LABOR STANDARDS LAWS EXPLAINED

LABOR STANDARDS
Professor: Prof. Domingo P. Disini

Based on Course Outline
PART 1
INTRODUCTORY MATERIALS
Section 1
LABOR LAW IN GENERAL
1.01 Labor Law Defined
It is the law governing the right and duties of ER and EE with
respect to (a) the terms and conditions of employment, and (b)
labor disputes arising from collective bargaining respecting
such terms and conditions
1.02 Law Classification (Branches)
Labor Standards
Constitution and constitutes a legitimate exercise of the police

power of the State
1.04 Sources of Law

A. Labor Code and Related Special Legislation (Including
Implementing Rules and Regulations)
Mariveles Shipyard Corp. v. CA
415 SCRA 573 (2003)
Labor standards are enacted by the legislature to alleviate the
plight of workers whose wages barely meet the spiraling costs of
their basic needs. xxx Labor laws are considered written in every
contract, and stipulations in violation thereof are considered null
B. Contract
Batong Buhay Goldmines, Inc. v. De La Serna

318 SCRA 22 (1999)
Labor standards refers to the minimum requirements prescribed
by existing laws, rules and regulations relating to wages, hours of
work, cost of living allowance and other monetary and welfare
benefits, including occupational, safety and health standards
Pearanda v. Baganga Plywood Corp.
489 SCRA 94 (2006)
Labor standards provide the working conditions of employees,
including entitlement to overtime pay and premium pay for
working on rest days
Labor Relations - provide for the institutional relationship

regulations; its objective is that no workers should become a
burden to society; in here the worker is part of the union and
the union speaks for the worker
Welfare Legislation - designed to provide for continuity of
income
ART. II, SEC. 18. The State affirms labor as a primary

social economic force. It shall protect the rights of
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worker and promote their welfare
ART. XIII, SEC. 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
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increments
CMS Estate, Inc. v. Social Security System

132 SCRA 108 (1984)
The [SSS Law] implements the general welfare mandate of the
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2
CONSTITUTION, Art. II, Sec. 18

CONSTITUTION, Art. XIII, Sec. 1
ART.1305. A contract is a meeting of minds between

two persons whereby one binds himself, with respect
to the other, to give something or to render some
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service
ART.1306. The contracting parties may establish such

stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not
contrary to law, morals, good customs, public order,
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or public policy
Kasapian ng Malayang Manggagawa sa Coca-Cola v. CA

487 SCRA 487 (2006)
The MOA, being a contract freely entered into by the parties, now
constitutes as the law between them, and the interpretation of its
contents purely involves an evaluation of the law as applied to the
facts herein
C. Collective Bargaining Agreement
1.03 Basis for Enactment (1987Constitution)
BOOK V, RULE I, SEC. 1 (J). Legitimate Labor

Organization" means any labor organization duly
registered with the Department of Labor and
Employment and includes any branch, local or
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affiliate thereof
DOLE Phils. v. Pawis ng Malabayang Obrero

395 SCRA 112 (2003)
The CBA is the norm of conduct between the parties and
compliance therewith is mandated by the express policy of the
law
Legal implication of a labor contract: It will become the law

between ER and EE; will become binding; there may be
economic costs and political repercussions
D. Past Practices (Company Practices)
Requisites: When (a) given voluntarily without any compulsion
of law; a unilateral action on the part of the ER, and (b) theres
a passage of time, or a time frame
Arco Metal Products Co. v. Samahan
CIVIL CODE, Art.1305
CIVIL CODE, Art.1306
5 LABOR CODE, Book V, Rule I, Sec. 1 (J)
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4
554 SCRA 111 (2008)

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner
had adopted a policy freely, voluntarily and consistently granting
full benefits to its employees regardless of the length of service
rendered. Jurisprudence has not laid down any rule specifying a
minimum number of years within which a company practice must
be exercised in order to constitute voluntary company practice.
Thus, it can be six years, three years, or even as short as two years
McLeod v. NLRC
512 SCRA 222 (2007)
To be considered a regular practice, the giving of the benefits
should have been done over a long period, and must be shown to
have been consistent and deliberate
Davao Fruits Corp. v. Associated Labor Union
225 SCRA 562 (1993)
The considerable length of time the questioned items had been
included by petitioner indicates a unilateral and voluntary act on
its part, sufficient itself to negate any claim of mistake
Samahang Manggagawa etc. v. NLRC
295 SCRA 171 (1998)
Granted that private respondent TFM had granted an across-theboard increase pursuant to RA 6727, that single instance may not
be considered an established company practice
American Wire and Cable Daily Rated Employees Union
v. American Wire and Cable Co., Inc.
457 SCRA 684 (2005)
To be considered regular practice the giving of the bonus should
have been done over a long period of time and must be shown to
have been consistent and deliberate
Pag-asa Steel Works, Inc. v. CA
486 SCRA 475 (2006)
To ripen into a company practice that is demandable as a matter
of right, the giving of the increase should not be by reason of a
strict legal or contractual obligation, but by reason of an act of
liberality on the part of the employer
E. Company Policies
Metropolitan Bank and Trust Company v. NLRC
589 SCRA 376 (2009)
It is a jurisprudential rule that where there is an established
employer practice of regularly, knowingly and voluntarily granting
benefits to employees over a significant period of time, despite
lack of a legal or contractual obligation on the part of the
employer to do so, the grant of such benefit ripens into a vested
right of the employees and can no longer be unilaterally reduced
or withdrawn by the employer
Suico v. NLRC
513 SCRA 325 (2007)
Company policies or practices are binding on the parties. Some
can ripen into a obligation on the part of the employer, such as
those benefits on employees or regulate the procedures and
requirements for their termination
China Banking Corporation v. Borromeo
440 SCRA 622 (2004)
It is well recognized that company policies and regulations are,
unless shown to be grossly oppressive or contrary to law,
generally binding and valid on the parties and must be complied
with until finally revised or amended unilaterally or preferable
through negotiation by competent authority
Maneja v. NLRC
290 SCRA 603 (1998)
It should be explained that company personnel policies are
guiding principles stated in broad, long-range terms that express

the philosophy of beliefs of an organizations top authority
regarding personnel matters
1.05 Law and Worker

Ankor Technology v. Juangco
512 SCAR 325 (2007)
While the Constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed
that every labor dispute will automatically decided in favor of
labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair
play
Cebu Royal Plant v. Hon. Deputy Minister of Labor
153 SCRA 38 (1987)
We agree that there was an attempt to circumvent the law by
separating the employee after five months service to prevent him
from becoming a regular employee, and then rehiring him on
probation, again without security of tenure. We cannot permit
this subterfuge if we are to be true to the spirit and mandate of
social justice.
1.06 Labor Case

Test of Labor Case:
1. Employer-Employee relationship exists
2. The issue must be resolved by referring to (1) the Labor
Code, (2) Labor Statutes, or (3) CBA
Phil. Hoteliers etc v. National Union, etc
599 SCRA 134 (2009)
Enriquez v. BPI
544 SCRA 593 (2008)
Where there is substantial compliance, a liberal interpretation of
procedural rules in this labor case is more in keeping with the
constitutional mandate to secure social justice
Smart Communications v. Astoria
542 SCRA 435 (2008)
An employers demand for payment of the market value of the car
or, in the alternative, the surrender of a car, is not a labor, but a
civil, dispute. It involves the relationship of debtor and creditor
rather than employee-employer relations. As such, the dispute
falls within the jurisdiction of the regular courts
Pioneer Concrete Products, Inc. v. Teodoro
524 SCRA 153 (2007)
Where no employer-employee relationship exists between the
parties and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes or any collective
bargaining agreement, it is the Regional Trail Court that has
jurisdiction
Villamaria, Jr. v. CA
487 SCRA 571 (2006)
Not every dispute between an employer and employee involves
matters that only the labor arbiter and the NLRC can resolve in
the exercise of their adjudicatory or quasi-judicial powers--actions
between employers and employees where the employeremployee relationship is merely incidental is within the exclusive
jurisdiction of the regular courts
Lapanday Agricultural Development Corp. v. CA
324 SCRA 77 (2001)
(a) Presence of ER-EE relationship
(b) Theres a violation of the Labor Code
Other than these, it is not a labor case. Labor Code is the
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regulatory law; there must be a strict interpretation

Article 217 of the Labor Code as amended vested upon the labor
arbiters exclusive original jurisdiction only over the following:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
(6) Except claims for employees compensation, social security,
medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
domestic or household service involving an amount exceeding five
thousand pesos (P5,000.00), whether or not accompanied with a
claim for reinstatement.
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requisite
Casa Cebuana, etc. v. Leuterio
598 SCRA 355
Labor cases must be decided according to justice and equity and
the substantial merits of the controversy
1.07 Case Decision

Philmare v. Suganib
557 SCRA 439 (2008)
This Court has repeatedly ruled that delay in the settlement of
labor cases cannot be countenanced. Not only does it involve the
survival of an employee and his loved ones who are dependent on
him for food, shelter, clothing, medicine and education, it also
wears down the meager resources of the workers
EDI Staff Builders International Inc. v. Magsino
359 SCRA 212 (2001)
No undue sympathy is to be accorded to any claim of a procedural
misstep in labor cases. Such must be decided according to justice
and equity.
Anino v. NLRC
290 SCRA 489 (1998)
A decision should faithfully comply with Sec. 14, Art. VIII of the
Constitution. (No decision shall be rendered by any court, or
quasi-judicial body, without expressing therein clearly and
distinctly the facts of the case and the law which it is based)
The factual and legal bases of public respondents conclusions
were bereft of substantial evidence--the quantum of proof in
labor cases--its disposition is manifestly a violation of the
constitutional mandate and an exercise of grave abuse of
discretion. Such decision is a nullity
1.08 Management Function

It is the right of the ER to promulgate rules and regulations as
are necessary for the efficient management and operation of
the establishment
Basis: The Right of Ownership, which is the inherent right of the
enterprise
BUT, the manner of exercise will be the subject of inquiry; it
must be in accordance with law and the principles of fair play
Recognition
Areno, Jr. v. Skycable, etc

611 SCRA 721 (2010)
It is axiomatic that appropriate disciplinary sanctions within the
purview of management imposition. What should not be
overlooked is the prerogative of an employer company to
prescribe reasonable rules and regulations necessary for the
proper conduct of its business and to provide certain disciplinary
measures in order to implement said rules to assure that the
same would be complied with
San Miguel Corp. v. NLRC
551 SCRA 410 (2008)
In the implementation of its rules and policies, the employer has
the choice to do so strictly or not, since this is inherent in its right
to control and manage it business effectively. Consequently,
management has the prerogative to impose sanctions lighter than
those specifically prescribed by its rules, or to condone
completely the violations of its erring employees. Of course, this
prerogative must be exercised free of grave abuse of discretion,
bearing in mind the requirements of justice and fair play. Indeed,
we have previously stated: Management also has its own rights
which, as such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for those with
[fewer] privileges in life, this Supreme Court has inclined more
often than not toward the worker and upheld his cause in his
conflicts with the employer. Such favoritism, however, has not
blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine. All told, we find SMC acted
well within its rights when it dismissed respondent for his
numerous absences. Respondent was afforded due process and
was validly dismissed for cause
Punzal v. EISI Technologies, Inc.
518 SCRA 66 (2007)
It is settled that it is the prerogative of management to regulate,
according to its discretion and judgment, all aspects of
employment
Torreda v. Toshiba
515 SCRA 133 (2007)
An employer has a free reign and enjoys wide latitude of
discretion to regulate all aspects of employment, including the
prerogative to instill discipline in its employees and to impose
penalties, including dismissal, upon erring employees
Norkis Trading Co., Inc. v. Canilo
544 SCRA 278 (2008)
Well-settled is the rule that it is the prerogative of the employer
to transfer and reassign employees for valid reasons and
according to the requirement of its business. An owner of a
business enterprise is given considerable leeway in managing his
business. Our law recognizes certain rights collectively called
management prerogative as inherent in the management of
business enterprise. We have consistently recognized and upheld
the prerogative of management to transfer an employee from one
office to another within the business establishment, provided that
there is no demotion in rank or diminution of his salary, benefits
and other privileges and the action is not motivated by
discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause. This privilege is
inherent in the rights of the employers to control and manage
their enterprises effectively. The right of employees to security of
tenure does not give them vested tights to their positions to the
extent of depriving management of its prerogative to change their
assignments or to transfer them. Managerial prerogatives,
however, are subject to limitations provided by law, collective
bargaining agreements, and general principles of fair play and
justice
Union of Filipo v. Nestle Phils., Inc.
449 SCRA 521 (2007)
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Star Paper Corp. v. Simpol

487 SCRA 228 (2006)
It is true that the policy of the petitioners prohibiting close
relatives from working in the same company takes the nature of
an anti-nepotism employment policy
Limitations
1. The law and public policy on labor and social justice
2. The terms and conditions of the CBA
3. Principles of fair play and justice
Marival Trading, Inc. v. NLRC
525 SCRA 708 (2007)
Tinio v. CA
524 SCRA 533 (2007)
1.09 Compromise and Waiver
ART. 227. Any compromise settlement, including

those involving labor standard laws, voluntarily
agreed upon by the parties with the assistance of the
Bureau or the regional office of the Department of
Labor, shall be final and binding upon the parties. The
National Labor Relations Commission or any court,
shall not assume jurisdiction over issues involved
therein except in case of non-compliance thereof or if
there is prima facie evidence that the settlement was
obtained through fraud, misrepresentation, or
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coercion
ART. 2028. A compromise is a contract whereby the
parties, by making reciprocal concessions, avoid a
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litigation or put an end to one already commenced
ART. 2036. A compromise comprises only those
objects which are definitely stated therein, or which
by necessary implication from its terms should be
deemed to have been included in the same
A general renunciation of rights is understood to refer
only to those that are connected with the dispute
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which was the subject of the compromise
Requisites for Validity of Compromise Agreement:

1. Clear and unequivocal showing intent to arrive at a
compromise
2. Compliance with labor standards, particularly with the
amounts in the employees money claims
3. Relative equality in the bargaining position of the parties
San Miguel etc v. Teodisio
607 SCRA 197 (2009)
Kimberly etc v. Dimayuga
600 SCRA 548 (2009)
Universal Robina v. Caballeda
560 SCRA 115 (2008)
Universal Staffing Services, Inc. v. NLRC
LABOR CODE, Art. 227
CIVIL CODE, Art. 2028
8 CIVIL CODE, Art. 2036
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559 SCRA 221 (2008)

Generally, deeds of release, waivers, 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. Where, however, 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 a valid and
binding undertaking. The burden of proving that the quitclaim or
waiver was voluntarily entered into rests on the employer
Hanjin etc. v. Ibaez
555 SCRA 537 (2008)
The quitclaims which the respondents signed cannot bar them
from demanding what is legally due to them as regular
employees. As a rule, quitclaims and waivers or Releases are
looked upon with disfavor and frowned upon as contrary to
public policy. They are thus ineffective to bar claims for the full
measure of a workers Legal rights, particularly when the
following conditions are applicable: (1) where there is clear
proof that the waiver was wangled from an unsuspecting or
gullible person, or (2) where the terms of settlement are
unconscionable on their face. To determine whether the
quitclaims signed by respondents are valid, one important factor
that must be taken into account is the consideration accepted by
respondents; the amount must constitute a reasonable
settlement equivalent to the full measure of their legal rights
Michael Press v. Galit
545 SCRA 23 (2008)
Arellano v. Powertech Corporation
542 SCRA 182 (2008)
Good-Manufacturing Corp. v. Ativo
611 SCRA 261 (2010)
Section 2
LABOR AND THE CONSTITUTION
Statutory Reference: 1935, 1973, and 1987 Constitution
2.01 Historical Background/Rationale
Antamoc Goldfields Mining Co. v. CIR
70 Phil. 340 (2007)
In Commonwealth Act No. 103, and by it, our Government no
longer performs the role of a mere mediator or intervenor but
that of the supreme arbiter. The policy of laissez faire has to some
extent given way to the assumption by the government of the
right of intervention even in contractual relations affected with
public interests. Justice Laurel in Ang Tibay v. CIR states that our
Constitution was adopted in the midst of surging unrest and
dissatisfaction resulting from economic and social distress which
was threatening the stability of governments the world over.
Embodying the spirit present epoch, general provisions were
inserted in the Constitution which are intended to bring about the
needed social and economic equilibrium between component
elements of society through the application of what may be
termed as the justitia communis advocated by Grotius and
Leibnitz many years ago to be secured through the
counterbalancing of economic and social forces and opportunities
which should be regulated if not controlled, by the State or
placed, as it were, in custodia societatis. The promotion of social
justice to insure the well-being and economic security of all
people was thus inserted as vital principle in our Constitution
(Sec. 5, Art. II)
2.02 Nature of Provision

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policy and decision-making processes affecting their

rights and benefits as may be provided by law.
PAL, Inc. v. Santos

218 SCRA 415 (1993)
The sympathy of the Court is on the side of the laboring classes,
not only because the Constitution imposes such sympathy, but
because of the one-sided relation between labor and capital. The
constitutional mandate for the promotion of labor is as explicit as
it is demanding. The purpose is to place the workingman on an
equal plane with management--with all its power and influence-in negotiation for the advancement of his interests and the
defense of his rights. Under the policy of social justice, the law
bends over backward to accommodate the interests of the
working class on the humane justification that those with less
privileges in life should have more privileges in law. (In short,
interpretation should be made in favor of the laborers)
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
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investments, and to expansion and growth
PCL Shipping Phils., Inc. v. NLRC

511 SCRA 44 (2007)
2.03 1987 Constitution
Compare with:
A. Labor Sector

9
worker and promote their welfare -- the State
recognizes that there is a human factor in production
(labor) in contrast to non-human factor (capital).
When there is conflict between labor and capital,
conflict should be resolved in favor of labor
ART. XIV, SEC. 6. The State shall afford protection to

labor, especially to working women, and minors, and
shall regulate the relations between the landowner
and tenant, and between labor and capital in industry
and in agriculture. The State may provide for
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compulsory arbitration
ART. II, SEC. 9. The State shall afford protection to

labor, promote full employment and equality in
employment, ensure equal work opportunities
regardless of sex, race, or creed, and regulate the
relation 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. The State may provide
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for compulsory arbitration

common good.
As a corollary to the social justice provision of the 1935

Constitution and in order that the principle of social justice may
not just be a medley of words, the 1935 Constitution provided
the means towards its realization
The 1973 Constitution adopted the provisions of the 1935
Constitution with the additional injunction that the State
should promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race or
creed and assure the rights of workers to self-organization,
collective bargaining, security of tenure, and just and humane
conditions. Under the 1973 Constitution, the protection the
state commanded to give to labor was linked by the Court to
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the survival of the nation itself

15
increments
The 1987 Constitution builds on previous provisions and

elaborates on its policy on labor in Article XIII, Section 3.. Article
II, Sec. 18, in affirming labor as a primary social economic
force, proclaims the primacy of the human factor over the non11
human factors of production
B. Protection of Labor (Guarantees)
ART. XIII, SEC. 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 selforganization, 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
CONSTITUTION, Art. II, Sec. 18

Phil. Apparel Workers Union v. NLRC, 106 SCRA 444 (1981)
11 1987 Constitution Commentary. Bernas, pp. 92-95
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10
ART. II, SEC. 10. The State shall promote social justice
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in all phases of national development

17
worker and promote their welfare

Basic rights of Labor:
1. Organize
2. Conduct collective bargaining or negotiation with management
3. Engage in peaceful concerted activities including strike in accordance
with law
4. Enjoy security of tenure
5. Work under humane conditions
6. Receive living wage
7. Participate in policy and decision-making processes affecting their rights
and benefits as may be provided by law
13 1935 CONSTITUTION, Art. XIV, Sec. 6
14 1973 CONSTITUTION, Art. II, Sec. 9
15 CONSTITUTION, Art. XIII, Sec. 1
16 CONSTITUTION, Art. II, Sec. 10
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Lopez v. Metropolitan Waterworks and Sewerage Authority

462 SCRA (2005)
The Court has invariably affirmed that it will not hesitate to tilt the
scales of justice to the labor class for no less than the Constitution
dictates that the State . . . shall protect the rights of workers and
promote their welfare. It is committed to this policy and has
always been quick to rise to defense in the rights of labor, as in
this case.
Protection to labor, it has been said, extends to all of labor, local
and overseas, organized and unorganized, in the public and
private sectors. Besides, there is no reason not to apply this
principle in favor of workers in the government. The government,
including government-owned and controlled corporations, as
employers, should set the example in upholding the rights and
interests of the working class.
PLDT v. Bolzo
530 SCRA 550 (2007)
Calalang v. Williams
70 Phil. 726 (1940)
[Social Justice is the] humanization of laws and the equalization of
social and economic forces by the State so that justice in its
rational and objective secular conception may at least be
approximated
Limits of Use
Telecommunications etc. v. Garriel
588 SCRA
Treveo v. Bobongan, etc
588 SCRA 1965 (2009)
C. Social Justice
ART. II, SEC. 6. The State shall promote social justice

to ensure the dignity, welfare, and security of all the
people. Towards this end, the State shall regulate the
acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse
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property ownership and profits
ART. II, SEC. 18. The promotion of social justice to

insure the well-being and economic security of all the
19
people should be the concern of the State

common good.
20
increments
ART. XIII, SEC. 2. The promotion of social justice shall

include the commitment to create economic
opportunities based on freedom of initiative and self21
reliance
Definition - Social Justice

Enriquez v. BPI
544 SCRA 453 (2008)
While the Constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed
that every labor dispute will automatically decided in favor of
labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair
play. Out of its concern for those less privileges in life, this Court
has inclined more often than not toward the worker and upheld
his cause in his conflicts with the employer. Such favoritism,
however, has not blinded us to the rule that justice is in every
case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine
CONSTITUTION, Art. II, Sec. 18 (Bernas, pp. 1194-1197)

1973 CONSTITUTION, Art. II, Sec. 6
19 1935 CONSTITUTION, Art. II, Sec. 18
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Heirs or Jugalbot v. CA
518 SCRA 202 (2007)
Agabon v. NLRC
442 SCRA 573 (2004)
An employee who is clearly guilty of conduct violative of Article
282 should not be protected by the Social Justice Clause of the
Constitution - as the same may only be used to correct an
injustice.
The constitutional policy to provide full protection to labor is not
meant to be a sword to oppress employers. The commitment of
the courts to the cause of labor does not prevent them from
sustaining the employer when it is in the right.
Social justice is not based on rigid formulas set in stone--it has to
allow for changing times and circumstances--social justice, as the
term suggests, should be used only to correct an injustice
PLDT v. NLRC
164 SCRA 671 (1988)
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the
underprivileged.
Compassion for the poor is an imperative of every humane society
but only when the recipient is not a rascal claiming undeserved
privilege
2.04 Constitutional Rights and Labor Law

Management and the Constitution
The mandate of the Constitution is to protect and promote
welfare of EE. But the law protects the worker, only when the
worker is right
The Constitution is not designed to destroy nor oppress ER
because ER is also protected by law
GR: Constitution protects and promotes welfare of EE
XPN:
Bibiana Farms, etc v. Lado
611 SCRA 302 (2010)
Sarocam v. Interorient Maritime Ent., Inc.
493 SCRA 502 (2006)
As a final note, let it be emphasized that the constitutional policy
to provide full protection to labor is not meant to be a sword to
oppress employers. The commitment of this Court to the cause of
labor does not prevent us from sustaining the employer when it is
in the right.
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Due Process Requirements

Dayan v. Bayer of the Phil. Islands
396 SCRA 712 (2001)
Law, in protecting rights of labor, authorized neither oppression
nor self-destruction of an employer company which itself is
possessed of rights that must be entitled to recognition and
respect
The 2 notice and hearing rule is indispensable for a dismissal to be
validly effected, but if it is for a just and valid cause, the failure to
observe procedural requirements does not invalidate the
dismissal of the employee. Instead, he must be granted
separation pay. Whether reinstated or given separation pay, he
should be paid backwages if he has been laid off without written
notice 30 days in advance. For the omission, an appropriate
sanction should be imposed depending on the fact and gravity of
the situation
Phil. Hoteliers etc v. National Union, etc
597 SCRA 134 (2009)
Equal Work Opportunities

Francisco v. NLRC
500 SCRA 690 (2007)
Star Paper Corp. v. Simbol
487 SCRA 228 (2006)
The questioned policy may not facially violate Article 136 of the
Labor Code but it creates a disproportionate effect and under the
disparate impact theory, the only way it could pass judicial
scrutiny is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. The failure of
petitioners to prove a legitimate business concern in imposing the
questioned policy cannot prejudice the employees right to be
free from arbitrary discrimination based upon stereotypes of
married persons working together in one company.
-The absence of a statute expressly prohibiting marital
discrimination in our jurisdiction cannot benefit the petitioners.
The protection given to labor in our jurisdiction is vast and
extensive that we cannot prudently draw inferences from the
legislatures silence that married persons are not protected under
our Constitution and declare valid a policy based on a prejudice or
stereotype. Thus, for failure of petitioners to present undisputed
proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management
prerogative.
Labor as Property
Ang Tibay v. CIR

59 Phil. 635 (1940)
Procedural Due Process Requirements:
1. Right to hearing. Includes the right of a part to present his own
case and submit evidence in support thereof
2. The tribunal must consider the evidence presented
3. Decision must be supported by evidence
4. Evidence must be substantial, i.e. more than a mere scintilla,
such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally
reasonable would opine otherwise
5. Decision must be rendered on the evidence presented at the
hearing or at least contained in the record and disclosed to the
parties affected; Only by confining the administrative tribunal to
the evidence disclosed to the parties, can the latter be protected
in their right to know and meet the case against them
6. Independent consideration of judge. Must not simply accept
the views of a subordinate in arriving at a decision
7. Decision rendered in such a manner as to let the parties know
the various issues involved and the reason for the decision
rendered
Air Manila, Inc. v. Balatbat
38 SCRA 489 ( 1971)
Administrative Due Process:
1. The right to notice, be it actual or constructive, of the
institution of the proceedings that may affect a persons legal
rights
2. Reasonable opportunity to appear and defend his rights,
introduce witnesses and relevant evidence in his favor
3. A tribunal so constituted as to give him reasonable assurance of
honesty and impartiality, and one of competent jurisdiction
4. A finding or decision by that tribunal supported by substantial
evidence presented at the hearing, or at least contained in the
records or disclosed to the parties affected
Century Textile Mills, Inc. v. NLRC
161 SCRA 528 (1989)
The twin requirements for notice and hearing constitute essential
elements of due process in cases of employee dismissal: the
requirement of notice is intended to inform the employee
concerned of the employers intent and the reason for the
proposed dismissal; upon the other hand, the requirement of
hearing affords the employee the opportunity to answer his
employers charges against him and accordingly to defend himself
Liberty of Contract/ Laissez-faire and State Interference
Labor is life itself for the worker. It is not only personal to the
worker, because he has a family to recognize. It is livelihood.
Therefore, EE should be accorded substantive and procedural
due process
Executive Secretary v. CA
429 SCRA 81 (2004)
Asuncion v. NLRC
362 SCRA 56 (2001)
A workers employment is property in the constitutional sense. He
cannot be deprived of his work without due process. In order for
the dismissal to be valid, not only must it be based on just cause
supported by clear and convincing evidence, the employee must
also be given an opportunity to be heard and defend himself. It is
the employer who has the burden of proving that the dismissal
was with just or authorized cause. The failure of the employer to
discharge this burden means that the dismissal is not justified and
that the employee is entitled to reinstatement and backwages
Phil. Assn. of Service Exporters v. Drilon

163 SCRA 386 (1988)
Leyte Land Transportation Co. v. Leyte Farmers and Workers
Union
80 Phil. 842 (1948)
Petitioner complains against a CIR order compelling the former to
grant wage increases to its employees and denounces the same
as state interference in its right to contract
The fact that both parties are of full age and competent to
contract does not necessarily deprive the State of the power to
interfere where the parties do not stand upon an equality, or
where the public health demands that one party to the contract
shall be protected against himself. The State still retains an
interest in his welfare, however reckless he may be. The whole is
no greater than the sum of all the parts, and where the individual
health, safety and welfare are sacrificed or neglected, the State
must suffer
Welfare State
Maneja v. NLRC
290 SCRA 603 (1998)
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Alalayan v. National Power Corporation

24 SCRA 172 (1968)
The welfare state concept is not alien to the philosophy [of] our
Constitution. It is implicit in quite a few of its provisions. There is
the clause on the promotion of social justice to ensure the wellbeing and economic security of all the people, as well as the
pledge of protection to labor with the specific authority to
regulate the relations between landowners and tenants and
between labor and capital
Participation in Decision Making Process

Phil. Assn. of Service Exporters v. Drilon
163 SCRA 386 (1988)
PAL v. NLRC
225 SCRA 301 (1993)
EEs right to participation in decision making process is not
absolute but qualified. A line is to be drawn between (a) unilateral
decision-making, that is, affecting only capital, and (b) bilateral
decision-making, that is, affecting labor (rights, benefits as
provided by law). EEs are entitled to such right to participate
ONLY with regard to decision and policy making processes
affecting their rights, duties and welfare
Section 3
LABOR AND THE CIVIL CODE
271 SCRA 275 (1997)

While the employer is not precluded from prescribing rules and
regulations to govern the conduct of his employees, these rules
and their implementation must be fair, just and reasonable
No less than our Constitution looks with compassion on the
workingman and protects his rights not only under a general
statement of a state policy, but under the Article on Social Justice
and Human Rights, thus, placing labor contracts on a higher plane
and with greatest safeguards. Verily, relations between capital
and labor are not merely contractual. They are impressed with
public interest and labor contracts must, perforce, yield to the
common good. We then conclude that complainants prolonged
absence without approval does not fall within the definition of
abandonment and that his dismissal was unjustified
Groundtag etc v. Margallo
594 SCRA 180 (2009)
3.02 Employer-Employee Standard of Conduct

ART. 1701. Neither capital nor labor shall act oppressively
against the other, or impair the interest or convenience of the
23
public
Fair Treatment
Statutory Reference: Civil Code of the Philippines, R.A. No. 386

as amended
Uypitching v. Quiamco
510 SCRA 172
Art. 19. Every person must in the exercise of his rights and in the
performance of his duties, act with justice, give every one his due,
and observe honesty and good faith?
3.01 Role of Law
Law Compliance
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,
22
working conditions, hours of labor and similar subjects
Sarmiento v. Tuico
162 SCRA 676 (1988)
It is also important to emphasize that the return-to-work order
not so much confers a right as it imposes a duty; and while as a
right it may be waived, it must be discharged as a duty even
against the workers will. Returning to work in this situation is not
a matter of option or voluntariness but of obligation
Labor Contracts
Employee Obedience and Compliance Employer Orders
The Civil Code provisions on contract of labor state that the

relation between the parties, that is of capital and labor, are
not merely contractual, impressed as they are with so much
public interest that the same should yield to the common good
Gustilo v. Wyeth Phils., Inc.

440 SCRA 67 (2004)
It is one of the fundamental duties of the employee to yield
obedience to all reasonable rules, orders, and instructions of the
employer and willful or intentional disobedience thereof, as a
general rule, justifies rescission of the contract of service and the
preemptory dismissal of the employee
Quevedo v. Benguet etc

599 SCRA 438
Halaguena v. PAL
602 SCRA 297 (2009)
PT&T v. NLRC
272 SCRA 596 (1997)
Respondents employment was terminated by petitioner
telephone company citing her misrepresenting herself thrice in
company documents as single even after she had contracted
marriage during her stay in the company. Petitioners company
policy dictates that no married woman shall be accepted for
employment
The same restrictions on contracts apply to contracts of labor, and
while the parties may establish any terms, agreements, or
conditions they may deem convenient, these should not be
contrary to laws, morals, good customs, public order, or policy
Brew Master International, Inc. v. NAFLU
22
GTE Directories Corp. v. Sanchez

197 SCRA 452 (1998)
Deliberate disregard or disobedience of rules and the defiance of
management authority cannot be countenanced. To sanction
disregard or disobedience by employees of a rule or order laid
down by management, on the pleaded theory that the rule or
order is unreasonable, illegal, or otherwise irregular for one
reason or another would be disastrous to he discipline and order
that is in the interest of both the employer and his employees to
preserve and maintain in the working establishment and which is
necessary for meaningful operation and progress to be possible
PCIB v. Jacinto
196 SCRA 697 (1991)
Any employee who is entrusted with responsibility by his
employer should perform the task assigned to him with care and
dedication. The lack of written or formal designation should not
be an excuse to disclaim any responsibility for any damages
23
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suffered by the employer due to his negligence. The measure of

the responsibility of an employee is that if he performed his
assigned task efficiently and according to the usual standards,
then he may not be held liable for any damage arising therefrom.
Failing in this, the employee must suffer the consequences of his
negligence if not lack of due care un the performance of his duties
Public Policy
Avon Cosmetics, Inc. v. Luna
511 SCRA 376 (2007)
(2) Motherhood and childhood are entitled to special

care and assistance. All children, whether born in or
out of wedlock, shall enjoy the same social
protection.
4.02 International Covenant on Economic, Social and Cultural
Rights
ART. 6. (1) The States Parties to the present Covenant

recognize the right to work, which includes the right
of everyone to the opportunity to gain his living by
work which he freely chooses or accepts, and will
take appropriate steps to safeguard this right.
(2) The steps to be taken by a State Party to the
present Covenant to achieve the full realization of
this right shall include technical and vocational
guidance and training [programs], policies and
techniques to achieve steady economic, social and
cultural development and full and productive
employment
under
conditions
safeguarding
fundamental political and economic freedoms to the
individual.
ART. 7. The States Parties to the present Covenant

recognize the right of everyone to the enjoyment of
just and favorable conditions of work which ensure, in
particular:
(a) Remuneration which provides all workers, as a
minimum, with:
(i) Fair wages and equal remuneration for
work of equal value without distinction of
any kind, in particular women being
guaranteed conditions of work not inferior
to those enjoyed by men, with equal pay for
equal work; (ii) A decent living for
themselves and their families in accordance
with the provisions of the present
Covenant;
(b) Safe and healthy working conditions;
(c) Equal opportunity for everyone to be promoted in
his employment to an appropriate higher level,
subject to no considerations other than those of
seniority and competence;
(d) Rest, leisure and reasonable limitation of working
hours and periodic holidays with pay, as well as
remuneration for public holidays
ART. 9. The States Parties to the present Covenant

recognize the right of everyone to social security,
including social insurance.
ART. 11. (1) The States Parties to the present

Covenant recognize the right of everyone to an
adequate standard of living for himself and his family,
including adequate food, clothing and housing, and to
the continuous improvement of living conditions. The
States Parties will take appropriate steps to ensure
the realization of this right, recognizing to this effect
the essential importance of international cooperation based on free consent.
(2) The States Parties to the present Covenant,
recognizing the fundamental right of everyone to be
free from hunger, shall take, individually and through
Section 4
LABOR AND INTERNATIONAL COVENENTS
(LABOR STANDARDS AND WELFARE LAW)
4.01 Universal Declaration of Human Rights
ART. 3. Everyone has the right to life, liberty and

security of person.
ART. 7. All are equal before the law and are entitled
without any discrimination to equal protection of the
law. All are entitled to equal protection against any
discrimination in violation of this Declaration and
against any incitement to such discrimination.
ART. 17. (1) Everyone has the right to own property

alone as well as in association with others.
(2) No one shall be arbitrarily deprived of his
property.
ART. 22. Everyone, as a member of society, has the

right to social security and is entitled to realization,
through national effort and international cooperation and in accordance with the organization
and resources of each State, of the economic, social
and cultural rights indispensable for his dignity and
the free development of his personality.
ART. 23. (1) Everyone has the right to work, to free

choice of employment, to just and favorable
conditions of work and to protection against
unemployment.
(2) Everyone, without any discrimination, has the
right to equal pay for equal work.
(3) Everyone who works has the right to just and
favorable remuneration ensuring for himself and his
family an existence worthy of human dignity, and
supplemented, if necessary, by other means of social
protection.
(4) Everyone has the right to form and to join trade
unions for the protection of his interests.
ART. 24. Everyone has the right to rest and leisure,

including reasonable limitation of working hours and
periodic holidays with pay.
ART. 25. (1) Everyone has the right to a standard of

living adequate for the health and well-being of
himself and of his family, including food, clothing,
housing and medical care and necessary social
services, and the right to security in the event of
unemployment, sickness, disability, widowhood, old
age or other lack of livelihood in circumstances
beyond his control.
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international co-operation, the measures, including

specific [programs], which are needed:
(a) To improve methods of production,
conservation and distribution of food by
making full use of technical and scientific
knowledge, by disseminating knowledge of
the principles of nutrition and by
developing or reforming agrarian systems in
such a way as to achieve the most efficient
development and utilization of natural
resources;
(b) Taking into account the problems of
both food-importing and food-exporting
countries, to ensure an equitable
distribution of world food supplies in
relation to need.
4.03 International Covenant on Civil and Political Rights
ART. 8. (1) No one shall be held in slavery; slavery and

the slave-trade in all their forms shall be prohibited.
(2) No one shall be held in servitude.
(3.a) No one shall be required to perform forced or
compulsory labor;
(3.b) Paragraph [3.a] shall not be held to preclude, in
countries where imprisonment with hard labor may
be imposed as a punishment for a crime, the
performance of hard labor in pursuance of a sentence
to such punishment by a competent court;
(3.c) For the purpose of this paragraph the term
"forced or compulsory labor" shall not include:
(i) Any work or service, not referred to in
subparagraph [3.b], normally required of a
person who is under detention in
consequence of a lawful order of a court, or
of a person during conditional release from
such detention;
(ii) Any service of a military character and,
in countries where conscientious objection
is recognized, any national service required
by law of conscientious objectors;
(iii) Any service exacted in cases of
emergency or calamity threatening the life
or well-being of the community;
(iv) Any work or service which forms part of
normal civil obligations.
Section 5
THE LABOR CODE OF THE PHILIPPINES
5.01 Decree Title
The Labor Code is the principal labor law of the country. It

contains most of our labor laws, such as those on illegal
recruitment, wages of workers, rights of union members,
collective bargaining, and employment termination. It also
deals with the rights of employers, such as the right to make
and enforce reasonable regulations, to reorganize and
economize, and to lay off lazy and undisciplined employees
Social justice is the reason for the existence of labor laws and
24
its basis or foundation is the police power of the State
5.02 Effectivity
ART. 2. This Code shall take effect six (6) months after
its promulgation.
5.03 Policy Declaration
ART. 3. 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.
ART. XIII, SEC. 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 selforganization, 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.
4.04 Conventions and Recommendations of the International

Labor Organization (ILO)

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.
International Conventions
International School Alliance of Educators v. Quisumbing
333 SCRA 13 (2000)
International law, which springs from general principles of law,
likewise proscribes discrimination. General principles of law
include principles of equity, i.e. the general principles of fairness
and justice, based on the test of what is reasonable. The Universal
Declaration of Human Rights, the International Covenant on
Economic, Social, and Cultural Rights, the International Covenant
on the Elimination of All Forms of Racial Discrimination in
Education, the Convention (No. 111) concerning Discrimination in
Respect of Employment and Occupation - all embody the general
principle against discrimination, the very antithesis of fairness and
justice. The Philippines, through its Constitution, has incorporated
this principle as part of its national laws
ART. 1. This Decree shall be known as the "Labor

Code of the Philippines"
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
25
investments, and to expansion and growth
5.04 Rational, Spirit, Intent
24
25
Everyones Labor Code (2001). Azucena, pp.7-8

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Magallanes v. Sun Yat Sen Elementary School

542 SCRA 78 (2008)
The Labor Code was promulgated to promote the welfare and
well-being of the working man. Its spirit and intent mandate the
speedy administration of justice, with least attention to
technicalities but without sacrificing the fundamental requisites
of due process.
5.05 Applicability
GR: ART. 6. All rights and benefits granted to workers

under this Code shall, except as may otherwise be
provided herein, apply alike to all workers, whether
agricultural or non-agricultural. (As amended by
Presidential Decree No. 570-A, November 1, 1974)
Note: Important in determining immunity from suit (the

government cannot be made to answer labor claims)
XPN: ART. 276. The terms and conditions of

employment of all government employees, including
employees of government-owned and controlled
corporations, shall be governed by the Civil Service
Law, rules and regulations. Their salaries shall be
standardized by the National Assembly as provided
for in the New Constitution. However, there shall be
no reduction of existing wages, benefits and other
terms and conditions of employment being enjoyed
by them at the time of the adoption of this Code.
Effect: Employees of government agencies may invoke the

jurisdiction of a regular court, Commission on Audit (with
26
regard to money claims) and not the NLRC
ART. IX, B, Sec. 2. (1) The civil service embraces all

branches, subdivisions, instrumentalities, and
agencies of the Government, including governmentowned or controlled corporations with original
27
charters.
Requisite Relationship
Uy v. Buenao
484 SCRA 628 (2006)
Employee-Employer Relationship is important: It is jurisdictional
for provisions of the Labor Code on post-employment to apply
Test - GOCC
Only GOCC with Original Charters come under the Civil Service
Law. If such is organized under the Corporation Law, the Labor
Code shall govern and NLRC shall have jurisdiction over them
Note: But in terms of wages, Labor Code applies to all
LRTA v. Venus
485 SCRA 301 (2006)
Section 2 (1), Article IX ' B, 1987 Constitution, expressly provides
that '[t]he civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original
charters. Corporations with original charters are those which have
been created by special law and not through the general
corporation law. Thus, in Philippine National Oil Company ' Energy
26
27
Everyones Labor Code (2001). Azucena, pp.12-13

CONSTITUTION, Art. IX, B, Sec. 2 (1)
Development Corporation v. Hon. Leogrado, we held that 'under

the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the
Civil Service Law is the manner of its creation such that
government corporations created by special charter are subject to
its provisions while those incorporated under the general
Corporation Law are not within its coverage. There should be no
dispute then that employment in petitioner LRTA should be
governed only by civil service rules, and not the Labor Code and
beyond the reach of the Department of Labor and Employment,
since petitioner LRTA is a government-owned and controlled
corporation with an original charter, Executive Order No. 603,
Series of 1980, as amended
International Agencies
Labor Code is not applicable. Remedy: To ask RP to withdraw
the grant of immunity from suit
Ebro III v. NLRC
261 SCRA 399 (1996)
The Labor Code and the NLRCs jurisdiction also covers/ applies to
labor disputes uninvolving international; agencies except where
the latter possess immunity from legal processes of the
Philippines by virtue of law or generally-accepted international
law principles incorporated as part of the law of our land. The
petition is denied for lack of jurisdiction on the part of the NLRC
The grant of immunity is by virtue of the Convention on the
Privileges and Immunities of Specialized agencies of the UN
adopted by the Senate on May 17, 1949. This has become part of
the law of the land under the Constitution on generally accepted
principles of international law
School Teachers
Chiang Kaishek College v. CA
437 SCRA 171 (2004)
Policies should be adequately known to the employees and
uniformly implemented to the body of employees as a whole and
not in isolation
Constructive dismissal - the employee suffers a cessation from
work because continued employment is rendered impossible,
unreasonable, or unlikely by the employer. A demotion in rank,
diminution in pay, discrimination, insensibility or disdain by an
employer becomes unbearable to the employee
National Mines and Allied Workers Union v. San Idelfonso College
299 SCRA 24 (1998)
Petitioner teachers union filed a complaint for illegal dismissal
and ULP against respondent for violation of tenure
On the issue of whether the individual petitioners were
permanent employees, it is the Manual of Regulations for Private
Schools, and not the Labor Code, which is applicable
Note: Public school teachers governed by the Civil Service Law

Religious Corporations
Ecclesiastical affairs: Labor Code cannot apply
Non-ecclesiastical/ Secular affairs: Labor Code applies
Austria v. NLRC
312 SCRA 410 (1999)
Under the Labor Code, the provision which governs the dismissal
of employees is comprehensive enough to include religious
corporation, such as the SDA, in its coverage
Section1. Coverage - This rule shall apply to all establishments and
undertakings, whether operated to profit or not, including
educational, medical, charitable and religious institutions and
organizations, in cases of regular employment with the exception
11 | P
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its implementing rules and regulations, shall be

resolved in favor of labor.
of Government and its political subdivisions including governmentowned or controlled corporations

With this clear mandate, the SDA cannot hide behind the mantle
of protection of the doctrine of separation of church and state to
avoid its responsibilities as an employer under the Labor Code
Managerial Employees
Pearada v. Baganga Plywood Corp.
489 SCRA 94 (2006)
Article 82 of the Labor Code exempts managerial employees from
the coverage of labor standards
5.06 Rule Making Power
A rule or regulation that exceeds DOLE rule-making authority is

void
Sonza v. ABS-CBN Broadcasting Corp
431 SCRA 583 (2004)
Petitioner Jay Sonza filed a complaint for recovery of his unpaid
salaries, separation pay, service incentive leave pay, 13th month
pay, signing bonus, and other amounts due his Employee Stock
Options plan with respondent ABS-CBN after his irrevocable
resignation and the rescission of his contract. The LA, NLRC and
CA dismissed his complaint on the ground that there was no
employer-employee relationship between the two parties
Sonza argues that the Policy Instruction No. 40 issued by then
Minister of Labor Blas Ople finally settled the status of workers in
the broadcast industry. Under this policy, the types of employees
in the broadcast industry are the station and program employees.
PI 40 is a mere executive issuance which does not have force and
effect of law. There is no legal presumption that PI 40determines
Sonzas status. A mere executive issuance cannot exclude
independent contractors from the class if service providers to the
broadcast industry. The classification of workers in the broadcast
industry into only two groups under PI 40 is not binding on this
Court, especially when the classification has no basis either in law
or in fact
Rizal Empire Insurance Group v. NLRC
150 SCRA 565 (1987)
Administrative regulations and policies enacted by administrative
bodies to interpret the law which they are entrusted to enforce,
have the force of law, and are entitled to great respect
CBTC Employees Union v. Clave
141 SCRA 9 (1986)
A labor regulation which in effect amends the Labor Code is null
and void. An administrative interpretation which diminishes the
benefits of labor to less than what the statute delimits or
withholds is obviously ultra vires
5.07 Law Interpretation
Labor laws are remedial legislation; they are enacted to better

the lot and promote the welfare of the members of the
labouring class. They are liberally construed in order to further
their cause. They cannot be given a narrow and limited
29
interpretation
Liberal Construction
ART. 5. The Department of Labor and other

government
agencies
charged
with
the
administration and enforcement of this Code or any
of its parts shall promulgate the necessary
implementing rules and regulations. Such rules and
regulations shall become effective fifteen (15) days
after announcement of their adoption in newspapers
of general circulation.
Limitation - Rule Making Power - Policy Instructions
ART. 1702. In case of doubt, all labor legislation and

all labor contracts shall be construed in favor of the
28
safety and decent living for the laborer.
HFS Phils. Etc v. Pilar

585 SCRA 315
Halaguena v. PAL
602 SCRA 297 (2009)
Manaya v. Alabang Country Club
525 SCRA 144 (2007)
Duncan Association etc v. Glaxo Wellcome
438 SCRA 343 (2004)
Petitioner Tecson, a medical representative, fell in love with and
married an employee from a pharmaceutical company competing
with his employer (respondent Glaxo). The relationship goes
against company policy which requires all employees to disclose
any existing or future relationships by consanguinity or affinity
with co-employees or employees of rival drug companies.
Respondent reserves the right to transfer an employee who
maintains a relationship that the company perceives as leading to
a conflict of interest
Glaxo insists on its genuine interest as a pharmaceutical company
to avoid any activity, relationship, or interest that may conflict
with their responsibilities to the company. They assert that the
prohibition against personal or marital relationships with
employees of rival companies is reasonable in order to prevent
rival companies from gaining access to Glaxos secrets and
procedures
While our laws endeavor to give life to the constitutional policy on
social justice and the protection of labor, it does not mean that
every labor dispute will be decided in favor of the workers. The
law also recognizes that management has rights which are also
entitled to respect and enforcement in the interest of fair play
Salinas v. NLRC
319 SCRA 54 (1999)
Petitioners filed a complaint against respondent corporation for
illegal dismissal claiming that their security of tenure (having been
hired and re-hired to perform the same jobs several times without
being accorded regular employment status) had been violated.
The LA and the NLRC, however, dismissed the complaint for lack
of merit, saying that petitioners are project employees and not
regular employees
It is basic and irrefragable rule that in carrying out and
interpreting the provisions of the Labor Code and its
implementing regulations, the workingmans welfare should be
the primordial and paramount consideration. The interpretation
herein made gives meaning and substance to the liberal and
compassionate spirit of the law enunciated in Article 4 of the
Labor Code that all doubts 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
ART. 4. All doubts in the implementation and

interpretation of the provisions of this Code, including
28
29

Philippine Labor and Social Legislation Annotated (2005). Alcantara, p.83
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In Favor of Labor - Rationale

Peaflor v. Outdoor Clothing Estate
610 SCRA 497 (2009)
Whatever doubts that remain in our minds on the credibility of
the parties evidence should, by the laws dictate, be settled in
favor of the working man.
Acua v. CA
489 SCRA 658 (2006)
It is a time-honored rule that in controversies between a worker
and his employer, doubts reasonably arising from the evidence or
in the interpretation of agreements and writing should be
resolved in the workers favor. The policy is to extend the
applicability of the decree to a greater number of employees
who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give
maximum aid and protection to labor
Asian Transnational Corp v. CA
425 SCRA 478 (2004)
In any event, Article 4 of the Labor Code provides that all doubts
in the implementation and interpretation of its provisions,
including the implementing rules and regulations, shall be
resolved in favor of labor. For the workingmans welfare should
be the primordial and paramount consideration
Abella v. NLRC
152 SCRA 140 (1987)
Petitioner farm-owner assails an NLRC decision compelling it to
award separation pay to private respondents and challenges the
applicable LC provision (Art. 284) as being invalid for impairing the
obligation of contracts
The policy behind the liberal interpretation of the Labor Code in
favor of labor is to extend the applicability of the decree to a
greater number of employees who can avail of the benefits under
the law, which is in consonance with the avowed policy of the
State to give maximum aid and protection to labor
and regulations, the doubt shall be resolved in favor of the

laborer, we find that the same has no application in this case since
the pertinent provisions of the Labor Code leave no room for
doubt either in their interpretation or application. For sickness or
disability to be compensable, the sickness must be the result of an
accepted occupational disease listed by the ECC, or any other
sickness caused by employment subject to claimants proof that
the risk of contracting the same is increased by the working
conditions
Sweeping Interpretation
Bravo v. Employees Compensation Commission
143 SCRA 101 (1986)
The Court is aware if the mandate that social legislation should be
applied in consonance with the principles of social justice and
protection of labor. however, it cannot adopt a sweeping
interpretation of the law in favor of labor lest we engage in
judicial legislation
Factual Considerations and Rationality

PAL, Inc. v. NLRC
201 SCRA 687 (1991)
Seventeen years after the termination of his employment from
PAL, private respondent Oscar Irineo filed a complaint for illegal
dismissal. PALs defense that Irineos cause of action had
prescribed was overruled by both the Labor Arbiter and the NLRC
based on a PAL circular placing its employees charged with crimes
inimical to the companys interest under preventive suspension
until final adjudication of the case
The Court ruled that considering the letter written by the PAL
president to Irineo categorically expressing the latters immediate
dismissal for just cause, the LA and the NLRCs construction and
application of the circular was untenable. By no stretch of the
imagination can the letter of dismissal be interpreted as one for
preventive suspension
Equity and Moral Consideration

Doubt
Clemente v. GSIS
152 SCRA 500 (1987)
Petitioner assails an Employees Compensation Commission (ECC)
decision denying her application for death benefits for her
deceased husband who died of diseases she claims he contracted
while serving for 10 years as a janitor of a skin clinic. The ECC
denied her claim on the ground that her husbands disease was
not included in the Annexed List of compensable occupational
diseases
This Court has held in appropriate cases that the conservative
posture of the respondents is not consistent with the liberal
interpretation of the Labor Code and the social justice guarantee
embodied in the Constitution in favor of the workers. It clashes
with the injuction in the Labor Code (Article 4) that, as a rule,
doubts should be resolved in favor of the claimant-employee.
Substantial evidence exists that the development of the disease is
brought largely by the conditions present in the nature of the job
No Doubt
Bonifacio v. GSIS
146 SCRA 276 (1986)
Petitioner challenges an ECC decision affirming GSIS denial of his
claim for death benefits for the death of his wife (a schoolteacher)
due to breast cancer. His claim was denied on the ground that
breast cancer is not among the compensable occupational
diseases under Annex A
While we do not dispute petitioners contention that under the
law, in case of doubt in the implementation and interpretation of
the provisions of the Labor Code, including its implementing rules
Manning International Corp. v. NLRC

195 SCRA 155 (1991)
Equity has been defined as justice outside law being ethical rather
than jural or belonging to the sphere of morals than law. It is
grounded on precepts of conscience and not on any sanction of
positive law. However, considerations of equity and social justice
cannot prevail over against the expressed provision of the labor
laws allowing dismissal of employees for cause and without any
provision for separation pay. A decision made to rest solely on
equity, in disregard of relevant provisions of law, is impossible
Fairness
Reliance Surety and Insurance Co,, Inc. v. NLRC
193 SCRA 365 (1991)
Petitioner challenges an NLRC decision ordering reinstatement
without backwages of respondent employees (instead of
dismissal) after a four-week long illegal strike. The NLRC found the
strike to be illegal, but ordered reinstatement nonetheless
As a general rule, the sympathy of the Court is on the side of the
laboring classes, not only because the Constitution imposes
sympathy but because of the one-sided relation between labor
and capital. The Court must take care, however, that in the
contest between labor and capital, the results achieved are fair
and in conformity with the rules
Balancing Conflicting Claims

