Court ruled: [Where] there is no
substantial evidence of the imputed immoral acts, it follows that the alleged violation of the Code
of Ethics would have no basis. If the two eventually fell in love, despite the disparity on their ages
and academic levels, this only lends substance, to the truism that the heart has reasons of its own
which reason does not know. But, definitely, yielding to this gentle and universal emotion is not to be
casually equated with immorality. The deviation of the circumstances of their marriage from the
usual societal pattern cannot be considered as a defiance of contemporary social norms.
*As to use of offensive words, it can be418 a just cause or not.419

d. Falsification of time records
e. Gross immorality
**The determination of whether a conduct is disgraceful or immoral
involves a TWO-STEP PROCESS: first, a consideration of the totality of the
circumstances surrounding the conduct; and second, an assessment of the said
circumstances vis-à-vis the prevailing norms of conduct, i.e., what the society
418YES: Escando, upset at his transfer to the washer section, repeatedly uttered “gago ka” and
threatened bodily harm to his superior Mr. Andres. Is the utterance of the obscene words and
threats of bodily harm gross and willful misconduct? YES. The repeated utterances by Escando of
obscene, INSULTING or offensive words against a superior were not only destructive of the
MORALE of his co-EEs and a violation of the company RULES and regulations, but ALSO
CONSTITUTE GROSS MISCONDUCT which is one of the grounds provided by law to terminate the
services of an EE (Autobus Workers Union v. NLRC, G.R. No. 117453, 26 June 1998).
419NO: Samson made insulting and obscene utterances towards the General Manager saying “Si
EDT bullshit yan, sabihin mo kay EDT yan” among others during the Christmas party. Are the
utterances towards the General Manager gross misconduct? NO. When viewed in its context is not of
such serious and grave character as to warrant his dismissal. Samson made the utterances and
obscene gestures at an informal Christmas gathering and it is to be expected during this kind of
gatherings, where tongues are more often than not **LOOSENED BY LIQUOR of other alcoholic
beverages, that EEs freely express their grievances and gripes against their EEs. EEs should be
**allowed wider latitude to freely express their grievances and gripes against their ER, especially
during these kinds of occasions which are beyond the disciplinary authority of the ER (Samson v.
NLRC, 12 April 2000).
generally considers moral and respectable.420

f. fighting back one’s superior.421
420 As to immorality: Cheryll Leus was a non-teaching personnel employed in St. Scholastica’s College
Westgrove (SSCW). Cheryll and her boyfriend conceived a child out of wedlock. SSCW dismissed
her on the ground that her pregnancy out of wedlock constitutes disgraceful and immoral conduct
and ran counter to the moral principles that SSCW stands for and teaches its students. Does
pregnancy out of wedlock (without a legal impediment to marry) constitutes immoral conduct as a
ground for dismissal contemplated by law? NO. It is **not the totality of the circumstances
surrounding the conduct per se that determines whether the same is disgraceful or immoral, but the
conduct that is GENERALLY ACCEPTED by society as respectable or moral. If the conduct does
not conform to what society generally views as respectable or moral, then the conduct is considered as
disgraceful or immoral. Tersely put, **SUBSTANTIAL EVIDENCE must be presented, which
would establish that a particular conduct, viewed in light of the prevailing norms of conduct, is
considered disgraceful or immoral.
Thus, the determination of whether a conduct is disgraceful or immoral involves a **TWO-
STEP PROCESS: first, a consideration of the totality of the circumstances surrounding the
conduct; and second, an assessment of the said circumstances vis-à-vis the prevailing norms of
conduct, i.e., what the society generally considers moral and respectable. There is still a necessity to
determine whether the petitioner's pregnancy out of wedlock is considered disgraceful or immoral in
accordance with the prevailing norms of conduct. To stress, **pre-marital sexual relations between
two consenting adults who have no impediment to marry each other, and, consequently, conceiving
a child out of wedlock, gauged from a purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct (Leus v. SSCW, 28 January 2015).
NB: Well, this is an opinion of the Supreme Court. The Catholic Church says this in its
Catechism: 2391 Some today claim a "right to a trial marriage" where there is an intention of getting
married later. However firm the purpose of those who engage in premature sexual relations may be,
"the fact is that such liaisons can scarcely ensure mutual sincerity and fidelity in a relationship between a
man and a woman, nor, especially, can they protect it from inconstancy of desires or whim." Carnal
union is morally legitimate only when a definitive community of life between a man and woman has
been established. Human love does not tolerate "trial marriages." It demands a total and definitive gift
of persons to one another.
421 Q: “A” is an audit clerk in the Seafront Financing Company. One day he had an argument with his
immediate superior after the latter accused him of having failed to record and check a certain
transaction a week earlier which resulted in the loss of P100, 000. The argument led to a fist-fight with
both protagonists sustaining serious injuries that required hospitalization. One and a half
months later, “A” returned to work but was immediately given by the same superior a dismissal
letter on the ground of loss of confidence, grave misconduct and fighting with his superior. “A”
later sued the company for illegal dismissal. He also claimed for reinstatement and backwages. Decide.
SUGGESTED ANSWER: There may be just cause for the termination of the employment of “A”.
After all, he is guilty of a serious misconduct if he fought his superior after the latter accused him
of having failed to record and check a transaction which resulted in a loss of P100,000 for the
company. This is also a factual basis for loss of confidence since it is a willful breach of trust by
the employee of the trust reposed in him by his employer. The foregoing is a just cause for the
termination of employment. However, the Company should first give “A” the ample opportunity to
be heard and defend himself with the assistance of his representatives if he so desires in accordance
with company rules and regulations promulgated pursuant to the guidelines set by the DOLE. Unless
the Company gives to “A” the ample opportunity to be heard and to defend himself, its
termination of “A” will be illegal, and “A” will be entitled to reinstatement and backwages.
g. if committed by a supervisor,422 it may be serious, although the same may

not be serious if committed by a rank and file EE.
422 Q: Julian Ramos started with Philippine Mines, Inc. as a laborer in 1965. He rose to become a
shift supervisor. Company rules and regulations governing employee conduct within its mine
compound and the residential area and barracks for workers provide that the commission of a third
offense in any year, even if the first two were merely punished with warning, reprimand, or suspension,
would result in dismissal. By June 10, 1987, Julian had been warned once and reprimanded once. On
July 15, 1987, Julian quarreled with a company guard in the mine’s residential area. Investigated
by the personnel manager, Julian admitted the offense. He was dismissed on July 17, 1987 for violating
company rules and regulations and gross misconduct. He filed a case for illegal dismissal with
backwages on July 22, 1987. The parties stipulated on the above facts before the Labor Arbiter and
submitted the case for decision. (1988 Bar Question): (a) You are the Labor Arbiter. Decide the case.
(b) If instead of quarreling with a guard, he was caught taking scrap lumber from the premises of the
mine and taking it home for fuel, would your answer be the same? Explain SUGGESTED ANSWER:
(a) I will decide the case, ruling that the dismissal is illegal, if the quarrel which Julian had with a
company guard was just a small quarrel, say, just an exchange of words, after which Julian and the
company guard parted as friends. It would be too harsh; it could be violation of the security of
tenure of an employee, especially in this case, of an employee who has been with the Company for
over 20 years, to punish him with dismissal just because he has committed a third offense within a
year. It should also be noted that the quarrel was in the miners residential area and not in the
working area of the miners. This “third offense” rules of the company, rules and regulations should
not be literally implemented. It is serious misconduct that is a just cause for termination. Thus, if the
quarrel was a serious one: it was Julian who provoked the quarrel; he inflicted physical injuries
on the security guard, then the quarrel could be just cause for termination. (b) I would rule that
the act of Julian taking scrap lumber from the premises of the Mine and taking it home for fuel will be
a just cause for terminating him. It is noted that Julian is a shift supervisor. He should be a model for
other employee. Thus, I will consider his act of taking home scrap lumber as serious misconduct.
f. intoxication at work.423
ON WILLFUL DISOBEDIENCE
1. REQUISITES424 that must concur in order that willful disobedience of the
ER's lawful orders are considered just cause for termination:*****
a. The EEs assailed conduct must have been WILLFUL OR
423 Q: Sergio, an employee of Encantado Philippines, Inc. (EPI), was at the company canteen when
Corazon, a canteen helper, questioned him for his use of somebody else’s identification card (ID).
Sergio flared up and shouted at Corazon “Wala kang pakialam! Kung gusto mo. itapon ko itong mga
pagkain ninyo!”. When Sergio noticed that some people where staring at him rather menacingly, he left
the canteen but returned a few minutes later to remark challengingly “Sino ba ang nagagalit" Sergio
then began smashing some food items that were on display for sale in the canteen, after which he
slapped Corazon which caused her to fall and suffer contusions. The incident prompted Corazon to file
a written complaint with Gustavo, the personnel manager of EPI against Sergio. Gustavo required
Sergio to explain in writing why no disciplinary action should be taken against him. In his written
explanation, Sergio admitted his misconduct but tried to explain it away by saying that he was
under the influence of liquor at the time of the incident. Gustavo thereafter issued a letter of
termination from the employment of Sergio for serious misconduct. Sergio now files a complaint for
illegal dismissal, arguing that his acts did not constitute serious misconduct that would justify his
dismissal. Decide. (1996 Bar Question) SUGGESTED ANSWER: The acts of Sergio constituted
serious misconduct. Thus, there was just cause for his termination. ***The fact that he was under the
influence of liquor at the time that he did what he did does not mitigate instead it aggravates,
his misconduct being under the influence of liquor while at work is by itself serious misconduct.
ALTERNATIVE ANSWER: The dismissal is not justified because the serious misconduct committed
by the employee is not in connection with his work. Art. 282(g) of the Labor Code was interpreted by
the Supreme Court in Aris Philippines, Inc. v. NLRC, as follows: "It is not disputed that private
respondent has done, indeed he admitted to have committed, a serious misconduct. I n order to
constitute a “just cause" for dismissal, however, the act complained of must be related to the
performance of the duties of the employee such as would show him to be thereby unfit to continue
working for the employer."
424Q: Oscar Pimentel was an agent supervisor, rising from the ranks, in a corporation engaged in real
estate. In order to promote the business, the company issued a memorandum to all agent supervisors
requiring them to submit a feasibility study within their respective areas of operation. All agent
supervisors complied except Oscar. Reminded by the company to comply with the memorandum,
Oscar explained that being a drop-out in school and uneducated, he would be unable to submit the
required study. The company found the explanation unacceptable and terminated his
employment. Aggrieved, Oscar filed a complaint for illegal dismissal against the company. Decide the
case. (2005 Bar Question) SUGGESTED ANSWER: For failure to comply with the memorandum
to submit a feasibility study on his area of operation, Oscar cannot be terminated (presumably for
insubordination or willful disobedience) because the same envisages the concurrence of at least two
requisites: (1) the employee’s assailed conduct must have been willful or intentional, the willfulness
being characterized by a wrongful and perverse attitude; and (2) the order violated must have been
reasonable, or lawful, made known to the employee and must pertain to the duties which he had
been engaged to discharge. In the case at bar, at least two requisites are absent, namely: (1) Oscar did
not willfully disobey the memorandum with a perverse attitude; and (2) the directive to make a
feasibility study did not pertain to his duties. Hence, the termination from employment of Oscar
Pimentel is not lawful.
INTENTIONAL, the willfulness being characterized by a wrongful and perverse attitude.425

b. The disobeyed orders, regulations or instructions of the ER must be:
i. Reasonable and lawful
ii. Sufficiently known to the EE
iii. In connection with the duties which the EE has been engaged to
425 Q: Pepe Santos was an international Flight steward of FlySafe Airlines. Under FSA’s Cabin Crew
Administration Manual, Santos must maintain, given his height and body frame, a weight of 150 to 170
pounds. After 5 years as a flight steward, Santos began struggling with his weight; he weighed
200 lbs., 30 pounds over the prescribed maximum weight. The Airline gave him a one-year
period to attain the prescribed weight, and enrolled him in several weight reduction programs.
He consistently failed to meet his target. He was given a 6-month grace period, after which he still
failed to meet the weight limit. FSC thus send him a Notice of Administrative Charge for violation of
company standards on weight requirements. He stated in his answer that, for medical reasons, he
cannot have a rapid weight loss. A clarificatory hearing was held where Santos fully explained his
predicament. The explanation did not satisfy FSA and so it decided to terminate Santos’s service for
violation of company standards. Santos Filed a complaint for illegal dismissal, arguing that the
company’s weight requirement policy is unreasonable and that his case is not a disciplinary but a
medical issue (as one gets older, the natural tendency is to grow heavier). FSA defended its policy as a
valid exercise of management prerogative and from the point of view of passenger safety and
extraordinary diligence required by law of common carriers; it also posited that Santos’ failure to
achieve his ideal weight constituted gross and habitual neglect of duty, as well s willful disobedience to
lawful employer orders. The Labor arbiter found the dismissal illegal for there was neither gross and
habitual neglect of duty nor willful disobedience. Is the Labor Arbiter correct? Why or why not?
Explain fully. (6%) (2008 Bar Question) SUGGESTED ANSWER: The Labor Arbiter is correct. There
is no gross and habitual neglect because it appears that Pepe was trying to meet the weight limit,
but just could not do so. His acts or omissions were not willfully or intentionally done with
conscious indifference to the consequences of such acts or omissions. There was no willful
disobedience because Pepe’s actions or omissions were not motivated by a wrongful or perverse
attitude. Besides, the rigid requirement of meeting the 170-pound maximum weight limit is not
reasonable, considering a person who could just be a few pounds over shall already be terminated.
*****At worst, Pepe could be suspended or reprimanded for his inability to reach the weight
limit. Dismissal would be too harsh a penalty to impose. ANOTHER SUGGESTED ANSWER:
The Labor Arbiter is not correct in finding the dismissal of Santos illegal. Pepe Santos, right at the
commencement of his employment at FSA as flight steward, knew that he must maintain, given his
height and body frame, a weight of 130 to 170 pounds. The FSA, through its Cabin Crew
Administrative Manual, told Santos, that given his height and body frame, he must maintain his weight
between 130 and 170 pounds. This pre -requisite is an exercise of management prerogative. When
Santos became a flight steward at FSA, he accepted his employment with this prerequisite which is not
violative of any law but is instead positively based on passenger safety and extraordinary diligence
required by law of common carrier. Thus, the termination of Santos was for a valid reason: He was no
longer complying with a pre-requisite which was in his contract of employment from the very
beginning.
discharge426 (Cosep v. NLRC, 16 June 1998; Realda v. New age Graphics 25 April
426 Q: Julie is a branch manager of Bangko Bangkarute National, rising from the ranks through her 21
years of employment. On November 25. 1992, she filed an application for a total 60 days leave of
absence; 15 days with pay (regular annual vacation leave), starting December 1 to 15. and 45 days
without pay (personal leave), starting December 16 to January 30. which she submitted to the Vice
President for Branch Banking Department, for approval. Unfortunately, the Vice President for the
Branch Banking Department, disapproved her request for personal leave without pay of 45 days,
citing as reason the anticipated heavy work load brought about by the onset of the Christmas season.
Nonetheless, he approved her regular annual leave with pay of 15 days. Realizing that the leave granted
her (15 days) is not sufficient she filed a motion for reconsideration only by way of formality since she
is bent on taking a leave for 60 days, irrespective of whether the bank management allows her personal
leave without pay for 45 days. Without waiting for the decision of the Vice President for branch
banking division, which denied her Motion for Reconsideration. Julie proceeded to take her
leave commencing on Dec. 1, 1992. Having exhausted her 60 days leave of absence, she reported back
for work but was presented a letter dated Dec. 16, 1992, from the Vice President for Branch Banking
Division, informing her of her termination effective December 16. 1992. She filed a case for illegal
dismissal and prayed for reinstatement and damages against Bangko Bangkarute National. 1) Is the
severance of Julie’s employment for a just cause? Explain. 2) Is she entitled to reinstatement? Why? 3)
Are damages recoverable from Bangko Bangkarute National? SUGGESTED ANSWER: 1) The
severance of Julie’s employment is for a Just cause. She is guilty of willful disobedience of the lawful
order of her employer, or her representative in connection with her work. As a branch manager of the
Bank, Julie is a high official, who should be a good example to the employees on how lawful orders
of the employer are to be observed and obeyed. The refusal of the Bank to grant her request for
personal leave without pay for 45 days was not whimsical or arbitrary. There was reason for the
refusal, that is, the anticipated heavy workload brought about by the onset of the Christmas
season. There was willful disobedience on the part of Julie. Her filing a motion for reconsideration
was only by way of formality, since she was bent on taking a leave for 60 days irrespective of whether
the Bank management allows her personal leave without pay for 45 days. 2) She is not entitled to
reinstatement because her dismissal was legal, it being for Just cause. 3) She cannot claim damages
from the Bank. There is no basis for a claim for damages. It may be noted that she was not given the
required due process by the Bank before her dismissal. She Is therefore entitled to an indemnity of
P1.000. TOM: the latter is confusing.
2012).427
2. Is **refusal to a promotion by an EE an act of insubordination or willful
disobedience? NO. There is no law that compels an EE to accept a
promotion for the reason that a promotion is in the NATURE of a GIFT OR
REWARD, which a person has the RIGHT TO REFUSE. The exercise of the
EE of the right to refuse a promotion cannot be considered in law as
insubordination or willful disobedience (PT&T Corp. v. CA, 29 September 2003).
3. On the test of reasonableness:
a. YES: a company rule prohibiting the use of company vehicles for
427 Q: Roman had been a driver of Double-Ten Corporation for ten (10) years. As early as his fifth year
in the service he was a ready commended as a Model Employee and given a salary increase. On his
seventh year, he became a steward of his labor union. Since then he became disputatious and
obstinate and his performance fell below par. One day his manager told him to pick up some
documents from a certain bank which were needed to close a business transaction. Roman did
not obey. He said he had an important personal engagement. Moreover, he did not want to drive a
vehicle that was not airconditioned. When his immediate supervisor asked him in the afternoon to
drive an airconditioned car, Roman again refused. He said he did not want to drive as he wanted
to leave the office early. Roman was asked to explain. After hearing his explanation, Roman was
dismissed for willful disobedience. Roman filed a case for illegal dismissal against the Double-Ten
Corporation with prayer for reinstatement and full back wages without loss of seniority rights, plus
moral and exemplary damages and attorney's fees. Roman contended that since there was no
emergency situation and there were other drivers available, his refusal to drive for the manager, and
later for his supervisor, was not serious enough to warrant his dismissal. On the other hand, he claimed
that he was being punished because of his activities as a steward of his union. If you were the Labor
Arbiter, would you sustain Roman? Discuss fully. (1995 Bar Question) SUGGESTED ANSWER: If I
were the Labor Arbiter, I will not sustain Roman. It is true that it would be an unfair labor practice
for an employer to discriminate against his employee for the latter’s union activities.
But in the case, the Corporation is not discriminating against Roman because he is a union official.
When the Manager of Roman told him to pick up some documents from a certain bank, this
was a lawful order and when Roman did not obey the order, he was disobedient; and when he
disobeyed a similar request made later in the afternoon of same day, he was guilty of willful
disobedience to do what management asked him to do. This is just cause for his termination.
ALTERNATIVE ANSWER: a) No. The existence-of an emergency situation is irrelevant to the charge
of willful disobedience; an opposite principle would allow a worker to shield himself under his self-
designed concept of “non-emergency situation" to deliberately defy the directive of the employer.
Roman was given adequate opportunity under the circumstances to answer the charge. His explanation
was taken into consideration in arriving at the decision to dismiss him. b) If it can be established that
the true and basic motive for the employer's act is derived from the employee's union affiliation or
activities, the allegation by the employer of another reason whatever its substance of validity, is
unavailing. Thus, the dismissal could be considered illegal.
personal/private use by EEs is reasonable.428

b. NO: The order of a security agency for its Basilan-based guards to report
to Manila is unreasonable, inconvenient and prejudicial to the EEs, especially if
they are not given transportation allowance.429
ON GROSS & HABITUAL NEGLIGENCE

1. It implies a want or absence of or failure to exercise slight care of
diligence or the entire absence of care; it evinces THOUGHTLESS
DISREGARD of consequences without exerting any effort to avoid them. However,
such neglect MUST NOT ONLY BE GROSS BUT HABITUAL in character
(Judy Phils. v. NLRC, 29 April 1998).
2. Degree of negligence as a just cause for termination: Gross and habitual430
negligence. What does habitual neglect of duties mean? It implies REPEATED
FAILURE to perform one’s duties over a period of time, depending upon the
circumstance (JGB and Associates v. NLRC, 7 March 1996).
3. Nuances when there is Gross & Habitual Negligence—Some FORMS OF
NEGLECT of duty
a. Habitual tardiness and absenteeism
b. Abandonment:
428 A company vehicle was brought twice out of the company premises without authorization. In
the first instance the company opted not to implement any action against Homer and instead issued a
memorandum reminding Homer as well as the security guards of the proper procedure. However, in
the second instance the vehicle met an accident. Is Homer guilty of willful disobedience even though
he was not the one who personally brought the company vehicle out of the company premises and
was merely a passenger in the second incident? YES. A rule prohibiting EEs from using company
vehicles for private purpose without authority from management is a **REASONABLE one. When
Homer rode the company vehicle, he was undoubtedly aware of the possible consequences of his act
and taking into consideration his moral ascendancy over the security guards it was incumbent
upon him not only to admonish them but also to refrain from using the company car himself. Homer
is responsible for the unauthorized release of the vehicle of the company which is a VIOLATION
OF THE RULES AND REGULATIONS of the company. Homer was already reminded of the proper
procedure of the company (Family Planning Org. of the Phil. v. NLRC, 23 May 1992).
429 Escobin’s group were security guards based in BASILAN. They were placed in floating status and
were asked to report for reassignment in Metro MANILA by PISI. Upon failure to report or respond to such
directives they were ordered dismissed from employment by PISI for willful disobedience. Did the
failure to report to Manila amount to willful disobedience? NO. The reasonableness of the rule
pertains to the kind of character of directives and commands and to the manner in which they are
made. In this case, **the order to report to the Manila office fails to meet this standard. The order
to report to Manila was INCONVENIENT, UNREASONABLE, AND PREJUDICIAL to Escobin’s group
since they are heads of families residing in Basilan and they were not given transportation money
or assurance of availability of work in Manila (Escobin v. NLRC, 15 April 1998)
430Antiola, as assorter of baby infant dress for Judy Phils., erroneously assorted and packaged
2,680 dozens of infant wear. Antiola was dismissed from employment for this infraction. Does the
single act of misassortment constitute gross negligence? NO. Such neglect MUST NOT ONLY
BE GROSS BUT ALSO HABITUAL in character. Hence, the **PENALTY OF DISMISSAL IS QUITE
SEVERE considering that Antiola committed the infraction for the first time (Judy Phils. v. NLRC, 29
April 1998).
i. Failure to report for work or absence without justifiable reason

ii. Clear intention to SEVER ER-EE relationship manifested by
some OVERT ACTS (Labor et. al v. NLRC, 14 September 1995).
4. Nuances when there is no Gross & Habitual Negligence:
a. The fact that an EE’s performance is found to be poor or unsatisfactory
does not necessarily mean that the EE is grossly and habitually negligent
of his duties.431
b. sleeping on the job is not a valid ground for dismissal, except when the
EE is a security guard, who has to be awake and watchful at all times.432
LOSS OF TRUST AND CONFIDENCE

*It is a just cause for termination when
1. It applies ONLY to cases involving—two classes of EEs:433
431As a general concept “POOR PERFORMANCE” is EQUIVALENT TO INEFFICIENCY AND

INCOMPETENCE in the performance of official duties. The fact that an EE’s performance is found to
be poor or unsatisfactory does not necessarily mean that the EE is grossly and habitually
negligent of his duties. Gross negligence implies a want or absence of or failure to exercise slight care
of diligence or the entire absence or care. It evinces a thoughtless disregard of consequences without
exerting any effort to avoid them (Eastern Overseas Employment Center Inc. v. Bea, 29 November 2005).
432Gamido was a quality control inspector of VH Manufacturing. Gamido was allegedly caught by the
company Pres. Dy Juanco of sleeping and was dismissed from employment. Did Gamido’s act of
sleeping on the job constitute a valid cause of dismissal? NO. sleeping on the job as a valid ground
for dismissal **ONLY APPLIES TO SECURITY GUARDS whose duty necessitates that they be awake
and watchful at all times. Gamido’s single act of SOLEEping further shows that the alleged
negligence or neglect of duty was neither gross nor habitual (VH Manufacturing v. NLRC, 19 January
2000).
433[] Q: Mabeza, a chambermaid at Hotel Supreme was terminated from employment because of
her refusal to sign an affidavit attesting to their ER's compliance with minimum wage and other labor
standards. Mabeza filed a complaint for illegal dismissal against Hotel Supreme. As a defense, Hotel
Supreme claimed that she abandoned her work and belatedly claimed loss of confidence as the
ground for the dismissal of Mabeza because she stole some of the properties of her ERR Is loss of
confidence a valid ground for dismissal of a hotel chambermaid? NO. Loss of confidence as a just
cause for dismissal was **never intended to provide ERs with a BLANK CHECK FOR TERMINATING
their EEs. Evidently, an ordinary chambermaid who has to sign out for linen and other hotel
property from the property custodian each day and who has to account for each and every towel or
bed sheet utilized by the hotel's guests at the end of her shift would **not fall under any of these
two classes of EEs for which loss of confidence, if ably supported by evidence, would normally
apply (Mabeza v. NLRC, 18 April 1997).
a. EEs occupying positions of trust and confidence434 (confidential

and managerial EE’s): To this class belong managerial EEs,435 i.e., those vested
with the powers or prerogatives to lay down management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline EEs or effectively
recommend such managerial actions. More on confidential EEs under Labor
Relations.
b. EEs routinely charged with the CARE AND CUSTODY OF THE
ER'S MONEY OR PROPERTY436 : To this class belong **cashiers, auditors,
property custodians, etc., or those who, in the normal and routine exercise of
their functions, regularly handle significant amounts of money or property
434 Q: "A" worked for company "B" as a rank and file employee until April 1990 when A's services
were terminated due to loss of confidence in A. However, before effecting A’s dismissal, B accorded
A due process including full opportunity to answer the charges against him in the course of the
investigation. Was B justified in dismissing A after the investigation? Why? (5%) (2001 Bar Question)
SUGGESTED ANSWER: In the case of PLDT vs. NLRC, (G.R. No. 106947, February 11, 1999), the
Supreme Court ruled that the basic requisite for dismissal on the ground of loss of confidence is
that the employee concerned must be one holding a position of trust and confidence. Rank-
and-file employees may only be dismissed for loss of confidence if the same is because of a willful
breach of trust by a rank and file employee of the trust reposed in him by his employer or duly
authorized representative (Art. 282(c), Labor Code). ANOTHER SUGGESTED ANSWER: "B" is
justified in dismissing "A" for loss of confidence after according him the right to procedural due
process. However, the following guidelines must be observed, as ruled in Nokom vs. NLRC, G.R. No.
140034, July 18, 2000: a. loss of confidence should not be simulated; b. it should not be used as
subterfuge for causes which are improper, illegal or unjustified; c. it may not be arbitrarily asserted in
the face of overwhelming evidence to the contrary; and d. it must be genuine, not a mere after thought
to justify their action
435*NB: The treatment of rank and file personnel and managerial EEs in so far as the application of
the doctrine of loss of trust and confidence is concerned is different. As regards managerial EEs, mere
existence of a basis for believing that such EE has breached the trust of his ER would suffice
for his dismissal (Caoile v. NLRC, G.R. No. 115491, 24 November 1998); **when an EE accepts a
promotion to a managerial position or to an office requiring full trust and confidence, such EE
gives up some of the rigid guaranties available to ordinary workers (Cecilia T. Manese v. Jollibee
Foods Corporation, 11 October 2012).
436Q: A foreign guest in a luxury hotel complained that he lost certain valuable items in his hotel
room. An investigation by the hotel pointed to two roomboys as the most probable thieves. May the
management invoke “loss of confidence” as a just cause for dismissing the roomboys? (2011 BAR)
(A) No, “loss of confidence” as reason for dismissal does not apply to rank and file employees. (B)
No, “loss of confidence” applies only to confidential positions. (C) Yes, “loss of confidence” is broad
enough to cover all dishonest acts of employee. (D) Yes, “loss of confidence” applies to
employees who are charged with the care and custody of the employer's property.
(Mabeza v. NLRC, 18 April 1997).437

***NB: not the job title but the actual work that the EE performs.438
2. The loss of trust and confidence must be BASED ON WILLFUL
437 Q: Domingo, a bus conductor of San Juan Transportation Company, intentionally did not issue a
ticket to a female passenger, Kim, his long-time crush. As a result, Domingo was dismissed from
employment for fraud or willful breach of trust. Domingo contests his dismissal, claiming that he is not
a confidential employee and, therefore, cannot be dismissed from the service for breach of trust. Is
Domingo correct? Reasons. (2%) (2009 Bar Question) SUGGESTED ANSWER: Domingo as bus
conductor holds a position wherein he was reposed with the employer’s trust and confidence. In
Bristol Mgers Squibb (Phils.) v. Baban (574 SCRA 198 [2008]), *****the Court established a second
class of positions of trust that involve rank- and-file employees who, in the normal and routine
exercise of their functions, regularly handle significant amounts of money. A bus conductor
falls under such second class of persons. This does not mean, however, that Domingo should be
dismissed. In Etcuban v. Sulpicio Lines (448 SCRA 516 [2005]), the Court held that where the amount
involved is miniscule, an employee may not be dismissed for loss of trust and confidence.
438Q: Abelardo Abel was first hired by Philex Mining Corp. in January 1988. He was later assigned to
the company’s Legal Department as a Contract Claims Asst., and held the position for 5 yrs. prior to
his transfer to the Mine Engineering and Draw Control Department wherein he was appointed Unit
Head. In 2002, he was implicated in an irregularity occurring in the subsidence area of the
company’s mine site at Benguet. His co-worker Lupega, executed an affidavit known as the
“Subsidence Area Anomaly.” The incidents in Lupega’s affidavit supposedly took place when Abel
was still a Contract Claims Asst. at the company’s legal department. An investigation was promptly
launched by the company’s officers. Abel attended the meetings but claimed that he was neither asked
if he needed the assistance of counsel nor allowed to properly present his side. By memo, the
company found Abel guilty of (1) fraud resulting in loss of trust and confidence and (2) gross neglect of
duty, and was meted out the penalty of dismissal from employment. Was Abel validly dismissed for any of
the causes provided for in Art.282 of the LC? NO. The **first requisite for dismissal on the ground
of loss of trust and confidence is that the EE concerned must be holding a position of trust and
confidence. Abel was a contract claims assistant at the time he allegedly committed the acts which
led to its loss of trust and confidence. It is **not the job title but the actual work that the EE
performs. It was part of Abel’s responsibilities to monitor the performance of the company’s
contractors in relation to the scope of work contracted out to them. The **second requisite is that
there must be an act that would justify the loss of trust and confidence. Loss of trust and
confidence, to be a valid cause for dismissal, **must be based on a willful breach of trust and
founded on clearly established facts. The basis for the dismissal must be clearly and convincingly
established but proof beyond reasonable doubt is not necessary. The company’s evidence against Abel fails to
meet this standard. Its lone witness, Lupega, did not support his affidavit and testimony during the
company investigation with any piece of evidence at all. It could hardly be considered substantial evidence
(Abel v. Philex Mining Corp., 31 July 2009).
BREACH.439 NB: A breach is willful if it is done INTENTIONALLY,

KNOWINGLY, AND PURPOSELY WITHOUT JUSTIFIABLE EXCUSE, as distinguished
from an act done carelessly, thoughtlessly, heedlessly, or inadvertently (De la
Cruz v. NLRC, 17 February 1997).440
*NB: Failure to reach monthly sales quota is not a valid ground for
dismissal based on loss of trust and confidence. It falls rather under analogous
causes for termination.441
3. The act constituting the breach must be “WORK-RELATED” such as would
show the EE concerned to be unfit to continue working for the ER (Gonzales v.
439 Q: May an ordinary rank-and -file employee be terminated for loss of trust and confidence? If
so, what proof is required? If not, why not? (2%) (1999 Bar Question) SUGGESTED ANSWER:
*****An ordinary rank and file employee may be terminated for loss of trust and confidence as long
as loss of trust and confidence is brought about objectively due to a willful breach by the
employee of the trust reposed in him by his employer or duly authorized representative, and said
willful breach is proven by substantial evidence. When adequately proven, the dual grounds of
breach of trust and loss of confidence constitute valid and ample bases to warrant termination of an
errant employee. As a general rule, however, employers are allowed a wider altitude of discretion in
terminating the employment of managerial personnel or those of similar rank performing functions
which by their nature requires the employer's full trust and confidence, than in the case of an ordinary
rank-and-file employee, whose termination on the basis of these same grounds requires proof of
involvement in the events in question; mere uncorroborated assertions and accusations by the employer
will not suffice. (Manila Midtown Commercial Corporation v. Nuwhrain, 159 SCRA 212).
440 Joseph Vilriolo (JV), a cashier of Seaside Sunshine Supremart (SSS), was found after an audit, to
have cash shortages on his monetary accountability covering a period of about five months in the total
amount of P48.000.00. SSS served upon JV the written charge against him via a memorandum order of
preventive suspension, giving JV 24 hours to submit his explanation. As soon as JV submitted his
written explanation within the given period, the same was deemed unsatisfactory by the company and
JV was peremptorily dismissed without any hearing. The day following his termination from
employment, JV filed a case of illegal dismissal against SSS. During the hearing before the Labor
Arbiter, SSS proved by substantial evidence JVs misappropriation of company funds and various
infractions detrimental to the business of the company. JV, however, contended that his dismissal was
illegal because the company did not comply with the requirements of due process.
xxx 2. If you were the Labor Arbiter, how would you decide the case? Explain briefly (3%) (1999 Bar
Question) SUGGESTED ANSWER: I will decide that the termination of JV was legal. It was for just
cause. JV's misappropriation of company funds and various infractions detrimental to the business
of the company duly proven by substantial evidence constitute a willful breach by JV of the trust
reposed in him by his employer which is a just cause for termination. (See Article 282) But I will award
him indemnity of, say P1, 000, for the failure of the employer to give him due process. TOM: the latest
amount of indemnity is 50K (in the form of nominal damages).
441 [] Q: Is **failure to reach the monthly sales quota a valid ground for dismissal based on loss of
trust and confidence? *NB LPS – it falls under analogous causes according to jurisprudence. NO. It is
stated in Art. 282 of the LC that loss of trust and confidence is a ground for termination of an
employee. However, it requires that such breach of trust be willful—whether it be done intentionally,
knowingly, and purposely, without justifiable excuse. The court finds that failure to reach the
monthly sales quota is not valid ground for loss of trust and confidence as this is not what has been
contemplated in Art. 282(c) of the LC. Several factors can be attributed to the low sales performance,
which may not be compelled by the respondent. It being **involuntary on his part the factors cannot
be taken as a valid ground as they are not to be considered willful breach of trust, for they were
not done intentionally, knowingly and purposely, without justifiable excuse (Norkis Distributors,
Inc v. Descallar, 14 March 2012).