Duncan Association etc. v. Glaxo Wellcome Phils., Inc
438 SCRA 343 (2004)
The sympathy of the Court is on the side of the laboring classes,
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not only because the Constitution imposes sympathy but because

of the one-sided relation between labor and capital. The Court
must take care, however, that in the contest between labor and
capital, the results achieved are fair and in conformity with the
rules
PAL, Inc. v. NLRC
201 SCRA 687 (1992)
That there should be care and solicitude in the protection and
vindication of the rights of workingmen cannot be gainsaid; but
that care and solicitude can not justify disregard of relevant facts
or eschewal of rationality in the construction of the text
applicable rules in order to arrive at a disposition in favor of an
employee who is perceived as otherwise deserving of sympathy
and commiseration
Section 6
WORK RELATIONSHIP
6.01 Work Relationship
A. Definitions: Employer and Employee
ART. 97, (a) "Person" means an individual,

partnership, association, corporation, business trust,
legal representatives, or any organized group of
persons.
ART. 97, (b) "Employer" includes any person acting

directly or indirectly in the interest of an employer in
relation to an employee and shall include the
government and all its branches, subdivisions and
instrumentalities,
all
government-owned
or
controlled corporations and institutions, as well as
non-profit private institutions, or organizations.
ART. 97, (c) "Employee" includes any individual

employed by an employer.
Art. 167, (f) "Employer" means any person, natural or

juridical, employing the services of the employee.
Art. 167, (g) "Employee" means any person

compulsorily covered by the GSIS under
Commonwealth Act Numbered One hundred eightysix, as amended, including the members of the Armed
Forces of the Philippines, and any person employed
as casual, emergency, temporary, substitute or
contractual, or any person compulsorily covered by
the SSS under Republic Act Numbered Eleven
hundred sixty-one, as amended.
Art. 212, (e) "Employer" includes any person acting in

the interest of an employer, directly or indirectly. The
term shall not include any labor organization or any
of its officers or agents except when acting as
employer.
Art. 212, (f) "Employee" includes any person in the

employ of an employer. The term shall not be limited
to the employees of a particular employer, unless the
Code so explicitly states. It shall include 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.
POLICY INSTRUCTION NO. 40 defines program

employees asxxx those whose skills, talents or
services are engaged by the station for a particular or
specific program or undertaking and who are not
required to observe normal working hours such that
on some days they work for less than eight (8) hours
and on other days beyond the normal work hours
observed by station employees and are allowed to
enter into employment contracts with other persons,
stations, advertising agencies or sponsoring
companies. The engagement of program employees,
including those hired by advertising or sponsoring
companies, shall be under a written contract
specifying, among other things, the nature of the
work to be performed, rates of pay and the programs
in which they will work. The contract shall be duly
registered by the station with the Broadcast Media
30
Council within three (3) days from its consummation
Employee
Uy v. Villanueva
526 SCRA 73 (2007)
An employee usually occupies no office and generally is employed
not by action of the directors or stockholders but by the managing
officer of the corporation who also determines the compensation
to be paid to such employee.
United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma
288 SCRA 15 (1998)
As can be seen from this description, a distinction exists between
those who have the authority to devise, implement and control
strategic and operational policies (top and middle managers) and
those whose task is simply to ensure that such policies are carried
out by the rank-and-file employees of an organization (first-level
managers/supervisors). What distinguishes them from the rankand-file employees is that they act in the interest of the employer
in supervising such rank-and-file employees.
Managerial employees may therefore be said to fall into two
distinct categories: the managers per se, who compose the
former group described above, and the supervisors who form
the latter group. Whether they belong to the first or the second
category, managers, vis--vis employers, are, likewise, employees
The rationale for inhibiting to and middle-level managerial
employees from joining labor unions is the evident conflict of
interest that may arise and the possibility that the Union will be
dominated by the employer
B. Employer-Employee Relationship
Four-Fold Test for Determining the Existence of an EmployerEmployee Relationship:
1. Selection of Employee (Hiring)
2. Payment of Wages
3. Power to Dismiss (Firing)
4. Control on Employee on Means and Methods (Control)
i. Control over both the results to be achieved and the
means to be used to achieve that result
ii. Does not require the actual existence of control but
only the mere existence of the right to control
Factual Test
Television and Production Exponents, Inc. v. Servaa
542 SCRA 578 (2008)
It bears emphasis that the existence of employer-employee
Television and Production Exponents, Inc. v. Servaa, G.R. No. 167648,
January 28, 2008
30
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relationship is ultimately a question of fact

Jurisprudence is abound with cases that recite the factors to be
considered in determining the existence of employer-employee
relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee with
respect to the means and method by which the work is to be
accomplished. The most important factor involves the control
test. Under the control test, there is an employer-employee
relationship when the person for whom the services are
performed reserves the right to control not only the end achieved
but also the manner and means used to achieve that end.
Remington Industrial Sales Corp v. Castaeda
507 SCRA 391 (2007)
The determination of the existence of an employer-employee
relationship is defined by law according to the facts of each case,
regardless of the nature of the activities involved.
Gomez v. PNOC
606 SCRA 187 (2009)
But the relationship of a person to a corporation, whether as
officer or agent or employee, is not determined by the nature of
the services he performs but by the incidents of his relationship
with the corporation as they actually exist.
Established
Miguel v. JCT Group, Inc.
453 SCRA 529 (2005)
The defense of respondents is anchored on an alleged lack of
employer-employee relationship with petitioners as stipulated in
the formers MOA with De Soleil. JCT further claims that any
relationship with De Soleil and the latters employees was
severed upon the termination of the Agreement. It is therefore
imperative to determine the nature of the MOA--WON it partook
only a consultancy agreement, in which no employer-employee
relationship existed between petitioners and respondents. The
test for determining an employer-employee relationship hinges
on resolving who has the power to select employees, who pays
their wages, who has the power to dismiss them, and who
exercises control in the methods and results by which the work is
accomplishedin resolving the status of the MOA, the test for
determining an employer-employee relationship has to be
applied
Wack-Wack Golf and Country Club v. NLRC
456 SCRA 280 (2005)
BSMI admitted that employed the respondents giving said retired
employees some degree of priority, and in order to have a
smooth transition of operations, in accordance with its own
recruitment policies, the respondent were made to sign
applications of employment, accepting the condition that they
were only hired by BSMI as probationary employees only. Not
being contrary to law, morals, good custom, public policy and
public order, these employment contracts, which the parties are
bound are considered valid
Unfortunately, after study and evaluation of its personnel
organization, BSMI was impelled to terminate the services if the
respondents on the ground of redundancy. this right to hire and
fire is another element of the employer-employee relationship
which actually existed between the respondent and BSMI, and
not with Wack-Wack
Factors
Masonic, etc. v. Madjos
605 SCRA 721 (2009)
The existence of an employer-employee relationship is a question
of fact which should be supported by substantial evidence.
It is common practice for companies to provide identification

cards to individuals not only as a security measure, but more
importantly to identify the bearers thereof as bona
fide employees of the firm or institution that issued them. The
provision of company-issued identification cards and uniforms to
respondents, aside from their inclusion in MCIs summary payroll,
indubitably constitutes substantial evidence sufficient to support
only one conclusion: that respondents were indeed employees of
MCI.
Pacific Consultants International Asia, Inc. v. Schonfeld
516 SCRA 209 (2007)
Jurisprudence is firmly settled that whenever the existence of an
employment relationship is in dispute, four elements constitute
the reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employers power to control the employees
conduct. It is the so-called control test which constitutes the most
important index of the existence of the employer-employee
relationship that is, whether the employer controls or has
reserved the right to control the employee not only as to the
result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to
control not only the end to be achieved but also the means to be
used in reaching such end.
Gabriel v. Bilon
515 SCRA 29 (2007)
[T]he relationship between jeepney owners/operators and
jeepney drivers under the boundary system is that of employeremployee and not of lessor-lessee because in the lease of chattels
the lessor loses complete control over the chattel leased although
the lessee cannot be reckless in the use thereof, otherwise he
would be responsible for the damages to the lessor. In the case of
jeepney owners/operators and jeepney drivers, the former
exercises supervision and control over the latter. The fact that
the drivers do not receive fixed wages but get only that in excess
of the so-called boundary [that] they pay to the owner/operator
is not sufficient to withdraw the relationship between them from
that of employer and employee. Thus, private respondents were
employees because they had been engaged to perform activities
which were usually necessary or desirable in the usual business or
trade of the employer.
Philippine Global Communicators, Inc. v. De Vera
459 SCRA 260 (2005)
The Court, in determining the existence of an employer-employee
relationship, has invariably adhered to the four-fold test. The
elements of an employer-employee relationship are wanting in
this case. We may add that the records of the case replete with
evidence showing that the respondent had to bill petitioner for
his monthly professional fees. It simply runs against the grain of
common experience to imagine that an ordinary employee has
yet to bill his employer to receive his salaryHere, petitioner had
no control over the means and methods by which respondent
went about performing his work at the company premises. he
could even embark in the private practice (respondent here is a
physician) of his profession, not to mention the fact that
respondents work hours and additional compensation therefore
were negotiated upon by the parties
Control Test
-To be distinguished from the control test used in Independent
Contractor; In IC, control is used not to test employer-employee
relationship but WON there is control (as to the means only) as
would warrant a relationship with an IC
Locsin v. PLDT
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602 SCRA 740 (2009)

SGV v. De Raedt
589 SCRA 160 (2009)
To determine the existence of an employer-employee
relationship, case law has consistently applied the four-fold test.
The so-called control test is the most important indicator of the
presence or absence of an employer-employee relationship.
Lopez v. MWSS
462 SCRA 425 (2005)
Not essential to actually supervise, it is enough to have a right to
wield power of control
Felix v. Buenaseda
240 SCRA 139 (1996)
A residency or resident physician position in a medical specialty is
never a permanent one. Residency connotes training and
temporary status. Promotion to the next post-graduate year is
based on merit and performance determined by periodic
evaluations and examinations of knowledge, skills and bedside
manner. Under this system, residents, especially those in
university teaching hospitals enjoy their right to security of tenure
only to the extent that they periodically make the grade. While
physicians (or consultants) of specialist rank are not subject to the
same stringent evaluation procedures, specialty societies require
continuing education as a requirement for accreditation in good
standing, in addition to peer review processes based on
performance, mortality and morbidity audits, feedback from
residents, interns and medical students and research output. The
nature of the contracts of resident physicians meets traditional
tests for determining employer employee relationships, but
because the focus of residency is training, they are neither here
nor there. Moreover, stringent standards and requirements for
renewal of specialist rank positions or for promotion to the next
postgraduate residency year are necessary because lives are
ultimately at stake.
From the position of senior resident physician, which he held at
the time of the government reorganization, the next logical step
in the stepladder process was obviously his promotion to the rank
of Medical Specialist 1, a position which he apparently accepted.
Such status, however, clearly carried with it certain professional
responsibilities including the responsibility of keeping up with the
minimum requirements of specialty rank, the responsibility of
keeping abreast with current knowledge in his specialty and in
Medicine in general, and the responsibility of completing board
certification requirements within a reasonable period of time. The
evaluation made by petitioner's peers and superiors clearly
showed that he was deficient in a lot of areas, in addition to the
fact that at the time of his non-renewal, he was not even boardcertified.
As respondent CSC has correctly pointed out, the appointment
was for a definite and renewable period which, when it was not
renewed, did not involve a dismissal but an expiration of the
petitioners term.
RTransport Corp. v. Ejandra
428 SCRA 725 (2004)
Petitioner is barred to negate the existence of an employeremployee relationship. In its petition filed before this Court,
petitioner invoked our rulings on the right of an employer to
dismiss an employee for just cause. Petitioner maintains that
private respondent was justifiably dismissed due to abandonment
of work. By adopting said ruling, petitioner impliedly admitted
that it was in fact the employer of private respondent
Insular Life v. NLRC
179 SCRA 459 (1989)
EER exists: rules that control/fix methodology + bind/restrict the
party hired to use of such means (result + means)
EER does not exist: rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating

the means or methods to be employed in attaining it (result only)
Economic Test
-Entails looking into the existing economic conditions between
the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-employee
relationship
Reason: Application of a strict test such as the four-fold test can
lead to results that deal injustice to the employee
Secondary Test - Mischief Remedy Test
1. SSS
2. Withholding taxes
3. State Insurance Fund
4. Pag-Ibig Fund
(All these require that the recipient is an employee)
Sevilla v. CA
160 SCRA 171 (1988)
In this jurisdiction, there has been no uniform test to determine
the existence of an employer-employee relation. In general, we
have relied on the so-called right of control test where the
person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be
used in reaching such end. Subsequently, however, we have
considered, in addition to the standard of right of control, the
existing economic conditions prevailing between the parties, like
the inclusion of the employees in the payrolls, in determining the
existence of an employer-employee relationship
Francisco v. NLRC
500 SCRA 690 (2006)
In Sevilla v. Court of Appeals, we observed the need to consider
the existing economic conditions prevailing between the parties,
in addition to the standard of right-of-control like the inclusion of
the employee in the payrolls, to give a clearer picture in
determining the existence of an employer-employee
relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer
and employee depends upon the circumstances of the whole
economic activity, such as:
(1) the extent to which the services performed are an integral
part of the employers business;
(2) the extent of the workers investment in equipment and
facilities;
(3) the nature and degree of control exercised by the employer;
(4) the workers opportunity for profit and loss;
(5) the amount of initiative, skill, judgment or foresight required
for the success of the claimed independent enterprise;
(6) the permanency and duration of the relationship between the
worker and the employer; and
(7) the degree of dependency of the worker upon the employer
for his continued employment in that line of business.
The proper standard of economic dependence is whether the
worker is dependent on the alleged employer for his continued
employment in that line of business. In the United States, the
touchstone of economic reality in analyzing possible employment
relationships for purposes of the Federal Labor Standards Act is
dependency. By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the
Labor Code ought to be the economic dependence of the worker
on his employer.
Agreement
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Chavez v. NLRC
478 (2005)
The contract of service,\ to the contrary notwithstanding, the
factual circumstances earlier discussed indubitably establish the
existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that
the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract and providing
therein that the employee is an independent contractor when, as
in this case, the facts clearly show otherwise. Indeed, the
employment status of a person is defined and prescribed by law
and not by what the parties say it should be.
San Miguel Corp v. Abella
461 SCRA 392 (2005)
The Contract of Service between SMC and Sunflower shows that
the parties clearly disapproved the existence of an employeremployee relationship between SMC and private respondents.
The language of a contract is not, however, determinative of the
parties relationship, rather it is the totality of facts and
surrounding circumstances of the case. A party cannot dictate, by
the mere expedient of a unilateral declaration in a contract, the
character of its business, i.e., whether labor only contractor or job
contractor, it being crucial that its character be measured in
terms of and determined by the criteria set by statute
Lopez v. MWSS
462 SCRA 428 (2005)
MWSS makes an issue out of the proviso in the Agreement that
specifically denies the existence of employer-employee
relationship between it and petitioners. It is axiomatic(supra)
Sonza v. ABS-CBN
431 SCRA 381 (2004)
Insular Life v. NLRC
287 SCRA 476 (1998)
It is axiomatic that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in the
management contract and providing therein that the employee
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 earlier mentioned has to be
applied
Broadcast - Talents - Performers
desirability of the petitioners work in private respondent ABCs

business.
ABS-CBN v. Nazareno
503 SCRA 204 (2007)
The fact that respondents received pre-agreed talent fees
instead of salaries, that they did not observe the required office
hours, and that they were permitted to join other productions
during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered talents
because they are not actors or actresses or radio specialists or
mere clerks or utility employees. They are regular employees who
perform several different duties under the control and direction
of ABS-CBN executives and supervisors.
Method of Wage Payment

Almirez v. Infinite Corp. Technology Corp
480 SCRA 364 (2006)
The Court has consistently held a four tier test to evaluate the
existence of an employer-employee relationship which include: 1)
manner of selection of engagement, 2) payment of wages, 3)
presence or absence of power of dismissal and 4) presence or
absence of power of control.
The deduction for SSS and tax do not bolster Almirezs contention
that there was an employee-employer relationship. However,
only one pay slip was issued (Januaryb 16-31, 2000) and the rest
were in cash vouchers. As such, the payslip cannot be considered
as proof of an employer-employee relationship.
The use of the word salary is not determinative of such a
relationship either. Salary is defined as remuneration for services
given. The contract details her salary and it serves between the
parties was the law governing them. But the contract, as pointed
out earlier, is bereft of proof of control of Infinite Loop over
Almirez.
Lazaro v. SSS
435 SCRA 472 (2004)
The fact that Laudato was paid by way of commission does not
preclude the establishment of an EERthe relevant factor
remains whether the employer controls or has reserved the right
to control the employee not only as to the result of the work to
be done but also to the means and methods by which the same is
to be accomplished
Hours of Work
Peoples, etc v. Sec. DOLE

587 SCRA 724 (2009)
Lazaro v. SSS
435 SCRA 472 (2004)
Television etc v. Servana

542 SCRA 578 (2008)
An independent contractor is not an employee of the employer,
while a talent or program employee is an employee. The only
difference between a talent or program employee and a regular
employee is the fact that a regular employee is entitled to all
the benefits that are being prayed for.
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 employer similarly denied the
existence of an employer-employee relationship, as the claimant
according to it, was a supervisor on commission basis who did not
observe normal hours of work. this Court declared that there was
an employer-employee relationship, noting that, although
compensated on commission basis, is exempt from the
observance of normal hours of works for his compensation is
measured by the number of sales he makes
Dumpit-Murillo v. CA
524 SCRA 290 (2007)
In our view, the requisites for regularity of employment have
been met in the instant case. Gleaned from the description of the
scope of services aforementioned, petitioners work
was necessary or desirable in the usual business or trade of the
employer which includes, as a pre-condition for its
enfranchisement, its participation in the governments news and
public information dissemination. In addition, her work was
continuous for a period of four years. This repeated engagement
under contract of hire is indicative of the necessity and
Proof (substantial evidence)

Television and Production Exponents, Inc. v. Servaa
542 SCRA 578 (2008)
Lopez v. Bodega City
532 SCRA 56 (2007)
In filing a complaint before the Labor Arbiter for illegal dismissal
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contracting and determine who among the parties

involved shall be considered the employer for
purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
based on the premise that she was an employee of respondent, it

is incumbent upon petitioner to prove the employee-employer
relationship by substantial evidence
McLeod v. NLRC
512 SCRA 222 (2007)
There 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, and the workers recruited and placed by such
person are performing activities which are directly
related to the principal business of such employer. In
such cases, the person or intermediary shall be
considered merely as an agent of the employer who
shall be responsible to the workers in the same
manner and extent as if the latter were directly
employed by him.
Domasig v. NLRC
261 SCRA 779 (1996)
It has long been established that in administrative and quasijudicial proceedings, substantial evidence is sufficient as a basis
for judgment on the existence of employer-employee
relationship. No particular form of evidence is required to prove
the existence of such
Absence of Relationship
Lopez v. Bodega City
532 SCRA 56 (2007)
The so-called control test is commonly regarded as the most
crucial and determinative indicator of the presence or absence of
an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for
whom the services are performed reserves the right to control
not only the end achieved, but also the manner and means to be
used in reaching that end.
Abante v. Lamadrid etc

430 SCRA 368 (2004)
Examples of absence of control:
1. Compensation by commission, no quota imposed
2. Not required to report to the office or submit periodic progress
reports
3. No interference or supervision from management
4. Employee is left to own style, strategy resources
Denial - Negative Pregnant Rule

RTransport Corp. v. Ejandra
428 SCRA 725 (2004)
Invoking the right to dismiss indicates employer-employee
relationship
6.02 Independent Contractor and Labor Contractor Only
ART. 106. Contractor or subcontractor. - Whenever an

employer enters into a contract with another person
for the performance of the formers work, the
employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with
the provisions of this Code.
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.
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting
as well as differentiations within these types of
ART. 107. Indirect employer. - The provisions of the

immediately preceding article shall likewise apply to
any 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.
ART. 109. Solidary liability. - The provisions of existing
laws to the contrary notwithstanding, every employer
or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
A. Independent Contractor
Recognition
Temic etc v. Temic
609 SCRA 355 (2009)
Coca Cola etc v. Dela Cruz
608 SCRA 16 (2009)
The law allows contracting and subcontracting involving services
but closely regulates these activities for the protection of
workers.Thus, an employer can contract out part of its
operations, provided it complies with the limits and standards
provided in the Code and in its implementing rules.
In strictly laymans terms, a manufacturer can sell its products on
its own, or allow contractors, independently operating on their
own, to sell and distribute these products in a manner that does
not violate the regulations. From the terms of the above-quoted
D.O. 18-02, the legitimate job contractor must have the
capitalization and equipment to undertake the sale and
distribution of the manufacturers products, and must do it on its
own using its own means and selling methods
Management Function - Determination Need

Manila Electric Co v. Quisumbing
302 SCRA 173 (1999)
The Company has the prerogative to contract out services
provided that this move is based on valid business reasons in
accordance with law, is made in good faith, is reasonably
exercised and, provided further that if the contracting out
involves more than six months, the Union must be consulted
before its implementation.
In San Miguel Employees Union-PTGWO vs Bersamina,[43]
(where we recognized that contracting out of work is a
proprietary right of the employer in the exercise of an inherent
18 | P
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management prerogative) the issue we see is whether the

Secretarys consultation requirement is reasonable or unduly
restrictive of the companys management prerogative.
We recognize that a balance already exist in the parties
relationship with respect to contracting out; MERALCO has its
legally defined and protected management prerogatives while
workers are guaranteed their own protection through specific
labor provisions and the recognition of limits to the exercise of
management prerogatives.
equipment
directly
or
intended to be related to the
job contracted
2. Carries an independent
business different from the
employers
3. Undertakes to perform
the job under its own
account and responsibility
Trilateral Relationship
PAL v. Ligan
547 SCRA 181 (2008)
In Department Order (D.O.) No. 18-02, Series of 2002:
Section 3. Trilateral relationship in contracting arrangements. In
legitimate contracting, there exists a trilateral relationship under
which there is a contract for a specific job, work or service
between the principal and the contractor or subcontractor, and a
contract of employment between the contractor or subcontractor
and its workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake
the performance of the job, work or service, and the contractual
workers engaged by the contractor or subcontractor to
accomplish the job, work or service.
Requirements - Independent Contractor

Traveo v. Bobongon
598 SCRA 627
4. Not under control and

supervision of the employer
No EER except when the
contractor
or
the
subcontractor fails to pay
the wages of the EE
Limited liability (principal
solidarily
liable
with
contractor or subcontractor
only when the latter fails to
comply
with
the
requirements as to unpaid
wages and other labor
standards violations
Permissible
equipment
2.
No
business
independent
3. Performs activities
directly related to the
main business of the
principal
4. Under control and
supervision of the ER
Principal treated as direct
employer of the person
recruited in all instances
Liable fully as an ER
Prohibited
Source: UP Portia Bar Mental Jugger

Iligan Cement etc v. Fliasor
586 SCRA 449 (2009)
PAL, Inc. v. Ligan
547 SCRA 181 (2008)
"Substantial capital or investment" refers to capital stocks and
subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted
out.
The "right to control" shall refer 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.
Big AA Manufactirer v. Antonio
484 SCRA 333 (2006)
Lakas v. Burlingame Corp
524 SCRA 690 (2007)
Job contracting is permissible only if the following conditions are
met: 1) the contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to
the results thereof; and 2) the contractor has substantial capital
or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct
of the business.
INDEPENDENT
CONTRACTORS
1. Has sufficient substantial
capital/
investment
in
machinery,
tools
or
LABOR ONLY
CONTRACTORS
1. No substantial capital/
investment in the form of
machinery,
tools
or
Desirable - Unnecessary
Manila Electric Co v. Benamira
463 SCRA 331 (2005)
Security guard unnecessary in distribution of electricity
Coca Cola Bottlers Phil., Inc. v. NLRC
307 SCRA 131 (1999)
The court took judicial notice of the practice adopted in several
institutions and industries of hiring janitorial services on an
independent contractor basis. In this respect, although the
janitorial services may be considered as directly related to the
principal business of an employer, as with every business, we
deemed them unnecessary in the conduct of the employers
principal business
Proof
Oregas v. NLRC
559 SCRA 153
Employer-Employee Relationship
Mercury Drug Corp v. Libunao
434 SCRA 404 (2004)
The petitioner had assigned Sido to help the management open
and close the door of the drug store; inspect the bags of
customers as they enter the store; and, check the receipts issued
by the cashier to said customers for their purchases. Such
circumstances do not automatically make the security guard the
employee of the petitioner, and, as such, liable for the guard's
tortious acts. The fact that a client company may give instructions
or directions to the security guards assigned to it, does not, by
itself, render the client responsible as an employer of the security
guards concerned and liable for their wrongful acts or omissions.
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PAL, Inc v. NLRC

298 SCRA 430 (1998)
a) Janitorial service agreement is not labor-only contacting AND
b) Extension of service contract is not a source of employeremployee relation.
The employee-employer relation existed between the individual
private respondents and STELLAR, not PAL. STELLAR possessed
these earmarks of an employer:
(1) the power of selection and engagement of employees
(2) the payment of wages
(3) the power of dismissal, and
(4) the power to control the employee's conduct
A contract of employment existed between STELLAR and the
individual private respondents, proving that it was said
corporation which hired them. It was also STELLAR which
dismissed them, as evidenced by Complainant Parenas'
termination letter, which was signed by Carlos P. Callanga, vice
president
for
operations
and
comptroller
of
STELLAR. Likewise, they worked under STELLAR's own supervisors,
Rodel Pagsulingan, Napoleon Parungao and Renato Topacio.
STELLAR even had its own collective bargaining agreement with
its employees, including the individual private respondents.
Moreover, PAL had no power of control and dismissal over them.
Liability
Jaguar v. Sales
552 SCRA 295 (2008)
This joint and several liability facilitates, if not guarantees,
payment of the workers' performance of any work, task, job or
project, thus giving the workers ample protection as mandated by
the 1987 Constitution.
labor-only contractors as they did not supply, recruit nor hire the
workers.
C. Effect of Finding
Mandaue etc v. Andales
548 SCRA 17 (2008)
San Miguel Corp v. MAERC Integrated Services, Inc
405 SCRA 579 (2003)
In legitimate job contracting, the law creates an employeremployee relationship for a limited purpose, i.e., to ensure that
the employees are paid their wages. The principal employer
becomes jointly and severally liable with the job contractor only
for the payment of the employees' wages whenever the
contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the
employees.
On the other hand, in labor-only contracting, the statute creates
an employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The contractor
is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor
as if such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarily
liable with the labor-only contractor for all the rightful claims of
the employees.
Aboitiz Haulers, Inc v. Dimapatol
502 SCRA 271 (2006)
Coca Cola etc v. Dela Cruz
608 SCRA 16 (2009)
MERALCO v. NLRC
548 SCRA 315 (2008)
Eparwa Security v. Liceo de Cagayan
608 SCRA 370 (2007)
Section 7
EMPLOYEE CLASSIFICATION
B. Labor Contractor Only
Statutory Reference: Art. 280; Book IV, Rule 1, Sec. 5, Omnibus

Rules
Requisites and Prohibition
7.01 Coverage
Iligan Cement etc v. Fliasor

586 SCRA 449 (2009)
Mandaue etc v. Andales
548 SCRA 17 (2008)
Aboitiz Haulers, Inc v. Dimapatol
502 SCRA 271 (2006)
Maraguinot v. NLRC
284 SCRA 539 (1998)
It is settled that the contracting out of labor is allowed only in
case of job contracting
Assuming that the associate producers are job contractors, they
must then be engaged in the business of making motion pictures.
As such, and to be a job contractor under the preceding
description, associate producers must have tools, equipment,
machinery, work premises, and other materials necessary to
make motion pictures. The associate producer did not have
substantial capital nor investment in the form of tools, equipment
and other materials necessary for making a movie. If private
respondents insist that their associate producers are labor
contractors, then these producers can only be labor-only
contractors.
As labor-only contracting is prohibited, the law considers the
person or entity engaged in the same a mere agent or
intermediary of the direct employer. But even by the preceding
standards, the associate producers of VIVA cannot be considered
ART. 278. Coverage. - The provisions of this Title shall

apply to all establishments or undertakings, whether
for profit or not.
7.02 Employee Classification
ART. 280. Regular and casual employment. - The

provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement
of the parties, 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 or termination of which has been
determined at the time of the engagement of the
employee or where the work or service to be
performed is seasonal in nature and the employment
is for the duration of the season.
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
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respect to the activity in which he is employed and his

employment shall continue while such activity exists.
7.03 Regular Employees
ART. 280, Par. 1: The provisions of written agreement

to the contrary notwithstanding and regardless of the
oral agreement of the parties, 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
ART. 280, Par. 2: 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.
ART. 281, Last Sentence: An employee who is allowed

to work after a probationary period shall be
considered a regular employee.
ART. 75 Learnership agreement. - Any employer

desiring to employ learners shall enter into a
learnership agreement with them, which agreement
shall include:
ART. 281. Probationary employment. - Probationary

employment shall not exceed six (6) months from the
date the employee started working, unless it is
covered by an apprenticeship agreement stipulating a
longer period. The services of an employee who has
been engaged on a probationary basis may be
terminated for a just cause or 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 his engagement. An
employee who is allowed to work after a
probationary period shall be considered a regular
employee.
Recognition and Types

Glory Philippines, Inc. v. Vergara
531 SCRA 253 (2007)
Pangilinan v. General Milling Corp
434 SCRA 159 (2004)
Article 280 of the Labor Code comprehends three kinds of
employees:
(a) regular employees or those whose work is necessary or
desirable to the usual business of the employer
(b) project employees or those whose 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 where the work or services to be
performed is seasonal in nature and the employment is for the
duration of the season
(c) casual employees or those who are neither regular nor project
employees
Nature of Issue
Universal Robina etc v. Caballeda
560 SCRA 115
Whether or not Agripino was a seasonal/project employee or a
regular employee is a question of fact. As such, this Court is not at
liberty to review the said factual issue because our jurisdiction is
generally limited to reviewing errors of law that the CA may have
committed. Time and again, we have held that this Court is not a
trier of facts, and it is not for us to re-examine and re-evaluate
the probative value of evidence presented before the LA, the
NLRC and the CA, which formed the basis of the assailed decision.
Employer Determination - Effect

San Miguel Corporation v. NLRC
297 SCRA 277 (1998)
The nature of ones employment does not depend on the will or
word of the employer. Nor on the procedure of hiring and the
manner of designating the employee, but on the nature of the
activities to be performed by the employee, considering the
employers nature of business and the duration and scope of the
work to be done.
Tabas v. California Manufacturing Co, Inc; NLRC
169 SCRA 497 (1989)
As we held in PBC v. NLRC, a temporary or casual employee,
under Article 218 of the Labor Code, becomes regular after
service of one year, unless he has been contracted for a specific
project. Merchandising is not a specific project, it is an activity
related to the day-to-day operations of California.
(d) A commitment to employ the learners if they so

desire, as regular employees upon completion of the
learnership. All learners who have been allowed or
suffered to work during the first two (2) months shall
be deemed regular employees if training is
terminated by the employer before the end of the
stipulated period through no fault of the learners.
The learnership agreement shall be subject to the
inspection by the Secretary of Labor and Employment
or his duly authorized representative
Types - Regular Employees
Philips Semiconductors v. Fadriquela
427 SCRA 408
According to Article 280 of the Labor Code, there are 2 kinds of
regular employees:
(1) those engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer; and
(2) those casual employees who have rendered at least one year
of service, whether continuous or broken, with respect to the
activities in which they are employed.
The respondent obviously falls under the first type of regular
employee. She had been working continuously for the petitioner
for over a year, evidencing the necessity and indispensability of
her services to the petitioners business. By operation of law,
respondent had attained regular status and was thus entitled to
security of tenure as provided in Art. 279 of the code. The said
article requires a just cause before termination, and entitles the
employee to reinstatement and other privileges in absence of
one.
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Other Regular employees:

1. Causal employee after 1 year of service whether continuous
or broken
2. Probationary employee who is allowed to work even after
completion of probationary period
3. Learner who is allowed or suffered work during first 2
months of learner period, if training is terminated by employer
before end of stipulated period
4. Project employees where the employment period is
extended long after the supposed project has been finished
5. Project employees performing activities which are usually
necessary or desirable in the usual business or trade of the
employer + continuously for more than the duration of the
31
period
6. Workpool employees CONTINUOUSLY (not intermittently) rehired by the SMAE EMPLOYER, SAME TASK/ NATURE OF TASK
and Task is vital, necessary and indispensable for the usual
32
business of the employer
33
7. Seasonal employees who are continuously re-hired
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.
Lopez v. Metropolitan Waterworks and Sewerage System

462 SCRA 428
The primary standard of 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. The test is whether the former is usually necessary or
desirable in the usual trade or business of the employer. 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. Likewise, the continuing need for
the performance of the job has been deemed sufficient evidence
of the necessity, if not indispensability of the activity to the
business
Nature of Work
Hiring Extend Period
Magsalin v. National Organization of Working Men
403 SCRA 199
In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable
connection between the particular activity performed by the
employee in relation to the usual business or trade of the
employer. The standard, supplied by the law itself, is whether
the work undertaken is necessary or desirable in the usual
business or trade of the employer, a fact that can be assessed by
looking into the nature of the services rendered and its relation
to the general scheme under which the business or trade is
pursued in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal activities required in
carrying on the particular business or trade. But, although the
work to be performed is only for a specific project or seasonal,
where a person thus engaged has been performing the job for at
least one year, even if the performance is not continuous or is
merely intermittent, the law deems the repeated and continuing
need for its performance as being sufficient to indicate the
necessity or desirability of that activity to the business or trade of
the employer. The employment of such person is also then
deemed to be regular with respect to such activity and while such
activity exists.
The postproduction activities done by sales route helpers are
important. The nature of the work performed must be viewed
from a perspective of the business or trade in its entirety and not
on a confined scope.
Hacienda Fatima v. National Federation of Sugarcane WorkersFood and General Trade
396 SCRA 518
The primary standard of determining regular employment is the
employer. The test is whether the former is usually necessary or
desirable in the usual trade or business of the employer. 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 employee has been
performing the job for at least a year, even if the performance is
Imbuido v. NLRC, 329 SCRA 357
Maraguinot v. NLRC, (1998)
33 Manila Hotel v. CIR
31
32
Contract to Contract
Beta Electric Corp v. NLRC
182 SCRA 384
The petitioner can not rightfully say that since the private
respondent's employment hinged from contract to contract, it
was ergo, "temporary", depending on the term of each
agreement. Under the Labor Code, an employment may only be
said to be "temporary" "where [it] has been fixed for a specific
undertaking the completion of or termination of which has been
determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season." Quite to
the contrary, the private respondent's work, that of "typist-clerk"
is far from being "specific" or "seasonal", but rather, one,
according to the Code, "where the employee has been engaged
to perform activities which are usually necessary or desirable in
the usual business." And under the Code, where one performs
such activities, he is a regular employee, "[t]he provisions of
written agreement to the contrary notwithstanding.
Universal Robina Corporation v. Catapang
473 SCRA 189
It is obvious that the said five-month contract of employment was
used by petitioners as a convenient subterfuge to prevent private
respondents from becoming regular employees. Such contractual
arrangement should be struck down or disregarded as contrary to
public policy or morals. To uphold the same would, in effect,
permit petitioners to avoid hiring permanent or regular
employees by simply hiring them on a temporary or casual basis,
thereby violating the employees security of tenure in their jobs.
Petitioners act of repeatedly and continuously hiring private
respondents in a span of 3 to 5 years to do the same kind of
work negates their contention that private respondents were
22 | P
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hired for a specific project or undertaking only.
Length of Time
Maraguinot v. NLRC
284 SCRA 539
The length of time during which the employee was continuously
re-hired is not controlling, but merely serves as a badge of regular
employment.
Abesco Construction And Development Corporation v. Ramirez
487 SCRA 9
The SC ruled that respondents were regular employees but not
for the reasons given by the LA (which both the NLRC and the CA
affirmed). Citing Palomar, et al. v. NLRC, the SC held that contrary
to the disquisitions of the LA, employees (like respondents) who
work under different project employment contracts for several
years do not automatically become regular employees; they can
remain as project employees regardless of the number of years
they work. Length of time is not a controlling factor in
determining the nature of ones employment.
Seafarers
It is clear that seafarers are considered contractual employees.
They can not be considered as regular employees under Article
280 of the Labor Code. Their employment is governed by the
contracts they sign everytime they are rehired and their
employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time.
They fall under the exception of Article 280 whose employment
has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the
time of engagement of the employee or where the work or
services to be performed is seasonal in nature and the
employment is for the duration of the season.
7.04 Project Employees
ART. 280, Par. 1: where the employment has been

fixed for a specific project or undertaking the
Defined
ALU-TUCP v. NLRC
234 SCRA 678
In business and industry, project could refer to one or the other
of at least two distinguishable types of activities. Firstly, a project
could refer to a particular job or undertaking that is within the
regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. Secondly, the term
project could also refer to a particular job or undertaking that is
not within the regular business of the corporation. Such job or
undertaking must also be identifiably separate and distinct from
the ordinary or regular business operations of the employer. The
job or undertaking also begins and ends at determined or
determinable times.
Whichever type of project employment is found in a particular
case, a common basic requisite is that the designation of named
employees as project employees and their assignment to a
specific project, are effected and implemented in good faith, and
not merely as a means of evading otherwise applicable
requirements of labor laws.
KIAMCO V NLRC
309 SCRA 424
In Violeta v. NLRC [10 October 1997, 280 SCRA 520.] it was held The principal test for determining whether particular employees
are properly characterized as "project employees," as
distinguished from "regular employees," is whether or not the
"project employees" were assigned to carry out a "specific project
or undertaking," the duration (and scope) of which were specified
at the time the employees were engaged for that project. As
defined, project employees are those workers hired (1) for a
specific project or undertaking, and (2) the completion or
termination of such project or undertaking has been determined
at the time of engagement of the employee.
Under Policy Instruction No. 20 of the Secretary of Labor, project
employees are those employed in connection with a particular
project. Non-project or regular employees are those employed
without reference to any particular project.
Project Employees
Phil. Jai-Alai & Amusement Corp v. Clave
126 SCRA 299
Private respondents were hired for a specific project - to renovate
the main building, where major repairs such as painting the main
building, repair of the roof, cleaning of clogged water pipes and
drains, and other necessary repairs were required.
It was made known, and so understood at the start of the hiring,
that their services would last until the completion of the
renovation. They rendered service from February 2 to December
11, 1976, almost 11 months, but less than a year.
There could be no other reason, however, than that the
termination of private respondents was because their services
were no longer needed and they had nothing more to do since
the project for which they were hired had been completed.
Not being regular employees, it cannot be justifiably said that
petitioner had dismissed them without just cause.
Sandoval v. NLRC
136 SCRA 675
Project Employees, as distinguished from regular or non-project
employees, are mentioned in Article 281 of the Labor Code, as
those 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
Respondent Deputy Minister himself affirmed such finding. He
ruled that the complainants are project workers whose
employments are coterminous with the completion of the
project, regardless of the number of projects in which they have
worked, as provided under Policy Instructions No. 20 of the
Ministry of Labor and Employment and as their employment is
one for a definite period, they are not entitled to separation pay.
Imbuido v. NLRC
329 SCRA 357
We agree with the findings of the NLRC that petitioner is a project
employee. The principal test for determining whether an
employee is a project employee or a regular employee is whether
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 that project. A project
employee is one whose employment has been fixed for a specific
project or undertaking, the completion or termination of which
has been determined at the time of the engagement of the
employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the
season. In the instant case, petitioner was engaged to perform
activities which were usually necessary or desirable in the usual
business or trade of the employer, as admittedly, petitioner
worked as a data encoder for private respondent, a corporation
engaged in the business of data encoding and keypunching, and
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her employment was fixed for a specific project or undertaking

the completion or termination of which had been determined at
the time of her engagement, as may be observed from the series
of employment contracts 32 between petitioner and private
respondent, all of which contained a designation of the specific
job contract and a specific period of employment.
Chua v. CA
440 SCRA 121
To be exempted from the presumption of regularity of
employment, the agreement between a project employee and his
employer must strictly conform to the requirements and
conditions under Article 280 of the Labor Code. It is not enough
that an employee is hired for a specific project or phase of work.
There must also be a determination of, or a clear agreement on,
the completion or termination of the project at the time the
employee was engaged if the objectives of Article 280 are to be
achieved. This second requirement was not met in this case.
This Court has held that an employment ceases to be co-terminus
with specific projects when the employee is continuously rehired
due to the demands of the employers business and re-engaged
for many more projects without interruption.
just and authorized causes enumerated under the Labor Code and
under the emloyment contract.
Specific Period
Pure Foods Corporation v. NLRC
174 SCRA 415
Criteria under which term employment cannot be said to be in
circumvention of the law on security of tenure:
a) 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 circumstances vitiating his consent; or
b) It satisfactorily appears that the employer and the employee
dealt with each other on more or less equal terms with no moral
dominance exercised by the former over the latter.
It was shown that it was really the practice of the company to hire
workers on a uniformly fixed contract basis and replace them
upon the expiration of their contracts with other workers on the
same employment duration. This scheme of PFC was apparently
designed to prevent the private respondents and the other
"casual" employees from attaining the status of a regular
employee. It was a clear circumvention of the employees' right to
security of tenure and to other benefits like minimum wage, costof-living allowance, sick leave, holiday pay, and 13th month pay.
Rationale
De Ocampo v. NLRC
186 SCRA 360
The Court stress the rule in Cartagenas v. Romago Electric Co.,
that contract workers are not considered regular employees, their
services being needed only when there are projects to be
undertaken. 'The rationale of 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 until another project is begun,
if at all. In effect, these stand-by workers would be enjoying the
status of privileged retainers, collecting payment for work not
done, to be disbursed by the employer from profits not earned.
This is not fair by any standard and can only lead to a coddling of
labor at the expense of management.
Noteworthy in this connection is Policy Instruction No. 20 of the
Department of Labor, providing that "project employees are not
entitled to separation pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are
employed, regardless of the projects in which they had been
employed by a particular construction company." This rule would
entitle project employees to separation pay if the projects they
are working on have not yet been completed when their services
are terminated. And this should be true even if their contracts
have expired, on the theory that such contracts would have been
renewed anyway because their services were still needed.
Employer Obligation
A.M. Oreta & Co Inc v. NLRC
176 SCRA 218
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. Nowhere in the
employment contract executed between petitioner company and
respondent Grulla is there a stipulation that the latter shall
undergo a probationary period for three months before he can
quality as a regular employee. There is also no evidence on record
showing that the Grulla had been apprised of his probationary
status and the requirements which he should comply in order to
be a regular employee. In the absence of these requisites, there is
justification in concluding that respondent Grulla was a regular
employee at the time he was dismissed by petitioner.
As such, he is entitled to security of tenure during his period of
employment and his services cannot be terminated except for
Labayog v. My San Biscuits Inc

494 SCRA 486
Article 280 does not proscribe or prohibit an employment
contract with a fixed period provided it is not intended to
circumvent the security of tenure.
Two criteria validate a contract of employment with a fixed
period:
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 on the employee and without any
circumstances vitiating consent;
2. It satisfactorily appears that the employer and employee dealt
with each other on more or less equal terms with no moral
dominance whatever being exercised by the former on the latter.
Continuous Rehiring
Chua v. CA
440 SCRA 121
This Court has held that an employment ceases to be co-terminus
with specific projects when the employee is continuously rehired
due to the demands of the employers business and re-engaged
for many more projects without interruption.
C.E. Construction Corp v. Cioco
437 SCRA 648
We again hold that the fact that the WORKERS have been
employed with the COMPANY for several years on various
projects, the longest being nine (9) years, did not automatically
make them regular employees considering that the definition of
regular employment in Article 280 of the Labor Code, makes
specific exception with respect to project employment. The rehiring of petitioners on a project-to-project basis did not confer
upon them regular employment status.
Workpool Employees
Maraguinot v. NLRC
284 SCRA 539
A project employee or a member of a work pool may acquire the
status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after
cessation of a project; and
2) The tasks performed by the alleged project employee are
vital, necessary and indispensable to the usual business or trade
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of the employer.
However, the length of time during which the employee was
continuously re-hired is not controlling, but merely serves as a
badge of regular employment.
Aguilar v. NLRC
269 SCRA 596
"Members of a work pool from which a construction company
draws its project employees, if considered employees of the
construction company while in the work pool, are non-project
employees or employees for an indefinite period. If they are
employed in a particular project, the completion of the project or
any phase thereof will not mean severance of (the) employeremployee relationship."
Abesco Construction and Development Corporation v. Ramirez
487 SCRA 9
Length of Service
Palomares v. NLRC
277 SCRA 439
Length of service is not the controlling determinant of the
employment tenure of a project employee. As stated earlier, it is
based on whether or not 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.
Furthermore, the second paragraph of Article 280, providing that
an employee, who has rendered service for at least one (1) year,
shall be considered a regular employee, pertains to casual
employees and not to project employees such as petitioners.
Filipinas Pre-Fabricated Building Systems Inc v. Puente
453 SCRA 820
It is a settled rule that the length of service of a project employee
is not the controlling test of employment tenure but whether or
not the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee.
7.05 Casual Employees
ART. 280, Par. 2: 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.
Nature of Work
A.M. ORETA & CO INC V NLRC (GRULLA)
176 SCRA 218
What determines regularity or casualness is not the employment
contract, written or otherwise, but the nature of the job. If the
job is usually necessary or desirable to the main business of the
employer, then employment is regular
One Year Service

KIMBERLY INDEPENDENT LABOR UNION V DRILON
185 SCRA 190
Article 280 provides for two kinds of regular employees: (1) those
who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the
activity in which they are employed. The individual petitioners

herein who have been adjudged to be regular employees (by law)
fall under the second category.
While the actual regularization of these employees entails the
mechanical act of issuing regular appointment papers and
compliance with such other operating procedures as may be
adopted by the employer, it is more in keeping with the intent
and spirit of the law to rule that the status of regular employment
attaches to the casual worker on the day immediately after the
end of his first year of service
The law is explicit. As long as the employee has rendered at least
one year of service, he becomes a regular employee with respect
to the activity in which he is employed. The law does not provide
the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before he
can acquire a regular status. Obviously, where the law does not
distinguish, no distinction should be drawn.
SAN MIGUEL CORP V ABELLA
461 SCRA 392
Those performing janitorial and messengerial services however
acquired regular status only after rendering one-year service
pursuant to Article 280 of the Labor Code. Although janitorial and
messengerial services are considered directly related to the
aquaculture business of SMC, they are deemed unnecessary in
the conduct of its principal business; hence, the distinction. The
law of course provides for two kinds of regular employees,
namely: (1) those who are engaged to perform activities which
are usually necessary or desirable in the usual business or trade of
the employer; and (2) those who have rendered at least one year
of service, whether continuous or broken, with respect to the
activity in which they are employed.
INTEGRATED CONTRACTOR V NLRC
464 SCRA 265
The test to determine whether employment is regular or not is
the reasonable connection between the particular activity
performed by the employee in relation to the usual business or
trade of the employer. Also, if the employee 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.
7.06 Contract - Fixed Period

Test Validity
Requisites:
1. The fixed period was voluntarily agreed upon by the parties
without any circumstance vitiating the employees consent
2. It satisfactorily appears that the employer and employee
dealt with each other on more or less equal terms (no moral
dominance)
BRENT SCHOOL V ZAMORA
181 SCRA 702
Since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly
appears to have been to prevent circumvention of the employee's
right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral
agreements conflicting with the concept of regular employment
as defined therein should be construed to refer to the substantive
evil that the Code itself has singled out: agreements entered into
precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was
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agreed upon knowingly and voluntarily by the parties, without

any force, duress or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating
his consent, or where it satisfactorily appears that the employer
and employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the
former over the latter. Unless thus limited in its purview, the law
would be made to apply to purposes other than those explicitly
stated by its framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and unintended
consequences.
LABAYOG V MY SAN BISCUITS INC
494 SCRA 486
Two criteria validate a contract of employment with a fixed
period:
agreed upon by the parties without any force, duress or improper
pressure being brought to bear on the employee and without any
circumstances vitiating consent;
dominance whatever being exercised by the former on the latter.
CIELO V NLRC
193 SCRA 410
Where from the circumstances it is apparent that the periods
were imposed in order to preclude the acquisition of tenurial
security by the employee, they should be struck down or
disregarded for being contrary to public policy, morals, etc.
Philippine National
Corporation vs. NLRC
521 SCRA 227
Oil
Company-Energy
Development
Two guidelines by which fixed contracts of employment can be

said NOT to circumvent security of tenure:
agreed upon by the parties, without any force, duress or
improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent; or
dominance whatever being exercised by the former on the
latter."
Seasonal Employees
MAGCALAS V NLRC (KOPPEL INC)
269 SCRA 453
The services of project employees are co-terminus with the
project and may be terminated upon the end or completion of
the project for which they were hired. Regular employees, in
contrast, are legally entitled to remain in the service of their
employer until that service is terminated by one or another of the
recognized modes of termination of service under the Labor
Code. The employment of seasonal employees, on the other
hand, legally ends upon completion of the project or the season.
PHILIPPINE TOBACCO V NLRC
300 SCRA 37
Seasonal workers who are called from time to time and are
temporarily laid off during off-season are not separated from
service in said period, but are merely considered on leave until reemployed
SAN MIGUEL CORPORATION V NLRC (GUZMAN)
297 SCRA 277
Under Article 280 of the Labor Code, an employment is deemed

regular when the activities performed by the employee are
usually necessary or desirable in the usual business or trade of
the employer even if the parties enter into an agreement stating
otherwise. But considered not regular under said Article (1) the
so-called "project employment" the termination of which is more
or less determinable at the time of employment, such as those
connected, which by its nature is only for one season of the year
and the employment is limited for the duration of that season,
such as the Christmas holiday season. Nevertheless, an exception
to this exception is made: any employee who has rendered at
least 1 year of service, whether continuous or intermittent, with
respect to the activity he performed and while such activity
actually exists, must be deemed regular
MANILA HOTEL COMPANY V CIR
9 SCRA 184
Seasonal employees called to work from time to time and
temporarily laid off from during off season are REGULARS but are
on LOA w/o pay.
They are not strictly speaking separated from the service but are
merely considered as on leave of absence without pay until they
are re-employed. Their employment relationship is never severed
but only suspended. As such, these employees can be considered
as in the regular employment of the hotel.
INDUSTRIAL-COMMERCIAL-AGRICULTURAL
WORKERS' ORGANIZATION V CIR
16 SCRA 562
The cessation of the Central's milling activities at the end of the
milling season is not permanent or definitive; it is a foreseeable
suspension of work, and both activities will be resumed, as they
are in fact resumed, when sugar cane ripe for milling is again
available. There is merely a temporary cessation of the
manufacturing process due to passing shortage of raw materials
that by itself alone is not sufficient, in the absence of other
justified reasons, to sever the employment or labor relationship
between the parties. The mere fact that the laborers assent to
their medical examination at the beginning of each milling season
does not indicate that a new labor contract is being entered into,
in the absence of a stipulation to such effect. Said examination is
in the interest of both the Central and the labor force.
HACIENDA BINO V CUENCA
456 SCRA 300
The primary standard for determining regular employment is the
employer. There is no doubt that the respondents were
performing work necessary and desirable in the usual trade or
business of an employer. Hence, they can properly be classified as
regular employees.
For respondents to be excluded from those classified as regular
employees, it is not enough that they perform work or services
that are seasonal in nature. They must have been employed only
for the duration of one season. While the records sufficiently
show that the respondents' work in the hacienda was seasonal in
nature, there was, however, no proof that they were hired for the
duration of one season only. In fact, the payrolls, submitted in
evidence by the petitioners, show that they availed the services
of the respondents since 1991. Absent any proof to the contrary,
the general rule of regular employment should, therefore, stand.
It bears stressing that the employer has the burden of proving the
lawfulness of his employee's dismissal.
POSEIDON FISHING V NLRC (ESTOQUIA)
482 SCRA 717
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The principal test for determining whether particular employees

are "project employees" as distinguished from "regular
employees," is whether or not the "project employees" were
assigned to carry out a "specific project or undertaking," the
duration and scope of which were specified at the time the
employees were engaged for that project. In this case, petitioners
have not shown that private respondent was informed that he
will 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 their
engagement.
Section 8
PROBATIONARY EMPLOYEE
Statutory Reference: Probationary Employees - 281; 61, 2
sentence, Book VI, Rule I, Sec. 6, Omnibus Rules
nd
ART. 61. Contents of apprenticeship agreements. Apprenticeship agreements, including the wage rates
of apprentices, shall conform to the rules issued by
the Secretary of Labor and Employment. The period
of apprenticeship shall not exceed six months.
Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case shall
start below 75 percent of the applicable minimum
wage, may be entered into only in accordance with
apprenticeship programs duly approved by the
Secretary of Labor and Employment. The Department
shall develop standard model programs of
apprenticeship.
GR: Abbreviation/ Lengthening of the probationary period part of the employers management function
8.01 Probationary Employees
ART. 281. Probationary employment. Probationary

employment shall not exceed six (6) months from the
date the employee started working, unless it is
covered by an apprenticeship agreement stipulating a
longer period. The services of an employee who has
been engaged on a probationary basis may be
terminated for a just cause or 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 his engagement. An
employee who is allowed to work after a
probationary period shall be considered a regular
employee.
Section 6, Book VI, Rule I, Omnibus Rules:
(a) Where the work for which an employee has been
engaged is learnable or apprenticeable in accordance
with the standards prescribed by the Department of
Labor, the probationary employment period of the
employee shall be limited to the authorized
learnership
or apprenticeship period, whichever is applicable.
(b) Where the work is neither learnable nor
apprenticeable, the probationary employment period
shall not exceed six (6) months reckoned from the
date
the employee actually started working.
(c) The services of an employee who has been
engaged
on probationary basis may be terminated only for a
just
cause or when authorized by existing laws, or when
he
fails to qualify as a regular employee in accordance
with reasonable standards prescribed by the
employer.
(d) In all cases involving employees engaged on
probationary basis, the employer shall make known
to
the employee the standards under which he will
qualify
as a regular employee at the time of his engagement.
XPN: (Art. 281) requisites:

1. Prior contractual agreement
2. Proof that the nature of work requires extension
3. Extension must be a definite period of time dependent on
the peculiar circumstances of the work
The employer may refuse to regularize a probationary
employee after the lapse of the probationary period, subject to
reasonable standards in relation to the job
Definition
INTERNATIONAL CATHOLIC MIGRATION COMMISSION V NLRC
169 SCRA 606
A probationary employee, as understood under Article 282 (now
Article 281) of the Labor Code, is one who is on trial by an
employer during which the employer determines whether or not
he is qualified for permanent employment. A probationary
appointment is made to afford the employer an opportunity to
observe the fitness of a probationer while at work, and to
ascertain whether he will become a proper and efficient
employee.
PHIL. FEDERATION OF CREDIT COOPERATIVES INC (PFCCI) V
NLRC
300 SCRA 72
Article 281 of the Labor Code, as amended, allows the employer
to secure the services of an employee on a probationary basis
which allows him to terminate the latter for just cause or upon
failure to qualify in accordance with reasonable standards set
forth by the employer at the time of his engagement. A
probationary employee is one who is on trial by an employer
during which the employer determines whether or not he is
qualified for permanent employment. A probationary
employment is made to afford the employer an opportunity to
employee. Probationary employees, notwithstanding their limited
tenure, are also entitled to security of tenure. Thus, except for
just cause as provided by law, or under the employment contract,
a probationary employee cannot be terminated.
Purpose
PHILEMPLOY SERVICES V RODRIGUEZ
486 SCRA 302
There is probationary employment where the employee, upon his
engagement, is made to undergo a trial period during which the
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employer determines his fitness to qualify for regular

employment, based on reasonable standards made known to him
at the time of engagement.
Grand Motors Parts Corp v Minister of Labor
130 SCRA 436
Indeed, the employer has the right or is at liberty to choose as to
who will be hired and who will be declined. It is within the
exercise of this right to select his employees that the employer
may set or fix a probationary period within which the latter may
test and observe the conduct of the former before hiring him
permanently. "The right of a laborer to sell his labor to such
persons as he may choose is, in its essence, the same as the right
of an employer to purchase labor from any person whom it
chooses. The employer and the employee have thus an equality
of right guaranteed by the Constitution. 'If the employer can
compel the employee to work against the latter's will, this is
servitude. If the employee can compel the employer to give him
work against the employer's will, this is oppression.'"
169 SCRA 606
A probationary employee, as understood under Article 282 (now
Article 281) of the Labor Code, is one who is on trial by an
employer during which the employer determines whether or not
he is qualified for permanent employment. A probationary
appointment is made to afford the employer an opportunity to
employee. The word "probationary", as used to describe the
period of employment, implies the purpose of the term or period,
but not its length.
Being in the nature of a "trial period" the essence of a
probationary period of employment fundamentally lies in the
purpose or objective sought to be attained by both the employer
and the employee during said period. The length of time is
immaterial in determining the correlative rights of both in dealing
with each other during said period.
ESCORPIZO V UNIVERSITY OF BAGUIO
306 SCRA 497
A probationary employee is one who, for a given period of time, is
being observed and evaluated to determine whether or not he is
qualified for permanent employment.
A probationary
appointment affords the employer an opportunity to observe the
skill, competence and attitude of a probationer. The word
probationary, as used to describe the period of employment,
implies the purpose of the term or period. While the employer
observes the fitness, propriety and efficiency of a probationer to
ascertain whether he is qualified for permanent employment, the
probationer at the same time, seeks to prove to the employer
that he has the qualifications to meet the reasonable standards
for permanent employment.
Employer Right Set Period/ Obligation

Grand Motors Parts Corp v Minister of Labor
130 SCRA 436
Indeed, the employer has the right or is at liberty to choose as to
who will be hired and who will be declined. It is within the
exercise of this right to select his employees that the employer
may set or fix a probationary period within which the latter may
test and observe the conduct of the former before hiring him
permanently.
ORIENT EXPRESS PLACEMENT PHILIPPINES V NLRC
273 SCRA 256
A281 LC, the services of an employee hired on probationary basis

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 engagement. The
Court cannot sustain dismissal on this ground because petitioner
failed to specify the reasonable standards by which Flores was
alleged to have been evaluated to have poor performance.
Due process dictates that an employee be apprised beforehand of
the condition of his employment and of the terms of
advancement therein. Even if unsatisfactory performance was
true, it is not 1 of the just causes for dismissal under the LC. There
was no standard by which such probationary period was made
known to him.
MITSUBISHI MOTORS CORP V CHRYSLER PHIL LABOR UNION
4333 SCRA 206
Indeed, an employer, in the exercise of its management
prerogative, may hire an employee on a probationary basis in
order to determine his fitness to perform work. Under Article 281
of the Labor Code, the employer must inform the employee of
the standards for which his employment may be considered for
regularization.
ALCIRA V NLRC
431 SCRA 508
An employer is deemed to substantially comply with the rule on
notification of standards if he apprises the employee that he will
be subjected to a performance evaluation on a particular date
after his hiring.
Duration/ Exception
BUISER V LEOGARDO
131 SCRA 151
Generally, the probationary period of employment is limited to
six (6) months. The exception to this general rule is when the
parties to an employment contract may agree otherwise, such as
when the same is established by company policy or when the
same is required by the nature of work to be performed by the
employee. In the latter case, there is recognition of the exercise
of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the
probationary period was set for eighteen (18) months, i.e. from
May, 1980 to October, 1981 inclusive, especially where the
employee must learn a particular kind of work such as selling, or
when the job requires certain qualifications, skills, experience or
training.
HOLIDAY INN MANILA V NLRC

226 SCRA 417
In the case at bar, the period was for three weeks, during
Honasans on-the-job training. When her services were continued
after this training, the petitioners in effect recognized that she
passed probation and was qualified to be a regular employee
BERNARDO V NLRC
310 SCRA 186
Articles 280 and 281 of the Labor Code put an end to the
pernicious practice of making permanent casuals of our lowly
employees by the simple expedient of extending to them
probationary appointments, ad infinitum." The contract signed by
petitioners is akin to a probationary employment, during which
the bank determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the six-month
probationary period, the employees thereby became regular
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employees. No employer is allowed to determine indefinitely the

fitness of its employees.
MITSUBISHI MOTORS CORP V CHRYSLER PHIL LABOR UNION
433 SCRA 206
Such probationary period, unless covered by an apprenticeship
agreement, shall not exceed six (6) months from the date the
employee started working. The employees services may be
terminated for just cause or for his failure to qualify as a regular
employee based on reasonable standards made known to him.
Respondent Paras was employed as a management trainee on a
probationary basis. During the orientation conducted on May 15,
1996, he was apprised of the standards upon which his
regularization would be based. He reported for work on May 27,
1996. As per the companys policy, the probationary period was
from 3 months to a maximum of 6 months. As clearly provided for
in the last paragraph of Article 13, in computing a period, the first
day shall be excluded and the last day included. Thus, the one
hundred eighty (180) days commenced on May 27, 1996, and
ended on November 23, 1996. The termination letter dated
November 25, 1996 was served on respondent Paras only at 3:00
a.m. of November 26, 1996. He was, by then, already a regular
employee of the petitioner under A281 LC
Criteria Regularization
ALCIRA V NLRC
431 SCRA 508
Section 6 (d) of rule 1 of the IRR Book VI of the Labor Code: In all
cases involving employees engaged on probationary basis, the
employer shall make known to the employee the standards under
which he will qualify as a regular employee at the time of his
engagement. Where o standards are made known to the
employee at that time, he shall be deemed a regular employee
WON Middleby informed petitioner of standards for
regularization at the start of his employment. Middleby
substantially notified the petitioner of the standards of a regular
employee when it apprised him, at the start of his employment,
that it would evaluate his supervisory skills after 5 months. That
the appointment paper contained the remark that Alcira would
be subjected to a performance evaluation is enough notice that
the probationary basis of his employment was conditional
(conditioned upon his meeting of performance standards)
Extension of Contract
MARIWASA V LEOGARDO
169 SCRA 465
For the extension of Dequila's probation was ex gratia, an act of
liberality on the part of his employer affording him a second
chance to make good after having initially failed to prove his
worth as an employee. Such an act cannot now unjustly be turned
against said employer's account to compel it to keep on its payroll
one who could not perform according to its work standards. The
law, surely, was never meant to produce such an inequitable
result.
By voluntarily agreeing to an extension of the probationary
period, Dequila in effect waived any benefit attaching to the
completion of said period if he still failed to make the grade
during the period of extension. The Court finds nothing in the law
which by any fair interpretation prohibits such a waiver. And no
public policy protecting the employee and the security of his
tenure is served by prescribing voluntary agreements which, by
reasonably extending the period of probation, actually improve
and further a probationary employee's prospects of
demonstrating his fitness for regular employment.
Absorbed Employees
CEBU STEVEDORING CO INC V REGIONAL DIRECTOR
168 SCRA 315

We agree with the Regional Director that COMPLAINANTS could
not be considered probationary employees because they were
already well-trained in their respective functions. While
COMPLAINANTS were still with the CCAS they were already clerks
with 10 years of service, on the average. They were, therefore,
experienced workers.
Double Probation
A PRIME SECURITY SERVICES INC V NLRC
322 SCRA 283
The Court cannot sanction the practice of some companies which,
shortly after a worker has become a regular employee, effects the
transfer of the same employee to another entity whose owners
are the same, or identical, in order to deprive subject employee
of the benefits and protection he is entitled to under the law.
The complainant became a regular employee upon completion of
his six-month period of probation. Private respondent started
working on January 30, 1988 and completed the said period of
probation on July 27, 1988. Thus, at the time private respondent
was dismissed on August 1, 1988, he was already a regular
employee with a security of tenure. He could only be dismissed
for a just and authorized cause. There is no basis for subjecting
private respondent to a new probationary or temporary
employment on January 30, 1988, considering that he was
already a regular employee when he was absorbed by A Prime
from Sugarland, its sister company.
Termination and Salary

169 SCRA 606
A281 LC gives ample authority to the employer to terminate a
probationary employee for a just cause or 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 his
engagement.
There is nothing under Article 281 of the Labor Code that would
preclude the employer from extending a regular or a permanent
appointment to an employee once the employer finds that the
employee is qualified for regular employment even before the
expiration of the probationary period. Conversely, Article 281 of
the Labor Code does not likewise preclude the employer from
terminating the probationary employment on justifiable causes as
in the instant case.
The dissatisfaction of petitioner over the performance of private
respondent in this regard is a legitimate exercise of its prerogative
to select whom to hire or refuse employment for the success of
its program or undertaking.
ORIENT EXPRESS PLACEMENT PHILIPPINES V NLRC
273 SCRA 256
A281 LC, the services of an employee hired on probationary basis
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 engagement. The
Court cannot sustain dismissal on this ground because petitioner
failed to specify the reasonable standards by which Flores was
alleged to have been evaluated to have poor performance.
Due process dictates that an employee be apprised beforehand of
the condition of his employment and of the terms of
advancement therein. Even if unsatisfactory performance was
true, it is not 1 of the just causes for dismissal under the LC. There
was no standard by which such probationary period was made
known to him.
DELA CRUZ V NLRC
418 SCRA 226
A probationary employee is one who, for a given period of time, is
under observation or evaluation to determine whether or not he
is qualified for permanent employment. During the probationary
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period, the employer is given the opportunity to observe the skill,

competence and attitude of the employee while the latter seeks
to prove to the employer that he has the qualifications to meet
the reasonable standards for permanent employment. The length
of time is immaterial in determining the correlative rights of both
the employer and the employee in dealing with each other during
this period.
There is no dispute that petitioner, as a probationary employee
enjoyed only a temporary employment status. This meant that he
was terminable anytime, permanent employment not having
been attained in the mean time. The employer could well decide
he no longer needed the probationary employees service or hi
performance fell short of expectation. As long as the termination
was made before the expiration of the 6-month probationary
period, the employer was well within his rights to sever the
employer-employee relationship.
A contrary interpretation
would defect the clear meaning of the term probationary. In this
case, Shemberg had good reason to terminate petitioners
employment. Petitioner was holding a managerial position in
which he was tasked to perform key functions in accordance with
an exacting work ethic. His position required the full trust and
confidence of his employer. While petitioner could exercise some
discretion, this obviously did not cover acts for his own personal
benefit. He committed a transgression which betrayed the trust
and confidence of his employer reimbursing his familys
personal travel expenses out of company funds.
its status as direct employer, while the corporation is deemed the

indirect employer of the guards for the purpose of paying their
wages in the event of failure of the agency to pay them.
Section 1
EMPLOYMENT POLICY
1.01 Pre-Employment Policy - Statement of Objectives
a) To promote and maintain a state of full employment

through improved manpower training, allocation and
utilization;
b) To protect every citizen desiring to work locally or
overseas by securing for him the best possible terms and
conditions of employment;
c) To facilitate a free choice of available employment by
persons seeking work in conformity with the national
interest;
d) To facilitate and regulate the movement of workers in
conformity with the national interest;
Rule Private School Teachers

CHIANG KAI SHEK COLLEGE V CA
437 SCRA 171
Under the Manual of Regulations for Private Schools, for a private
school teacher to acquire a permanent status of employment
and, therefore, be entitled to a security of tenure, the following
requisites must concur: (a) the teacher is a full-time teacher; (b)
the teacher must have rendered three consecutive years of
service; and (c) such service must have been satisfactory. Since
Ms. Belo has measured up to these standards, she therefore
enjoys security of tenure
LA CONSOLACION COLLEGE V NLRC
366 SCRA 226
In resolving issues regarding security of tenure of private school
teachers, it is the Manual of Regulations for Private Schools, not
the Labor Code, which is applicable.
The written contract of respondent stated that he shall be
employed by the LCC for the school year June 1992 - March 1993,
a fixed term of 10 mos. Clearly, the employment was not
permanent but for a specified duration of one school year.
Respondent was a new hire having previously resigned & never
denied the fact that he failed to comply with the requirements of
the school.
PART 2
LABOR STANDARDS
Purpose
MARIVELES SHIPYARD CORP V CA (REGONDOLA)
415 SCRA 573
Labor standards are enacted by the legislature to alleviate the
plight of workers whose wages barely meet the spiraling costs of
basic needs. Labor laws are considered written in every contract.
Stipulations in violation thereof are considered null. Similarly,
legislated wage increases are deemed amendments to the
contract. Thus, employers cannot hide behind their contracts in
order to evade their (or their contractors or subcontractors)
liability for noncompliance with the statutory minimum wage.
When the agency as contractor failed to pay the guards, the
corporation as principal becomes jointly and severally liable to
the guards wages. The security agency is held liable by virtue of
ART. 12. Statement of objectives. - It is the policy of the

State:
e) To regulate the employment of aliens, including the

establishment of a registration and/or work permit
system;
f) To strengthen the network of public employment offices
and rationalize the participation of the private sector in
the recruitment and placement of workers, locally and
overseas, to serve national development objectives;
g) To insure careful selection of Filipino workers for
overseas employment in order to protect the good name
of the Philippines abroad.
Section 2
RECRUITMENT AND PLACEMENT WORKERS
Statutory Reference: Art. 13-29; Book I, Rules III-VIII, Omnibus
Rules; Migrant Workers and Overseas Filipinos Act of 1995 (RA
8042); As amended by RA 9422 (2007) and RA 10022 (2010)
RA 8759 (2000) - Public Employment Service Office Act of 1999
- Secs. 2-3
EO 857 - Governing the Remittance to the Philippines of
Foreign Exchange Earnings of Filipino Workers Abroad and for
Other Purposes - 1984
2.01 Recruitment and Placement of Workers
ART. 13. (a) "Worker" means any member of the labor

force, whether employed or unemployed.
ART. 13. (b) "Recruitment and placement" refers to any act

of canvassing, enlisting, contracting, transporting, utilizing,
hiring or procuring workers, and includes referrals,
contract services, promising or advertising for
employment, locally or abroad, whether for profit or not:
Provided, That any person or entity which, in any manner,
30 | P
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offers or promises for a fee, employment to two or more

persons shall be deemed engaged in recruitment and
placement.
public employment offices, shall engage in the recruitment

and placement of workers.
ART. 18. Ban on direct-hiring. - No employer may hire a

Filipino worker for overseas employment except through
the Boards and entities authorized by the Secretary of
Labor. Direct-hiring by members of the diplomatic corps,
international organizations and such other employers as
may be allowed by the Secretary of Labor is exempted
from this provision.
ART. 25. Private sector participation in the recruitment and

placement of workers. - Pursuant to national development
objectives and in order to harness and maximize the use of
private sector resources and initiative in the development
and implementation of a comprehensive employment
program, the private employment sector shall participate
in the recruitment and placement of workers, locally and
overseas, under such guidelines, rules and regulations as
may be issued by the Secretary of Labor.
ART. 12. Statement of objectives. - It is the policy of the

State:
Definition - Law Structure
PEOPLE V PANIS
142 SCRA 664
The number of persons dealt with is not an essential ingredient of
the act of recruitment and placement of workers. Any of the acts
mentioned in the basic rule in Article 13(b) will constitute
recruitment and placement even if only one prospective worker is
involved. 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 two or more prospective workers, the individual
or entity dealing with them shall be deemed to be engaged in the
act of recruitment and placement.
The proviso was intended neither to impose a condition on the
basic rule nor to provide an exception thereto but merely to
create a presumption. The presumption is that the individual or
entity is engaged in recruitment and placement whenever he or it
is dealing with two or more persons to whom, in consideration of
a fee, an offer or promise of employment is made in the course of
the "canvassing, enlisting, contracting, transporting, utilizing,
hiring or procuring (of) workers."
f) To strengthen the network of public employment offices

and rationalize the participation of the private sector in
the recruitment and placement of workers, locally and
overseas, to serve national development objectives;
PEOPLE V SAULO
344 SCRA 605
Recruitment under the Labor Code refers to any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring or
procuring workers and includes referrals, contract services,
promising or advertising for employment locally or abroad,
whether for profit or not; Provided, that any person or entity in
which, in any manner, offers or promises for a fee employment to
two or more persons shall be deemed engaged in recruitment
and placement.
2.02 Employment Agency
ART. 13. (c) "Private fee-charging employment agency"

means any person or entity engaged in recruitment and
placement of workers for a fee which is charged, directly
or indirectly, from the workers or employers or both.
ART. 13. (d) "License" means a document issued by the

Department of Labor authorizing a person or entity to
operate a private employment agency.
ART. 13. (e) "Private recruitment entity" means any person

or association engaged in the recruitment and placement
of workers, locally or overseas, without charging, directly
or indirectly, any fee from the workers or employers.
ART. 13. (f) "Authority" means a document issued by the
Department of Labor authorizing a person or association
to engage in recruitment and placement activities as a
private recruitment entity.
2.03 Allowed Entities

General Rule
ART. 16. Private recruitment. - Except as provided in

Chapter II of this Title, no person or entity other than the
Allowed Entities
A. Private
ART. 13. (c) "Private fee-charging employment agency"

means any person or entity engaged in recruitment and
placement of workers for a fee which is charged, directly
or indirectly, from the workers or employers or both.
ART. 13. (e) "Private recruitment entity" means any person

or association engaged in the recruitment and placement
of workers, locally or overseas, without charging, directly
or indirectly, any fee from the workers or employers.
B. Public
ART. 12. (f) To strengthen the network of public

employment offices and rationalize the participation of the
private sector in the recruitment and placement of
workers, locally and overseas, to serve national
development objectives;
ART. 14. Employment promotion. - The Secretary of Labor

shall have the power and authority: (a) To organize and
establish new employment offices in addition to the
existing employment offices under the Department of
Labor as the need arises;
2.04 Deployment Migrant Workers
SEC. 4. Deployment of Migrant Workers - The State shall

deploy overseas Filipino workers only in countries where
the rights of Filipino migrant workers are protected. The
government recognizes any of the following as guarantee
on the part of the receiving country for the protection and
the rights of overseas Filipino workers:
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substantial capitalization as determined by the Secretary

of Labor.
(a) It has existing labor and social laws protecting the

rights of migrant workers;
ART. 29. Non-transferability of license or authority. - No

license or authority shall be used directly or indirectly by
any person other than the one in whose favor it was issued
or at any place other than that stated in the license or
authority be transferred, conveyed or assigned to any
other person or entity. Any transfer of business address,
appointment or designation of any agent or representative
including the establishment of additional offices anywhere
shall be subject to the prior approval of the Department of
Labor.
ART. 30. Registration fees. - The Secretary of Labor shall

promulgate a schedule of fees for the registration of all
applicants for license or authority.
(Bonds) ART. 31. Bonds. - All applicants for license or

authority shall post such cash and surety bonds as
determined by the Secretary of Labor to guarantee
compliance with prescribed recruitment procedures, rules
and regulations, and terms and conditions of employment
as may be appropriate.
(Workers Fees) ART. 32. Fees to be paid by workers. - Any

person applying with a private fee-charging employment
agency for employment assistance shall not be charged
any fee until he has obtained employment through its
efforts or has actually commenced employment. Such fee
shall be always covered with the appropriate receipt
clearly showing the amount paid. The Secretary of Labor
shall promulgate a schedule of allowable fees.
(Reports Submission) ART. 33. Reports on employment

status. - Whenever the public interest requires, the
Secretary of Labor may direct all persons or entities within
the coverage of this Title to submit a report on the status
of employment, including job vacancies, details of job
requisitions, separation from jobs, wages, other terms and
conditions and other employment data.
(Suspension and/or Cancellation of License or Authority)

ART. 35. Suspension and/or cancellation of license or
authority. - The Minister of Labor shall have the power to
suspend or cancel any license or authority to recruit
employees for overseas employment for violation of rules
and regulations issued by the Ministry of Labor, the
Overseas Employment Development Board, or for
violation of the provisions of this and other applicable
laws, General Orders and Letters of Instructions.
(b) It is a signatory to multilateral conventions, declaration

or resolutions relating to the protection of migrant
workers;
(c) It has concluded a bilateral agreement or arrangement
with the government protecting the rights of overseas
Filipino workers; and
(d) It is taking positive, concrete measures to protect the
rights of migrant workers.
2.05 Prohibited Entity
ART. 16. Private recruitment. - Except as provided in

Chapter II of this Title, no person or entity other than the
public employment offices, shall engage in the recruitment
and placement of workers.
ART. 18. Ban on direct-hiring. - No employer may hire a
Filipino worker for overseas employment except through
the Boards and entities authorized by the Secretary of
Labor. Direct-hiring by members of the diplomatic corps,
international organizations and such other employers as
may be allowed by the Secretary of Labor is exempted
from this provision.
ART. 26. Travel agencies prohibited to recruit. - Travel
agencies and sales agencies of airline companies are
prohibited from engaging in the business of recruitment
and placement of workers for overseas employment
whether for profit or not.
2.06 Techniques of Regulation

License
ART. 25. Private sector participation in the recruitment and

placement of workers. - Pursuant to national development
objectives and in order to harness and maximize the use of
private sector resources and initiative in the development
and implementation of a comprehensive employment
program, the private employment sector shall participate
in the recruitment and placement of workers, locally and
overseas, under such guidelines, rules and regulations as
may be issued by the Secretary of Labor.
ART. 26. Travel agencies prohibited to recruit. - Travel
agencies and sales agencies of airline companies are
prohibited from engaging in the business of recruitment
and placement of workers for overseas employment
whether for profit or not.
ART. 27. Citizenship requirement. - Only Filipino citizens or

corporations, partnerships or entities at least seventy-five
percent (75%) of the authorized and voting capital stock of
which is owned and controlled by Filipino citizens shall be
permitted to participate in the recruitment and placement
of workers, locally or overseas.
ART. 28. Capitalization. - All applicants for authority to hire

or renewal of license to recruit are required to have such
PEOPLE V BULI-E
404 SCRA 105
The essential elements of the crime of illegal recruitment in large
scale are (1) the accused engages in acts of recruitment and
placement of workers defined under Article 13(b) or in any
prohibited activities under Article 34 of the Labor Code; (2) the
accused has not complied with the guidelines issued by the
Secretary of Labor and Employment, particularly with respect to
the securing of a license or an authority to recruit and deploy
workers, either locally or overseas; and (3) the accused commits
the unlawful acts against three or more persons, individually or as
a group. When illegal recruitment is committed in large scale or
when it is committed by a syndicate, it is considered as an offense
involving economic sabotage.
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(f) To engage 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;
2.07 Illegal Recruitment
ART. 38. Illegal recruitment. - (a) Any recruitment

activities, including the prohibited practices enumerated
under Article 34 of this Code, to be undertaken by nonlicensees or non-holders of authority, shall be deemed
illegal and punishable under Article 39 of this Code. The
Department of Labor and Employment or any law
enforcement officer may initiate complaints under this
Article.
(g) To obstruct or attempt to obstruct inspection by the

Secretary of Labor or by his duly authorized
representatives;
(h) To fail 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 be required by the
Secretary of Labor.
(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. 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 the first
paragraph hereof. Illegal recruitment is deemed
committed in large scale if committed against three (3) or
more persons individually or as a group.
(c) The Secretary of Labor and Employment or his duly
authorized representatives shall have the power to cause
the arrest and detention of such non-licensee or nonholder of authority if after investigation it is determined
that his activities constitute a danger to national security
and public order or will lead to further exploitation of jobseekers. The Secretary shall order the search of the office
or premises and seizure of documents, paraphernalia,
properties and other implements used in illegal
recruitment activities and the closure of companies,
establishments and entities found to be engaged in the
recruitment of workers for overseas employment, without
having been licensed or authorized to do so.
ART. 34. Prohibited practices. - It shall be unlawful for any

individual, entity, licensee, or holder of authority:
(a) To charge or accept, 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) To furnish or publish any false notice or information or
document in relation to recruitment or employment;
(c) To give 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) To induce or attempt 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) To influence or to attempt to influence any person or
entity not to employ any worker who has not applied for
employment through his agency;
(i) To substitute or alter employment contracts approved

and verified by the Department of Labor from the time of
actual signing thereof by the parties up to and including
the periods of expiration of the same without the approval
of the Secretary of Labor;
(j) To become an officer or member of the Board of any
corporation engaged in travel agency or to be engaged
directly or indirectly in the management of a travel
agency; and
(k) To withhold or deny 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, Sec. 6. Definitions. - For purposes of this Act,

illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring,
procuring workers and includes referring, contact services,
promising or advertising for employment abroad, whether
for profit or not, when undertaken by a non-license or
non-holder of authority contemplated under Article 13(f)
of Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines. Provided, that
such non-license or non-holder, who, in any manner,
offers or promises for a fee employment abroad to two or
more persons shall be deemed so engaged. It shall likewise
include the following acts, whether committed by any
persons, whether a non-licensee, non-holder, licensee or
holder of authority.
(a) To charge or accept directly or indirectly any amount
greater than the specified in the schedule of allowable
fees prescribed by the Secretary of Labor and
Employment, or to make a worker pay any amount greater
than that actually received by him as a loan or advance;
(b) To furnish or publish any false notice or information or
document in relation to recruitment or employment;
(c) To give any false notice, testimony, information or
document or commit any act of misrepresentation for the
purpose of securing a license or authority under the Labor
Code;
(d) To induce or attempt 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 of
employment;
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(e) To influence or attempt to influence any persons or

entity not to employ any worker who has not applied for
employment through his agency;
(f) To engage in the recruitment of placement of workers
in jobs harmful to public health or morality or to dignity of
the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the
Secretary of Labor and Employment or by his duly
authorized representative;
(h) To fail to submit reports on the status of employment,
placement vacancies, remittances of foreign exchange
earnings, separations from jobs, departures and such
other matters or information as may be required by the
Secretary of Labor and Employment;
(i) To substitute or alter to the prejudice of the worker,
employment contracts approved and verified by the
Department of Labor and Employment from the time of
actual signing thereof by the parties up to and including
the period of the expiration of the same without the
approval of the Department of Labor and Employment;
(j) For an officer or agent of a recruitment or placement
agency to become an officer or member of the Board of
any corporation engaged in travel agency or to be engaged
directly on indirectly in the management of a travel
agency;
(k) To withhold or deny travel documents from applicant
workers before departure for monetary or financial
considerations other than those authorized under the
Labor Code and its implementing rules and regulations;
(l) Failure to actually deploy without valid reasons as
determined by the Department of Labor and Employment;
and
(m) Failure to reimburse expenses incurred by the workers
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.
Illegal recruitment when committed by a syndicate or in
large scale shall be considered as offense involving
economic sabotage.
Illegal recruitment is deemed committed by a syndicate
carried out by a group of three (3) or more persons
conspiring or confederating with one another. It is deemed
committed in large scale if committed against three (3) or
more persons individually or as a group.
RA 10022, Sec. 2: Section 3, paragraph (a) of Republic Act

No. 8042, as amended, is hereby amended to read as
follows: "(a) "Overseas Filipino worker" refers to a person
who is to be engaged, is engaged or has been engaged in a
remunerated activity in a state of which he or she is not a
citizen or on board a vessel navigating the foreign seas
other than a government ship used for military or noncommercial purposes or on an installation located offshore
or on the high seas; to be used interchangeably with
migrant worker."
RA 10022, Sec. 5: Section 6 of Republic Act No. 8042, as

amended, is hereby amended to read as follows: "In
addition to the acts enumerated above, it shall also be
unlawful for any person or entity to commit the following
prohibited acts:
"(1) Grant 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;
"(2) Impose a compulsory and exclusive arrangement
whereby an overseas Filipino worker is required to avail of
a loan only from specifically designated institutions,
entities or persons;
"(3) Refuse to condone or renegotiate a loan incurred by
an overseas Filipino worker after the latter's employment
contract has been prematurely terminated through no
fault of his or her own;
whereby an overseas Filipino worker is required to
undergo health examinations only from specifically
designated medical clinics, institutions, entities or persons,
except in the case of a seafarer whose medical
examination
cost
is
shouldered
by
the
principal/shipowner;
whereby an overseas Filipino worker is required to
undergo training, seminar, instruction or schooling of any
kind only from specifically designated institutions, entities
or persons, except fpr recommendatory trainings
mandated by principals/shipowners where the latter
shoulder the cost of such trainings;
"(6) For a suspended recruitment/manning agency to
engage in any kind of recruitment activity including the
processing of pending workers' applications; and
"(7) For a recruitment/manning agency or a foreign
principal/employer to pass on the overseas Filipino worker
or deduct from his or her salary the payment of the cost of
insurance fees, premium or other insurance related
charges, as provided under the compulsory worker's
insurance coverage.
"The persons criminally liable for the above offenses are
the principals, accomplices and accessories. In case of
juridical persons, the officers having ownership, control,
management or direction of their business who are
responsible for the commission of the offense and the
responsible employees/agents thereof shall be liable.
"In the filing of cases for illegal recruitment or any of the
prohibited acts under this section, the Secretary of Labor
and Employment, the POEA Administrator or their duly
authorized representatives, or any aggrieved person may
initiate the corresponding criminal action with the
appropriate office. For this purpose, the affidavits and
testimonies of operatives or personnel from the
Department of Labor and Employment, POEA and other
34 | P
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law enforcement agencies who witnessed the acts

constituting the offense shall be sufficient to prosecute
the accused.
recruitment in large scale, a third element is added: that the

accused commits the acts against three or more persons,
individually or as a group.
"In the prosecution of offenses punishable under this

section, the public prosecutors of the Department of
Justice shall collaborate with the anti-illegal recruitment
branch of the POEA and, in certain cases, allow the POEA
lawyers to take the lead in the prosecution. The POEA
lawyers who act as prosecutors in such cases shall be
entitled to receive additional allowances as may be
determined by the POEA Administrator.
PEOPLE V DUJUA
422 SCRA 169
"The filing of an offense punishable under this Act shall be

without prejudice to the filing of cases punishable under
other existing laws, rules or regulations.
Elements of Crime
PEOPLE V SAGAYAGA
423 SCRA 468
Recruitment is any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes
referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not:
Provided, That any person or entity which, in any manner, offers
or promises for a fee employment to two or more persons shall
be deemed engaged in recruitment and placement.
Section 6 of Rep. Act No. 8042 provides that illegal recruitment
shall be considered an offense involving economic sabotage if
committed in large scale, viz, committed against three (3) or more
persons individually or as a group, the imposable penalty for
which is life imprisonment and a fine of not less than P500,000.00
nor more than P1,000,000.00. In this case, there are three private
complainants, namely, Elmer Janer, Eric Farol and Elmer Ramos.
The trial court, thus, correctly convicted the appellant of large
scale illegal recruitment and sentenced her to suffer life
imprisonment.
PEOPLE V BAYTIC
398 SCRA 18
Illegal recruitment is committed when two (2) elements concur.
First, the offender has no valid license or authority required by
law to enable one to engage lawfully in recruitment and
placement of workers. Second, he or she undertakes either any
activity within the meaning of "recruitment and placement"
defined under Art. 13, par. (b), or any prohibited practices
enumerated under Art. 34 of the Labor Code. In case of illegal
recruitment in large scale, a third element is added: that the
accused commits the acts against three or more persons,
individually or as a group.
Large Scale
PEOPLE V BULI-E
404 SCRA 105
Illegal recruitment is committed when two (2) elements concur.
First, the offender has no valid license or authority required by
law to enable one to engage lawfully in recruitment and
placement of workers. Second, he or she undertakes either any
activity within the meaning of "recruitment and placement"
defined under Art. 13, par. (b), or any prohibited practices
enumerated under Art. 34 of the Labor Code. In case of illegal
The essential elements of the crime of illegal recruitment in large

scale are:
(1) the accused engages in acts of recruitment and placement of
workers defined under Article 13(b) or in any prohibited activities
under Art. 34 of the Labor Code;
(2) the accused has not complied with the guidelines issued by
the Secretary of Labor and Employment, particularly with respect
to the securing of a license or an authority to recruit and deploy
workers, either locally or overseas; and
(3) the accused commits the unlawful acts against three or more
persons, individually or as a group.
PEOPLE V REYES
242 SCRA 264
When the Labor Code speaks of illegal recruitment "committed
against three (3) or more persons individually or as a group," it
must be understood as referring to the number of complainants
in each case who are complainants therein, otherwise,
prosecutions for single crimes of illegal recruitment can be
cumulated to make out a case of large scale illegal recruitment. In
other words, a conviction for large scale illegal recruitment must
be based on a finding in each case of illegal recruitment of three
or more persons whether individually or as a group.
Referrals
PEOPLE V MERIS
329 SCRA 33
The prosecution undoubtedly proved that accused-appellant,
without license or authority, engaged in recruitment and
placement activities. This was done in collaboration with Julie
Micua, when they promised complainants employment in
Hongkong. Art. 13, par. (b) of the Labor Code defines recruitment
and placement as "any act of canvassing enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes
referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not;
Provided that any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement."
Although accused-appellant was not an employee of the alleged
illegal recruiter Julie Micua, the evidence show that she was the
one who approached complainants and prodded them to seek
employment abroad. It was through her that they met Julia
Micua. This is clearly an act of referral.
Illegal recruitment is conducted in a large scale if perpetrated
against three (3) or more persons individually or as a group. This
crime requires proof that the accused: (1) engaged in the
recruitment and placement of workers defined under Article 13
or in any of the prohibited activities under Article 34 of the Labor
Code; (2) does not have a license or authority to lawfully engage
in the recruitment and placement of workers; and (3) committed
the infraction against three or more persons, individually or as a
group. All these three essential elements are present in the case.
PEOPLE V FORTUNA
395 SCRA 354
The crime of illegal recruitment is committed when, among other
things, a person who, without being duly authorized according to
law, represents or gives the distinct impression that he or she has
the power or ability to provide work abroad convincing those
whom the representation is made to part with their money in
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order to be assured of that employment
Employees
PEOPLE V CORPUZ
412 SCRA 479
(b) Any licensee or holder of authority found violating or

causing another to violate any provision of this Title or its
implementing rules and regulations shall, upon conviction
thereof, suffer the penalty of imprisonment of not less
than two years nor more than five years or a fine of not
less than P10,000 nor more than P50,000, or both such
imprisonment and fine, at the discretion of the court;
In the case at bar, the prosecution failed to adduce sufficient

evidence to prove appellants active participation in the illegal
recruitment activities of the agency. As already established,
appellant received the processing fees of the private
complainants for and in behalf of Mrs. Reyes who ordered her to
receive the same. She neither gave an impression that she had
the ability to deploy them abroad nor convinced them to part
with their money. More importantly, she had no knowledge that
the license was suspended the day before she received the
money. Their failure to depart for Taiwan was due to the
suspension of the license, an event which appellant did not have
control of. Her failure to refund their money immediately upon
their demand was because the money had been remitted to Mrs.
Reyes on the same day she received it from them.
An employee of a company or corporation engaged in illegal
recruitment may be held liable as principal, together with his
employer, if it is shown that he actively and consciously
participated in illegal recruitment. However, where it is shown
that the employee was merely acting under the direction of his
superiors and was unaware that his acts constituted a crime, he
may not be held criminally liable for an act done for and in behalf
of his employer.
(c) Any person who is neither a licensee nor a holder of

authority under this Title found violating any provision
thereof or its implementing rules and regulations shall,
upon conviction thereof, suffer the penalty of
imprisonment of not less than four years nor more than
eight years or a fine of not less than P20,000 nor more
than P100,000 or both such imprisonment and fine, at the
discretion of the court;
(d) If the offender is a corporation, partnership,
association or entity, the penalty shall be imposed upon
the officer or officers of the corporation, partnership,
association or entity responsible for violation; and if such
officer is an alien, he shall, in addition to the penalties
herein prescribed, be deported without further
proceedings;
PEOPLE V SAGAYAGA
423 SCRA 468
The appellant is guilty of illegal recruitment as a principal by
direct participation, having dealt directly with the private
complainants.
The appellants bare denial of her involvement in the
management, administration, control and operation of APSC
cannot prevail over her judicial admissions, the positive
testimonies of the private complainants and the documentary
evidence adduced by the prosecution.
An employee of a company or corporation engaged in illegal
recruitment may be held liable as principal, together with his
employer, if it is shown that he actively and consciously
participated in illegal recruitment.
PEOPLE V GUTIERREZ
422 SCRA 32
Appellant cannot escape liability by claiming that she was not
aware that before working for her employer in the recruitment
agency, she should first be registered with the POEA. Illegal
recruitment in large scale is malum prohibitum, not malum in se.
Good faith is not a defense.
2.08 Enforcement and Sanctions
ART. 36. Regulatory power. - The Secretary of Labor shall

have the power to restrict and regulate the recruitment
and placement activities of all agencies within the
coverage of this Title and is hereby authorized to issue
orders and promulgate rules and regulations to carry out
the objectives and implement the provisions of this Title.
ART. 37. Visitorial Power. - The Secretary of Labor or his
duly authorized representatives may, at any time, inspect
the premises, books of accounts and records of any person
or entity covered by this Title, require it to submit reports
regularly on prescribed forms, and act on violation of any
provisions of this Title.
ART. 39. Penalties. - (a) The penalty of life imprisonment

and a fine of One Hundred Thousand Pesos (P1000,000.00)
shall be imposed if illegal recruitment constitutes
economic sabotage as defined herein;
(e) In every case, conviction shall cause and carry the

automatic revocation of the license or authority and all the
permits and privileges granted to such person or entity
under this Title, and the forfeiture of the cash and surety
bonds in favor of the Overseas Employment Development
Board or the National Seamen Board, as the case may be,
both of which are authorized to use the same exclusively
to promote their objectives.
RA 10022, Sec. 7: Section 10 of Republic Act No. 8042, as

amended, is hereby amended to read as follows: "SEC. 10.
Money Claims. - Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral,
exemplary and other forms of damage. Consistent with
this mandate, the NLRC shall endeavor to update and keep
abreast with the developments in the global services
industry.
"The liability of the principal/employer and the
recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision
shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its
approval. The performance bond to de filed by the
recruitment/placement agency, as provided by law, 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
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directors and partners as the case may be, shall

themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and
damages.
"Such liabilities 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 the said contract.
"Any compromise/amicable settlement or voluntary
agreement on money claims inclusive of damages under
this section shall be paid within thirty (30) days from
approval of the settlement by the appropriate authority.
"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 if his placement fee and the
deductions made with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
"In case of a final and executory judgement against a
foreign employer/principal, it shall be automatically
disqualified, without further proceedings, from
participating in the Philippine Overseas Employment
Program and from recruiting and hiring Filipino workers
until and unless it fully satisfies the judgement award.
"Noncompliance with the mandatory periods for
resolutions of case provided under this section shall
subject the responsible officials to any or all of the
following penalties:
"(a) The salary of any such official who fails to render his
decision or resolution within the prescribed period shall
be, or caused to be, withheld until the said official
complies therewith;
"(b) Suspension for not more than ninety (90) days; or
"(c) Dismissal from the service with disqualification to hold
any appointive public office for five (5) years.
"Provided, however, That the penalties herein provided
shall be without prejudice to any liability which any such
official may have incured under other existing laws or rules
and regulations as a consequence of violating the
provisions of this paragraph."
EXECUTIVE SECRETARY V CA
429 SCRA 81 (2004)
Penalizing unlicensed and licensed recruitment agencies and their
officers and employees and their relatives employed in
government agencies charged with the enforcement of the law
for illegal recruitment and imposing life imprisonment for those
who commit large scale illegal recruitment is not offensive to the
Constitution. The accused may be convicted of illegal recruitment
only if, after trial, the prosecution is able to prove all the
elements of the crime charged
Equally important, into every contract is read provisions of
existing law, and always, a reservation of police power for so long
as the agreement deals with a subject impressed with public

welfare
2.09 Liability of Agency
G & M (PHIL) INC V BATOMALAQUE

461 SCRA 111
Aside from its bare allegation that its principal Abdul Aziz had
fully paid respondents salaries, petitioner did not present any
evidence, e.g., payroll or payslips, to support its defense of
payment.
It is settled that as a general rule, a party who alleges payment as
a defense has the burden of proving it. Specifically with respect to
labor cases, the burden of proving payment of monetary claims
rests on the employer, the rationale being that the pertinent
personnel files, payrolls, records, remittances and other similar
documents which will show that overtime, differentials, service
incentive leave and other claims of workers have been paid are
not in the possession of the worker but in the custody and
absolute control of the employer.
Contractual undertakings submitted to the Bureau of
Employment Services constitute the legal basis for holding
petitioner, and other private employment or recruitment
agencies, liable jointly and severally with its principal, the foreignbased employer, for all claims filed by recruited workers which
may arise in connection with the implementation of the service
agreements or employment contracts.
Basis for liability: First, in applying for its license to operate a
private employment agency for overseas recruitment and
placement, petitioner was required to submit, among others, a
document or verified undertaking whereby it assumed all
responsibilities for the proper use of its license and the
implementation of the contracts of employment with the workers
it recruited and deployed for overseas employment. Second, it
was also required to file with Bureau a formal appointment or
agency contract executed by the foreign-based employer in its
favor to recruit and hire personnel for the former, which
contained a provision empowering it to sue and be sued jointly
and solidarily with the foreign principal for any of the violations of
the recruitment agreement and the contracts of employment.
And third, it was required as well to post such cash and surety
bonds as determined by the Sec. of Labor to guarantee
compliance with prescribed recruitment procedures, rules and
regulations, and terms and conditions of employment as
appropriate.
2.10 Migrant Workers Act
RA 8142, SEC. 2. DECLARATION OF POLICIES-"(a) In the pursuit of an independent foreign policy and
while considering national sovereignty, territorial integrity,
national interest and the right to self-determination
paramount in its relations with other states, the State
shall, at all times, uphold the dignity of its citizens whether
in country or overseas, in general, and Filipino migrant
workers, in particular, continuously monitor international
conventions, adopt/be signatory to and ratify those that
guarantee protection to our migrant workers, and
endeavor to enter into bilateral agreements with countries
hosting overseas Filipino workers."
(b) 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. Towards this end, the State shall provide adequate
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and timely social, economic and legal services to Filipino

migrant workers.
(c) While recognizing the significant contribution of Filipino
migrant workers to the national economy through their
foreign exchange remittances, the State does not promote
overseas employment as a means to sustain economic
growth and achieve national development. The existence
of the overseas employment program rests solely on the
assurance that the dignity and fundamental human rights
and freedoms of the Filipino citizens shall not, at any time,
be compromised or violated. The State, therefore, shall
continuously create local employment opportunities and
promote the equitable distribution of wealth and the
benefits of development.
(d) The State affirms the fundamental equality before the
law of women and men and the significant role of women
in nation-building. Recognizing the contribution of
overseas migrant women workers and their particular
vulnerabilities, the State shall apply gender sensitive
criteria in the formulation and implementation of policies
and programs affecting migrant workers and the
composition of bodies tasked for the welfare of migrant
workers.
"(e) Free access to the courts and quasi-judicial bodies and
adequate legal assistance shall not be denied to any
person by reason of poverty. In this regard, it is imperative
that an effective mechanism be instituted to ensure that
the rights and interest of distressed overseas Filipinos, in
general, and Filipino migrant workers, in particular,
whether regular/documented or irregular/undocumented,
are adequately protected and safeguarded."
(f) The right of Filipino migrant workers and all overseas
Filipinos to participate in the democratic decision-making
processes of the State and to be represented in
institutions relevant to overseas employment is recognized
and guaranteed.
"(g) The State recognizes that the most effective tool for
empowerment is the possession of skills by migrant
workers. The government shall provide them free and
accessible skills development and enhancement programs.
Pursuant to this and as soon as practicable, the
government shall deploy and/or allow the deployment
only of skilled Filipino workers."
"(h) The State recognizes non-governmental organizations,
trade unions, workers associations, stakeholders and their
similar entities duly recognized as legitimate, are partners
of the State in the protection of Filipino migrant workers
and in the promotion of their welfare. The State shall
cooperate with them in a spirit of trust and mutual
respect. The significant contribution of recruitment and
manning agencies shall from part this partnership."
(I) Government fees and other administrative costs of
recruitment, introduction, placement and assistance to
migrant workers shall be rendered free without prejudice
to the provision of Section 36 hereof.
Nonetheless, the deployment of Filipino overseas workers,
whether land-based or sea-based by local service
contractors and manning agencies employing them shall

be encouraged. Appropriate incentives may be extended
to them.
"RA 8042, SEC. 4. Deployment of Migrant Workers. - The

State shall allow the deployment of overseas Filipino
workers only in countries where the rights of Filipino
migrant workers are protected. The government
recognizes any of the following as a guarantee on the part
of the receiving country for the protection of the rights of
overseas Filipino workers:
"(a) It has existing labor and social laws protecting the
rights of workers, including migrant workers;
"(b) 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
"(c) It has concluded a bilateral agreement or arrangement
with the government on the protection of the rights of
overseas Filipino Workers:
Provided, That the receiving country is taking positive,
concrete measures to protect the rights of migrant
workers in furtherance of any of the guarantees under
subparagraphs (a), (b) and (c) hereof.
"In the absence of a clear showing that any of the
aforementioned guarantees exists in the country of
destination of the migrant workers, no permit for
deployment shall be issued by the Philippine Overseas
Employment Administration (POEA).
"The members of the POEA Governing Board who actually
voted in favor of an order allowing the deployment of
migrant workers without any of the aforementioned
guarantees shall suffer the penalties of removal or
dismissal from service with disqualification to hold any
appointive public office for five (5) years, Further, the
government official or employee responsible for the
issuance of the permit or for allowing the deployment of
migrant workers in violation of this section and in direct
contravention of an order by the POEA Governing Board
prohibiting deployment shall be meted the same penalties
in this section.
"For this purpose, the Department of Foreign Affairs,
through its foreign posts, shall issue a certification to the
POEA, specifying therein the pertinent provisions of the
receiving
country's
labor/social
law,
or
the
convention/declaration/resolution, or the bilateral
agreement/arrangement which protect the rights of
migrant workers.
"The State shall also allow the deployment of overseas
Filipino workers to vessels navigating the foreign seas or to
installations located offshore or on high seas whose
owners/employers are compliant with international laws
and standards that protect the rights of migrant workers.
"The State shall likewise allow the deployment of overseas
Filipino workers to companies and contractors with
international operations: Provided, That they are
compliant with standards, conditions and requirements, as
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embodied in the employment contracts prescribed by the

POEA and in accordance with internationally-accepted
standards."
RA 8042, Sec. 6: supra
RA 8042, Sec. 10: supra
PHIL EMPLOY SERVICES AND RESOURCES INC V PARAMIO

427 SCRA 732
The employment permit may be issued to a non-resident

alien or to the applicant employer 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.
For an enterprise registered in preferred areas of
investments, said employment permit may be issued upon
recommendation of the government agency charged with
the supervision of said registered enterprise.
The rule lex loci contractus (the law of the place where the
contract is made) governs. Therefore, the Labor Code, its
implementing rules and regulations, and other laws affecting
labor, apply in this case
(b) Any non-resident alien who shall take up employment

in violation of the provision of this Title and its
implementing rules and regulations shall be punished in
accordance with the provisions of Articles 289 and 290 of
the Labor Code.
PLACEWELL INTERNATIONAL SERVICES V CAMOTE

492 SCRA 761
R.A. No. 8042 explicitly prohibits the substitution or alteration to
the prejudice of the worker, of employment contracts already
approved and verified by the Department of Labor and
Employment (DOLE) from the time of actual signing thereof by
the parties up to and including the period of the expiration of the
same without the approval of the DOLE.
In addition, the alien worker shall be subject to

deportation after service of his sentence.
ART. 42. Submission of list. - Any employer employing nonresident foreign nationals on the effective date of this
Code shall submit a list of such nationals to the Secretary
of Labor within thirty (30) days after such date indicating
their names, citizenship, foreign and local addresses,
nature of employment and status of stay in the country.
The Secretary of Labor shall then determine if they are
entitled to an employment permit.
RA 7916, SEC. 2. Declaration of Policy. It is the declared

policy of the government to translate into practical
realities the following State policies and mandates in the
1987 Constitution, namely:
2.11 Pre-Termination
Section 3
ALIEN EMPLOYMENT
Statutory Reference: Art. 40-42; Revised Guidelines for
Issuances of Employment Permit - 1988
3.01 Coverage
Non-Resident Alien
(b) "The State shall promote the preferential use of Filipino

labor, domestic materials and locally produced goods and
adopt measures that help make them competitive." (Sec.
12, Art XII)
ALMODIEL V NLRC (RAYTHEON PHILS INC)

223 SCRA 341
Likewise destitute of merit is petitioner's imputation of unlawful
discrimination when Raytheon caused corollary functions
appertaining to cost accounting to be absorbed by Danny Ang Tan
Chai, a resident alien without a working permit. Article 40 of the
Labor Code which requires employment permit refers to nonresident aliens. The employment permit is required for entry into
the country for employment purposes and is issued after
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.
Since Ang Tan Chai is a resident alien, he does not fall within the
ambit of the provision
In pursuance of these policies, the government shall

actively encourage, promote, induce and accelerate a
sound and balanced industrial, economic and social
development of the country in order to provide jobs to the
people specially those in the rural areas, increase their
productivity and their individual and family income, and
thereby improve the level and quality of their living
condition through the establishment, among others, of
special economic zones in suitable and strategic locations
in the country and through measures that shall effectively
attract legitimate and productive foreign investments.
3.02 Technique Regulation - Employment Permit
ART. 40. Employment permit of non-resident aliens. - Any

alien seeking admission to the Philippines for employment
purposes and any domestic or foreign employer who
desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the
Department of Labor.
ART. 41. Prohibition against transfer of employment. - (a)

After the issuance of an employment permit, the alien
shall not transfer to another job or change his employer
without prior approval of the Secretary of Labor.
RA 7916, SEC. 3. Purposes, Intents and Objectives. It is

the purpose, intent and objective of this Act:
(c) To promote the flow of investors, both foreign and
local, into special economic zones which would generate
employment opportunities and establish backward and
forward linkages among industries in and around the
economic zones;
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RA 7916, SEC. 4. Definition of Terms. For purposes of this