4. It must be SUBSTANTIAL and founded on clearly ESTABLISHED facts
sufficient to warrant the EE’s separation from employment (Sulpicio Lines Inc. v.
Gulde, 22 February 2002). It cannot be due to mere allegation of loss of confidence
by the ER.442 
5. FRAUD must be committed against the ER or his representatives, e.g.:
a. Falsification of time cards
b. Theft of company property
*Even if the EE is acquitted in a theft case, the ER can dismiss him
442 The Septuagint Company, Inc., through its general manager, dismissed Juan Suntok, a rank-and-file
employee, on the ground of loss of confidence. The company served on his the notice of
termination effective on the date of receipt, which was 8 September 1986. Taken aback by his sudden
dismissal, Juan confronted the general manager and hit him on the face with a cast of iron pipe.
The company filed a complaint against him for less serious physical injuries. On 1 September 1990, a
week after he was acquitted by the court which tried the criminal case, Juan filed a complaint for illegal
dismissal, seeking reinstatement and payment of back wages. a) On the basis of the facts given, was the
dismissal of Juan valid? SUGGESTED ANSWER: The dismissal of Juan was not valid. The ground
for his dismissal is mere allegation of “loss of confidence." Such allegation is not sufficient unless
there are facts that provide the objective basis of loss of confidence. It should also be noted that
Juan was not given any opportunity to be heard and to defend himself.
b) If the Labor Arbiter finds that the dismissal was illegal for being without just cause, what
relief/s may be granted to Juan? SUGGESTED ANSWER: Juan is entitled to these reliefs, namely
reinstatement without loss of seniority and other privileges and full backwages, inclusive of
allowances, and to other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
c) If the Labor Arbiter finds that there was just cause for the termination of Juan's
employment, but that the requirement of notice and hearing was not complied with, what relief/s may
be granted to Juan? SUGGESTED ANSWER: The relief to be granted to Juan is indemnity if the
amount of PI.000.00. [TOM: latest is 50K]
d) Was the complaint for illegal dismissal filed within the reglementary period? SUGGESTED
ANSWER: It was filed within the reglementaiy period. Juan filed his complaint for illegal dismissal
within four (4) years from the date of his dismissal which is the prescriptive period for filing cases of
illegal dismissal. An action for illegal dismissal prescribes in four years under the Civil Code, It
being an action predicated “upon an injury to the rights of the plaintiff."
since what is only required here is substantial evidence,443 not proof beyond
reasonable doubt.444
c. **Unauthorized use of company vehicle
6. GUIDELINES445 for the Doctrine of Loss of Confidence to apply:*****
a. Loss of confidence should not be simulated (reasonable basis for loss
of trust and confidence);
b. Not used for subterfuge for causes which are improper and/or illegal
443Q: Jose and Pedro were utility workers employed by Yellow Farms. Inc. On 13 January 1984, they
were picked up by the company's guards in connection with the theft of polyethylene bags belonging to
the company. They were detained at the Baybay Municipal Jail. Initial investigation of the police yielded
no prima facie case against them, resulting in their release. However, after further investigation. an
amended complaint was formally filed against them and two others, charging them with theft before
the Municipal Court. The Company terminated Jose and Pedro due to loss of confidence.
Consequently, the two filed a complaint of illegal dismissal on the ground that their dismissal
based on the criminal complaint did not justify their termination. Is the filing of the criminal
complaint against Jose and Pedro sufficient ground for their termination? What is the quantum of
proof necessary to terminate an employee for loss of confidence? What if the criminal complaint was
dismissed on the ground of reasonable doubt? SUGGESTED ANSWER: The mere filing of the
criminal complaint against Jose and Pedro would not be sufficient ground for their termination
because while it is true that the criminal complaint could be properly filed only if there was a
prima facie case against said employees, this fact does not in turn automatically mean that
there is already substantial evidence to prove that there is Just cause for their termination. The
quantum of evidence necessary to terminate an employee for loss of confidence is that of substantial
evidence. Even if the criminal complaint was dismissed on the ground of reasonable doubt. Jose and
Pedro could still be dismissed as long as there is substantial evidence to prove that they have
committed acts that could be an objective basis for loss of confidence. ALTERNATIVE ANSWER:
Yes, the filing of a criminal complaint is sufficient ground, since such complaint is founded upon prima
facie evidence of their guilt of theft. In dismissal for loss of confidence, it is sufficient if there is
substantial evidence to believe that the employee is guilty of theft. This standard is equivalent to a
prima facie finding of guilt in criminal procedure. Mere dismissal on the ground that proof beyond
reasonable doubt was adduced, will not entitle the employees to reinstatement. In criminal law the
higher standard will not necessarily negative the existence of the lower standard of proof of substantial
evidence of guilt.
444*NB LPS – An Er may dismiss an Ee for theft and misappropriation despite the fact the latter
has been acquitted. The acquittal in a criminal case does not automatically preclude a determination
that he has been guilty of acts inimical to the Er’s interest resulting in lost of trust and confidence.
Corollarily, the ground for the dismissal of an Ee does not require proof beyond reasonable doubt,
the quantum of proof required is merely substantial evidence (Vergara v. NLRC, 5 December 1997).
445Q: Which is NOT a guideline for the dismissal of an employee on the ground of “loss of
confidence”? (2011 BAR) (A) Loss of confidence may not be arbitrarily invoked in the face of
overwhelming evidence to the contrary. (B) Loss of confidence as cause of dismissal should be
expressly embodied in written company rules. (C) The employee holds a position of trust and
confidence. (D) Loss of confidence should not be simulated nor a mere afterthought to justify
earlier action taken in bad faith.
and unjustified;446
c. Not arbitrarily asserted in the face of overwhelming evidence to the
contrary—must be based on substantial grounds;447
d. Must be genuine, not a mere afterthought to justify earlier action taken in bad
faith;
e. The EE involved holds a position of trust and confidence.
ABANDONMENT
(as a just cause for termination)
1. It means DELIBERATE AND UNJUSTIFIED REFUSAL of an employee
to resume his employment.
2. Requirements for a valid finding of abandonment—Two (2) factors must be
present:
a. The FAILURE TO REPORT for work, or ABSENCE without valid
or justifiable reason; and
*NB: when the failure to report to work is due to lack of knowledge
446 For misconduct or improper behavior to be a just cause for dismissal, the following guidelines must
be met, except: (2012 Bar Question) a) It must be serious; b) It must relate to the performance of the
employee’s duties; c) It should not be used as a subterfuge for causes which are improper, illegal or  
unjustified; d) It must show that the employee has become unfit to continue working for the employer.
SUGGESTED ANSWER: c. It should not be used as a subterfuge for causes which are improper,
illegal or unjustified [Solid Development Corp. Workers Association vs. Solid Development Corp., 530
SCRA 132 (2007)].
447 *NB: The breach of trust **must rest on substantial grounds and not on the ER's arbitrariness,
whims, caprices, or suspicion; otherwise, the EE would eternally remain at the mercy of the ER.
It should be GENUINE AND NOT SIMULATED, nor should it appear as a MERE AFTERTHOUGHT to
justify earlier action taken in bad faith or a SUBTERFUGE for causes which are improper, illegal, or
unjustified. It has never been intended to afford and occasion for abuse because of its subjective
nature. **There must, therefore, be an ACTUAL BREACH of duty committed by the EE which must be
established by substantial evidence (Dela Cruz v. NLRC, 17 February 1997).
of the new company premises, there is no abandonment.448

b. A CLEAR INTENTION TO SEVER ER-EE relationship, with the
2nd element as the MORE DETERMINATIVE factor, being manifested by some
OVERT ACTS (Sta. Catalina College v. NLRC, G.R. No. 144483, 19 November 2003).
3. How to prove abandonment: the ER must show that the EE deliberately and
unjustifiably refused to resume his employment without any intention of
returning. There must be a CONCURRENCE of**
a. the INTENTION to abandon and
b. some OVERT ACTS from which an EE may be deduced as having no
more intention to work.
[] The law, however, does not enumerate what specific overt acts can be
considered as strong evidence of the intention to sever the EER (Sta. Catalina
College v. NLRC, 19 November 2003). The following are provided by jurisprudence:
turning over his key of the ER’s shop, taking away his belongings in the company
premises, employment in another company, and filing of illegal dismissal without a
prayer for reinstatement.449
4. Rule on IMMEDIATE FILING OF COMPLAINT
a. GR: The filing by an Ee of a complain for illegal dismissal is proof
448The EEs averred that they were underpaid and filed a complaint for money claims against the
ER before the LA. As a result of their complaint, they were relieved from their posts and were not
given new assignments despite the lapse of six months. On the other hand, the ER maintains that
the EEs were not dismissed but were merely transferred to a new post and voluntarily abandoned
their jobs when they failed to report for duty in the new location. Upon termination, the EE moved to file a
joint complaint for illegal dismissal. Is there a valid indication of abandonment from work? NO. For
abandonment of work to fall under Art. 282 of the LC, as amended, as gross and habitual neglect of
duties there must be the occurrence of two elements: first, there should be a failure of the EE to
report for works without a valid or justifiable reason and second, there should be a showing that the
EE intended to sever the ER-EE relationship, the second element being the more determinative
factor as manifested by overt acts. The ER **cannot simply conclude knowledge that an EE is ipso
facto notified of a transfer when there is no evidence to indicate that the EE had knowledge of
the transfer order. Hence, the failure of an EE to report for work at the new location cannot be taken
against him as an element of abandonment. In addition to these tests for valid transfer, there
should be **proper and effective notice to the EE concerned. It is the ER's burden to show that the
EE was duly notified of the transfer. Verily, an ER cannot reasonably expect an EE to report for
work in a new location without first informing said EE of the transfer. Alert security’s insistence on
the sufficiency of mere issuance of the transfer order is indicative of bad faith on their part (Alert
Security and Investigation Agency, Inc. et al v. Saidali Pasawilan, et al., September 14, 2011).
449 Mejila, a barber at Windfield Barber Shop, had an altercation with a fellow barber which resulted in
his subsequent turning over the duplicate keys of the shop to the cashier and took away all his
belongings therefrom and worked at different barbershop. Mejila then filed an illegal dismissal case
but did not seek reinstatement as a relief. Did Mejila commit abandonment? YES. Mejila’s acts such as
surrendering the shop’s keys, not reporting to the shop anymore without any justifiable reason,
his EMPLOYMENT IN ANOTHER barber shop, and the **filing of a complaint for illegal dismissal
without praying for reinstatement clearly show that there was a concurrence of the intention to abandon and
some overt acts from which it may be inferred that the EE concerned has no more interest in working (Jo
v. NLRC, 2 February 2000).
enough of his desire to return to work,450 thus negating the Er’s charge of
abandonment;
b. XPN: Where evidence revealed instead that the illegal dismissal
complaint was intended to gain leverage for the Ee to induce the Er to
withdraw the criminal charge filed against the Ee. Abandonment not having
been disproved, the Ee’s dismissal on that ground may be held valid (Arc-Men Food
Industries Corp v. NLRC, 7 May 1997)
5. NB LPS – proof of abandonment how shown: According to Atty. Marquez,
best proof of abandonment is by also following the due process requirement
in dismissal cases such as issuing notice to the Ee to show cause why such Ee
has been absent for quite sometime.
COMMISSION OF A CRIME OR OFFENSE

*As a just cause for termination of an E’s service
1. When an offense committed by the EE against
a. the person of his ER or
b. any immediate member of his family or
450(Labor et al. v. NLRC, 14 September 1995). The complainants in this case filed the case four days after
being prevented from entering company premises.
c. his duly authorized representative.451

2. Thus, conviction of a crime involving moral turpitude is NOT
ANALOGOUS thereto as the element of relation to his work or to his ER is
lacking.
3. NB: A **criminal case need not be actually filed. Commission of acts
constituting a crime itself is sufficient.
ANALOGOUS CAUSES
1. For an act to be included in analogous cases of just causes of termination, it
must be due to the voluntary and/or it’s a willful act or omission of the EE
(Nadura v. Benguet Consolidated, 24 August 1962).
2. Examples:
a. Violation of company rules and regulations
b. Drunkenness
451Q: Jose and Erica, former sweethearts, both worked as sales representatives for Magna, a
multinational firm engaged in the manufacture and sale of pharmaceutical products. Although the
couple had already broken off their relationship, Jose continued to have special feelings for Erica.
One afternoon, Jose chanced upon Erica riding in the car of Paolo, a co-employee and Erica's
ardent suitor; the two were on their way back to the office from a sales call on Silver Drug, a major
drug retailer. In a fit of extreme jealousy, Jose rammed Paolo's car, causing severe injuries to
Paolo and Erica. Jose's flare up also caused heavy damage to the two company-owned cars they were
driving. A) As lawyer for Magna, advise the company on whether just and valid grounds exist to dismiss
Jose. (2013 Bar Questions) SUGGESTED ANSWER: Jose can be dismissed for serious misconduct,
violation of company rules and regulations, and commission of a crime against the employer’s
representatives. Article 282 of the Labor Code provides that an employer may terminate an
employment for any serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or his representatives in connection with his work. Misconduct involves “the
transgression of some established and definite rule of action, forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error in judgment.” *****For misconduct
to be serious and therefore a valid ground for dismissal, it must be: 1. of grave and aggravated
character and not merely trivial or unimportant and 2. connected with the work of the employee.
SUGGESTED ALTERNATIVE ANSWER: Article 282(e) of the Labor Code talks of other
analogous causes or those which are susceptible of comparison to another in general or in specific
detail as a cause for termination of employment. In one case, the Court considered theft committed
against a co-employee as a case analogous to serious misconduct, for which penalty of dismissal from
service may be meted out to the erring employee. (Cosmos Bottling Corp. v. Fermin, G.R. No.
193676/194303 [2012]). Similarly, Jose’s offense perpetrated against his co-employees, Erica and Paolo,
can be considered as a case analogous to serious misconduct.
B) Assuming this time that Magna dismissed Jose from employment for cause and you are the
lawyer of Jose, how would you argue the position that Jose's dismissal was illegal? (2013 Bar Questions)
SUGGESTED ANSWER: The offense committed by Jose did not relate to the performance of his
duties.. For misconduct or improper behavior to be a just cause for dismissal, it (a) must be serious; (b)
must relate to the performance of the employee’s duties; and (c) must show that the employee has
become unfit to continue working for the employer. On the basis of the forgoing guidelines, it can be
concluded that Paolo was not guilty of serious misconduct: Paolo was not performing official work at
the time of the incident. (Lagrosas v. Bristol Myers Squibb, G.R. No. 168637/170684 [2008])
Additionally, there was no compliance with the rudimentary requirements of due process.
c. Gross inefficiency452
d. Illegally diverting ER's products
e. **Failure to heed an order not to join an illegal picket
f. Violation of safety rules and code of discipline
g. Theft of property owned by a co-employee;453
3. NB: To fall within the ambit of “analogous cases” the **act or omission must
have an element similar to those found in the specific just cause enumerated
under Art. 282. (International Rice Research Institute v. NLRC, G.R. No. 97239, 12 May
1993).
a. attitude problem454—can’t get along well with other EEs—is analogous to
loss of trust and confidence; must be proved by ER.
b. HOW ABOUT PAST OFFENSES? Previous offenses may be used as a
valid justification for dismissal from work **ONLY if the infractions are
RELATED to the subsequent offense upon which the basis the termination of
employment is decreed (Stellar Industrial Service Inc. v. NLRC, 24 January 1996).
c. DOCTRINE OF INCOMPATIBILITY: Where the EE has done
something that is CONTRARY OR INCOMPATIBLE with the faithful
performance of his duties, his ER has a just cause for terminating his employment
(Manila Chauffeur’s League v. Bachrach Motor Co., 29 June 1940).
4. No valid cause of dismissal: when a school failed to show that a teacher took
advantage of her position to court a student.455
————————————————
B2.b. Authorized Causes
*****Authorized Causes of Termination by the Employer
452[] Is INEFFICIENCY a just cause for dismissal? YES. Failure to observe prescribed standards
of work or to fulfill reasonable work assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either
by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory
results (Buiser v. Leogardo 1984). This ground is considered ANALOGOUS to those enumerated
under Art. 282. (Skippers United Pacific v. Magud, G.R. No. 166363, August 15, 2006).
453*NB LPS – other analogous causes according to jurisprudence: Theft of property owned by a co-Ee
as distinguished from company-owned property which is considered serious misconduct;
incompetence, inefficiency or ineptitude; failure to attain work quota; attitude problem
454ON ATTITUDE PROBLEM: An Ee who cannot get along with his co-Ees is detrimental to the
company, for he can upset and strain the working environment. Without the necessary teamwork and
synergy, the organization cannot function well. Thus, management has the prerogative to take the
necessary action to correct the situation and protect its organization… thus, an Ee’s attitude problem is
a valid ground for his termination. It is a situation analogous to loss of trust and confidence that must
be duly proved by the Er. (Heavylift Manila v. CA, 20 October 2005)
455 The school failed to show that Chua took advantage of her position to court her student. If the
two eventually fell in love, despite the disparity in their ages and academic levels, this only lends
substance to the truism that the **heart has reasons of its own which reason does not know. But,
yielding to this gentle and universal emotion is not to be so casually equated with immorality. The
**deviation of the circumstances of their marriage from the usual social pattern cannot be
considered as a defiance of contemporary social mores (Chua-Qua v. Clave, 30 August 1990).
1. Installation of LABOR-SAVING DEVICES (automation/robotics)456

2. REDUNDANCY
3. REORGANIZATION
4. RETRENCHMENT:
5. CLOSING OR CESSATION of operation of the establishment or
undertaking.
6. DISEASE.457
OTHER AUTHORIZED CAUSES

1. Total and permanent disability of EE
2. Valid application of union security clause
3. Expiration of period in term of employment
4. Completion of project in project employment
5. Failure in probation
6. Relocation of business to a distant place
7. Defiance of return-to work-order
8. Commission of Illegal acts in strike
9. Violation of contractual agreement
10. Retirement
Just vs. Authorized Causes

1. The authorized causes for a valid dismissal are distinct from just causes because
where the dismissal of an employee is based on just causes, these just causes are
acts committed by the employee which provide the basis for his dismissal. On
the other hand, where the dismissal is based on authorized causes, these
authorized causes are the results of the proper exercise by the employer of his
management prerogatives.
456Art. 283 [now 298]. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor- saving devices, redundancy,
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, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
457Art. 284. Disease as ground for termination. An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to
the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a
fraction of at least six (6) months being considered as one (1) whole year.
2. If a valid dismissal is based on just causes, there is no liability on the part

of the employer, although sometimes, financial assistance to be given to the
dismissed employee is asked of the employer. If a valid dismissal is based on
authorized causes, the employer has to pay separation pay except In case of
closure or cessation of operation due to serious business losses or financial
reverses.
ON INSTALLATION OF LABOR-SAVING DEVICES/AUTOMATION

(LPS)
1. The law authorizes an Er, to terminate the employment of an Ee due to the
installation of labor saving devices. The installation of these devices is a
management prerogative, and the courts will not interfere with its exercise in
the absence of
a. abuse of discretion,
b. arbitrariness, or
c. maliciousness
on the part of the management (Magnolia Dairy Products v. NLRC, 29 January
1996).
ON REDUNDANCY
1. What it is: SUPERFLUITY458 in the performance of a particular work; it
exists where the services of an EE are in EXCESS of what is REASONABLY
DEMANDED by the actual requirements of the enterprise (Wiltshire File Co., Inc.
v. NLRC, 7 February 1991).
a. The redundancy should not have been created by the ER.
458a) Can redundancy exist where the same is due to the company’s failure to properly forecast its
manpower requirements? (3%); b) Can redundancy exist where the work performed by twelve (12)
workers can be performed as efficiently by ten (10) workers by increasing the speed of a machine
without detriment to the health and safety of the workers? (3%) SUGGESTED ANSWER: a) Yes,
redundancy exists when a position has become an excess or superfluous which, in turn, may be
caused by reorganization, closure of a section or department, or adoption of labor-saving
arrangements. Poor forecasting does not invalidate redundancy. Forecasting after all is not fail-
free. [Wiltshire File Co.,Inc. v. NLRC, 193 SCRA 665 (1991)]. b) Yes, redundancy can exist where
work efficiency has been improved mechanically thus resulting in excessive or superfluous
manpower. (Wiltshire File Co., Inc. v. NLRC, 193 SCRA 665 (1991)].
b. Redundancy does not necessarily mean duplication of work459— a

position is redundant where it is SUPERFLUOUS, and superfluity of a
position or positions may be the outcome of a number of factors, such as
i. over hiring of workers,
ii. decreased volume of business, or
iii. dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise.
c. The ER has no legal obligation to keep in its payroll more EEs than
are necessary for the operation of its business
459Ong, a Sales Manager of Wiltshire File Co., Inc., was informed of the termination of his
employment due to redundancy upon returning from a trip abroad. Ong maintains that there can
be no redundancy since he was the only person occupying his position in the company. Is there
redundancy even though Ong was the only one occupying his position? YES. Redundancy in an ER's
personnel **does not necessarily or even ordinarily refer to duplication of work. The
characterization of Ong’s services as no longer necessary or sustainable and therefore properly
terminable, was AN EXERCISE OF BUSINESS JUDGMENT on the part of Wiltshire. Furthermore, a
position is redundant where it is SUPERFLUOUS, and superfluity of a position or positions may
be the outcome of a number of factors, such as
a. over hiring of workers,
b. decreased volume of business, or
c. dropping of a particular product line or service activity previously manufactured or
undertaken by the enterprise.
The ER has no legal obligation to keep in its payroll more EEs than are necessary for the
operation of its business (Wiltshire File Co., Inc. v. NLRC, G.R. No. 82249, 7 February 1991).
2. REQUISITES460 of a valid redundancy:*****461

a. WRITTEN NOTICE served on both the EEs and the DOLE at least
1 month prior to separation from work
b. Payment of SEPARATION PAY equivalent to at least 1 month pay or
at least 1 month pay for every year of service, whichever is higher
c. GOOD FAITH in abolishing redundant position
d. FAIR AND REASONABLE criteria in ascertaining what positions are
to be declared redundant:
i. Less preferred status, e.g. temporary EE
ii. Efficiency and
ii. Seniority
*NB: An ER is not precluded from adopting a new policy conducive to
a more economical and effective management, and the **law does not
require that the ER should be suffering financial losses before he can
460Q: What conditions must prevail and what requirements, If any, must an employer comply with to
justify/effect a valid redundancy program? (2%). (2001 Bar Question) SUGGESTED ANSWER: In
the case of Asian Alcohol Corp. (supra), the Supreme Court stated that redundancy exists when the
service capability of the work is in excess of what is reasonably needed to meet the demands on the
enterprise. A redundant position is one rendered superfluous by any number of factors, such as
overhiring of workers, decreased volume of business dropping of a particular line previously
manufactured by the company or phasing out of a service activity previously undertaken by the
business. Under these conditions, the employer has no legal obligation to keep in its payroll more
employees than are necessary for the operation of its business. For the implementation of a
redundancy program to be valid, the employer must comply with the following requisites: (1) written
notice served on both the employees and the Department of Labor and Employment at least one
month prior to the intended date of retrenchment; (2) payment of separation pay equivalent to at least
one month pay or at least one month pay for every year of service whichever is higher; (3) good faith in
abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what positions
are to be declared redundant and accordingly abolished.
461 Q: Juan and Pedro were regular employees of Rose Manufacturing Company for 20 years. On May
31, 1984, both were dismissed by the company for dishonesty and fraud. They sued for
reinstatement and backwages. The labor arbiter ordered the reinstatement of Juan and Pedro and
the payment of their backwages. During the pendency of its appeal to the National Labor Relations
Commission (NLRC). The company undertook a reorganization of its various departments where,
among others, the positions of Juan and Pedro were eliminated as redundant. On April 30, 1989, the
NLRC affirmed the labor arbiter’s award and ordered the reinstatement of Juan and Pedro and
payment of backwages covering five years. You are asked by the company to question the ruling of
the NLRC before the Supreme Court. What would be your main arguments? SUGGESTED
ANSWER: I will question the ruling of the NLRC before the Supreme Court with the following as my
main arguments: 1. The order to reinstate Juan and Pedro is no longer correct because of the
supervening event, namely, the reorganization at the company that included, among others, the
elimination of the positions of Juan and Pedro which were considered redundant. Redundancy is an
authorized cause for the termination of employment. (Art. 283, Labor Code). 2. The award of
backwages covering five years is not correct. The Supreme Court has been consistently applying the so-
clled Mercury Drug ruling that limits the backwages to a three year period. [TOM: the Mercury Drug
ruling has been superseded—see related notes] ALTERNATIVE ANSWER: I will charge the NLRC
and the Labor Arbiter with abuse of discretion amounting to lack of jurisdiction for ordering the
reinstatement and the payment of back wages to them. Assuming that the dishonesty and fraud of Juan
and Pedro have been established as facts, their dismissal is for just cause.
terminate the services of the EE on the ground of redundancy (DOLE Phil., Inc.
v. NLRC, 25 July 1983).
ON RETRENCHMENT
1. Retrenchment is a MEANS OF LAST RESORT because in the normal course
of business losses are expected. ER must have TAKEN ALL MEASURES
NECESSARY to prevent462 losses and it is the last measure when you touch the
work force.
a. Cutting of expenses and includes the reduction of personnel;
b. It is a management prerogative, a means to protect and preserve the
ER's VIABILITY463 and ensure his survival. To be an authorized cause it must
be effected in GOOD FAITH and for the retrenchment, which is after all a
drastic recourse with serious consequences for the livelihood of the EE’s or
otherwise laid-off.
462 Q: The Company Legal Counsel advised the Board of Directors as follows: "A company cannot
retrench to prevent losses until actual losses occur. The Company must wait until the end of the
Business Year when its Books of Accounts, Profit and Loss Statement showing the actual loss and
Balance Sheet have been audited by an independent auditing firm." Is the legal advice of counsel
correct? [5%] (1998 Bar Question) SUGGESTED ANSWER: The legal advice is not correct. The
Labor Code (in Article 283) provides that retrenchment may be resorted to “to prevent losses"
Thus, there could be legal basis for retrenchment even before actual losses as long as the losses
are imminent and serious. ANOTHER SUGGESTED ANSWER: The advise of the Company
Legal Counsel that an employer cannot retrench to prevent losses until actual losses occur is not
correct. The Labor Code provides: Art. 283. Closure of establishment and reduction of personnel. -
The employer may also terminate the employment of any employee xxx retrenchment to prevent
losses. The Law does not require that retrenchment can be undertaken by an employer only
after an actual business loss occurs. The Supreme Court in Lopez Sugar Corporation v. Federation
of Free Workers, 189 SCRA 179 (1990), said: In its ordinary connotation, the phrase “to prevent
losses" means that the retrenchment or termination ot some employees is authorized to be
undertaken by the employer sometime before the losses anticipated are actually sustained or realized. It
is not, in other words, the intention of the lawmaker to compel the employer to stay his hand and keep
all his employees until sometime after losses shall have in fact materialized; if such an Intent were
expressly written into law, the law may well be vulnerable to constitutional attack as taking property
from one man to another.
463 Q: Due to mounting losses the former owners of Asian Alcohol Corporation sold its stake in the
company to Prior Holdings. Upon taking control of the company and to prevent losses, Prior
Holdings implemented a reorganization plan and other cost-saving measures including the
retrenchment of 117 EEs some of which are members of the union and the majority held by non-
union members. Some retrenched workers filed a complaint for illegal dismissal alleging that the
retrenchment was a subterfuge for union busting activities. Was the retrenchment made by Asian
Alcohol valid and justified? YES. **Even though the bulk of the losses were suffered under the
old management and continued only under the new management, ultimately the new
management of Prior Holdings will absorb such losses. The law gives the new management every
**right to undertake measures to save the company from bankruptcy (Asian Alcohol Corp. v.
2. REQUISITES464 of a valid retrenchment:*****

a. WRITTEN NOTICE served on both the EE and the DOLE at least 1
month prior to the intended date of retrenchment (*NB LPS – if the dismissal
was without notice but nevertheless bona fide, the dismissal is valid but the Er
will be liable for nominal damages for failing to comply with due process
requirements (Manila Polo Club, infra.)) in this case, the amount granted was
50,000 nominal damages.
b. Payment of SEPARATION PAY equivalent to at least one month pay
or at least 1/2 month pay for every year of service, whichever is higher
c. Good faith
d. Proof of expected or actual losses: The phrase “to PREVENT
LOSSES” means that retrenchment or termination from the service of some EEs
is authorized to be undertaken by the ER sometime before the anticipated
losses are actually sustained or realized. Evidently, **actual losses need not
set in prior to retrenchment (Cajucom VII v. TP Phils Cement Corp., 11 February
2005). The losses which the company may suffer or is suffering **may be proved
by financial statements audited by independent auditors (Asian Alcohol
Corporation v. NLRC, 25 March 1999).465
e. The ER used **FAIR AND REASONABLE CRITERIA in
ascertaining who would be retained among the EEs, such as status, efficiency,
seniority, physical fitness, age, and financial hardship of certain workers (FASAP v.
PAL, 2 October 2009). Criteria in SELECTING EEs to be retrenched—There
must be FAIR AND REASONABLE CRITERIA to be used in selecting EEs to
464Q: What conditions must prevail and what requirements, if any, must an employer comply with to
justify/effect a valid retrenchment program? (2%) (2001 Bar Question) SUGGESTED ANSWER: In
the case of Asian Alcohol Corp. vs. NLRC, G.R. No. 131108, March 25, 1999, the Supreme Court
stated that the requirements for a valid retrenchment must be proved by clear and convincing
evidence: (1) that the retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, are not merely de minimis, but substantial, serious, actual and real or if only
expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) that
the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment; (3) that the employer
pays the retrenched employees separation pay equivalent to one month pay or at least one month
pay for every year of service, whichever is higher; (4) that the employer exercises its prerogative to
retrench employees in good faith for the advancement of its interest and not to defeat or circumvent
the employees' right to security of tenure; and (5) that the employer used fair and reasonable criteria
in ascertaining who would be dismissed and who would be retained among the employees, such as
status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency, seniority,
physical fitness, age, and financial hardship for certain workers.
465NB LPS – that retrenchment is necessary to prevent lossess and its proven, by sufficient and
convincing evidence such as the Er’s financial statements audited by an independent and credible
external auditor, that such losses are substantial and not merely flimsy and actual or reasonably
imminent; and that retrenchment is the only effective measure (thus necessary) to prevent imminent
losses (Manila Polo Club Employees Union v. Manila Polo Club, 14 July 2013)
be dismissed such as:466

i. Less preferred status;
ii. Efficiency rating;
iii. Seniority or “LAST IN FIRST OUT” **(LIFO) RULE:467 It
applies in the termination of employment in the line of work. What is
contemplated in the LIFO rule is that when there are two or more EEs
occupying the same position in the company affected by the retrenchment program,
the last one employed will necessarily be the first one to go (Maya Farms EEs’
Organization v. NLRC, 28 December 1994). NB: LIFO is not to be strictly
followed468 as no law mandates such policy. This is mainly a business judgment of
management and it shall be upheld as long as it passes the test of arbitrariness.469
466 (Phil. Tuberculosis Society, Inc. v. National Labor Union, 25 August 1998).
467Q: Is the seniority rule or "last in first out" policy to be strictly followed in effecting a
retrenchment or redundancy program? (1%). (2001 Bar Question) SUGGESTED ANSWER: Again,
in Asian Alcohol Corp., the Supreme Court stated that with regard the policy of "first in, last out" in
choosing which positions to declare as redundant or whom to retrench to prevent further business
losses, there is no law that mandates such a policy. The reason is simple enough. A hoot of relevant
factors come into play in determining cost efficient measures and in choosing the employees who will
be retained or separated to save the company from closing shop. In determining these issues,
management plays a pre-eminent role. *****The characterization of positions as redundant is an
exercise of business judgment on the part of the employer. It will be upheld as long as it passes the
test of arbitrariness.
468[] Bar 2001: Is the seniority rule or "last in first out" policy to be strictly followed in effecting a
retrenchment or redundancy program? NO. In Asian Alcohol Corp., it was held that with regard the
policy of "first in, last out" in choosing which positions to declare as redundant or whom to retrench to
prevent further business losses, there is **NO LAW THAT MANDATES SUCH A POLICY. The
reason is simple enough. A host of relevant factors come into play in determining COST EFFICIENT
MEASURES and in choosing the EEs who will be RETAINED OR SEPARATED to save the company
from closing shop. In determining these issues, MANAGEMENT PLAYS A PRE-EMINENT
ROLE. The characterization of positions as redundant is an **EXERCISE OF BUSINESS JUDGMENT
on the part of the ER. It will be upheld as long as it PASSES THE TEST OF ARBITRARINESS.
469 [] Q: Philippine Tuberculosis Society, Inc. retrenched 116 EEs after incurring deficits amounting to
9.1 million pesos. Aside from retrenching its EEs, the company also implemented cost cutting
measures to prevent such losses for increasing and minimizing it. The NLRC ruled that the
retrenchment was not valid on the ground that the Society did not take the seniority rule into
account in the selection of the retrenchment. Was the retrenchment done by the Society not valid for
its failure to follow the criteria laid down by law? NO (but the explanation points to a YES). The
Society terminated the employment of several workers who have worked with the Society for great
number of years without consideration for the number of years of service and their seniority indicates
that they had been retained for such a long time because of loyal and efficient service. The burden of
proving the contrary rests on the Society (Phil. Tuberculosis Society, Inc. v. National Labor Union, G.R.
No. 115414, 25 August 1998).
REDUNDANCY VS. RETRENCHMENT470

1. Redundancy does not involve losses or the closing or cessation of operations
of the establishment.
2. On the other hand, retrenchment involves losses, closures or cessation of
operations of establishment or undertaking due to serious471 business losses or
financial reverses. However, the phrase “to PREVENT LOSSES” means that
retrenchment or termination from the service of some EEs is authorized to be
undertaken by the ER sometime before the anticipated losses are actually
sustained or realized. Evidently, **actual losses need not set in prior to
retrenchment (Cajucom VII v. TP Phils Cement Corp., 11 February 2005).
3. The burden of proof is upon the employer to show compliance with the
470Q: Soon after the Aslan meltdown began in October 1997, ABC Realty and Management
Corporation undertook a downsizing program and terminated nearly a third of its regular workforce.
The affected employees questioned their termination arguing that the action was precipitate in that
ABC had not proved that it sustained any losses. Is the claim of the employees correct? Explain
your answer. (3%). (2001 Bar Question) SUGGESTED ANSWER: The claim of the employees may or
may not be correct. When the Corporation undertook its "downsizing" program, it may have
terminated its employees on either one of two grounds, namely, redundancy or retrenchment.
For redundancy, there is no requirement of losses, whereas in retrenchment, substantial losses,
actual or anticipated, is a requirement. (Article 283, Labor Code). In Atlantic Gulf and Pacific
Company vs. NLRC, G.R. No. 127516, May 28, 1999, the Supreme Court ruled: "... it is necessary to
distinguish redundancy from retrenchment... Redundancy exists when the services of an
employee are in excess of what is required by an enterprise. Retrenchment on the other hand, is
resorted to primarily to avoid or minimize business losses." In Escareal vs. NLRC, 213 SCRA 472
(1992), the Supreme Court ruled that the law does not require financial loss as a basis for redundancy.
471 Q: A sugar mill in Laguna, capitalized at P300 million, suffered a P10,000.00 loss last year. This
year it dismissed three young female employees who gave birth in the last three years. In its termination
report to DOLE, the sugar mill gave as reason for the dismissal “retrenchment because of losses.” Did
it violate any law? (2011 BAR) (A) Yes, the law on retrenchment, the sugar mill’s loses not being
substantial. (B) Yes, the law against violence committed on women and children.(C) No, except the
natural law that calls for the protection and support of women. (D)No, but the management action
confirms suspicion that some companies avoid hiring women because of higher costs.
following requisites for reduction of personnel:*****472

a. Losses or expected losses should be substantial and not merely de
minimis;  
b. The expected losses must be reasonably imminent, and such
imminence can be perceived objectively and in good faith by the employer. 
c. It must be necessary and likely to prevent the expected losses. The
employer must have taken other measures to cut costs other than labor costs;
and 
d. Losses if already realized, or the expected losses must be proved by
sufficient and convincing evidence. (Lopez Sugar Corp. v. Federation of Sugar
Workers. 189 SCRA 179 [19901]).
CLOSURE OF BUSINESS (LPS)

1. Closure or cessation of business is the complete or partial cessation of the
operations and/or shut-down of the establishment of the Er. It is carried out to
either stave off the financial ruin or promote the business interest of the Er,
472Q: Daisy’s Department Store hired Leo as a checker to apprehend shoplifters. Leo later became
Chief of the Checkers Section and acquired the status of a regular employee. By way of a cost-
cutting measure, Daisy's decided to abolish the entire Checkers Section. The services of Leo,
along with those of his co-employees working in the same section, were terminated on the same day. A
month after the dismissal of Leo, Daisy’s engaged the services of another person as an ordinary
checker and with a salary much lower than that which Leo used to receive. Given the above factual
settings (nothing more having been established), could the dismissal of Leo be successfully assailed by
him? (2005 Bar Question) SUGGESTED ANSWER: Yes. Given the factual setting in the problem,
and since ‘‘nothing more (have) been established”, the dismissal of Leo can be successfully
assailed by him. This is so because the burden of proof is upon the employer to show compliance with
the following requisites for reduction of personnel: 1. Losses or expected losses should be substantial
and not merely de minimis; 2. The expected losses must be reasonably imminent, and such imminence
can be perceived objectively and in good faith by the employer. 3. It must be necessary and likely to
prevent the expected losses. The employer must have taken other measures to cut costs other than
labor costs; and 4. Losses if already realized, or the expected losses must be proved by sufficient and
convincing evidence. (Lopez Sugar Corp. v. Federation of Sugar Workers. 189 SCRA 179 [19901]).
Moreover, the notice requirements to be given by Daisy's Department Store to DOLE and the
employees concerned 30 days prior to the intended date of termination, as well as the requisite
separation pay, were not complied with. ANOTHER SUGGESTED ANSWER: Yes. The authorized
cause to dismiss due to redundancy or retrenchment under Art. 283 of the Labor Code has been
disproved by Daisy’s engaging the services of a substitute checker at salary much lower than that which
Leo used to receive. Also, it appears that the one (1) month notice rule required in said law was not
complied with. Such being the case, the twin requirements for a valid dismissal under Arts. 277 (b) and
283 of the Code have clearly not been complied with. That no separation pay was paid Leo, in violation
of Art. 283 of the Code, his dismissal can all the more be successfully assailed.
not to circumvent the law nor to avoid the formation of a union.473

2. Unlike retrenchment, closure of business, as an authorized cause need not
depend on evidence of actual or imminent reversal of Er’s fortune (Manila
Polo Club, supra.).474
3. REQUISITES of a valid closure:
a. WRITTEN NOTICE served on both the EEs and the DOLE at least 1
month prior to the intended date of closure. In order to meet the purpose, service of
the written notice must be made individually upon each and every EE of the
company. However, the Court held that where the dismissal is for an authorized
cause, **non-compliance with statutory due process should not nullify the
dismissal, or render it illegal, or ineffectual. Still, the ER should **indemnify
the EE, in the form of NOMINAL damages, for the VIOLATION OF HIS
RIGHT TO STATUTORY DUE PROCESS
b. Payment of SEPARATION PAY equivalent to at least one month pay
**or at least 1/2 month pay for every year of service, whichever is higher. It is
473Carmelcraft Corporation closed its business operations allegedly due to losses of Php 1,603.88 after
the Carmelcraft Employees Union filed a petition for certification election. Carmelcraft Union filed a
complaint for illegal lockout and ULP with damages and claim for employment benefits. Were the
losses incurred by the company enough to justify closure of its operations? NO. The determination to
cease operations is a **prerogative of management that is usually not interfered with by the State
as no business can be required to continue operating at a loss simply to maintain the workers in
employment. That would be a taking of property without due process of law which the ER has a right to
resist. **But where it is manifest that the closure is MOTIVATED not by a desire to avoid further
losses but to DISCOURAGE THE WORKERS FROM ORGANIZING themselves into a union for more
effective negotiations with management, the State is bound to intervene. The losses of less than Php
2,000 for a corporation capitalized at Php 3 million cannot be considered serious enough to call for
the closure of the company (Carmelcraft Corp. v. NLRC, 6 June 1990).
474 ABC Tomato Corporation, owned and managed by three (3) elderly brothers and two (2)
sisters, has been in business for 40 years. Due to serious business losses and financial reverses
during the last five (5) years, they decided to close the business.
a. As counsel for the corporation, what steps will you take prior to its closure? (3%) (2012 BAR)
Suggested Answer: I will serve a written notice on both the workers and the Regional Office of
the Department of Labor and Employment, at least one (1) month before the intended date of
closure. (Art. 283, Labor Code); *****and (2) provide proof of ABC’s serious business losses or
financial reverses [Balasbas v. NLRC, G.R. No. 85286, August 24, 1992]
b. Are the employees entitled to separationp ay?(2%)(2012BAR) Suggested Answer: No. Where
closure is due to serious business losses, no separation pay is required. [North Davao Mining
Corp. v. NLRC, 254 SCRA 721; JAT General Services vs. NLRC, 421 SCRA 78 (2004)] 
[] If the reason for the closure is due to old age of the brothers and sisters: c. Is the closure
allowed by law?(2%)(2012BAR) Suggested Answer: Yes. The determination to cease or suspend
operations is a prerogative of management that the State usually does not interfere with, as no
business can be required to continue operating to simply maintain the workers in employment. [San
Pedro Hospital of Digos v. Secretary of Labor, G.R. No. 104624, October 11, 1996; Espina vs. CA, 519
SCRA 327 (2007)]; d. Are the employees entitled to separation benefits?(3%)(2012BAR) Suggested
Answer: Yes. *****In case of cessation of operations of establishment or undertaking not due
to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month ay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year [Art. 283, Labor Code].
required only where closure is a UNILATERAL475 AND VOLUNTARY

ACT on the part of the ER to close the business establishment. But it is not
required when it is due to the following:
i. serious business losses476
ii. an act of Government477 (North Davao Mining Corp v. NLRC, 13
March 1996; NFL v. NLRC, 2 March 2000)
iii. compulsion of law.478
475Rank-and-file workers of SIMEX filed a petition for direct certification and affiliated with Union
of Filipino Workers (UFW). Subsequently, 36 workers of the company’s “lumpia” department and 16
other workers from other departments were effectively locked out when their working areas were
cleaned out. The workers through UFW filed a complaint for unfair labor practices against the
company. SIMEX then filed a notice of permanent shutdown/total closure of all units of
operation in the establishment with the DOLE allegedly due to business reverses brought about by
the enormous rejection of their products for export to the United States. Was the closure warranted
by the alleged business reverses? NO. The closure of a business establishment is a ground for the
termination of the services of any EE unless the closing is for the purpose of circumventing the
provisions of the law. But business reverses must be sufficiently proved. In this case, the audited
financial statement of SIMEX clearly indicates that they actually derived earnings. **Although the
rejections may have reduced their earnings they were not suffering losses. There is no question
that an ER may reduce its work force to prevent losses **BUT IT MUST BE SERIOUS, ACTUAL AND
REAL otherwise this ground for termination would be SUSCEPTIBLE TO ABUSE BY SCHEMING ERS
who might be MERELY FEIGNING BUSINESS LOSSES or reverses in their business ventures to ease out
EEs (Union of Filipino Workers v. NLRC, 23 March 1992).
476Galaxie Steel Corp. decided to close down because of serious business loses. It filed a written notice
with the DOLE informing its intended closure and the termination of employment. It posted the
notice of closure on the corporate bulletin board.
a. Does the written notice posted by Galaxie on the bulletin board sufficiently comply with
the notice requirement under Art. 283 of the LC? NO. In order to meet the purpose, service of the
written notice must be made **individually upon each and every EE of the company. However, the
Court held that where the dismissal is for an authorized cause, **non-compliance with statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. Still, the ER should
**indemnify the EE, in the form of NOMINAL damages, for the VIOLATION OF HIS RIGHT TO
STATUTORY DUE PROCESS (Galaxie Steel Workers Union v. NLRC, 17 October 2006).
b. Are Galaxie EEs entitled to separation pay? NO. Galaxie had been experiencing serious
financial losses at the time it closed business operations. Art. 283 of the LC governs the grant of
separation benefits "in case of closures or cessation of operation" of business establishments "not due
to serious business losses or financial reverses." **Where the closure then is due to serious business
losses, the LC does not impose any obligation upon the ER to pay separation benefits (Galaxie Steel
Workers Union v. NLRC, 17 October 2006).
*NB LPS – where closure is due to acts of the government, no separation pay (National Federation of
477
Labor v. NLRC, 2 March 2000).

478Where closure of business is BY COMPULSION OF LAW because closure of business is not
attributed to ER's will. EG: the land where the building is situated was declared covered by the
Comprehensive Agrarian Reform Law.
c. Good faith—this is the TEST for the validity of the closure;479

d. No circumvention of the law;
e. **NO OTHER OPTION available to the ER
RULE ON TRANSFER OF EEs of CLOSED corporations

1. Is the transferee of the closed corporation required to absorb the EEs of
the old corporation?
*GR: There is no law requiring a BONA FIDE PURCHASER OF ASSETS of
an on-going concern to absorb in its employ the EE’s of the latter except when
the transaction between the parties is colored or clothed with BAD FAITH
(Sundowner Dev’t Corp. v. Drilon, 6 December 1989).
*XPNs:
a. Where the transferee was found to be MERELY AN ALTER EGO of
the different merging firms (Filipinas Port Services, Inc. v. NLRC, 16 August 1991).
b. Where the TRANSFEREE VOLUNTARILY AGREES to do so
(Marina Port Services, Inc. v. Iniego, 22 January 1990).
479TEST for the validity of closure or cessation of establishment or undertaking: The **ultimate test
of the validity of closure or cessation of establishment or undertaking is that it must be BONA
FIDE in character. And the BURDEN OF PROVING such FALLS UPON THE ER (Capitol Medical
Center, Inc. v. Dr. Meris, 16 September 2005). IOW, it must be done in GOOD FAITH and NOT for the
purpose of CIRCUMVENTING pertinent labor laws.
2. This is also known as the PRINCIPLE OF ABSORPTION (LPS)480

a. Under the principle, a change of business ownership does not create
an obligation on the part of the new owner to absorb the Ees of the previous
owner. Unless expressly assumed, labor contracts being in personam, are not
enforceable against a transferee of an enterprise (Fernando v. Angat Labor Unit,
480 Blank Garments, Inc. (BLANK), a clothing manufacturer, employs more than 200 employees
in its manufacturing business. Because of its high overhead, BLANK decided to sell its
manufacturing business to Bleach Garments, Inc. (BLEACH) lock, stock and barrel which
included goodwill, equipment, and personnel. After taking on BLANK's business, BLEACH
reduces the workforce by not hiring half the workers specifically the ones with seniority. BLANK and
BLEACH are still discerned to be sister companies with identical incorporators. The laid-off
employees sue both BLANK and BLEACH for unlawful termination. (a) How would you decide
this case? (4%)(b) What is the "successor employer" doctrine? (2%) (2015 BAR) Suggested Answer:
(a) In transfer of ownership, the buyer corporation, as a general rule, is not duty-bound to absorb
the employees of the selling corporation. The buyer corporation becomes liable to the displaced
employees only if the change in ownership is done in bad faith or is used to defeat the rights of
labor. In such a case, the successor-employer is duty- bound to absorb the displaced employees
(Penafrancia Tours and Travel Transport, Inc., v. Sarmiento, 634 SCRA 279). Since the facts of the case
do no show any bad faith in BLEACH’s sale to BLANK, BLEACH, consequently, is not obliged to
absorb the displaced employees of BLANK. ***The case at hand involves sales of assets as
differentiated from sales of stock. The ruling in SME Bank v. De Guzman (G.R. No. 184517, Oct. 8,
2013), which reversed Manlimos v. NLRC (312 Phil. 178), pointed out that *****in asset sales, the
rule is that the seller in good faith is authorized to dismiss the affected employees, but is liable
for the payment of separation pay under the law. The buyer in good faith, on the other hand, is
not obliged to absorb the employees affected by the sales, nor is it liable for the payment of their
claims. In contrast with asset sales, in which the assets of the selling corporation are transferred to
another entity, the transaction in stock sales takes place at the shareholder level. Because the
corporation possesses a personality separate and distinct from that of its shareholders, a shift in
the composition of its shareholders will not affect its existence and continuity. Hence the
corporation continues to be the employer and continues to be liable for the payment of their just
claims. Absent a just or authorized cause, the corporation or its new majority shareholders are
not entitled to lawfully dismiss corporate employees.
(b) *****The “successor employer” doctrine refers to a sales or transfer in ownership of
an entity that has been done in bad faith or to defeat the rights of labor. In such a case, it is as if
there have been no changes in employer-employee relationship between the seller and its
employees. The buyer becomes a “successor employer” and is obliged to absorb the displaced
employees.
30 May 1962).481
b. A bona fide482 buyer or transferee of all, or substantially all, the
properties of the seller or transferor is not obliged to absorb the latter's
481 Q: Coronet Records Phil. (CRP) manufactures audio/video record players, compact discs, video
discs, cassettes and the like. CRP’s shareholdings is 40% foreign and 60% domestic. CRP signed a
Collective Bargaining Agreement (CBA) with its rank-and-file workers for three years starting from
January 1, 1990 and ending on December 31. 1993. Before the expiration of the CBA. CRP decided
to sell all its assets to Lyra Music Corporation effective September 30. 1993. In this regard, notice
was sent on August 30. 1993 to each employee advising them of the sale of the Company's assets to
Lyra Music Corporation and the closure of the company’s operations effective September 30. 1993.
CRP, likewise, requested that each employee receive his separation pay equivalent to one-and-one-half
(1 & 1/2) month’s pay per year of service, exclusive of all unused leaves which were also converted to
cash, and his 13th-month pay for 1993. The employees received their respective separation pay under
protest and thereafter filed an action against CRP and Lyra Music Corporation for unfair labor
practice (ULP). The Arbiter ruled in favor of the workers and ordered Lyra Music Corporation to
absorb the former workers of CRP. Was the Labor Arbiter correct in his decision? SUGGESTED
ANSWER: No. The Labor Arbiter is not correct. As held in the case of San Felipe Neri School of
Mandaluyong vs. NLRC, *****when there is a legitimate sale of a company’s assets, the buyer in
good faith cannot be legally compelled to absorb the employees of the seller in good faith. In the
case at bar, the employees of the CRP were validly terminated based on Article 284. e.g. closure of
operations and separation pay was paid at a rate much higher than the law. Furthermore, the case
filed by the employees was UNFAIR LABOR PRACTICE. It is highly irregular to order
absorption of employees in a ULP case.
482 (1) Y Corporation suffered business reverses and it was forced to cease operations and dismiss all
its employees. Said employees filed a complaint with the National Labor Relations Commission fob
illegal dismissal and payment of separation pay. Decide with reasons. (2) Suppose it was found by
the labor arbiter that the corporation did not suffer business losses. It was also found that the
corporation went on with its operations. May an illegally dismissed employee be ordered reinstated
despite his strained relationship with the corporation? What may be awarded to the employee? Explain
your answers. SUGGESTED ANSWER: (1) When Y Corporation dismissed all its employees because
it ceased operations, the dismissal was legal. Cessation of operations of. an establishment or
undertaking is one of the authorized causes for the termination of employees. (Art. 283. Labor
Code). But considering the facts of the case in question, the employer is not under legal obligation
to pay separation pay since the cessation of operations was due to business reverses.
Nevertheless, the employer should serve a written notice on the workers at least one (1) month before
the intended date of the cessation of operation. (2) There are some Supreme Court decisions ruling
that even if there is no legal basis for the termination of an employee, he may not be reinstated
because of strained relationship between the employer and the employee. Instead. he should be
given separation pay. (an example of these cases is Hernandez vs. National Labor Relations
Commission, G.R. No. 84302, Aug. 10. 1989. where the Supreme Court said: “Inasmuch as the charge
against petitioner has not been substantiated, the inevitable result is that this Court must declare the
dismissal as unwarranted and. therefore, illegal. Considering, however, that the relationship between
petitioner and private respondent has been severely strained by reason of their respective imputation of
bad faith against each other, this Court believes that to order reinstatement at this juncture will no
longer serve any prudent purpose.") Under the facts of the case given in the question, however, it is
respectfully submitted that the above ruling of the Supreme Court should not apply. In the case, the
employer acted in bad faith. He claimed business losses. It was found that there were no such business
losses. He said he will cease operations. Instead, he actually went on with the operations. On the basis
of these proofs of bad faith, the employer should reinstate the illegally dismissed employee
pursuant to the Labor Code which specifically provides for the reinstatement of an unjustly dismissed
employee.
employees. The most483 that the purchasing company may do, for reasons of
public policy and social justice, is to give preference of re-employment to
the selling company's qualified separated employees, who in its judgment are
necessary to the continued operation of the business establishment. (Barayoga v.
Asset Privatization Trust, G.R. No. 160073, October 24, 2005).484
CLOSURE VS. RETRENCHMENT

CLOSURE RETRENCHMENT
It is the reversal of fortune of the ER Is the reduction of personnel for the purpose of
whereby there is a complete cessation of cutting down on costs of operations in terms of salaries and
business operations to prevent further financial wages resorted to by an ER because of losses in
drain upon an ER who cannot pay anymore operation of a business occasioned by lack of work and
his EEs since business has already stopped. considerable reduction in the volume of business.
One of the prerogatives of management It must be proven that the losses incurred are
is the decision to close the entire substantial and actual or reasonably imminent;
establishment or to close or abolish a that the same increased through a period of time; and
department or section thereof for economic that the condition of the company is not likely to
reasons, such as to minimize expenses improve in the near future.
and reduce capitalization.
Does not obligate the ER for the LC provides for the payment of separation package
payment of separation package if there is in case of retrenchment to prevent losses.
closure of business due to serious losses.
DISEASE AS A GROUND FOR DISMISSAL

1. When the EE suffers from a disease, and:**
a. His continued employment is PROHIBITED by law or PREJUDICIAL
to his health or to the health of his co-EEs (IRR, Book VI, Rule I, Sec.8).
b. With a CERTIFICATION485 by competent public health authority
that the disease is INCURABLE WITHIN 6 MONTHS despite due medication and
483Marikina Dairy Industries, Inc. decided to sell its assets and close operations on the ground of
heavy losses. The unions alleged that the financial losses were imaginary and the dissolution was a
scheme maliciously designed to evade its legal and social obligations to its EEs. The unions want the
buyers of the corporation’s assets restrained to operate unless the members of the unions are hired to
operate the plant under the terms and conditions specified in the collective bargaining agreements. Is
the buyer of a company’s assets required to absorb the EEs of the seller? NO. There is no law
requiring that the purchaser of a company’s assets should absorb its EEs and the **most that can be
done for reasons of public policy and social justice was to direct that buyers of such assets to give
PREFERENCE to the qualified separated EEs in the filling up of vacancies in the facilities of the
buyer (MDII Supervisors & Confidential EEs Ass’n (FFW) v. residential Assistant on Legal Affairs, 9 September
1977).
484 *This is similar to the Y-1 Leisure case—the application of the Nell Doctrine.
485 *NB: Medical Certificate as **MANDATORY requirement; it CANNOT BE DISPENSED WITH;
otherwise, it would sanction the unilateral and arbitrary determination by the ER of the gravity or
extent of the EE’s illness and thus DEFEAT THE PUBLIC POLICY on the protection of labor
(Manly Express v. Payong, 25 October 2005; Tan v. NLRC, 14 April 1997).
treatment (Solis v. NLRC, 28 October 1996).486

2. PROCEDURE in terminating an EE’s employment on the ground of disease
a. The ER shall not terminate his employment unless:
i. There is a certification by a competent public health authority
ii. That the disease is of such nature or at such a stage that it cannot
be cured within a period of 6 months even with proper medical treatment.487
b. If the disease or ailment can be cured within the period, the ER shall
not terminate the EE’s employment but shall ask the EE to take a leave. The
ER shall REINSTATE such EE to his former position immediately upon the
restoration of his normal health (IRR, Book VI, Rule I, Sec.8).
**NB: Termination from work on the sole basis of actual,
perceived or suspected HIV status is deemed unlawful (R.A. 8504 HIV/AIDS
Law, Sec. 35).
3. ENTITLEMENT to reinstatement: An EE suffering from a disease is
entitled to a reinstatement, **provided he presents a certification by a
competent public health authority THAT HE IS FIT TO RETURN to work
(Cebu Royal Plant v. Deputy Minister, 12 August 1987).
—————————————————
486Bar 2004: Anna Ferrer has been working as a bookkeeper at Great Foods, Inc., which operates a
chain of high-end restaurants throughout the country, since 1970 when it was still a small eatery at
Binondo. In the early part of the year 2003, Anna, who was already 50 years old, reported for work
after a week-long vacation in her province. It was the height of the SARS scare, and management
learned that the first confirmed SARS death case in the Phils, a “balikbayan” nurse from Canada, is
a townmate of Anna. Immediately, a memorandum was issued by management terminating the
services of Anna on the ground that she is a probable carrier of SARS virus and that her continued
employment is prejudicial to the health of her co-EEs. Is the action taken by the ER justified? NO.
There is no showing that said EE is sick with SARS, or that she associated or had contact with the
deceased nurse. They are merely town mates. Furthermore, there is **no certification by a
competent public health authority that the disease is of such a nature or such a stage that it cannot
be cured within a period of 6 months even with proper medical treatment (IRR, Book VI, Rule 1, Sec. 8).
487Q: Gabriela Liwanag has been working as bookkeeper at Great foods. Inc., which operates a chain
of high-end restaurants throughout the country, since 1970 when it was still a small eatery at Binondo.
In the early part of the year 2003. Gabriela. Who was already 50 years old, reported for work after a
week-long vacation in her province. It was the height of the SARS (Severe Acute Respiratory
Syndrome) scare, and management learned that the first confirmed SARS death case in the Philippines.
A “balikbayan" nurse from Canada, is a townmate of Gabriela. Immediately, a memorandum was
issued by management terminating the services of Gabriela on the ground that she is a probable
carrier of SARS virus and that her continued employment is prejudicial to the health of her co-
employees. Is the action taken by the employer justified? (5%) (2005 Bar Question) SUGGESTED
ANSWER: The employer's act of terminating the employment of Gabriela is not justified. There is no
showing that said employee is sick with SARS, or that she associated or had contact with the
deceased nurse. They are merely townmates. Furthermore, there is no certification by a
competent public health authority that the disease is of such a nature or such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. (Implementing
Rules, Book VI, Rule I, Sec. 8, Labor Code).
RULES ON SEPARATION PAY******

1. Under present laws and jurisprudence, separation pay may be viewed in 4 ways:
1a. In lieu of reinstatement in illegal dismissal cases, where EE is ordered
reinstated but reinstatement is NOT FEASIBLE.488
1b. As ER's STATUTORY/LEGAL OBLIGATION in cases of legal
termination due to authorized causes under Arts. 283 and 284 of the LC.
1c. As FINANCIAL ASSISTANCE, as an ACT OF SOCIAL JUSTICE489
and even in case of legal dismissal under Art. 282 of the LC; But this does not apply in
cases of termination due to just causes,490 although the latter only usually applies
to serious misconduct, with a caveat.491
1d. As EMPLOYMENT BENEFIT granted in CBA or company policy
(POQUIZ, 2005).
1e. as an INTERIM RELIEF, granted to a dismissed or separated EE
while the case for illegal dismissal is pending appeal. It does not apply where
there is no finding of illegal dismissal;492
1f. In case of PRE-TERMINATION of employment contract in job-
contracting arrangement (D.O 18-02, Rules Implementing Art. 106–109, LC).
488When the termination from service has been declared ILLEGAL, but his reinstatement to his
former position is no longer feasible for some valid reason (Gabuay v. Oversea Paper Supply, 13 August
2004).
Where separation pay is awarded as a measure of social or compassionate JUSTICE (PLDT v.
489

490 Q: An employee is NOT entitled to “financial assistance” in cases of legal dismissal when the
dismissal (2011 BAR) (A) is based on an offense reflecting the depraved character of the employee. (B)
is based on serious misconduct or breach of the employer's trust. (C) is grounded on any of the just
causes provided by the Labor Code. (D)when the employee has less than 10 years of service.
491Q: The Supreme Court categorically declared that separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly dismissed for cause other than:
(2012 Bar Question) a. Serious Misconduct; b. Gross and habitual neglect of duties; c. Willfull
disobedience to lawful orders; d. Fraud or willful breach of trust. SUGGESTED ANSWER: A)
Serious Misconduct [Tirazona vs. PET, Inc., 576 SCRA 625] But Apacible (G.R. No. 178903,
May 30, 2011) disallows separation pay for employees who are dismissed under any of 4
grounds in Art. 282, thus NO CORRECT ANSWER.
492 Does separation pay apply in cases of legal dismissal? It depends.
a. As ER's STATUTORY OBLIGATION in cases of legal termination due to authorized
causes under Arts. 283 and 284 of the LC.
b. As FINANCIAL ASSISTANCE, as an act of social justice and even in case of legal
dismissal under Art. 282 of the LC.
c. Art. 223 of the LC concerns itself with an INTERIM RELIEF, granted to a dismissed or
separated EE while the case for illegal dismissal is pending appeal. It does not apply where there is no
finding of illegal dismissal.
d. On the other hand, an EE who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement (Lansangan v. Amkor Technology Philippines, Inc., 30
January 2009).
1a. Separation in lieu of reinstatement usually occurs when:

a. **DOCTRINE OF STRAINED RELATIONS (applies to confidential
and managerial EEs only)—The following must be proven before the strained
relations rule can be applied to a particular case: a) The EE concerned occupies a
position where he enjoys the TRUST AND CONFIDENCE (there is a
FIDUCIARY relationship) of his ER;493 and b) That it is likely if the EE is
reinstated, an ATMOSPHERE OF ANTIPATHY AND ANTAGONISM may
be generated as to adversely affect the efficiency and productivity of the EE
concerned (Globe Mackay Cable & Wire Corp. v. NLRC, 3 March 1992). NB: this
doctrine does not always bar reinstatement.494
b. In case the POSITION HAS BEEN ABOLISHED (applies to both
managerial and rank and file EEs)
*NB: In such cases, it would be **MORE PRUDENT TO ORDER
PAYMENT OF SEPARATION PAY INSTEAD OF REINSTATEMENT (Quijano v.
Mercury Drug Corporation, July 8, 1998).
c. Those who were illegally dismissed if reinstatement is no longer
viable495 in view of the strained relations between the employee and his employer,
or in view of the advanced age of the employees who were illegally dismissed, etc.
493*NB LPS – A room boy, does not occupy such a sensitive position as would require complete trust
and confidence, where personal ill will would preclude reinstatement (Maranaw Hotels and Resorts Corp. v.
CA, 6 November 1992)
494Does the strained relations rule always bar reinstatement in all cases? NO. **The rule should be
applied on a case to case basis, based on each case’s peculiar conditions and not universally.
OTHERWISE, REINSTATEMENT CAN NEVER BE POSSIBLE simply because some hostility is invariably
engendered between the parties as a result of litigation. That is HUMAN NATURE (Anscor
Transport v. NLRC, September 28, 1990). Besides, **NO STRAINED RELATIONS SHOULD ARISE
FROM A VALID AND LEGAL ACT OF ASSERTING ONE'S RIGHT; otherwise an EE who shall assert
his right could be EASILY SEPARATED from the service, by MERELY PAYING HIS SEPARATION PAY
on the pretext that his relationship with his ER had already become strained (Globe Mackay Cable &
Wire Corp. v. NLRC, 3 March 1992).
495 Q: What circumstances or instances may an employee who is found to have been illegally dismissed
and, therefore, entitled to reinstatement, be nevertheless. NOT ordered reinstated but merely awarded
(a) separation pay in lieu of reinstatement and (b) back wages? At what rate would the separation pay
be? What would be the maximum limit for the back wages? SUGGESTED ANSWER: In a number of
Supreme Court decision, it has been ruled that an employee who is found to have been illegally
dismissed shall be awarded separation pay in lieu of reinstatement if reinstatement is no longer
viable in view of the strained relations between the employee and his employer. In a case, the
Supreme Court also ruled that since reinstatement was no longer feasible in view of the advanced
age of the employees who were illegally dismissed, they should instead received separation pay.
The rate of separation pay is one month salary for every year of service. The Supreme Court has
also ruled that in the computation of separation pay account must be taken not only of the basis salary
of the employee but also his allowances. In decisions applying the law before Rep. Act No. 6715, the
Supreme Court ruled that the maximum limit for back wages shall be three years. The law has been
changed by Rep. Act No. 6715. Back wages are now to be computed from the time the compensation
of the employee was withheld from him up to the time of his actual reinstatement. Thus, in applying
the amendment Introduced by Rep. Act No. 6715, this means that back wages will now be paid for
the entire period up to the actual reinstatement of the employees, even if the period is over three years.
(see related notes on “separation pay in lieu of reinstatement.”

[] Is an illegally dismissed EE entitled to reinstatement as a MATTER
OF RIGHT?
a. GR: Yes.
b. XPNs: Proceeds from an illegal dismissal wherein reinstatement is
ordered but cannot be carried out as in the following cases:
i. Reinstatement cannot be effected in view of the long passage of
time or because of the realities of the situation.
ii. It would be inimical to the ER's interest.
iii. When reinstatement is no longer feasible.
iv. When it will not serve the best interest of the parties involved.
v. Company will be prejudiced by reinstatement.
vi. When it will not serve a prudent purpose.
vii. When there is resultant strained relation (applies to both
confidential and managerial EEs only) (more on strained relations, infra)
viii. When the position has been abolished (applies to managerial,
supervisory and rank-and-file EEs).
*NB: The common denominator of those instances where payment
of separation pay is warranted is that the employee was dismissed by the ER. If
the EE voluntarily496 chose not to return to work, he is not entitled to separation
496 [] Q: Romeo has been an EE of AAA Company from 1993 to 1999 but was unable to report to
work due to some illness. Romeo claimed that he was offered by AAA of Php 15,000 separation pay,
on the contrary AAA claimed Romeo was never terminated and even told the latter that Romeo could
go back to work anytime but Romeo clearly manifested that he was no longer interested in
returning to work and instead asked for separation pay.
a. Is Romeo terminated or considered resigned? Romeo is CONSIDERED RESIGNED.
Romeo’s various pleadings support his INTENTION OF NOT RETURNING to work on the ground that
his health is failing. Moreover, Romeo DID NOT ASK FOR REINSTATEMENT and rejected
AAA Company’s offer for him to return to work. This is **TANTAMOUNT TO
RESIGNATION. Resignation is defined as the VOLUNTARY ACT of an EE who finds himself in a
situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of
the service and he has no other choice but to disassociate himself from his employment.
b. Is Romeo entitled to separation pay? NO. There is **no provision in the LC which grants
separation pay to voluntarily resigning EEs. In fact, the rule is that an EE 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 established ER
practice or policy. Hence, Romeo is not entitled to separation pay in the absence of a Labor provision
and a stipulation in his employment contract or CBA (Romeo Villaruel v. Yeo Han Guan, G.R. No. 169191,
1 June 2011).
pay.497
1b. With regard to each cause498 of termination:*****
CAUSE OF TERMINATION SEPARATION PAY
Equivalent to at least 1 month pay or at least 1 month pay