Act, the following definitions shall apply to the following
terms:
(a) "Special Economic Zones (SEZ)" hereinafter referred

to as the ECOZONES, are selected areas with highly
developed or which have the potential to be developed
into agro-industrial, Industrial tourist/recreational,
commercial, banking, investment and financial centers. An
ECOZONE may contain any or all of the following:
Industrial Estates (IEs), Export Processing Zones (EPZs),
Free Trade Zones, and Tourist/Recreational Centers.
"(g) Employment of Foreign Nationals. Subject to the

provisions of Section 29 of Commonwealth Act No. 613, as
amended, a registered enterprise may employ foreign
nationals in supervisory, technical or advisory positions for
a period not exceeding five (5) years from its registration,
extendible for limited periods at the discretion of the
Board: Provided, however, That when the majority of the
capital stock of a registered enterprise is owned by foreign
investors, the positions of president, treasurer, and
general manager or their equivalents may be retained by
foreign nationals beyond the period set forth within.
(b) "Industrial Estate (IE)" refers to a tract of land

subdivided and developed according to a comprehensive
plan under a unified continuous management and with
provisions for basic infrastructure and utilities, with or
without pre-built standard factory buildings and
community facilities for the use of the community of
industries.
(c) "Export Processing Zone (EPZ)" a specialized industrial
estate located physically and/or administratively outside
customs territory, predominantly oriented to export
production. Enterprises located in export processing zones
are allowed to import capital equipment and raw materials
free from duties, taxes and other import restrictions.
(d)"Free Trade Zone" - an isolated policed area adjacent to
a port of entry (as a seaport) and/or airport where
imported goods may be unloaded for immediate
transshipment or stored, repacked, sorted, mixed, or
otherwise manipulated without being subject to import
duties. However, movement of these imported goods from
the free-trade area to a non-free-trade area in the country
shall be subject to import duties.
Enterprises within the zone are granted preferential tax
treatment and immigration laws are more lenient.
RA 7916, SEC. 10. Immigration. Any investor within the

ECOZONE whose initial investment shall not be less than
One Hundred Fifty Thousand Dollars ($150,000.00),
his/her spouse and dependent children under twenty-one
(21) years of age shall be granted permanent resident
status within the ECOZONE. They shall have freedom of
ingress and egress to and from the ECOZONE without any
need of special authorization from the Bureau of
Immigration.
The PEZA shall issue working visas renewable every two (2)
years to foreign executives and other aliens, processing
highly-technical skills which no Filipino within the
ECOZONE possesses, as certified by the Department of
Labor and Employment. The names of aliens granted
permanent resident status and working visas by the PEZA
shall be reported to the Bureau of Immigration within
thirty (30) days after issuance thereof.
RA 7916, SEC. 40. Percentage of Foreign Nationals. Employment of foreign nationals hired by ECOZONE
enterprises in a supervisory, technical or advisory capacity
shall not exceed five percent (5%) of Its workforce without
the express authorization of the Secretary of Labor and
Employment.
RA 7018: Article 39, Title III of Executive Order No. 226,

otherwise known as the Omnibus Investments Code of
1987, as amended, is hereby further amended to read as
follows: "Art. 39. Incentives to Registered Enterprises.
All registered enterprises shall be granted the following
incentives to the extent engaged in a preferred area of
investment:
"Foreign nationals under employment contract within the

purview of this incentive, their spouses and unmarried
children under twenty-one (21) years of age, who are not
excluded by Section 29 of Commonwealth Act No. 613, as
amended, shall be permitted to enter and reside in the
Philippines during the period of employment of such
foreign nationals.
"A registered enterprise shall train Filipinos as
understudies of foreign nationals in administrative,
supervisory and technical skills and shall submit annual
reports on such training to the Board.
Authority Employment Permit
GENERAL MILLING CORP. V TORRES
196 SCRA 215 (1991)
The Labor Code itself specifically empowers respondent Secretary
to make a determination as to the availability of the services of a
person in the Philippines who is competent, able and willing at
the time of application to perform the services for which an alien
is desired. In short, the Department of Labor is the agency
vested with jurisdiction to determine the question of availability
of local workers. The constitutional validity of legal provisions
granting such jurisdiction and authority and requiring proof of
non-availability of local nationals able to carry out the duties of
the position involved, cannot be seriously questioned
Section 4
EMPLOYMENTOF APPRENTICES, LEARNERS
AND HANDICAPPED WORKERS
Statutory Reference: Art. 57-81; Technical Education and Skills
Development Authority Act of 1994, R.A. No. 7796; Dual
Training Systems Act of 1994 (R.A. No. 7686); Magna Carta for
Disabled Persons (R.A. No. 7277)
4.01 Policy Objectives
RA 7796, SEC. 2. Declaration of Policy. - I t is hereby

declared the policy of the State to provide relevant,
accessible, high quality and efficient technical education
and skills development in support of the development of
high quality Filipino middle-level manpower responsive to
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and in accordance with Philippine development goals and

priorities.
The State shall encourage active participation of various
concerned
sectors,
particularly
private
enterprises, being direct participants in and immediate
beneficiaries of a trained and skilled workforce, in
providing technical education and skills development
opportunities.
apprentice and the apprentice in turn accepts the terms of

training.
(a) Be at least fourteen (14) years of age;

(b) Possess vocational
appropriate tests; and
RA 7796, SEC. 3. Statement of Goals and Objectives. - It is

the goal and objective of this Act to:
(c) Encourage critical and creative thinking by

disseminating the scientific and technical knowledge base
of middle-level manpower development programs;
for
ART. 60. Employment of apprentices. - Only employers in

the highly technical industries may employ apprentices
and only in apprenticeable occupations approved by the
Secretary of Labor and Employment.
ART. 62. Signing of apprenticeship agreement. -Every

apprenticeship agreement shall be signed by the employer
or his agent, or by an authorized representative of any of
the recognized organizations, associations or groups and
by the apprentice.
An apprenticeship agreement with a minor shall be signed
in his behalf by his parent or guardian, if the latter is not
available, by an authorized representative of the
Department of Labor, and the same shall be binding during
its lifetime.
A. Apprentice (Labor Code Provisions)
capacity
(e) Inculcate desirable values through the development of

moral character with emphasis on work ethic, selfdiscipline, self-reliance and nationalism.
Every apprenticeship agreement entered into under this

Title shall be ratified by the appropriate apprenticeship
committees, if any, and a copy thereof shall be furnished
both the employer and the apprentice.
ART. 57. Statement of objectives. - This Title aims:

(1) To help meet the demand of the economy for trained
manpower;
and
Trade and industry associations may recommend to the

Secretary of Labor appropriate educational requirements
for different occupations.
(d) Recognize and encourage the complementary roles of

public and private institutions in technical education and
skills development and training systems; and
aptitude
(c) Possess the ability to comprehend and follow oral and

written instructions.
(a) Promote and strengthen the quality of technical

education and skills development programs to attain
international competitiveness;
(b) Focus technical education and skills development on
meeting the changing demands for quality middle-level
manpower;
ART. 59. Qualifications of apprentice. - To qualify as an

apprentice, a person shall:
(2) To establish a national apprenticeship program through

the participation of employers, workers and government
and non-government agencies; and
ART. 63. Venue of apprenticeship programs. - Any firm,

employer, group or association, industry organization or
civic group wishing to organize an apprenticeship program
may choose from any of the following apprenticeship
schemes as the training venue for apprentice:
(3) To establish apprenticeship standards for the

protection of apprentices.
(a) Apprenticeship conducted entirely by and within the

sponsoring firm, establishment or entity;
ART. 58. Definition of Terms. - As used in this Title:
(b) Apprenticeship entirely within a Department of Labor

and Employment training center or other public training
institution; or
(a) "Apprenticeship" means practical training on the job

supplemented by related theoretical instruction.
(c) Initial training in trade fundamentals in a training

center or other institution with subsequent actual work
participation within the sponsoring firm or entity during
the final stage of training.
(b) An "apprentice" is a worker who is covered by a written

apprenticeship agreement with an individual employer or
any of the entities recognized under this Chapter.
(c) An "apprenticeable occupation" means any trade, form
of employment or occupation which requires more than
three (3) months of practical training on the job
supplemented by related theoretical instruction.
ART. 64. Sponsoring of apprenticeship program. - Any of

the apprenticeship schemes recognized herein may be
undertaken or sponsored by a single employer or firm or
by a group or association thereof or by a civic organization.
Actual training of apprentices may be undertaken:
(d) "Apprenticeship agreement" is an employment contract

wherein the employer binds himself to train the
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(a) In the premises of the sponsoring employer in the case

of individual apprenticeship programs;
(b) In the premises of one or several designated firms in

the case of programs sponsored by a group or association
of employers or by a civic organization; or
(1) When a child works directly under the sole

responsibility of his parents or legal guardian and where
only members of the employer's family are employed:
Provided, however, That his employment neither
endangers his life, safety, health and morals, nor impairs
his normal development; Provided, further, That the
parent or legal guardian shall provide the said minor child
with the prescribed primary and/or secondary education;
or
(c) In a Department of Labor and Employment training

center or other public training institution.
ART. 68. Aptitude testing of applicants. - Consonant with

the minimum qualifications of apprentice-applicants
required under this Chapter, employers or entities with
duly recognized apprenticeship programs shall have
primary responsibility for providing appropriate aptitude
tests in the selection of apprentices. If they do not have
adequate facilities for the purpose, the Department of
Labor and Employment shall perform the service free of
charge.
(2) Where a child's employment or participation in public

entertainment or information through cinema, theater,
radio or television is essential: Provided, The employment
contract is concluded by the child's parents or legal
guardian, with the express agreement of the child
concerned, if possible, and the approval of the
Department of Labor and Employment: and Provided, That
the following requirements in all instances are strictly
complied with:
ART. 69. Responsibility for theoretical instruction. Supplementary theoretical instruction to apprentices in
cases where the program is undertaken in the plant may
be done by the employer. If the latter is not prepared to
assume the responsibility, the same may be delegated to
an appropriate government agency.
(a) The employer shall ensure the protection,

health, safety, morals and normal development of the
child;
(b) The employer 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
(c) The employer shall formulate and implement,
subject to the approval and supervision of competent
authorities, a continuing program for training and skills
acquisition of the child.
ART. 70. Voluntary organization of apprenticeship

programs; exemptions. - (a) The organization of
apprenticeship program shall be primarily a voluntary
undertaking by employers;
(b) When national security or particular requirements of
economic development so demand, the President of the
Philippines may require compulsory training of apprentices
in certain trades, occupations, jobs or employment levels
where shortage of trained manpower is deemed critical as
determined by the Secretary of Labor and Employment.
Appropriate rules in this connection shall be promulgated
by the Secretary of Labor and Employment as the need
arises; and
(c) Where services of foreign technicians are utilized by
private companies in apprenticeable trades, said
companies are required to set up appropriate
apprenticeship programs.
4.02 Apprentice
Defined
RA 7796, Sec. 4. (j) Apprenticeship training within

employment with compulsory related theoretical
instructions involving a contract between an apprentice
and an employer on an approved apprenticeable
occupation;
Apprenticeable Occupation
RA 7796, Sec. 4. (m) Apprenticeable Occupation is an

occupation officially endorsed by a tripartite body and
approved for apprenticeship by the Authority;
Qualification
"Sec. 12. Employment of Children. Children below

fifteen (15) years of age shall not be employed except:
In the above exceptional cases where any such child may

be employed, the employer shall first secure, before
engaging such child, a work permit from the Department
of Labor and Employment which shall ensure observance
of the above requirements.
The Department of Labor and Employment shall
promulgate rules and regulations necessary for the
effective implementation of this Section."
Allowed Employment - Requirement Program Approval
NITTO ENTERPRISES V NLRC (CAPILI)
248 SCRA 654
Article 61 of the Labor Code provides:
Contents of apprenticeship agreement. - Apprenticeship
agreements, including the main rates of apprentices, shall
conform to the rules issued by the Minister of Labor and
Employment. The period of apprenticeship shall not exceed 6
months. Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case shall start below
75% per cent of the applicable minimum wage, may he entered
into only in accordance with apprenficeship program duly
approved by the Minister of Labor and Employment. The Ministry
shall develop standard model programs of apprenticeship.
Terms and Conditions of Employment
ART. 61. Contents of apprenticeship agreements. Apprenticeship agreements, including the wage rates of
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apprentices, shall conform to the rules issued by the

Secretary of Labor and Employment. The period of
apprenticeship shall not exceed six months.
Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case shall
start below 75 percent of the applicable minimum wage,
may be entered into only in accordance with
apprenticeship programs duly approved by the Secretary
of Labor and Employment. The Department shall develop
standard model programs of apprenticeship.
ART. 73. Learners defined. - Learners are persons hired as

trainees in semi-skilled and other industrial occupations
which are non-apprenticeable and which may be learned
through practical training on the job in a relatively short
period of time which shall not exceed three (3) months.
RA 7796, Sec. 4. (n) Learners refer to persons hired as

trainees in semi-skilled and other industrial occupations
which are non-apprenticeable. Learnership programs must
be approved by the Authority.
ART. 72. Apprentices without compensation. - The

Secretary of Labor and Employment may authorize the
hiring of apprentices without compensation whose
training on the job is required by the school or training
program curriculum or as requisite for graduation or board
examination.
Allowed Employment
Costs
ART. 71. Deductibility of training costs. - An additional

deduction from taxable income of one-half (1/2) of the
value of labor training expenses incurred for developing
the productivity and efficiency of apprentices shall be
granted to the person or enterprise organizing an
apprenticeship program: Provided, That such program is
duly recognized by the Department of Labor and
Employment: Provided, further, That such deduction shall
not exceed ten (10%) percent of direct labor wage: and
Provided, finally, That the person or enterprise who wishes
to avail himself or itself of this incentive should pay his
apprentices the minimum wage.
Terms and Conditions of Employment
ART. 65. Investigation of violation of apprenticeship

agreement. - Upon complaint of any interested person or
upon its own initiative, the appropriate agency of the
Department of Labor and Employment or its authorized
representative shall investigate any violation of an
apprenticeship agreement pursuant to such rules and
regulations as may be prescribed by the Secretary of Labor
and Employment.
ART. 66. Appeal to the Secretary of Labor and Employment.

- The decision of the authorized agency of the Department
of Labor and Employment may be appealed by any
aggrieved person to the Secretary of Labor and
Employment within five (5) days from receipt of the
decision. The decision of the Secretary of Labor and
Employment shall be final and executory.
ART. 75. Learnership agreement. - Any employer 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 three (3) months;
(c) The wages or salary rates of the learners which shall
begin at not less than seventy-five percent (75%) of the
applicable minimum wage; and
Enforcement
ART. 74. When learners may be hired. - Learners may be

employed when no experienced workers are available, the
employment of learners is necessary to prevent
curtailment of employment opportunities, and the
employment does not create unfair competition in terms
of labor costs or impair or lower working standards.
(d) A commitment to employ the learners if they so desire,

as regular employees upon completion of the learnership.
All learners who have been allowed or suffered to work
during the first two (2) months shall be deemed regular
employees if training is terminated by the employer
before the end of the stipulated period through no fault of
the learners.
The learnership agreement shall be subject to inspection
by the Secretary of Labor and Employment or his duly
authorized representative.
ART. 76. Learners in piecework. - Learners employed in

piece or incentive-rate jobs during the training period shall
be paid in full for the work done.
C. Handicapped (Labor Code Provisions)
ART. 67. Exhaustion of administrative remedies. - No

person shall institute any action for the enforcement of
any apprenticeship agreement or damages for breach of
any such agreement, unless he has exhausted all available
administrative remedies.
ART. 78. Definition. - Handicapped workers are those

whose earning capacity is impaired by age or physical or
mental deficiency or injury.
ART. 79. When employable. - Handicapped workers may be

employed when their employment is necessary to prevent
curtailment of employment opportunities and when it
does not create unfair competition in labor costs or impair
or lower working standards.
ART. 80. Employment agreement. - Any employer who

employs handicapped workers shall enter into an
B. Learners
4.05 Learners
Defined
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employment agreement with them, which agreement shall

include:
(e) To facilitate integration of disabled persons into the

mainstream of society, the State shall advocate for and
encourage respect for disabled persons. The State shall
exert all efforts to remove all social, cultural, economic,
environmental and attitudinal barriers that are prejudicial
to disabled persons.
a. The names and addresses of the handicapped workers

to be employed;
b. The rate to be paid the handicapped workers which
shall not be less than seventy five (75%) percent of the
applicable legal minimum wage;
Sec. 3. Coverage. This Act shall cover all disabled

persons and, to the extent herein provided, departments,
offices and agencies of the National Government or
nongovernment organizations involved in the attainment
of the objectives of this Act.
Sec. 4. Definition of Terms. For purposes of this Act,

these terms are defined as follows:
c. The duration of employment period; and

d. The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection
by the Secretary of Labor or his duly authorized
representative.
Disabled Persons
ART. 81. Eligibility for apprenticeship. - Subject to the

appropriate provisions of this Code, handicapped workers
may be hired as apprentices or learners if their handicap is
not such as to effectively impede the performance of job
operations in the particular occupations for which they are
hired.
(a) Disabled persons are those suffering from restriction or

different abilities, as a result of a mental, physical or
sensory impairment, to perform an activity in the manner
or within the range considered normal for a human being;
4.06 Handicapped Worker
(b) Impairment is any loss, diminution or aberration of

psychological, physiological, or anatomical structure or
function;
Defined
Disability shall mean
(c) Disability shall mean 1) a physical or mental impairment

that substantially limits one or more psychological,
physiological or anatomical function of an individual or
activities of such individual; 2) a record of such an
impairment; or 3) being regarded as having such an
impairment;
Sec. 2. Declaration of Policy The grant of the rights and

privileges for disabled persons shall be guided by the
following principles:
(a) Disabled persons are part of Philippine society, thus the
State shall give full support to the improvement of the
total well-being of disabled persons and their integration
into the mainstream of society. Toward this end, the State
shall adopt policies ensuring the rehabilitation, selfdevelopment and self-reliance of disabled persons. It shall
develop their skills and potentials to enable them to
compete favorably for available opportunities.
(d) Handicap refers to a disadvantage for a given

individual, resulting from an impairment or a disability,
that limits or prevents the function or activity, that is
considered normal given the age and sex of the individual;
Sec. 6. Sheltered Employment If suitable employment

for disabled persons cannot be found through open
employment as provided in the immediately preceding
Section, the State shall endeavor to provide it by means of
sheltered employment. In the placement of disabled
persons in sheltered employment, it shall accord due
regard to the individual qualities, vocational goals and
inclinations to ensure a good working atmosphere and
efficient production.
Sec. 7. Apprenticeship. Subject to the provisions of the

Labor Code as amended, disabled persons shall be eligible
as apprentices or learners: Provided, That their handicap is
not as much as to effectively impede the performance of
job operations in the particular occupation for which they
are hired; Provided, further, That after the lapse of the
period of apprenticeship, if found satisfactory in the job
performance, they shall be eligible for employment.
Sec. 8. Incentives for Employers. (a) To encourage the

active participation of the private sector in promoting the
welfare of disabled persons and to ensure gainful
employment for qualified disabled persons, adequate
(b) Disabled persons have the same rights as other people

to take their proper place in society. They should be able
to live freely and as independently as possible. This must
be the concern of everyone the family, community and
all government and nongovernment organizations.
Disabled persons' rights must never be perceived as
welfare services by the Government.
(c) The rehabilitation of the disabled persons shall be the
concern of the Government in order to foster their
capacity to attain a more meaningful, productive and
satisfying life. To reach out to a greater number of
disabled persons, the rehabilitation services and benefits
shall be expanded beyond the traditional urban-based
centers to community based programs, that will ensure
full participation of different sectors as supported by
national and local government agencies.
(d) The State also recognizes the role of the private sector
in promoting the welfare of disabled persons and shall
encourage partnership in programs that address their
needs and concerns.
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incentives shall be provided to private entities which

employ disabled persons.
(b) Private entities that employ disabled persons who
meet the required skills or qualifications, either as regular
employee, apprentice or learner, shall be entitled to an
additional deduction, from their gross income, equivalent
to twenty-five percent (25%) of the total amount paid as
salaries and wages to disabled persons: Provided,
however, That such entities present proof as certified by
the Department of Labor and Employment that disabled
persons are under their employ: Provided, further, That
the disabled employee is accredited with the Department
of Labor and Employment and the Department of Health
as to his disability, skills and qualifications.
(c) 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
fifty percent (50%) of the direct costs of the improvements
or modifications. This Section, however, does not apply to
improvements or modifications of facilities required under
Batas Pambansa Bilang 344.
Allowed Employment
Sec. 5. Equal Opportunity for Employment. No disable

person shall be denied access to opportunities for suitable
employment. 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.
Five percent (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.
BERNARDO V NLRC
310 SCRA 186
Magna Carta for Disabled Persons mandates that a qualified
disabled employee should be given the same terms and
conditions of employment as a qualified able-bodied person.
Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportunity for Employment. No disabled person
shall be denied access to opportunities for suitable employment.
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.
Since the Magna Carta accords them the rights of qualified ablebodied persons, they are thus covered by Article 280 of the Labor
Code
The noble objectives of Magna Carta for Disabled Persons are not
based merely on charity or accommodation, but on justice and
the equal treatment of qualified persons, disabled or not. The
Court believes, that, after showing their fitness for the work
assigned to them, they should be treated and granted the same
rights like any other regular employees.
Section 5
CONDITIONS OF EMPLOYMENT
HOURS OF WORK
Statutory Reference: Art. 82-90; Book III, Rules I, IA, II, Omnibus
Rules Implementing the Labor Code
(Hours of Work): RULE I, SECTION 1. General statement on

coverage. The provisions of this Rule shall apply to all
employees in all establishments and undertakings,
whether operated for profit or not, except to those
specifically exempted under Section 2 hereof.
(Hours of Work): RULE I, SECTION 2. Exemption. The

provisions of this Rule shall not apply to the following
persons if they qualify for exemption under the conditions
set forth herein:
(a) Government employees whether employed by the
National Government or any of its political subdivision,
including those employed in government-owned and/or
controlled corporations;
(b) Managerial employees, if they meet all of the following
conditions:
(1) Their primary duty consists of the management of the
establishment in which they are employed or of a
department or sub-division thereof.
(2) They customarily and regularly direct the work of two
or more employees therein.
(3) They have the authority to hire or fire employees of
lower rank; or their suggestions and recommendations as
to hiring and firing and as to the promotion or any other
change of status of other employees, are given particular
weight.
(c) Officers or members of a managerial staff if they
perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work
directly related to management policies of their employer;
(2) Customarily and regularly exercise discretion and
independent judgment; and
(3) (i) Regularly and directly assist a proprietor or a
managerial employee 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) execute, under general supervision, special
assignments and tasks; and
(4) Who do not devote more than 20 percent of their
hours worked in a work week to activities which are not
directly and closely related to the performance of the
work described in paragraphs (1), (2) and (3) above.
(d) Domestic servants and persons in the personal service
of another if they perform such services in the employer's
home which are usually necessary or desirable for the
maintenance and enjoyment thereof, or minister to the
personal comfort, convenience, or safety of the employer
as well as the members of his employer's household.
(e) 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
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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.
(f) Non-agricultural field personnel if they regularly
perform their duties away from the principal or branch
office or place of business of the employer and whose
actual hours of work in the field cannot be determined
with reasonable certainty.
5.01 Hours Regulation
Rationale and Enforcement
MANILA TERMINAL CO, INC. V CIR
91 Phil. 625
The Eight-Hour Labor Law was designed not only to safeguard the
health and welfare of the laborer or employee, but in a way to
minimize unemployment by forcing employers, in cases where
more than 8-hour operation is necessary, to utilize shifts of
laborers or employees working only for eight hours each
5.02 Coverage
ART. 82. Coverage. - The provisions of this Title shall apply

to employees in all establishments and undertakings
whether for profit or not, but not to government
employees, managerial employees, field personnel,
members of the family of the employer who are
dependent on him for support, domestic helpers, persons
in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in
appropriate regulations.
As used herein, "managerial employees" refer to those
whose primary 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.
"Field personnel" shall refer to non-agricultural employees
who regularly perform their duties away from the principal
place of business or branch office of the employer and
whose actual hours of work in the field cannot be
determined with reasonable certainty.
Exemption - Managerial Employees

PEARANDA V BAGANGA PLYWOOD CORP.
Article 82 of the Labor Code exempts managerial employees from
the coverage of labor standards. Labor standards provide the
working conditions of employees, including entitlement to
overtime pay and premium pay for working on rest days.
Under this provision, managerial employees are those whose
primary duty consists of the management of the establishment in
which they are employed or of a department or subdivision.
The Implementing Rules of the Labor Code state that managerial
employees are those who meet the following conditions:
(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department or
subdivision thereof;
(2) They customarily and regularly direct the work of two or
more employees therein;
(3) They have the authority to hire or fire other employees of
lower rank; or their suggestions and recommendations as to the
hiring and firing and as to the promotion or any other change of

status of other employees are given particular weight.
The Court disagreed with the NLRCs finding that petitioner was a
managerial employee. However, petitioner was a member of the
managerial staff, which also takes him out of the coverage of
labor standards. Like managerial employees, officers and
members of the managerial staff are not entitled to the
provisions of law on labor standards. The Implementing Rules of
the Labor Code define members of a managerial staff as those
with the following duties and responsibilities:
(1) The primary duty consists of the performance of work
directly related to management policies of the employer;
(2) Customarily and regularly exercise discretion and
independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial
employee 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) execute under general supervision special
assignments and tasks; and
(4) who do not devote more than 20 percent of their hours
worked in a workweek to activities which are not directly and
closely related to the performance of the work described in
paragraphs (1), (2), and (3) above.
Petitioners duties and responsibilities conform to the definition
of a member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant
boiler. His work involved overseeing the operation of the
machines and the performance of the workers in the engineering
section. This work necessarily required the use of discretion and
independent judgment to ensure the proper functioning of the
steam plant boiler. As supervisor, petitioner is deemed a member
of the managerial staff.
ASIA PACIFIC CHARTERING (PHILS) INC V FAROLAN
393 SCRA 454
Recent decisions of this Court distinguish the treatment of
managerial employees from that of rank and file personnel
insofar as the application of the doctrine of loss of trust and
confidence is concerned.
"Thus with respect to rank and file personnel, loss of trust and
confidence as ground for valid dismissal requires proof of
involvement in the alleged events in question and that mere
uncorroborated assertions and accusations by the employer will
not be sufficient. But as regards a managerial employee, mere
existence of a basis for believing that such employee has breached
the trust of his employer would suffice for his dismissal."
NATIONAL WATERWORKS & SEWERAGE AUTHORITY V NWSA
CONSOLIDATED UNIONS
11 SCRA 766
The philosophy behind the exemption of managerial employees
from the 8-Hour Labor Law is that such workers are not usually
employed for every hour of work but their compensation is
determined considering their special training, experience, or
knowledge which requires the exercise of discretion and
independent judgment, or perform work related to management
policies or general work related to management policies or
general business operations along specialized or technical lines.
For these workers it is not feasible to provide a fixed hourly rate
of pay or maximum hours of labor.
Tests - Field Personnel

AUTO BUS TRANSPORT SYSTEMS INC V BAUTISTA
458 SCRA 578
According to A82 LC, field personnel shall refer to nonagricultural employees who regularly perform their duties away
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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. This definition is further
elaborated in the Bureau of Working Conditions (BWC), Advisory
Opinion to Philippine Technical-Clerical Commercial Employees
Association which states that:
As a general rule, field personnel are those whose performance of
their job/service is not supervised by the employer or his
representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount
for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees
including drivers cannot be said to be field personnel despite the
fact that they are performing work away from the principal office
of the employee.
The definition of a field personnel is not merely concerned with
the location where the employee regularly performs his duties
but also with the fact that the employees performance is
unsupervised by the employer. As discussed above, field
personnel are those who regularly perform their duties away
from the principal place of business of the employer and whose
actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an
employee is a field employee, it is also necessary to ascertain if
actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry
must be made as to whether or not the employees time and
performance are constantly supervised by the employer.
UNION OF FILIPRO EMPLOYEES V VIVAR

205 SCRA 200
Under Article 82, field personnel are not entitled to holiday pay.
Said article defines field personnel as "non-agricultural employees
who regularly perform their duties away from the principal place
of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable
certainty."
SALAZAR V NLRC
256 SCRA 273
Although petitioner cannot strictly be classified as a managerial
employee under Art. 82 of the Labor Code, and Sec. 2(b), Rule 1,
Book III of the Omnibus Rules Implementing the Labor Code,
nonetheless he is still not entitled to payment of the aforestated
benefits because he falls squarely under another exempt category
- officers or members of a managerial staff as defined under
Sec. 2(c)34 of the abovementioned implementing rules
MERCIDAR FISHING CORP V NLRC
297 SCRA 440
not to government employees, field personnel, members of the

family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and
workers who are paid by results as determined by the Secretary of
Labor in appropriate regulations.
Field personnel shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours
of work in the field cannot be determined with reasonable
certainty.
In the case of Union of Filipro Employees (UFE) v. Vicar, SC
explained that the requirement of whose actual hours of work in
the field cannot be determined with reasonable certainty must
be read in conjunction with Rule IV, Book III35 of the
Implementing Rules.
The clause whose time and performance is unsupervised by the
employer did not amplify but merely interpreted and expounded
the clause whose actual hours of work in the field cannot be
determined with reasonable certainty. There is no contradiction;
the former clause is still within the scope and purview of Art. 82
which defines field personnel. Hence, in deciding whether or not
an employees actual working hours in the field can be
determined with reasonable certainty, query must be made as to
whether or not such employees time and performance is
constantly supervised by the employer.
During the entire course of their fishing voyage, fishermen
employed by petitioner have no choice but to remain on board its
vessel. Although they perform non-agricultural work away from
petitioners business offices, the fact remains that throughout the
duration of their work they are under the effective control and
supervision of petitioner through the vessels patron or master as
the NLRC correctly held.
Rationale Exemption - Piece Worker

RED V COCONUT PRODUCTS LTD V CIR
17 SCRA 553
Although the Eight-Hour Labor Law provides that it does not
cover those workers who prefer to be paid on piece-work basis
(Sec. 2, CA 444), nothing in said law precludes an agreement for
the payment of overtime precludes an agreement for the
payment of overtime compensation to piece-workers. And in
agreeing to the provision for payment of shift differential to the
petitioners-workers aforementioned, in the bargaining
agreement, as well as in actually paying to them said differentials,
though not in full, the company in effect freely adhered to an
application and implementation of the Eight-Hour Labor Law, or
its objectives, to said workers.
5.03 Normal Hours of Work
Art. 82. Coverage. - The provisions of this Title [Working

Conditions and Rest Periods] shall apply to employees in all
establishments and undertakings whether for profit or not, but
Sec. 2. Exemption. - The provisions of this Rule shall not apply to the
following persons if they qualify for exemption under the condition set forth
herein: (c) Officers or members of a managerial staff if they perform the
following duties and responsibilities: (1) The primary duty consists of the
performance of work directly related to management policies of their
employer; (2) Customarily and regularly exercise discretion and independent
judgment; (3) [i] Regularly and directly assist a proprietor or a managerial
employee 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] execute under general
supervision special assignments and tasks; and (4) who do not devote more
than 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in
paragraphs (1), (2), and (3) above.
(Normal hours of work): ART. 83. The normal hours of

work of any employee shall not exceed eight (8) hours a
day.
Health personnel in cities and municipalities with a
population of at least one million (1,000,000) or in
hospitals and clinics with a bed capacity of at least one
hundred (100) shall hold regular office hours for eight (8)
hours a day, for five (5) days a week, exclusive of time for
meals, except where the exigencies of the service require
that such personnel work for six (6) days or forty-eight (48)
hours, in which case, they shall be entitled to an additional
compensation of at least thirty percent (30%) of their
regular wage for work on the sixth day. For purposes of
34
Rule IV Holidays with Pay. Section 1. Coverage - This rule shall apply to all
employees except: (e) Field personnel and other employees whose time and
performance is unsupervised by the employer xxx (Italics supplied)
35
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this Article, "health personnel" shall include resident

physicians, nurses, nutritionists, dietitians, pharmacists,
social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all
other hospital or clinic personnel.
(Hours of Work of Hospital and Clinic Personnel): RULE I-A,

SECTION 1. General statement on coverage. This Rule
shall apply to:
For purposes of this Rule a "day" shall mean a work day of

twenty-four (24) consecutive hours beginning at the same
time each calendar year. A "week" shall mean the work of
168 consecutive hours, or seven consecutive 24-hour work
days, beginning at the same hour and on the same
calendar day each calendar week.
(a) All hospitals and clinics, including those with a bed

capacity of less than one hundred (100) which are situated
in cities or municipalities with a population of one million
or more; and
(b) All hospitals and clinics with a bed capacity of at least
one hundred (100), irrespective of the size of the
population of the city or municipality where they may be
situated.
RULE I-A, SECTION 2. Hospitals or clinics within the

meaning of this Rule. The terms "hospitals" and "clinics"
as used in this Rule shall mean a place devoted primarily to
the maintenance and operation of facilities for the
diagnosis, treatment and care of individuals suffering from
illness, disease, injury, or deformity, or in need of
obstetrical or other medical and nursing care. Either term
shall also be construed as any institution, building, or place
where there are installed beds, or cribs, or bassinets for
twenty-four (24) hours use or longer by patients in the
treatment of disease, injuries, deformities, or abnormal
physical and mental states, maternity cases or sanitorial
care; or infirmaries, nurseries, dispensaries, and such
other similar names by which they may be designated.
Employers are not precluded from changing the time at

which the work day or work week begins, provided that
the change is not intended to evade the requirements of
this Rule.
RULE I-A, SECTION 7. Overtime work. Where the

exigencies of the service so require as determined by the
employer, any employee covered by this Rule may be
scheduled to work for more than five (5) days or forty (40)
hours a week, provided that the employee is paid for the
overtime work an additional compensation equivalent to
his regular wage plus at least thirty percent (30%) thereof,
subject to the provisions of this Book on the payment of
additional compensation for work performed on special
and regular holidays and on rest days.
RULE I-A, SECTION 8. Hours worked. In determining the

compensable hours of work of hospital and clinic
personnel covered by this Rule, the pertinent provisions of
Rule 1 of this Book shall apply.
RULE I-A, SECTION 9. Additional compensation. Hospital

and clinic personnel covered by this Rule, with the
exception of those employed by the Government, shall be
entitled to an additional compensation for work
performed on regular and special holidays and rest days as
provided in this Book. Such employees shall also be
entitled to overtime pay for services rendered in excess of
forty hours a week, or in excess of eight hours a day,
whichever will yield the higher additional compensation to
the employee in the work week.
RULE I-A, SECTION 10. Relation to Rule I. All provisions

of Rule I of this Book which are not inconsistent with this
Rule shall be deemed applicable to hospital and clinic
personnel.
RULE I-A, SECTION 3. Determination of bed capacity and

population.
(a) For purposes of determining the applicability of this
Rule, the actual bed capacity of the hospital or clinic at the
time of such determination shall be considered, regardless
of the actual or bed occupancy. The bed capacity of
hospital or clinic as determined by the Bureau of Medical
Services pursuant to Republic Act No. 4226, otherwise
known as the Hospital Licensure Act, shall prima facie be
considered as the actual bed capacity of such hospital or
clinic.
(b) The size of the population of the city or municipality
shall be determined from the latest official census issued
by the Bureau of the Census and Statistics.
RULE I-A, SECTION 6. Regular working days. The regular

working days of covered employees shall not be more than
five days in a work week. The work week may begin at any
hour and on any day, including Saturday or Sunday,
designated by the employer.
5.04 Hours Worked
RULE I-A, SECTION 4. Personnel covered by this Rule.

This Rule applies to all persons employed by any private or
public hospital or clinic mentioned in Section 1 hereof, and
shall include, but not limited to, resident physicians,
nurses, nutritionists, dieticians, pharmacists, social
workers, laboratory technicians paramedical technicians,
psychologists, midwives, and attendants.
RULE I-A, SECTION 5. Regular working hours. The
regular working hours of any person covered by this Rule
shall not be more than eight (8) hours in any one day nor
more than forty (40) hours in any one week.
(Hours worked): ART. 84. Hours worked shall include (a) all
time during which an employee is required to be on duty
or to be at a prescribed workplace; and (b) all time during
which an employee is suffered or permitted to work.
Rest periods of short duration during working hours shall
be counted as hours worked.
Idle time
NATIONAL DEVELOPMENT CO V CIR
6 SCRA 763
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As stated in Sec 1 of Com. Act No. 444, The legal working day for
any person employed by another shall be of not more than 8
hours daily. When the work is not continuous, the time during
which the laborer is not working and can leave his working place
and can rest completely shall not be counted. It is clear from the
provision that idle time spent resting and during which an
employee may leave the workplace is not counted as working
time only where the work is broken or not continuous. In this
case, the CIR's finding that work in the NDC was continuous and
did not permit employees and laborers to rest completely is not
without basis in evidence and following the Courts earlier rulings,
these findings are not to be disturbed.
LUZON STEVEDORING CO V LUZON MARINE DEPARTMENT
UNION
101 Phil 257
There is no need to set a different criterion to be applied to the
seamen. A laborer doesnt need to leave the premises in order
that his period of rest shall not be counted, such that it is enough
that he ceases to work, may rest completely and leave his spot
where he actually has stays while working.36
Continuous Work
STATES MARINE CORP V CEBU SEAMEN'S ASSOC
7 SCRA 294
The provisions of sec. 1, of Comm. Act No. 444, states that "When
the work is not continuous, the time during which the laborer is
not working and can leave his working place and can rest
completely shall not be counted." Severino Pepito categorically
stated that he worked during the late hours of the evening and
during the early hours of the day when the boat docks and
unloads. Aside from the above, he did other jobs such as
removing rusts and cleaning the vessel, which overtime work
totalled to 6 hours a day, and of which he has not been paid as
yet. Sec. 1, of Comm. Act No. 444 finds no application in his case.
Waiting Time
ARICA V NLRC
170 SCRA 776
The Minister of Labor held: The thirty (30)-minute assembly time
long practiced and institutionalized by mutual consent of the
parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as waiting time within the
purview of Section 5, Rule I, Book III of the Rules and Regulations
Implementing the Labor Code.
Travel Time
RADA V NLRC
205 SCRA 69
It was the job of Rada to pick up and drop off employees of the
project at certain specified points along EDSA. Hence the time he
spent in doing this work should be included in determining the
number of hours he had worked. Rada is hence entitled to the
overtime pay claimed.(Note: Ordinarily, the travel time of
employees from house to place of work and vice versa is not
included as part of time worked. Time of work starts when the
employee reports at the place of workand ends when he leaves
the same place.)
CA 444 (Eight-Hour-Labor Law) Sec 1 is applied to contemporary
regulations issued by administrative authorities.
SEC. 1. The legal working day for any person employed by another shall be of
not more than eight hours daily. When the work is not continuous, the time
during which the laborer is not working AND CAN LEAVE HIS WORKING
PLACE and can rest completely, shall not be counted.
36
Entry Time Cards

AKLAN ELECTRIC COOPERATIVE INC V NLRC
323 SCRA 258
We hold that public respondent erred in merely relying on the
computations of compensable services submitted by private
respondents. There must be competent proof such as time cards
or office records to show that they actually rendered
compensable service during the stated period to entitle them to
wages. It has been established that the petitioner's business
office was transferred to Kalibo and all its equipments, records
and facilities were transferred thereat and that it conducted its
official business in Kalibo during the period in question. It was
incumbent upon private respondents to prove that they indeed
rendered services for petitioner, which they failed to do.
PRANGAN V NLRC
289 SCRA 142
NLRC, in declaring that PRANGAN only worked for four hours,
relied solely on the supposed daily time records of the petitioner
submitted by MASAGANA. We, however, are of the opinion that
these documents cannot be considered substantial evidence as to
conclude that petitioner only worked for four hours.
As PRANGANS employer, MASAGANA has unlimited access to all
relevant documents and records on the hours of work of the
petitioner. Yet, even as it insists that petitioner only worked for
four hours and not twelve, no employment contract, payroll,
notice of assignment or posting, cash voucher or any other
convincing evidence which may attest to the actual hours of work
of the petitioner were even presented. Instead, what the private
respondent offered as evidence were only petitioners daily time
record, which the latter categorically denied ever accomplishing,
much less signing.
Daily time record showed that PRANGAN started work at 10PM
and would leave his post at exactly 2AM. Obviously, such
unvarying recording of a daily time record is improbable and
contrary to human experience. It is impossible for an employee
to arrive at the workplace and leave at exactly the same time, day
in day out. The very uniformity and regularity of the entries are
badges of untruthfulness and as such indices of dubiety.
NICARIO V NLRC
193 SCRA 603
In evaluating the evidentiary value of daily time records,
especially those which show uniform entries with regard to the
hours of work rendered by an employee, the court has ruled that
such unvarying recording of a daily time record is improbable
and contrary to human experience. It is impossible for an
employee to arrive at the workplace and leave at exactly the
same time, day in day out. The uniformity and regularity of the
entries are 'badges of untruthfulness and as such indices of
dubiety. On the other hand, the supermarket failed to present
substantial evidence, other than the disputed DTRs, to prove that
Nicario indeed worked for only 8 hrs a day
5.05 Meal Period
(Meal periods): ART. 85. Subject to such regulations as the

Secretary of Labor may prescribe, it shall be the duty of
every employer to give his employees not less than sixty
(60) minutes time-off for their regular meals.
SECTION 7. Meal and Rest Periods. Every employer shall

give his employees, regardless of sex, not less than one (1)
hour time-off for regular meals, except in the following
cases when a meal period of not less than twenty (20)
minutes may be given by the employer provided that such
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shorter meal period is credited as compensable hours

worked of the employee:
excess of eight (8) hours on special holidays and rest days

not falling on regular holidays, an employee shall be paid
an additional compensation for the overtime work
equivalent to his rate for the first eight hours on a special
holiday or rest day plus at least thirty percent (30%)
thereof.
(a) Where the work is non-manual work in nature or does

not involve strenuous physical exertion;
(b) Where the establishment regularly operates not less
than sixteen (16) hours a day;
(b) Employees of public utility enterprises as well as those

employed in non-profit institutions and organizations shall
be entitled to the premium and overtime pay provided
herein, unless they are specifically excluded from the
coverage of this Rule as provided in Section 2 hereof.
(c) In case of actual or impending emergencies or there is

urgent work to be performed on machineries, equipment
or installations to avoid serious loss which the employer
would otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of
perishable goods.
Rest periods or coffee breaks running from five (5) to
twenty (20) minutes shall be considered as compensable
working time.
(c) The payment of additional compensation for work

performed on regular holidays shall be governed by Rule
IV, Book Three, of these Rules.
(Emergency overtime work):ART. 89. Any employee may

be required by the employer to perform overtime work in
any of the following cases:
Meal Time - Free Time

(a) When the country is at war or when any other national
or local emergency has been declared by the National
Assembly or the Chief Executive;
PHILIPPINE AIRLINES INC V NLRC

302 SCRA 582
The eight-hour work period does not include the meal break.
Nowhere in the law may it be inferred that employees must take
their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return
to their posts on time.
(b) When it is necessary to prevent loss of life or property

or in case of imminent danger to public safety due to an
actual or impending emergency in the locality caused by
serious accidents, fire, flood, typhoon, earthquake,
epidemic, or other disaster or calamity;
PAN AMERICAN WORLD AIRWAYS SYSTEM (PHILS) V PAN

AMERICAN EMPLOYEES ASSOCIATION
1 SCRA 527
(c) When there is urgent work to be performed on

machines, installations, or equipment, in order to avoid
serious loss or damage to the employer or some other
cause of similar nature;
The one-hour meal period shall be considered as part of overtime

work if the evidence shows that during that period, the company
may call resting employees to render some services.
(d) When the work is necessary to prevent loss or damage

to perishable goods; and
5.06 Overtime Work and Offsetting Prohibition
(Overtime work): ART. 87. Work may be performed

beyond eight (8) hours a day provided that the employee
is paid for the overtime work, an additional compensation
equivalent to his regular wage plus at least twenty-five
percent (25%) thereof. Work performed beyond eight
hours on a holiday or rest day shall be paid an additional
compensation equivalent to the rate of the first eight
hours on a holiday or rest day plus at least thirty percent
(30%) thereof.
RULE I, SECTION 8. Overtime pay. Any employee
covered by this Rule who is permitted or required to work
beyond eight (8) hours on ordinary working days shall be
paid an additional compensation for the overtime work in
the amount equivalent to his regular wage plus at least
twenty-five percent (25%) thereof.
RULE I, SECTION 9. Premium and overtime pay for holiday
and rest day work.
(a) Except employees referred to under Section 2 of this
Rule, an employee who is permitted or suffered to work
on special holidays or on his designated rest days not
falling on regular holidays, shall be paid with an additional
compensation as premium pay of not less than thirty
percent (30%) of his regular wage. For work performed in
(e) Where the completion or continuation of the work

started before the eighth hour is necessary to prevent
serious obstruction or prejudice to the business or
operations of the employer.
Any employee required to render overtime work under
this Article shall be paid the additional compensation
required in this Chapter.
RUULE I, SECTION 10. Compulsory overtime work. In

any of the following cases, an employer may require any of
his employees to work beyond eight (8) hours a day,
provided that the employee required to render overtime
work is paid the additional compensation required by
these regulations:
(a) When the country is at war or when any other national
or local emergency has been declared by Congress or the
Chief Executive;
(b) When overtime work is necessary to prevent loss of life
or property, or in case of imminent danger to public safety
due to actual or impending emergency in the locality
caused by serious accident, fire, floods, typhoons,
earthquake, epidemic or other disaster or calamities;
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(c) When there is urgent work to be performed on

machines, installations, or equipment, in order to avoid
serious loss or damage to the employer or some other
causes of similar nature;
(d) When the work is necessary to prevent loss or damage
to perishable goods;
(e) When the completion or continuation of work started
before the 8th hour is necessary to prevent serious
obstruction or prejudice to the business or operations of
the employer; or
(f) When overtime work is necessary to avail of favorable
weather or environmental conditions where performance
or quality of work is dependent thereon.
In cases not falling within any of these enumerated in this
Section, no employee may be made to work beyond eight
hours a day against his will.
(Computation of additional compensation):ART. 90. For

purposes of computing overtime and other additional
remuneration as required by this Chapter, the "regular
wage" of an employee shall include the cash wage only,
without deduction on account of facilities provided by the
employer.
Definition and Rationale - Overtime Pay
CALTEX REGULAR EMPLOYEES V CALTEX (PHILS) INC

247 SCRA 398
Overtime work consists of hours worked on a given day in excess
of the applicable work period, which here is eight (8) hours. It is
not enough that the hours worked fall on disagreeable or
inconvenient hours. In order that work may be considered as
overtime work, the hours worked must be in excess of and in
addition to the eight (8) hours worked during the prescribed daily
work period, or the forty (40) hours worked during the regular
work week Monday thru Friday.
PNB V PNB EMPLOYEES ASSOCIATION
115 SCRA 507
Overtime Pay Rationale: Why is a laborer or employee who works
beyond the regular hours of work entitled to extra compensation
called, in this enlightened time, overtime pay? Verily, there can be
no other reason than that he is made to work longer than what is
commensurate with his agreed compensation for the statutorily
fixed or voluntarily agreed hours of labor he is supposed to do.
When he thus spends additional time to his work, the effect upon
him is multi-faceted; he puts in more effort, physical and/or
mental; he is delayed in going home to his family to enjoy the
comforts thereof; he might have no time for relaxation,
amusement or sports; he might miss important pre-arranged
engagements; etc. It is thus the additional work, labor or service
employed and the adverse effects just mentioned of his longer
stay in his place of work that justify and are the real reasons for
the extra compensation that is called overtime pay.
Overtime Pay Definition: The additional pay for service or work
rendered or performed in excess of 8 hours a day by employees or
laborers in employment covered by the 8 hour Labor Law [C.A.
444, now Art. 87 Labor Code] and not exempt from its
requirements. It is computed by multiplying the overtime hourly
rate by the number of hours worked in excess of eight.
MANILA TERMINAL CO V CIR

91 Phil 625
The right of employees and laborers to overtime compensation
cannot be waived expressly or impliedly. It is high time that all
employers were warned that the public is interested in the strict
enforcement of the Eight-Hour Labor Law. This was designed not
only to safeguard the health and welfare of the laborer or
employee, but in a way to minimize unemployment by forcing
employers, in cases where more than 8-hour operation is
necessary, to utilize shifts of laborers or employees working only
for eight hours each
No Computation Formula Basic Contract

MANILA TERMINAL CO V CIR
91 Phil 625
A contract of employment, which provides for a weekly wage for
a specified number of hours, sufficient to cover both the statutory
minimum wage and overtime compensation, if computed on the
basis of the statutory minimum, and which makes no provision
for a fixed hourly rate or that the weekly wage includes overtime
compensation, does not meet the requirements of the Act
Built-In Compensation
ENGINEERING EQUIPMENT INC V MINISTER OF LABOR
138 SCRA 616
A written contract with a built-in overtime pay in the ten hour
workday and that their basic monthly pay was adjusted to reflect
the higher amount covering the guaranteed two-hour extra time
whether worked or unworked are valid
Proof of Work
LAGATIC V NLRC
285 SCRA 251
Entitlement to overtime pay must first be established by proof
that said overtime work was actually performed, before an
employee may avail of said benefit.
SOCIAL SECURITY SYSTEM V CA
348 SCRA 1
Applying the four-fold test, a preponderance of evidence exists in
support of the conclusion that Tana was an employee of Ayalde
VILLAR V NLRC
331 SCRA 686
As a general rule, one who pleads payment has the burden of
proving it. Even where the plaintiff must allege non-payment, the
general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The
debtor has the burden of showing with legal certainty that the
obligation has been discharged with payment.
The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents
which will show that overtime, differentials, service incentive
leave and other claims of workers have been paid are not in the
possession of the worker but in the custody and absolute control
of the employer. Thus, in choosing not to present evidence to
prove that it had paid all the monetary claims of petitioners, HITECH failed once again to discharge the onus probandi.
Consequently, we have no choice but to award those claims to
petitioners.
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RULE II, SECTION 5. Additional compensation on regular

holidays. For work on the period covered during regular
holidays, an employee shall be entitled to his regular wage
during these days plus an additional compensation of no
less than ten (10%) per cent of such premium rate for each
hour of work performed.
RULE II, SECTION 6. Relation to agreements. Nothing in

this Rule shall justify an employer in withdrawing or
reducing any benefits, supplements or payments as
provided in existing individual or collective agreements or
employer practice or policy.
Employer Obligation
SOCIAL SECURITY SYSTEM V CA
348 SCRA 1
An employer is duty-bound to keep faithful and complete records
of her business affairs, not the least of which would be the
salaries of the workers. Ayalde has failed in this duty as the
documents she presented were selective, few and incomplete in
substance and content
Computation
Rationale Prohibition
5.07 Night Work
(Night shift differential): ART. 86. Every employee shall be

paid a night shift differential of not less than ten percent
(10%) of his regular wage for each hour of work performed
between ten oclock in the evening and six oclock in the
morning.
(Night Shift Differential): RULE II, SECTION 1. Coverage.