Automation for every year of service, whichever is higher
Equivalent to at least 1 month pay or at least 1 month pay
Redundancy for every year of service, whichever is higher
Equivalent to 1 month pay or at least ½ month pay for every
Retrenchment year or service
Closures or cessation of operation not Equivalent to at least 1 month pay or at least 1 month pay
due to serious business for every year of service; if due to severe financial losses, no
losses/financial reverses separation pay
Equivalent to at least 1 month pay or at least ½ month pay
Disease for every year of service, whichever is higher
a. Why is there no separation for serious misconduct as a just cause for
497[] Q: Delfin and Luisito are licensed drivers of public utility jeepneys owned by Moises Capili.
When Capili assumed ownership and operation of the jeepneys, the drivers were required to sign
individual contracts of lease of the jeepneys. The drivers gathered the impression that signing
the contract was a condition precedent before they could continue driving. The drivers stopped
plying their assigned routes and a week later filed with the LA a complaint for illegal dismissal
praying not for reinstatement but for separation pay. Are the respondents entitled to separation
pay? NO. When the DRIVERS VOLUNTARILY CHOSE NOT TO RETURN TO WORK anymore, they must
be CONSIDERED AS HAVING RESIGNED from their employment. **The common
denominator of those instances where payment of separation pay is warranted is that the employee
was dismissed by the ER (Capili v. NLRC, 26 March 1997).
498Q: Buster Sison, a 55-year old employee of Telecom Facilities, Inc., wanted to retire. He talked to
the personnel manager, who agreed. The necessary papers were drawn up, and Sison was paid
retirement benefits equivalent to 75% of his last basic monthly salary for every year of service.
Sison enjoyed post-retirement life for more than three years, until his retirement benefits were
exhausted. Expecting to get more from Telecom, Sison filed a complaint for recovery of separation
pay under the Labor Code. Decide. (1987 Bar Question) SUGGESTED ANSWER:
Sison is not entitled to separation pay under the Labor Code. The Labor Code (in Arts. 283 ad 284)
provides the instances when the employer is to pay separation pay, namely, when he terminates the
employment of an employee because of the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation not due to serious business
losses, or when an employee has been found to be suffering from any disease and his continued
employment is prohibited by law or is prejudicial to his health as well as the health of his co--
employees. Sison’s termination was not brought by any of the above authorized causes. He
voluntarily retired, and he accepted what was paid him by the Company which paid retirement
benefits not because it was under legal obligation to do so, there being no CBA or any
agreement providing for such payment. Because of all the above, he is not entitled to separation
pay. If he waited so that he retired at age 60, he could have taken advantage of a provision in the Rules
and Regulations for the payment of termination pay equivalent to at least one-half month salary for
every year of service, but this is even less than 75% he received when he retired at age 55.
termination?:499 because separation pay will be to reward an employee for a

wrongdoing. Hence, separation pay shall be allowed as a measure of social justice
only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting his moral character. The
policy of social justice is not intended to countenance wrongdoing. Compassion
for the poor is an imperative of every human society but only when the
recipient is not a rascal claiming an undeserved privilege. Those who invoke
social justice may do so only if their hands are clean and their motives
blameless. A contrary rule would have the effect of rewarding rather than
punishing the erring employee for his offense.
b. As to authorized causes, separation pay refers to the amount due to the EE
who has been terminated from service for CAUSES AUTHORIZED by law
such as the installation of labor-saving losses or the closing or cessation of operation of the
establishment or undertaking. PURPOSE for providing separation pay: Separation
pay intends to provide the EE with the **WHEREWITHAL during the
period he is looking for another employment (Gabuay v. Oversea Paper Supply, 13
August 2004).
c. The validity of suspending operation does not excuse the ER from
paying separation pay; separation pay should be paid to EEs even if the closure
499Q: Daisy, the branch manager of Tropical Footwear Inc. was dismissed for serious misconduct.
She filed a complaint for illegal dismissal and damages. The Labor Arbiter sustained Daisy’s
dismissal but awarded her separation pay based on social Justice and as an act of compassion
considering her 10-year service with the company. Was the award of the separation pay proper?
Explain. (1996 Bar Question) SUGGESTED ANSWER: No. the award of separation pay is not proper
because the employee was terminated for serious misconduct and payment of separation pay will be to
reward an employee for a wrongdoing. In PhiLippine Long Distance Telephone Co., vs NLRC, 164
SCRA 671 (1988). We hold that henceforth separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting his moral character. The policy of social justice is not intended to
countenance wrongdoing. Compassion for the poor is an imperative of every human society but only
when the recipient is not a rascal claiming an undeserved privilege. Those who invoke social justice may
do so only if their hands are clean and their motives blameless. A contrary rule would have the effect
of rewarding rather than punishing the erring employee for his offense. ALTERNATIVE ANSWER:
The award of the separation pay was not proper. According to the Labor Code, separation pay is to be
paid to an employee whose employment is terminated due to the Installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking. When an employer terminates the services of an employee who has been
found to be suffering from any disease, the employee is also to be paid separation pay. *****But on the
basis of equity, the Supreme Court has ruled that an employee whose employment has been
terminated for just cause may nevertheless, for humanitarian reasons, be granted financial
assistance in the form of separation pay. But also according to the Supreme Court, a terminated
employee is not deserving of said financial assistance if her termination is due to serious
misconduct. In the case, Daisy was dismissed because of serious misconduct. Thus, she should not be
paid separation pay.
or cessation of operations is not due to losses.500

d. As to closure of business, payment of separation pay is equivalent to at
least one month pay or at least 1/2 month pay for every year of service,
whichever is higher.
i. . YES. It is required only where closure is a UNILATERAL501
AND VOLUNTARY ACT on the part of the ER to close the business
establishment. b
ii. . NO. But it is not required when it is due to the following:
a) serious business losses
b) an act of Government
c) compulsion of law.
e. When the severance of employment is caused by a DISEASE,
particularly when the EE is found to be suffering from any disease and whose
continued employment is prohibited by law or is PREJUDICIAL to his
health and of his co-EEs (LC, Art. 284).
1c. FINANCIAL ASSISTANCE: Circumstances where financial assistance
are proper
a. The general rule is that financial assistance is **allowed only in
instances where the EE is validly dismissed for CAUSES OTHER THAN
SERIOUS MISCONDUCT OR THOSE REFLECTING ON HIS
MORAL CHARACTER.
b. Nonetheless, financial assistance may be allowed as a MEASURE OF
SOCIAL JUSTICE and exceptional circumstances, and as an EQUITABLE
CONCESSION for balancing the interests of the ER with those of the
worker.
c. Where there is **neither a dismissal nor abandonment, it has been
500[] Does the validity of suspending operation excuse the ER from paying separation pay? NO. The
validity of its act of suspending its operations does not excuse it from paying separation pay. Art.
283 of the LC is emphatic that an EE, who was dismissed due to cessation of business operation, is
entitled to the separation pay equivalent to **one month pay or at least 1/2 month pay for every
year of service, whichever is higher. And it is jurisprudential that separation pay should also be paid to
EEs even if the closure or cessation of operations is not due to losses (Manila Minings Corp.
Employees Assn. v. Manila Mining Corp., 29 September 2010).
501 Q: Company "A" was engaged in the manufacture of goods using the by-products of coconut trees
and employed some fifty workers who lived in the coconut plantation in Quezon Province. The land
upon which A conducted its operation was subjected to land reform under R.A. 6657 for distribution
to the tenants and residents of the land. Consequently, A had to close its operations and dismiss
its workers. The union representing the employees demanded that A pay the dismissed workers
separation pay under Art. 283 of the Labor Code that requires, among others, the payment of
separation pay to employees in cases of "closing or cessation of operations of the establishment or
undertaking". Is the union is claim correct or not? Why? (5%) (2001 Bar Question). SUGGESTED
ANSWER: The union's claim is not correct. In the case of National Federation of Labor vs. NLRC,
G.R. No. 12771.8, March 2, 2000, the Supreme Court ruled that there is no obligation to pay
separation pay if the closure is not a 'unilateral and voluntary act of the employer. In the
question, the closure was brought about not by a unilateral and voluntary act of the employer but
due to the act of government in the implementation of the Comprehensive Agrarian Reform Law.
previously held that separation pay may be awarded under appropriate

circumstances.
d. Also, in cases where there is no dismissal, the status quo between the EE
and ER should be maintained; and in lieu of reinstatement the grant of separation
pay to EE is proper (Luna v. Allado Construction Co., Inc., 30 May 2011).
2. How much is paid? It depends on the cause (see the table); common rules
below:
a. The rate of separation pay is one (1) month pay or to at least one (1)
or (1/2) month pay (see the table to know which is for 1 and which is for
1/2) for every year of service, whichever is higher. A fraction of at least 6
months shall be considered 1 whole year.502
b. In illegal dismissal cases, where reinstatement is no longer viable as an
option, separation pay equivalent to one (1) month salary for every year503 of
service should be awarded as an alternative. It must be emphasized that this
payment of separation pay is in addition to payment of backwages.
c. What is included in the computation of separation pay504—
i. In the computation of backwages and separation pay, account
must be taken not only of basic salary but also of (transportation and
emergency living) allowances.
502 Q: Bugoy, an employee with only six (6) months of service, was dismissed due to redundancy. He is,
under Art. 283 of the Labor Code, entitled to a separation pay of: (2012 Bar Question): a. One (1)
month pay; b. One (1) year pay. Art. 283 of the Labor Code being explicit that “a fraction of at least six
(6) months shall be considered one (1) whole year; c. Six (6) months pay; d. One (1) year and six (6)
months pay, as Art. 4 of the Labor Code mandated that “(a)ll doubts in the implementation and
interpretation of this Code xxx shall be resolved in favor of labor”. SUGGESTED ANSWER:
a) One (1) month pay [Art. 283, Labor Code]
503if due to illegal dismissal (in lieu of reinstatement): equivalent to at least one month pay, or one
month pay for every year of service, whichever is higher.
504 Q: Robert Suarez is a salesman for Star Pharmaceuticals. Star Pharmaceuticals has applied with the
Department of Labor and Employment for clearance to terminate (by way of retrenchment) the
services of Suarez due to financial losses. Robert Suarez, aside from his monthly salary, receives
commissions on the sales he makes. He also receives allowances. The existing CBA between Star
Pharmaceuticals and the union, of which Robert Suarez is a member, states that any employee
separated from employment for causes not due to the fault of the employee shall receive from the
company a retirement gratuity in an amount equivalent to one month’s salary per year of service.
Robert Suarez contends that in computing his separation pay, his sales commission and his allowances
should be included in the monthly salary. Do you agree? (1997 Bar Question) SUGGESTED
ANSWER: I agree, with some conditions. In computing separation pay, the monthly salary should
include commissions because commissions received by a salesman is part of his salary. But for
allowances to be included as part of salary, they should be for services rendered or to be
rendered, like a cost of living allowance. But transportation and representation allowances are not
considered as part of salary because they are to meet expenses for transportation and representation.
Thu s. cost of living allowances, but not transportation or representation allowances, shall be included
as part of salary in the computation of separation pay. Note: Re: allowances as part of salary, in Santos
us. NLRC, 154 SCRA 166, the Supreme Court said: "in the computation of backwages and separation
pay, account must be taken not only of basic salary but also her transportation and emergency living
allowances."
ii. For salesmen, in computing separation pay, the monthly salary

should include commissions505 because commissions received by a salesman is
part of his salary.
3. When there is no separation pay:*****
a. GR: It is an elementary rule is that an employee who voluntarily
resigns from employment is not entitled to separation pay,
*XPN: except when it is
i. stipulated in the employment contract or
ii. stipulated in the Collective Bargaining Agreement or
iii. based on established employer practice in the company.
————————————————
B2.c. Due Process

1. SUBSTANTIVE AND PROCEDURAL DUE PROCESS
a. Substantive due process mandates that an employee can only be
dismissed based on just or authorized causes.
b. Procedural506 due process requires further that he can only be dismissed
after he has been given an opportunity to be heard.
c. The import of due process necessitates the compliance of these two
aspects (Maneja v. NLRC, 5 June 1998)
2. CONTRACTUAL DUE PROCESS: In addition to compliance with
statutory due process, the Er should still comply with the due process procedure
prescribed in its own company rules. The Er’s failure to observe its own
company-prescribed due process will make it liable to pay an indemnity in the
505Q: Lizzy Lu is a sales associate for Luna Properties. The latter is looking to retrench Lizzy and five
other sales associates due to financial losses. Aside from a basic monthly salary, Lizzy and her
colleagues receive commissions on the sales they make as well as cost of living and representation
allowances. In computing Lizzy’s separation pay, Luna Properties should consider her: (2014 Bar
Question) (A) monthly salary only; (B) monthly salary plus sales commissions; (C) monthly salary
plus sales commissions, plus cost of living allowance; (D) monthly salary plus sales commissions,
plus cost of living allowance and representation allowance SUGGESTED ANSWER: (D)
monthly salary plus sales commissions, plus cost of living allowance and representation allowance
(Songco v. NLRC, G.R. No. L-50999, March 23, 1990).
506Q: The employer must observe both substantive and procedural due process when dismissing an
employee. If procedural due process is not observed, the dismissal will be regarded as (A) defective;
the dismissal process has to be repeated.(B) an abuse of employer's discretion, rendering the dismissal
void. (C)ineffectual; the dismissal will be held in abeyance. (D) legal and valid but the employer will
be liable for indemnity.
form of nominal damages.507 The contract is the law between the parties and
thus, breach of the same impels recompense to vindicate a right that has been
violated (Abbot Laboratories v. Alcaraz, 23 July 2013)
BURDEN OF PROOF IN TERMINATION CASES

1. The burden of proof **RESTS UPON THE ER to show that the dismissal
of the EE is for a just cause, and failure to do so would necessarily mean that the
dismissal is not justified, consonant with the CONSTITUTIONAL GUARANTEE
OF SECURITY OF TENURE.
*Due process REFERS TO THE PROCESS to be followed; burden of
proof refers to the AMOUNT of proof to be adduced. In MONEY CLAIMS,
the burden of proof as to the amount to be paid the EEs **rests upon the ER
since he is in custody of documents that would be able to PROVE the
amount due, such as the PAYROLL.
*NB LPS – the burden of proving the termination was for a just or
authorized cause lies with the Er.508 Failing to meet this burden, the dismissal is
507 Q: Luisa was hired as a secretary by the Asian Development Bank (ADB) in Manila. Luisa’s first
boss was a Japanese national whom she got along with. But after two years, the latter was replaced by
an arrogant Indian national who did not believe her work output was in accordance with international
standards. One day, Luisa submitted a draft report filled with typographical errors to her boss. The
latter scolded her, but Luisa verbally fought back. The Indian boss decided to terminate her services
right then and there. Luisa filed a case for illegal dismissal with the Labor Arbiter claiming arbitrariness
and denial of due process. If you were the Labor Arbiter, how would you decide the case? (2014 Bar
Question) SUGGESTED ANSWER: I will dismiss the case. ADB enjoys immunity from suit (DFA vs.
NLRC, G.R. No. 113191, September 18, 1996). SUGGESTED ALTERNATIVE ANSWER:
I will decide in favor of Luisa, by granting nominal damages. To clarify, however, Luisa's
dismissal is not illegal, for it has been held that failure to observe prescribed standards of work, or to
fulfill reasonable work assignments due to inefficiency, as in this case, may constitute just cause for
dismissal. (Iluminada, Buiser, et. al. v. Leogardo, Jr., 131 SCRA 151 (1969)] Nonetheless, the employer's
failure to comply with the procedure prescribed by law in terminating the services of the employee
warrants the payment of nominal damages of Php30,000.00, in accordance with the Supreme Court's
ruling in the case of Agabon v. NLRC (G.R. No. 158693, November 17, 2004). TOM: latest amount for
nominal damages is 50K.
508Gary, a salesman of Astro Chemical Company (ASTRO), was reported to have committed some
serious anomalies in his sale and distribution of company products. ASTRO designated its Chief Legal
Officer to investigate Gary. Instead of submitting to the investigation. Gary filed a petition to enjoin
the investigation on the ground that ASTRO would appear to be his accuser, prosecutor, and
judge at the same time. Will the petition to enjoin the investigation prosper? Discuss fully. (1995 Bar
Question) SUGGESTED ANSWER: The petition to enjoin the investigation will not prosper. It is
inevitable that in disciplinary cases, the employer would appear to be accuser, prosecutor, and
judge at the same time since it is the employer who charges an employee for the commission of
an offense; he is also the person who directs the investigation to determine whether the charge
against the employee is true or not and he is the one who will judge if the employee is to be
penalized or not. But if the employee is given ample opportunity to defend himself, he could not
validly claim that he was deprived of his right to due process of law. ALTERNATIVE
ANSWER: No. The employer is merely complying with the legal mandate to afford the employee due
process by giving him the right to be heard and the chance to answer the charges against him and
accordingly to defend himself before dismissal is effected-.
illegal (ALPS Transportation v. Rodriguez, 13 June 2013).

2. Degree of proof required: In illegal dismissal cases, the ER is burdened to
prove just cause for terminating the employment of its EE **WITH CLEAR
AND CONVINCING EVIDENCE to give flesh and blood to the guaranty
of security of tenure granted by the Constitution to EEs under the LC (Duty Free
Phils. Services, Inc. v. Tria, 27 June 2012).
3. GUIDELINES in determining whether the penalty imposed on EE is proper
a. Gravity of the offense
b. Position occupied by the EE
c. Degree of damage to the ER
d. Previous infractions509 of the same offense
e. Length of service (ALU-TUCP v. NLRC, February 10, 1999); PAL v.
PALEA, 28 June 1974)
B2.c.i. Twin-notice Requirement

1. Twin requirements of PROCEDURAL due process [Art. 277(b), LC]510
a. Notice: “TWIN-NOTICE RULE” for just causes of termination;
TWO NOTICE RULE for authorized causes.
b. Hearing – Two fundamental rules:
i. Hearing means ample opportunity to be heard
509 [] Q: Felizardo was dismissed from Republic Flour Mills-Selecta Ice Cream Corporation for
dishonesty and theft of company property for bringing out a pair of boots, 1 piece aluminum
container and 15 pieces of hamburger patties. Is the penalty of dismissal commensurate with the
offense committed? NO. There is no question that the ER has the inherent right to discipline its
EEs which includes the right to dismiss. However this right is SUBJECT TO THE POLICE
POWER of the State. As such, the Court finds that the **penalty imposed upon Felizardo was NOT
COMMENSURATE with the offense committed considering the VALUE OF THE ARTICLES he
pilfered and the fact that he had NO PREVIOUS DEROGATORY RECORD during his 2 years of employment
in the company. Moreover, Felizardo was NOT A MANAGERIAL OR CONFIDENTIAL EE in whom greater
trust is reposed by management and from whom greater fidelity to duty is correspondingly expected (ALU-
TUCP v. NLRC, 10 February 1999).
510Assuming the existence of valid grounds for dismissal, what are the requirements before an
employer can terminate the services of an employee? [5%] (1998 Bar Question) SUGGESTED
ANSWER: ******The employee being terminated should be given due process by the employer. 1.
For termination of employment based on any of the just causes for termination, the requirements of
due process that the employer must comply with are: a. A written notice should be served on the
employee specifying the ground or grounds for termination' and giving to said employee reasonable
opportunity within which to explain his side; b. A hearing or conference should be held during
which the employee concerned, with the assistance of counsel if the employee so desires, is given
the opportunity to respond to the charge, present his evidence and present the evidence presented
against him; c. A written notice of termination, if termination is the decision of the employer,
should be served on the employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination. 2. For termination of employment based
on authorized causes, the requirements of due process shall be deemed complied with upon service
of a written notice to the employee and the appropriate Regional Office of the Department of
Labor & Employment at least thirty (30) days before the effectivity of the termination specifying
the ground or grounds for termination.
ii. What the law prohibits is total absence of opportunity to be

heard;511 If ample opportunity to be heard is given, there is no violation.
2. Just vs. Authorized causes as to the notice requirement:***
a. When termination is based on just cause, notice should be GIVEN TO
THE EE applying the “twin notice rule”;
b. If the termination is based on all of the authorized causes, notices
should be GIVEN TO ALL EES AFFECTED AND THE DOLE at least
one month before the intended date of termination.
*see details, infra
3. PURPOSE of notice and hearing:
a. The requirement of NOTICE is intended to inform the EE concerned
of the ER's intent to dismiss him and the reason for the proposed dismissal.
b. On the other hand the requirement of HEARING affords the EE the
opportunity to answer his ER's charges against him and accordingly to defend
himself there from before dismissal is effected (Salaw v. NLRC, 27 September
1991).
4. Effect of FAILURE TO COMPLY with the requirement of the 2 notices
**MAKES THE DISMISSAL ILLEGAL. The procedure is MANDATORY (Loadstar
Shipping Co. Inc. v. Mesano, 7 August 2003).
5. Effect of NON-COMPLIANCE WITH THE DUE PROCESS
REQUIREMENTS in the termination of a person’s employment: a company is
sanctioned to pay a certain amount as DAMAGES (King of Kings  
v. Mamac, 29 June 2007). Even if the termination is due to a just cause, the
employee entitled to indemnity if he was denied due process of law by said
employer.
MORE ON DUE PROCESS ON JUST CAUSE TERMINATION

1. Two-fold requirements of a valid dismissal for a JUST CAUSE
a. Substantive: It must be for a just cause;
b. Procedural:512 There must be notice and hearing; notice should be
GIVEN TO THE EE applying the “twin notice rule”
511*A position paper is a valid alternative because not all cases are of litigation concerns. It should suffice
in matters that only involve a question of law.
512Should there exist a valid and just cause, may the ER depart from giving the EE the right to be
heard? NO. Art. 277(b) of the LC MANDATES that an ER who seeks to dismiss an EE must “afford
the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires.” Expounding on this provision, the SC held that **“ample opportunity”
connotes EVERY KIND OF ASSISTANCE that management must accord the EE to enable him to
prepare adequately for his defense including legal representation (U-BIX Corp. v. Bravo, 31 October
2008).
2. PROCEDURE513 to be observed by the ER for the termination of

employment based on any of the just causes for termination:514
a. A WRITTEN NOTICE should be served to the EE specifying the
GROUND/s for termination and giving the said EE reasonable opportunity to
explain. This first written notice must apprise the EE that his termination is
being considered due to the acts stated in the notice (Phil. Pizza Inc. v. Bungabong,
May 9, 2005).
b. A HEARING OR CONFERENCE should be held during which the
EE concerned, with the assistance of counsel, if the EE so desires, is given the
opportunity to respond to the charge, provide for his evidence and present the
evidence offered against him. NB: The “ample opportunity to be heard” under
the LC is paramount over the “hearing or conference” standard in the IRR of
LC. Due process requirements are satisfied where the parties are afforded fair
513Joseph Vilriolo (JV), a cashier of Seaside Sunshine Supremart (SSS), was found after an audit, to
have cash shortages on his monetary accountability covering a period of about five months in the total
amount of P48.000.00. SSS served upon JV the written charge against him via a memorandum order of
preventive suspension, giving JV 24 hours to submit his explanation. As soon as JV submitted his
written explanation within the given period, the same was deemed unsatisfactory by the
company and JV was peremptorily dismissed without any hearing. The day following his
termination from employment, JV filed a case of illegal dismissal against SSS. During the hearing
before the Labor Arbiter, SSS proved by substantial evidence JVs misappropriation of company funds
and various infractions detrimental to the business of the company. JV, however, contended that his
dismissal was illegal because the company did not comply with the requirements of due process. (1999
Bar Question) Did SSS comply with the requirements of procedural due process in the dismissal from
employment of J'V? Explain briefly (2%) SUGGESTED ANSWER: In connection with the right to
due process in the termination of an employee, the Labor Code (in Article 277(b)) requires that the
employer furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires. SSS did not
comply with the above described requirements for due process. ***The memorandum order was for
the preventive suspension of JV, not a notice for his termination and the causes of his termination.
514 Q: Inday was employed by Herrera Home Improvements, Inc. (Herrera Home) as interior decorator.
During the first year of her employment, she did not report for work for one month. Hence, her
employer dismissed her from the service. She filed with the Labor Arbiter a complaint for illegal
dismissal alleging she did not abandon her work and that in terminating her employment, Herrera
Home deprived her of her right to due process. She thus prayed that she be reinstated to her
position. Inday hired you as counsel. In preparing the position paper to be submitted to the Labor
Arbiter, explain the standards of due process which should have been observed by Herrera Home in
terminating your client's employment. 5% (2006 Bar Question) SUGGESTED ANSWER: The Labor
Code provides the following procedure to be observed in terminating the services of an employee
based on just causes as defined in Art. 282 of the Code: a) A written notice must be served on the
employee specifying the ground or grounds for termination and giving him reasonable opportunity
within which to explain his side: b) A hearing or conference shall be conducted during which the
employee concerned, with the assistance of counsel if he so desires, is given an opportunity to respond
to the charge, present his evidence or rebut the evidence presented against him; and c) A written
notice of termination must be served on the employee indicating that upon due consideration of
all the circumstances, grounds have been established to justify his termination.
and reasonable opportunity to explain their side of the controversy at hand.515

c. A WRITTEN NOTICE OF TERMINATION: If termination is the
decision of the ER, it should be served on the EE indicating that upon due
consideration of all the circumstance, grounds have been established to justify
his termination. NB: Single notice of termination does not comply with the
requirements of the law (Aldeguer & Co., Inc. v. Honeyline Tomboc, 28 July 2008).
3. Summary of the TWIN-NOTICE516 RULE:
a. FIRST notice: Necessity of first notice to inform the worker of the
violation and preparation for the defense (PRE-NOTICE)
b. LAST notice: To give the worker a notice of the ER's final decision
(POST NOTICE)
MORE ON DUE PROCESS FOR TERMINATION DUE TO

AUTHORIZED CAUSES
1. WRITTEN NOTICE TO DOLE 30 days prior to the intended day of
termination. Purpose: To enable it to ascertain the veracity of the cause of
515 [] Q: Caong, Tresquio and Daluyon were employed by Regualos under a boundary agreement, as
drivers of his jeepneys. Later on, the three were barred by Regualos from driving the vehicles due to
deficiencies in their boundary payments. Is the policy of suspending jeepney drivers pending
payment of arrears in their boundary obligations reasonable? YES. The policy of suspending drivers
who fail to remit the full amount of the boundary was fair and reasonable under the
circumstances. **Notice was given to the drivers who were getting lax in remitting their boundary
payments. In fact, Regualos incurred a considerable amount of arrears. He had to put a stop to it as
he also **relied on these boundary payments to raise the full amount of his monthly
amortizations on the jeepneys. Caong, Tresquio and Daluyon were not denied due process. Due
process is not a matter of strict, rigid or formulaic process. The **ESSENCE of due process is
simply the opportunity to be heard, or as applied to administrative proceedings, an opportunity to
explain one’s side or an opportunity to seek a reconsideration of the action or ruling complained
of. A **formal or trial-type hearing is not at all times and in all instances essential, as the due
process requirements are satisfied where the parties are afforded fair and reasonable opportunity
to explain their side of the controversy at hand (Caong v. Regualos, 26 January 2011).
516 [] Q: Perez and Doria were employed by PT&T. After investigation, Perez and Doria were placed on
preventive suspension for 30 days for their alleged involvement in anomalous transactions in the
shipping section. PT&T dismissed Perez and Doria from service for falsifying documents. They filed
a complaint for illegal suspension and illegal dismissal. The LA found that the suspension and the
subsequent dismissal were both illegal. The NLRC reversed the LA’s decision, it ruled that Perez and
Doria were dismissed for just cause, that they were accorded due process and that they were illegally
suspended for only 15 days (without stating the reason for the reduction of the period of petitioners’
illegal suspension). On appeal, the CA held that they were dismissed without due process. Were
petitioners illegally dismissed? YES. The **ER must establish that the dismissal is for cause in
view of the security of tenure that EEs enjoy under the Constitution and the LC. PT&T failed to
discharge this burden. PT&T’s illegal act of dismissing Perez and Doria was **aggravated by their
failure to observe due process. To meet the requirements of due process in the dismissal of an EE,
an ER must furnish the worker with 2 written notices: (1) a written notice specifying the grounds for
termination and giving to said EE a reasonable opportunity to explain his side and (2) another
written notice indicating that, upon due consideration of all circumstances, grounds have been
established to justify the ER's decision to dismiss the EE (Perez. v. Phil. Telegraph and Telephone Company,
G.R. No. 152048, 29 April 2009).
termination.
2. WRITTEN NOTICE TO EE concerned 30 days prior the intended date of
termination.
3. PURPOSE OF THE TWO NOTICES517 served to the EE and the DOLE 1
month prior to termination based on authorized causes:**
a. To give the EEs some time to prepare for the eventual loss of their jobs and
their corresponding income, look for other employment and ease the impact of the
loss of their jobs.
b. To give the DOLE the opportunity to ascertain the veracity of the
alleged cause of termination (Phil. Telegraph & Telephone Corp. v. NLRC, August 15,
2005).
[] NB: Notice to both the EEs concerned and the DOLE are
MANDATORY and must be WRITTEN and given AT LEAST 1 MONTH
BEFORE the intended date of retrenchment—and **the fact that the EEs were
already on temporary lay-off at the time notice should have been given to them is
not an excuse to forego the 1-month written notice (Sebuguero v. NLRC, 27
September 1995). Neither is actual knowledge518 of the EEs sufficient to forego the
written notice requirement.
4. Payment of separation pay: **Serious business losses do not excuse the ER
from complying with the clearance or report required in Art. 283 of the LC and
its IRR before terminating the employment of its workers. In the absence of justifying
circumstances, the failure of the ER to observe the procedural requirements under
Art. 284 of the LC taints their actuations with bad faith.
*See “rules on separation pay”
517Q: Sampaguita Company wants to embark on a retrenchment program in view of declining sales. It
identified five employees that it needed to separate. The human resource manager seems to recall that
she has to give the five employees and the DOLE a 30-day notice but she feels that she can give a
shorter notice. What will you advise her? (2011 BAR) (A) Instead of giving a 30-day notice, she can
just give a 30-day advanced salary and make the separation effective immediately. (B) So long as she
gave DOLE a 30-day prior notice, she can give the employees a shorter notice. (C)The 30-day
advance notice to the employee and the DOLE cannot be shortened even with a 30-day
advance salary. (D)She can give a shorter notice if the retrenchment is due to severe and substantial
losses.
518 DAP Corp. ceased its operation due to the termination of its distribution agreement with Int’l
Distributors Corp. which resulted in its need to cease its business operations and to terminate the
employment of its EEs. Marcial et al. filed a complaint for illegal dismissal and for failure to give the
EEs written notices regarding the termination of their employment. On the other hand, DAP claims
that their EEs actually knew of the termination therefore the written notices were no longer
required. Are written notices dispensed with when the EEs have actual knowledge of the redundancy?
NO. The EEs’ ACTUAL KNOWLEDGE of the termination of a company’s distributorship agreement
with another company is NOT SUFFICIENT to replace the formal and written notice required
by law. In the written notice, the EEs are informed of the specific date of the termination, at least a
month prior to the date of effectivity, to give them sufficient time to make necessary arrangements. In
this case, notwithstanding the EEs knowledge of the cancellation of the distributorship agreement,
they remained uncertain about the status of their employment when DAP failed to formally
inform them about the redundancy (DAP Corp. v. CA, 14 December 2005).
B2.c.ii. Hearing: Ample Opportunity to be Heard

1. Coverage of opportunity to be heard: Under the Omnibus Rules,
**REASONABLE OPPORTUNITY means every kind of assistance that
management must accord to the EEs to enable them to prepare adequately for
their DEFENSE. This should be construed as
a. a period of at least five (5) calendar days from receipt of the notice
b. to give the EEs an opportunity to study the accusation against them,
consult a union official or lawyer, gather data and evidence, and decide on the
defenses they will raise against the complaint.
c. To enable the EEs to intelligently prepare their explanation and defenses,
the notice should contain a DETAILED narration of the facts and
circumstances that will serve as basis for the charge against the EEs. **A
general description of the charge will not suffice.
d. Lastly, the notice should SPECIFICALLY mention which company
rules, if any, are violated and/or which among the grounds under Art. 282 is
being charged against the EEs.
2. After serving the first notice, the ERs should schedule and conduct a
hearing or conference wherein the EEs will be given the opportunity to:
(1) explain and clarify their defenses to the charge against them;
(2) present evidence in support of their defenses; and
(3) rebut the evidence presented against them by the management.
*During the hearing or conference, the EEs are given the chance to
defend themselves personally, with the assistance of a representative or
counsel519 of their choice. Moreover, this conference or hearing could be used

by the parties as an **opportunity to come to an AMICABLE
SETTLEMENT (King of Kings v. Mamac, 29 June 2007).
3. NB: Trial-type hearings are not required in labor cases and these may be
decided on verified position papers, with supporting documents and their affidavits.
The holding of a formal hearing or trial is DISCRETIONARY with the labor
arbiter and is something that the PARTIES CANNOT DEMAND AS A MATTER OF
519 On September 3. 1998, the National Bureau of Investigation (NBI) extracted from Joko Diaz—
without the assistance of counsel — a sworn statement which made it appear that Joko, in cahoots
with another employee, Reuben Padilla, sold ten (10) cash registers which had been foreclosed by
North- South Bank for P50.000.00 and divided the proceeds therefrom in equal shares between the two
of them. On September 10, 1998, Joko was requested by Rolando Bato, the bank manager, to
appear before the Disciplinary Board for an investigation in the following tenor: “You are requested to
come on Thursday, September 14, 1998, at 11:00 a.m. the Board Room, without counsel or
representative, in connection with the investigation of the foreclosed cash registers which you sold
without authority.” Mr. Bato himself conducted the investigation, and two (2) days thereafter, he
dismissed Joko. The bank premised its action in dismissing Joko solely on the latter's admission of
the offense imputed to him by the NBI in its interrogation on September 3, 1998. Aside from this
sworn statement, no other evidence was presented by the bank to establish the culpability of Joko
in the fraudulent sale of the banks foreclosed properties. (1999 Bar Question) 1. Is the dismissal of
Joko Diaz by North-South Bank legally justified? Explain briefly. (3%) SUGGESTED ANSWER: The
dismissal of Joko Diaz by North-South Bank is not legally justified. Diaz was not given the required
due process by the Bank. He should have been given a written notice that he was being terminated
and a statement of the causes for his termination. *****He was instead given a just notice about an
investigation relative to an incident. It was also contrary to law for the Bank to tell Diaz that he
should attend the investigation “without counsel or representative. Instead, he should have been
afforded as provided In the Labor Code (in Article 277[b]) ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires. If the evidence that was the
basis for the termination of Joko Diaz was only his own statement ’'extracted” from him by the NBI
when Joko was without the assistance of counsel, then the statement cannot be substantial evidence for
Joko’s termination. ALTERNATIVE ANSWER: NO. Under Sec, 12 of Art. in of the 1987
Constitution any “confession or admission obtained in violation of Sec. 12 and 17 shall be Inadmissible
in evidence against him”. Since the sole basis for his dismissal was the confession procured by the NBI
in violation of his right to counsel which is inadmissible for any purpose and any proceeding including
an administrative case, his dismissal is illegal. Diaz's termination is likewise illegal because he was
deprived of his light to due process since during the investigation he was required to attend without
counsel or representative.
2. Can Reuben Padilla’s participation in the fraudulent sale of the bank's foreclosed properties
be made to rest solely on the unilateral declaration of Joko Diaz? Why? (2%) SUGGESTED
ANSWER: No. The unilateral declaration of Joko, where Joko has not been subjected to cross-
examinations cannot be considered as substantial evidence; it is just hearsay. ALTERNATIVE
ANSWER: No. The unilateral declaration of Joko is not enough. Such declaration must be
corroborated by other competent and convincing evidence. At the very least, what the Bank
should do should be to confront Reuben Padilla with the declaration of Joko (Century Textile Mills,
Inc. vs, NLRC, 161 SCRA 628).
RIGHT.520 **The ESSENCE OF DUE PROCESS IS SIMPLY AN

OPPORTUNITY TO BE HEARD, or as applied to administrative proceedings, an
OPPORTUNITY TO EXPLAIN ONE’S SIDE or an OPPORTUNITY TO SEEK A
RECONSIDERATION of the action or ruling complained of (PLDT v. Bolso, 17
August 2007). HEARING IS NOT AN INDISPENSABLE PART of due
process.521
4. If the dismissal is for JUST OR AUTHORIZED CAUSE but the
REQUIREMENT OF NOTICE AND HEARING WERE NOT
COMPLIED WITH, should the dismissal be held illegal? NO. **In Agabon
v. NLRC, G.R. No. 158693, 17 November 2004, it was held that when dismissal is
for just or authorized cause but due process was not observed, the dismissal
should be UPHELD. The ER, however, should be held liable for non-
compliance with the procedural requirements of due process in the form of
520The illegal dismissal case was referred to the LA. Is a formal hearing or trial required to satisfy the
requirement of due process? NO. **Trial-type hearings are not required in labor cases and these
may be decided on verified position papers, with supporting documents and their affidavits. The holding
of a formal hearing or trial is **DISCRETIONARY with the labor arbiter and is something that the
PARTIES CANNOT DEMAND AS A MATTER OF RIGHT. It is entirely within his authority to decide a
labor case before him, BASED ON THE POSITION PAPERS AND SUPPORTING DOCUMENTS of the
parties, WITHOUT A TRIAL OR FORMAL HEARING. The requirements of due process are
SATISFIED when the parties are given the opportunity to submit position papers wherein they
are supposed to attach all the documents that would prove their claim in case it be decided that no
hearing should be conducted or was necessary (Shoppes Manila v. NLRC, 14 January 2004).
*NB: It is NOT NECESSARY for the affiants to appear and testify and be cross-
examined by the counsel for the adverse party. It is SUFFICIENT that the documents submitted by
the parties have a bearing on the issue at hand and support the positions taken by them (C.F. Sharp
& Co. v. Zialcita, 17 July 2006).
521 Art. 277(b) of the LC provides that, in cases of termination for a JUST CAUSE, an EE must be
given “ample opportunity to be HEARD and to DEFEND himself.” Thus, the opportunity to be heard
afforded by law to the EE is qualified by the word “ample” which ordinarily means “considerably
more than adequate or sufficient.” In this regard, the phrase “ample opportunity to be heard” can be
reasonably interpreted as extensive enough to cover actual hearing or conference. To this extent,
Sec. 2(d), Rule I of the IRR of Book VI of the LC requiring a hearing and conference during which the
EE concerned is given the opportunity to respond to the charge is in conformity with Art. 277(b).
Significantly, Sec. 2(d), Rule I of the IRR of Book VI of the LC itself provides that the so-called
standards of due process outlined therein shall be observed **“SUBSTANTIALLY,” NOT
STRICTLY. This is a recognition that WHILE A FORMAL HEARING OR CONFERENCE IS IDEAL, IT
IS NOT AN ABSOLUTE, MANDATORY OR EXCLUSIVE AVENUE OF DUE PROCESS (Perez v. PT&T, G.R.
No. 152048, 29 April 2009).
(nominal)522 DAMAGES.
522 Q: Under current jurisprudence, when the dismissal is for a just or authorized cause but due process
is not observed, the dismissal is said to be: (2012 Bar Question): a. Void for denial of due process;
hence, the employee should be reinstated; b. Void for lack of due process, the employee should be paid
full backwages; c. Valid, for the dismissal is with just/authorized cause, but the employer  
shall be liable for nominal damages; d. Valid, even if due process is not observed, hence reinstatement
should not be ordered. SUGGESTED ANSWER: c. Valid, for the dismissal is with just/
authorized cause, but the employer shall be liable for nominal damages. [Agabon vs. NLRC,
G.R. No. 158693, November 17, 2004]
523
a. NB: The Agabon ruling was modified by JAKA Food Processing v.