This Rule shall apply to all employees except:
(a) Those of the government and any of its political
subdivisions, including government-owned and/or
controlled corporations;
(b) Those of retail and service establishments regularly
employing not more than five (5) workers;
(c) Domestic helpers and persons in the personal service of
another;
(d) Managerial employees as defined in Book Three of this
Code;
(e) Field personnel and other employees whose time and
performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in
the performance thereof.
RULE II, SECTION 2. Night shift differential. An employee

shall be paid night shift differential of no less than ten per
cent (10%) of his regular wage for each hour of work
performed between ten o'clock in the evening and six
o'clock in the morning.
RULE II, SECTION 3. Additional compensation. Where an
employee is permitted or suffered to work on the period
covered after his work schedule, he shall be entitled to his
regular wage plus at least twenty-five per cent (25%) and
an additional amount of no less than ten per cent (10%) of
such overtime rate for each hour or work performed
between 10 p.m. to 6 a.m.
RULE II, SECTION 4. Additional compensation on scheduled
rest day/special holiday. An employee who is required
or permitted to work on the period covered during rest
days and/or special holidays not falling on regular
holidays, shall be paid a compensation equivalent to his
regular wage plus at least thirty (30%) per cent and an
additional amount of not less than ten (10%) per cent of
such premium pay rate for each hour of work performed.
SHELL OIL CO. OF THE PHILS LTD V NATIONAL LABOR UNION

81 Phil 315
Nightwork cannot be regarded as desirable, either from the point
of view of the employer or of the wage earner. It is uneconomical
unless overhead costs are unusually heavy. Frequently the scale
of wages is higher as an inducement to employees to accept
employment on the night shift, and the rate of production is
generally lower.
The case against nightwork, then, may be said to rest upon
several grounds. In the first place, there are the remotely
injurious effects of permanent nightwork manifested in the later
years of the worker's life. Of more immediate importance to the
average worker is the disarrangement of his social life, including
the recreational activities of his leisure hours and the ordinary
associations of normal family relations. From an economic point
of view, nightwork is to be discouraged because of its adverse
effect upon efficiency and output. A moral argument against
nightwork in the case of women is that the night shift forces the
workers to go to and from the factory in darkness. Recent
experiences of industrial nations have added much to the
evidence against the continuation of nightwork, except in
extraordinary circumstances and unavoidable emergencies. The
immediate prohibition of nightwork for all laborers is hardly
practicable; its discontinuance in the case of women employees is
unquestionably desirable. 'The night was made for rest and sleep
and not for work' is a common saying among wage-earning
people, and many of them dream of an industrial order in which
there will be no night shift.
5.08 Holiday
(Right to holiday pay): ART. 94. (a) Every worker shall be

paid his regular daily wage during regular holidays, except
in retail and service establishments regularly employing
less than ten (10) workers;
(b) The employer may require an employee to work on any
holiday but such employee shall be paid a compensation
equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years
Day, Maundy Thursday, Good Friday, the ninth of April, the
first of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for holding a
general election.
Section 6
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WEEKLY REST PERIOD
Statutory Reference: Art. 91-93; Book III, Rule III, Omnibus
Rules Implementing the Labor Code
SECTION 2. Business on Sundays/Holidays. All

establishments and enterprises may operate or open for
business on Sundays and holidays provided that the
employees are given the weekly rest day and the benefits
as provided in this Rule.
6.01 Rationale
Rationale
MANILA ELECTRIC COMPANY
EMPLOYEES' ASSOCIATION
79 PHIL. 409
(Weekly Rest Periods): RULE III, SECTION 1. General

statement on coverage. This Rule shall apply to all
employers whether operating for profit or not, including
public utilities operated by private persons.
THE
PUBLIC
UTILITIES
SECTION 3. Weekly rest day. Every employer shall give

his employees a rest period of not less than twenty-four
(24) consecutive hours after every six consecutive normal
work days.
Said section 1 consists of two parts: the first, which is the

enactment clause, prohibits a person, firm or corporation,
business establishment, or place or center of labor from
compelling an employee or laborer to work during Sundays and
legal holidays, unless the former pays the latter an additional sum
of at least twenty five per centum of his regular remuneration;
and the second part, which is an exception, exempts public
utilities performing some public service, such as supplying gas,
electricity, power, water or providing means of transportation or
communication, from the prohibition established in the
enactment clause.
Commonwealth Act No. 444 provides that public utilities
supplying electricity, gas, power, water, or providing means of
transportation or communication may compel their employees or
laborers to work during Sundays and legal holidays without
paying them an additional compensation of not less than 25 per
cent of their regular remuneration on said days.
The division is not arbitrary, and the basis thereof is reasonable.
Public utilities exempted from the prohibition set forth in the
enactment clause of section 4, Commonwealth Act No. 444, are
required to perform a continuous service including Sundays and
legal holidays to the public, since the public good so demands,
and are not allowed to collect an extra charge for services
performed on those days; while the others are not required to do
so and are free to operate or not their shops, business, or
industries on Sundays and legal holidays.
It would be unfair for the law to compel public utilities like the
appellant to pay an additional or extra compensation to laborers
whom they have to compel to work during Sundays and legal
holidays, in order to perform a continuous service to the public.
To require public utilities performing service to do so, would be
tantamount to penalize them for performing public service during
said days in compliance with the requirement of the law and
public interest.
SECTION 4. Preference of employee. The preference of

the employee as to his weekly day of rest shall be
respected by the employer if the same is based on
religious grounds. The employee shall make known his
preference to the employer in writing at least seven (7)
days before the desired effectivity of the initial rest day so
preferred.
Where, however, the choice of the employee as to his rest
day based on religious grounds will inevitably result in
serious prejudice or obstruction to the operations of the
undertaking and the employer cannot normally be
expected to resort to other remedial measures, the
employer may so schedule the weekly rest day of his
choice for at least two (2) days in a month.
SECTION 5. Schedule of rest day. (a) Where the weekly
rest is given to all employees simultaneously, the
employer shall make known such rest period by means of
a written notice posted conspicuously in the work place at
least one week before it becomes effective.
(b) Where the rest period is not granted to all employees
simultaneously and collectively, the employer shall make
known to the employees their respective schedules of
weekly rest through written notices posted conspicuously
in the work place at least one week before they become
effective.
6.04 Compulsory Work and Compensation
6.02 Coverage
ART. 82, supra
ART. 91. Right to weekly rest day. - (a) It shall be the duty
of every employer, whether operating for profit or not, to
provide each of his employees a rest period of not less
than twenty-four (24) consecutive hours after every six (6)
consecutive normal work days.
6.03 Scheduling of Rest Day
ART. 91. - (b) The employer shall determine and schedule

the weekly rest day of his employees subject to collective
bargaining agreement and to such rules and regulations as
the Secretary of Labor and Employment may provide.
However, the employer shall respect the preference of
employees as to their weekly rest day when such
preference is based on religious grounds.
ART. 92. When employer may require work on a rest day. The employer may require his employees to work on any
day:
(a) In case of actual or impending emergencies caused by
serious accident, fire, flood, typhoon, earthquake,
epidemic or other disaster or calamity to prevent loss of
life and property, or imminent danger to public safety;
(b) In cases of urgent work to be performed on the
machinery, equipment, or installation, to avoid serious loss
which the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to
special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
(d) To prevent loss or damage to perishable goods;
53 | P
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(e) Where the nature of the work requires continuous

operations and the stoppage of work may result in
irreparable injury or loss to the employer; and
(f) Under other circumstances analogous or similar to the
foregoing as determined by the Secretary of Labor and
Employment.
SECTION 6. When work on rest day authorized. An

employer may require any of his employees to work on his
scheduled rest day for the duration of the following
emergencies and exceptional conditions:
(a) In case of actual or impending emergencies caused by
epidemic or other disaster or calamity, to prevent loss of
life or property, or in cases of force majeure or imminent
danger to public safety;
(b) In case of urgent work to be performed on
machineries, equipment or installations to avoid serious
loss which the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to
special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
375 SCRA 311

Wages and other emoluments granted by law to the working man
are determined on the basis of the criteria laid down by laws and
certainly not on the basis of the workers faith or religion.
Muslim holidays are provided under Articles 169 and 170, Title I,
Book V, of Presidential Decree No. 1083, otherwise known as the
Code of Muslim Personal Laws. The aforementioned provisions
should be read in conjunction with Art. 94 of the Labor Code:
Art. 94. Right to holiday pay:
(a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments
regularly employing less than ten (10) workers;
equivalent to twice his regular rate; x x x.
There should be no distinction between Muslims and nonMuslims as regards payment of benefits for Muslim holidays.
Petitioner asserts that Article 3(3) of Presidential Decree No. 1083
provides that (t)he provisions of this Code shall be applicable
only to Muslims x x x. However, said article also declares that x
x x nothing herein shall be construed to operate to the prejudice
of a non-Muslim.
1999 Handbook on Workers Statutory Benefits:
Considering that all private corporations, offices, agencies, and
entities or establishments operating within the designated
Muslim provinces and cities are required to observe Muslim
holidays, both Muslim and Christians working within the Muslim
areas may not report for work on the days designated by law as
Muslim holidays.
(d) To prevent serious loss of perishable goods;

(e) Where the nature of the work is such that the
employees have to work continuously for seven (7) days in
a week or more, as in the case of the crew members of a
vessel to complete a voyage and in other similar cases; and
(f) When the work is necessary to avail of favorable
weather or environmental conditions where performance
or quality of work is dependent thereon.
No employee shall be required against his will to work on
his scheduled rest day except under circumstances
provided in this Section: Provided, However, that where an
employee volunteers to work on his rest day under other
circumstances, he shall express such desire in writing,
subject to the provisions of Section 7 hereof regarding
additional compensation.
Section 7
HOLIDAYS
Statutory Reference: Art. 94-95; Exec. Order No. 203, (1984);
Book II, Rule IV, Omnibus Rules
7.01 Coverage
ART. 94. Right to holiday pay. - (a) Every worker shall be

Coverage and Purpose

MANTRADE/FMC DIVISION EMPLOYEES AND WORKERS UNION
V BACUNGAN
SAN MIGUEL V CA
ASIAN TRANSMISSION CORP V CA

425 SCRA 478
Holiday pay is a legislated benefit enacted as part of the
Constitutional imperative that the State shall afford protection to
labor. Its purpose is not merely "to prevent diminution of the
monthly income of the workers on account of work interruptions.
In other words, although the worker is forced to take a rest, he
earns what he should earn, that is, his holiday pay."8 It is also
intended to enable the worker to participate in the national
celebrations held during the days identified as with great
historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9),
National Heroes Day (last Sunday of August), Bonifacio Day
(November 30) and Rizal Day (December 30) were declared
national holidays to afford Filipinos with a recurring opportunity
to commemorate the heroism of the Filipino people, promote
national identity, and deepen the spirit of patriotism. Labor Day
(May 1) is a day traditionally reserved to celebrate the
contributions of the working class to the development of the
nation, while the religious holidays designated in Executive Order
No. 203 allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended,
affords a worker the enjoyment of ten paid regular holidays. The
provision is mandatory, regardless of whether an employee is
paid on a monthly or daily basis. Unlike a bonus, which is a
management prerogative, holiday pay is a statutory benefit
demandable under the law. Since a worker is entitled to the
enjoyment of ten paid regular holidays, the fact that two
holidays fall on the same date should not operate to reduce to
nine the ten holiday pay benefits a worker is entitled to receive.
7.02 Holidays
EXECUTIVE ORDER NO. 203 June 30, 1987
PROVIDING A LIST OF REGULAR HOLIDAYS AND SPECIAL DAYS
TO BE OBSERVED THROUGHOUT THE PHILIPPINES AND FOR
OTHER PURPOSES
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WHEREAS, a Cabinet Assistance Secretariat Committee was

constituted to review all existing public holidays;
WHEREAS, there are too many holidays being observed which
has caused confusion among the public.
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the
Philippines, do hereby order:
(e) 'Id-ul-Adha (Hari Raja Haji), which falls on the tenth day of
the twelfth lunar month of Dhu 1-Hijja.
7.03 Holiday Pay
Sec. 1. Unless otherwise modified by law, order or

proclamation, the following regular holidays and special days
shall be observed in this country:

equivalent to twice his regular rate; and
A. Regular Holidays
New Year's Day
-January 1
Maundy Thursday
-Movable Date
Good Friday
-Movable Date
Araw ng Kagitingan (Bataan & Corregidor Day)
-April 9
Labor Day
-May 1
Independence Day
-June 12
National Heroes Day
-Last Sunday
of August
Bonifacio Day
Christmas Day
Rizal Day
-November 30
-December 25
-December 30
B. Nationwide Special Days

All Saints Day
Last Day of the Year
-November 1
-December 31
Sec. 2. Henceforth, the terms "legal or regular holiday" and

"special holiday", as used in laws, orders, rules and regulations
or other issuances shall now be referred to as "regular holiday"
and "special day", respectively.
PRESIDENTIAL DECREE No. 1083
A DECREE TO ORDAIN AND PROMULGATE A CODE
RECOGNIZING THE SYSTEM OF FILIPINO MUSLIM LAWS,
CODIFYING MUSLIM PERSONAL LAWS, AND PROVIDING FOR
ITS ADMINISTRATION AND FOR OTHER PURPOSES
TITLE I
MUSLIM HOLIDAYS
Article 169. Official Muslim holidays. The following are hereby
recognized as legal Muslim holidays:
(a) 'Amun Jadid (New Year), which falls on the first day of the
first lunar month of Muharram;
(b) Maulid-un-Nabi (Birthday of the Prophet Muhammad),
which falls on the twelfth day of the third lunar month of Rabiul-Awwal;
(c) Lailatul Isra Wal Mi'raj (Nocturnal Journey and Ascension of
the Prophet Muhammad), which falls on the twenty-seventh
day of the seventh lunar month of Rajab;
(d) 'Id-ul-Fitr (Hari Raya Pausa), which falls on the first day of
the tenth lunar month of Shawwal, commemorating the end of
the fasting season; and
ART. 94. Right to holiday pay. - (a) Every worker shall be

(c) As used in this Article, "holiday" includes: New Years

Day, Maundy Thursday, Good Friday, the ninth of April, the
first of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for holding a
general election.
(Holidays with Pay): RULE IV, SECTION 1. Coverage. This

rule shall apply to all employees except:
(a) Those of the government and any of the political
subdivision, including government-owned and controlled
corporation;
(b) Those of retail and service establishments regularly
employing less than ten (10) workers;
(c) Domestic helpers and persons in the personal service of
another;
(d) Managerial employees as defined in Book Three of the
Code;
(e) Field personnel and other employees whose time and
the performance thereof.
SECTION 2. Status of employees paid by the month.
Employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a
salary of not less than the statutory or established
minimum wage shall be paid for all days in the month
whether worked or not.
For this purpose, the monthly minimum wage shall not be
less than the statutory minimum wage multiplied by 365
days divided by twelve.
SECTION 3. Holiday Pay. Every employer shall pay his
employees their regular daily wage for any worked regular
holidays.
As used in the rule, the term 'regular holiday' shall
exclusively refer to: New Year's Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the
twelfth of June, the last Sunday of August, the thirtieth of
November, the twenty-fifth and thirtieth of December.
Nationwide special days shall include the first of
November and the last day of December.
As used in this Rule legal or regular holiday and special
holiday shall now be referred to as 'regular holiday' and
'special day', respectively.
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SECTION 4. Compensation for holiday work. Any

employee who is permitted or suffered to work on any
regular holiday, not exceeding eight (8) hours, shall be
paid at least two hundred percent (200%) of his regular
daily wage. If the holiday work falls on the scheduled rest
day of the employee, he shall be entitled to an additional
premium pay of at least 30% of his regular holiday rate of
200% based on his regular wage rate.
SECTION 5. Overtime pay for holiday work. For work
performed in excess of eight hours on a regular holiday, an
employee shall be paid an additional compensation for the
overtime work equivalent to his rate for the first eight
hours on such holiday work plus at least 30% thereof.
Where the regular holiday work exceeding eight hours falls
on the scheduled rest day of the employee, he shall be
paid an additional compensation for the overtime work
equivalent to his regular holiday-rest day for the first 8
hours plus 30% thereof. The regular holiday rest day rate
of an employee shall consist of 200% of his regular daily
wage rate plus 30% thereof.
SECTION 6. Absences. (a) All covered employees shall be
entitled to the benefit provided herein when they are on
leave of absence with pay. Employees 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.
(b) Employees shall grant the same percentage of the
holiday pay as the benefit granted by competent authority
in the form of employee's compensation or social security
payment, whichever is higher, if they are not reporting for
work while on such benefits.
(c) Where the day immediately preceding the holiday is a
non-working day in the establishment or the scheduled
rest day of the employee, he shall not be deemed to be on
leave of absence on that day, 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.
SECTION 7. Temporary or periodic shutdown and
temporary cessation of work. (a) In cases of temporary
or periodic shutdown and temporary cessation of work of
an establishment, as when a yearly inventory or when the
repair or cleaning of machineries and equipment is
undertaken, the regular holidays falling within the period
shall be compensated in accordance with this Rule.
(b) The regular holiday during the cessation of operation of
an enterprise due to business reverses as authorized by
the Secretary of Labor and Employment may not be paid
by the employer.
SECTION 8. Holiday pay of certain employees. (a)
Private school teachers, including faculty members of
colleges and universities, may not be paid for the regular
holidays during semestral vacations. They shall, however,
be paid for the regular holidays during Christmas vacation;
(b) Where a covered employee, is paid by results or
output, such as payment on piece work, his holiday pay
shall not be less than his average daily earnings for the last
seven (7) actual working days preceding the regular
holiday; Provided, However, that in no case shall the
holiday pay be less than the applicable statutory minimum
wage rate.
(c) Seasonal workers may not be paid the required holiday

pay during off-season when they are not at work.
(d) Workers who have no regular working days shall be
entitled to the benefits provided in this Rule.
SECTION 9. Regular holiday falling on rest days or Sundays.
(a) A regular holiday falling on the employee's rest day
shall be compensated accordingly.
(b) Where a regular holiday falls on a Sunday, the following
day shall be considered a special holiday for purposes of
the Labor Code, unless said day is also a regular holiday.
SECTION 10. Successive regular holidays. 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.
Faculty Private School
JOSE RIZAL COLLEGE V NLRC
156 SCRA 27
It is readily apparent that the declared purpose of the holiday pay
which is the prevention of diminution of the monthly income of
the employees 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 on 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.
New decision rendered:
(a) exempting petitioner from paying hourly paid faculty
members their pay for regular holidays, whether the same be
during the regular semesters of the school year or during
semestral, Christmas, or Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their
regular hourly rate on days declared as special holidays or for
some reason classes are called off or shortened for the hours they
are supposed to have taught, whether extensions of class days be
ordered or not; in case of extensions said faculty members shall
likewise be paid their hourly rates should they teach during said
extensions.
Divisor as Factor
TRANSASIA PHILS EMPLOYER ASSN V NLRC
320 SCRA 547
The Court notes that there is a need to adjust the divisor used by
Trans-Asia to 287 days, instead of only 286 days, in order to
properly account for the entirety of regular holidays and special
days in a year as prescribed by Executive Order No. 203 in relation
to Section 6 of the Rules Implementing Republic Act 6727.
Section 1 of Executive Order No. 203 provides:
SECTION 1. Unless otherwise modified by law, order or
proclamation, the following regular holidays and special days shall
be observed in the country:
A. Regular Holidays
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New Year's Day-January 1

Maundy Thursday-Movable Date
Good Friday-Movable Date
Araw ng Kagitingan (Bataan & Corregidor Day)-April 9
Labor Day-May 1
Independence Day-June 12
National Heroes Day-Last Sunday of August
Bonifacio Day-November 30
Christmas Day-December 25
Rizal Day-December 30
B. Nationwide Special Days
All Saints Day-November 1
Last Day of the Year-December 31
On the other hand, Section 6 of the Implementing Rules and
Regulations of Republic Act No. 6727 provides that the total
number of working days is 262 days (see original for the formula
and computation)
intended precisely to avoid re-computations and alterations in

salary on account of the contingencies just mentioned, which, by
the way, are routinely made between employer and employees
when the wages are paid on daily basis.
Proof of Payment
BUILDING CARE CORP V NLR
268 SCRA 666
If BCC had really paid Rodil his holiday pay, it could easily have
presented its payrolls, which constitute the best proof of
payment. To prove payment of salary differentials, it could have
presented proofs of such monetary benefitsbut it did not. It
failed to comply with the mandate of the law; as NLRC ruled, the
burden of proof in this regard lies with the employer, not the
employee.
UNION OF FILIPRO EMPLOYEES V VIVAR

205 SCRA 200
The divisor to be used is 251. The respondent arbitrator's order to
change the divisor from 251 to 261 days would result in a lower
daily rate which is violative of the prohibition on non-diminution
of benefits found in Article 100 of the Labor Code. The Court
resolves that the grant of holiday pay be effective, not from the
date of promulgation of the Chartered Bank case nor from the
date of effectivity of the Labor Code, but from October 23, 1984,
the date of promulgation of the IBAA case.
Computation
Section 8
LEAVES
Statutory Reference: Art. 95; Book III, Rule V, Omnibus Rules
A. Service Incentive Leave
8.01 Coverage
AGGA V NLRC
298 SCRA 285
Petitioners contend that the lumpsum mode of payment of
salaries is illegal, citing Articles 5 and 6 of the New Civil Code,
Articles 86, 87, 90, 93 and 94 of PD 442 and Book V, Rule II,
Section 2(a) of the 1991 POEA Rules.
As correctly observed by the respondents, none of the
aforementioned laws and rules prohibit the subject payment
scheme. The cited articles of the New Civil Code merely provide
that agreements in violation of law or public policy cannot be
entered into and have legal effect. The cited provisions of PD 442
simply declare that night shift differential and additional
remuneration for overtime, rest day, Sunday and holiday work
shall be computed on the basis of the employee's regular wage. In
like fashion, the 1991 POEA Rules merely require employers to
guarantee payment of wages and overtime pay. Thus, petitioners'
stance is bereft of any legal support.
Sunday
WELLINGTON INVESTMENT V TRAJANO
245 SCRA 561
There is no provision of law requiring any employer to make such
adjustments in the monthly salary rate set by him to take account
of legal holidays falling on Sundays in a given year, or, contrary to
the legal provisions bearing on the point, otherwise to reckon a
year at more than 365 days. What the law requires of employers
opting to pay by the month is to assure that "the monthly
minimum wage shall not be less than the statutory minimum
wage multiplied by 365 days divided by twelve," and to pay that
salary "for all days in the month whether worked or not," and
"irrespective of the number of working days therein." That salary
is due and payable regardless of the declaration of any special
holiday in the entire country or a particular place therein, or any
fortuitous cause precluding work on any particular day or days
(such as transportation strikes, riots, or typhoons or other natural
calamities), or cause not imputable to the worker. The legal
provisions governing monthly compensation are evidently
ART. 95. Right to service incentive leave. - (a) Every

employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five
days with pay.
(b) This provision shall not apply to those who are already
enjoying the benefit herein provided, those enjoying
vacation leave with pay of at least five days and those
employed in establishments regularly employing less than
ten employees or in establishments exempted from
granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial
condition of such establishment.
Coverage
MAKATI HABERDASHERY INC V NLRC
179 SCRA 449
While private respondents are entitled to Minimum Wage, COLA
and 13th Month Pay, they are not entitled to service incentive
leave pay because as piece-rate workers being paid at a fixed
amount for performing work irrespective of time consumed in the
performance thereof, they fall under one of the exceptions stated
in Section 1(d), Rule V, Implementing Regulations, Book III, Labor
Code.
Private respondents cannot also claim holiday pay under Section
1(e), Rule IV, Implementing Regulations, Book III, Labor Code.
8.02 Entitlement and Arbitration
ART. 95. Right to service incentive leave. - (a) supra

(c) The grant of benefit in excess of that provided herein
shall not be made a subject of arbitration or any court or
administrative action.
(Service Incentive Leave): RULE V, SECTION 1. Coverage.

This rule shall apply to all employees except:
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(a) Those of the government and any of its political

subdivisions, including government-owned and controlled
corporations;
(b) Domestic helpers and persons in the personal service
of another;
(c) Managerial employees as defined in Book Three of this
Code;
(d) Field personnel and other employees whose
the performance thereof;
(e) Those who are already enjoying the benefit herein
provided;
(f) Those enjoying vacation leave with pay of at least five
days; and
(g) Those employed in establishments regularly employing
less than ten employees.
SECTION 2. Right to service incentive leave. Every
employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five
days with pay.
SECTION 3. Definition of certain terms. The term "at
least one-year service" shall mean service for not less than
12 months, whether continuous or broken reckoned from
the date the employee 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 said period shall be
considered as one year.
SECTION 4. Accrual of benefit. Entitlement to the
benefit provided in this Rule shall start December 16,
1975, the date the amendatory provision of the Code took
effect.
SECTION 5. Treatment of benefit. The service incentive
leave shall be commutable to its money equivalent if not
used or exhausted at the end of the year.
SECTION 6. Relation to agreements. Nothing in the Rule
shall justify an employer from withdrawing or reducing any
benefits, supplements or payments as provided in existing
individual or collective agreements or employer's practices
or policies.
8.03 Computation and Liability
AUTO BUS TRANSPORT SYSTEMS INC V BAUTISTA
458 SCRA 578
Correspondingly, it can be conscientiously deduced that the cause
of action of an entitled employee to claim his service incentive
leave pay accrues from the moment the employer refuses to
remunerate its monetary equivalent if the employee did not
make use of said leave credits but instead chose to avail of its
commutation. Accordingly, if the employee wishes to accumulate
his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action
to claim the whole amount of his accumulated service incentive
leave shall arise when the employer fails to pay such amount at
the time of his resignation or separation from employment
SENTINEL SECURITY AGENCY INC V NLRC

295 SCRA 123
Under Articles 107 and 109, the indirect employer is jointly and
severally liable with the contractor for the workers wages, in the
same manner and extent that it is liable to its direct employees.
This liability of the Client covers the payment of the service
incentive leave pay of the complainants during the time they
were posted at the Cebu Branch of the Client. As service had been
rendered, the liability accrued, even if the complainants were
eventually transferred or reassigned. The service incentive leave
is expressly granted by these pertinent provisions of the Labor
Code
B. Paternity Leave
REPUBLIC ACT NO. 8187
AN ACT GRANTING PATERNITY LEAVE OF SEVEN (7) DAYS
WITH FULL PAY TO ALL MARRIED MALE EMPLOYEES IN THE
PRIVATE AND PUBLIC SECTORS FOR THE FIRST FOUR (4)
DELIVERIES OF THE LEGITIMATE SPOUSE WITH WHOM HE IS
COHABITING AND FOR OTHER PURPOSES
[Paternity Leave Act of 1996]
SEC. 2. Notwithstanding any law, rules and regulations to the
contrary, every married male employee in the private and
public sectors shall be entitled to a paternity leave of seven (7)
days with full pay for the first four (4) deliveries of the
legitimate spouse with whom he is cohabiting. The male
employee applying for paternity leave shall notify his employer
of the pregnancy of his legitimate spouse and the expected
date of such delivery.
For purposes of this Act, delivery shall include childbirth or any
miscarriage.
C. Maternity Leave
AN ACT FURTHER STRENGTHENING THE SOCIAL SECURITY
SYSTEM THEREBY AMENDING FOR THIS PURPOSE, REPUBLIC
ACT NO. 1161, AS AMENDED, OTHERWISE KNOWN AS THE
SOCIAL SECURITY LAW.
[Maternity Leave Benefit]
SEC. 14-A. A female member who has paid at least three (3)
monthly contributions in the twelve-month period immediately
preceding the semester of her childbirth or miscarriage shall be
paid a daily maternity benefit equivalent to one hundred
percent (100%) of her average daily salary credit for sixty (60)
days or seventy-eight (78) days in case of caesarian delivery,
subject to the following conditions:
(a) That the employee shall have notified her employer of her
pregnancy and the probable date of her childbirth, which notice
shall be transmitted to the SSS in accordance with the rules and
regulations it may provide;
(b) The full payment shall be advanced by the employer within
thirty (30) days from the filing of the maternity leave
application;
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(c) That payment of daily maternity benefits shall be a bar to

the recovery of sickness benefits provided by this Act for the
same period for which daily maternity benefits have been
received;
A. Wages - In General
(d) That the maternity benefits provided under this section shall
be
paid only for the first four (4) deliveries or miscarriages;
9.01 Coverage
Statutory Reference: Art. 97-119; Book III, Rule VII-VIII,

Omnibus Rules
(e) That the SSS shall immediately reimburse the employer of

one hundred percent (100%) of the amount of maternity
benefits advanced to the employee by the employer upon
receipt of satisfactory proof of such payment and legality
thereof; and
(f) That if an employee member should give birth or suffer
miscarriage without the required contributions having been
remitted for her by her employer to the SSS, or without the
latter having been previously notified by the employer of the
time of the pregnancy, the employer shall pay to the SSS
damages equivalent to the benefits which said employee
member would otherwise have been entitled to.
ART. 97. Definitions. - As used in this Title:

(b) "Employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an
employee and shall include the government and all its
branches, subdivisions and instrumentalities, all
government-owned or controlled corporations and
institutions, as well as non-profit private institutions, or
organizations.
(c) "Employee" includes any individual employed by an
employer.
(e) "Employ" includes to suffer or permit to work.
D. Vacation and Sick Leave
ART. 98. Application of Title. - This Title shall not apply to

farm tenancy or leasehold, domestic service and persons
working in their respective homes in needle work or in any
cottage industry duly registered in accordance with law.
ST. MICHAEL ACADEMY V NLRC

The payment of vacation and sick leave is governed by the policy
of the employer or the agreement between the employer and
employee

AN ACT PROVIDING FOR BENEFITS AND PRIVILEGES TO SOLO
PARENTS AND THEIR CHILDREN, APPROPRIATING FUNDS
THEREFOR AND FOR OTHER PURPOSES
Section 2. Declaration of Policy. - It is the policy of the State to
promote the family as the foundation of the nation, strengthen
its solidarity and ensure its total development. Towards this
end, it shall develop a comprehensive program of services for
solo parents and their children to be carried out by the
Department of Social Welfare and Development (DSWD), the
Department of Health (DOH), the Department of Education,
Culture and Sports (DECS), the Department of the Interior and
Local Government (DILG), the Commission on Higher Education
(CHED), the Technical Education and Skills Development
Authority (TESDA), the National Housing Authority (NHA), the
Department of Labor and Employment (DOLE) and other
related government and nongovernment agencies.
Section 6. Flexible Work Schedule. - The employer shall provide
for a flexible working schedule for solo parents: Provided, That
the same shall not affect individual and company productivity:
Provided, further, That any employer may request exemption
from the above requirements from the DOLE on certain
meritorious grounds.
Section 8. Parental Leave. - In addition to leave privileges under
existing laws, parental leave of not more than seven (7)
working days every year shall be granted to any solo parent
employee who has rendered service of at least one (1) year.
Section 9
WAGES
Government Agency
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY V NLRC
213 SCRA 621
Notwithstanding that the petitioner is a government agency, its
liabilities, which are joint and solidary with that of the contractor,
are provided in Articles 106, 107 and 109 of the Labor Code. This
places the petitioner's liabilities under the scope of the NLRC.
Moreover, Book Three, Title 11 on Wages specifically provides
that the term "employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an
employee and shall include the Government and all its branches,
subdivisions and instrumentalities, all government-owned or
controlled corporations and institutions as well as non-profit
private institutions, or organizations (Art. 97 [b], Labor Code..)
9.02 Wage
(f) "Wage" paid to any employee shall mean 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, 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 and includes the
fair and reasonable value, as determined by the Secretary
of Labor and Employment, of board, lodging, or other
facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not include
any profit to the employer, or to any person affiliated with
the employer.
Constitution, Art. II
Defined
CHAVEZ V NLRC
448 SCRA 478
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Wages are defined as 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, 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
MAYON HOTEL AND RESTAURANTS v ADANA
458 SCRA 609
The employer cannot exempt himself from liability to pay
minimum wages because of poor financial condition of the
company. The payment of minimum wages is not dependent on
the employers ability to pay.
PHILEX GOLD VS PHILEX BULAWAN SUPERVISORS

468 SCRA 111
Fair Day Pay

NAVARRO V. P.V. PAJARILLO, ETC.
586 SCRA 489
AKLAN ELECTRIC COOPERATIVE INC V NLRC

323 SCRA 258
The age-old rule governing the relation between labor and capital
or management and employee is that of a "fair day's wage for a
fair day's labor." If there is no work performed by the employee
there can be no wage or pay, unless of course, the laborer was
able, willing and ready to work but was illegally locked out,
dismissed or suspended, or otherwise illegally prevented from
working, a situation which we find is not present in the instant
case. It would neither be fair nor just to allow private respondents
to recover something they have not earned and could not have
earned because they did not render services at the Kalibo office
during the stated period
In Manila Trading & Supply Co v. Manila Trading Labor Assn., 93

Phil. 288, the age-old rule governing the relation between labor
and capital or management and employee is that of a "fair day's
wage for a fair day's labor.' If there is no work performed by the
employee there can be no wage or pay, unless of course, the
laborer was able, willing and ready to work but was illegally
locked out, dismissed or suspended. It is hardly fair or just for
an employee or laborer to fight or litigate against his employer
on the employer's time.
Discrimination
INTERNATIONAL
QUISUMBING
"humane conditions of work." The Constitution also directs the

State to promote "equality of employment opportunities for all."
Similarly, the Labor Code provides that the State shall "ensure
equal work opportunities regardless of sex, race or creed.
Discrimination, particularly in terms of wages, is frowned upon by
the Labor Code (Art.135)
The dislocation factor and limited tenure affecting foreign-hires
are adequately compensated by certain benefits accorded them
which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel
allowances. Hence, the "dislocation factor" and the foreign-hires'
limited tenure also cannot serve as valid bases for the distinction
in salary rates.
SCHOOL
ALLIANCE
OF
EDUCATORS
The Constitution, Labor Code and the International Covenant on

Economic, Social, and Cultural Rights impregnably institutionalize
in this jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries. This rule applies to the
School, its "international character" notwithstanding.
The International Covenant on Economic, Social, and Cultural
Rights in Art.7 provides that: The States Parties to the present
Covenant recognize the right of everyone to the enjoyment of
just and favorable conditions of work, which ensure, in particular,
fair wages and equal remuneration for work of equal value
without distinction of any kind, in particular women being
guaranteed conditions of work not inferior to those enjoyed by
men, with equal pay for equal work. The Philippines, through its
Constitution, has incorporated this principle as part of its national
laws.
The Constitution specifically provides that labor is entitled to
In this case, the petitioner failed to differentiate the basic salary

from any kind of salary increase or additional benefit which may
have been given to the Padcal supervisors due to their seniority,
experience and other factors. The records only show that an exPadcal supervisor is paid a higher salary than a locally hired
supervisor of he same rank. The companys prerogative must be
exercised in good faith and with due regard to the rights of labor.
A priori, they are not absolute prerogatives but are subject to
legal limits, collective bargaining agreements, and the general
principles of fair play and justice.
BANKARD EMPLOYEES UNION V NLRC (BANKARD INC)
423 SCRA 148
Absent any indication that the voluntary increase of salary rates
by an employer was done arbitrarily and illegally for the purpose
of circumventing the laws or was devoid of any legitimate
purpose other than to discriminate against the regular
employees, this Court will not step in to interfere with this
management prerogative.
Petitioner cannot make a contrary classification of private
respondents employees without encroaching upon recognized
management prerogative of formulating a wage structure, in this
case, one based on level.
While seniority may be a factor in determining the wages of
employees, it cannot be made the sole basis in cases where the
nature of their work differs. Moreover, for purposes of
determining the existence of wage distortion, employees cannot
create their own independent classification and use it as a basis
to demand an across-the-board increase in salary.
Apart from the findings of fact of the NLRC and the Court of
Appeals that some of the elements of wage distortion are absent,
petitioner cannot legally obligate 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. The
wordings of Article 124 are clear. If it was the intention of the
legislators to cover all kinds of wage adjustments, then the
language of the law should have been broad, not restrictive as it
is currently phrased.
Moreover, Bankards right to increase its hiring rate, to establish
minimum salaries for specific jobs, and to adjust the rates of
employees affected thereby is embodied under Section 2, Article
V (Salary and Cost of Living Allowance) of the parties Collective
Bargaining Agreement (CBA).
Facilities and Supplements - Valuation of Meals and Other

Facilities
Dole Order No. 4 (1988)
37
STATES MARINE CORP V CEBU SEAMEN'S ASSOC

7 SCRA 294
37
See APPENDIX
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It is argued that the food or meals given to the deck officers,

marine engineers and unlicensed crew members in question,
were mere "facilities" which should be deducted from wages, and
not "supplements" which, according to said section 19, should not
be deducted from such wages, because it is provided therein:
"Nothing in this Act shall deprive an employee of the right to such
fair wage ... or in reducing supplements furnished on the date of
enactment." In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms
are defined as follows
"Supplements", therefore, constitute extra remuneration or
special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages.
"Facilities", on the other hand, are items of expense necessary for
the laborer's and his family's existence and subsistence so that by
express provision of law (Sec. 2[g]), they form part of the wage
and when furnished by the employer are deductible therefrom,
since if they are not so furnished, the laborer would spend and
pay for them just the same.
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
ordinary earning or wage, is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility. The
criterion is not so much with the kind of the benefit or item (food,
lodging, bonus or sick leave) given, but its purpose. Considering,
therefore, as definitely found by the respondent court that the
meals were freely given to crew members prior to August 4, 1951,
while they were on the high seas "not as part of their wages but
as a necessary matter in the maintenance of the health and
efficiency of the crew personnel during the voyage", the
deductions therein made for the meals given after August 4,
1951, should be returned to them, and the operator of the
coastwise vessels affected should continue giving the same
benefit..
MILLARES V. NLRC
305 SCRA 500
are direct remunerations for services rendered.

Commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor, trustee,
receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the profit to
the principal.
SONGCO V NLRC
183 SCRA 610
Article 97(f) by itself is explicit that commission is included in the
definition of the term "wage". It has been repeatedly declared by
the courts that where the law speaks in clear and categorical
language, there is no room for interpretation or construction;
there is only room for application.
The ambiguity between Article 97(f), which defines the term
'wage' and Article XIV of the Collective Bargaining Agreement,
Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and "salary",
is more apparent than real.
Broadly, the word "salary" means a recompense or consideration
made to a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or more
fancifully from "sal," the pay of the Roman soldier, it carries with
it the fundamental idea of compensation for services rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous. "Salary," the
etymology of which is the Latin word "salarium," is often used
interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one
and the same meaning, that is, a reward or recompense for
services performed.
Likewise, "pay" is the synonym of "wages" and "salary". Inasmuch
as the words "wages", "pay" and "salary" have the same meaning,
and commission is included in the definition of "wage", the logical
conclusion, therefore, is, in the computation of the separation
pay of petitioners, their salary base should include also their
earned sales commissions.
Wages and Salary

Tips
ACE NAVIGATION CO INC V CA
338 SCRA 380
The word tip has several meanings. It is more frequently used
to indicate additional compensation, and in this sense "tip" is
defined as meaning a gratuity; a gift; a present; a fee; money
given, as to a servant to secure better or more prompt service.
Tipping is done to get the attention and secure the immediate
services of a waiter, porter or others for their services. Since a tip
is considered a pure gift out of benevolence or friendship, it can
not be demanded from the customer. Whether or not tips will be
given is dependent on the will and generosity of the giver.
Although a customer may give a tip as a consideration for services
rendered, its value still depends on the giver. They are given in
addition to the compensation by the employer. A gratuity given
by an employer in order to inspire the employee to exert more
effort in his work is more appropriately called a bonus.
Cash Wage/ Commissions

IRAN V NLRC
106 SCRA 444
The nature of the work of a salesman and the reason for such
type of remuneration for services rendered demonstrate clearly
that commissions are part of a salesmans wage or salary.
Article 97(f), LC explicitly includes commissions as part of wages.
While commissions are, indeed, incentives or forms of
encouragement to inspire employees to put a little more industry
on the jobs particularly assigned to them, still these commissions
EQUITABLE BANKING CORP V SADAC

490 SCRA 380
Broadly, the word "salary" means a recompense or consideration
made to a person for his pains or industry in another mans
business. It carries with it the fundamental idea of compensation
for services rendered. In labor law, the distinction between salary
and wage appears to be merely semantics. That wage and salary
are synonymous has been settled. Both words generally refer to
one and the same meaning, that is, a reward or recompense for
services performed. Likewise, "pay" is the synonym of "wages"
and "salary".
GAA V CA
140 SCRA 304
The legislature intended the exemption in Article 1708 of the New
Civil Code to operate in favor of laboring men or women in the
sense that their work is manual. Persons belonging to this class
usually look to the reward of a day's labor for immediate or
present support, and such persons are more in need of the
exemption than any others.
LABORER: everyone who performs any kind of mental or physical
labor, but as commonly and customarily used and understood, it
only applies to one engaged in some form of manual or physical
labor.
WAGE: the pay given "as hire or reward to artisans, mechanics,
domestics or menial servants, and laborers employed in
manufactories, agriculture, mines, and other manual occupation
and usually employed to distinguish the sums paid to persons
hired to perform manual labor, skilled or unskilled, paid at stated
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LATON
(a) There is a bank or other facility for encashment within

a radius of one (1) kilometer from the workplace;
times, and measured by the day, week, month, or season."

The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated
times, and measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or a superior
grade of services, and implies a position of office.
(b) The employer or any of his agents or representatives

does not receive any pecuniary benefit directly or
indirectly from the arrangement;
Gratuity and Wages
(c) The employees are given reasonable time during

banking hours to withdraw their wages from the bank
which time shall be considered as compensable hours
worked if done during working hours; and
(d) The payment by check is with the written consent of
the employees concerned if there is no collective
agreement authorizing the payment of wages by bank
checks.
PLASTIC TOWN CENTER CORPORATION V NLRC

172 SCRA 380
From the foregoing, gratuity pay is therefore, not intended to pay
a worker for actual services rendered. It is a money benefit given
to the workers whose purpose is "to reward employees or
laborers, who have rendered satisfactory and efficient service to
the company." (Sec. 2, CBA) While it may be enforced once it
forms part of a contractual undertaking, the grant of such benefit
is not mandatory so as to be considered a part of labor standard
law unlike the salary, cost of living allowances, holiday pay, leave
benefits, etc., which are covered by the Labor Code. Nowhere has
it ever been stated that gratuity pay should be based on the
actual number of days worked over the period of years forming
its basis.
th
13 Month Pay
AGABON V NATIONAL LABOR RELATIONS
442 SCRA 573
Intent of PD 851 is to grant an additional income in the form of
the 13th month pay to employees; included in the definition of
wages under Art. 97 (f); employer prohibited from making
deductions
B. Payment of Wages
Statutory Reference: Art. 102-104; Sec. 7, R.A. No. 6727
9.03 Form
ART. 102. Forms of payment. - No employer shall pay the

wages of an employee by means of promissory notes,
vouchers, coupons, tokens, tickets, chits, or any object
other than legal tender, even when expressly requested by
the employee.
Payment of wages by check or money order shall be
allowed when such manner of payment is customary on
the date of effectivity of this Code, or is necessary because
of special circumstances as specified in appropriate
regulations to be issued by the Secretary of Labor and
Employment or as stipulated in a collective bargaining
agreement.
SECTION 1. Manner of wage payment. As a general rule,

wages shall be paid in legal tender and the use of tokens,
promissory notes, vouchers, coupons, or any other form
alleged to represent legal tender is absolutely prohibited
even when expressly requested by the employee.
SECTION 2. Payment by check. Payment of wages by

bank checks, postal checks or money orders is allowed
where such manner of wage payment is customary on the
date of the effectivity of the Code, where it is so stipulated
in a collective agreement, or where all of the following
conditions are met:
R.A. No. 6727, Sec. 7. Upon written permission of the

majority of the employees or workers concerned, all
private establishments, companies, businesses, and other
entities with twenty five (25) or more employees and
located within one (1) kilometer radius to a commercial,
savings or rural bank shall pay the wages and other
benefits of their employees through any of said banks and
within the period of payment of wages fixed by
Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines.
Labor Advisory Payment of Salary thru ATM (DOLE 1996) supra

Full Payment
LOPEZ SUGAR CORPORATION V FRANCO
458 SCRA 515
G & M (PHIL) INC V BATOMALAQUE

461 SCRA 111
It is settled that as a general rule, a party who alleges payment as
a defense has the burden of proving it. Specifically with respect to
labor cases, the burden of proving payment of monetary claims
rests on the employer, the rationale being that the pertinent
personnel files, payrolls, records, remittances and other similar
documents which will show that overtime, differentials, service
incentive leave and other claims of workers have been paid are
not in the possession of the worker but in the custody and
absolute control of the employer.
The fact of underpayment does not shift the burden of evidence
to the respondent Batomalaque because partial payment does
not extinguish the obligation. Only when the debtor introduces
evidence that the obligation has been extinguished does the
burden of evidence shift to the creditor who is then under a duty
of producing evidence to show why payment does not extinguish
the obligation.
P.I MANUFACTURING V. P.I. MANUFACTURING ETC
545 SCRA 613
Payroll Payment
PHILIPPINE GLOBAL COMMUNICATIONS INC V DE VERA
459 SCRA 260
CHAVEZ V. NLRC
448 SCRA 478
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LATON
Cash Wage
(b) In case of payment of wages by results involving work

which cannot be finished in two (2) weeks, payment shall
be made at intervals not exceeding sixteen days in
proportion to the amount of work completed. Final
settlement shall be made immediately upon completion of
the work.
CONGSON V NLRC
243 SCRA 260
Congsons practice of paying the private respondents the
minimum wage by means of legal tender combined with tuna
liver and intestines runs counter to the above cited provision of
the Labor Code. The fact that said method of paying the minimum
wage was not only agreed upon by both parties in the
employment agreement but even expressly requested by private
respondents, does not shield petitioner. Article 102 of the Labor
Code is clear. Wages shall be paid only by means of legal tender.
The only instance when an employer is permitted to pay wages
informs other than legal tender, that is, by checks. or money
order, is when the circumstances prescribed in the second
paragraph of Article 102 are present.
Payroll Entries
9.05 Place Payment (LABOR ADVISORY ON PAYMENT OF

SALARIES THRU AUTOMATED TELLER MACHINE (ATM))
ART. 104. Place of payment. - Payment of wages shall be

made at or near the place of undertaking, except as
otherwise provided by such regulations as the Secretary
of Labor and Employment may prescribe under conditions
to ensure greater protection of wages.
Article 104 of the Labor Code, as amended, requires that

payment of wages shall be made at or near the place of
undertaking, except as otherwise provided by such
regulations as the Secretary of Labor and Employment
may prescribe under conditions that would ensure prompt
payment and protection of wages.
Based on Article 104, as well as the provisions of Sec. 4,

Rule VIII, Book III of the Codes Implementing Rules and
considering present-day circumstances, practices and
technology, employers may adopt a system of payment
other than in the workplace, such as through automated
teller machine (ATM) of banks, provided that the following
conditions are met:
1. The ATM systems of payment is with the written
consent of the employees concerned.
2. The employees are given reasonable time to
withdraw their wages from the bank facility which
time, if done during working hours, shall be
considered compensable hours worked.
3. The system shall allow workers to receive their wages
within the period or frequency and in the amount
prescribed under the Labor Code, as amended.
4. There is a bank or ATM facility within a radius of one
kilometer to the place of work.
5. Upon request of the concerned employee/s, the
employer shall issue a record of payment of wages,
benefits and deductions for particular period.
6. There shall be no additional expenses and no
diminution of benefits and privileges as a result of the
ATM system of payment.
7. The employer shall assume responsibility in case the
wage protection provisions of law and regulations are
not complied with under the arrangement.
SECTION 4. Place of payment. As a general rule, the

place of payment shall be at or near the place of
undertaking. Payment in a place other than the work place
shall be permissible only under the following
circumstances:
KAR ASIA V CORONA

437 SCRA 184
While ordinarily a payslip is only a statement of the gross monthly
income of the employee, his signature therein coupled by an
acknowledgement of full compensation alter the legal complexion
of the document. The payslip becomes a substantial proof of
actual payment. Moreover, there is no hard-and-fast rule
requiring that the employees signature in the payroll is the only
acceptable proof of payment. By implication, the respondents, in
signing the payslips with their acknowledgement of full
compensation, unqualifiedly admitted the receipt thereof,
including the COLA for December 1994
9.04 Time Payment
ART. 103. Time of payment. - Wages shall be paid at least

once every two (2) weeks or twice a month at intervals not
exceeding sixteen (16) days. If on account of force
majeure or circumstances beyond the employers control,
payment of wages on or within the time herein provided
cannot be made, the employer shall pay the wages
immediately after such force majeure or circumstances
have ceased. No employer shall make payment with less
frequency than once a month.
The payment of wages of employees engaged to perform a
task which cannot be completed in two (2) weeks shall be
subject to the following conditions, in the absence of a
collective bargaining agreement or arbitration award:
(1) That payments are made at intervals not exceeding
sixteen (16) days, in proportion to the amount of work
completed;
(2) That final settlement is made upon completion of the
work.
SECTION 3. Time of payment. (a) Wages shall be paid

not less than once every two (2) weeks or twice a month
at intervals not exceeding sixteen (16) days, unless
payment cannot be made with such regularity due to force
majeure or circumstances beyond the employer's control
in which case the employer shall pay the wages
immediately after such force majeure or circumstances
have ceased.
(a) When payment cannot be effected at or near the place

of work by reason of the deterioration of peace and order
conditions, or by reason of actual or impending
emergencies caused by fire, flood, epidemic or other
calamity rendering payment thereat impossible;
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LATON
(b) When the employer provides free transportation to the

employees back and forth; and
the contractor and of the latters subcontractor, if any,

shall be paid in accordance with the provisions of this
Code.
(c) Under any other analogous circumstances; Provided,

That the time spent by the employees in collecting their
wages shall be considered as compensable hours worked;
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.
(d) No employer shall pay his employees in any bar, night

or day club, drinking establishment, massage clinic, dance
hall, or other similar places or in places where games are
played with stakes of money or things representing money
except in the case of persons employed in said places.

contracting-out of labor to protect the rights of workers
established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well
as differentiations within these types of contracting and
determine who among the parties involved shall be
considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of
this Code.
9.06 Direct Payment
ART. 105. Direct payment of wages. - Wages shall be paid

directly to the workers to whom they are due, except:
(a) In cases of force majeure rendering such payment
impossible or under other special circumstances to be
determined by the Secretary of Labor and Employment in
appropriate regulations, in which case, the worker may be
paid through another person under written authority given
by the worker for the purpose; or
(b) Where the worker has died, in which case, the
employer may pay the wages of the deceased worker to
the heirs of the latter without the necessity of intestate
proceedings. The claimants, if they are all of age, shall
execute an affidavit attesting to their relationship to the
deceased and the fact that they are his heirs, to the
exclusion of all other persons. If any of the heirs is a minor,
the affidavit shall be executed on his behalf by his natural
guardian or next-of-kin. The affidavit shall be presented to
the employer who shall make payment through the
Secretary of Labor and Employment or his representative.
The representative of the Secretary of Labor and
Employment shall act as referee in dividing the amount
paid among the heirs. The payment of wages under this
Article shall absolve the employer of any further liability
with respect to the amount paid.
SECTION 5. Direct payment of wages. Payment of wages

shall be made direct to the employee entitled thereto
except in the following cases:

equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter
were directly employed by him.

immediately preceding article shall likewise apply to any
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.
ART. 108. Posting of bond. - An employer or indirect

employer may require the contractor or subcontractor to
furnish a bond equal to the cost of labor under contract,
on condition that the bond will answer for the wages due
the employees should the contractor or subcontractor, as
the case may be, fail to pay the same.
ART. 109. Solidary liability. - The provisions of existing laws

to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall
be considered as direct employers.
SECTION 7. Civil liability of employer and contractors.

Every employer or indirect employer shall be jointly and
severally liable with his contractor or sub-contractor for
the unpaid wages of the employees of the latter. Such
employer or indirect employer may require the contractor
or sub-contractor to furnish a bond equal to the cost of
labor under contract on condition that the bond will
(a) Where the employer is authorized in writing by the

employee to pay his wages to a member of his family;
(b) Where payment to another person of any part of the
employee's wages is authorized by existing law, including
payments for the insurance premiums of the employee
and union dues where the right to check-off has been
recognized by the employer in accordance with a collective
agreement or authorized in writing by the individual
employees concerned; or
(c) In case of death of the employee as provided in the
succeeding Section.
9.07 Contractor - Sub Contractor

employer enters into a contract with another person for
the performance of the formers work, the employees of
64 | P
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answer for the wages due the employees should the

contractor or subcontractor, as the case may be, fail to pay
the same.
9.09 Wage Deduction
SECTION 8. Job Contracting. There is job contracting

permissible under the Code if the following conditions are
met:
ART. 113. Wage deduction. - No employer, in his own

behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(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;
(a) The contractor carries on an independent business and

undertakes the contract work on his own account under
his own responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected with the
performance of the work except as to the results thereof;
and
(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
(b) The contractor has substantial capital or investment in

the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of
his business.
(c) In cases where the employer is authorized by law

or regulations issued by the Secretary of Labor and
Employment.
SECTION 9. Labor-only contracting. (a) Any person who

undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where
such person:
ART. 117. Deduction to ensure employment. - 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.
(1) Does not have substantial capital or

investment in the form of tools, equipment,
machineries, work premises and other materials;
and
Wage Deduction
(2) The workers recruited and placed by such

person are performing activities which are
directly related to the principal business or
operations of the employer in which workers are
habitually employed.
We agree that Article 222 of the Labor Code requiring an

individual written authorization as a prerequisite to wage
deductions seeks to protect the employee against unwarranted
practices that would diminish his compensation without his
knowledge and consent. However, for all intents and purposes,
the deductions required of the petitioner and the employees do
not run counter to the express mandate of the law since the same
are not unwarranted or without their knowledge and consent.
Also, the deductions for the union service fee in question are
authorized by law and do not require individual check-off
authorizations.
(b) Labor-only contracting as defined herein is hereby

prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly
employed by him.
(c) For cases not falling under this Rule, the Secretary of
Labor and Employment shall determine through
appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of
each case and after considering the operating needs of the
employer and the rights of the workers involved. In such
case, he may prescribe conditions and restrictions to
insure the protection and welfare of the workers.
RADIO COMMUNICATIONS OF THE PHILS INC V SEC OF LABOR

169 SCRA 38
APODACA V NLRC
172 SCRA 442
9.08 Non-Interference - Disposal Wages
Assuming that there had been a call for payment, the NLRC still
cannot validly set it off against the wages and other benefits due
petitioner.
Art. 113 of the Labor code allows such a deduction from the
wages of the employees by employer in only 3 instances: (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
checkoff 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.
Check-Off
C. Prohibition Regarding Wages
ART. 112. Non-interference in disposal of wages. - 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. 113. Wage deduction. - No employer, in his own

behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
(b) For union dues, in cases where the right of the worker
or his union to check-off has been recognized by the
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employer or authorized in writing by the individual worker

concerned; and
SECTION 13. Wages deduction. Deductions from the

wages of the employees may be made by the employer in
any of the following cases:
(a) When the deductions are authorized by law, including
deductions for the insurance premiums advanced by the
employer in behalf of the employee as well as union dues
where the right to check-off has been recognized by the
employer or authorized in writing by the individual
employee himself.
(b) When the deductions are with the written
authorization of the employees for payment to the third
person and the employer agrees to do so; Provided, That
the latter does not receive any pecuniary benefit, directly
or indirectly, from the transaction.
MANILA TRADING & SUPPLY CO V MANILA TRADING LABOR

ASSN
93 PHIL 288
An employer may be compelled to check-off union dues from
the wages of his employee when it has been authorized to do so
by the employee. This is upon the theory that it is necessary to
promote the welfare and integrity of the union which he belongs.
It is a forward step to promote social justice as envisage by our
Constitution
9.10 Deposit
(c) That the amount of such deduction is fair and

reasonable and shall not exceed the actual loss or damage;
and
ART. 114. Deposits for loss or damage. - No employer shall

require his worker to make deposits from which
deductions shall be made for the reimbursement of loss of
or damage to tools, materials, or equipment supplied by
the employer, except when the employer is engaged in
such trades, occupations or business where the practice of
making deductions or requiring deposits is a recognized
one, or is necessary or desirable as determined by the
Secretary of Labor and Employment in appropriate rules
and regulations.
ART. 115. Limitations. - No deduction from the deposits of

an employee for the actual amount of the loss or damage
shall be made unless the employee has been heard
thereon, and his responsibility has been clearly shown.
SECTION 14. Deduction for loss or damage. Where the

employer is engaged in a trade, occupation or business
where the practice of making deductions or requiring
deposits is recognized to answer for the reimbursement of
loss or damage to tools, materials, or equipment supplied
by the employer to the employee, the employer may make
wage deductions or require the employees to make
deposits from which deductions shall be made, subject to
the following conditions:
(a) That the employee concerned is clearly shown to be
responsible for the loss or damage;
(b) That the employee is given reasonable opportunity to
show cause why deduction should not be made;
(d) That the deduction from the wages of the employee

does not exceed 20 percent of the employee's wages in a
week.
FIVE J TAXI V NLRC
235 SCRA 556
Article 114 does not apply to or permit deposits to defray any
deficiency which the taxi driver may incur in the remittance of
his "boundary." Also, when private respondents stopped working
for petitioners, the alleged purpose for which petitioners required
such unauthorized deposits no longer existed. In other case, any
balance due to private respondents after proper accounting must
be returned to them with legal interest.
DENTECH MANUFACTURING V NLRC
172 SCRA 588
Article 114 of the Labor Code prohibits an employer from
requiring his employees to file a cash bond or to make deposits,
subject to certain exceptions.
9.11Withholding of Wages; Record Keeping
ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to
withhold 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 workers consent.
Garnishment/ Attachment
SPECIAL STEEL PRODUCTS, INC. V VILLAREAL
The above provision is clear and needs no further elucidation.
Indeed, petitioner has no legal authority to withhold respondents
13th month pay and other benefits. What an employee has
worked for, his employer must pay. Thus, an employer cannot
simply refuse to pay the wages or benefits of its employee
because he has either defaulted in paying a loan guaranteed by
his employer; or violated their memorandum of agreement; or
failed to render an accounting of his employers property.
The petitioner has no legal right to withhold respondents 13th
month pay and other benefits to recompense for whatever
amount it paid as security for respondent Villareals car loan; and
for the expenses incurred by respondent So in his training abroad.
PACIFIC CUSTOMS BROKERAGE V INTER-ISLAND DOCKMEN AND
LABOR UNION AND CIR
89 PHIL 722
Art 1708 of new Civil Code provides, Laborers wages shall not be
subject to execution or attachment, except for debts incurred for
food, shelter, clothing, medical attendance.
Pacific Customs Brokerage doesnt dispute that money garnished
is intended to pay wages of members of labor union. There is
nothing to show that such money was garnished or attached for
debts incurred for food, shelter, clothing and medical attendance.
The writ of garnishment issued by the court, while it purports to
include all moneys and properties belonging to the employing
company, cannot, in any manner, touch or affect what said
company has in its possession to pay the wages of its laborers.
GAA V CA
140 SCRA 304
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The term "wages" as distinguished from "salary", applies to the

compensation for manual labor, skilled or unskilled, paid at stated
times, and measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or a superior
grade of services, and implies a position of office.
The legislature intended the exemption in Article 1708 of the New
Civil Code to operate in favor of laboring men or women in the
sense that their work is manual. Persons belonging to this class
usually look to the reward of a day's labor for immediate or
present support, and such persons are more in need of the
exemption than any others.
Record Keeping
distributed at the rate of 85% for the employees and 15%

for the management. The 85% shall be distributed equally
among the covered employees. The 15% shall be for the
disposition by management to answer for losses and
breakages and distribution to managerial employees at the
discretion of the management in the latter case.
SECTION 4. Frequency of distribution. The shares

referred to herein shall be distributed and paid to the
employees not less than once every two (2) weeks or twice
a month at intervals not exceeding sixteen (16) days.
SECTION 5. Integration of service charges. In case the

service charges is abolished the share of covered
employees shall be considered integrated in their wages.
The basis of the amount to be integrated shall be the
average monthly share of each employee for the past
twelve (12) months immediately preceding the abolition of
withdrawal of such charges.
SECTION 6. Relation to agreements. Nothing in this Rule

shall prevent the employer and his employees from
entering into any agreement with terms more favorable to
the employees than those provided herein, or be used to
diminish any benefit granted to the employees under
existing laws, agreement and voluntary employer practice.
SECTION 7. This rule shall be without prejudice to existing,

future collective bargaining agreements.
ART. 119. False reporting. - It shall be unlawful for any

person to make any statement, report, or record filed or
kept pursuant to the provisions of this Code knowing such
statement, report or record to be false in any material
respect.
SOUTH MOTORISTS ENTERPRISES V TOSOC

181 SCRA 386
All employment records of the employees of an employer shall be
kept and maintained in or about the premises of the workplace.
The premises of a workplace shall be understood to mean the
main or branch office or establishment, if any, depending upon
where the employees are regularly assigned. the keeping of the
employees records in another place is prohibited
D. Other Forms of Remuneration

Nothing in this rule shall be construed to justify the
reduction or diminution of any benefit being enjoyed by
any employee at the time of effectivity of this rule.
9.12 Service charges
ART. 96. Service charges. - All service charges collected by

hotels, restaurants and similar establishments shall be
distributed at the rate of eighty-five percent (85%) for all
covered employees and fifteen percent (15%) for
management. The share of the employees shall be equally
distributed among them. In case the service charge is
abolished, the share of the covered employees shall be
considered integrated in their wages.
SECTION 1. Coverage. This rule shall apply only to
establishments collecting service charges such as hotels,
restaurants, lodging houses, night clubs, cocktail lounge,
massage clinics, bars, casinos and gambling houses, and
similar enterprises, including those entities operating
primarily as private subsidiaries of the Government.
SECTION 2. Employees covered. This rule shall apply to
all employees of covered employers, regardless of their
positions, designations or employment status, and
irrespective of the method by which their wages are paid
except to managerial employees.
As used herein, a "managerial employee" shall mean 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 or to effectively recommend such managerial
actions. All employees not falling within this definition
shall be considered rank-and-file employees.
SECTION 3. Distribution of service charges. All service

charges collected by covered employers shall be
Service Charges
MARANAW HOTELS AND RESORT CORPORATION V NLRC
303 SCRA 540
As regards the share of Damalerio in the service charges collected
during the period of his preventive suspension, the same form
part of his earnings and his dismissal having been adjudged to be
illegal, he is entitled not only to full backwages but also to other
benefits, including a just share in the service charges, to be
computed from the start of his preventive suspension until his
reinstatement.
Tips
ACE NAVIGATION CO INC V CA
338 SCRA 380
The word tip has several meanings. It is more frequently used
to indicate additional compensation, and in this sense "tip" is
defined as meaning a gratuity; a gift; a present; a fee; money
given, as to a servant to secure better or more prompt service.
Tipping is done to get the attention and secure the immediate
services of a waiter, porter or others for their services. Since a tip
is considered a pure gift out of benevolence or friendship, it can
not be demanded from the customer. Whether or not tips will be
given is dependent on the will and generosity of the giver.
Although a customer may give a tip as a consideration for services
rendered, its value still depends on the giver. They are given in
addition to the compensation by the employer. A gratuity given
by an employer in order to inspire the employee to exert more
effort in his work is more appropriately called a bonus.
9.13 Thirteenth Month Pay (P.D. No. 851)

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Coverage - Revised Guidelines on the Implementation of 13

38
Month Pay Law, 16 November 1987 - Secs. 1-8; PD No. 851
Coverage
PETROLEUM SHIPPING LIMITED V NLRC
491 SCRA 35
The Court of Appeals premised its grant of 13th month pay on its
ruling that Tanchico was a regular employee. The Court of
Appeals also ruled that petitioners are not exempt from the
coverage of PD 851 which requires all employers to pay their
employees a 13th month pay.
We do not agree with the Court of Appeals. Again, Tanchico was a
contractual, not a regular, employee. Further, PD 851 does not
apply to seafarers.
Tanchicos employment is governed by his Contract of Enlistment.
The Contract has been approved by the POEA in accordance with
Title I, Book One of the Labor Code and the POEA Rules Governing
Employment. Hence, in the absence of any provision in his
Contract governing the payment of 13th month pay, Tanchico is
not entitled to the benefit.
KING OF KINGS TRANSPORT, INC V. MAMAC
526 SCRA 116
ULTRA VILLA FOOD HAUS V GENISTON

309 SCRA 17
Art 141 of the LC defines Domestic or household service as to
include services of family drivers.
The Revised Guidelines on the Implementation of the 13th Month
Pay Law excludes employers of household helpers from the
coverage of PD 851, thus:
2.. Exempted Employers
The following employers are still not covered by P.D. No. 851:
a. . . .;
b. Employers of household helpers . . .;
c. . . .;
d. . . .
The court also found that Geniston is not entitled to the other
benefits he was asking for because Art 82 (LC) excludes domestic
helpers from the mandatory grant of overtime pay, holiday pay,
premium pay and service incentive leave.
Manner of Wage Payment

JACKSON BLDG V NLRC
246 SCRA 329
Presidential Degree No. 851, as amended by Memorandum Order
No. 28, provides that employees are entitled to the thirteenthmonth pay benefit regardless of their designation and irrespective
of the method by which their wages are paid.
Wage Difference
JPL MARKETING PROMOTIONS V CA
463 SCRA 136
JPL cannot escape the payment of 13th month pay and service
incentive leave pay to private respondents. Said benefits are
mandated by law and should be given to employees as a matter
of right.
Admittedly, private respondents were not given their 13th month
pay and service incentive leave pay while they were under the
th
employ of JPL. Instead, JPL provided salaries which were over and
above the minimum wage.
The Court rules that the difference between the minimum wage
and the actual salary received by private respondents cannot be
deemed as their 13th month pay and service incentive leave pay
as such difference is not equivalent to or of the same import as
the said benefits contemplated by law. Thus, as properly held by
the Court of Appeals and by the NLRC, private respondents are
entitled to the 13th month pay and service incentive leave pay.
Househelpers
309 SCRA 17
include services of family drivers.
The Revised Guidelines on the Implementation of the 13th Month
Pay Law excludes employers of household helpers from the
coverage of PD 851, thus:
2.. Exempted Employers
The following employers are still not covered by P.D. No. 851:
a. . . .;
b. Employers of household helpers . . .;
c. . . .;
d. . . .
The court also found that Geniston is not entitled to the other
benefits he was asking for because Art 82 (LC) excludes domestic
helpers from the mandatory grant of overtime pay, holiday pay,
premium pay and service incentive leave.
Government Employees
ALLIANCE OF GOVERNMENT WORKERS V MINISTER OF LABOR
124 SCRA 1
An analysis of the "whereases" of P.D. No. 851 shows that the
President had in mind only workers in private employment when
he issued the decree. There was no intention to cover persons
working in the government service.
Terminated Employees
ARCHILLES MANUFACTURING CORP V NLRC
244 SCRA 750
Paragraph 6 of the Revised Guidelines on the Implementation of
the 13th Month Pay Law (P. D. 851) provides that "an employee
who has resigned or whose services were terminated at any time
before the payment of the 13th month pay is entitled to this
monetary benefit in proportion to the length of time he worked
during the year, reckoned from the time he started working
during the calendar year up to the time of his resignation or
termination from the service . . . The payment of the 13th month
pay may be demanded by the employee upon the cessation of
employer-employee relationship. This is consistent with the
principle of equity that as the employer can require the employee
to clear himself of all liabilities and property accountability, so can
the employee demand the payment of all benefits due him upon
the termination of the relationship."
Furthermore, Sec. 4 of the original Implementing Rules of P.D.
851 mandates employers to pay their employees a 13th month
pay not later than the 24th of December every year provided that
they have worked for at least one (1) month during a calendar
year. In effect, this statutory benefit is automatically vested in
the employee who has at least worked for one month during the
calendar year. As correctly stated by the Solicitor General, such
benefit may not be lost or forfeited even in the event of the
employee's subsequent dismissal for cause without violating his
property rights.
Rationale - P.D. No. 851 - Whereas Clauses and Limitations

38
See APPENDIX
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WHEREAS, it is necessary to further protect the level of

real wages from the ravage of worldwide inflation;
WHEREAS, there has been no increase in the legal

minimum wage rates since 1970;
WHEREAS, the Christmas season is an opportune time for

society to show its concern for the plight of the working
masses so they may properly celebrate Christmas and New
Year.
Basic Wage/ Commissions

HONDA PHILS INC V SAMAHAN NG MALAYANG MANGGAGAWA
SA HONDA
460 SCRA 186
The said pro-rated computation is violative of the provisions of
the CBA. A collective bargaining agreement refers to the
negotiated contract between a legitimate labor organization and
the employer concerning wages, hours of work and all other
terms and conditions of employment in a bargaining unit. As in
all contracts, the parties in a CBA may establish such stipulations,
clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and
compliance therewith is mandated by the express policy of the
law.
It is violative of the provision of P.D. No. 851 which, provided that
the minimum 13th month pay required by law shall not be less
than one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year.
The act has ripened into a practice and therefore can no longer be
withdrawn, reduced, diminished, discontinued or eliminated.
Honda did not adduce evidence to show that the 13th month,
14th month and financial assistance benefits were previously
subject to deductions or pro-rating or that these were dependent
upon the companys financial standing.
It is more in keeping with the underlying principle for the grant of
this benefit. It is primarily given to alleviate the plight of workers
and to help them cope with the exorbitant increases in the cost of
living. To allow the pro-ration of the 13th month pay in this case
is to undermine the wisdom behind the law and the mandate that
the workingmans welfare should be the primordial and
paramount consideration.
To rule otherwise inevitably results to dissuasion, if not a
deterrent, for workers from the free exercise of their
constitutional rights to self-organization and to strike in
accordance with law.
IRAN V NLRC
106 SCRA 444
The nature of the work of a salesman and the reason for such
type of remuneration for services rendered demonstrate clearly
that commissions are part of a salesmans wage or salary.
Article 97(f), LC explicitly includes commissions as part of wages.
While commissions are, indeed, incentives or forms of
encouragement to inspire employees to put a little more industry
on the jobs particularly assigned to them, still these commissions
are direct remunerations for services rendered.
Commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor, trustee,
receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the profit to
the principal.
The commissions received by every duplicating machine sold

constitute part of the basic compensation of PDIs salesmen,
apart from a small fixed wage. It is important to note that the
fixed portion of their salaries represent only 15-30% of an
employees total earnings in a year. Considering this, the sales
commissions were an integral part of PDIs basic salary structure
and not mere profit-sharing payments or fringe benefits.
The Supplementary Rules and Regulations Implementing P.D.
851(The 13th Month Pay Law) clarifies the scope of items excluded
in the computation of 13th month pay. Section 4 of the Law states
that Overtime pay, earnings and other remunerations which are
not part of the basic salary shall not be included in the
computation of the 13th month pay. What constitutes other
remunerations not part of basic salary is a question to be
resolved on a case-to-case basis. In the instant case, it is
important to distinguish the productivity bonuses granted in BoieTakeda from the sales commissions of the Duplicators case.
A productivity bonus is something extra given to an employee for
which no specific additional services are rendered. Since a bonus
is a gratuity of the employer, the recipient cannot demand its
payment as a matter of right. If an employer cannot be compelled
to pay a productivity bonus to his employees, then it follows that
the bonus should not fall under basic salary when computing
13th month pay.
Sales commissions, on the other hand, are directly proportional to
the extent or energy of an employees work. Such commissions
are paid upon the specific results achieved by a salesman and
form an integral part of his basic pay and should thus be included
in the computation of 13th month pay.
BOIE TAKEDA V DELA SERNA
228 SCRA 329
In including commissions in the computation of the 13th month
pay, the second paragraph of Section 5(a) of the Revised
Guidelines on the Implementation of the 13th Month Pay Law
unduly expanded the concept of "basic salary" as defined in P.D.
851. It is a fundamental rule that implementing rules cannot add
to or detract from the provisions of the law it is designed to
implement. Administrative regulations adopted under legislative
authority by a particular department must be in harmony with
the provisions of the law they are intended to carry into effect.
They cannot widen its scope. An administrative agency cannot
amend an act of Congress.
In remunerative schemes consisting of a fixed or guaranteed
wage plus commission, the fixed or guaranteed wage is patently
the "basic salary" for this is what the employee receives for a
standard work period. Commissions are given for extra efforts
exerted in consummating sales or other related transactions.
They are, as such, additional pay, which this Court has made clear
do not form part of the "basic salary."
San Miguel Corp. vs. Inciong discussion on history of 13th Month
Pay Law. The exclusion of all allowances and monetary benefits
such as profit-sharing payments, COLA, overtime pay, premiums
for special holiday, and the like indicate the intention to strip
basic salary of other payments, and any and all additions which
may be in the form of allowances or fringe benefits. If they
were not excluded, it is hard to find any earnings and other
remunerations (exclusionary phrase) expressly excluded in the
computation of the 13th month pay. Then the exclusionary
provision would prove to be idle and with no purpose.
Substitute Payment
FRAMANLIS FARMS INC V MOLE
171 SCRA 87
PHIL DUPLICATORS V NLRC

241 SCRA 380
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Under Section 3 of PD No. 85139, such benefits in the form of food

or free electricity, assuming they were given, were not a proper
substitute for the 13th month pay required by law.
Neither may year-end rewards for loyalty and service be
considered in lieu of 13th month pay according to Section 10 of
the Rules and Regulations Implementing Presidential Decree No.
th
14 Month Pay
KAMAYA PORT HOTEL V NLRC
177 SCRA 87
Art. 100 of the LC states: Prohibition against elimination or
diminution of benefits.- Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee
benefits being enjoyed at the time of promulgation of this Code.
It is patently obvious that Article 100 is clearly without
applicability. The date of effectivity of the Labor Code is May 1,
1974. In the case at bar, petitioner extended its 14th month pay
beginning 1979 until 1981. What is demanded is payment of the
14th month pay for 1982. Indubitably from these facts alone,
Article 100 of the Labor Code cannot apply.
- Moreover, there is no law that mandates the payment of the
14th month pay. This is emphasized in the grant of exemption
under Presidential Decree 851 (13th Month Pay Law) which
states: "Employers already paying their employees a 13th month
pay or its equivalent are not covered by this Decree." Necessarily
then, only the 13th month pay is mandated. Having enjoyed the
additional income in the form of the 13th month pay, private
respondents' insistence on the 14th month pay for 1982 is
already an unwarranted expansion of the liberality of the law.
Verily, a 14th month pay is a misnomer because it is basically a
bonus and, therefore, gratuitous in nature. The granting of the
14th month pay is a management prerogative which cannot be
forced upon the employer. It is something given in addition to
what is ordinarily received by or strictly due the recipient. It is a
gratuity to which the recipient has no right to make a demand.
This Court is not prepared to compel petitioner to grant the 14th
month pay solely because it has allegedly ripened into a company
practice" as the labor arbiter has put it. Having lost its catering
business derived from Libyan students, Kamaya Hotel should not
be penalized for its previous liberality.
An employer may not be obliged to assume a "double burden" of
paying the 13th month pay in addition to bonuses or other
benefits aside from the employee's basic salaries or wages.
Restated differently, we rule that an employer may not be obliged
to assume the onerous burden of granting bonuses or other
benefits aside from the employee's basic salaries or wages in
addition to the required 13th month pay.
Diminution
DAVAO FRUITS CORPORATION V ASSOCIATED LABOR UNIONS
The "Supplementary Rules and Regulations Implementing P.D.
No. 851," which put to rest all doubts in the computation of the
thirteenth month pay, was issued by the Secretary of Labor as
early as January 16, 1976, barely one month after the effectivity
of P.D. No. 851 and its Implementing Rules. And yet, petitioner
computed and paid the thirteenth month pay, without excluding
Section 3. Employees covered The Decree shall apply to all employees
except to:
xxx
xxx
xxx
"The term 'its equivalent' as used in paragraph (c) hereof shall include
Christmas bonus, mid-year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12 of the basic salary but shall not
include cash and stock dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary
benefits.
"Where an employer pays less than 1/12 of the employee's basic salary the
employer shall pay the difference."
the subject items therein until 1981. Petitioner continued its

practice in December 1981, after promulgation of the aforequoted San Miguel decision on February 24, 1981, when
petitioner purportedly "discovered" its mistake. From 1975 to
1981, petitioner had freely, voluntarily and continuously
included in the computation of its employees' thirteenth month
pay, the payments for sick, vacation and maternity leaves,
premiums for work done on rest days and special holidays, and
pay for regular holidays. The considerable length of time the
questioned items had been included by petitioner indicates a
unilateral and voluntary act on its part, sufficient in itself to
negate any claim of mistake.
- A company practice favorable to the employees had indeed
been established and the payments made pursuant thereto,
ripened into benefits enjoyed by them. And any benefit and
supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer, by virtue
of Section 10 of the Rules and Regulations Implementing P.D. No.
851, and Article 100 of the labor of the Philippines, which prohibit
the diminution or elimination by the employer of the employees'
existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
9.14 Bonus
Management Function
KIMBERLY ETC V. DIMAYUGA
600 SCRA 648
BUSINESSDAY INFORMATION SYSTEMS AND SERVICES INC V

NLRC
221 SCRA 9
The grant of a bonus is a prerogative, not an obligation, of the
employer. The matter of giving a bonus over and above the
worker's lawful salaries and allowances is entirely dependent on
the financial capability of the employer to give it. The fact that the
company's business was no longer profitable (it was in fact
moribund) plus the fact that the private respondents did not work
up to the middle of the year (they were discharged in May 1993)
were valid reasons for not granting them a mid-year bonus
Making the company to pay the bonus would in effect be
penalizing them for their past generosity
ASIAN TRANSUNION CORP V CA
425 SCRA 478
As reflected above, Art. 94 of the Labor Code, as amended,
affords a worker the enjoyment of ten paid regular holidays. The
provision is mandatory, regardless of whether an employee is
paid on a monthly or daily basis. Unlike a bonus, which is a
management prerogative, holiday pay is a statutory benefit
demandable under the law. Since a worker is entitled to the
enjoyment of ten paid regular holidays, the fact that two
holidays fall on the same date should not operate to reduce to
nine the ten holiday pay benefits a worker is entitled to receive.
Nature - Bonus - When Demandable

AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION V
AMERICAN WIRE AND CABLE CO., INC.
39
- ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION

OF BENEFITS.-Nothing in this Book shall be construed to eliminate
or in any way diminish supplements, or other employee benefits
being enjoyed at the time of promulgation of this Code.
- a determination must first be made on whether the benefits are
in the nature of a bonus or no, and assuming they are so, whether
they are demandable and enforceable obligations.
- Definition of bonus (Producers Bank of the Philippines v. NLRC)
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a bonus is an amount granted and paid to an employee for his

industry and loyalty it is an act of generosity granted by an
enlightened employer to spur the employee to greater efforts
the granting of a bonus is a management prerogative 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.
- Court ruled that the benefits /entitlements subjects of the
instant case are all bonuses given by respondent out of its
generosity and munificence. Benefits/entitlements are all in
excess of what the law requires each employer to give its
employees. Since they are above what is strictly due, the granting
of the same was a management prerogative, which, whenever
management sees necessary, may be withdrawn.
- the consequential question therefore that needs to be settled is
if the subject benefits, which are bonuses, are demandable or
not.
- the Court does not believe so. For a bonus to be enforceable, it
has to be promised by the employer and expressly agreed upon
by the parties or it must have a fixed amount and had been a long
and regular practice on the part of the employer. To be
considered regular practice the giving of the bonus should have
been done over a long period of time and must be shown to have
been consistent and deliberate.
LUZON STEVEDORING CORP V CIR
15 SCRA 660
As a rule a bonus is an amount granted and paid to an employee
for his industry and loyalty which contributed to the success of
the employers business and made possible the realization of
profits. It is an act of generosity for which the employee ought to
be thankful and grateful. From a legal point of view, a bonus is
not a demandable and enforceable obligation. It would be
different if this bonus was made part of the wage, salary, or
compensation.
LIBERATION STEAMSHIP CO INC V CIR
23 SCRA 1105
While normally discretionary, the grant of a gratuity or bonus by
reason of its long and regular concession may become regarded
as part of regular compensation. (Phil. Education Co., Inc., vs.
C.I.R., 92 Phil., 382, 385). For this reason, where there is a resale
of the vessels to another party during the pendency of the motion
for reconsideration, the court may order the reopening of the
case insofar as the demands for gratuity are concerned, in order
to determine whether aforecited conditions operated in the
instant case.
MARCOS V NLRC
248 SCRA 146
Anniversary and performance bonuses have ripened into a
company practice therefore become demandable. It is not
disputed that it is respondent's practice to give an anniversary
bonus every five years from its incorporation. The prerogative of
the employer to determine who among its employees shall be
entitled to receive bonuses which are, as a matter of practice,
given periodically cannot be exercised arbitrarily.
Pursuant to their policies on the matter, the service award
differential is given at the end of the year to an employee who
has completed years of service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some services or
consideration and is in addition to what would ordinarily be
given. The term "bonus" as used in employment contracts, also
conveys an idea of something which is gratuitous, or which may
be claimed to be gratuitous, over and above the prescribed wage
which the employer agrees to pay.
If one enters into a contract of employment under an agreement
that he shall be paid a certain salary by the week or some other
stated period and, in addition, a bonus, in case he serves for a
specified length of time, there is no reason for refusing to

enforce the promise to pay the bonus, if the employee has
served during the stipulated time, on the ground that it was a
promise of a mere gratuity.
PHILIPPINE NATIONAL CONSTRUCTION CORP V NLRC
307 SCRA 218
A bonus is a gift from the employer and the grant thereof is a
management prerogative. A bonus becomes a demandable or
enforceable obligation only when it is made part of the
compensation of the employee. Whether a bonus forms part of
wages depends upon the circumstances for its payment. 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. 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. Where it is payable 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 [citing Metro Transit vs NLRC,
245 SCRA 767 (1995)].
PRODUCERS BANK OF THE PHILIPPINES V NLRC
355 SCRA 489
A bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the
employer's business and made possible the realization of profits.
It 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.13 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.
However, an employer cannot be forced to distribute bonuses
which it can no longer afford to pay. To hold otherwise would be
to penalize the employer for his past generosity.
PHIL DUPLICATORS V NLRC
241 SCRA 380
A productivity bonus is something extra given to an employee for
which no specific additional services are rendered. Since a bonus
is a gratuity of the employer, the recipient cannot demand its
payment as a matter of right. If an employer cannot be compelled
to pay a productivity bonus to his employees, then it follows that
the bonus should not fall under basic salary when computing
13th month pay.
- Sales commissions, on the other hand, are directly proportional
to the extent or energy of an employees work. Such commissions
are paid upon the specific results achieved by a salesman and
form an integral part of his basic pay and should thus be included
in the computation of 13th month pay.
MANILA ELECTRIC CO V. QUISUMBING
302 SCRA 173
Christmas bonus - As a rule, a bonus is not a demandable and
enforceable obligation; ,it may nevertheless be granted on
equitable considerations as when the giving of such bonus has
been the company's long and regular practice, To be considered a
"regular practice," the giving of the bonus should have been done
over a long period of time, and must be shown to have been
consistent and deliberate. We can not, however, affirm the
Secretary's award of a two-month special Christmas bonus to the
employees since there was no recognized company practice of
giving a two-month special grant. The two-month special bonus
was given only in 1995 in recognition of the employees' prompt
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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.
and efficient response during the calamities. Instead, a onemonth special bonus, We believe, is sufficient, this being merely a
generous act on the part of MERALCO.
PHILIPPINE APPLIANCE CORPORATION (PHILACOR) V CA
430 SCRA 525
A signing bonus may not be demanded as a matter of right if it is
not agreed upon by the parties or unilaterally offered as an
additional incentive. It is not a demandable and enforceable
obligation. The condition for awarding it must be duly satisfied.
2 things militate against the grant of the signing bonus: first, the
non-fulfillment of the condition for which it was offered, i.e., the
speedy and amicable conclusion of the CBA negotiations; and
second, the failure of respondent union to prove that the grant of
the said bonus is a long established tradition or a regular
practice on the part of petitioner. Petitioner admits, and
respondent union does not dispute, that it offered an early
conclusion bonus or an incentive for a swift finish to the CBA
negotiations.
A signing bonus is justified by and is the consideration paid for the
goodwill that existed in the negotiations that culminated in the
signing of a CBA. In the case at bar, the CBA negotiation between
petitioner and respondent union failed. Respondent union went
on strike for eleven days and blocked the ingress to and egress
from petitioners work plants. The labor dispute had to be
referred to the Secretary of Labor and Employment because
neither of the parties was willing to compromise their respective
positions regarding the four remaining items which stood
unresolved. While we do not fault any one party for the failure of
the negotiations, it is apparent that there was no more goodwill
between the parties and that the CBA was clearly not signed
through their mutual efforts alone. Hence, the payment of the
signing bonus is no longer justified and to order such payment
would be unfair and unreasonable for petitioner.
We have consistently ruled that although a bonus is not a
demandable and enforceable obligation, it may nevertheless be
granted on equitable considerations as when the giving of such
bonus has been the companys long and regular practice. To be
considered a regular practice, however, the giving of the bonus
should have been done over a long period of time, and must be
shown to have been consistent and deliberate. The test or
rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law
requiring payment thereof. Respondent does not contest the fact
that petitioner initially offered a signing bonus only during the
previous CBA negotiation. Previous to that, there is no evidence
on record that petitioner ever offered the same or that the
parties included a signing bonus among the items to be resolved
in the CBA negotiation. Hence, the giving of such bonus cannot be
deemed as an established practice considering that the same was
given only once.
9.15 Productivity Incentives Act of 1990 - R.A. No. 6971
40

contracting-out of labor to protect the rights of workers
established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well
as differentiations within these types of contracting and
determine who among the parties involved shall be
considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of
this Code.
equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter
were directly employed by him.

immediately preceding article shall likewise apply to any
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.
ART. 108. Posting of bond. - An employer or indirect

employer may require the contractor or subcontractor to
furnish a bond equal to the cost of labor under contract,
on condition that the bond will answer for the wages due
the employees should the contractor or subcontractor, as
the case may be, fail to pay the same.
ART. 109. Solidary liability. - The provisions of existing laws

to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall
be considered as direct employers.
Employer, Independent Contractor and Sub-Contractor and

Labor Only Contracting
Liabilities
LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION V CA

employer enters into a contract with another person for
the performance of the formers work, the employees of
the contractor and of the latters subcontractor, if any,
shall be paid in accordance with the provisions of this
Code.
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
40
See APPENDIX
Private respondent admits that there is no employer-employee

relationship between it and the petitioner. The private
respondent is an independent/job contractor1 who assigned
security guards at the petitioner's premises for a stipulated
amount per guard per month. The Contract of Security Services
expressly stipulated that the security guards are employees of the
Agency and not of the petitioner. Articles 106 and 107 of the
Labor Code provides the rule governing the payment of wages of
employees in the event that the contractor fails to pay such
wages.
- It will be seen from the above provisions that the principal
(petitioner) and the contractor (respondent) are jointly and
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severally liable to the employees for their wages. This Court held
in Eagle Security, Inc. vs. NLRC and Spartan Security and Detective
Agency, Inc. vs. NLRC that the joint and several liability of the
contractor and the principal is mandated by the Labor Code to
assure compliance with the provisions therein including the
minimum wage. The contractor is made liable by virtue of his
status as direct employer. The principal, on the other hand, is
made the indirect employer of the contractor's employees to
secure payment of their wages should the contractor be unable
to pay them. Even in the absence of an employer-employee
relationship, the law itself establishes one between the principal
and the employees of the agency for a limited purpose i.e. in
order to ensure that the employees are paid the wages due them.
In the above-mentioned cases, the solidary liability of the
principal and contractor was held to apply to the aforementioned
Wage Order Nos. 5 and 6. In ruling that under the Wage Orders,
existing security guard services contracts are amended to allow
adjustment of the consideration in order to cover payment of
mandated increases, and that the principal is ultimately liable for
the said increases.
- It is clear that it is only when contractor pays the increases
mandated that it can claim an adjustment from the principal to
cover the increases payable to the security guards. The conclusion
that the right of the contractor (as principal debtor) to recover
from the principal as solidary co-debtor) arises only if he has paid
the amounts for which both of them are jointly and severally
liable is in line with Article 121741 of the Civil Code.
- The right of reimbursement from a co-debtor is recognized in
favor of the one who paid.
The liability of the petitioner to reimburse the respondent only
arises if and when respondent actually pays its employees the
increases granted by Wage Order Nos. 5 and 6. Payment, which
means not only the delivery of money but also the performance,
in any other manner, of the obligation,is the operative fact which
will entitle either of the solidary debtors to seek reimbursement
for the share which corresponds to each of the debtors.
- It is not disputed that the private respondent has not actually
paid the security guards the wage increases granted under the
Wage Orders in question. Neither is it alleged that there is an
extant claim for such wage adjustments from the security guards
concerned, whose services have already been terminated by the
contractor. Accordingly, private respondent has no cause of
action against petitioner to recover the wage increases. Needless
to stress, the increases in wages are intended for the benefit of
the laborers and the contractor may not assert a claim against the
principal for salary wage adjustments that it has not actually paid.
Otherwise, as correctly put by the respondent, the contractor
would be unduly enriching itself by recovering wage increases, for
its own benefit.
- Finally, considering that the private respondent has no cause of
action against the petitioner, private respondent is not entitled to
attorney's fees.
295 SCRA 123
The Client did not, as it could not, illegally dismiss the
complainants. Thus, it should not be held liable for separation pay
and back wages. But even if the Client is not responsible for the
illegal dismissal of the complainants, it is jointly and severally
liable with the Agency for the complainants service incentive
leave pay.
Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.
41
He who made payment may claim from his co-debtors only the share which
corresponds to each, with interest for the payment already made. If the
payment is made before the debt is due, no interest for the intervening period
may be demanded. . . .
OSM SHIPPING V NLRC

398 SCRA 606
Joint and solidary liability is meant to assure aggrieved workers of
immediate and sufficient payment of what is due them. The fact
that petitioner and its principal have already terminated their
agency agreement does not relieve the former of its liability. The
reason for this ruling was given by this Court in Catan National
Labor Relations Commission, which we reproduce in part as
follows:
"This must be so, because the obligations covenanted in the
[manning] agreement between the local agent and its foreign
principal are not coterminus with the term of such agreement so
that if either or both of the parties decide to end the agreement,
the responsibilities of such parties towards the contracted
employees under the agreement do not at all end, but the same
extends up to and until the expiration of the, employment
contracts of the employees recruited and employed pursuant to
the said recruitment agreement. Otherwise, this will render
nugatory the very purpose for which the law governing the
employment of workers for foreign jobs abroad was enacted."
MANILA ELECTRIC CO V BENAMIRA
302 SCRA 173
The fact that there is no actual and direct employer-employee
relationship between MERALCO and the individual respondents
does not exonerate MERALCO from liability as to the monetary
claims of the individual respondents. When MERALCO contracted
for security services with ASDAI as the security agency that hired
individual respondents to work as guards for it, MERALCO
became an indirect employer of individual respondents pursuant
to Article 107 of the Labor Code, which reads:
ART. 107. Indirect employer - The provisions of the immediately
preceding Article shall likewise apply to any 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.
When ASDAI as contractor failed to pay the individual
respondents, MERALCO as principal becomes jointly and severally
liable for the individual respondents wages, under Articles 106
and 109 of the Labor Code, which provide:
ART. 106. Contractor or subcontractor. - Whenever an employer
enters into a contract with another person for the performance of
the former[s] work, the employees of the contractor and of the
latter[s] subcontractor, if any, shall be paid in accordance with
the provisions of this Code.
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.
ART. 109. Solidary liability - The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for
any violation of any provision of this Code. For purpose of
determining the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
ASDAI is held liable by virtue of its status as direct employer,
while MERALCO is deemed the indirect employer of the individual
respondents for the purpose of paying their wages in the event of
failure of ASDAI to pay them. This statutory scheme gives the
workers the ample protection consonant with labor and social
justice provisions of the 1987 Constitution.
However, as held in Mariveles Shipyard Corp. vs. Court of
Appeals, the solidary liability of MERALCO with that of ASDAI does
not preclude the application of Article 1217 of the Civil Code on
the right of reimbursement from his co-debtor by the one who
paid, which provides:
ART. 1217. Payment made by one of the solidary debtors
extinguishes the obligation. If two or more solidary debtors offer
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to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only
the share which corresponds to each, with the interest for the
payment already made. If the payment is made before the debt
is due, no interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.
ASDAI may not seek exculpation by claiming that MERALCOs
payments to it were inadequate for the individual respondents
lawful compensation. As an employer, ASDAI is charged with
knowledge of labor laws and the adequacy of the compensation
that it demands for contractual services is its principal concern
and not any others.[35]
9.17 Worker Preference - Bankruptcy
ART. 110. Worker preference in case of bankruptcy. - In the

event of bankruptcy or liquidation of an employers
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).
Art. 1707. The laborer's wages shall be a lien on the goods

manufactured or the work done.
Art. 2241. With reference to specific movable property of

the debtor, the following claims or liens shall be preferred
(6) Claims for laborers' wages, on the goods manufactured
or the work done;
Art. 2242. With reference to specific immovable property

and real rights of the debtor, the following claims,
mortgages and liens shall be preferred, and shall
constitute an encumbrance on the immovable or real
right:
(3) Claims of laborers, masons, mechanics and other
workmen, as well as of architects, engineers and
contractors, engaged in the construction, reconstruction
or repair of buildings, canals or other works, upon said
buildings, canals or other works;
Art. 2244. With reference to other property, real and

personal, of the debtor, the following claims or credits
shall be preferred in the order named:
(2) Credits for services rendered the insolvent by
employees, laborers, or household helpers for one year
preceding the commencement of the proceedings in
insolvency;
(4) Compensation due the laborers or their dependents
under laws providing for indemnity for damages in cases of
labor accident, or illness resulting from the nature of the
employment;
Art. 2245. Credits of any other kind or class, or by any

other right or title not comprised in the four preceding
articles, shall enjoy no preference. (1925)
Civil Code - Labor Code

JETHRO ETC V. SEC. DOLE
596 SCRA 293
PEOPLE ETC V. SEC. DOLE

587 SCRA 724
PHILIPPINE EXPORT V CA
251 SCRA 354
A final observation. On 21 March 1989, Article 110 of the Labor
Code was amended by Republic Act No. 6715 so as to read:
Art. 110. Worker preference in case of bankruptcy. 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 claims shall
be paid in full before claims of the Government and other
creditors may be paid.
In Development Bank of the Philippines vs. National Labor
Relations Commission (183 SCRA 328, 336-339), the Court has
said:
The amendment expands worker preference to cover not only
unpaid wages but also other monetary claims to which even
claims of the Government must be deemed subordinate.
xxx xxx xxx
Notably, the terms "declaration" of bankruptcy or "judicial"
liquidation have been eliminated. Does this mean then that
liquidation proceedings have been done away with?
We opine in the negative, upon the following considerations:
1. Because of its impact on the entire system of credit, Article 110
of the Labor Code cannot be viewed in isolation but must be read
in relation to the Civil Code scheme on classification and
preference of credits.
xxx xxx xxx
2. In the same way that the Civil Code provisions on classification
of credits and the Insolvency Law have been brought into
harmony, so also must the kindred provisions of the Labor Law be
made to harmonize with those laws.
3. In the event of insolvency, a principal objective should be to
effect an equitable distribution of the insolvent's property among
his creditors. To accomplish this there must first be some
proceeding where notice to all of the insolvent's creditors may be
given and where the claims of preferred creditors may be
bindingly adjudicated (De Barretto vs. Villanueva, No. L-14938,
December 29, 1962, 6 SCRA 928). The rationale therefore has
been expressed in the recent case of DBP vs. Secretary of Labor
(G.R. No. 79351, 28 November 1989), which we quote:
xxx xxx xxx
4. A distinction should be made between a preference of credit
and a lien. A preference applies only to claims which do not
attach to specific properties. A lien creates a charge on a
particular property. The right of first preference as regards unpaid
wages recognized by Article 110 does not constitute a lien on the
property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is
a method adopted to determine and specify the order in which
credits should be paid in the final distribution of the proceeds of
the insolvent's assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor.
xxx xxx xxx
6. Even if Article 110 and its implementing Rule, as amended,
should be interpreted to mean "absolute preference," the same
should be given only prospective effect in line with the cardinal
rule that laws shall have no retroactive effect, unless the contrary
is provided (Article 4, Civil Code). Thereby, any infringement on
the constitutional guarantee on non-impairment of the obligation
of contracts (Section 10, Article III, 1987 Constitution) is also
avoided. In point of fact, DBP's mortgage credit antedated by
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several years the amendatory law, RA No. 6715. To give Article

110 retroactive effect would be to wipe out the mortgage in
DBP's favor and expose it to a risk which it sought to protect itself
against by requiring a collateral in the form of real property.
In fine, the right to preference given to workers under Article 110
of the Labor Code cannot exist in any effective way prior to the
time of its presentation in distribution proceedings. It will find
application when, in proceedings such as insolvency, such unpaid
wages shall be paid in full before the "claims of the Government
and other creditors" may be paid. But, for an orderly settlement
of a debtor's assets, all creditors must be convened, their claims
ascertained and inventoried, and thereafter the preferences
determined in the course of judicial proceedings which have for
their object the subjection of the property of the debtor to the
payment of his debts or other lawful obligations. Thereby, an
orderly determination of preference of creditors' claims is
assured (Philippine Savings Bank vs. Lantin, No. L-33929,
September 2, 1983, 124 SCRA 476); the adjudication made will be
binding on all parties-in-interest, since those proceedings are
proceedings in rem; and the legal scheme of classification,
concurrence and preference of credits in the Civil Code, the
Insolvency Law, and the Labor Code is preserved in harmony.
BARAYOGA V ASSET PRIVATIZATION TRUST
473 SCRA 690
Relevant to this transfer of assets is Article 110 of the Labor Code,
as amended by Republic Act No. 6715, which reads:
Article 110. Workers preference in case of bankruptcy. In the
event of bankruptcy or liquidation of the employers business, his
workers shall enjoy first preference as regards their unpaid wages
and other monetary claims shall be paid in full before the claims
of the Government and other creditors may be paid.
- This Court has ruled in a long line of cases that under Articles
2241 and 2242 of the Civil Code, a mortgage credit is a special
preferred credit that enjoys preference with respect to a
specific/determinate property of the debtor. On the other
hand, the workers preference under Article 110 of the Labor
Code is an ordinary preferred credit. While this provision raises
the workers money claim to first priority in the order of
preference established under Article 2244 of the Civil Code, the
claim has no preference over special preferred credits.
Thus, the right of employees to be paid benefits due them from
the properties of their employer cannot have any preference over
the latters mortgage credit. In other words, being a mortgage
credit, APTs lien on BISUDECOs mortgaged assets is a special
preferred lien that must be satisfied first before the claims of the
workers.
In Development Bank of the Philippines v. NLRC the rationale of
this ruling was explained as follows:
A preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The
right of first preference as regards unpaid wages recognized by
Article 110 does not constitute a lien on the property of the
insolvent debtor in favor of workers. It is but a preference of
credit in their favor, a preference in application. It is a method
adopted to determine and specify the order in which credits
should be paid in the final distribution of the proceeds of the
insolvents assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor. Furthermore,
workers claims for unpaid wages and monetary benefits cannot
be paid outside of a bankruptcy or judicial liquidation proceedings
against the employer. It is settled that the application of Article
110 of the Labor Code is contingent upon the institution of those
proceedings, during which all creditors are convened, their claims
ascertained and inventoried, and their preferences determined.
Assured thereby is an orderly determination of the preference
given to creditors claims; and preserved in harmony is the legal
scheme of classification, concurrence and preference of credits in
the Civil Code, the Insolvency Law, and the Labor Code. The Court
hastens to add that the present Petition was brought against APT
alone. In holding that the latter, which has never really been an
employer of petitioners, is not liable for their claims, this Court is
not reversing or ruling upon their entitlement to back wages and

other unpaid benefits from their previous employer.
REPUBLIC V PERALTA
150 SCRA 37
For the specific purposes of Article 11042 and in the context of
insolvency termination or separation pay is reasonably regarded
as forming part of the remuneration or other money benefits
accruing to employees or workers by reason of their having
previously rendered services to their employer; as such, they fall
within the scope of "remuneration or earnings for services
rendered or to be rendered--." Liability for separation pay might
indeed have the effect of a penalty, so far as the employer is
concerned. So far as concerns the employees, however,
separation pay is additional remuneration to which they become
entitled because, having previously rendered services, they are
separated from the employer's service.
We note, in this connection, that in Philippine Commercial and
Industrial Bank (PCIB) us. National Mines and Allied Workers
Union, the Solicitor General took a different view and there urged
that the term "wages" under Article 110 of the Labor Code may
be regarded as embracing within its scope severance pay or
termination or separation pay. In PCIB, this Court agreed with the
position advanced by the Solicitor General. We see no reason for
overturning this particular position.
The resolution of the issue of priority among the several claims
filed in the insolvency proceedings instituted by the Insolvent
cannot, however, rest on a reading of Article 110 of the labor
Code alone.
Article 110 of the Labor Code, in determining the reach of its
terms, cannot be viewed in isolation. Rather, Article 110 must be
read in relation to the provisions of the Civil Code concerning the
classification, concurrence and preference of credits, which
provisions find particular application in insolvency proceedings
where the claims of all creditors, preferred or non-preferred, may
be adjudicated in a binding manner.
BALLADAREN V. PEAK, ETC
589 SCRA 173
Receivership
RUBBERWORLD (PHILS), INC. V. NLRC
336 SCRA 433
Presidential Decree No. 902-A is clear that "all actions for claims
against corporations, partnerships or associations under
management or receivership pending before any court, tribunal,
board or body shall be suspended accordingly." The law did not
make any exception in favor of labor claims. The justification for
the automatic stay of all pending actions for claims is to enable
the management committee or the rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra
judicial interference that might unduly hinder or prevent the
'rescue' of the debtor company. To allow such other actions to
continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and
rehabilitation. Thus, the labor case would defeat the purpose of
an automatic stay. To rule otherwise would open the floodgates
to numerous claims and would defeat the rescue efforts of the
management committee.
This finds ratiocination in that the power to hear and decide labor
Article 110. Worker preference in case of bankruptcy In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary
notwithstanding. Union paid wages shall be paid in full before other creditors may establish any claim to a
share in the assets of the employer. (emphasis supplied).
42
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(d) It shall be unlawful for any person or entity to obstruct,

impede, delay or otherwise render ineffective the orders
of the Secretary of Labor and Employment or his duly
authorized representatives issued pursuant to the
authority granted under this Article, and no inferior court
or entity shall issue temporary or permanent injunction or
restraining order or otherwise assume jurisdiction over
any case involving the enforcement orders issued in
accordance with this Article.
disputes is deemed suspended when the Securities and Exchange

Commission puts the corporation under rehabilitation. Thus,
when NLRC proceeded to decide the case despite the SEC
suspension order, the NLRC acted without or in excess of its
jurisdiction to hear and decide cases. As a consequence, any
resolution, decision or order that it rendered or issued without
jurisdiction is a nullity.
9.18 Wage Recovery and Attorneys Fees
ART. 128. Visitorial and enforcement power.