Pacot G.R. No. 151378, 28 March 2005 where it was held that:**
i. If based on JUST CAUSE (LC, Art. 282) but the ER 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 EE; and
ii. If based on AUTHORIZED CAUSES (LC, Art. 283) but the ER
failed to comply with the notice requirement, the sanction should be
523 Q: Juan Santos is a regular employee of Far East Development Company. During office hours, he
quarelled with a co-employee. Santos was holding a knife and when his supervisor Olivia Garcia
tried to pacify him, he chased her instead with the knife but he was held back by cooler heads. On
the ground of gross misconduct and insubordination, he was dismissed from the service. He filed a
complaint for illegal dismissal with the labor arbiter. The labor arbiter required Santos and his
employer to file their position papers. On the basis of the position papers submitted, the labor
arbiter found that the dismissal was for lawful cause and thus, the complaint was dismissed. On appeal
to the National Labor Relations Commission, the said decision was reversed on the ground that
Santos was not afforded due process by his employer before he was dismissed. Hence, he was
ordered reinstated with backwages from the date of his separation to the date of his reinstatement
without qualification or deduction. The employer elevated the case lo the Supreme Court. He argued
that even if there was no due process in the dismissal of Santos, at the hearing before the labor arbiter,
it was found that the dismissal was for a just cause and therefore Santos was not entitled to
reinstatement. Santos, on the other hand, challenged the proceedings before the labor arbiter on the
ground that no hearing was conducted and that the decision was reached only on the basis of position
papers submitted and hence, in violation of due process. (1) Is the employer's contention valid?
Explain. (2) Is the contention of Santos correct? Explain. SUGGESTED ANSWER:
(1) The employer's contention is valid. It is true that under the facts of the case in the question, the
employer failed to give due process to Santos before the latter was dismissed since the
employer did not give Santos the required written notice of his termination and the reason or
reasons for his termination. The employer did not give Santos the required opportunity to defend
himself. But on the basis of the position papers submitted, the labor arbiter found that the dismissal
was lawful cause since Santos was indeed guilty of serious misconduct and willful disobedience which
are just causes for termination. The fact that Santos was not afford due process by the employer
does not mean that thereby the employer cannot dismiss Santos, if there is just cause for his
termination. (2) In Wenph.il Corporation v. National Labor Relations Commission et al, G.A. No.
80587, Feb. 8, 1989, the Supreme Court said: "By the same token, the conclusion of the public
respondent NLRC on appeal that private respondent was not afforded due process before he was
dismissed is binding on this Court. Indeed, it is well taken and supported by the records. However, it
can not justify a ruling that private respondent should be reinstated with back wages as the public
respondent NLRC so decreed. Although belatedly, private respondent was afforded due process
before the labor arbiter wherein the just cause of his dismissal had been established. With such
finding, it would be arbitrary and unfair to order his reinstatement with back wages." The contention of
Santos is not correct. The Labor Codes provides (in Art. 221) that in any proceeding before the
National Labor Relations Commission or any labor arbiter, the rules of evidence prevailing in
courts oflaw or equity shall not be controlling and that it is in the spirit and intention of the
Code that the Commission and the labor arbiters shall use every and all reasonable means to
ascertain the fact in each case speedily, and objectively, without regard to technicalities of law on
procedure, all in the interest of due process. Considering the above provision in the Labor Code, in
many decisions, the Supreme Court has held that it is proper for a labor arbiter to decide a case on the
basis of the position papers submitted by the parties. (Example: Robusta Agro Marine Products Inc. u.
Corobalem. G.R. No.80500, July 5. 1989).
STIFFER because the dismissal process was INITIATED BY ER'S EXERCISE OF

HIS MANAGEMENT PREROGATIVE.
b. NB LPS – The Jaka ruling was further modified in the case of Industrial
Timber v. Ababon. This case subdivided the dismissal for 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 Er who disregarded
due process may be lighter than if the authorized cause has no relation to losses.
The SC likewise mentions some factors to considered in assessing the penalty of
the Er, to wit:
i. The authorized cause invoked (retrenchment or closure)
ii. The number of Ees to be awarded
iii. The capacity of the Ers to satisfy the awards, taken into account
their prevailing financial status as borne by the records
iv. The Er’s grant of other termination benefits in favor of the Ees;
and
v. Whether there was a bona fide attempt to comply with the notice
requirement as opposed to giving no notice at all (Industrial timber corp. v. Ababon 30
March 2006)
Procedural Due Process under Art. 282-284 of the LC as applied in the Agabon Case
Art. 282 Art. 283 Art. 284
The ER must give the EE a The ER must give the EE and the DOLE ER may
notice specifying the grounds written notices 30 days prior to the effectivity terminate the
for which dismissal is sought; a of his separation. services of his
hearing or an opportunity to EE.
be heard; and after hearing or
opportunity to be heard, a notice
of the decision to dismiss.
The requirement under Art. 277 Worker is an inactive party in the cause for There is no
(b) of notice and hearing termination. Only notice with DOLE and hearing
applies only in Art. 282 notice to worker is required. No need for a requirement in
because the ER is accusing the hearing because due process is found in LC diseases but
worker that the latter (Art. 283) not in Constitution according to Agabon. there is notice
committed an act or omission NB: in Art. 277 (b) in relation to Art. 283, if the requirement to
constituting a cause for closure of business will result in a mass layoff worker, but no
termination of his employment. and serious labor dispute, the SOLE can enjoin notice to
the ER as regards mass termination DOLE.
***
Effect of
Possible Situations Liability of ER
termination
a.) With Just or Authorized Cause; NO Liability. NB: Separation Pay if for
VALID
b.) With Due Process Authorized Cause
a.) Without Just or Authorized Reinstatement + Full Backwages. NB: If
INVALID
Cause; b.) With Due Process Reinstatement not possible—Separation Pay
a.) Without Just or Authorized Reinstatement + Full Backwages. NB: If

INVALID
Cause; b.) Without Due Process Reinstatement not possible—Separation Pay
Liable for noncompliance with procedural
a.) With Just or Authorized Cause;
VALID requirements. NB: Separation Pay if for
b.) Without Due Process
Authorized Cause
————————————————
B3. Reliefs for Illegal Dismissal

*Remedies of EE in case of illegal dismissal:*****
1a. REINSTATEMENT WITHOUT LOSS OF SENIORITY RIGHTS;
a. Reinstatement is the RESTORATION of the EE to the state from
which he has been unjustly removed or separated without loss of seniority
rights and other privileges.
b. Forms of reinstatement:
i. ACTUAL or physical: The EE is admitted back to work; NB: An
order of reinstatement by the LA is not the same as actual reinstatement of a
dismissed or separated EE, however, it is **IMMEDIATELY EXECUTORY
EVEN PENDING APPEAL.524
524Thus, until the ER continuously fails to actually implement the reinstatement aspect of the
decision of the LA, their obligation to the illegally dismissed EE, insofar as accrued backwages and
other benefits are concerned, continues to accumulate. It is **only when the illegally dismissed
EE RECEIVES THE SEPARATION PAY (in case of strained relations) that it could be claimed with
certainty that the EER has formally ceased thereby precluding the possibility of reinstatement
(Triad Security & Allied Services, Inc. et al v.Ortega, 6 February 2006).
ii. PAYROLL:525 The EE is merely reinstated in the payroll526

This is an option given to the ER. It cannot be ordered by the LA or NLRC.527
c. An EE has NO INHERENT RIGHT TO SENIORITY. He has only
such rights as may be based on a CONTRACT, STATUTE, OR AN
ADMINISTRATIVE REGULATION relative thereto. Seniority rights which are
acquired by an EE through long-time employment are CONTRACTUAL AND
525Q: What is meant by "payroll reinstatement" and when does it apply? (4%) (2005 Bar Question)
SUGGESTED ANSWER: Payroll reinstatement is a form of reinstatement which an employer may
opt to exercise in lieu of an actual reinstatement. Here, the illegally dismissed employee is to receive
his basic pay without the obligation of rendering any service to the employer. This occurs when a
Labor Arbiter decides that an employee was illegally dismissed and as a consequence awards
reinstatement, pursuant to Article 279 of the Labor Code. Such award of reinstatement, according to
Art. 223 of the Code, is immediately executory even pending appeal.
526[] Q: A complaining EE obtained a favorable decision in an illegal dismissal case. The LA ordered
her immediate reinstatement. The ER opted payroll reinstatement pending appeal. The NLRC
reversed the decision of the LA ruled that the dismissal was valid. The ER stopped the payroll
reinstatement. The EE elevated the case to the CA, and eventually to the SC. The SC upheld the
dismissal. Is the EE entitled to continued payroll reinstatement after the NLRC decision? NO. The
EE is not entitled to continued payroll reinstatement. **The decision of the NLRC on appeal
from decisions of the LA shall become final and executory after 10 calendar days from receipt
thereof by the parties. **That the CA may take cognizance of and resolve a PETITION FOR
CERTIORARI for the nullification of the decisions of the NLRC on jurisdictional and due process
considerations does not affect the statutory finality of the NLRC decision. Since the NLRC decision
which upheld the dismissal became final, the ER was correct in stopping the payroll reinstatement of the
EE (Bago v. NLRC, April 4, 2007).
[] Compare it with this one: Can the ER demand that the EE reimburse the amount that had
been paid under the period of payroll reinstatement? NO. **Even if the order of reinstatement
of the LA is reversed on appeal, it is obligatory on the part of the ER to reinstate and pay the
wages of the dismissed EE DURING THE PERIOD OF APPEAL UNTIL REVERSAL by the higher
court. If the EE has been reinstated during the appeal period and such reinstatement order is reversed
with finality, the EE is not required to reimburse whatever salary he received for he is entitled to
such, more so if he actually rendered services during the period (Garcia v. PAL, 20 June 2009).
527May the NLRC order the payroll reinstatement of Sharon Cometa? Why? (2%) SUGGESTED
ANSWER: The NLRC may NOT order the payroll reinstatement of Sharon Cometa. The Labor
Code (Article 223) provides that in the immediate reinstatement of a dismissed employee, the employee
shall be admitted back to work under the same terms and conditions prevailing prior to the
employee's dismissal or, at the option of the employer, merely reinstated in the payroll. Thus, the
reinstatement of the employee in the payroll is at the option of the employer and not of the NLRC
or the Labor Arbiter who have the power only to direct reinstatement.
NOT CONSTITUTIONAL.528
d. Reinstatement and re-employment are not synonymous. Although both
terms refer to restoration of employment, the former connotes to an obligation;
while the latter, is discretionary on the part of the Er to place the Ee affected in
the position previously held (NSSC v. NSEWA, 13 November 1958).
e. Does the offer to reinstate the illegally dismissed EE affect the liability
of the erring ER? NO. At any rate, sincere or not, the offer of reinstatement
COULD NOT CORRECT THE EARLIER ILLEGAL DISMISSAL of the EE. The
**ER INCURRED LIABILITY under the LC from the moment an EE was
illegally dismissed, and the liability DID NOT ABATE as a result of the
ER's REPENTANCE (Ranara v. NLRC, 14 August 1992).
f. An award or order for reinstatement is immediately SELF-
EXECUTORY.529 It does not require the issuance of a writ of execution
(Pioneer Texturizing Corp. v. NLRC, G.R. No. 118651, 6 October 1997). It shall be
immediately self-executory pending appeal. Compare:
i. a. OLD SYSTEM: In Genuino v. NLRC, the EE reinstated should
refund the salaries he received while the case was pending appeal for he should
not enrich himself at the expense of the ER.
ii. NEW SYSTEM: However, in Garcia v. PAL, the Supreme Court
528[] Q: PAL dismissed strike leader Capt. Gaston as a result of which the Union resolved to undertake
the grounding of all PAL planes and the filing of applications for “protest retirement” of members
who had completed 5 years of continuous service, and “protest resignation” for those who had
rendered less than 5 years of service in the company. PAL acknowledged receipt of said letters and
among the pilots whose “protest resignation or retirement” was accepted by PAL were Enriquez and
Ecarma. Before their readmission, PAL required Enriquez and Ecarma to accept 2 conditions,
namely: that they sign conformity to PAL’s letter of acceptance of their retirement and or
resignation and that they submit an application for employment as new EEs without protest or
reservation. As a result of this, their seniority rights were lost. Are the pilots entitled to the
restoration of their seniority rights? NO. An EE has **NO INHERENT RIGHT TO
SENIORITY. He has only such rights as may be based on a CONTRACT, STATUTE, OR AN
ADMINISTRATIVE REGULATION relative thereto. Seniority rights which are acquired by an EE
through long-time employment are **CONTRACTUAL AND NOT CONSTITUTIONAL. The
discharge of an EE thereby terminating such rights would not violate the Constitution. When the pilots
tendered their respective retirement or resignation and PAL immediately accepted them, both parties
mutually terminated the contractual employment relationship between them thereby curtailing
whatever seniority rights and privileges the pilots had earned through the years
529Can the order of reinstatement be immediately enforced in the absence of a motion for the issuance
of a writ of execution? YES. In Pioneer Texturizing Corp. v. NLRC, the Court held that an **award or
order of reinstatement is SELF-EXECUTORY and does not require a writ of execution to
implement and enforce it. To require the application for and issuance of a writ of execution as a
prerequisite for the execution of a reinstatement award would certainly betray and run counter to the
VERY OBJECTIVE AND INTENT of Art. 223 of the Labor Code (on the immediate execution of a
reinstatement order).
*NB: Under the circumstances where the employment relationship has become SO
STRAINED to preclude a harmonious working relationship and that all hopes at reconciliation
are naught after reinstatement, it would be more beneficial to accord the EE BACKWAGES AND
SEPARATION PAY.
ruled that the **PRINCIPLE OF SOCIAL JUSTICE RENDERS

INAPPLICABLE THE CIVIL LAW DOCTRINE OF UNJUST ENRICHMENT.
There is no need for the EE to reimburse the ER of what he received during
appeal.530
g. So long as there is a finding that the EE was illegally dismissed, the
court can order the reinstatement of an EE EVEN IF THE COMPLAINT DOES
NOT INCLUDE531 A PRAYER FOR REINSTATEMENT,532 unless, of course the
EE has waived his right to reinstatement. Such is already covered by the
GENERAL PRAYER for such further or other reliefs as may be deemed just
530PAL dismissed Garcia, for violating PAL’s Code of Discipline for allegedly sniffing shabu in PAL’s
Technical Center Tool Room Section. Garcia then filed for illegal dismissal and damages where the LA
ordered PAL to immediately reinstate Garcia. On appeal, the NLRC reversed the decision and
dismissed Garcia’s complaint for lack of merit. Garcia’s motion for reconsideration was denied by the
NLRC. It affirmed the validity of the writ and the notice issued by the LA but suspended and referred
the action to the Rehabilitation Receiver for appropriate action. May Garcia collect wages during the
period between the LA’s order of reinstatement pending appeal and the NLRC decision
overturning that of the LA? YES. Art. 223(3) of the LC provides that the decision of the LA
reinstating a dismissed or separated EE, insofar as the reinstatement aspect is concerned, shall
immediately be executory, pending appeal. Even if the order of reinstatement of the LA is
reversed on appeal, it is OBLIGATORY on the part of the ER to reinstate and pay the wages of
the dismissed EE during the period of appeal until reversal by the higher court. On the other hand,
**if the EE has been reinstated during the appeal period and such reinstatement order is reversed with
finality, the EE is NOT REQUIRED TO REIMBURSE whatever salary he received for he is
entitled to such, more so if he actually rendered services during the period.
531Is failure to claim backwages in the complaint fatal? No. it is evident that the award of backwages
resulting from illegal dismissal of an Ee is a substantive right. Thus, the failure to claim backwages in a
complaint for illegal dismissal has been held to be mere procedural lapse which cannot defeat a right
granted under substantive law (General Baptist Bible College v. NLRC, 5 March 1993)
5321) Distinguish between the substantive and the procedural requirements for the dismissal of an
employee. 2) May a court order the reinstatement of a dismissed employee even if the prayer of the
complaint did not include such relief ? SUGGESTED ANSWER: 1) This is the substantive
requirement for the valid dismissal of an employee: There should be a just cause for the termination of
an employee or that the termination is authorized by law. This is the procedural requirement: The
employer should furnish the employee whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and the employer should afford the employee to
be terminated ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires. (Arts. 279 and 277 (b). Labor Code). 2) So long as there is a finding
that the employee was illegally dismissed, the court can order the reinstatement of an employee
even if the complaint does not include a prayer for reinstatement, unless, of course, the
employee has waived his right to reinstatement; By law an employee who is unjustly dismissed is
entitled to reinstatement, among others. The mere fact that the complaint did not pray for
reinstatement will not prejudice the employee, because technicalities of law and procedure are
frowned upon in labor proceedings. (General Baptist Bible College vs. NLRC, 219 SCRA 549).
and equitable found in the pleading.533
533 May the Court order the reinstatement of a dismissed employee even if the prayer of the
complaint did not include such relief? YES. **So long as there is a finding that the EE was
illegally dismissed, the court can order the reinstatement of an EE EVEN IF THE COMPLAINT DOES
NOT INCLUDE A PRAYER FOR REINSTATEMENT, unless, of course the EE has waived his right to
reinstatement. **BY LAW, an EE who is unjustly dismissed is ENTITLED to reinstatement
among others. The mere fact that the complaint did not pray for reinstatement will not prejudice the
EE, **because TECHNICALITIES OF LAW AND PROCEDURE ARE FROWNED UPON
IN LABOR PROCEEDINGS (Pheschem Industrial Corp. v. Moldez, 9 May 2005). *In any case, Sec.2(c),
Rule 7 of the Rules of Court provides that a pleading shall specify the relief sought, but may add a
**GENERAL PRAYER for such further or other reliefs as may be deemed just and equitable.
Under this rule, a **court can grant the RELIEF WARRANTED BY THE ALLEGATION AND THE
PROOF even if it is not specifically sought by the injured party; the INCLUSION OF A GENERAL PRAYER MAY
JUSTIFY the grant of a remedy different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant. The prayer in the complaint for other reliefs
equitable and just in the premises justifies the grant of a relief not otherwise specifically prayed for
(Prince Transport, Inc. v. Garcia et.al, 12 January 2011)
1b. REINSTATEMENT PENDING APPEAL.534

a. The phrasing is “immediate reinstatement pending appeal.”535
b. This order is immediately executory.536
1c. Instances when an illegally dismissed employee may not be reinstated.
(1995/2007 Bar Question)*****
a. When the position held by the illegally dismissed employee has been
abolished and there is no substantially equivalent position for said employee;
534 Juan Dukha, a bill collector of Ladies Garments Company, was dismissed because he did not
remit his collections. He filed a case against his company for illegal dismissal. During the hearing, the
President of the Company admitted that Juan was never formally investigated for his dishonesty;
neither was he informed of the nature of the charge against him. He was simply barred from entering
company premises by the security guards upon instruction of management. Juan Dukha asks for
immediate reinstatement with full back wages and without loss of seniority rights. (1995 Bar
Question) 1. Will the complaint of Juan Dukha for illegal dismissal prosper? Explain. SUGGESTED
ANSWER: Yes, there may be just cause for terminating Juan Dukha. But he was not accorded the
required due process of law. ALTERNATIVE ANSWER: The complaint of Juan Dukha for Illegal
dismissal will prosper in the sense that the complaint will be heard by a Labor Arbiter. His being barred
from entering company premises is tantamount to dismissal. In the hearings, the employer will have the
burden of proving that there is just cause for terminating Juan, possibly on the basis of willful breach
of trust. On the other hand, Juan will be given the opportunity to prove that his failure to remit his
collection is not because of dishonesty.
2. Assuming that he cannot be reinstated, what right can he immediately assert against his
employer? Explain. SUGGESTED ANSWER: Assuming that Juan cannot be reinstated because there
is Just cause for his dismissal, he would nevertheless be entitled to an indemnity from his employer,
because he was denied due process of law by said employer. ALTERNATIVE ANSWER: Juan can
pursue the case of illegal dismissal before a Labor Arbiter where he will assert the right to defend
himself i.e., to explain his failure to remit his collections.
3. Suppose Juan Dukha proved during the hearing that he was robbed of his collections and,
consequently, the Labor Arbiter decided in his favor. In the meantime, the Ladies Garments
Company appealed to the National Labor Relations Commission (NLRC). Pending appeal, what rights
are available to Juan relative to the favorable decision of the Labor Arbiter? Explain. SUGGESTED
ANSWER: *****Juan can ask for immediate reinstatement pending resolution of the appeal filed
by the company with the NLRC. At the option of his employer, he may be admitted back to work
or merely reinstated in the payroll.
535 Q: The employees’ union in San Joaquin Enterprise continued their strike despite a return to
work order from the Secretary of Labor. Because of this defiance, the employer dismissed the
strikers. But the Labor Arbiter declared as illegal the dismissal of those whose commission of
unlawful acts had not been proved. They were ordered immediately reinstated. The employer
refused, however, to reinstate them on the ground that the rule on immediate reinstatement applies
only to terminations due to just or authorized causes. Is the employer’s refusal justified? (2011 BAR)
(A) No, every employee found to have been illegally dismissed is entitled to immediate
reinstatement even pending appeal. (B)Yes. The employer’s refusal is legal and justified as a penalty
for defying the secretary’s lawful order. (C)Yes, the rule on immediate reinstatement does not apply to
employees who have defied a return-to-work order. (D)No. The dismissal of the employees was valid;
reinstatement is unwarranted.
536Q: The decision of the Labor Arbiter in a labor dispute case is: (2012 Bar Question): a.
Immediately executory; b. Requires a writ of execution; c. Is immediately executor insofar as the
reinstatement of the employee is concerned; d. Is stayed by the appeal of the employer and posting of
appeal bond. SUGGESTED ANSWER: c. Is immediately executory insofar as the reinstatement
of the employee is concerned. [Art. 223, Labor Code]
b. When the employer has ceased to operate;  

c. When the employee no longer wishes to be reinstated;537  
d. When strained relations between the employer and the employee have
developed; and  
e. When the employer has lost his trust and confidence in the employee
who is holding a position of trust and confidence.
[] In addition to the above, an illegally dismissed employee may not be
reinstated:
f. When he is already entitled to retire at the time he is to be reinstated;  
g. When he is already dead;  
h. When reinstatement will not serve the interest of the parties; and  
i. When he has obtained regular and substantially equivalent
employment elsewhere.
2. SEPARATION PAY in lieu of reinstatement:538
a. Under present laws and jurisprudence, separation pay may be viewed in 4 ways:
i. In lieu of reinstatement in illegal dismissal cases, where EE is
ordered reinstated but reinstatement is NOT FEASIBLE.
ii. As ER's STATUTORY OBLIGATION in cases of legal
termination due to authorized causes under Arts. 283 and 284 of the LC.
iii. As FINANCIAL ASSISTANCE, as an ACT OF SOCIAL JUSTICE
and even in case of legal dismissal under Art. 282 of the LC.
iv. As EMPLOYMENT BENEFIT granted in CBA or company policy
(POQUIZ, 2005).
b. Separation in lieu of reinstatement usually occurs when:
i. **DOCTRINE OF STRAINED RELATIONS (applies to
confidential and managerial EEs only)—The following must be proven before
the strained relations rule can be applied to a particular case: a) The EE concerned
occupies a position where he enjoys the TRUST AND CONFIDENCE of
his ER;539 and b) That it is likely if the EE is reinstated, an ATMOSPHERE OF
ANTIPATHY AND ANTAGONISM may be generated as to adversely
affect the efficiency and productivity of the EE concerned (Globe Mackay Cable
& Wire Corp. v. NLRC, 3 March 1992). NB: this doctrine does not always bar
537Despite a reinstatement order, an employer may choose not to reinstate an employee if: (2014
Bar Question) (A) there is a strained employer-employee relationship (B) the position of the employee
no longer exists (C) the employer’s business has been closed (D) the employee does not wish to be
reinstated. SUGGESTED ANSWER: (D) the employee does not wish to be reinstated (DUP
Sound Phils. v. CA, G.R. No. 168317, Nov. 21, 2011).
538See separate “Rules on Separation Pay” thought units where all rules on separation pay are put
together.
539*NB LPS – A room boy, does not occupy such a sensitive position as would require complete trust
and confidence, where personal ill will would preclude reinstatement (Maranaw Hotels and Resorts Corp. v.
CA, 6 November 1992)
reinstatement.540 NB: An employer cannot use “strained relations" as a valid

reason for not reinstating an employee who has been illegally dismissed, if such
strained relations arose from a worker filing a case of illegal dismissal
against his employer. When he filed the case, the employee was only asserting his
constitutional right to security of tenure.541
ii. In case the POSITION HAS BEEN ABOLISHED (applies to both
managerial and rank and file EEs)
iii. in case the establishment where the employee is to be reinstated
has closed or ceased operations;
iv. where the company has been declared insolvent;  
v. former position no longer exists at the time of reinstatement for
reason not attributable to the fault of the employer; and
vi. where the employee decides not to be reinstated as when he
does not pray for reinstatement in his complaint or position paper.542
*NB: In such cases, it would be **MORE PRUDENT TO ORDER
PAYMENT OF SEPARATION PAY INSTEAD OF REINSTATEMENT (Quijano v.
Mercury Drug Corporation, July 8, 1998).
540Does the strained relations rule always bar reinstatement in all cases? NO. **The rule should be
applied on a case to case basis, based on each case’s peculiar conditions and not universally.
OTHERWISE, REINSTATEMENT CAN NEVER BE POSSIBLE simply because some hostility is invariably
engendered between the parties as a result of litigation. That is HUMAN NATURE (Anscor
Transport v. NLRC, September 28, 1990). Besides, **NO STRAINED RELATIONS SHOULD ARISE
FROM A VALID AND LEGAL ACT OF ASSERTING ONE'S RIGHT; otherwise an EE who shall assert
his right could be EASILY SEPARATED from the service, by MERELY PAYING HIS SEPARATION PAY
on the pretext that his relationship with his ER had already become strained (Globe Mackay Cable &
Wire Corp. v. NLRC, 3 March 1992).
541Q: Johnny Torres is an employee of M.C.U, hospital having worked therein as janitor for 12 years.
Sometime in March 1993, he was suspected of conniving with some medical students in the theft
of laboratory equipment for which reason, the management of M.C.U Hospital ordered his
employment terminated for loss of confidence. Johnny Torres filed before the Arbitration Branch of
the NLRC a case of illegal dismissal against the hospital. After hearing, the Labor Arbiter cleared
Johnny Torres of any involvement in the theft and rendered a decision declaring the order of
dismissal illegal thereby ordering the hospital to reinstate Johnny Torres to his former position
and to pay him full backwages, which he would have received were it not for the illegal dismissal. MCU
Hospital filed a Motion for Reconsideration alleging that the Labor Arbiter gravely abused his
discretion in ordering a reinstatement which is no longer possible under the “strained relations"
principle, a hostility that developed between the parties as a result of the litigation. Is the legal
argument poised by MCU Hospital tenable? SUGGESTED ANSWER: The legal argument poised by
MCU Hospital is not tenable. An employer cannot use “strained relations" as a valid reason for
not reinstating an employee who has been illegally dismissed, if such strained relations arose
from a worker filing a case of illegal dismissal against his employer. When he filed the case, the
employee was only asserting his constitutional right to security of tenure. ALTERNATIVE ANSWER:
The principle of “strained relations" does not apply on this case, Johnny Torres a janitor, does
not occupy a confidential or responsible position. The rule cannot be applied universally.
Otherwise, reinstatement can never be possible simply because some hostility is engendered between
the parties as a result of litigation.
542TOM: but even if he does not ask for reinstatement, it is considered part of the “other reliefs”
prayer for in the general prayer at the end of the pleading.
c. Is an illegally dismissed EE entitled to reinstatement as a MATTER

OF RIGHT? GR: Yes.
*XPNs: Proceeds from an illegal dismissal wherein reinstatement is
ordered but cannot be carried out as in the following cases:
i. Reinstatement cannot be effected in view of the long passage of
time or because of the realities of the situation.
ii. It would be inimical to the ER's interest.
iii. When reinstatement is no longer feasible.
iv. When it will not serve the best interest of the parties involved.
v. Company will be prejudiced by reinstatement.
vi. When it will not serve a prudent purpose.
vii. When there is resultant strained relation (applies to both
confidential and managerial EEs only) (more on strained relations, infra)
viii. When the position has been abolished (applies to managerial,
supervisory and rank-and-file EEs).
*NB: The common denominator of those instances where payment
of separation pay is warranted is that the employee was dismissed by the ER. If
the EE voluntarily543 chose not to return to work, he is not entitled to separation
pay.544
543 [] Q: Romeo has been an EE of AAA Company from 1993 to 1999 but was unable to report to
work due to some illness. Romeo claimed that he was offered by AAA of Php 15,000 separation pay,
on the contrary AAA claimed Romeo was never terminated and even told the latter that Romeo could
go back to work anytime but Romeo clearly manifested that he was no longer interested in
returning to work and instead asked for separation pay.
a. Is Romeo terminated or considered resigned? Romeo is CONSIDERED RESIGNED.
Romeo’s various pleadings support his INTENTION OF NOT RETURNING to work on the ground that
his health is failing. Moreover, Romeo DID NOT ASK FOR REINSTATEMENT and rejected
AAA Company’s offer for him to return to work. This is **TANTAMOUNT TO
RESIGNATION. Resignation is defined as the VOLUNTARY ACT of an EE who finds himself in a
situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of
the service and he has no other choice but to disassociate himself from his employment.
b. Is Romeo entitled to separation pay? NO. There is **no provision in the LC which grants
separation pay to voluntarily resigning EEs. In fact, the rule is that an EE 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 established ER
practice or policy. Hence, Romeo is not entitled to separation pay in the absence of a Labor provision
and a stipulation in his employment contract or CBA (Romeo Villaruel v. Yeo Han Guan, G.R. No. 169191,
1 June 2011).
544[] Q: Delfin and Luisito are licensed drivers of public utility jeepneys owned by Moises Capili.
When Capili assumed ownership and operation of the jeepneys, the drivers were required to sign
individual contracts of lease of the jeepneys. The drivers gathered the impression that signing
the contract was a condition precedent before they could continue driving. The drivers stopped
plying their assigned routes and a week later filed with the LA a complaint for illegal dismissal
praying not for reinstatement but for separation pay. Are the respondents entitled to separation
pay? NO. When the DRIVERS VOLUNTARILY CHOSE NOT TO RETURN TO WORK anymore, they must
be CONSIDERED AS HAVING RESIGNED from their employment. **The common
denominator of those instances where payment of separation pay is warranted is that the employee
was dismissed by the ER (Capili v. NLRC, 26 March 1997).
d. Separation pay is different in the following cases:545***

i. if due to illegal dismissal (in lieu of reinstatement): equivalent to at
least one month pay, or one month pay for every year of service, whichever is
higher.
ii. Art. 283 in case of retrenchment to prevent losses or in case of
closure or cessation of the ER's business (this is legal dismissal): equivalent to at
least one (1) month or one-half (1/2) month pay for every year of service,
whichever is higher.
iii. in case of other forms of legal dismissal: a) as ER's
STATUTORY OBLIGATION in cases of legal termination due to authorized
causes; b) As FINANCIAL ASSISTANCE, as an act of social justice; c) as an
INTERIM RELIEF, granted to a dismissed or separated EE while the case for
illegal dismissal is pending appeal. It does not apply where there is no finding of
545 [] Q: Two groups of seasonal workers claimed separation benefits after the closure of Phil.
Tobacco processing plant in Balintawak and the transfer of its tobacco operations to Candon, Ilocos
Sur. Phil. Tobacco refused to grant separation pay to the workers belonging to the first batch, because
they had not been given work during the preceding year and, hence, were no longer in its employ at the
time it closed its Balintawak plant. Likewise, it claims exemption from awarding separation pay to the
second batch, because the closure of its plant was due to "serious business losses," as defined in Art.
283 of the LC. Both labor agencies held that the two groups were entitled to separation pay equivalent
to 1/2 month salary for every year of service, provided that the employee worked at least 1 month in a
given year. Is the separation pay granted to an illegally dismissed EE the same as that provided
under Art.283 of the LC in case of retrenchment to prevent losses? NO. The separation pay
awarded to EEs due to illegal dismissal is different from the amount of separation pay provided for
in Art. 283 of the LC.
a. Preceding from the above, Phil. Tobacco is liable for illegal dismissal and should be
responsible for the REINSTATEMENT of the first group and the payment of their backwages.
b. However, since reinstatement is no longer possible as Phil. Tobacco have already closed
its Balintawak plant, members of the said group should instead be awarded normal SEPARATION
PAY (in lieu of reinstatement) equivalent to at least one month pay, or one month pay for every
year of service, whichever is higher.
c. It must be stressed that the **separation pay being awarded to the first group is due to
illegal dismissal; hence, it is different from the amount of separation pay provided for in Art. 283 in case of
retrenchment to prevent losses or in case of closure or cessation of the ER's business, in either of
which the separation pay is equivalent to at least one (1) month or one-half (1/2) month pay for
every year of service, whicIhever is higher (Phil. Tobacco Flue-Curing & Redrying Corp. v. NLRC, 10
December 1998).
illegal dismissal;546
3. FULL BACKWAGES
a. Backwages refers to the RELIEF given to an EE to COMPENSATE
him for the LOST EARNINGS during the period of his dismissal. It
**presupposes ILLEGAL termination.
b. Full backwages means no deduction; The LC as amended by R.A. 6715
points to "full backwages" as meaning exactly that—without deducting from
backwages the EARNINGS DERIVED ELSEWHERE by the concerned
EE during the period of his illegal dismissal (Buenviaje v. CA, 12 November
2002).
c. Entitlement to backwages of the illegally dismissed EE **FLOWS
FROM LAW. Even if he does not ask for it, it may be given. The failure to
claim backwages in the complaint for illegal dismissal is a MERE PROCEDURAL
LAPSE which CANNOT DEFEAT A RIGHT GRANTED UNDER SUBSTANTIVE LAW
(St. Michael’s Institute v. Santos, 4 December 2001).
d. What is the BASIS of awarding backwages to an illegally dismissed
employee? 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; the grant thereof is intended to
restore the earnings that WOULD HAVE ACCRUED to the dismissed EE during
the period of dismissal until it is determined that the termination of
employment is for a just cause. It is NOT PRIVATE COMPENSATION
OR DAMAGES but is AWARDED IN FURTHERANCE AND EFFECTUATION OF
THE PUBLIC OBJECTIVE of the LC. NOR IS IT A REDRESS OF A
PRIVATE RIGHT but rather in the nature of a command to the ER to make
PUBLIC REPARATION for dismissing an EE either due to the former's unlawful act or
bad faith (Tomas Claudio Memorial College Inc., v. CA, 16 February 2004).
e. ORDER of reinstatement: It means RESTORATION to a state or
condition from which one had been removed or separated. If it is no longer
existent, one that is substantially equivalent or of similar nature may be had
546 Does separation pay apply in cases of legal dismissal? It depends.