(a) The Secretary of Labor and Employment or his duly
authorized representatives, including labor regulation
officers, shall have access to employers records and
premises at any time of the day or night whenever work is
being undertaken therein, and the right to
copy therefrom, to question any employee and investigate
any fact, condition or matter which may be necessary to
determine violations or which may aid in the enforcement
of this Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217
of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the
Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance
orders to give effect to the labor standards provisions of
this Code and other labor legislation based on the findings
of labor employment and enforcement officers or
industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings
of the labor employment and enforcement officer and
raises issues supported by documentary proofs which
were not considered in the course of inspection. (As
amended by Republic Act No. 7730, June 2, 1994)
An order issued by the duly authorized representative of
the Secretary of Labor and Employment under this Article
may be appealed to the latter. In case said order involves a
monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by
the Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed
from. (As amended by Republic Act No. 7730, June 2,
1994).
(c) The Secretary of Labor and Employment may likewise
order stoppage of work or suspension of operations of any
unit or department of an establishment when noncompliance with the law or implementing rules and
regulations poses grave and imminent danger to the
health and safety of workers in the workplace. Within
twenty-four hours, a hearing shall be conducted to
determine whether an order for the stoppage of work or
suspension of operations shall be lifted or not. In case the
violation is attributable to the fault of the employer, he
shall pay the employees concerned their salaries or wages
during the period of such stoppage of work or suspension
of operation.
(e) Any government employee found guilty of violation of,

or abuse of authority, under this Article shall, after
appropriate administrative investigation, be subject to
summary dismissal from the service.
(f) The Secretary of Labor and Employment may, by
appropriate regulations, require employers to keep and
maintain such employment records as may be necessary in
aid of his visitorial and enforcement powers under this
Code.
ART. 129. Recovery of wages, simple money claims and

other benefits. - Upon complaint of any interested party,
the Regional Director of the Department of Labor and
Employment or any of the duly authorized hearing officers
of the Department is empowered, through summary
proceeding and after due notice, to hear and decide any
matter involving the recovery of wages and other
monetary claims and benefits, including legal interest,
owing to an employee or person employed in domestic or
household service or househelper under this Code, arising
from employer-employee relations: Provided, That such
complaint does not include a claim for reinstatement:
Provided further, That the aggregate money claims of each
employee or househelper does not exceed Five thousand
pesos (P5,000.00). The Regional Director or hearing officer
shall decide or resolve the complaint within thirty (30)
calendar days from the date of the filing of the same. Any
sum thus recovered on behalf of any employee
or househelper pursuant to this Article shall be held in a
special deposit account by, and shall be paid on order of,
the Secretary of Labor and Employment or the Regional
Director
directly
to
the
employee
or househelper concerned. Any such sum not paid to the
employee or househelper because he cannot be located
after diligent and reasonable effort to locate him within a
period of three (3) years, shall be held as a special fund of
the Department of Labor and Employment to be used
exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or
hearing officer pursuant to this provision may be appealed
on the same grounds provided in Article 223 of this Code,
within five (5) calendar days from receipt of a copy of said
decision or resolution, to the National Labor Relations
Commission which shall resolve the appeal within ten (10)
calendar days from the submission of the last pleading
required or allowed under its rules.
The Secretary of Labor and Employment or his duly
authorized representative may supervise the payment of
unpaid wages and other monetary claims and benefits,
including legal interest, found owing to any employee
or househelper under this Code.(As amended by Section 2,
Republic Act No. 6715, March 21, 1989).
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PLACEWELL INTERNATIONAL, ETC V. CAMOTE

492 SCRA 761
The labor arbiter and the CA did not err in awarding attorneys
fees to respondent. It is settled that in actions for recovery of
wages or where an employee was forced to litigate and incur
expenses to protect his rights and interests, he is entitled to an
award of attorneys fees. However, with regard to Unauthorized
Deductions amounting to P171,780.00; we note that the
appellate court did not state any basis for its award, thus, the
same is deleted for lack of factual and legal basis.
SAN MIGUEL CORP V. TEODISIO
602 SCRA 197
BARON, ETC V. PERALTA

602 SCRA 258
ART. 111. Attorneys fees. - (a) In cases of unlawful

withholding of wages, the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of
wages recovered.
(b) It shall be unlawful for any person to demand or
accept, in any judicial or administrative proceedings for
the recovery of wages, attorneys fees which exceed ten
percent of the amount of wages recovered.
F. Minimum Wages
Statutory Reference: Arts. 126-127; Book III, Rule IX, Omnibus
Rules; R.A. No. 6727
9.19 Wages and the Constitution
ARTICLE 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 selforganization, 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.
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.
Minimum Wages
ATOK BIG WEDGE MINING CO INC V ATOK BIG WEDGE MUTUAL
BENEFIT ASSOCIATION
92 PHIL 755
The law guarantees the laborer a fair and just wage. The
minimum must be fair and just. The "minimum wage" can by no
means imply only the actual minimum. Some margin or leeway
must be provided, over and above the minimum, to take care of
contingencies, such as increase of prices of commodities and
increase in wants, and to provide means for a desirable
improvement in his mode of living.
Beneficiaries
PEOPLE V GATCHALIAN
104 PHIL 664
"The establishment of the maximum wage benefits directly the
low-paid employees, who now receive inadequate wages on
which to support themselves and their families. It benefits all
wage earners indirectly by setting a floor below which their
remuneration cannot fail. It raises the standards of competition
among employers, since it would protect the fair-minded
employer who voluntarily pays a wage that supports the wage
earner from the competition of the employer who operates at
lower cost by reasons of paying his workers a wage below
subsistence. If, in fact, the employer cannot pay a subsistence
wage then he should riot continue his operation unless he
improves his methods and equipment so as to make the payment
of the minimum wage feasible for him otherwise the ernployer is
wasting the toil of the worker and the material resources used in
the employment. Second methods of operation, progressive and
fair-minded Management, and an adequate minimum wage go
hand in hand."
Effect Inability Pay

PHIL. APPAREL WORKERS UNION V NLRC (PHIL APPAREL INC)
106 SCRA 444
The stability of the economy does not depend on the employer
alone, but on government economic policies concerning
productivity in all areas. It is the living wage of the workers which
is the basis of a stable economy. If a company cannot pay a living
wage, it has no business operating at the expense of the lives of
its workers from the very start. The preservation of the lives of
citizens is a basic duty of the State, more vital than the
preservation of corporate profits.
9.20 Agencies for Wage Fixing Machinery

National Wages and Productivity Commission
ART. 120. Creation of National Wages and Productivity

Commission. - There is hereby created a National Wages
and Productivity Commission, hereinafter referred to as
the Commission, which shall be attached to the
Department ofLabor and Employment (DOLE) for policy
and program coordination. (As amended by Republic Act
No. 6727, June 9, 1989).
ART. 121. Powers and functions of the Commission. - The

Commission shall have the following powers and
functions:
(a) To act as the national consultative and advisory body to
the President of the Philippines and Congress on matters
relating to wages, incomes and productivity;
(b) To formulate policies and guidelines on wages, incomes
and productivity improvement at the enterprise, industry
and national levels;
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(c) To prescribe rules and guidelines for the determination

of appropriate minimum wage and productivity measures
at the regional, provincial, or industry levels;
(d) To review regional wage levels set by the Regional
Tripartite Wages and Productivity Boards to determine if
these are in accordance with prescribed guidelines and
national development plans;
(e) To undertake studies, researches and surveys
necessary for the attainment of its functions and
objectives, and to collect and compile data and
periodically disseminate information on wages and
productivity and other related information, including, but
not limited to, employment, cost-of-living, labor costs,
investments and returns;
(f) To review plans and programs of the Regional Tripartite
Wages and Productivity Boards to determine whether
these are consistent with national development plans;
(g) To exercise technical and administrative supervision
over
the
Regional
Tripartite
Wages
and
Productivity Boards;
(h) To call, from time to time, a national tripartite
conference of representatives of government, workers and
employers for the consideration of measures to promote
wage rationalization and productivity; and
(i) To exercise such powers and functions as may be
necessary to implement this Act.
Regional Tripartite Wages and Productivity Board
The Regional Boards shall have the following powers and

functions in their respective territorial jurisdictions:
(a) To develop plans, programs and projects relative to
wages, incomes and productivity improvement for their
respective regions;
(b) To determine and fix minimum wage rates applicable in
their regions, provinces or industries therein and to issue
the corresponding wage orders, subject to guidelines
issued by the Commission;
(c) To undertake studies, researches, and surveys
necessary for the attainment of their functions, objectives
and programs, and to collect and compile data on wages,
incomes, productivity and other related information and
periodically disseminate the same;
(d) To coordinate with the other Regional Boards as may
be necessary to attain the policy and intention of this
Code;
(e) To receive, process and act on applications for
exemption from prescribed wage rates as may be provided
by law or any Wage Order; and
(f) To exercise such other powers and functions as may be
necessary to carry out their mandate under this Code.
The Commission shall be composed of the Secretary

of Labor and Employment as ex-officio chairman, the
Director-General of the National Economic and
Development Authority (NEDA) as ex-officio vice-chairman,
and two (2) members each from workers and employers
sectors who shall be appointed by the President of the
Philippines upon recommendation of the Secretary
of Labor and Employment to be made on the basis of the
list of nominees submitted by the workers and employers
sectors, respectively, and who shall serve for a term of five
(5) years. The Executive Director of the Commission shall
also be a member of the Commission.
Implementation of the plans, programs, and projects of

the Regional Boards referred to in the second paragraph,
letter (a) of this Article, shall be through the respective
regional offices of the Department of Labor and
Employment within their territorial jurisdiction; Provided,
however, That the Regional Boards shall have technical
supervision over the regional office of the Department
of Labor and Employment with respect to the
implementation of said plans, programs and projects.
The Commission shall be assisted by a Secretariat to be

headed by an Executive Director and two (2) Deputy
Directors, who shall be appointed by the President of the
Philippines, upon the recommendation of the Secretary
of Labor and Employment.
Each Regional Board shall be composed of the Regional

Director of the Department of Labor and Employment as
chairman, the Regional Directors of the National Economic
and Development Authority and the Department of Trade
and Industry as vice-chairmen and two (2) members each
from workers and employers sectors who shall be
appointed by the President of the Philippines, upon the
recommendation of the Secretary of Labor and
Employment, to be made on the basis of the list of
nominees submitted by the workers and employers
sectors, respectively, and who shall serve for a term of five
(5) years.
The Executive Director shall have the same rank, salary,

benefits and other emoluments as that of a Department
Assistant Secretary, while the Deputy Directors shall have
the same rank, salary, benefits and other emoluments as
that of a Bureau Director. The members of the
Commission representing labor and management shall
have the same rank, emoluments, allowances and other
benefits as those prescribed by law for labor and
management representatives in the Employees
Compensation Commission. (As amended by Republic Act
No. 6727, June 9, 1989).
ART. 126. Prohibition against injunction. No preliminary

or permanent injunction or temporary restraining order
may be issued by any court, tribunal or other entity
against any proceedings before the Commission or the
Regional Boards. (As amended by Republic Act No. 6727,
June 9, 1989).
ART. 122. Creation of Regional Tripartite Wages and

Productivity Boards. - There is hereby created Regional
Tripartite Wages and Productivity Boards, hereinafter
referred to as Regional Boards, in all regions, including
autonomous regions as may be established by law. The
Commission shall determine the offices/headquarters of
the respective Regional Boards.
Each Regional Board to be headed by its chairman shall be

assisted by a Secretariat. (As amended by Republic Act No.
6727, June 9, 1989).
ART. 126. supra
Functions
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arbitration. Unless otherwise agreed by the parties in

writing, such dispute shall be decided by the voluntary
arbitrators within ten (10) calendar days from the time
said dispute was referred to voluntary arbitration.
NASIPIT LUMBER CO V NLRC (NWPC)

289 SCRA 339 (03)
JUSTICE PANGANIBAN: The foregoing clearly grants the NWPC, x
x x, the power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures. x x
x, the NWPC has the power not only to prescribe guidelines to
govern wage orders, but also to issue exemptions therefrom, x x
x. In short, the NWPC lays down the guidelines which the RTWPB
implements.
In cases where there are no collective agreements or

recognized labor unions, the employers and workers
shall endeavor to correct such 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,
shall be referred to the appropriate branch of the
National Labor Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous hearings
and decide the dispute within twenty (20) calendar days
from the time said dispute is submitted for compulsory
arbitration.
9.21 Area Minimum Wages and Criteria
ART. 124. Standards/Criteria for minimum wage fixing. The regional minimum wages to be established by the
Regional Board shall be as nearly adequate as is
economically feasible to maintain the minimum standards
of living necessary for the health, efficiency and general
well-being of the employees within the framework of the
national economic and social development program. In the
determination of such regional minimum wages, the
Regional Board shall, among other relevant factors,
consider the following:
The pendency of a dispute arising from a wage distortion

shall not in any way delay the applicability of any increase
in prescribed wage rates pursuant to the provisions of law
or wage order.
(a) The demand for living wages;

(b) Wage adjustment vis--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 of the capital invested and capacity to pay
of employers;
(i) Effects on employment generation and family income;
and
(j) The equitable distribution of income and wealth along
the imperatives of economic and social development.
As used herein, a wage distortion shall mean a situation

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.
The wages prescribed in accordance with the provisions of

this Title shall be the standard prevailing minimum wages
in every region. These wages shall include wages varying
with industries, provinces or localities if in the judgment of
the Regional Board, conditions make such local
differentiation proper and necessary to effectuate the
purpose of this Title.
All recognized learnership and apprenticeship agreements

shall be considered automatically modified insofar as their
wage clauses are concerned to reflect the prescribed wage
rates. (As amended by Republic Act No. 6727, June 9,
1989).
Any person, company, corporation, partnership or any

other entity engaged in business shall file and register
annually with the appropriate Regional Board, Commission
and the National Statistics Office, an itemized listing of
their labor component, specifying the names of their
workers and employees below the managerial level,
including learners, apprentices and disabled/ handicapped
workers who were hired under the terms prescribed in the
employment contracts, and their corresponding salaries
and wages.
Where the application of any prescribed wage increase by
virtue of a law or wage order issued by any Regional Board
results in distortions of the wage structure within an
establishment, the employer and the union shall negotiate
to correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance
procedure under their collective bargaining agreement
and, if it remains unresolved, through voluntary
All workers paid by result, including those who are paid on

piecework, takay, pakyaw or task basis, shall receive not
less than the prescribed wage rates per eight (8) hours of
work a day, or a proportion thereof for working less than
eight (8) hours.
9.22 Wage Order
ART. 123. Wage Order. - Whenever conditions in the

region so warrant, the Regional Board shall investigate and
study all pertinent facts; and based on the standards and
criteria herein prescribed, shall proceed to determine
whether a Wage Order should be issued. Any such Wage
Order shall take effect after fifteen (15) days from its
complete publication in at least one (1) newspaper of
general circulation in the region.
In the performance of its wage-determining functions, the
Regional Board shall conduct public hearings/
consultations, giving notices to employees and employers
groups, provincial, city and municipal officials and other
interested parties.
Any party aggrieved by the Wage Order issued by the
Regional Board may appeal such order to the Commission
within ten (10) calendar days from the publication of such
order. It shall be mandatory for the Commission to decide
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such appeal within sixty (60) calendar days from the filing
thereof.
The filing of the appeal does not stay the order unless the
person appealing such order shall file with the
Commission, an undertaking with a surety or sureties
satisfactory to the Commission for the payment to the
employees affected by the order of the corresponding
increase, in the event such order is affirmed. (As amended
by Republic Act No. 6727, June 9, 1989).
Regional Board deprived petitioner and other employers of due

process as they were not given the opportunity to ventilate their
positions regarding the proposed wage increase. The contention
that, despite the wording of RO2-02 providing for a statutory
increase in minimum wage, the real intention of the Regional
Board was to provide for an across the board increase is absurd.
There was no ambiguity in the provision of RO2-02 as it provided
in clear and categorical terms for an increase in statutory
minimum wage of workers in the region. The subsequent passage
of RO2-02-A changed the essence of the original Order.
Piece Worker
ART. 124. supra
Methods of Fixing
EMPLOYERS CONFEDERATION OF THE PHILIPPINES V NWPC
201 SCRA 759
RA 6727 was intended to rationalize wages, first, by providing for
full-time boards to police wages round-the-clock, and second, by
giving the boards enough powers to achieve this objective.
Congress meant the boards to be creative in resolving the annual
question of wages without labor and management knocking on
the legislature's door at every turn.
LAMBO V NLRC
317 SCRA 420
The relationship at bar passes the four-fold test. The mere fact
that they were employed on a per piece basis does not negate
their status as regular employees. Payment by the piece is just a
method of compensation and does not define the essence of the
relations. Nor does the fact that petitioners are not covered by
the SSS affect the employer-employee relationship
PULP AND PAPER INC V NLRC (ANTONIO)
279 SCRA 408
The Court does not think that the law intended to deregulate the
relation between labor and capital for several reasons: (1 ) The
Constitution calls upon the State to protect the rights of workers
and promote their welfare; (2) the Constitution also makes it a
duty of the State "to intervene when the common goal so
demands" in regulating property and property relations; (3) the
Charter urges Congress to give priority to the enactment of
measures, among other things, to diffuse the wealth of the nation
and to regulate the use of property; (4) the Charter recognizes
the "just share of labor in the fruits of production;" (5) under the
Labor Code, the State shall regulate the relations between labor
and management; (6) under Republic Act No. 6727 itself, the
State is interested in seeing that workers receive fair and
equitable wages; and (7) the Constitution is primarily a document
of social justice, and although it has recognized the importance of
the private sector, it has not embraced fully the concept of laissez
faire or otherwise, relied on pure market forces to govern the
economy; We can not give to the Act a meaning or intent that will
conflict with these basic principles.
In the absence of wage rates based on time and motion studies

determined by the labor secretary or submitted by the employer
to the labor secretary for his approval, wage rates of piece-rate
workers must be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and Productivity
Commission. To ensure the payment of fair and reasonable wage
rates, Article 101 of the Labor Code provides that "the Secretary
of Labor shall regulate the payment of wages by results,
including pakyao, piecework and other nontime work." The
same statutory provision also states that the wage rates should
be based, preferably, on time and motion studies, or those
arrived at in consultation with representatives of workers' and
employers' organizations. In the absence of such prescribed
wage rates for piece-rate workers, the ordinary minimum wage
rates prescribed by the Regional Tripartite Wages and
Productivity Boards should apply. This is in compliance with
Section 8 of the Rules Implementing Wage Order Nos. NCR-02
and NCR-02-A the prevailing wage order at the time of dismissal
of private respondent, viz:
Agency Authority
Sec. 8. Workers Paid by Results.

a) All workers paid by results including those who are paid on
piece work, takay, pakyaw, or task basis, shall receive not less
than the applicable minimum wage rates prescribed under the
Order for the normal working hours which shall not exceed eight
(8) hours work a day, or a proportion thereof for work of less than
the normal working hours.
- The adjusted minimum wage rates for workers paid by results
shall be computed in accordance with the following steps:
1) Amount of increase in AMW x 100 = % increase Previous
AMW
2) Existing rate/piece x % increase = increase in rate/piece;
3)
Existing rate/piece + increase in rate/piece = adjusted
rate/piece.
NASIPIT LUMBER CO V NLRC (NWPC)

289 SCRA 339 (03)
JUSTICE PANGANIBAN: The foregoing clearly grants the NWPC, x
x x, the power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures. x x
x, the NWPC has the power not only to prescribe guidelines to
govern wage orders, but also to issue exemptions therefrom, x x
x. In short, the NWPC lays down the guidelines which the RTWPB
implements.
Requirements Validity
CAGAYAN SUGAR MILLING CO V SECRETARY
284 SCRA 150
b) The wage rates of workers who are paid by results shall

continue to be established in accordance with Art. 101 of the
Labor Code, as amended and its implementing regulations.
Article 123 of the Labor Code provides that in the performance of

their wage-determining functions, the Regional Board shall
conduct public hearings and consultations, giving notices to
interested parties. Moreover, it mandates that the Wage Order
shall take effect only after publication in a newspaper of general
circulation in the region. In passing RO2-02-A without going
through the process of public consultation and hearings, the
Moreover, since petitioner employed piece-rate workers, it

should have inquired from the secretary of labor about their
prescribed specific wage rates. In any event, there being no such
prescribed rates, petitioner, after consultation with its workers,
should have submitted for the labor secretary's approval time and
motion studies as basis for the wage rates of its employees. This
responsibility of the employer is clear under Section 8, Rule VII,
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Book III of the Omnibus Rules Implementing the Labor Code:

Sec. 8. Payment by result.
(a) On petition of any interested party, or upon its initiative, the
Department of Labor shall use all available devices, including the
use of time and motion studies and consultations with
representatives of employers' and workers' organizations, to
determine whether the employees in any industry or enterprise
are being compensated in accordance with the minimum wage
requirements of this Rule.
(b) The basis for the establishment of rates for piece, output or
contract work shall be the performance of an ordinary worker of
minimum skill or ability.
(c) An ordinary worker of minimum skill or ability is the average
worker of the lowest producing group representing 50% of the
total number of employees engaged in similar employment in a
particular establishment, excluding learners, apprentices and
handicapped workers employed therein.
(d) Where the output rates established by the employer do not
conform with the standards prescribed herein, or with the rates
prescribed by the Department of Labor in an appropriate order,
the employees shall be entitled to the difference between the
amount to which they are entitled to receive under such
prescribed standards or rates and that actually paid them by
employer.
Wage Distortion
BANKARD EMPLOYEES UNION V NLRC

423 SCRA 148
While seniority may be a factor in determining the wages of
employees, it cannot be made the sole basis in cases where the
nature of their work differs. Moreover, for purposes of
determining the existence of wage distortion, employees cannot
create their own independent classification and use it as a basis
to demand an across-the-board increase in salary.
Apart from the findings of fact of the NLRC and the Court of
Appeals that some of the elements of wage distortion are absent,
petitioner cannot legally obligate 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. The
wordings of Article 124 are clear. If it was the intention of the
legislators to cover all kinds of wage adjustments, then the
language of the law should have been broad, not restrictive as it
is currently phrased.
PRUBANKERS ASSOCIATION V PRUDENTIAL BANK & TRUST
COMPANY
302 SCRA 74
The statutory definition of' wage distortion I'S found Article 124
of the Labor Code, as amended by Republic Act No. 6727: As
used herein, a wage distortion shall mean a situation where an
increase in prescribed wage 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
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary
rates
2. A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the
country
A wage distortion arises when a wage order engenders wage

parity, between employees in different rungs of the
organizational ladder of the same establishment. It bears
emphasis that wage distortion involves a parity in the salary rates
of different pay classes which, as a result, eliminates the
distinction between the different ranks in the same region
It must be understood that varying in each region of the country
are controlling factors such as the cost of living; supply and
demand of basic goods, services and necessities; and the
purchasing power of the peso.
NATIONAL FEDERATION OF LABOR V NLRC
234 SCRA 311
In this case the Court summarized the principles regarding wage
distortion:
[a] The concept of wage distortion assumes an existing grouping
or classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis. This
classification is reflected in a differing wage rate for each of the
existing classes of employees.
[b] Wage distortions have often been the result of governmentdecreed increases in minimum wages. There are however, other
causes of wage distortions, like merger of 2 companies (with
differing classifications of employees and different wage rates)
where the surviving company absorbs all the employees of the
dissolved corporation.
[c] Should a wage distortion exist, there is no legal requirement
that, in the rectification of that distortion by readjustment of the
age rates of the differing classes of employees, the gap which had
previously or historically existed or restored in precisely the same
amount. In other words correction of a wage distortion may be
done by reestablishing a substantial or significant gap (as
distinguished from the historical gap) between the wage rates of
the differing classes of employees.
[d] The reestablishment of a significant difference in wage rates
may be the result of resort to grievance procedures or collecting
bargaining negotiations.
ASSOCIATED LABOR UNIONS-TUCP V NLRC
235 SCRA 395
Art. 124 of the Labor Code, as amended by Republic Act No. 6727,
expressly provides that where the application of any prescribed
wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within
an establishment, the employer and the union shall negotiate to
correct the distortions. The law recognizes, therefore, the
validity of negotiated wage increases to correct wage
distortions. The legislative intent is to encourage the parties to
seek solution to the problem of wage distortions through
voluntary negotiation or arbitration, rather than strikes,
lockouts, or other concerted activities of the employees or
management. Recognition and validation of wage increases given
by employers either unilaterally or as a result of collective
bargaining negotiations for the purpose of correcting wage
distortions are in keeping with the public policy of encouraging
employers to grant wage and allowance increases to their
employees which are higher than the minimum rates of increases
prescribed by statute or administrative regulation.
9.23Effect on Benefits
ART. 100. Prohibition against elimination or diminution of

benefits. - Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of
promulgation of this Code.
PRUBANKERS ASSOCIATION V PRUDENTIAL BANK & TRUST

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COMPANY
302 SCRA 74
Wage distortion presupposes an increase in the compensation of

the lower ranks in an office hierarchy wirhout a corresponding
raise for higher-tiered employees in the same region of the
country, resulting in the elimination or the severe diminution of
the distinction between the two groups. Such 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.
Section 10
WOMEN WORKERS
Statutory Reference: Art. 130-138; Book III, Rule XII, Omnibus
Rules Implementing Labor Code; R.A. No. 7877; R.A. No. 8184;
and R.A. No. 8282
10.01 Women and the Constitution
ARTICLE 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.
Women Workers
PHIL TELEGRAPH AND TELEPHONE CO V NLRC
The petitioners policy of not accepting or considering as
disqualified from work any woman worker who contracts
marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by our labor laws and
by no less than the Constitution. Contrary to petitioners
assertion, the record discloses clearly that her ties with the
company were dissolved principally because of the companys
policy that married women are not qualified for employment in
PT&T, and not merely because of her supposed acts of
dishonesty.
In Zialcita, et al. vs. Philippine Air Lines, a PAL policy requiring that
prospective flight attendants must be single and that they will be
automatically separated from the service once they marry was
declared void, it being violative of the clear mandate in Article
136 of the Labor Code with regard to discrimination against
married women. In Gualberto, et al. vs. Marinduque Mining &
Industrial Corporation, the Court of Appeals considered a policy of
the same nature, as repugnant to the Civil Code, Presidential
Decree No. 148 and the Constitution and therefore void and
unlawful.
10.02 Coverage
Book III, Rule XIII, Employment of Women and Minors,

SECTION 1. General statement on coverage. This Rule
shall apply to all employers, whether operating for profit
or not, including educational, religious and charitable
institutions, except to the Government and to
government-owned or controlled corporations and to
employers of household helpers and persons in their
personal service insofar as such workers are concerned.
10.03 Prohibited Acts

Night Work and Exception
ART. 130. Nightwork prohibition. - No woman, regardless

of age, shall be employed or permitted or suffered to
work, with or without compensation:
(a) In any industrial undertaking or branch thereof
between ten oclock at night and six oclock in the morning
of the following day; or
(b) In any commercial or non-industrial undertaking or
branch thereof, other than agricultural, between midnight
and six oclock in the morning of the following day; or
(c) In any agricultural undertaking at nighttime unless she
is given a period of rest of not less than nine (9)
consecutive hours.

SECTION 1. supra
SECTION 2. Employable age. Children below fifteen (15)
years of age may be allowed to work under the direct
responsibility of their parents or guardians in any nonhazardous undertaking where the work will not in any way
interfere with their schooling. In such cases, the children
shall not be considered as employees of the employers or
their parents or guardians.
SECTION 3. Eligibility for employment. Any person of
either sex, between 15 and 18 years of age, may be
employed in any non-hazardous work. No employer shall
discriminate against such person in regard to terms and
conditions of employment on account of his age.
For purposes of this Rule, a non-hazardous work or
undertaking shall mean any work or activity in which the
employee is not exposed to any risk which constitutes an
imminent danger to his safety and health. The Secretary of
Labor and Employment shall from time to time publish a
list of hazardous work and activities in which persons 18
years of age and below cannot be employed.
SECTION 4. Status of women workers in certain work
places. Any woman who is permitted or suffered to
work with or without compensation, in any night club,
cocktail lounge, beer house, massage clinic, bar or similar
establishments, under the effective control or supervision
of the employer for a substantial period of time as
determined by the Secretary of Labor and Employment,
shall be considered as an employee of such establishments
for purposes of labor and social legislation. No employer
shall discriminate against such employees or in any
manner reduce whatever benefits they are now enjoying
by reason of the provisions of this Section.
SECTION 5. Night work of women employees. Any
woman employed in any industrial undertaking may be
allowed to work beyond 10:00 o'clock at night, or beyond
12:00 o'clock midnight in the case of women employees of
commercial or non-industrial enterprises, in any of the
following cases:
(a) In cases of actual or impending emergencies caused by
serious accident, fire, flood, typhoon, earthquakes,
epidemic or other disaster or calamity, to prevent loss of
life or property or in cases of force majeure or imminent
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machineries, equipment or installation, to avoid serious
(c) Where the work is necessary to prevent serious loss of
perishable goods;
(d) Where the woman employee holds a responsible
position of a managerial or technical nature, or where the
woman employee has been engaged to provide health and
welfare services;
(e) Where the nature of the work requires the manual skill
and dexterity of women and the same cannot be
performed with equal efficiency by male workers or where
the employment of women is the established practice in
the enterprises concerned on the date these Rules become
effective; and
(f) Where the women employees are immediate members
of the family operating the establishment or undertaking.
(a) Payment of a lesser compensation, including wage,

salary or other form of remuneration and fringe benefits,
to a female employee as against a male employee, for
work of equal value; and
(b) Favoring a male employee over a female employee
with respect to promotion, training opportunities, study
and scholarship grants solely on account of their sexes.
Criminal liability for the willful commission of any unlawful
act as provided in this Article or any violation of the rules
and regulations issued pursuant to Section 2 hereof shall
be penalized as provided in Articles 288 and 289 of this
Code: Provided, That the institution of any criminal action
under this provision shall not bar the aggrieved employee
from filing an entirely separate and distinct action for
money claims, which may include claims for damages and
other affirmative reliefs. The actions hereby authorized
shall proceed independently of each other. (As amended
by Republic Act No. 6725, May 12, 1989).
The Secretary of Labor and Employment shall from time to

time determine cases analogous to the foregoing for
purposes of this Section.
Marriage
SECTION 6. Agricultural work. No woman, regardless of
age, shall be permitted or suffered to work, with or
without compensation, in any agricultural undertaking at
night time unless she is given a rest period of not less than
nine (9) consecutive hours, subject to the provisions of
Section 5 of this Rule.
ART. 131. Exceptions. - The prohibitions prescribed by the

preceding Article shall not apply in any of the following
cases:
ART. 136. Stipulation against marriage. - 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, 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 marriage.
General
(a) In cases of actual or impending emergencies caused by
epidemic or other disasters or calamity, to prevent loss of
life or property, or in cases of force majeure or imminent
machineries, equipment or installation, to avoid serious
(c) Where the work is necessary to prevent serious loss of
perishable goods;
(d) Where the woman employee holds a responsible
position of managerial or technical nature, or where the
woman employee has been engaged to provide health and
welfare services;
(e) Where the nature of the work requires the manual skill
and dexterity of women workers and the same cannot be
performed with equal efficiency by male workers;
(f) Where the women employees are immediate members
of the family operating the establishment or undertaking;
and
(g) Under other analogous cases exempted by the
Secretary of Labor and Employment in appropriate
regulations.
Article 137. Prohibited Acts. (a) It shall be unlawful for

any employer:
(1) To deny any woman employee the benefits provided
for in this Chapter or to discharge any woman employed
by him for the purpose of preventing her from enjoying
any of the benefits provided under this Code;
(2) To discharge such woman on account of her pregnancy,
or while on leave or in confinement due to her pregnancy;
(3) To discharge or refuse the admission of such woman
upon returning to her work for fear that she may again be
pregnant.
10.04 Facilities
ART. 132. Facilities for women. - The Secretary

of Labor and Employment shall establish standards that
will ensure the safety and health of women employees. In
appropriate cases, he shall, by regulations, require any
employer to:
Discrimination
Article 135. Discrimination Prohibited. It shall be

unlawful for any employer to discriminate against any
woman employee with respect to terms and conditions of
employment solely on account of her sex.
The following are acts of discrimination:
(a) Provide seats proper for women and permit them to

use such seats when they are free from work and during
working hours, provided they can perform their duties in
this position without detriment to efficiency;
(b) To establish separate toilet rooms and lavatories for
men and women and provide at least a dressing room for
women;
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(c) To establish a nursery in a workplace for the benefit of

the women employees therein; and
(d) To determine appropriate minimum age and other
standards for retirement or termination in special
occupations such as those of flight attendants and the like.

SECTION 14. Facilities for woman employees. Subject to
the approval of the Secretary of Labor and Employment,
the Bureau of Women and Young Workers shall, within
thirty (30) days from the effective date of these Rules,
determine in an appropriate issuance the work situations
for which the facilities enumerated in Article 131 of the
Code shall be provided, as well as the appropriate
minimum age and other standards for retirement or
termination of employment in special occupations in
which women are employed.
unused leave credits from which such extended leave may

be charged.
(c) The maternity leave provided in this Article shall be
paid by the employer only for the first four (4) deliveries
by a woman employee after the effectivity of this Code.
Article 134. Family Planning Services; Incentives for Family

Planning. - (a) Establishments which are required by law to
maintain a clinic or infirmary shall provide free family
planning services to their employees which shall include,
but not be limited to, the application or use of
contraceptive pills and intrauterine devices.

SECTION 7. Maternity leave benefits. Every employer
shall grant to a pregnant woman employee who has
rendered an aggregate service of at least six (6) months for
the last twelve (12) months immediately preceding the
expected date of delivery, or the complete abortion or
miscarriage, maternity leave of at least two (2) weeks
before and four (4) weeks after the delivery, miscarriage
or abortion, with full pay based on her regular or average
weekly wages.
SECTION 8. Accreditation of leave credits. Where the
pregnant woman employee fails to avail of the two-week
pre-delivery leave, or any portion thereof, the same shall
be added to her post-delivery leave with pay.
SECTION 9. Payment of extended maternity leave.
When so requested by the woman employee, the
extension of her maternity leave beyond the four-week
post-delivery leave shall be paid by the employer from her
unused vacation and/or sick leave credits, if any, or
allowed without pay in the absence of such leave credits,
where the extended leave is due to illness medically
certified to arise out of her pregnancy, delivery, complete
abortion or miscarriage which renders her unfit for work.
(b) In coordination with other agencies of the government

engaged in the promotion of family planning, the
Department of Labor and Employment shall develop and
prescribe incentive bonus schemes to encourage family
planning among female workers in any establishment or
enterprise.
10.05 Special Classification Special Women Workers
SECTION 10. Limitation on leave benefits. The maternity

benefits provided herein shall be paid by an employer only
for the first four (4) deliveries, miscarriages, and/or
complete abortions of the employee from March 13, 1973,
regardless of the number of employees and deliveries,
complete abortions or miscarriages the woman employee
had before said date. For purposes of determining the
entitlement of a woman employee to the maternity leave
benefits as delimited herein, the total number of her
deliveries, complete abortions, or miscarriages after said
date shall be considered regardless of the identity or
number of employers she has had at the time of such
determination, provided that she enjoyed the minimum
benefits therefor as provided in these regulations.
Article 138. Classification of Certain Women Workers.

Any woman who is permitted or suffered to work, with or
without compensation, in any night club, cocktail lounge,
massage clinic, bar or similar establishments under the
effective control or supervision of the employer for a
substantial period of time as determined by the Secretary
of Labor and Employment, shall be considered as an
employee of such establishment for purposes of labor and
social legislation.
10.06 Maternity Leave

See: Social Security Act of 1997, Sec. 14-A, And Paternity Leave
Act of 1996, R.A. No. 8187
ART. 133. Maternity leave benefits. - (a) Every employer

shall grant to any pregnant woman employee who has
rendered an aggregate service of at least six (6) months for
the last twelve (12) months, maternity leave of at least
two (2) weeks prior to the expected date of delivery and
another four (4) weeks after normal delivery or abortion
with full pay based on her regular or average weekly
wages. The employer may require from any woman
employee applying for maternity leave the production of a
medical certificate stating that delivery will probably take
place within two weeks.
(b) The maternity leave shall be extended without pay on
account of illness medically certified to arise out of the
pregnancy, delivery, abortion or miscarriage, which
renders the woman unfit for work, unless she has earned
R.A. 8282 Social Security Act of 1997, SEC. 14-A.

Maternity Leave Benefit. A female member who has paid
at least three (3) monthly contributions in the twelvemonth period immediately preceding the semester of her
childbirth or miscarriage shall be paid a daily maternity
benefit equivalent to one hundred percent (100%) of her
average daily salary credit for sixty (60) days or seventyeight (78) days in case of caesarian delivery, subject to the
following conditions:
(a) That the employee shall have notified her employer of
her pregnancy and the probable date of her childbirth,
which notice shall be transmitted to the SSS in accordance
with the rules and regulations it may provide;
(b) The full payment shall be advanced by the employer
within thirty (30) days from the filing of the maternity
leave application;
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(c) That payment of daily maternity benefits shall be a bar

to the recovery of sickness benefits provided by this Act
for the same period for which daily maternity benefits
have been received;
(d) That the maternity benefits provided under this
section shall be paid only for the first four (4) deliveries or
miscarriages;
(e) That the SSS shall immediately reimburse the
employer of one hundred percent (100%) of the amount of
maternity benefits advanced to the employee by the
employer upon receipt of satisfactory proof of such
payment and legality thereof; and
(f) That if an employee member should give birth or
suffer miscarriage without the required contributions
having been remitted for her by her employer to the SSS,
or without the latter having been previously notified by
the employer of the time of the pregnancy, the employer
shall pay to the SSS damages equivalent to the benefits
which said employee member would otherwise have been
entitled to.
(1) The sexual favor is made as a condition in the hiring

or in the employment, re-employment or continued
employment of said individual, or in granting said
individual favorable compensation, terms of conditions,
promotions, or privileges; or the refusal to grant the
sexual favor results in limiting, segregating or classifying
the employee which in any way would discriminate,
deprive or diminish employment opportunities or
otherwise adversely affect said employee;
(2) The above acts would impair the employee's rights
or privileges under existing labor laws; or
(3) The above acts would result in an intimidating,
hostile, or offensive environment for the employee.
Education or Training-Related Environment
R.A. 8187 Paternity Leave Act of 1996, SEC. 2.

Notwithstanding any law, rules and regulations to the
contrary, every married male employee in the private and
public sectors shall be entitled to a paternity leave of
seven (7) days with full pay for the first four (4) deliveries
of the legitimate spouse with whom he is cohabiting. The
male employee applying for paternity leave shall notify his
employer of the pregnancy of his legitimate spouse and
the expected date of such delivery.
(b) In an education or training environment, sexual

harassment is committed:
(1) Against one who is under the care, custody or
supervision of the offender;
(2)
Against
one
whose
education,
training,
apprenticeship or tutorship is entrusted to the offender;
(3) When the 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 stipend, allowance or
other benefits, privileges, or consideration; or
For purposes of this Act, delivery shall include childbirth or

any miscarriage.
(4) When the sexual advances result in an

intimidating, hostile or offensive environment for the
student, trainee or apprentice.
10.07 Sexual Harassment

R.A. No. 7877 (1995)
Any person who directs or induces another to commit

any act of sexual harassment as herein defined, or who
cooperates in the commission thereof by another without
which it would not have been committed, shall also be
held liable under this Act.
Policy
SECTION 2. Declaration of Policy. - The State shall value the

dignity of every individual, enhance the development of its
human resources, guarantee full respect for human rights,
and uphold the dignity of workers, employees, applicants
for employment, students or those undergoing training,
instruction or education. Towards this end, all forms of
sexual harassment in the employment, education or
training environment are hereby declared unlawful.
Work Related Environment
SECTION 3. Work, Education or Training -Related, Sexual

Harassment Defined. - Work, education or training-related
sexual harassment is committed by an employer,
employee, manager, supervisor, agent of the
employer, teacher, instructor, professor, coach, trainor, or
any other person who, having authority, influence or
moral ascendancy over another in a work or training or
education environment, demands, requests or otherwise
requires any sexual favor from the other, regardless of
whether the demand, request or requirement for
submission is accepted by the object of said Act.
(a) In a work-related or employment environment,
sexual harassment is committed when:
Duty Employer
SECTION 4. Duty of the Employer or Head of Office in a

Work-related, Education or Training Environment.- It shall
be the duty of the employer or the head of the workrelated, educational or training environment or institution,
to prevent or deter the commission of acts of
sexual harassment and to provide the procedures for the
resolution, settlement or prosecution of acts of sexual
harassment. Towards this end, the employer or head of
office shall:
(a) Promulgate appropriate rules and regulations in
consultation with and joint1y approved by the employees
or students or trainees, through their duly designated
representatives, prescribing the procedure for the
investigation of sexual harassment cases and the
administrative sanctions therefor.
Administrative sanctions shall not be a bar to
prosecution in the proper courts for unlawful acts of
sexual harassment
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The said rules and regulations issued pursuant to

this subsection (a) shall include, among others, guidelines
on proper decorum in the workplace and educational or
training institutions.
(b) Create a committee on decorum and investigation
of cases on sexual harassment. The committee shall
conduct meetings, as the case may be, with officers and
employees, teachers, instructors, professors, coaches,
trainors, and students or trainees to increase
understanding
and
prevent incidents
of
sexual
harassment. It shall also conduct the investigation of
alleged cases constituting sexual harassment.
In the case of a work-related environment, the
committee shall be composed of at least one (1)
representative each from the management, the union, if
any, the employees from the supervisory rank, and from
the rank and file employees.
In the case of the educational or training institution,
the committee shall be composed of at least one (1)
representative from the administration, the trainors,
instructors, professors or coaches and students or
trainees, as the case may be.
PHIL AEOLUS AUTOMOTIVE UNITED CO V NLRC

331 SCRA 237
The gravamen of the offense in sexual harassment is not the
violation of the employee's sexuality but the abuse of power by
the employer. Any employee, male or female, may rightfully cry
"foul" provided the claim is well substantiated. Strictly speaking,
there is no time period within which he or she is expected to
complain through the proper channels. The time to do so may
vary depending upon the needs, circumstances, and more
importantly, the emotional threshold of the employee.
LIBRES V NLRC
307 SCRA 675
Republic Act No. 7877 was not yet in effect at the time of the
occurrence of the act complained of. It was still being deliberated
upon in Congress when petitioner's case was decided by the
Labor Arbiter. As a rule, laws shall have no retroactive effect
unless otherwise provided, or except in a criminal case when their
application will favor the accused. Hence, the Labor Arbiter have
to rely on the MEC report and the common connotation of sexual
harassment as it is generally as understood by the public. Faced
with the same predicament, the NLRC had to agree with the
Labor Arbiter. In so doing, the NLRC did not commit any abuse of
discretion in affirming the decision of the Labor Arbiter.
The employer or head of office, educational or

training institution shall disseminate or post a copy of this
Act for the information of all concerned.
Liability Employer
SECTION 5. Liability of the Employer, Head of Office,

Educational or Training Institution. - The employer or head
of office, educational or training institution shall be
solidarily liable for damages arising from the acts of sexual
harassment committed in the employment, education or
training environment if the employer or head of
office, educational or training institution is informed of
such acts by the offended party and no immediate action
is taken.
Section 11
MINORS
Statutory Reference: Art. 138-140; R.A. No. 7610 as amended
by R.A. No. 7658, Special Protection of Children Against Child
Abuse, etc. R.A. No. 7610 (1991) as amended by R.A. No, 7658
(1993)
11.01 Minors and the Constitution
Remedies
SECTION 6. Independent Action for Damages. - Nothing in

this Act 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.
SECTION 7. Penalties. - Any person who violates
the provisions of this Act shall, upon conviction, be
penalized by imprisonment of not less than one (1)
month nor more than six (6) months, or a fine of not less
than Ten thousand pesos (P10,000) nor more than Twenty
thousand pesos (P20,000), or both such fine and
imprisonment at the discretion of the court.
Any action arising from the violation of the provisions
of this Act shall prescribe in three (3) years.
ARTICLE 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.
11,02 Law
Art. VII, Working Children, R.A. No. 7610 as amended by R.A.
No, 7658
Sec. 2. Declaration of State Policy and Principles. It is

hereby declared to be the policy of the State to provide
special protection to children from all firms of abuse,
neglect, cruelty exploitation and discrimination and other
conditions, prejudicial their development; provide
sanctions for their commission and carry out a program for
prevention and deterrence of and crisis intervention in
situations of child abuse, exploitation and discrimination.
The State shall intervene on behalf of the child 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 when such acts
against the child are committed by the said parent,
guardian, teacher or person having care and custody of the
same.
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It shall be the policy of the State to protect and

rehabilitate children gravely threatened or endangered by
circumstances which affect or will affect their survival and
normal development and over which they have no control.
(4) Other acts of abuses; and

(5) Circumstances which threaten or endanger the survival
and normal development of children.
The best interests of children shall be the paramount

consideration in all actions concerning them, whether
undertaken by public or private social welfare institutions,
courts of law, administrative authorities, and legislative
bodies, consistent with the principle of First Call for
Children as enunciated in the United Nations Convention
of the Rights of the Child. Every effort shall be exerted to
promote the welfare of children and enhance their
opportunities for a useful and happy life.
(1) When a child works directly under the sole

responsibility of his parents or legal guardian and where
only members of the employer's family are
employed: Provided, however, That his employment
neither endangers his life, safety, health and morals, nor
impairs his normal development; Provided, further, That
the parent or legal guardian shall provide the said minor
child with the prescribed primary and/or secondary
education; or
Section 3. Definition of Terms. (a) "Children" refers to

person below eighteen (18) years of age or those over but
are unable to fully take care of themselves or protect
themselves from abuse, neglect, cruelty, exploitation or
discrimination because of a physical or mental disability or
condition;
(2) Where a child's employment or participation in public

entertainment or information through cinema, theater,
radio or television is essential: Provided, The employment
contract is concluded by the child's parents or legal
guardian, with the express agreement of the child
concerned, if possible, and the approval of the
Department of Labor and Employment: and Provided, That
the following requirements in all instances are strictly
complied with:
(b) "Child abuse" refers to the maltreatment, whether

habitual or not, of the child which includes any of the
following:
(1) Psychological and physical abuse, neglect, cruelty,
sexual abuse and emotional maltreatment;
(2) Any act by deeds or words which debases, degrades or
demeans the intrinsic worth and dignity of a child as a
human being;
(3) Unreasonable deprivation of his basic needs for
survival, such as food and shelter; or
(4) Failure to immediately give medical treatment to an
injured child resulting in serious impairment of his growth
and development or in his permanent incapacity or death.
(c) "Circumstances which gravely threaten or endanger the
survival and normal development of children" include, but
are not limited to, the following;
(1) Being in a community where there is armed conflict or
being affected by armed conflict-related activities;
(2) Working under conditions hazardous to life, safety and
normal which unduly interfere with their normal
development;
(3) Living in or fending for themselves in the streets of
urban or rural areas without the care of parents or a
guardian or basic services needed for a good quality of life;
(4) Being a member of a indigenous cultural community
and/or living under conditions of extreme poverty or in an
area which is underdeveloped and/or lacks or has
inadequate access to basic services needed for a good
quality of life;
(5) Being a victim of a man-made or natural disaster or
calamity; or
(6) Circumstances analogous to those above-stated which
endanger the life, safety or normal development of
children.
(d) "Comprehensive program against child abuse,
exploitation and discrimination" refers to the coordinated
program of services and facilities to protected children
against:
(1) Child Prostitution and other sexual abuse;
(2) Child trafficking;
(3) Obscene publications and indecent shows;
Sec. 12. Employment of Children. Children below fifteen

(15) years of age shall not be employed except:
(a) The employer shall ensure the protection, health,

safety, morals and normal development of the child;
(b) The employer 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
(c) The employer shall formulate and implement, subject
to the approval and supervision of competent authorities,
a continuing program for training and skills acquisition of
the child.
In the above exceptional cases where any such child may
be employed, the employer shall first secure, before
engaging such child, a work permit from the Department
of Labor and Employment which shall ensure observance
of the above requirements.
The Department of Labor and Employment shall
promulgate rules and regulations necessary for the
effective implementation of this Section.
Sec. 13. Non-formal Education for Working Children. The

Department of Education, Culture and Sports shall
promulgate a course design under its non-formal
education program aimed at promoting the intellectual,
moral and vocational efficiency of working children who
have not undergone or finished elementary or secondary
education. Such course design shall integrate the learning
process deemed most effective under given
circumstances.
Sec. 14. Prohibition on the Employment of Children in

Certain Advertisements. No person shall employ child
models in all commercials or advertisements promoting
alcoholic beverages, intoxicating drinks, tobacco and its
byproducts and violence.
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Sec. 15. Duty of Employer. Every employer shall comply

with the duties provided for in Articles 108 and 109 of
Presidential Decree No. 603.
Sec. 16. Penalties. Any person who shall violate any

provision of this Article shall suffer the penalty of a fine of
not less than One thousand pesos (P1,000) but not more
than Ten thousand pesos (P10,000) or imprisonment of
not less than three (3) months but not more than three (3)
years, or both at the discretion of the court; Provided,
That, in case of repeated violations of the provisions of this
Article, the offender's license to operate shall be revoked.
Sec. 3. Any law, executive order, letter of instruction, or any

part thereof, which is inconsistent with any of the provisions of
this Act is hereby repealed or amended accordingly.
Sec. 4. This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) national
newspapers of general circulation, whichever comes earlier.
12.01 Coverage
11.03 Discrimination
months or a fine of not more than Two thousand pesos

(P2,000.00) or both, at the discretion of the court.
Article 140. Prohibition Against Child Discrimination. - No

employer shall discriminate against any person in respect
to terms and conditions of employment on account of his
age.
Domestic or household service shall mean service in the

employers 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 employers household, including
services of family drivers.
Section 12
HOUSEHELPERS
Statutory Reference: Art. 141-152; Book III, Rule XIII, Omnibus
Rules; Civil Code of the Philippines, R.A. No. 386 as amended;
and Minimum Wage of Househelpers, R.A. No. 7655

AN ACT INCREASING THE MINIMUM WAGE OF
HOUSEHELPERS, AMENDING FOR THE PURPOSE ARTICLE 143
OF PRESIDENTIAL DEGREE NO. 442, AS AMENDED.
SECTION 2. Method of payment not determinant. The

provisions of this Rule shall apply irrespective of the
method of payment of wages agreed upon by the
employer and househelper, whether it be hourly, daily,
weekly, or monthly, or by piece or output basis.
"ART. 143. Minimum wage. (a) Househelpers shall be paid

the following minimum wage rates;
(1) Eight hundred pesos (P800.00) a month for househelpers in
Manila, Quezon, Pasay and Caloocan cities and municipalities of
Makati, San Juan, Mandaluyong, Muntinlupa, Navotas,
Malabon, Paraaque, Las Pias, Pasig, Marikina, Valenzuela,
Taguig and Pateros in Metro Manila and in highly urbanized
cities;
SECTION 3. Children of househelpers. The children and

relatives of a househelper who live under the employer's
roof and who share the accommodations provided for the
househelpers by the employer shall not be deemed as
househelpers if they are not otherwise engaged as such
and are not required to perform any substantial household
work.
(2) Six hundred fifty pesos (P650.00) a month for those in other
chartered cities and first class municipalities; and
12.02 Househelpers
Provided, That the employees shall review the employment

contracts of their househelpers every three (3) years with the
end in view of improving the terms and conditions thereof.
Sec. 2. Any violation of any provision of this Act shall be

punished with an imprisonment of not more than three (3)
Article 141. supra
12.03 Non-Household Work Assignment
Provided, further, That those househelpers who are receiving at

least One thousand pesos (P1,000.00) shall be covered by the
Social Security System (SSS) and be entitled to all the benefits
provided thereunder."
Book III, Rule XIII, Employment of Househelpers, SECTION

1. General statement on coverage. (a) The provisions of
this Rule shall apply to all househelpers whether employed
on full or part-time basis.
(b) 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.
Section 1. Subparagraphs (1), (2) and (3), Article 143

of Presidential Decree No. 442, as amended, otherwise known
as the "Labor Code of the Philippines" are hereby amended to
read as follows:
(3) Five hundred fifty pesos (P550.00) a month for those in

other municipalities;
Article 141. Coverage. - This Chapter shall apply to all

persons rendering services in households for
compensation.
Article 145. Assignment to Non-Household Work. No

househelper shall be assigned to work in a commercial,
industrial or agricultural enterprise at a wage or salary rate
lower than that provided for agricultural or nonagricultural workers as prescribed herein.
BARCENAS V NLRC (REV SIM DEE)

187 SCRA 498
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SECTION 9. Time and manner of payment. Wages shall

be paid directly to the househelper to whom they are due
at least once a month. No deductions therefrom shall be
made by the employer unless authorized by the
househelper himself or by existing laws.
Barcenas, being proficient in the Chinese language, attended to

the visitors, mostly Chinese, who came to pray or seek advice
before Buddha for personal or business problems; arranged
meetings between these visitors and Su and supervised the
preparation of the food for the temple visitors; acted as tourist
guide of foreign visitors; acted as liaison with some government
offices; and made the payment for the temple, Meralco, MWSS
and PLDT bills. Indeed, these tasks may not be deemed activities
of a household helper. They were essential and important to the
operation and religious functions of the temple.
SECTION 10. Assignment to non-household work. No

househelper shall be assigned to work in a commercial,
industrial or agricultural enterprise at a wage or salary rate
lower than that provided for agricultural and nonagricultural workers.
APEX MINING CO V NLRC

196 SCRA 251
SECTION 20. Relation to other laws and agreements.

Nothing in this Rule shall deprive a househelper of the
right to seek higher wages, shorter working hours and
better working conditions than those prescribed herein,
nor justify an employer in reducing any benefit or privilege
granted to the househelper under existing laws,
agreements or voluntary employer practices with terms
more favorable to the househelpers than those prescribed
in this Rule.
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.
12.04 Conditions Employment
Article 141. supra
Article 142. Contract of Domestic Service. The original

contract of domestic service shall not last for more than
two (2) years but it may be renewed for such periods as
may be agreed upon by the parties.
Article 143. supra
Book III, Rule XIII, Employment of Househelpers, SECTION

5. Minimum monthly wage. The minimum
compensation of househelpers shall not be less than the
following rates:
(a) Sixty pesos (P60.00) a month for those employed in the
cities of Manila, Quezon, Pasay and Caloocan, and in the
municipalities of Makati, San Juan, Mandaluyong,
Muntinlupa, Navotas, Malabon, Paraaque, Las Pias,
Pasig and Marikina, in the Province of Rizal.
(b) Forty-five pesos (P45.00) a month for those employed
in other chartered cities and first class municipalities; and
(c) Thirty pesos (P30.00) a month for those in other
municipalities.
Article 144. Minimum Cash Wage. The minimum wage

rates prescribed under this Chapter shall be the basic cash
wages which shall be paid to the househelpers in addition
to lodging, food and medical attendance.
Article 145. supra
Article
146. Opportunity
for
Education.
If
the househelper is under the age of eighteen (18) years,
the employer shall give him or her an opportunity for at
least elementary education. The cost of education shall be
part of the househelpers compensation, unless there is a
stipulation to the contrary.
Article 147. Treatment of Househelpers. The employer

shall treat the househelper in a just and humane
manner. In no case shall physical violence be used upon
the househelper.
Article 148. Board, Lodging, and Medical Attendance.

The employer shall furnish the househelper, free of
charge, suitable and sanitary living quarters as well as
adequate food and medical attendance.
Article 149. Indemnity for Unjust Termination of Services.