a. As ER's STATUTORY OBLIGATION in cases of legal termination due to authorized
causes under Arts. 283 and 284 of the LC.
b. As FINANCIAL ASSISTANCE, as an act of social justice and even in case of legal
dismissal under Art. 282 of the LC.
c. Art. 223 of the LC concerns itself with an INTERIM RELIEF, granted to a dismissed or
separated EE while the case for illegal dismissal is pending appeal. It does not apply where there is no
finding of illegal dismissal.
d. On the other hand, an EE who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement (Lansangan v. Amkor Technology Philippines, Inc., 30
January 2009).
instead.547 Otherwise, the ER shall grant the EE separation pay consisting of 1-

month salary for every year of service.548
f. An order for reinstatement entitles an EE to receive his ACCRUED
BACKWAGES from the moment the reinstatement order was issued up to the date when
the same was reversed by a higher court WITHOUT FEAR OF REFUNDING
what he had received (Pfizer v. Velasco, March 9, 2011).
g. What is the PERIOD COVERED by the payment of backwages? The
backwages shall cover the period:
i. from the time that wages are unlawfully withheld, i.e, from the
date of dismissal; NB: if there is no unlawful withholding of wages, back
wages are counted only from the time of the refusal of the company to
reinstate the EE.549 For probationary EEs, back wages are reckoned only from
the time of constructive dismissal until date of termination of employment. It
does not cover the time from withdrawal of compensation up to actual
reinstatement because the lapse of the probationary period severs the EER.550
ii. until the time of actual reinstatement or, if reinstatement is no longer
feasible, until the finality of judgment awarding backwages (Buhain v. CA, G.R.
143709, July 2, 2002). NB: If it’s due to closure of business, payment of
547The person reinstated assumes the POSITION he had occupied PRIOR to his dismissal.
Reinstatement PRESUPPOSES that the previous position from which one had been removed STILL
EXISTS, OR THAT THERE IS AN UNFILLED POSITION which is SUBSTANTIALLY
EQUIVALENT or of SIMILAR NATURE as the one previously occupied by the EE. An **order
for reinstatement entitles an EE to receive his ACCRUED BACKWAGES from the moment the
reinstatement order was issued up to the date when the same was reversed by a higher court WITHOUT
FEAR OF REFUNDING what he had received (Pfizer v. Velasco, March 9, 2011).
548What happens if there is an Order of Reinstatement but the POSITION IS NO LONGER
AVAILABLE? The EE should be given a SUBSTANTIALLY EQUIVALENT position. If no
substantially equivalent position is available, reinstatement should not be ordered because that would in effect
compel the ER to do the impossible. **In such a situation, the EE should merely be given a separation
pay consisting of 1-month salary for every year of service (Grolier Int’l Inc. v. ELA, 31 August 1989).
549Bar 2009: Baldo was dismissed from employment for having been absent without leave (AWOL)
for eight (8) months. It turned out that the reason for his absence was his incarceration after he was
mistaken as his neighbor’s killer. Eventually acquitted and released from jail, Baldo returned to
his ER and demanded reinstatement and full backwages. Is Baldo entitled to reinstatement and
backwages? YES. Baldo is entitled to REINSTATEMENT. Although he shall NOT BE
ENTITLED TO BACKWAGES during the period of his detention, but **ONLY FROM THE TIME THE
COMPANY REFUSED TO REINSTATE him. (Magtoto v. NLRC, 18 November 1985).
550 How are the backwages of a probationary EE who fails to qualify as a regular EE computed? The
backwages that should be awarded to respondent shall be reckoned from the time of her
constructive dismissal until the date of the termination of her employment. The computation **should
not cover the entire period from the time her compensation was withheld up to the time of her actual
reinstatement. This is because as a probationary EE, the lapse of probationary employment without
appointment as a regular EE of EFFECTIVELY SEVERED the ER-EE relationship between the
parties (Robinsons Galleria v. Ranchez, G.R. No. 177937, 9 January 2011).
backwages is up to the date of DISSOLUTION OR CLOSURE OF BUSINESS.551

**NB: The backwages to be awarded **should not be diminished
or reduced by earnings elsewhere during the period of his illegal dismissal. The
REASON is that the EE while litigating the illegality of his dismissal must
earn a living to support himself and his family (Bustamante v. NLRC, Mar. 15,
1996; Buenviaje v. CA, 12 November 2002).
h. NB LPS - CUT-OFF DATES FOR FULL BACKWAGES IN
RELATIONSHIP WITH THE MERCURY DRUG CASE
i. March 21, 1989 (effectivity of R.A. No. 6715) – if filed prior to
this date, the doctrine to be followed will be the 1974 case of Mercury drug v.
CIR (3 year backwages doctrine)
ii. With the ruling in Bustamante v. NLRC giving full effect to R.A.
No. 6715 illegally dismissed employees now are entitled to the payment of full
backwages as long as the cause of action accrued after March 21, 1989
(Naga College v. Bose, G.R. No. 122633, 20 April 1998): Full backwages, no
deductions or qualifications. Income from other sources cannot be deducted from
backwages.552
i. Rule on WAGES during reinstatement pending appeal: Dismissed EE
whose case was favorably decided by the LA is **ENTITLED TO RECEIVE
WAGES PENDING APPEAL UPON REINSTATEMENT, which is
IMMEDIATELY EXECUTORY.
i. **Unless there is a restraining order, it is MINISTERIAL upon the LA
551 Is an EE entitled to backwages even after the CLOSURE of the business? NO. The closure of the
business rendered the reinstatement of complainant to an EEs previous position **impossible but she
is still entitled to the payment of backwages UP TO the date of DISSOLUTION OR CLOSURE. An
ER found guilty of ULP in dismissing his EE **may not be ordered to pay backwages beyond the
date of closure of business where such closure was due to legitimate business reasons and not merely an
attempt to defeat the order of reinstatement (Pizza Inn v. NLRC, 28 June 1988).
552 *GR: In the case of Osmalik Bustamante, et al. v. NLRC and Evergreen Farms, Inc., the SC held that the
passing of R.A. 6715, particularly Sec. 34, which took effect on March 21, 1989, amended Art. 279 of
the LC, which now states in part: [] ART. 279. Security of Tenure. - An EE who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. **Verily, the EVIDENT LEGISLATIVE INTENT as expressed in R.A. 6715, is that the
backwages to be awarded to an illegally dismissed EE, should not, as a general rule, be diminished
or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The
underlying reason for this ruling is that the EE, while litigating the legality (illegality) of his dismissal,
MUST STILL EARN A LIVING TO SUPPORT HIMSELF AND HIS FAMILY. Corollary
thereto, full backwages have to be paid by the ER as part of the price or penalty he has to pay for
illegally dismissing his EE. Thus, the provision calling for “full backwages” to illegally dismissed EEs
is clear, plain and free from ambiguity and, therefore, must be applied without attempted or strained
interpretation.
*XPN: Award of backwages to a separated EE may be **limited for a certain number of
years considering GOOD FAITH ON THE PART OF THE ER in terminating the EE, which
period shall DEPEND ON THE ATTENDING CIRCUMSTANCES of the case (Victory Liner, Inc. v. Race, 28
March 2007).
to implement the order of reinstatement and it is MANDATORY ON THE ER

to comply therewith.
ii. After the LA’s decision is reversed by a higher tribunal, the EE
may be BARRED from collecting the accrued wages, if it is shown that the delay
in enforcing the reinstatement pending appeal was without fault on the part of the ER. The test
is two-fold:
a) there must be actual delay or the fact that the order of
reinstatement pending appeal was **not executed prior to its reversal; and
b) the delay must not be due to the ER's unjustified act or
omission. **If the delay is due to the ER's unjustified refusal, the ER may still be
required to pay the salaries notwithstanding the reversal of the LA’s decision
(Garcia v. PAL, G.R. No. 164856, 29 August 2009).
Art. 223 Art. 279
May be availed of as soon as the LA renders a Presupposes that the judgment has already
judgment declaring that the dismissal of the EE become final and executory. Consequently,
is illegal and ordering said reinstatement. It may there is nothing left to be done except the
be availed of even pending appeal execution thereof.
j. Backwages vs. unpaid wages [Bar]: An award for backwages is to
compensate an employee who has been illegally dismissed, for the wages,
allowances and other benefits or their monetary equivalent, which said employee
did not receive from the time he was illegally dismissed up to the time of his
actual reinstatement. On the other hand, an award for unpaid wages is for an
employee who has actually worked but has not been paid the wages he is
entitled to receive for such work done. (Arts. 279 and 97(f). Labor Code)553
k. COMPUTATION:
i. The following are INCLUDED in the computation of backwages:
a) Transportation and emergency allowances; b) Vacation or SIL and sick leave;
c) 13th month pay554 The benefits and increases during the period of lay-off by
553 ALTERNATIVE ANSWER: An award of backwages is given to an employee who is unjustly

dismissed. The cause of action here is the unjust dismissal. On the other hand, an award of unpaid
wages is given to an employee who has not been paid his salaries or wages for services actually
rendered. The cause of action here is non-payment of wages or salaries. (General Baptist Bible College
vs. NLRC 219 SCRA 549).
554Q: An employee proved to have been illegally dismissed is entitled to reinstatement and full
backwages computed on the basis of his (2011 BAR): (A) basic salary plus the regular allowances
and the thirteenth month pay. (B) basic salary plus the salary CBA increases during the pendency of
his case. (C) basic salary plus the increases mandated by wage orders issued during the
pendency of his case. (D) basic salary at the time of dismissal.
the illegally-dismissed EE are included.555

ii. Facilities such as uniforms, shoes, helmets and ponchos should
not be included in the computation of backwages because said items are given
for free, to be used only during official tour of duty not for private or personal use.
iii. The award of backwages is computed on the BASIS OF 30-DAY
MONTH (JAM Trans Co. v. Flores, 19 March 1993).556
***NB: These only apply to non-managerial EEs, since managerial
EEs cannot join labor organizations.557
l. Circumstances that PREVENT AWARD of backwages
i. Dismissal for cause
ii. Death, physical or mental incapacity of the employee
iii. Business reverses
iv. Detention in prison
555 Q: An employee was ordered reinstated with backwages. Is he entitled to the benefits and
increases granted during the period of his lay-off? Explain briefly. (3%) SUGGESTED ANSWER:
Yes. An employee who is ordered reinstated with backwages is entitled to the benefits and
increases granted during the period of his lay-off. The Supreme Court has ruled: “Backwages are
granted for earnings a worker lost due to his illegal dismissal and an employer is obliged to pay an
illegally dismissed employee the *****whole amount of salaries plus all other benefits and bonuses
and general increases to which the latter should have been normally entitled had he not been
dismissed.” [Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993)]
556 Q: Linder what circumstances or instances may an employee who is found to have been illegally
dismissed and, therefore, entitled to reinstatement, be nevertheless, NOT ordered reinstated but merely
awarded (a) separation pay in lieu of reinstatement and (b) back wages? At what rate would the
separation pay be? What would be the maximum limit for the back wages? SUGGESTED ANSWER:
In a number of Supreme Court decision, it has been ruled that an employee who is found to have
been illegally dismissed shall be awarded separation pay in lieu of reinstatement if reinstatement
is no longer viable in view of the strained relations between the employee and his employer. In a case,
the Supreme Court also ruled that since reinstatement was no longer feasible in view of the advanced
age of the employees who were illegally dismissed, they should instead receive separation pay. The rate
of separation pay is one month salary for every year of service. The Supreme Court has also ruled
that in the computation of separation pay account must be taken not only of the basis salary of the
employee but also his allowances. In decisions applying the law before Rep. Act No. 6715, the Supreme
Court ruled that the maximum limit for back wages shall be three years. The law has been changed by
Rep. Act No. 6715. Back wages are now to be computed from the time the compensation of the
employee was withheld from him up to the time of his actual reinstatement. Thus, in applying the
amendment Introduced by Rep. Act No. 6715, this means that back wages will now be paid for the
entire period up to the actual reinstatement of the employees, even if the period is over three years.
557 Q: What economic components constitute backwages for a rank and file employee? Are these
components equally applicable to a managerial employee? (5%) (2001 Bar Question) SUGGESTED
ANSWER: The Labor Code (Art. 279) provides that an employee who is unjustly dismissed from work
is entitled to reinstatement and also to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from
him up to his actual reinstatement. An employee is entitled to all the above benefit regardless of
whether he is a rank-and- file employee or a managerial employee. However, backwages may
also include the 13th month pay which are paid to rank-and- file employees, as well as benefits
arising from a CBA given only to employees in the bargaining unit. Managerial employees cannot
be given the same since they sue ineligible to join a labor organization.
m. Corporate officers558 can be held solidarily liable for back wages only
558 Q: Lincoln was in the business of trading broadcast equipment used by television and radio
networks. He employed Lionel as his agent. Subsequently, Lincoln set up Liberty Communications to
formally engage in the same business. He requested Lionel to be one of the incorporators and assigned
to him 100 Liberty shares. Lionel was also given the title Assistant Vice-President for Sales and
Head of Technical Coordination. After several months, there were allegations that Lionel was
engaged in “under the table dealings” and received “confidential commissions” from Liberty’s
clients and suppliers. He was, therefore, charged with serious misconduct and willful breach of trust,
and was given 48 hours to present his explanation on the charges. Lionel was unable to comply with the
48- hour deadline and was subsequently barred from entering company premises. Lionel then filed a
complaint with the Labor Arbiter claiming constructive dismissal. Among others, the company sought
the dismissal of the complaint alleging that the case involved an intra-corporate controversy
which was within the jurisdiction of the Regional Trial Court (RTC). If you were the Labor
Arbiter assigned to the case, how would you rule on the company’s motion to dismiss? (2014 Bar
Question) SUGGESTED ANSWER: I will deny the motion to dismiss. "Corporate officers" in the
context of Presidential Decree No. 902-A are those officers of the corporation who are given
that character by the Corporation Code or by the corporation's by-laws. *****Section 25 of the
Corporation Code enumerates three specific officers that in law are considered as corporate
officers – the president, secretary and the treasurer. Lincoln is not one of them. There is likewise
no showing that his position as Assistant Vice-President is a corporate officer in the company's by-laws.
The Labor Arbiter therefore, has jurisdiction over the case (Art. 217 (a) (2), Labor Code).
559if they acted in malice, bad faith, personal ill-will or without or in excess of
authority.560
559 Q: Mario comes from a family of coffee bean growers. Deciding to incorporate his fledgling coffee
venture, he invites his best friend, Carlo, to join him. Carlo is hesitant because he does not have money
to invest but Mario suggests a scheme where Carlo can be the Chief Marketing Agent of the company,
earning a salary and commissions. Carlo agrees and the venture is formed. After one year, the business
is so successful that they were able to declare dividends. Mario is so happy with Carlo's work that
he assigns 100 shares of stock to Carlo as part of the latter's bonus. Much later on, it is
discovered that Carlo had engaged in unethical conduct which caused embarrassment to the
company. Mario is forced to terminate Carlo but he does so without giving Carlo the
opportunity to explain. Carlo filed a case against Mario and the company for illegal dismissal. Mario
objected on the ground that the Labor Arbiter had no jurisdiction over the case as it would
properly be considered as an intra-corporate controversy cognizable by the RTC. Further, Mario
claimed that because Carlo's dismissal was a corporate act, he cannot be held personally liable. (a) As
the Labor Arbiter assigned to this case, how would you resolve the jurisdiction question. (2015 Bar
Question) (b) What is the rule on personal liability of corporate officers for a corporate act declared to
be unlawful? (2015 Bar Question) SUGGESTED ANSWER: (a) The Labor Arbiter has jurisdiction
over Carlo’s illegal dismissal complaint as he was hired by Mario on a “salary and commission”
basis. In Grepalife v. Judico (180 SCRA 445) it was held that a worker who is paid on a salary plus
commission basis is an employee. *****While regular courts have jurisdiction over Mario’s
corporate act of severing ties with Carlo, the Labor Arbiter, pursuant to Art. 217 A-(2) of the Labor
Code, has jurisdiction over Carlo’s illegal dismissal complaint. (b) Corporate officers are not, as a
general rule, personally liable for the corporate acts they performed in behalf of the corporation they
represent. They are, however, personally liable for their corporate acts if they acted with malice or bad
faith (Girly Ico v. Systems Technology Institute, Inc., G.R. No. 185100, July 9, 2014). SUGGESTED
ALTERNATIVE ANSWER: (a) Carlo is party to a joint-venture. Hence, he is not related to Mario as
an employee. As a business organization, the affairs of that joint-venture are not governed by Labor
Law, except in relation to its employees. Any issue arising from that affair, therefore, must be brought
to the RTC. Thus, the NLRC has no jurisdiction because the matter did not arise from employer-
employee relationship and the issue between the disputants is not resolvable solely through the
application of Labor Law.
560 Q: May the general manager of a company be held jointly and severally liable for backwages of an
illegally dismissed employee? (2%) SUGGESTED ANSWER: Yes. If it is shown that he acted in bad
faith, or without or in excess of authority, or was motivated by personal ill-will in dismissing the
employee, the general manager may be held jointly and severally liable for the backwages of an illegally
dismissed employee. [ARB Construction C. v. Court of Appeals, 332 SCRA 427, (2000), Lim v. NLRC,
303 SCRA 432, (1999)] ANOTHER SUGGESTED ANSWER: Yes. The General Manager may be
held jointly and severally liable for back wages of an illegally dismissed employee if he or she actually
authorized or ratified the wrongful dismissal of the employee under the rule of respondent
superior. In case of illegal dismissal, corporate directors and officers are solidarily liable with the
corporation where termination of employment are done with malice or bad faith. {Bogo-
Medellin Sugar Planters Assoc., Inc. v. NLRC, 296 SCRA 108, (1998)]
4. DAMAGES,561 INCLUDING ATTORNEY’S FEES*****

a. Usually NOMINAL (Nominal damages cannot co-exist with actual
damages, Armovit vs CA, 20 April 1990). The purpose of nominal damages is to
VINDICATE or RECOGNISE a RIGHT that has been violated);
b. Moral and exemplary damages may also be awarded.
c. Attorney’s fees have a ceiling of 10% (for all cases) to be paid by the
losing party.562 Attorney’s fees are not limited to cases of wage recovery.563
———————————————
B4. Preventive Suspension

1. Preventive suspension means that DURING THE PENDENCY of the
investigation, the ER may place the EE under preventive suspension leading
to termination when there is an IMMINENT THREAT OR A
REASONABLE POSSIBILITY of a threat to the LIVES AND
PROPERTIES of the ER, his family and representatives as well as the offender's
561What damages can an illegally dismissed employee collect from his employer? (2%). (2001 Bar
Question) SUGGESTED ANSWER: An illegally dismissed employee may collect from his employer
actual or compensatory damages, moral damages and exemplary damages, aa well as attorney's
fees as damages. ANOTHER SUGGESTED ANSWER: Moral and exemplary damages are only
proper where the employee has been harassed and arbitrarily terminated by the employer. Nueva
Ecija vs. Electric Cooperative Employees Association (G.R. No. 116066, January 24, 2000; Cruz vs.
NLRC, G.R. No. 16384, February 7, 2000; Philippine Aeolus etc., vs. Chua (G.R. No. 124617, April 28,
2000; and Lucas vs. Royo, G.R. No. 136185, October 30, 2000).
562Q: How much attorney's fees may a lawyer assess a culpable party in cases of unlawful withholding
of wages? SUGGESTED ANSWER: In cases of unlawful withholding of wages, the culpable party
may be assessed attorney's fees equivalent to ten percent (10%) of the amount of wages recovered.
(Art. III, Labor Code)
563The union’s by-laws provided for burial assistance to the family of a member who dies. When
Carlos, a member, died, the union denied his wife's claim for burial assistance, compelling her to
hire a lawyer to pursue the claim. Assuming the wife wins the case, may she also claim attorney's fees?
(2011 BAR QUESTION) (A) No, since the legal services rendered has no connection to CBA
negotiation. (B) Yes, since the union should have provided her the assistance of a lawyer. (C) No, since
burial assistance is not the equivalent of wages. (D)Yes, since award of attorney's fee is not limited
to cases of withholding of wages.
co-workers by the continued service of the EE.564 There is no such threat of

the EE is merely implicated in an offense.565
2. DURATION of preventive suspension: It should **NOT LAST FOR
MORE THAN 30 DAYS. The EE should be made to resume his work after 30
days. It **can be extended provided the EE’s wages are paid after the 30-day
period. This period is INTENDED ONLY FOR THE PURPOSE OF
INVESTIGATING the offense to determine whether he is to be dismissed or not. It is
**NOT A PENALTY.
a. The ER may continue the period of preventive suspension provided that
he pays the salary of the EE. **If more than 1 month, the EE must actually be
reinstated or reinstated in the payroll.
b. OFFICERS are LIABLE ONLY FOR THE OFFENSE COMMITTED IF
DONE WITH MALICE and bad faith. NB:566 *****As a general rule, the
obligations incurred by the principal officers and employees of a corporation are
not theirs but the direct accountabilities of the corporation they represent.
However, solidary liability may at times be incurred by them but only when
exceptional circumstances warrant such as in the following cases: when
directors and trustees or in appropriate cases, the officers of a corporation: (a)
vote for or assent to patently unlawful acts of the corporation; (b) act in bad
faith or with gross negligence in directing the corporate affairs; (c) are guilty of
564Q: Karina Santos is a famous news anchor appearing nightly in the country's most watched
newscast. She is surprised, after one newscast, to receive a notice of hearing before the station's Vice-
President for Human Resources and calls the VP immediately to ask what was wrong. Karina is told
over the phone that one of her crew filed a complaint against her for verbal abuse and that
management is duty bound to investigate and give her a chance to air her side. Karina objects and
denies that she had ever verbally assaulted her crew. The VP then informed her that pending the
investigation she will be placed on a 30-day preventive suspension without pay and that she will
not be allowed to appear in the newscast during this time. Is the preventive suspension of Karina valid?
Discuss the reasons for your answer. (2015 Bar Question) SUGGESTED ANSWER: No. The
preventive suspension of Karina is not valid. *****The employer may place an employee under
preventive suspension if his/her continued employment would pose a serious and imminent
threat to the life or property of the employer or of his/her co-employees. These requirements are not
present here.
565Q: Cantor and Pepito were preventively suspended pending application for their dismissal by
Manila Doctor’s Hospital after being implicated by one Macatubal when they refused to help him when
he was caught stealing x-ray films from the hospital. Was the preventive suspension of Cantor and
Pepito proper? NO. **Where the continued employment of an EE poses a serious and imminent
threat to the life and property of the ER or on his co-EEs, the EEs’ preventive suspension is
PROPER. In this case, NO SUCH THREAT to the life and property of the ER or of their co-EE’s
is present and they were merely implicated by Macatubal (Manila Doctors Hospital v. NLRC, 28
February 1985).
566Q: Are the principal officers of a corporation liable in their personal capacity for non-payment of
unpaid wages and other monetary benefits due its employees? (1997 Bar Question)
SUGGESTED ANSWER: See main text. ALTERNATIVE ANSWER: No. Unless they are guilty of
malice or bad faith in connection with the non-payment of unpaid wages and other monetary
benefits due to employees.
conflict of interest to the prejudice of the corporation, its stockholders or

members, and other persons.
In labor cases, the Supreme Court has held corporate directors and
officers solidarity liable with the corporation for the termination of employment
of employees done with malice or bad faith. (Sunto u. NLRC, 127 SCRA 390;
General Bank and Trust Co. v. Court of Appeals, 135 SCRA 659).
————————————————
C. Retirement
1. Retirement: the result of a BILATERAL ACT of the parties, a
VOLUNTARY AGREEMENT between the ER and the EE whereby the latter
after reaching a certain AGE agrees and/or consents to sever his employment
with the former (Soberano v. Secretary of Labor, 29 August 1980; Ariola v. Philex
Mining Corp., 9 August 2005).
2. Persons COVERED by retirement benefit—All EEs in the private sector:
a. Regardless of their position, designation or status; and
b. Irrespective of the method567 by which their wages are paid (IRR, Book
VI, Rule II, Sec.1).
3. *****Persons NOT COVERED568 by retirement benefits
a. EEs of the National Government and its political subdivisions, including
GOCCs (if they are covered by the Civil Service Law)
b. Domestic helpers and persons in the personal service of another
c. EEs of retail, service, and agricultural establishments or operations
employing not more than 10 EEs (IRR, Book VI, Rule II, Sec.2).
d. where there is a retirement plan of the employer that grants more
than what the Labor Code grants.
4. KINDS of retirement schemes
a. COMPULSORY and CONTRIBUTORY in nature;
b. One set up by the AGREEMENT between the ER and EEs in the
567 Q: At age 65 and after 20 years of sewing work at home on a piece rate basis for PQR Garments,
a manufacturer-exporter to Hongkong, Aling Nena decided it was time to retire and to just take it easy.
Is she entitled to retirement pay from PQR? (2013 Bar Questions) (A) Yes, but only to one month pay.
(B) No, because she was not a regular employee. (C) Yes, at the same rate as regular employees. (D)
No, because retirement pay is deemed included in her contracted per piece pay. (E) No, because
homeworkers are not entitled to retirement pay. SUGGESTED ANSWER: (C)
568What exception(s) do(es) the law on retirement benefits provide(s) if any? (3%). (2001 Bar
Question) SUGGESTED ANSWER: Retail, service and agricultural establishments or operations
employing not more than ten (10) employees or workers are exempted from the coverage of the
provision on retirement benefits in the Labor Code. Also, where there is a retirement plan of the
employer that grants more than what the Labor Code grants.
CBA569 or other agreements between them (other applicable employment

contract);
*Caveat: EE’s retirement benefits under any collective bargaining and
569 Q: A Collective Bargaining Agreement (CBA) between Company A and its employees provides
for optimal retirement benefits for employees who have served the company for over 25 years
regardless of age, equivalent to one-and- one-half months pay per year of service based on the
employee’s last pay. The CBA further provides that “employees whose services are terminated,
except for cause, shall receive said retirement benefits regardless of age or service record with the
company or to the applicable separation pay provided by law, whichever is higher." The Company, due
to poor business conditions, decided to cease operations and gave its employees the required one
month’s advance notice as well as notice to DOLE, with the further advice that each employee may
claim his corresponding separation or retirement benefits whichever is higher after executing the
required waiver and quitclaim. Dino Ramos and his co-employees who have all rendered more
than 25 years of service, received their retirement benefits. Soon after, Ramos and others
similarly situated demanded for their separation pay. The Company refused, claiming that under
the CBA they cannot receive both benefits. Who is correct, the employees or the Company?
SUGGESTED ANSWER: The employees are correct. *****In the absence of a categorical
provision in the Retirement Plan and the CBA that an employee who receives separation pay is no
longer entitled to retirement benefits, the employee is entitled to the payment of both benefits
pursuant to the social justice policy. [Conrado M. Aquino, et aL v. National Labor Relations
Commission, et al., G.R No. 87653, 11 February 1992) ALTERNATIVE ANSWER: a) The Company
is correct. The CBA clearly provides that employees who are terminated are entitled to retirement
benefits or separation pay, whichever is higher. The CBA, therefore, does not give the employees a
right to both retirement pay and separation pay. Hence, they cannot be entitled to both. The
exclusion of one by the other is deductible not only from the term “or” but also by the qualifying
phrase “whichever is higher”. This phrase would be immaterial if the employees were entitled to both.
b) Dino and his co-employees were correct. In the case of University of the East vs. NLRC, it was
clarified that the *****retirement benefits arising from the CBA is an Obligation Ex Contractu
while separation pay under Art. 284 is an Obligation Ex-Lege. Thus, the Company should grant
both benefits to those who were separated due to CLOSURE and at the same time were qualified to
retire. (Cipriano v. San Miguel, 24 SCRA 703)
other agreement SHALL NOT BE LESS than those provided in the LC.570
c. One that is VOLUNTARILY GIVEN by the ER,
i. expressly as announced COMPANY POLICY or
ii. impliedly as in the failure to contest the EE’s claim for
retirement benefits (Gertach v. Reuters Ltd Phils., 17 January 2005).
5. RETROACTIVE application of Art. 287 of the LC (on retirement) as
amended by R.A. 7641—Art. 287 of the LC as amended by R.A. 7641 can be
applied retroactively, provided that;
a. The claimant for retirement benefits was still the EE of the ER 
AT THE TIME the statute took EFFECT; and
b. The claimant was in compliance with the requirements for eligibility
under the statute for such retirement benefits (PSVSIA v. NLRC, April 14, 1997).
6. Provisions of the retirement plan BINDING as part of the employment
contract: The retirement plan forms part of the employment contract since
a. it is made known to the EEs
b. and accepted by them,
c. and such plan has an express provision that the company has the choice to
retire an EE regardless of age, with 20 years of service, said policy is within the
bounds contemplated by the LC.
*Moreover, the manner of computation of retirement benefits depends
on the stipulation provided in the company retirement plan (Progressive Dev’t
Corporation v. NLRC, 30 October 2000).
7. Condition: Although retirement plan forms part of the employment contract,
**before a right to retirement benefits or pension vests in an EE, he must have
met the STATED CONDITIONS OF ELIGIBILITY with respect to the nature of
570 [] Q: The instant labor dispute between petitioners (PAL) stemmed from petitioner's act of
unilaterally retiring airline pilot Captain Albino Collantes under PAL-ALPAP Retirement Plan. The
SOLE assailed the order of PAL’s action of unilaterally retiring Captain Collantes and further
ordered that the basis of the computation of Captain Collantes’ retirement benefits should be Art. 287
of the LC, not the PAL-ALPAP Retirement Plan. But PAL contends that the retirement plan
should prevail as it is the agreement between the parties. What should be the basis of the
computation of Captain Collantes’ retirement benefits? **ART. 287 OF THE LC. The given
retirement benefits **under the retirement plan is LOW COMPARED TO the retirement
benefits provided under Art. 287 of the LC. Applying the second paragraph of Art. 287 of the LC,
an **EE’s retirement benefits under any collective bargaining and other agreement SHALL
NOT BE LESS than those provided in the LC. Hence, Art. 287 of the LC and not the PAL-
ALPAP Retirement Plan, should govern the computation of the benefits to be awarded to Captain
Collantes.
Moreover, a pilot who retires after twenty years of service or after flying 20,000 hours would
still be in the prime of his life and at the peak of his careeR, compared to one who retires at the age of 60
years old. Based on this peculiar circumstance that PAL pilots are in, the parties provided for a
SPECIAL SCHEME of retirement different from that contemplated in the LC. Conversely, the provisions
of Art. 287 of the LC could not have contemplated the situation of PAL’s pilots. Rather, it was intended
for those who have no more plans of employment after retirement, and are thus in need of
financial assistance and reward for the years that they have rendered service. (Philippine Airlines, Inc. v.
Airline Pilots Association of the Philippines, 15 January 2002). So, what now?
employment, age, and length of service. This is a **CONDITION PRECEDENT to

his acquisition of rights thereunder. SC ruled that the conditions of eligibility
for retirement must be MET AT THE TIME OF RETIREMENT at which juncture
the right to retirement benefits or pension, if the EE is eligible, vests in him.
*NB: Pension and retirement plans **create a CONTRACTUAL
obligation in which the promise to pay benefits is made in consideration of
the continued faithful service of the EE for the requisite period (Brion v. South Phil.
Union Mission of the Seventh Day Adventist Church, 19 May 1999).
8. Caveat: A company may employ a retired employee whose knowledge,
experience and expertise are recognized, but he cannot be compulsorily retired
twice in the same company.571
ELIGIBILITY FOR RETIREMENT

1. Retirement age: It is the age of retirement that is specified in the
a. CBA;
b. Employment contract;
c. Retirement plan (IRR, Book VI, Rule II, Sec. 3); or
d. Optional retirement age for underground572 mining EEs: upon reaching
571 Q: After thirty (30) years of service, Beta Company compulsorily retired Albert at age 65
pursuant to the company's Retirement Plan. Albert was duly paid his full retirement benefits of one
(1) month pay for every year of service under the Plan. Thereafter, out of compassion, the company
allowed Albert to continue working and paid him his old monthly salary rate, but without the
allowances that he used to enjoy. After five (5) years under this arrangement, the company finally
severed all employment relations with Albert; he was declared fully retired in a fitting ceremony but
the company did not give him any further retirement benefits. Albert thought this treatment unfair
as he had rendered full service at his usual hours in the past five (5) years. Thus, he filed a
complaint for the allowances that were not paid to him, and for retirement benefits for his additional
five (5) working years, based either on the company's Retirement Plan or the Retirement Pay Law,
whichever is applicable. (A) After Albert's retirement at age 65, should he be considered a regular
employee entitled to all his previous salaries and benefits when the company allowed him to continue
working? (2013 Bar Questions) SUGGESTED ANSWER: He would be considered a contractual
employee, not a regular employee. His salaries and benefits will be in accordance with the
stipulations of the contract he signed with the company. The present case is similar to a case decided by
the Supreme Court (Januaria Rivera v. United Laboratories, G.R. No. 155639 [2009]) where the Court
held that the company, in employing a retired employee whose knowledge, experience and
expertise the company recognized, as an employee or as a consultant, is not an illegality; on
the contrary, it is a recognized practice in this country. (B) Is he entitled to additional retirement
benefits for the additional service he rendered after age 65? (2013 Bar Questions) SUGGESTED
ANSWER: No. He cannot be compulsorily retired twice in the same company.
572 When is retirement due for underground miners? (2007 Bar Question) SUGGESTED ANSWER:
Pursuant to R.A. 8558, in the absence of a retirement plan or other applicable agreement providing for
retirement benefits of underground mine employees in the establishment, any such employee may
retire upon reaching the age of 50 years or more if he has served for at least 5 years as underground
mine employee or in underground mine of the establishment.
the age of 50 years or more if he has served for at least 5 years.573

2. *****Retirement age in the absence of a retirement plan or other applicable
agreement574
a. OPTIONAL: Upon reaching 60 years old provided that EE has
rendered 5 years of service.575
*NB: The **option to retire upon reaching the age of 60 years or more
but not beyond 65 is the EXCLUSIVE PREROGATIVE OF THE EE if there is
no provision on retirement in a CBA or any other agreement or if the ER has no
retirement plan (R.A. 7641; Capili v. NLRC, 26 March 1997).
b. COMPULSORY: 65 years old, regardless of years of service (IRR, Book VI, Rule
II, Sec. 4).
*NB: Retirement benefits, where not mandated by law, may be granted
by agreement of the EEs and their ER or as a voluntary act on the part of the
ER. Retirement benefits are intended to help the EE enjoy the remaining
years of his life, lessening the burden of worrying for his financial support,
and are a FORM OF REWARD for his loyalty and service to the ER (Aquino v.
NLRC, 11 February 1992).
3. Compulsory retirement age below 60 allowed: Art. 287 permits ER and ER
573Q: How many years of service is the underground mine employees required to have rendered in
order to be entitled to retirement benefits? (2012 Bar Question): a. 5; b. 10; c. 15; d. 20. SUGGESTED
ANSWER: a) 5 [Section 2.1, 0005-04-1998, Rules Prescribing the Retirement Age for Underground
Mine Employees, May 9, 1998]
574Q: As a rule, when is retirement due? (2007 Bar Question) SUGGESTED ANSWER:
Article 287 provides for two types of retirement: a. optional retirement - which may be availed of by an
employee reaching the age of 60 years; b. compulsory retirement - which may be availed of by an
employee upon reaching the age of 65 years. In both instances, the law imposes the minimum
service requirement of 5 years with the establishment.
[] ***When is retirement due for underground miners? (2007 Bar Question) SUGGESTED
ANSWER: Pursuant to R.A. 8558, in the absence of a retirement plan or other applicable agreement
providing for retirement benefits of underground mine employees in the establishment, any such
employee may retire upon reaching the age of 50 years or more if he has served for at least 5
years as underground mine employee or in underground mine of the establishment.
575Q: Ricky Marvin had worked for more than ten (10) years in 1GB Corporation. Under the terms
of the personnel policy on retirement, any employee who had reached the age of 65 and completed at
least ten (10) years of service would be compulsorily retired and paid 30 days’ pay for every year of
service. Ricky Marvin, whose immigrant visa to the USA had just been approved, celebrated his 60th
birthday recently. He decided to retire and move to California where the son who petitioned him had
settled. The company refused to grant him any retirement benefits on the ground that he had
not yet attained the compulsory retirement age of 65 years as required by its personnel policy;
moreover, it did not have a policy on optional or early retirement. Taking up the cudgels for Ricky
Marvin, the union raised the issue in the grievance machinery as stipulated in the CBA. No
settlement was arrived at and the matter was referred to voluntary arbitration. If you were the
Voluntary Arbitrator, how would you decide? Briefly explain the reasons for your award. (5% ) (2005
Bar Question) SUGGESTED ANSWER: (1) I will grant Ricky Marvin the retirement benefits under
Art. 287 of the Labor Code. Art. 287 of the Labor Code, as the minimum standard in law, allows
an employee an optional retirement upon reaching the age of 60 years provided he rendered at
least 5 years of service - requirements that Ricky Marvin met under the facts of the case.
to fix the applicable retirement age at below 60. The same is **legal and
enforceable so long as the parties agree to be governed by such CBA (Pantranco
North Express v. NLRC, 24 July 1996).
4. Rule for EXTENSION of service of retiree upon reaching the compulsory
retirement age: Upon the compulsory retirement of an EE or official in the public or
private service, his employment is DEEMED TERMINATED. The matter of
**extension of service of such EE or official is addressed to the sound
discretion of the ER (UST Faculty Union v. NLRC, 6 August 1990).
COMPUTATION OF RETIREMENT BENEFITS

1. Computation of retirement benefits in the absence of an applicable agreement or
retirement plan: A retiree is entitled to a retirement pay equivalent to:576
a. at least ½ month salary for every year of service,
b. a fraction of at least 6 months being considered as 1 whole year (R.A. 7641).
2. Composition of ½ month salary or retirement pay—Unless parties provide for
broader inclusions, retirement pay is comprised of:
a. 15 days577 salary based on latest salary rate;
b. Cash equivalent of not more than 5 days of service incentive leaves
c. 1/12 of the 13th month pay, i.e., 2.5 days [Hence, total of a, b & c is 22.5
days]
d. All other benefits as may be agreed upon by the ER and ER (IRR, Book
VI, Rule II, Sec.5.2).
*NB: Under Sec. 26 of R.A. 4670, otherwise known as “Magna Carta for
Public School Teachers”, public school teachers having fulfilled the age and
service requirements of the applicable retirement laws shall be given **one range
salary RAISE UPON THE RETIREMENT, which shall be the BASIS of the
576Q: Ukol was compulsorily retired by his employer, Kurot Bottling Corporation, upon the former
reaching 65 years of age having rendered 30 years of service. Since there was no CBA, Ukol was paid
his retirement benefits computed 15 days' pay for every year of service, based on Ukol’s highest salary
during each year of his employment. Not satisfied, Ukol filed action with the Arbitration Branch of
the NLRC claiming that his retirement benefits were not computed properly. Is B. Ukol's claim
meritorious? What are the components of his retirement benefits? (2%). (2001 Bar Question)
SUGGESTED ANSWER: Ukol's claim is meritorious. His retirement benefit is to be computed in
accordance with Article 287, which reads: "In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the establishment, an employee may retire ... and
shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of
service, a fraction of at least six months being considered as one whole year. The same Article then
explains that the term one-half (1/2) month salary means fifteen days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves. The
components of retirement pay are: 1. 15 days pay; 2. 1/12 of 13th month pay, and 3. Cash equivalent
of not more than five {5) days of service incentive leave.
577Q: The Labor Code on retirement pay expands the term “one-half (1⁄2) month salary” because it
means (2011 BAR) (A) 15 days' pay plus 1/12th of the 13th month pay and 1/12th of the cash value
of service incentive leave. (B) 15 days' pay plus 1/12th of the 13th month pay and the cash equivalent
of five days service incentive leave. (C)15 days pay plus a full 13th month pay. (D) 15 calendar days'
pay per year of service plus allowances received during the retirement year.
computation of the lump sum of the retirement pay and monthly benefit thereafter.
3. Gratuity pay is separate and distinct from retirement pay.578
GRATUITY PAY RETIREMENT BENEFITS
It is paid to the beneficiary for the past services or Are intended to help the EE enjoy the
favor rendered purely out of the generosity of the remaining years of his life, releasing him
giver or grantor. It is not intended to pay a worker for from the burden of worrying for his
actual services rendered or for actual performance. It is a financial support, and are a form of reward
money benefit or bounty given to the worker, the for his loyalty to the EE (Sta. Catalina
purpose of which is to reward EEs who have rendered College v. NLRC and Hilaria Tercera, November
satisfactory service to the company 19, 2003).
RETIREMENT PAY UNDER RA 7641 (LC) VIS-À-VIS RETIREMENT

BENEFITS UNDER SSS AND GSIS LAWS [Bar 1997]
Revised Government Service Employees’

Social Security Law
Insurance Act Compensation Act
Compulsory upon all EEs not Compulsory for all permanent Compulsory upon all ERs and
over 60 years of age and their EEs below 60 years of age upon their EEs not over 60years of
ERs: 1. Filipinos recruited in the appointment of permanent age; Provided, that an EE who
Philippines by foreign-based status, and for all elective is over 60 years of age and
ERs for employment abroad officials for the duration of their paying contributions to
may be covered by the SSS on a tenure. NB: Any person, whether qualify for the retirement or
voluntary basis; 2. elected or appointed, in the life insurance benefit
Compulsory upon all self- service of an ER is a covered administered by the System
employed persons earning Php EE if he receives compensation for shall be subject to
1,800 or more per annum. such service. compulsory coverage.
RETIREMENT BENEFITS OF WORKERS PAID BY RESULTS and

PART-TIME WORKERS
1. Determination of the amount of retirement benefits of workers paid by
results and part-time workers
a. The 15-day salary of workers paid by results and part-time workers shall be
determined from their average daily salary which is the average daily salary for
the last 12 months reckoned from the date of their retirement, divided by the number of
578 [] GN: In 1955, Hilaria was hired as a grade school teacher at the Sta. Catalina College. In 1970,
she applied for and was granted a 1 year leave of absence (LOA) without pay due to the illness of her
mother. After the expiration in 1971 of her LOA, she had not been heard from by Sta. Catalina. In the
meantime, she was employed as a teacher at the San Pedro Parochial School during SY ‘80-‘81
and at the Liceo de San Pedro, during SY 1981-1982. In 1982, she applied anew at Sta. Catalina
which hired her. On Mar 22, 1997, during the 51st Commencement Exercises of Sta. Catalina, Hilaria
was awarded a Plaque of Appreciation for 30 yrs. of service and Php 12,000 as gratuity pay. On
May 31, 1997, Hilaria reached the compulsory retirement age of 65. Sta. Catalina pegged her
retirement benefits at Php 59,038.35. However, amount of Php 12,000 representing the gratuity pay, which
was given to her, was deducted from her retirement benefits. Should the gratuity pay be deducted
from the retirement benefits? YES. Gratuity pay is **separate and distinct from retirement benefits.
It is paid purely out of generosity. TOM: With that reasoning, the answer should be NO.
actual working days in that particular period (Rules Implementing the New
Retirement Law, Sec. 5.2 and 5.3).
TAXABILITY OF RETIREMENT BENEFITS

1. Non-taxability of retirement benefits under R.A. 7641: Retirement benefits
under R.A 7641 are TAX EXEMPT provided that such benefits provided by the
retirement plan be **EQUAL OR LESS THAN THE MINIMUM requirement
provided by law.
2. Requirements for tax exemption under R.A. 7641:
a. That there be **no CBA or other applicable employment contract
providing for retirement benefits for an EE; or
b. Even if **there is a CBA or other applicable employment contract providing for
retirement benefits for an EE, that the same is below the requirements set
forth by law.
V. Management Prerogative
ON Management prerogative 349

ON THE RIGHT TO HIRE 355
A. Discipline 355
B. Transfer of Employees 357
SUMMARY OF LIMITATIONS TO THE RIGHT TO TRANSFER 362
MANAGEMENT PREROGATIVE vs. SECURITY OF TENURE (SOT) 362
C. Productivity Standard 362
D. Bonus 363
E. Change of Working Hours 366
F. Marriage Between Employees of Competitor-Employers 368
G. Post-Employment Ban 368
Management Prerogative
ON MANAGEMENT PREROGATIVE
1. The law also recognizes that management has rights which are also entitled
to respect and enforcement in the interest of fair play (St. Luke’s Medical Center EEs
Ass’n v. NLRC, 7 March 2007).
2. GR: It is the RIGHT OF AN ER to REGULATE, according to his own
discretion and judgment, ALL ASPECTS of employment, including:
a. Hiring
b. Work assignments
c. Working methods
d. Time, place and manner of work
e. Tools to be used
f. Processes to be followed
g. Supervision of workers
h. Working regulations
i. Transfer of EEs
j. Work supervision
k. Lay-off of workers
l. Discipline
m. Dismissal
n. Recall of workers
o.*****579 farm out jobs;580 iow, contracting out581 company activities.
579 Q: Venus Department Store decided to contract out the security services that its 10 direct-hired
full-time security guards provided. The company paid the men separation pay. With this move, the
Store was able to cut costs and secure efficient outside professional security services. But the
terminated security guards complained of illegal dismissal, claiming that regular jobs such as
theirs could not be contracted out. Will their complaint prosper? (2011 BAR) (A) No. the
management has the right to contract out jobs to secure efficient and economical operations.
(B)Yes. They should be reinstated or absorbed by the security agency as its employees. (C)No. They are
estopped from demanding reinstatement after receiving their separation pay. (D)Yes. The company
cannot contract out regular jobs such as they had.
580 Q: Luisa Court is a popular chain of motels. It employs over 30 chambermaids who, among
others, help clean and maintain the rooms. These chambermaids are part of the union rank-and-file
employees which has an existing collective bargaining agreement (CBA) with the company.
While the CBA was in force, Luisa Court decided to abolish the position of chambermaids and
outsource the cleaning of the rooms to Malinis Janitorial Services, a bona fide independent
contractor which has invested in substantial equipment and sufficient manpower. The chambermaids
filed a case of illegal dismissal against Luisa Court. In response, the company argued that the decision
to outsource resulted from the new management’s directive to streamline operations and save on costs.
If you were the Labor Arbiter assigned to the case, how would you decide? (2014 Bar Question)
SUGGESTED ANSWER: I will decide in favor of Luisa Court, provided that all the requisites for a
valid retrenchment under the Labor Code are satisfied. It is management prerogative to farm
out any of its activities (BPI Employees Union-Davao City-FUBU (BPIEU-Davao City- FUBU) v.
Bank of the Philippine Islands, et al., G.R. No. 174912, July 23, 2013). SUGGESTED
ALTERNATIVE ANSWER: I will decide in favor of the chambermaids. Article 248 (c) of the Labor
Code considers as unfair labor practice on the part of Luisa Court its “contradicting out the services or
functions being performed by union members”. Luisa Court's abolition and act of outsourcing the
chambermaids' position are clearly acts of illegal dismissal.
581 A golf and country club outsourced the jobs in its food and beverage department and offered
the affected employees an early retirement package of 1 1⁄2 month’s pay for each year of service.
The employees who accepted the package executed quitclaims. Thereafter, employees of a service
contractor performed their jobs. Subsequently, the management contracted with other job
contractors to provide other services like the maintenance of physical facilities, golf operations,
and administrative and support services. Some of the separated employees who signed quitclaims later
filed complaints for illegal dismissal. Were they validly dismissed? (2011 BAR) (A) Yes. The jobs were
given to job contractors, not to labor-only contractors, and the dismissed employees received
higher separation pay than the law required. (B) No. The outsourcing and the employment
termination were invalid since the management failed to show that it suffered severe financial losses.
(C) No. Since the outsourcing of jobs in several departments entailed the separation of many
employees, the club needed the Secretary of Labor’s approval of its actions. (D) No. Since the
outsourced jobs were held by old-time regular employees, it was illegal for the club to terminate them
and give the jobs to others.
582583
3. XPNs: Otherwise limited by [LIMITATIONS on management prerogative—

It is circumscribed by limitations found in:]
a. Law,
b. the CBA (contract), or
c. General principles of fair play and justice
582Q: Company "A" contracts out its clerical and janitorial services. In the negotiations of its
CBA, the union insisted that, henceforth, the company may no longer engage in contracting
out these types of services, which services the union claims to be necessary in the company's business,
without prior consultation. Is the union is stand valid or not? For what reason(s)? (2%) (2001 Bar
Question) SUGGESTED ANSWER: The union's stand is not valid. It is part of management
prerogative, to contract out any work, task, job or project *****except that it is an unfair labor
practice to contract out services or functions performed by union members when, such will
interfere with, restrain or coerce employees in the exercise of their rights to self- organization.
(Art. 248(c) of the. Labor Code) ANOTHER SUGGESTED ANSWER: The union's stand that there
must be a prior consultation by the employer with the union before contracting out can be effected is
valid. Article XJH, Section 3 of the Constitution, and Article 255 of the Labor Code- guarantee the
right of workers to participate. ID. policy and decision making processes which affect their rights, and
benefits. Job contracting will undoubtedly and directly affect their rights, benefits and welfare.
Philippine Airlines vs. NLRC, 255 SCRA 301 (1993), and Manila Electric Company vs. Quisumbing,
302 SCRA 173 (1999).
583 Q: Harbor View Hotel has an existing Collective Bargaining Agreement (CBA) with the union
of rank-and-file employees consisting, among others, of bartenders, waiters, roomboys, housemen
and stewards. During the lifetime of the CBA, Harbor View Hotel, for reasons of economy and
efficiency, decided to abolish the position of housemen and stewards who do the cleaning of the
hotel’s public areas. Over the protest of the Union, the Hotel contracted out the aforementioned
job to the City Service Janitorial Company, a bonafide independent contractor which has a
substantial capital in the form of janitorial tools, equipment, machineries and competent manpower. Is
the action of the Harbor View Hotel legal and valid? SUGGESTED ANSWER: The action of Harbor
View Hotel is legal and valid. *****The valid exercise of management prerogative, discretion and
judgment encompasses all aspects of employment, including the hiring, work assignments,
working methods, time, place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, work supervision, lay-off
of workers, and the discipline, dismissal and recall of workers, except as provided for, or limited
by special laws. Company policies and regulations are, unless shown to be gross oppressive or contrary to law,
generally binding and valid on the parties and must be complied with until finally revised or
amended unilaterally or preferably through negotiation or by competent authority. (San Miguel
Corporation us. Reynaldo R. Ubaldo and Emmanuel Noel A. Cruz, Chairman and Member respectively
ojthe Voluntary Arbitration Panel, et aL G.R. No. 92859, 1 February 1993. J. Campos. Jr.. 218 SCRA.
293) ALTERNATIVE ANSWER: a) The action of the Harbor View Hotel is legal and valid.
Contracting out services or functions being performed by union members is not illegal per se. In fact, it
is the prerogative of management to adopt cost-saving measures to ensure economy and efficiency.
Contracting out services or functions being performed by union members becomes illegal only when it
interferes with, restrains or coerces employees in the exercise of their right to self-organization. b) The
action of Harbor View Hotel would, at first glance, appear to be an unfair labor practice under Article
248(c), e.g., “to contract out services or functions being performed by union members if such will
interfere with, restrain or coerce employees in the exercise of their right to self-organization.”
Considering, however, that in the case at bar. there is no showing that the contracting out of services
would violate the employees right to self-organization, it is submitted that the hotel’s action is a valid
exorcise of its management prerogatives and the right to make business judgments in accordance with
law.
*More limitations (MERALCO v. Quisumbing, 22 February 2000):

d. ER must be motivated by good faith
e. The contracting out should not be resorted to circumvent the law or
must not have been the result of malicious or arbitrary actions.
f. TOM: if the benefit granted by management has been deliberately and
consistently granted, i.e. with the ER's full consciousness that despite its not
being bound by law or contract to grant it, it may become a demandable
right.584
4. NB: So long as a company’s prerogatives are **exercised in GOOD FAITH
for the advancement of the ER's interest and not for the purpose of
defeating or circumventing the rights of the EEs under special laws or under
valid agreements, the Supreme Court will uphold them.
5. Furthermore, a LINE must be drawn between**
a. MANAGEMENT PREROGATIVES regarding business operations per se and
**The worker does not have a right to questions this (a), while he has
a right to question the second type below (b) under the PRINCIPLE OF CO-
DETERMINATION, infra.
b. those which affect the RIGHTS OF EES. In treating the latter,
management should see to it that its EEs are at least properly INFORMED of its
decisions and modes of actions. Such management prerogative may be availed
of **without fear of any liability so long as it is exercised in GOOD FAITH
for the advancement of the ER's interest and not for the purpose of
defeating or CIRCUMVENTING THE RIGHTS OF EES under special laws or valid
agreement and are NOT EXERCISED IN A MALICIOUS, HARSH,
OPPRESSIVE, VINDICTIVE OR WANTON MANNER or out of
MALICE OR SPITE (PAL v. NLRC, 13 August 1993; San Miguel Brewery Sales v.
Ople, 8 February 1989; Punzal v. ETSI Technologies Inc, 518 SCRA 66).
*NB: It must be **established that the prerogative being invoked is
CLEARLY A MANAGERIAL ONE.
584 [] Bar 2005: Little Hands Garment Company, an unorganized manufacturer of children's apparel
with around 1,000 workers, suffered losses for the 1st first time in history when its US and European
customers shifted their huge orders to China and Bangladesh. The management informed its EEs that
it could no longer afford to provide transportation shuttle services. Consequently, it announced
that a normal fare would be charged depending on the distance traveled by the workers availing of
the service. Was the Little Hands Garments Company within its rights to withdraw this benefit which
it had **unilaterally been providing its EES? YES. This is a management prerogative which is **not
due because of any legal or contractual obligation. The facts of the case do not state the
circumstances through which the shuttle service may be considered as a benefit that ripened into a
demandable right. There is **no showing that the benefit has been deliberately and consistently
granted, i.e. with the ER's full consciousness that despite its not being bound by law or contract to
grant it, it just the same granted the benefit.
6. Bar 2007: **PRINCIPLE OF CO-DETERMINATION585 (related to the

principle of shared responsibility—TOM): It refers to the right of workers to
participate in policy and decision-making process affecting their rights and
benefits586 (Art. XIII, Sec. 3; PAL v. NLRC, 13 August 1993). Extent of the
worker's right to participate in policy and decision-making processes in a
company:
a. Such right refers (i) not only to formulation of corporate programs and
policies (ii) but also to participation in grievance procedures and voluntary
modes of settling disputes.
b. Does this right to participate in policy and decision-making process
include the right to put a union member in the corporation’s Board of Directors
(BOD)? NO. Such participation of the union in committees of the ER is **not
in the nature of a co-management CONTROL of the business. (Manila
Electric Company v. Quisumbing, 27 January 1999).
c. How about compelling the management to share with the union or its
EES its prerogative of formulating a Code of Discipline? YES. A Code of
Discipline involves security of tenure and loss of employment—a property
right. Management has to realize that that to attain effectiveness in implementing
its conduct rules, there should be candidness and openness by Management
and participation by the union, representing its members. The Constitution itself
has recognized the PRINCIPLE OF SHARED RESPONSIBILITY between
ERs and workers and has likewise recognized the right of workers to participate
in policy and decision-making process affecting their rights (cf. PAL v.
7. A provision in the collective bargaining agreement concerning management
prerogatives, may not be interpreted as cession of the employees’ right to
participate in the deliberation of matters which may affect their right and the
formulation of policies relative thereto, such as the formulation of a code of
discipline. Transparency in managerial moves affecting employees' rights is
585Q: What, if any, is the basis under the Constitution for adopting it? (2007 Bar Question)
SUGGESTED ANSWER: Art. XIII, Sec. 3 of the Constitution guarantees labor their right to
participate in decision and policy-making processes affecting their rights, duties and welfare. FIRST
ALTERNATIVE ANSWER: The adoption of codetermination is based on the police power of the
state and the constitutional mandate to the State “to promote, the principle of shared
responsibility between the workers and the employers.” The Constitution expressly provides
that:“It shall guarantee the rights of all workers to xxx collective bargaining and negotiations, xxx. They
shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall
also participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.” (Art. XIII, Sec. 3, 1987 Constitution)
586Q: The employees’ rights to organize and to bargain collectively are means of exercising the broader
right to participate in policy or decision-making processes. The employees' right to participate in policy
and decision making processes is available (2011 BAR) (A) if a labor-management council exists.(B) if a
labor-management council does not exist. (C) if a union exists and it agrees to the creation of a labor-
management council. (D) whether or not a labor-management council exists.
crucial for industrial peace.587

8. Case scenarios:
a. Is withholding an EE’s salary a valid exercise of management
prerogative? NO. Any WITHHOLDING of an EE’s WAGES by an ER may
**only be allowed in the form of WAGE DEDUCTIONS under the circumstances
provided in Art. 113 of the LC:
1) the worker is insured;
2) for union dues;
3) in cases authorized by law or regulation issued by the SOLE.
In the absence of the following circumstances, withholding thereof is thus
unlawful (SHS Perforated Materials, Inc. v. Diaz, 13 October 2010).
b. May a MERALCO EE invoke the remedy of WRIT OF HABEAS
DATA where his ER decides to transfer her workplace on the basis of copies
of an anonymous letter posted therein, imputing to her disloyalty to the
company and calling for her to leave, which imputation it investigated but fails to
inform her of the details thereof ? NO. The **writs of amparo and habeas data will
NOT issue to protect PURELY PROPERTY OR COMMERCIAL
587 Q: Bulacan Medical Hospital (BMH) entered into a Collective Bargaining Agreement (CBA) with its
Union, wherein it is expressly stipulated in the Management Prerogative Clause that BMH shall,
in the exercise of its management prerogatives, have the sole and exclusive right to
promulgate, amend and modify rules and regulations for the employees within the bargaining unit.
A year after the contract was signed, BMH issued its Revised Rules and Regulations and furnished a
copy thereof to the Union for dissemination to all employees covered by the CBA. The Union wrote
BMH demanding that the Revised Rules and Regulations be first discussed with them before
its implementation. BMH refused. So. the Union filed an action for unfair labor practice (ULP)
against BMH. 1) Is the Union correct? 2) Assuming that the CBA was signed or executed before the
1987 Constitution was ratified, would your answer to the preceding question be different?
SUGGESTED ANSWER: 1) The Union is correct. A provision in the collective bargaining agreement
concerning management prerogatives, may not be interpreted as cession of the employees’ right to
participate in the deliberation of matters which may affect their right and the formulation of policies
relative thereto, such as the formulation of a code of discipline. A line must be drawn between
management prerogatives regarding business operations per se and those which affect the rights of the
employees, and in treating the latter, management should see to it that its employees are at least
properly informed of its decisions or modes of action. The attainment of a harmonious labor-
management relationship and the existing state policy of enlightening workers concerning their rights
as employees demand no less than the observance of transparency in managerial moves affecting
employees' rights. (Philippine Airlines. Inc. vs. National Labor Relations Commission, et al, G.R. No.
85985, 13 August 1993. J. Melo. 225 SCRA 258. 301.) ALTERNATIVE ANSWER: a) The Union is
correct. ***Workers have the right to participate in policy and decision-making processes
affecting their rights, benefits and welfare. (Art. 255).
2. Yes. The Union is correct in asking for discussion of the revised rules prior to their
effectivity. The reason is Art. XIII. Sec. 3 of the 1987 Constitution, allowing workers the right to
participate 'in policy and decision-making on matters related to their welfare and benefits. *****The
Union's remedy however should not be to file a ULP case but to initiate a GRIEVANCE
proceeding, and if unresolved, submit the matter to voluntary arbitration. SUGGESTED ANSWER:
The answer would be the same even if the CBA was signed or executed before the ratification of
the 1987 Constitution because it has always been the policy of the State to promote the
enlightenment of workers concerning their rights and obligations as employees. (Art. 211; PAL vs.
NLRC, GR 85985. August 13. 1993)
CONCERNS nor when the grounds invoked in support of the petitions

therefore are VAGUE OR DOUBTFUL. **Employment constitutes a
PROPERTY RIGHT under the context of the DUE PROCESS CLAUSE of the
Constitution. The writ of habeas data directs the issuance of the writ **ONLY
against PUBLIC OFFICIALS or EEs, OR PRIVATE INDIVIDUALS OR ENTITIES
engaged in the gathering, collecting or storing of data or information regarding an
aggrieved party’s person, family or home; and that MerALCO (or its officers) is clearly
not engaged in such activities (MERALCO v. Lim, 5 October 2010).
ON THE RIGHT TO HIRE

1. It is both a RIGHT and a PREROGATIVE.
2. Legal limitations and prohibitions PRIOR to hiring
a. STIPULATION AGAINST MARRIAGE. It shall be unlawful for an
employer to require as a condition of employment or continuation of
employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be DEEMED
RESIGNED OR SEPARATED, or to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of her marriage (LC, Art. 136).
b. To require as a condition of employment that a person or an employee
shall NOT JOIN A LABOR ORGANIZATION or shall WITHDRAW from one to
which he belongs [LC, Art. 248 (2)].
3. Minimum employable age.
a. No child below fifteen (15) years of age shall be employed, **except
when he works directly under the sole responsibility of his parents or
guardian, and his employment does not in any way interfere with his
schooling.
b. Any person between fifteen (15) and eighteen (18) years of age may be
employed for such number of hours and such periods of the day as determined by the Secretary
of Labor and Employment in appropriate regulations.
c. The foregoing provisions shall in no case allow the employment of a
person below eighteen (18) years of age in an undertaking which is
HAZARDOUS OR DELETERIOUS in nature as determined by the Secretary
of Labor and Employment (LC, Art. 139).
4. Prohibitions on Compulsory HIV Testing: HIV Testing shall NOT BE IMPOSED
AS A PRECONDITION for the following: Employment (RA 8504, Sec. 27).
——————————————
A. Discipline
1. ER's right to discipline his EEs: The ER has the PREROGATIVE TO
INSTILL DISCIPLINE in his EEs and **to IMPOSE REASONABLE
PENALTIES, INCLUDING DISMISSAL, on erring EEs pursuant to company
rules and regulations (San Miguel Corporation v. NLRC, G.R. No. 87277, 12 May
1989).
*An ER has the PREROGATIVE TO PRESCRIBE REASONABLE RULES AND
REGULATIONS NECESSARY for the PROPER CONDUCT OF ITS BUSINESS, to
provide certain DISCIPLINARY MEASURES in order to implement said
rules and to assure that the same would be complied with. An ER enjoys a
WIDE LATITUDE OF DISCRETION in the promulgation of policies, rules and
regulations on work-related activities of the EEs. This is **INHERENT in its
RIGHT TO CONTROL AND MANAGE its business effectively (San Miguel Corp. v.
NLRC, 16 April 2008).588
2. LIMITATION on the ER's power to discipline: While management has the
prerogative to discipline its EEs and to impose appropriate penalties on erring
workers, pursuant to company rules and regulations, however, such management
prerogative **MUST BE EXERCISED IN GOOD FAITH for the
ADVANCEMENT of the ER's INTEREST and NOT FOR THE PURPOSE OF
DEFEATING OR CIRCUMVENTING THE RIGHTS OF THE EES under special laws
and valid agreements (PLDT v. Teves, 15 November 2010).
3. An ER is estopped from imposing a disciplinary measure it has a right to
impose if he hired an EE despite failure of the EE to meet such measure in the
588Q: Universal Milling Company (UNIVERSAL) and Mara’s Canteen (MARA’S) executed an
agreement that UNIVERSAL employees patronizing MARA’S could buy food on credit and enjoy a
25% discount provided that they present their Identification Card (ID) and wear their company
uniform. Nikko, an employee of UNIVERSAL, used the ID of Galo, a co-employee, in buying food
at MARA’S. An alert employee of MARA’S discovered the misrepresentation of Nikko but not without
engaging him in a heated argument. Nikko boxed MARA’S employee resulting in serious physical
injuries to the latter. UNIVERSAL dismissed Nikko from the company. Nikko sued UNIVERSAL
for illegal dismissal. As Labor Arbiter, how would you decide the case? Discuss fully. (1995 Bar
Question) SUGGESTED ANSWER: There is ground for disciplining Nikko. In presenting the ID
of a co-employee to buy food at Mara’s at a discount and engaging in a fist fight, these acts of Nikko
constitute misconduct. But it is not the kind of serious misconduct that could be the basis of
dismissal. It will be noted that the fight did not take place at the workplace. ALTERNATIVE
ANSWER: The facts are not clear whether the canteen is within the company premises. If it is, then
the act of Nikko in boxing Mara’s employee may be considered as a valid ground for disciplinary
action. However, in this case, ***the penalty of dismissal is not commensurate to the misconduct
allegedly committed.
first place.589
——————————————
B. Transfer of Employees
1. Employer’s RIGHT TO TRANSFER AND REASSIGN EEs: In the
**pursuit of its LEGITIMATE BUSINESS INTERESTS, especially during adverse
business conditions, management has the prerogative to transfer or assign EEs
from one office or area of operation to another **PROVIDED THERE IS NO
DEMOTION in rank OR DIMINUTION of salary, benefits and other privileges and the
action is NOT motivated by DISCRIMINATION, BAD FAITH, or effected as a form of
PUNISHMENT OR DEMOTION WITHOUT SUFFICIENT CAUSE.
2. This privilege is **INHERENT in the RIGHT OF ERS TO CONTROL AND
MANAGE their enterprises effectively.
*NB: The RIGHT of EEs to SECURITY OF TENURE does **not give
them VESTED rights to their positions to the extent of depriving
management of its prerogative to change their assignments or to transfer
589Q: Flight attendant A, five feet and six inches tall, weighing 170 pounds ended up weighing
220 pounds in two years. Pursuant to the long standing Cabin and Crew Administration Manual of
the employer airline that set a 147-pound limit for A’s height, management sent A a notice to “shape
up or ship out” within 60 days. At the end of the 60-day period, A reduced her weight to 205
pounds. The company finally served her a Notice of Administration Charge for violation of company
standards on weight requirements. Should A be dismissed? Explain. (3%) (2010 Bar Question)
SUGGESTED ANSWER: NO. While the weight standards for cabin crew may be a valid
company policy in light of its nature as a common carrier, the airline company is now ESTOPPED
from enforcing the Manual as ground for dismissal against A. It hired A despite her weight of 170
pounds, in contravention of the same Manual it now invoked. *****The Labor Code gives to an
airline the power to determine appropriate minimum age and other standards for requirement
or termination in special occupations such as those of flight attendants and the like. Weight standards
for cabin crew is a reasonable imposition by reason of flight safety [Yrasuegui v. PAL, 569 SCRA
467 [2008]). However, A had already been employed for two (2) years before the airline company
imposed on her this weight regulation, and an incident did the airline company raise which rendered
her amiss of her duties.
them (Endico v. Quantum Foods Distribution Center, 30 January 2009).590

3. May the ER exercise his right to transfer an EE and compel the latter to
accept the same if said transfer is coupled with or is in the nature of
promotion? NO. There is **NO LAW that compels an EE to accept
promotion. Promotion is in the NATURE OF A GIFT OR A REWARD591 which a
PERSON HAS A RIGHT TO REFUSE. When an EE refused to accept his
promotion, he was exercising his right and cannot be punished for it. While it
may be true that the **RIGHT TO TRANSFER OR REASSIGN an EE is an ER's exclusive
590 Q: Bobby, who was assigned as company branch accountant in Tarlac where his family also
lives, was dismissed by Theta Company after anomalies in the company's accounts were discovered in
the branch. Bobby filed a complaint and was ordered reinstated with full backwages after the
Labor Arbiter found that he had been denied due process because no investigation actually took
place. Theta Company appealed to the National Labor Relations Commission (NLRC) and at
the same time wrote Bobby, advising him to report to the main company office in Makati where
he would be reinstated pending appeal. Bobby refused to comply with his new assignment because
Makati is very far from Tarlac and he cannot bring his family to live with him due to the higher
cost of living in Makati. (A) Is Bobby's reinstatement pending appeal legally correct? (2013 Bar
Questions) SUGGESTED ANSWER: No. it is not really correct. The transfer of an employee
ordinarily lies within the ambit of management prerogatives but like other rights, there are limits
thereto. This managerial prerogative to transfer personnel must be exercised without grave abuse of
discretion, bearing in mind the basic elements of justice and fair play. Thus, the transfer of
Bobby from Tarlac to Makati must be done in good faith, and it must not be unreasonable,
inconvenient or prejudicial to the employee. For another, the reinstatement of Bobby ought to be
to his former position, much akin to return to work order, i.e. to restore the status quo in the
work place. (Composite Enterprises v. Capamaroso, 529 SCRA 470 [2007]). SUGGESTED
ALTERNATIVE ANSWER: No. Under Article 223 of the Labor Code, the reinstatement order of the
Labor Arbiter which is immediately executory even pending appeal, should pertain to restoration to
status quo ante. (B) Advise Bobby on the best course of action to take under the circumstances. (2013
Bar Questions) SUGGESTED ANSWER: The best course of action for Bobby to take under the
circumstances is to allege constructive dismissal in the same case, and pray for separation pay in lieu of
reinstatement.
591Q: George Clinton, an American, was hired as marketing assistant by Perot Drug Company in its
main office in Cleveland. Ohio. Because of his good performance, Clinton was appointed manager
of the Company’s branch in Manila. After two years in Manila, Clinton was advised of his
promotion and transfer to Cleveland as director for international marketing. Because of his refusal to
be promoted and transferred “for family reasons", Clinton was dismissed by the Company. Clinton
sought your advice. As his counsel, answer the following:
a) What Clinton's cause of action, if any, against Perot Drug Company? SUGGESTED
ANSWER: The course of action of Clinton against Perot Drug Company is that of illegal dismissal.
When the Company dismissed him for his refusal to be promoted and transferred “for family reason",
he could claim he was being dismissed without just cause.
b) If he has a cause of action, where will you file the appropriate petition — in the U.S. or in
the Philippines? SUGGESTED ANSWER: I will file the case of illegal dismissal in the
Philippines where Clinton was working when he was dismissed. The Company can be sued in the
Philippines because it is doing business in the country by having a branch in Manila.
c) Will your petition, if you decide to file one, proper? Answer with reasons. SUGGESTED
ANSWER: The petition will prosper. The refusal of Clinton to be promoted and transferred to
Cleveland is not just cause. His refusing a promotion - his refusing to receive the gift that the
Company was offering, namely, his promotion - cannot be considered as willful disobedience of a
lawful order of his employer. Thus, there is not just cause for the dismissal of Clinton
right and the prerogative of management, such right is NOT ABSOLUTE592 (Dosch v.
NLRC and Northwest Airlines, 5 July 1983).593
4. BURDEN OF PROVING that the transfer was REASONABLE: The Er
must be able to show that the transfer is NOT UNREASONABLE,
INCONVENIENT OR PREJUDICIAL to the EE; NOR does it involve a
DEMOTION in rank or a DIMINUTION of his salaries, privileges and other benefits. Should
the ER fail to overcome this burden of proof, the EE’s transfer shall be
**TANTAMOUNT TO CONSTRUCTIVE DISMISSAL (Blue Dairy
Corporation v. NLRC, 14 September 1999).
5. Mere inconvenience on the part of the EE as to his transfer is not enough to
592Q: Din Din is a single mother with one child. She is employed as a sales executive at a prominent
supermarket. She and her child live in Quezon City and her residence and workplace are a 15-minute
drive apart. One day, Din Din is informed by her boss that she is being promoted to a managerial
position but she is now being transferred to the Visayas. Din Din does not want to uproot her
family and refuses the offer. Her boss is so humiliated by Din Din's refusal of the offer that she
gives Din Din successive unsatisfactory evaluations that result in Din Din being removed from the
supermarket. Din Din approaches you, as counsel, for legal advice. What would you advise her? (2015
Bar Question) SUGGESTED ANSWER: I will advise Din Din to sue her boss and the supermarket
for illegal dismissal. Din Din cannot be compelled to accept the promotion. *****Her
unsatisfactory evaluations as well as her boss’ insistence that she should agree to the intended transfer
to Visayas are badges of an abuse of management prerogative. In Pfizer Inc. v. Velasco (645 SCRA
135), the Supreme Court held that the managerial prerogative to transfer personnel must be
exercised without abuse of discretion, bearing in mind the basic elements of justice and fair
play. Hence, Din Din’s dismissal is illegal.
593 Q: Lionel, an American citizen whose parents migrated to the U.S. from the Philippines, was
hired by JP Morgan in New York as a call center specialist. Hearing about the phenomenal growth of
the call center industry in his parents’ native land, Lionel sought and was granted a transfer as a
call center manager for JP Morgan’s operations in Taguig City. Lionel’s employment contract did
not specify a period for his stay in the Philippines. After three years of working in the Philippines,
Lionel was advised that he was being recalled to New York and being promoted to the position
of director of international call center operations. However, because of certain “family reasons,”
Lionel advised the company of his preference to stay in the Philippines. He was dismissed by the
company. Lionel now seeks your legal advice on: (2014 Bar Question) SUGGESTED ANSWER: (A)
whether he has a cause of action: Lionel has a cause of action; he was illegally dismissed.
****Dismissal due to an employee’s refusal of a promotion is not within the sphere of
management prerogative. There is no law that compels an employee to accept promotion
(Dosch v. NLRC, et al., G.R. No. L-51182, July 5, 1983). (B) whether he can file a case in the
Philippines. Yes. Since this is a case of illegal dismissal, the Labor Arbiters have jurisdiction over the
same (Art. 217 (a) (2), Labor Code). Under the 2011 NLRC Rules of Procedure, *****all cases which
Labor Arbiters have authority to hear and decide, may be filed in the Regional Arbitration
Branch having jurisdiction over the workplace of the complainant or petitioner (Rule IV, Section
1). (C) what are his chances of winning? He has a big chance of winning. An employee cannot be
promoted without his consent, even if the same is merely a result of a transfer, and an employee’s
refusal to accept promotion cannot be considered as insubordination or willful disobedience of a lawful
order of the employer. In this case, JP Morgan cannot dismiss Lionel due to the latter's refusal
to accept the promotion (Norkis Trading Co., Inc. v. Gnilo, 544 SCRA 279 [2008]). SUGGESTED
ALTERNATIVE ANSWER: His chances of winning is NIL because the objection to the transfer was
grounded solely on personal “family reasons” that will be caused to him because of the transfer. (OSS
Security v. NLRC, 325 SCRA 157 [2000]); Phil. Industrial Security Agency Corp. v. Dapiton, 320 SCRA
124 [1999]).
question the management’s prerogative to transfer him. It does not amount to

constructive dismissal. The right to transfer an employee is part of the
employer’s managerial function. An employer's right to security of tenure does
not give him a vested right to his position as would deprive the Company of its
prerogative to change his assignment or transfer him where he will be most useful.
When his transfer is not unreasonable, not inconvenient, nor prejudicial to him
and it does not involve a demotion in rank or a diminution of his salaries, benefits,
and other privileges, the employee may not complain that it amounts to a
constructive dismissal.594 Refusal to transfer amounts to insubordination.595