If the period of household service is fixed, neither the
employer nor the househelper may terminate the contract
before the expiration of the term, except for a just
cause. If the househelper is unjustly dismissed, he or she
shall be paid the compensation already earned plus that
for fifteen (15) days by way of indemnity.
SECTION 6. Equivalent daily rate. The equivalent

minimum daily wage rate of househelpers shall be
determined by dividing the applicable minimum monthly
rate by thirty (30) days.
SECTION 7. Payment by results. Where the method of
payment of wages agreed upon by the employer and the
househelper is by piece or output basis, the piece or
output rates shall be such as will assure the househelper
of the minimum monthly or the equivalent daily rate as
provided in this issuance.
If the househelper leaves without justifiable reason, he or

she shall forfeit any unpaid salary due him or her not
exceeding fifteen (15) days.
SECTION 8. Minimum cash wage. The minimum wage

rates prescribed under this Rule shall be basic cash wages
which shall be paid to the househelpers in addition to
lodging, food and medical attendance.
Article 150. Service of Termination Notice. If the duration

of the household service is not determined either in
stipulation or by the nature of the service, the employer or
the househelpermay give notice to put an end to the
relationship five (5) days before the intended termination
of the service.
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Article 151. Employment Certification. Upon the

severance of the household service relation, the employer
shall give the househelper a written statement of the
nature and duration of the service and his or her efficiency
and conduct a shousehelper.
Article 152. Employment Record. The employer may keep
such records as he may deem necessary to reflect the
actual terms and conditions of employment of
his househelper, which the latter shall authenticate by
signature or thumb mark upon request of the employer.
See also: Arts. 1689-1999, NCC

309 SCRA 17
include services of family drivers
Section 13
HOMEWORKERS
13.02 Employer
Article 155. supra

Section 14
TERMINATION OF EMPLOYMENT
Statutory Reference: Arts. XIII, Sec. 3, Constitution; Arts. 282286; 277(b); Book VI, Rule I, Secs. 1-8, Omnibus Rules
GENERAL CONCEPTS
14.01 Security of Tenure
A. Nature of Security of Tenure
SONZA V ABS-CBN BROADCASTING CORP
[See Digests List Page 42]
QUIJANO V BARTOLABAC
480 SCRA 204
13.01 Coverage and Regulation
Article 153. Regulation of Industrial Homeworkers. - The

employment
of
industrial homeworkers and
field
personnel shall be regulated by the government through
the appropriate regulations issued by the Secretary
of Labor and Employment to ensure the general welfare
and protection of homeworkers and field personnel and
the industries employing them.
Article 155. Distribution of Homework. For purposes of

this Chapter, the employer of homeworkers 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 employee, agent
contractor, sub-contractor or any other person:
(1) Delivers, or causes to be delivered, any goods, articles
or materials to be processed or fabricated in or about a
home and thereafter to be returned or to be disposed of
or distributed in accordance with his directions; or
(2) Sells any goods, articles or materials to be processed or
fabricated in or about a home and then rebuys them after
such processing or fabrication, either by himself or
through some other person.
Department Order No. 5, DOLE, February 2, 1992:
Our Constitution mandates that no person shall be deprived of

life, liberty, and property without due process of law. It should be
borne in mind that employment is considered a property right
and cannot be taken away from the employee without going
through legal proceedings. In the instant case, respondents
wittingly or unwittingly dispossessed complainant of his source of
living by not implementing his reinstatement. In the process,
respondents also run afoul of the public policy enshrined in the
Constitution ensuring the protection of the rights of workers and
the promotion of their welfare.
PHILIPS SEMICONDUCTORS V FADRIQUELA

B. Importance of Employment
Employment
GONZALES V NLRC
313 SCRA 169
Employment is not merely a contractual relationship; it has
assumed the nature of property right. It may spell the difference
whether or not a family will have food on their table, roof over
their heads and education for their children. It is for this reason
that the State has taken up measures to protect employees from
unjustified dismissals. It is also because of this that the right to
security of tenure is not only a statutory right but, more so, a
constitutional right.
C. State Regulation - Rationale

Rationale
The right of the employer must not be exercised arbitrarily and
without just cause. Otherwise, the constitutional guarantee of
security of tenure of the workers would be rendered nugatory.
While dismissing or laying off of an employee is a management's
prerogative, it must nevertheless be done without abuse of
discretion. Furthermore, the right of employer to freely select or
discharge his employees is regulated by the State, because the
preservation of the lives of the citizens is a basic duty of the State,
more vital than the preservation of the corporate profit. In
90 | P
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addition, security of tenure is a right of paramount value

guaranteed by the Constitution and should not be denied on
mere speculation. Protection for labor and social justice
provisions of the Constitution and the labor laws and rules and
regulations are interpreted in favor of the exercise of labor rights.
employment, including 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 work.
D. Coverage
So long as a company's management prerogatives are exercised

in good faith for the advancement of the employer's interest and
not for the purpose of defeating or circumventing the rights of
the employees under special laws or under valid agreements, this
Court will uphold them
ART. 278. Coverage. - The provisions of this Title shall

apply to all establishments or undertakings, whether for
profit or not.
F. Guidelines on Imposition of Penalties
Contract Employee
CENTRAL PANGASINAN ELECTRIC COOP INC V MACARAEG

395 SCRA 720
LABAJO V ALEJANDRO
165 SCRA 747
As probationary and contractual employees, private respondents
enjoyed security of tenure, but only to a limited extent i.e., they
remained secure in their employment during the period of time
their respective contracts of employment remained in effect. As
petitioners were not under obligation to renew those contracts of
employment, the separation of private respondents in this case
cannot be said to have been without justifiable cause, much less
illegal.
Probationary Employee
SKILLWORD MANAGEMENT AND MARKETING CORPORATION V
NLRC
186 SCRA 465
There is no dispute that as a probationary employee, Manuel had
but a limited tenure. Although on probationary basis, however,
he still enjoys the constitutional protection on security of tenure.
During his tenure of employment therefore, or before his
contract expires, he cannot be removed except for cause as
provided for by law.
PHILIPPINE LONG DISTANCE TELEPHONE V NLRC

303 SCRA 9
Dismissal is the ultimate penalty and should not be imposed if the
employee has been in service for a considerable length of time
and has not been the recipient of any disciplinary actions. Where
a penalty less punitive would suffice, whatever missteps may
have been committed by the worker ought not to be visited with
a consequence so severe such as dismissal. This interpretation
gives meaning and substance to the liberal and compassionate
spirit of the law as provided for in Article 4 of the Labor Code
which states that all doubts 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.
Dismissal as Penalty
Managerial Employee
PHILIPS SEMICONDUCTORS V FADRIQUELA

INTERORIENT MARITIME ENTERPRISES INC V NLRC

235 SCRA 268
It is well settled in this jurisdiction that confidential and
managerial employees cannot be arbitrarily dismissed at any
time, and without cause as reasonably established in an
appropriate investigation. Such employees, too, are entitled to
security of tenure, fair standards of employment and the
protection of labor laws.
E. Management Rights and Security of Tenure

COLEGIO DE SAN JUAN DE LETRAN
EMPLOYEES AND FACULTY OF LETRAN
340 SCRA 587
ASSOCIATED LABOR UNION V NLRC

V.
ASSN
OF
While we recognize the right of the employer to terminate the

services of an employee for just cause, the dismissal of employees
must be made within the parameters of law and pursuant to the
tenets of equity and fair play and must be exercised in good faith.
It must not amount to interfering with, restraining or coercing
employees in the exercise of their right to self-organization as it
would amount to unlawful labor practice under Article 248.
SAN MIGUEL BREWERY SALES FORCE UNION V OPLE
170 SCRA 25
Except as limited by special laws, an employer is free to regulate,
according to his own discretion and judgment, all aspects of
CENTRAL PANGASINAN ELECTRIC COOP INC V MACARAEG

395 SCRA 720
Article 282(c) of the Labor Code allows an employer to dismiss
employees for willful breach of trust or loss of confidence. Proof
beyond reasonable doubt of their misconduct is not required, it
being sufficient that there is some basis for the same or that the
employer has reasonable ground to believe that they are
responsible for the misconduct and their participation therein
rendered them unworthy of the trust and confidence demanded
of their position.
GOLDEN THREAD KNITTING INDUSTIRES V NLRC
304 SCRA 720
Dismissal is the ultimate penalty that can be meted to an
employee. It must therefore be based on a clear and not on an
ambiguous or ambivalent ground.
the dismissal will not be upheld where it appears that the
employees act of disrespect was provoked by the employer. xxx
the employee hurled incentives at the personnel manager
because she was provoked by the baseless suspension imposed
on her. The penalty of dismissal must be commensurate with the
act, conduct, or omission to the employee.
The right to terminate should be utilized with extreme caution
91 | P
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1. Serious insult by the employer or his representative on

the honor and person of the employee;
because its immediate effect is to put an end to an employee's

present means of livelihood while its distant effect, upon a
subsequent finding of illegal dismissal, is just as pernicious to the
employer who will most likely be required to reinstate the subject
employee and grant him full back wages and other benefits.
2. Inhuman and unbearable treatment accorded the

employee by the employer or his representative;
CEBU FILVENEER CORPORATION V NLRC

286 SCRA 556
3. Commission of a crime or offense by the employer or his

representative against the person of the employee or any
of the immediate members of his family; and
A breach is willful if it is done intentionally, knowingly and

purposely.
4. Other causes analogous to any of the foregoing.

Gross negligence implies a want or absence of or failure to
exercise slight care or diligence or the entire absence of care. It
evinces a thoughtless disregard of consequences without exerting
any effort to avoid them.
G. Rules - Managerial and Rank & File Employees

SALVADOR V PHILIPPINE MINING SERVICE CORP
395 SCRA 729
To be sure, length of service is taken into consideration in
imposing the penalty to be meted an erring employee. However,
the case at bar involves dishonesty and pilferage by petitioner
which resulted in respondents loss of confidence in him. Unlike
other just causes for dismissal, trust in an employee, once lost is
difficult, if not impossible, to regain. Moreover, petitioner was
not an ordinary rank-and-file employee. He occupied a high
position of responsibility. As foreman and shift boss, he had overall control of the care, supervision and operations of respondents
entire plant. It cannot be over-emphasized that there is no
substitute for honesty for sensitive positions which call for utmost
trust. Fairness dictates that respondent should not be allowed to
continue with the employment of petitioner who has breached
the confidence reposed on him.
CAOILE V NLRC
299 SCRA 76
It must be noted the recent decisions of this Court has
distinguished the treatment of managerial employees from that
of rank-and-file personnel, insofar as the application of the
doctrine of loss of trust and confidence is concerned. Thus with
respect to rank-and-file personnel, loss of trust and confidence
as ground for valid dismissal requires proof of involvement in
the alleged events in question, and that mere uncorroborated
assertion and accusations by the employer will not be sufficient.
But, as regards as a managerial employee, mere existence of a
basis for believing that such employee has breached the trust of
his employer would suffice for his dismissal. Hence, in the case
of managerial employees, proof beyond reasonable doubt is not
required, it being sufficient that there is some basis for such loss
of confidence, such as when the employer has reasonable ground
to believe that the employee concerned is responsible for the
purported misconduct, and the nature of his participation therein
renders him unworthy of the trust and confidence demanded by
his position.
TERMINATION OF EMPLOYMENT BY EMPLOYEE
B. Without Just Cause - Requisites
ART. 285. Termination by employee. - (a) An employee

may terminate without just cause the employee-employer
relationship by serving a written notice on the employer at
least one (1) month in advance. The employer upon whom
no such notice was served may hold the employee liable
for damages.
C. Resignation
Definition
HABANA V NLRC
298 SCRA 537
Voluntary resignation is the voluntary act of an employee 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.
Requisites
AZCOR MANUFACTURING V NLRC (CAPULSO)
303 SCRA 26
- On resignation, requisites
Ratio To constitute a resignation, it must be unconditional and
with the intent to operate as such. There must be an intention to
relinquish a portion of the term of office accompanied by an act
of relinquishment.
METRO TRANSIT ORG V NLRC (GARCIA)
284 SCRA 308
An examination of the circumstances surrounding the submission
of the letter indicates that the resignation was made without
proper discernment so that it could not have been intelligently
and voluntarily done.
Voluntary Resignation
14.02 Causes
A. Just Causes
ART. 285. Termination by employee. - (b) An employee

may put an end to the relationship without serving any
notice on the employer for any of the following just
causes:
PHIL WIRELESS INC V NLRC (LUCILA)

310 SCRA 653
Ratio Constructive dismissal is an involuntary resignation resorted
to when continued employment is rendered impossible,
unreasonable or unlikely; when there is a demotion in rank
and/or diminution in pay; or when a clear discrimination,
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insensibility or disdain by an employer becomes unbearable to

the employee.
PASCUA V NLRC
287 SCRA 554
Basic is the doctrine that resignation must be voluntary and made
with the intention of relinquishing the office, accompanied with
an act of relinquishment.
In labor cases, the employer has the burden of proving that the
dismissal was for a just cause; failure to show this, as in the
instant case, would necessarily mean that the dismissal was
unjustified and, therefore, illegal. To allow an employer to dismiss
an employee based on mere allegations and generalities would
place the employee at the mercy of his employer; and the right to
security of tenure, which this Court is bound to protect, would be
unduly emasculated.
Under the Labor Code, as amended, the dismissal of an employee
which the employer must validate has a twofold requirement:
one is substantive, the other procedural. Not only must the
dismissal be for a just or an authorized cause as provided by law
(Articles 282, 283 and 284 of the Labor Code, as amended); the
rudimentary requirements of due process -- the opportunity to be
heard and to defend oneself -- must be observed as well.
media commentators and announcers such as private respondent

to resign from their radio or TV stations but only to go on leave
for the duration of the campaign period, we think that the
company may nevertheless validly require them to resign as a
matter of policy.
- The policy is justified on the following grounds:
1) Working for the government and the company at the same
time is clearly disadvantageous and prejudicial to the rights and
interest not only of the company but the public as well. In the
event an employee wins in an election, he cannot fully serve, as
he is expected to do, the interest of his employer. The employee
has to serve two (2) employers, obviously detrimental to the
interest of both the government and the private employer.
2) In the event the employee loses in the election, the impartiality
and cold neutrality of an employee as broadcast personality is
suspect, thus readily eroding and adversely affecting the
confidence and trust of the listening public to employers station.
These are valid reasons for petitioner. No law has been cited by
private respondent prohibiting a rule such as that in question.
14.03 No Termination - Performance of Military or Civic Duty
ART. 286. When employment not deemed terminated. The bona-fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or
the fulfillment by the employee of a military or civic duty
shall not terminate employment. In all such cases, the
employer shall reinstate the employee to his former
position without loss of seniority rights if he indicates his
desire to resume his work not later than one (1) month
from the resumption of operations of his employer or
from his relief from the military or civic duty.
Book VI, Rule I, Sec. 12, Omnibus Rules: SECTION 12.

Suspension of relationship. The employer-employee
relationship shall be deemed suspended in case of
suspension of operation of the business or undertaking of
the employer for a period not exceeding six (6) months,
unless the suspension is for the purpose of defeating the
rights of the employees under the Code, and in case of
mandatory fulfillment by the employee of a military or
civic duty. The payment of wages of the employee as well
as the grant of other benefits and privileges while he is on
a military or civic duty shall be subject to special laws and
decrees and to the applicable individual or collective
bargaining agreement and voluntary employer practice or
policy.
AZCOR MANUFACTURING INC V NLRC

VALDEZ V NLRC (NELBUSCO INC)
286 SCRA 87
- The so-called "floating status" of an employee should last only
for a legally prescribed period of time. When that "floating
status" of an employee lasts for more than six months, he may be
considered to have been illegally dismissed from the service.
Thus, he is entitled to the corresponding benefits for his
separation, and this would apply to the two types of work
suspension heretofore noted, that is, either of the entire business
or of a specific component thereof.
- Resignation is defined as the voluntary act of an employee who
finds himself in a situation where he believes that personal
service, and, that he has no other choice but to disassociate
himself from his employment. Resignation is a formal
pronouncement of relinquishment of an office. It must be made
with the intention of relinquishing the office accompanied by an
act of relinquishment.
- The cardinal rule in termination cases is that the employer bears
the burden of proof to show that the dismissal is for just cause,
failing in which it would mean that the dismissal is not justified.
This rule applies adversely against herein respondent company
since it has utterly failed to discharge that onus by the requisite
quantum of evidence.
- Under Article 279 of the Labor Code, as amended, an employee
who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges
and to his full back wages, 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.
TERMINATION OF EMPLOYMENT BY EMPLOYER

1. PRELIMINARY MATTERS
14.04 Basis of Right and Requirements
Basis
Effectivity
Validity of Policy
MANILA BROADCASTING COMPANY V NLRC (OLAIREZ, BANGLOY)
294 SCRA 486
Ratio Although 11(b) of R.A. No. 6646 does not require mass
GUTIERREZ V SINGER SEWING MACHINE

411 SCRA 512
- Extreme caution should be exercised in terminating the services
of a worker for his job may be the only lifeline on which he and
his family depend for survival in these difficult times. That lifeline
should not be cut off except for a serious, just and lawful cause,
for, to a worker, the loss of his job may well mean the loss of
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hope for a decent life for him and his loved ones.
- In the present case, the penalty of dismissal appears in our view
unjustified, much too harsh and quite disproportionate to the
alleged infractions. Not only were the alleged violations minor in
nature, in this case the evidence adduced to prove them did not
fairly show they fall exactly within the rules and regulations
allegedly violated. Otherwise stated, the evidence did not square
fully with the charges. That is why the Labor Arbiter found only
analogous causes which, in our view do not sufficiently justify
the extreme penalty of termination.
- The penalty imposed on the erring employee ought to be
proportionate to the offense, taking into account its nature and
surrounding circumstances. In the application of labor laws, the
courts and other agencies of the government are guided by the
social justice mandate in our fundamental law.
- To be lawful, the cause for termination must be a serious and
grave malfeasance to justify the deprivation of a means of
livelihood. This is merely in keeping with the spirit of our
Constitution and laws which lean over backwards in favor of the
working class, and mandate that every doubt must be resolved in
their favor.
the power of this Court not only to scrutinize the basis for
dismissal but also to determine if the penalty is commensurate to
the offense, notwithstanding the company rules.
Penalties
Requirements
(a) Serious misconduct or willful disobedience by the

employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his
duties;
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;
MANILA TRADING AND SUPPLY CO INC V ZULUETA

69 PHIL 485
- The right of an employer to freely select or discharge his
employees, is subject to regulation by the State. An employer
cannot legally be compelled to continue with the employment of
a person who admittedly was guilty of misfeasance or
malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interest. The law, in
protecting the rights of the laborer, authorizes neither oppression
nor self-destruction of the employer. There may, of course, be
cases where the suspension or dismissal of an employee is
whimsical or unjustified or otherwise illegal scrutinized carefully
and the proper authorities will go to the core of the controversy
and not close their eyes to the real situation.
(d) Commission of a crime or offense by the employee

against the person of his employer or any immediate
member of his family or his duly authorized
representatives; and
(e) Other causes analogous to the foregoing.
ART. 283. 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.
ART. 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 coemployees: 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.
AGABON V NLRC
PLDT V TOLENTINO
438 SCRA 555
- However, the right of the management to dismiss must be
balanced against the managerial employees right to security of
tenure which is not one of the guaranties he gives up. This Court
has consistently ruled that managerial employees enjoy security
of tenure and, although the standards for their dismissal are less
stringent, the loss of trust and confidence must be substantial
and founded on clearly established facts sufficient to warrant the
managerial employees separation from the company. Substantial
evidence is of critical importance and the burden rests on the
employer to prove it. Due to its subjective nature, it can easily be
concocted by an abusive employer and used as a subterfuge for
causes which are improper, illegal or unjustified.
PEREZ V MEDICAL CITY GENERAL HOSPITAL
484 SCRA 138
- The power to dismiss an employee is a recognized prerogative
that is inherent in the employers right to freely manage and
regulate his business. An employer cannot be expected to retain
an employee whose lack of morals, respect and loyalty to his
employer or regard for his employers rules and appreciation of
the dignity and responsibility of his office has so plainly and
completely been bared. An employer may not be compelled to
continue to employ a person whose continuance in service will
patently be inimical to his interest. The dismissal of an employee,
in a way, is a measure of self-protection.
- Nevertheless, whatever acknowledged right the employer has to
discipline his employee, it is still subject to reasonable regulation
by the State in the exercise of its police power. Thus, it is within
ART. 282. Termination by employer. - An employer may

terminate an employment for any of the following causes:
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Article. 277. Miscellaneous provisions. - (b) Subject to the

constitutional right of workers to security of tenure and
their right to be protected against dismissal except for a
just and authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the
employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a
statement of the causes for termination and shall afford
the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so
desires in accordance with company rules and regulations
promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken
by the employer shall be without prejudice to the right of
the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of
the National Labor Relations Commission. The burden of
proving that the termination was for a valid or authorized
cause shall rest on the employer. The Secretary of the
Department of Labor and Employment may suspend the
effects of the termination pending resolution of the
dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and
Employment before whom such dispute is pending that
the termination may cause a serious labor dispute or is in
implementation of a mass lay-off. (As amended by Section
33, Republic Act No. 6715, March 21, 1989).
for dismissal is negated by such defect, rendering the dismissal

without basis.
PHILIPPINE NATIONAL BANK V CABANSAG
460 SCRA 514
- As enunciated in A217 of the Labor Code, labor arbiters clearly
have original and exclusive jurisdiction over claims arising from
employer-employee relations, including termination disputes
involving all workers, among whom are overseas Filipino workers
- The law gives her two choices:

(1) at the Regional Arbitration Branch (RAB) where she resides or
(2) at the RAB where the principal office of her employer is
situated
- The twin requirements of notice and hearing constitute the
essential elements of procedural due process, and neither of
these elements can be eliminated without running afoul of the
constitutional guarantee
- In dismissing employees, the employer must furnish them two
written notices:
1) one to apprise them of the particular acts or omissions for
which their dismissal is sought; and
2) the other to inform them of the decision to dismiss them. As
to the requirement of a hearing, its essence lies simply in the
opportunity to be heard.
GENUINO ICE CO INC V MAGPANTAY
493 SCRA 195
Substantive and Procedural Due Process

FUJITSU COMPUTER PRODUCTS OF THE PHILS V CA (DE GUZMAN,
ALVAREZ)
454 SCRA 737
To be a valid ground for dismissal, loss of trust and confidence
must be based on a willful breach of trust and founded on clearly
established facts. 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. It must rest on substantial grounds
and not on the employers arbitrariness, whims, caprices or
suspicion; otherwise, the employee would eternally remain at the
mercy of the employer. In order to constitute a just cause for
dismissal, the act complained of must be work-related and shows
that the employee concerned is unfit to continue working for the
employer.
Reasoning
- The term trust and confidence is restricted to managerial
employees. In this case, it is undisputed that respondent De
Guzman, as the Facilities Section Manager, occupied a position of
responsibility, a position imbued with trust and confidence.
- The Court had the occasion to reiterate in Nokom v. National
Labor Relations Commission the guidelines for the application of
the doctrine of loss of confidence:
Loss of confidence should not be simulated;
> It should not be used as a subterfuge for causes which are
improper, illegal or unjustified;
> It may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and
> It must be genuine, not a mere afterthought to justify earlier
action taken in bad faith.
ARIOLA V PHILEX MINING CORP
446 SCRA 514
If the intent to retire is not clearly established or if the retirement
is involuntary, it is to be treated as a discharge.
A substantive defect invalidates a dismissal because the ground
- The New Rules of Procedure of the NLRC provides the rule for
the service of notices and resolutions in NLRC cases, to wit:
Sec. 4. Service of notices and resolutions. a) Notices or
summons and copies of orders, resolutions or decisions shall be
served on the parties to the case personally by the bailiff or the
duly authorized public officer within three (3) days from receipt
thereof by registered mail; Provided, that where a party is
represented by counsel or authorized representative, service shall
be made on such counsel or authorized representative;
As such, the proceedings before it are not bound by the technical
niceties of the law and procedure and the rules obtaining in
courts of law, as dictated by Article 221 of the Labor Code:
ART. 221. Technical rules not binding and prior resort to amicable
settlement. In any proceeding before the Commission or any of
the Labor Arbiters, the rules of evidence prevailing in courts of
law or equity 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 all reasonable means to
ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the
interest of due process. This rule applies equally to both the
employee and the employer. In the interest of due process, the
Labor Code directs labor officials to use all reasonable means to
ascertain the facts speedily and objectively, with little regard to
technicalities or formalities. What is essential is that every
litigant is given reasonable opportunity to appear and defend his
right, introduce witnesses and relevant evidence in his favor,
which undoubtedly, was done in this case. Willful disobedience,
or insubordination as otherwise branded in this case, as a just
cause for dismissal of an employee, necessitates the concurrence
of at least two requisites: (1) the employee's assailed conduct
must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been
reasonable, lawful, made known to the employee and must
pertain to the duties which he had been engaged to discharge.
Company policies and regulations are generally valid and binding
on the parties and must be complied with until finally revised or
amended, unilaterally or preferably through negotiation, by
competent authority. For misconduct or improper behavior to be
a just cause for dismissal, the same must be related to the
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performance of the employees duties and must show that he has

become unfit to continue working for the employer. In the case at
bench, petitioner informed respondent, through a Memorandum
dated November 14, 1995, that he was being transferred to its
GMA, Cavite operations effective November 20, 1995.
- Simply stated, the employer must furnish the employee a
written notice containing a statement of the cause for
termination and to afford said employee ample opportunity to be
heard and defend himself with the assistance of his
representative, if he so desires, and the employee must be
notified in writing of the decision dismissing him, stating clearly
the reasons therefor.
intent and not mere error in judgment. Such misconduct,

however serious, must, nevertheless, be in connection with the
employees work to constitute just cause for his separation
COCA-COLA BOTTLERS PHIL INC V KAPISANAN NG MALAYANG
MANGGAGAWA SA COCA-COLA
452 SCRA 480
For misconduct or improper behavior to be a just cause for
dismissal, the same must be related to the performance of the
employees duties and must show that he has become unfit to
continue working for the employer.
14.05 Just Causes - Substantive Due Process - Grounds for

Termination
A. Serious Misconduct

(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
PREMIERE DEVT BANK V MANTAL

485 SCRA 234
Misconduct is improper or wrongful conduct. It is 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. Under
Article 282 of the Labor Code, the misconduct, to be a just cause
for termination, must be of such grave and aggravated character,
not merely of a trivial or unimportant nature. For serious
misconduct to warrant the dismissal of an employee, it (1) must
be serious; (2) must relate to the performance of the employees
duty; and (3) must show that the employee has become unfit to
Definition and Acts

MOLINA V PACIFIC PLANS INC
484 SCRA 498
VALIAO V CA
VILLAMOR GOLF CLUB V PEHID
472 SCRA 36
Serious misconduct as a valid cause for the dismissal of an
employee is defined as improper or wrong conduct; the
transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. 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. However serious such
misconduct, it must be in connection with the employees work to
constitute just cause for his separation. The act complained of
must be related to the performance of the employees duties
such as would show him to be unfit to continue working for the
employer
LAKPUE V BELGA
473 SCRA 617
- We have defined misconduct as a transgression of some
established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful
- Misconduct has been defined as improper or wrong conduct;

the transgression of some established and definite rule of action;
a forbidden act, a dereliction of duty, unlawful in character and
implies wrongful intent and not mere error of judgment. The
misconduct to be serious must be of such grave and aggravated
character and not merely trivial and unimportant. Such
misconduct, however, serious, must nevertheless, be in
connection with the employees work to constitute just cause for
his separation.
- The loss of trust and confidence, in turn, must be based on the
willful breach of the trust reposed in the employee by his
employer. Ordinary breach will not suffice. A breach of trust is
willful if it is done intentionally, knowingly and purposely without
justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.
Willful Disoedience
MICRO SALES OPERATION NETWORK V NLRC
472 SCRA 328
- For willful disobedience to be a valid cause for dismissal, the
following twin elements must concur: (1) the employee's assailed
conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated must
have been reasonable, lawful, made known to the employee and
must pertain to the duties which he had been engaged to
discharge.
BASCON V CA (METRO CEBU COMMUNITY HOSPITAL)
422 SCRA 122
Willful disobedience of the employers lawful orders, as a just
cause for dismissal of an employee, envisages the concurrence of
at least two requisites: (1) the employee's assailed conduct must
have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been
reasonable, lawful, made known to the employee and must
pertain to the duties which he had been engaged to discharge
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R TRANSPORT CORP V EJANELRA

B. Gross and Habitual Neglect of Duties

Requisites
employer to terminate an employee. Gross negligence is

negligence characterized by want of even slight care, acting or
omitting to act in a situation where there is a duty to act, not
inadvertently but willfully and intentionally with a conscious
indifference to consequences insofar as other persons may be
affected. In this case, however, there is no substantial basis to
support a finding that petitioner committed gross negligence.
JUDY PHILIPIINES V NLRC

289 SCRA 755
The test to determine the existence of negligence is as follows:

Did petitioner in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person
would use in the same situation?
- Gross negligence implies a want or absence of or failure to

exercise slight care or diligence, or the entire absence of care. It
- Article 282 (b) of the Labor Code requires that xxx such
neglect must not only be gross, it should be Gross and habitual
neglect in character.
- The employers obligation to give his workers just compensation
and treatment carries with it the corollary right to expect from
the workers adequate work, diligence and good conduct.
CEBU FILVENEER CORPORATION V NLRC

CHAVEZ V NLRC
CHALLENGE SOCKS CORP V CA (NLRC, ANTONIO ET AL)
474 SCRA 356
- One of the just causes for terminating an employment under
Article 282 of the Labor Code is gross and habitual neglect by the
employee of her duties. This cause includes gross inefficiency,
negligence and carelessness. Such just causes is derived from the
right of the employer to select and engage his employees.
- Habitual neglect implies repeated failure to perform ones duties
for a period of time. Buguats repeated acts of absences without
leave and her frequent tardiness reflect her indifferent attitude to
and lack of motivation in her work. Her repeated and habitual
infractions, committed despite several warnings, constitute gross
misconduct. Habitual absenteeism without leave constitute gross
negligence and is sufficient to justify termination of an employee.
- An employees past misconduct and present behavior must be
taken together in determining the proper imposable penalty. The
totality of infractions or the number of violations committed
during the period of employment shall be considered in
determining the penalty to be imposed upon an erring employee.
The offenses committed by him should not be taken singly and
separately but in their totality. Fitness for continued employment
cannot be compartmentalized into tight little cubicles of aspects
of character, conduct, and ability separate and independent of
each other.
- It is the totality, not the compartmentalization, of such company
infractions that Buguat had consistently committed which
justified her dismissal.
- Terminating an employment is one of petitioners prerogatives.
- Management has the prerogative to discipline its employees and
to impose appropriate penalties on erring workers pursuant to
company rules and regulations.
- The Court has upheld a companys management prerogatives so
long as they are
Gross and Habitual Negligence Defined

VALIAO V CA
REYES V MAXIMS TEA HOUSE
398 SCRA 288
- Under the Labor Code, gross negligence is a valid ground for an
CITIBANK NA V GATCHALIAN
240 SCRA 212
- Gross negligence implies a want or absence of or failure to
exercise slight care or diligence, or the entire absence of care. It
Gross negligence implies a want or absence of or failure to
exercise slight care or diligence or the entire absence of care. It
CHUA V NLRC (SCHERING-PLOUGH CORP ET AL)
453 SCRA 244
- Gross negligence under Article 282 of the Labor Code, as
amended, connotes want of care in the performance of ones
duties, while habitual neglect implies repeated failure to perform
ones duties for a period of time, depending upon the
circumstances. Clearly, the petitioners repeated failure to submit
the DCRs on time, as well as the failure to submit the doctors call
cards constitute habitual neglect of duties. Needless to state, the
foregoing clearly indicates that the employer had a just cause in
terminating the petitioners employment.
PREMIER DEVT BANK V MANTAL
Simple Negligence
PAGUIO TRANSPORT CORP V NLRC (MELCHOR)
294 SCRA 657
Employer has the burden of proving that the dismissal of an
employee is for a just cause. The failure of the employer to
discharge this burden means that the dismissal is not justified and
that the employee is entitled to reinstatement and backwages.
- Mere involvement in an accident, absent any showing of fault or
recklessness on the part of an employee, is not a valid ground for
dismissal.
The twin requirements of notice and hearing are essential
elements of due process. The employer must furnish the worker
two written notices: (1) one to apprise him of the particular acts
or omissions for which his dismissal is sought and (2) the other to
inform him of his employer's decision to dismiss him. The essence
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of due process lies simply in an opportunity to be heard, and not

always and indispensably in an actual hearing.
duties of the employee to show that he or she is woefully unfit to

C. Fraud - Willful Breach of Trust
- It has oft been held that loss of confidence should not be used
as a subterfuge for causes which are illegal, improper and
unjustified. It must be genuine, not a mere afterthought to justify
an earlier action taken in bad faith. Be it remembered that at
stake here are the sole means of livelihood, the name and the
reputation of the employee. Thus, petitioner must prove an
actual breach of duty founded on clearly established facts
sufficient to warrant his loss of employment.

(c) Fraud or willful breach by the employee of the trust
representative;
SANTOS V SAN MIGUEL CORPORATION

399 SCRA 172
Under the Labor Code, a valid dismissal from employment
requires that: (1) the dismissal must be for any of the causes
expressed in Article 282 of the Labor Code and (2) the employee
must be given an opportunity to be heard and to defend
himself.Article 282(c) of the same Code provides that "willful
breach by the employee of the trust reposed in him by his
employer" is a cause for the termination of employment by an
employer. This ground should be duly established. Substantial
evidence is sufficient as long as such loss of confidence is wellfounded or if the employer has reasonable ground to believe that
the employee concerned is responsible for the misconduct and
her act rendered her unworthy of the trust and confidence
demanded of her position. It must be shown, though, that the
employee concerned holds a position of trust. The betrayal of this
trust is the essence of the offense for which an employee is
penalized.
LAKPUE DRUG INC V BELGA
Loss of Confidence - Requisites

JARDINE DAVIES INC V NLRC (REYES)
311 SCRA 289
The right of an employer to dismiss employees on account of loss
of trust of confidence must not be exercised arbitrarily and
without showing just cause, so as not to render the employees
constitutional right to security of tenure nugatory.
- Article 282 provides that an employer may terminate an
employment for fraud or willful breach by the employee of the
trust reposed in him by his employer. It is settled that loss of
confidence as a just cause for termination must be premised on
the fact that an employee concerned holds a position of trust and
confidence, as in this case. And in order to constitute just cause,
the act complained of must be work-related. Proof beyond
reasonable doubt is not required, so long as there is some basis
for the loss of confidence, but basis thereof must still be clearly
and convincingly established, arising from particular proven facts
which the employer bears to prove.
- We stress once more that the right of an employer to dismiss an

employee on account of loss of trust and confidence must not be
exercised whimsically. To countenance an arbitrary exercise of
that prerogative is to negate the employees constitutional right
to security of tenure. In other words, the employer must clearly
and convincingly prove by substantial evidence the facts and
incidents upon which loss of confidence in the employee may be
fairly made to rest; otherwise, the latters dismissal will be
rendered illegal.
CRUZ V CA (NLRC, CITYTRUST BANK)
494 SCRA 226
- WRT to rank-and-file personnel, loss of trust and confidence
requires proof of involvement in the alleged events in question.
But as regards a managerial employee, the mere existence of a
basis fro believing that such employee has breached the trust of
his employer would suffice for his dismissal. Proof beyond
reasonable doubt is not required, it being sufficient that there is
some basis for such loss of confidence such when the employer
has reasonable ground to believe that the employee concerned id
responsible for the purported misconduct, and the nature of his
participation renders him unworthy of the trust and confidence
demanded by his position.
- Art 282 ( c) LC states that the loss of trust and confidence must
be based on willful breach. It should be done intentionally,
knowingly and purposely without justifiable excuse. It must not
be indiscriminately used as a shield by the employer against a
claim that the dismissal of an employee was arbitrary. And, in
order to constitute a just cause for dismissal, the act complained
of must be work-related and shows that the employee concerned
is unfit to continue working for the employer. In addition, loss of
confidence is premised on the fact that the employee concerned
holds a position of responsibility, trust and confidence or that the
employee concerned is entrusted with confidence with respect to
delicate matters. The betrayal of this trust is the essence of the
offense for which an employee is penalized
Breach of Trust - Loss of Confidence

CENTRAL PANGASINAN ELEC CORP V MACARAEG
Position Trust and Confidence

PLDT V TOLENTINO
DELA CRUZ V NLRC
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION V MATIAS
458 SCRA 148
To constitute a valid cause to terminate employment, loss of trust
and confidence must be proven clearly and convincingly by
substantial evidence. To be a just cause for terminating
employment, loss of confidence must be directly to the
SANTOS V SAN MIGUEL CORP

PANDAY V NLRC (LUZON MAHOGANY TIMBER INDUSTRIES INC)
209 SCRA 122
- Panday, as branch accountant occupied a position involving trust
and confidence and in the light of the estranged relation between
the complainant and the respondent that may not permit the full
restoration of an employment relationship based on trust and
confidence, we have to allow termination of the employeremployee relationship but upon the payment of separation pay
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equivalent to one-half (1/2) month for every year of service

rendered.
- The case of Lepanto Consolidated Mining Co. v. Court of Appeals
provides a definition of a "position of trust and confidence". It is
one where a person is "entrusted with confidence on delicate
matters, or with the custody, handling, or care and protection of
the employer's property"
- A few examples were given by the Court in the case of GlobeMackay Cable and Radio Corporation v. National Labor Relations
Commission and Imelda Salazar, G.R. No. 82511, March 3, 1992,
to illustrate the principle:
- where the employee is a Vice-President for Marketing and as
such, enjoys the full trust and confidence of top management
- or is the Officer-In-Charge of the extension office of the bank
where he works
- or is an organizer of a union who was in a position to sabotage
the union's efforts to organize the workers in commercial and
industrial establishments
- or is warehouseman of a non-profit organization whose primary
purpose is to facilitate and maximize voluntary gifts by foreign
individuals and organizations to the Philippines
- or is a manager of its Energy Equipment Sales
- Credit and Collection Supervisor (Tabacalera Insurance Co. v.
National Labor Relations Commission)
- If the respondent had been a laborer, clerk or other rank-andfile employee, there would be no problem in ordering her
reinstatement with facility. An officer in such a key position as
Vice President for Marketing(or as Chief Accountant as in the
present case) can work effectively only if she enjoys the full trust
and confidence of top management.
- The case of Metro Drug Corp. v. National, Labor Relations
Commission, aptly describes the difference in treatment between
the positions of trust on one hand and mere clerical positions on
the other. It states:
Managerial personnel and other employees occupying positions
of trust and confidence are entitled to security of tenure, fair
standards of employment, and the protection of labor laws.
However, the rules on termination of employment, penalties for
infractions, and resort to concerted action are not necessarily the
same as those for ordinary employees.
A special and unique employment relationship exists between a
corporation and its cashiers. More than most key positions, that
of cashier calls f or the utmost trust and confidence. . . .
When an employee accepts a promotion to a managerial position
or to an office requiring full trust and confidence she gives up
some of the rigid guaranties available to ordinary workers.
Infractions which if committed by others would be overlooked or
condoned or penalties mitigated may be visited with more severe
disciplinary action. A company's resort to acts of self-defense
would be more easily justified. It would be most unfair to require
an employer to continue employing as its cashier a person whom
it reasonably believes is no longer capable of giving full and
wholehearted trustworthiness in the stewardship of company
funds.
Guidelines
VITARICH CORP V NLRC (RECODO)
307 SCRA 509
- While an employer is allowed wide latitude to dismiss
employees on loss of trust and confidence, still the loss thereof
must have some basis and must be proved by the employer
otherwise the social justice policy of the labor lawsand the
constitution will be for naught. The guidelines for the application
of the doctrine of loss of confidence are:
a. loss of confidence should not be simulated
b. it dhould not be used as subterfuge for causes which
are improper, illegal, or unjustified
c. it should not be arbitrarily asserted in the face of overwhelming
evidence to the contrary
d. it must be genuine, not a mere afterthought to justify
earlier action taken in bad faith
COCA-COLA BOTTLERS PHIL INC V KAPISANAN NG MALAYANG
MANGGAGAWA SA COCA-COLA
Willful Breach
ATLAS CONSOLIDATED MINING & DEVELOPMENT CORP V NLRC
(VILLACENCIO)
290 SCRA 479
Settled is the rule that under Article 283(c) of the Labor Code, the
breach of trust must be willful. 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. It must rest on substantial grounds
and not on the employer's arbitrariness, whims, caprices or
suspicion; otherwise, the employee would eternally remain at the
mercy of the employer. 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 an occasion for abuse because of its subjective nature.
Private respondent explained that he failed to inspect the
logbook for about two (2) months before its disappearance
because he was preoccupied with some emergency works
brought about by a storm. With the foregoing explanation, it
cannot be said that Villavicencios failure was willful.
Coverage
FUJITSU COMPUTER PRODUCTS CORP V CA
Proof
CRUZ V COCA-COLA BOTTLERS PHILS INC

460 SCRA 340
RAMATEK PHILS V DE LOS REYES

474 SCRA 129
- Termination of employment by reason of loss of confidence is

governed by Article 282(c) of the Labor Code, which provides that
an employer can terminate the employment of the employee
concerned for fraud or willful breach by an employee of the trust
representative. Loss of confidence, as a just cause for
termination of employment, is premised on the fact that the
employee concerned holds a position of responsibility, trust and
confidence. He must be invested with confidence on delicate
matters such as the custody, handling, care and protection of the
employers property and/or funds.
- Loss of confidence as a ground for dismissal does not require

proof beyond reasonable doubt. The law requires only that there
be at least some basis to justify it. Thus, there must be some
evidence to substantiate the claim and form a legal basis for loss
of confidence. The employer cannot exercise arbitrarily and
without just cause the right to dismiss an employee for loss of
trust and confidence.
Lack of Damage
CADIZ V CA (PHILIPPINE COMMERCIAL BANK [EQUITABLE
PCIBANK])
474 SCRA 232
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(d) Commission of a crime or offense by the employee

against the person of his employer or any immediate
member of his family or his duly authorized
representatives; and
without cause and a dismissal for a false or non-existent cause. In

the former, it is the intention of the employer to dismiss his
employee for no cause whatsoever, in which case the
Termination Pay Law would apply. In the latter case, the
employer does not intend to dismiss the employee but for a
specific cause which turns out to be false or non-existent. Hence,
absent the reason which gave rise to his separation from
employment, there is no intention on the part of the employer to
dismiss the employee concerned. Consequently, reinstatement is
in order. And this is the situation here. Petitioner was separated
because of his alleged involvement in the pilferage in question.
However, he was absolved from any responsibility therefor by the
court. The cause for his dismissal having been proved nonexistent or false, his reinstatement is warranted. It would be
unjust and unreasonable for the Company to dismiss petitioner
after the latter had proven himself innocent of the cause for
which he was dismissed.
While it may be true that after the preliminary investigation of
the complaint, probable cause for rape was found and
respondent Javier had to be detained, these cannot be made as
legal bases for the immediate termination of his employment.
Conviction - Moral Turpitude
- In University of the East v. NLRC the court held that lack of

material or pecuniary damages would not in any way mitigate a
persons liability nor obliterate the loss of trust and confidence.
- In the case of Etcuban v. Sulpicio Lines, this Court definitively
ruled that:
. . . Whether or not the respondent bank was financially
prejudiced is immaterial. Also, what matters is not the amount
involved, be it paltry or gargantuan; rather the fraudulent scheme
in which the petitioner was involved, which constitutes a clear
betrayal of trust and confidence. . . .
D. Commission of Crime

E. Analogous Causes

Quarrelsome - Bossy
CATHEDRAL SCHOOL OF TECHNOLOGY V NLRC (VALLEJERA)
214 SCRA 551
PETITIONERS' averments on VALLEJERAs disagreeable character
as "quarrelsome, bossy, unreasonable and very difficult to deal
with," are supported by testimonies of several co-employees and
students of CST. I
The conduct she exhibited on that occasion smacks of sheer
disrespect and defiance of authority and assumes the proportion
of serious misconduct or insubordination, any of which
constitutes just cause for dismissal from employment.
HEAVYLIFT MANILA INC V CA (GALAY, NLRC)
473 SCRA 541
An employee who cannot get along with his co-employees 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. When personal
differences between employees and management affect the work
environment, the peace of the company is affected. Thus, an
employees 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 employer. Similarly, compliance with
the twin requirement of notice and hearing must also be proven
by the employer.
Probable Cause
STANDARD ELECTRIC MANUFACTURING CORP V STANDARD
ELECTRIC EMPLOYEES UNION
- A non-existent cause for dismissal was explained in Pepito v.
Secretary of Labor (96 SCRA 454):
... A distinction, however, should be made between a dismissal
IRRI V NLRC (MICOSA)

221 SCRA 760
- Moral turpitude has been defined in Can v. Galing citing In Re
Basa and Tak Ng v. Republic as everything which is done contrary
to justice, modesty, or good morals; an act of baseness, vileness
or depravity in the private and social duties which a man owes his
fellowmen, or to society in general, contrary to justice, honesty,
modesty or good morals.
As to what crime involves moral turpitude, is for the Supreme
Court to determine. The conclusion of IRRI that conviction of the
crime of homicide involves moral turpitude is unwarranted
considering that the said crime which resulted from an act of
incomplete self-defense from an unlawful aggression by the
victim has not been so classified as involving moral turpitude.
OANIA V NLRC (PHILEX MINING)
244 SCRA 668
- Violation of a company rule prohibiting the infliction of harm or
physical injury against any person under the particular
circumstances provided for in the same rule may be deemed
analogous to "serious misconduct" stated in Art. 282 (a).
(H)owever, there is no substantial evidence definitely pointing to
petitioners as the perpetrators of the mauling of Malong. What is
an established fact is that, after investigation, private respondent
dismissed them and, thereafter, a criminal complaint was filed
against petitioners. It is of record that Malong desisted from suing
the perpetrators before the regular courts. In criminal cases, an
affidavit of desistance may create serious doubts as to be the
liability of the accused
LIM V NLRC (PEPSI-COLA FAR EAST TRADE DEVT)
259 SCRA 485
"Gross inefficiency" is closely related to "gross neglect," for both
involve specific acts of omission on the part of the employee
resulting in damage to the employer or to his business. The Court
has ruled that failure to observe prescribed standards of work, or
to fulfill reasonable work assignments due to inefficiency may
constitute just cause for dismissal.
F. Others - Just Causes Claimed by Employer

1. Abandonment
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Defined
abandonment.
CHAVEZ V NLRC
NUEVA ECIJA ELECTRIC COOP (NEECO) II V NLRC

461 SCRA 169
Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment; it is a form of neglect of
duty; hence, a just cause for termination of employment by the
employer under Article 282 of the Labor Code, which enumerates
the just causes for termination by the employer: i.e., (a) serious
misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latters representative in connection
with the employees work; (b) gross and habitual neglect by the
employee of his duties; (c) fraud or willful breach by the
employee of the trust reposed in him by his employer or his duly
authorized representative; (d) commission of a crime or offense
by the employee against the person of his employer or any
immediate member of his family or his duly authorized
representative; and (e) other analogous causes.
FLOREN HOTEL V NLRC (CALIMLIM, RICO, ET AL)

458 SCRA 128
- It was true that private respondents abandoned their jobs, then
petitioners should have served them with a notice of termination
on the ground of abandonment as required under Sec. 2, Rule
XIV, Book V, Rules and Regulation Implementing the Labor Code,
in effect at that time. Said Section 2 provided that:
Notice of Dismissal. Any employer who seeks to dismiss a worker
shall furnish him a written notice stating the particular acts or
omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the workers
last known address.
But petitioners failed to comply with the foregoing
requirement, thereby bolstering further private respondents
claim that they did not abandon their work but were illegally
dismissed.
GABUAY V OVERSEA PAPER SUPPLY INC

436 SCRA 514
- As correctly ruled by the Labor Arbiter, the NLRC and the CA, the
petitioners were not illegally dismissed.
Even after the
petitioners received notices from the respondent corporation
requiring them to report for work and to explain their
unauthorized absences and failure to submit their updated biodata, they still failed to report for work. It can then be inferred
that the petitioners had abandoned their work. Indeed, the
factors considered for finding a valid abandonment are present in
the case at bar: the petitioners failure to report for work or
absence was without valid or justifiable cause, and their refusal to
report for work notwithstanding their receipt of letters requiring
them to return to work, show their
clear intention to sever the employer-employee relationship.
Requisites
2. Absenteeism
HDA. DAPDAP V NLRC (BARRIENTOS JR)
285 SCRA 9
- Nor could intent to abandon be presumed from private
respondent's subsequent employment with another employer as
petitioner alleges.
- It has been said that abandonment of position cannot be lightly
inferred, much less legally presumed from certain equivocal acts
such as an interim employment.
Inference
Specific Acts
PREMIERE DEVT BANK V NLRC (LABANDA)
293 SCRA 49
LEONARDO V NLRC (REYNALDO'S MKTG CORP)

333 SCRA 589
Ratio To constitute abandonment there must be (1) failure to
report for work or absence without valid or justifiable reason; and
(2) a clear intention, as manifested by some overt acts, to sever
the employer-employee relationship.
R.P. DINGLASAN CONSTRUCTION INC V ATIENZA
433 SCRA 263
1. Ratio In an illegal dismissal case, the onus probandi rests on
the employer to prove that its dismissal of an employee is for a
valid cause. In the case at bar, petitioner failed to discharge its
burden.
It failed to establish that private respondents
deliberately and unjustifiably refused to resume their
employment without any intention of returning to work.
- To constitute abandonment of work, two (2) requisites must
concur: first, the employee must have failed to report for work or
must have been absent without justifiable reason; and second,
there must have been a clear intention on the part of the
employee to sever the employer-employee relationship as
manifested by overt acts. Abandonment as a just ground for
dismissal requires deliberate, unjustified refusal of the employee
to resume his employment. Mere absence or failure to report for
work, after notice to return, is not enough to amount to
- The law, however, does not enumerate what specific overt acts
can be considered as strong evidence of the intention to sever the
employee-employer relationship. An employee who merely took
steps to protest her indefinite suspension and to subsequently file
an action for damages, cannot be said to have abandoned her
work nor is it indicative of an intention to sever the employeremployee relationship. Her failure to report for work was due to
her indefinite suspension. Petitioner's allegation of abandonment
is further belied by the fact that Labanda filed a complaint for
illegal dismissal. Abandonment of work is inconsistent with the
filing of said complaint.
2.1 Loans
Borrowing Money
MEDICAL DOCTORS INC V NLRC (MAGLAYA, ELOA)
136 SCRA 1
Borrowing money is neither dishonest, nor immoral nor illegal,
much less criminal.
PEARL S. BUCK FOUNDATION V NLRC
182 SCRA 446
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Ratio Borrowing money is neither dishonest, nor immoral, nor

illegal, much less criminal. However, said act becomes a serious
misconduct that may justly be asserted as a ground for dismissal
when reprehensible behavior such as the use of a trust
relationship as a leverage for borrowing money is involved.
2.2 Courtesy Resignation

BATONGBACAL V ASSOCIATED BANK
168 SCRA 600
circumvention of the law on security of tenure if: (1) The fixed

period or 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 circumstances vitiating his consent; or (2) It
satisfactorily appears that the employer and the employee dealt
dominance exercised by the former or the latter None of these
requisites were complied with.
MEDENILLA V PHIL VETERANS BANK
- While it may be said that the private respondent's call for

courtesy resignations was prompted by its determination to
survive, we cannot lend legality to the manner by which it
pursued its goalBy directing its employees to submit letters of
courtesy resignation, the bank in effect forced upon its
employees an act which they themselves should voluntarily do. It
should be emphasized that resignation per se means voluntary
relinquishment of a position or office. 11 Adding the word
"courtesy" did not change the essence of resignation. That
courtesy resignations were utilized in government reorganization
did not give private respondent the right to use it as well in its
own reorganization and rehabilitation plan. There is no guarantee
that all employers will not use it to rid themselves arbitrarily of
employees they do not like, in the guise of "streamlining" its
organization. On the other hand, employees would be unduly
exposed to outright termination of employment which is
anathema to the constitutional mandate of security of tenure
- As held by this Court, if the contract is for a fixed term and the
employee is dismissed without just cause, he is entitled to the
payment of his salaries corresponding to the unexpired portion of
the employment contract
2.3 Work Attitude
STELLAR INDUSTRIAL SERVICE INC V NLRC (PEPITO)

252 SCRA 323
Absences
MANILA ELECTRIC CO V NLRC
GSP MANUFACTURING CORP V CABANBAN
495 SCRA 123
- Abandonment as a just ground for dismissal requires the
deliberate, unjustified refusal of the employee to perform his
employment responsibilities. Mere absence or failure to work,
even after notice to return, is not tantamount to abandonment.
The records are bereft of proof that petitioners even furnished
respondent such notice.
- Furthermore, it is a settled doctrine that the filing of a complaint
for illegal dismissal is inconsistent with abandonment of
employment. An employee who takes steps to protest his
dismissal cannot logically be said to have abandoned his work.
The filing of such complaint is proof enough of his desire to return
to work, thus negating any suggestion of abandonment.
MAGSALIN V NATIONAL ORGANIZATION OF WORKING MEN

LABAYOG V MY SAN BISCUITS INC
2.5 Past Infractions

Past Offenses
The correct rule is that previous infractions may be used as

justification for an employee's dismissal from work in connection
with a subsequent similar offense.
LA CARLOTA PLANTERS ASSN V NLRC (COMPACION)
298 SCRA 252
The correct rule has always been that such previous offenses may
be so used as valid justification for dismissal from work only if the
infractions are related to the subsequent offense upon which
basis the termination of employment is decreed. The previous
infraction, in other words, may be used if it has a bearing to the
proximate offense warranting dismissal.
2.6 Professional Training

Residency Training
FELIX V BUENASEDA
2.4 Term Employment

2.7 Love and Morals
BRENT SCHOOL V ZAMORA
Immorality
ROMARES V NLRC
294 SCRA 411
SANTOS V NLRC (HAGONOY INSTITUTE ET AL)

287 SCRA 117
From Brent v Zamora: The decisive determinant in "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 relationship. But, if from the circumstances it is
apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be
struck down or disregarded as contrary to public policy and
morals.
Note however that, "term employment" cannot be said to be in
- To constitute immorality, the circumstances of each particular

case must be holistically considered and evaluated in light of the
prevailing norms of conduct and applicable laws. America
jurisprudence has defined immorality as a course of conduct
which offends the morals of the community and is a bad example
to the youth whose ideals a teacher is supposed to foster and to
elevate, the same including sexual misconduct. Thus, in
petitioner's case, the gravity and seriousness of the charges
against him stem from his being a married man and at the same
time a teacher.
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- Having an extra-marital affair is an affront to the sanctity of

marriage, which is a basic institution of society. Even our Family
Code provides that husband and wife must live together, observe
mutual love, respect and fidelity. This is rooted in the fact that
both our Constitution and our laws cherish the validity of
marriage and unity of the family. Our laws, in implementing this
constitutional edict on marriage and the family underscore their
permanence, inviolability and solidarity.
Love
CHUA-QUA V CLAVE
189 SCRA 117
To constitute immorality, the circumstances of each particular
case must be holistically considered and evaluated in the light of
prevailing norms of conduct and the applicable law.
DUNCAN ASSOCIATION V GLAXO-WELLCOME
2.8 Violation of Company Rules

APARENTE SR V NLRC (COCA-COLA BOTTLERS PHIL)
331 SCRA 82
The essence of due process does not necessarily mean or require
a hearing but simply a reasonable opportunity or a right to be
heard or as applied to administrative proceedings, an opportunity
to explain one's side. In labor cases, the filing of position papers
and supporting documents fulfill the requirements of due
process.
The law warrants the dismissal of an employee without making
any distinction between a first offender and a habitual delinquent
where the totality of the evidence was sufficient to warrant his
dismissal. In protecting the rights of the laborer, the law
authorizes neither oppression nor self-destruction of the
employer.
- Company policies and regulations, unless shown to be grossly
oppressive or contrary to law, are generally valid and binding on
the parties and must be complied with until finally revised or
amended, unilaterally or preferably through negotiation, by
competent authority. The Court has upheld a company