6. Note that if the transfer will prevent an EE to exercise his right to self-
594Q: Mansueto was hired by the Philippine Packing Company (PPC) sometime in 1960 as an hourly
paid research field worker at its pineapple plantation in Bukidnon. In 1970, he was transferred to the
general crops plantation in Misamis Oriental. Mansueto was promoted to the position of a monthly
paid regular supervisor four years after. Subsequently, research activity in Misamis Oriental was phased
out in March of 1982 for having become unnecessary. Mansueto thereafter received a written
memorandum from the PPC, reassigning him to the Bukidnon plantation effective April 1, 1982,
with assurance that his position of supervisor was still there for him to hold. Mansueto tried to
persuade the PPC management to reconsider his transfer and if this was not possible, to at least
consider his position as redundant so that he could be entitled to severance pay. PPC did not accept
Mansueto's proposal. When Mansueto continuously failed to report for work at the Bukidnon
plantation, PPC terminated his employment by reason of his refusal to accept his new
assignment. Mansueto claims that his reassignment is tantamount to an illegal constructive
dismissal. Do you agree with Mansueto? Explain. (1996 Bar Question) SUGGESTED ANSWER:
There is no constructive dismissal by the mere act of transferring an employee. The employee’s
contention cannot be sustained simply because a transfer causes inconvenience. There is no
constructive dismissal where, as in Philippine Japan Active Carbon Corp., us. NLRC, 171 SCRA 164
(1989), the Court ruled that constructive dismissal means: A quitting because continued employment is
rendered impossible, unreasonable or unlikeable; as, an offer involving a demotion in rank and a
diminution in pay. The transfer will not substantially alter the terms and conditions of employment of
the Supervisor. The right to transfer an employee is part of the employer’s managerial function.
Furthermore, the Court ruled that an employee has no vested right to a position, and in justifiable
cases employment may be terminated. An employer's right to security of tenure does not give him such
a vested right to his position as would deprive the Company of its prerogative to change his assignment
or transfer him where he will be most useful. When his transfer is not unreasonable, not inconvenient,
nor prejudicial to him and it does not involve a demotion in rank or a diminution of his salaries,
benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.
595Mariet Demetrio was a clerk-typist in the Office of the President of a multi-national corporation.
One day she was berated by the President of the company, the latter shouting invectives at her in the
presence of employees and visitors for a minor infraction she committed. Mariet was reduced to tears
out of shame and felt so bitter about the incident that she filed a civil case for damages against the
company president before the regular courts. Soon thereafter, Mariet received a memorandum
transferring her to the Office of the General Manager without demotion in rank or diminution in pay.
Mariet refused to transfer. With respect to the civil suit for damages, the company lawyer filed a Motion
to Dismiss for lack of jurisdiction considering the existence of an employer- employee relationship and
therefore, it is claimed that the case should have been filed before the Labor Arbiter. (1999 Bar
Question) 1. Will Mariet Demetrio’s refusal to transfer constitute the offense of insubordination?
Explain briefly. (2%) SUGGESTED ANSWER: Mariet Demetrio's refusal to transfer constitutes the
offense of insubordination. The transfer is a lawful order of the employer. It is the employer's
prerogative, based on its assessment and perception of its employees' qualifications, aptitudes, and
competence, to move its employees around in the various areas of its business operations in order to
ascertain where they will function with maximum benefit to the company. An employee’s right to
security of tenure does not give him such a vested right in his position as would deprive the company
of its prerogative to change his assignment or transfer him where he will be most useful. When his
transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a
demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not
refuse to obey the order of transfer. (Philippine Japan Active Carbon Corp. V. NLRC, 171 SCRA 164)
organization, he can refuse the same.596
SUMMARY OF LIMITATIONS TO THE RIGHT TO TRANSFER

1. The transfer must not be motivated by discrimination or bad faith.
2. The managerial prerogative cannot be used by the Er to rid himself of an
undesirable Ee.
3. Transfer even due to promotion, cannot be done without Ee’s consent (PT&T,
supra.)
4. The mere fact that it would be inconvenient does not by itself make the transfer
illegal (OSS Security v. NLRC, 9 February 2000).
5. It is the prerogative of the company to promote, transfer, or even demote its
Ee to other positions when the interests of the company reasonably demand it.
Unless there circumstances which directly point to interference by the company
with the Ee’s right to self-organization, the transfer of an Ee should be considered
as within the bounds allowed by law, e.g. despite the transfer to a lower position,
his original rank and salary remained undiminished (Rubberworld Phils. V. NLRC,
19 July 1989).
6. Security of Tenure is also intended to shield workers from unwarranted and
unconsented demotion and transfer, infra.
MANAGEMENT PREROGATIVE vs. SECURITY OF TENURE (SOT)

1. Which takes precedence in conflicts arising between employers’ management
prerogative and the employees’ right to security of tenure? SOT.
2. **The employee's right to security of tenure takes precedence over the
employer's management prerogative. Thus, an employer's management
prerogative includes the right to terminate the services of an employee but
this management prerogative is limited by the Labor Code which provides that
the employer can terminate an employee only for a just cause or when
authorized by law. This limitation on management prerogative is based in the
constitutional recognition and guarantee of an employee’s right to security of
tenure. (Art. 279. Labor Code: Art. XIII, Sec. 3. Constitution)
——————————————
C. Productivity Standard
1. May an ER impose productivity standards for its workers? YES. An ER is
**ENTITLED TO IMPOSE PRODUCTIVITY STANDARDS for its
workers. In fact, non-compliance may be visited with a penalty even more
severe than demotion and may constitute a just cause for dismissal. One
596Q: Of the four grounds mentioned below, which one has been judicially affirmed as justification
for an employee’s refusal to follow an employer’s transfer order? (2011 BAR) (A) A transfer to
another location is not in the employee's appointment paper. (B) The transfer deters the employee
from exercising his right to self- organization. (C)The transfer will greatly inconvenience the
employee and his family. (D)The transfer will result in additional housing and travel expenses for the employee.
example is ER’s right to assign who among the EEs should work together.597
2. The practice of a company in laying off workers because of the following have
been recognized in our jurisdiction:
a. they failed to make the WORK QUOTA
b. **Failure to meet the SALES QUOTA assigned to each of them
CONSTITUTE A JUST CAUSE of their dismissal, regardless of the permanent or
probationary status of their employment.
c. Failure to observe PRESCRIBED STANDARDS of work, or to fulfill
reasonable work assignments due to inefficiency may constitute JUST CAUSE
for dismissal. Such inefficiency is understood to mean failure to attain work
goals or work quotas, either
i. by failing to complete the same within the allotted reasonable period, or
ii. by producing unsatisfactory results.
3. This **management prerogative of REQUIRING STANDARDS may be
availed of SO LONG AS THEY ARE EXERCISED IN GOOD FAITH for the
advancement of the ER's interest (Leonardo v. NLRC 16 June 2000).
——————————————
D. Bonus
1. Bonus: an amount granted and paid to an EE for his industry and loyalty
which CONTRIBUTED TO THE SUCCESS of the ER's business and made
597 Q: Union “X” is the majority union of the rank and file employees at Slipper Mart Company. It
amended its by-laws to include among the obligations of its members “to refuse to work with non-
union members.” Slipper Mart wants the amendment to be declared null and void considering that
not all its rank and file employees belong to Union “X” and its enforcement will cause work stoppage
in the company. Give your opinion on the validity of the amendment. SUGGESTED ANSWER: The
provision of the by-laws of the union that made it among the obligations of its members ‘‘to refuse to
work with non-union members” cannot be implemented at the Slipper Mart Company. It is
management’s prerogative to determine who shall work together in a company.
ALTERNATIVE ANSWER: The act is an unfair labor practice on the part of the union because it
could have the effect of compelling the employer to compel its employees to join Union “X”,
thus, in effect restraining or coercing employees in the exercise of their right to self- organization.
possible the realization of profits;598 it is something given in addition599 to

what is ordinarily received by or strictly due the recipient. It is dependent on the
financial capacity of the ER.600 Thus, a bonus is not a demandable and
enforceable obligation, except when it is made part of the wage, salary or
598What is a bonus? When is it demandable as a matter of right? Explain. SUGGESTED ANSWER: 

A bonus is money given in addition to an employee’s usual compensation. It may be given as a
gratuity, as an act of liberality. But a bonus is demandable as a matter of right if it is made a
legal obligation by law or in a collective bargaining agreement or in a contract of employment or
by its having been given for such a long time such that the receipt of a bonus has ripened into a
right. ALTERNATIVE ANSWER: A bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the employer's success and realization of profit. (1) Grant of
bonus is a prerogative, not an obligation of the employer; and (2) It is entirely dependent on the
employer's capacity to pay. Normally discretionary, it becomes part of the regular compensation by
reason of long and regular concession or when the bonus is included as among the benefits granted in
a CBA.
599Q: The projected bonus for the employees of Suerte Co. was 50% of their monthly compensation.
Unfortunately, due to the slump in the business, the president reduced the bonus to 5 % of their
compensation. Can the company unilaterally reduce the amount of bonus? Explain briefly. (2%)
SUGGESTED ANSWER: Yes. The granting of a bonus is a management prerogative, something
given in addition to what is ordinarily received by or strictly due the recipient. ***An employer, like
Suerte Co., cannot be forced to distribute bonuses when it can no longer afford to pay. To hold
otherwise would be to penalize the employer for his past generosity. [Producers Bank of the Phil.
V. NLRC, 355 SCRA 489, (2001)] ANOTHER SUGGESTED ANSWER: It depends. If there is a legal
obligation on the part of Suerte Co. to pay a bonus of its employees equivalent to 50% of their
monthly compensation, because said obligation is included in a collective bargaining agreement, then
Suerte Co. cannot reduce the bonus to 5% of their monthly compensation. But if the payment of the
bonus is not a legal obligation but only a voluntary act on the part of the employer, said employer,
unilaterally, can only reduce the bonus from 50% to 5% of the monthly compensation of its
employees; the employer can, in fact, not give any bonus at all.
600 Q: XYZ Employees Association filed a complaint against ABC Bank for wrongful diminution of
benefits. It alleged that the bank had been providing for a mid-year bonus equivalent to one-month
basic pay and a Christmas bonus equivalent to one-month basic pay since 1971. Upon the
effectivity of Presidential Decree (P.D.) No. 851 in 1975 which granted the 13th month pay, the bank
started giving its employees a one-month basic pay as mid-year bonus, one-month basic pay as
Christmas bonus, and one-month basic pay as 13th month pay. In 1980, the bank was placed under
conservatorship and by virtue of a monetary board resolution of the Central Bank, the bank only
gave one month basic pay mandated by P.D. 851, and it no longer gave its employees the traditional
mid-year and Christmas bonuses. Could ABC Bank be compelled, given the circumstances, to continue
paying its employees the traditional mid-year and Christmas bonuses in addition to the 13th month pay?
(2005 Bar Question) SUGGESTED ANSWER: No. The grant of a bonus is a prerogative, not an
obligation, of the employer. (Traders Royal Bank v. NLRC, 189 SCRA 274 PI9901). The matter of
giving a bonus over and above that which is required by law is entirely dependent on the financial
capability of the employer to give it. (Businessday v. NLRC. 221 SCRA 9 f19931). Hence, given the
circumstances, ABC Bank cannot be compelled to continue paying its employees the traditional
mid-year and Christmas bonuses in addition to the 13th month pay.
compensation of the employee.601 At the same time, permitting reduction of

pay at the slightest indication of losses is contrary to the policy of the State to
afford full protection to labor and promote full employment.602
2. Can bonus be demanded?
601Q: Lito was anticipating the bonus he would receive for 2013. Aside from the 13th month pay, the
company has been awarding him and his other co-employees a two to three months bonus for the last
10 years. However, because of poor overall sales performance for the year, the company
unilaterally decided to pay only a one month bonus in 2013. Is Lito’s employer legally allowed to
reduce the bonus? (2014 Bar Question) Page 249 of 450 Labor Law SUGGESTED ANSWER: Yes. A
bonus is an act of generosity granted by an enlightened employer to spur the employee to greater
efforts for the success of the business and realization of bigger profits. The granting of a bonus is a
management prerogative, something given in addition to what is ordinarily received by or strictly
due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is
made part of the wage, salary or compensation of the employee. It may, therefore, be withdrawn,
unless they have been made a part of the wage or salary or compensation of the employees, a matter
which is not in the facts of the case (American Wire and Cable Daily Rated Employees Union v.
American Wire and Cable Co., Inc. and the Court of Appeals, G.R. No. 155059, April 29, 2005).
SUGGESTED ALTERNATIVE ANSWER: No. Having been enjoyed for the last
the granting of the bonus has ripened into a company practice or policy which can no longer be
peremptorily withdrawn. Art. 100 of the Labor Code prohibits the diminution or elimination by the
employer of the employees' existing benefits.
602Q: Far East Bank (FEB) is one of the leading banks in the country. Its compensation and bonus
packages are top of the industry. For the last 6 years, FEB had been providing the following bonuses
across-the-board to all its employees: (a) 13th month pay; (b) 14th to 18th month pay; (c) Christmas
basket worth P6,000; (d) Gift check worth P4,000; and (e) Productivity-based incentive ranging from a
20o/o to 40% increase in gross monthly salary for all employees who would receive an evaluation of
"Excellent" for 3 straight quarters in the same year. Because of its poor performance over-all, FEB
decided to cut back on the bonuses this year and limited itself to the following: (a) 13th month pay;  
(b) 14th month pay; (c) Christmas basket worth P4,000; and (d) Gift check worth P2,000 Katrina, an
employee of FEB, who had gotten a rating of "Excellent" for the last 3 quarters was looking forward
to the bonuses plus the productivity incentive bonus. After learning that FEB had modified the
bonus scheme, she objected. Is Katrina's objection justified? Explain. (2015 Bar Question)
SUGGESTED ANSWER: Katrina’s objection is justified. *****Having enjoyed the across-the-
board bonuses, Katrina has earned a vested right. Hence, none of them can be withheld or
reduced. In the problem, the company has not proven its alleged losses to be substantial.
Permitting reduction of pay at the slightest indication of losses is contrary to the policy of the State
to afford full protection to labor and promote full employment. (Linton Commercial Co. v. Hellera,
535 SCRA 434) As to the withheld productivity-based bonuses, Katrina is deemed to have earned
them because of her excellent performance ratings for three quarters. On this basis, they cannot
be withheld without violating the Principle of Non-Diminution of Benefits. Moreover, it is
evident from the facts of the case that what was withdrawn by FEB was a productivity bonus.
Protected by RA 6791 which mandates that the monetary value of the productivity improvement
be shared with the employees, the “productivity-based incentive” scheme of FEB cannot just
be withdrawn without the consent of its affected employees.
*GR: No. Bonus is **not demandable as a matter of right.603 It is a

management prerogative given in addition to what is ordinarily received by
or strictly due to recipient (Producers Bank of the Phil. v. NLRC, March 28, 2001).
*****XPNs—when a bonus is a demandable right: if it is made a legal
obligation
a. by law or
b. in a collective bargaining agreement or
c. in a contract of employment or
d. by its having been given for such a long time such that the receipt of a
bonus has ripened into a right. RE: Given for a LONG PERIOD OF TIME,
provided that:
i. CONSISTENT AND DELIBERATE: ER continued giving benefit
without any condition imposed for its payment;
ii. ER knew he was not required to give benefit;
iii. Nature of benefit is not dependent on profit;
iv. Made part of the wage or compensation agreed and stated in the
employment contract.
——————————————
E. Change of Working Hours

1. ER’s right to change working hours: Well-settled is the rule that
**management retains the prerogative, whenever EXIGENCIES604 of the
603Bar 2002: The projected bonus for the EEs of SuERte Co. was 50% of their monthly
compensation. Unfortunately, due to the slump in the business, the president reduced the bonus to
5% of their compensation. Can the company **unilaterally reduce the amount of bonus? YES. The
granting of a bonus is a management prerogative, something GIVEN IN ADDITION to what is
ordinarily received by or strictly due the recipient. An ER CANNOT BE FORCED TO DISTRIBUTE
BONUSES when it can NO LONGER AFFORD to pay. To hold otherwise would be to **penalize the
ER for his past generosity (Producers Bank of the Phil. v. NLRC, 28 March 2001).
604 Q: LKG Garments Inc. makes baby clothes for export. As part of its measures to meet its
orders, LKG requires its employees to work beyond eight (8) hours everyday, from Monday to
Saturday. It pays its employees an additional 35% of their regular hourly wage for work rendered
in excess of eight (8) hours per day. Because of additional orders, LKG now requires two (2) shifts
of workers with both shifts working beyond eight (8) hours but only up to a maximum of four
(4) hours. Carding is an employee who used to render up to six (6) hours of overtime work before the
change in schedule. He complains that the change adversely affected him because now he can only earn
up to a maximum of four (4) hours worth of overtime pay. Does Carding have a cause of action
against the company? (2015 Bar Question) SUGGESTED ANSWER: NO. A change in work
schedule is a management prerogative of LKG. Thus, Carding has no cause of action against LKG
if, as a result of its change to two (2) shifts, he now can only expect a maximum of four (4) hours
overtime work. Besides, Art. 97 of the Labor Code does not guarantee Carding a certain number of
hours of overtime work. In Manila Jockey Employees’ Union v. Manila Jockey Club (517 SCRA 707),
the Supreme Court held that the basis of overtime claim is an employee’s having been “permitted to
work”. Otherwise, as in this case, such is not demandable.
service so require, to change the working hours of its EEs.605 The ER also has
a right to determine who renders overtime work.606
2. May the normal hours fixed in Art. 83 of the LC be reduced by the ER? It
depends. Art. 83 provides that the normal hours of work of an EE shall NOT
EXCEED 8 HOURS A DAY.
a. This implies that the ER, in the exercise of its management
prerogatives, **may schedule a WORK SHIFT CONSISTING OF LESS THAN 8
HOURS. And following the principle of **“A FAIR DAY’S WAGE FOR A
FAIR DAY’S LABOR,” the ER is NOT OBLIGED to pay an EE, working for
less than 8 hours a day, the wages due for 8 hours.
b. Nonetheless, if by voluntary practice or policy, the EE for a
considerable period of time HAS BEEN PAYING his EEs’ wages due for 8 hours
work although the work shift less than 8 hours (e.g. seven) it cannot later on
increase the working hours without an increase in the pay of the EEs
affected. An ER is **not allowed to withdraw a benefit which he has
voluntarily given.
——————————————
605 Sime Darby Pilipinas issued a memorandum implementing a new work schedule. It eliminated the
30 minute paid “on call” lunch break of its monthly salaried employees and instead provided for a
10 minute break time and one hour lunch break. The employees felt adversely affected by the
memorandum and filed before the Labor Arbiter a complaint for unfair labor practice. The LA dismissed
the complaint on the ground that the change in the work schedule constituted a valid exercise of
management prerogative. Is it? YES. The **right to fix the work schedules of the employee RESTS
PRINCIPALLY on their employer. The petitioner, as the employer, cites as reason for the adjustment
the efficient conduct of its business operations and IMPROVED PRODUCTION.
Management retains the prerogative, whenever exigencies of the service so require, to change the
working hours of its employees. **SO LONG AS SUCH PREROGATIVE IS EXERCISED IN GOOD
FAITH for the advancement of the employer's interest and not for the purpose of defeating and
circumventing the rights of the employees under special laws or under valid agreements, this court will
uphold such exercise (Sime Darby Pilipinas v. NLRC, 15 April 1998).
606Q: Inter-Garments Co. manufactures garments for export and requires its employees to render
overtime work ranging from two to three hours a day to meet its clients' deadlines. Since 2009, it has
been paying its employees on overtime an additional 35% of their hourly rate for work rendered in
excess of their regular eight working hours. Due to the slowdown of its export business in 2012, Inter-
Garments had to reduce its overtime work; at the same time, it adjusted the overtime rates so that
those who worked overtime were only paid an additional 25% instead of the previous 35%. To
replace the workers' overtime rate loss, the company granted a one-time 5% across-the-board wage
increase. Vigilant Union, the rank-and-file bargaining agent, charged the company with Unfair Labor
Practice on the ground that (1) no consultations had been made on who would render overtime
work; and (2) the unilateral overtime pay rate reduction is a violation of Article 100 (entitled
Prohibition Against Elimination or Diminution of Benefits) of the Labor Code. Is the union position
meritorious? (2013 Bar Questions) SUGGESTED ANSWER: The allegation of ULP by the Union is
not meritorious. The selection as to who would render overtime work is a management
prerogative. However, the charge of the Union on the diminution of benefits (violation of Article
100 of the Labor Code) appears to be meritorious. *****Since three (3) years have already lapsed,
the overtime rate of 35% has ripened into practice and policy, and cannot anymore be removed.
(Sevilla Trading v. Semana, 428 SCRA 239 [2004]) This is deliberate, consistent and practiced over a
long period of time.
F. Marriage Between Employees of Competitor-Employers

*Is the stipulation in the employment contract prohibiting an EE from marrying
another EE of a competitor company a valid exercise of management
prerogative? YES.
1. The policy is **NOT AIMED AT RESTRICTING A PERSONAL PREROGATIVE
that belongs only to the individual. However, an EE’s personal decision does not
detract the ER from exercising management prerogatives to ENSURE
MAXIMUM PROFIT AND BUSINESS SUCCESS.
2. It does NOT impose an ABSOLUTE PROHIBITION against
relationships between its EEs and those of competitor companies. Its EEs are
free to cultivate relationships with and marry persons of their own
choosing.
3. *****What the company merely seeks to avoid is a CONFLICT OF
INTEREST between the employee and the company that may arise out of such
relationships.607
4. It is also NOT VIOLATIVE OF THE EQUAL PROTECTION clause
because it is a settled principle that the **commands of the equal protection
clause are addressed only to the State or those acting under color of its authority.
Corollarily, it has been held in a long array of U.S. Supreme Court decisions that
the equal protection clause ERECTS NO SHIELD AGAINST MERELY PRIVATE
CONDUCT, however discriminatory or wrongful. **The ONLY
EXCEPTION occurs when the State in any of its manifestations or actions has
been found to have become entwined or involved in the wrongful private
conduct (Duncan Association of Detailman-PTGWO and Pedro A. Tecson v. Glaxo
Wellcome Philippines, Inc., 17 September 2004).
——————————————
G. Post-Employment Ban
1. Post-employment ban: Genesis Fulgencio had been working for Solidbank
Corporation since 1977. He later on applied for retirement. Solidbank required
Genesis to sign an undated Undertaking where he promised that "[he] will not
seek employment with a competitor bank or financial institution within one
(1) year from February 28, 1995, and that any breach of the Undertaking or the
provisions of the Release, Waiver and Quitclaim would entitle Solidbank to a
607 Q: A was working as a medical representative of RX pharmaceutical company when he met and
fell in love with B, a marketing strategist for Delta Drug Company, a competitor of RC. On several
occasions, the management of RX called A’s attention to the stipulation in his employment
contract that requires him to disclose any relationship by consanguinity or affinity with co-
employees or employees of competing companies in light of a possible conflict of interest. A seeks
your advice on the validity of the company policy. What would be your advice? (3%) (2010 Bar
Question) SUGGESTED ANSWER: The company policy is valid. However, it does not apply to A.
As A and B are not yet married, no relationship by consanguinity or affinity exists between them.
The case of Duncan v. Glaxo Wellcome (438 SCRA 343 [2004]) does not apply in the present case.
cause of action against him before the appropriate courts of law.” Equitable
Banking Corporation (Equitable) employed Genesis. Is the post-retirement
employment ban incorporated in the Undertaking which Genesis executed upon
his retirement unreasonable, oppressive, hence, contrary to public policy? NO.
There is a distinction between
a. RESTRICTIVE COVENANTS barring an EE to accept a post-employment
competitive employment or RESTRAINT ON TRADE in employment contracts and
b. RESTRAINTS ON POST-RETIREMENT COMPETITIVE EMPLOYMENT in
pension and retirement plans either incorporated in employment contracts or in CBAs
between the ER and the union of EEs, or separate from said contracts or CBAs
which provide that an EE who accepts post retirement competitive
employment will FORFEIT retirement and other benefits or will be obliged
to REINSTITUTE the same to the ER.
2. The strong weight of authority is that FORFEITURES for engaging in
subsequent competitive employment included in pension and retirement plans
are VALID even though unrestricted in time or geography. A **POST-
RETIREMENT COMPETITIVE EMPLOYMENT RESTRICTION is designed to
protect the ER against competition by former EE who may retire and obtain
retirement or pension benefits and, at the same time, engage in competitive
employment (Rivera v. Solidbank, 19 April 2006).
3. Types or classes of post-employment bans or restrictive covenants (LPS):
a. NON-COMPETITION/NON-COMPETE CLAUSE – when the
employee is prevented from directly competing or working for a competitor of
his former employer, or when the employee is prevented from setting up a
competing business;608
b. NON-SOLICITATION CLAUSE – when a duty is imposed on the
employee not to approach his former employer’s customers or prospective
customers, or when the employee is prevented from taking customers/clients of
his former employer; and
c. NON-POACHING CLAUSE – when the employee is prevented from
enticing his former employer’s staff away from the business, the aim is to prevent
the employee from taking key employees with him to his new employment or
business.
4. Jurisdiction over the claims of damages for employment contracts having
non-compete clauses: an ordinary civil action the jurisdiction of which is vested
with the **regular courts not the LA. The "Goodwill Clause" or the "Non-
Compete Clause" is a contractual undertaking effective after the cessation of the
employment relationship between the parties. In accordance with jurisprudence,
608Q: TRUE or FALSE. An employment contract prohibiting employment in a competing company

within one year from separation is valid. (2009 Bar Question) SUGGESTED ANSWER:
True. *****The employer has the right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information.
breach of the undertaking is a civil law dispute, not a labor law case (Portillo v. Lietz
Inc, 10 October 2012 reiterating Dai-chi Electronics v. Villarama, 21 November 1994).
5. Validity of the clause - In order to determine whether restrictive covenants are
reasonable or not, the following factors should be considered:
(a) whether the covenant protects a legitimate business interest of the
employer;
(b) whether the covenant creates an undue burden on the employee;
(c) whether the covenant is injurious to the public welfare;
(d) whether the time and territorial limitations contained in the covenant
are reasonable; and
(e) whether the restraint is reasonable from the standpoint of public policy
(Rivera v. Solidbank Corporation , G.R. No. 163269, 19 April 2006).
6. Who has the burden of proof in case of conflict? (EE assails the validity of the
clause) - In cases where an employee assails a contract containing a provision
prohibiting him or her from accepting competitive employment as against public
policy, the employer has to adduce evidence to prove that the restriction is
reasonable and not greater than necessary to protect the employer’s legitimate
business interests (Rivera v Solidbank citing Foti v. Cook, Jr., 263 S.E.2d 430 (1980))
7. Case scenarios:
a. Two-year non-involvement clause in any pre-need business akin to that of
the ER is valid because there are reasonable limitations as to time, trade, and
place.609
b. If the restriction is subsumed in a benefit given by the Er, there is no
need to follow the Tiu ruling in (a), the restriction in the contract precluding the
Ee from engaging in competitive activity should be construed as loss of rights or
privileges if he does so.
c. Post-retirement competitive restrictions are valid:610 A post-retirement
competitive employment restriction is designed to protect the employer against
competition by former employees who may retire and obtain retirement or
pension benefits and, at the same time, engage in competitive employment.
———————————————————————————————
609A non-involvement clause is not necessarily void for being in restraint of trade as long as there are
reasonable limitations as to time, trade, and place. (Tiu v. Platinum Plans, 28 February 2007) NB - In this
case, the non-involvement clause which has time limit: two years from the time petitioners
employment with respondent ends and also limited as to trade, it only prohibits petitioner from
engaging in any pre-need business akin to respondents was upheld.
610 RATIONALE (Rivera, citing a US case) - The authorities, though, generally draw a clear and
obvious distinction between restraints on competitive employment in employment contracts and in
pension plans. The strong weight of authority holds that forfeitures for engaging in subsequent
competitive employment, included in pension retirement plans, are valid, even though unrestricted
in time or geography. The reasoning behind this conclusion is that the forfeiture, unlike the restraint
included in the employment contract, is not a prohibition on the employee’s engaging in
competitive work but is merely a denial of the right to participate in the retirement plan if he
does so engage.
REFERENCES
1. UST Notes:611 GN, case syllabus, bar Q&As, class lectures.
2. Thanks to Laurence & Kyle for their contributions.
611These notes were culled mainly from notes (GN), lectures, outlines, case summaries, etc. provided to
students at the UST Faculty of Civil Law, plus researches and updates by those who write them in and
contribute to their present form. Errors are to be attributed to the main author and he is asking you to
send him whatever you think needs to be corrected at [email protected]. Aside from that, all
he requests from you is prayers for him, his family and friends. Yes, seriously, if you are happy with
these notes, please send him prayers, generous prayers, if possible. His favorite prayer is the Holy Mass,
and oh, Rosaries :)

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electi mei non laborabunt frustra 1! of !

TOM Bar Reviewer on Labor Law I

Guide to these notes:

I. Fundamental Principles and Policies

I. Fundamental Principles and Policies

PURPOSE OF LABOR LEGISLATION (2006 Bar)

A1. 1987 Constitution [State Policies; Bill of Rights; Social Justice]

SUMMARY OF STATE POLICIES1 ON LABOR IN THE

1 Declaration of basic policy: It is the policy of the State to:**

2. Afford full protection to labor2

processes affecting their right and benefits5

OTHER CONSTITUTIONAL PROVISIONS ON LABOR

d. role of the youth12 and women13 in nation building;

e. As to working conditions, it guarantees the right to security of tenure,19

BASIC RIGHTS24 OF WORKERS GUARANTEED BY THE

3. Just and humane working conditions27

MORE ON DUE PROCESS IN LABOR

a. Substantive: no EE should be dismissed except for causes provided by

BURDEN OF PROOF IN TERMINATION CASES

**The law in protecting the rights of the EEs authorizes neither

ON THE USE OF NATURAL RESOURCES [Art. XII]

A2. **New Civil Code [Articles 1700 & 1702]

B. Construction in favor or labor

LIBERAL APPROACH IN INTERPRETING THE LABOR CODE

276 SCRA 1 [1997]).

COMPASSIONATE JUSTICE; PRIMACY OF JUSTICE

AIM OF LABOR = SOCIAL JUSTICE

LIMITATIONS TO PRINCIPLE OF SOCIAL JUSTICE (SJ)

SOCIAL JUSTICE PREVAILS OVER EQUAL PROTECTION39

wrongdoing (Corazon Jamer v. NLRC, 278 SCRA 632).40

D. Overview of Labor Law

THREE GENERAL CLASSIFICATION41 OF LABOR STATUTES42

c. unfair labor practices,

ADDITIONAL CLASSIFICATION OF LABORS LAWS [POQUIZ]

LABOR LEGISLATION vs. SOCIAL LEGISLATION

45 Is there any distinction between labor legislation and social legislation?

PURPOSE OF LABOR LEGISLATION

SOURCES OF LABOR LAWS

CONTRACT OF LABOR AS SOURCE OF LAW

CBA AS A SOURCE OF LAW

COMPANY PRACTICES AS SOURCE OF LAW

E. Agrarian Reform Law (added by TOM)

FOUNDATION OF AGRARIAN REFORM

BENEFICIARIES OF THE AGRARIAN REFORM LAW

f. collectives or cooperatives of the above beneficiaries; and

JUST COMPENSATION (JC) IN the Bill of Rights vs. CARL

II. Recruitment and Placement

DURATION OF EMPLOYMENT PERMIT 53

II. Recruitment & Placement

A2. Prohibited Activities

worker's insurance coverage

PROHIBITED ACTS UNDER LC vs. OVERSEAS FILIPINOS &

A3. Types53 of Illegal Recruitment

Simple vs. Complex Illegal Recruitment

Illegal recruitment in large scale54 vs. committed by a syndicate55

Illegal recruitment as economic sabotage56

A4. Illegal Recruitment vs. Estafa

**Malum prohibitum, thus: **Malum in se, thus:

Malum prohibitum, thus: Malum in se, thus: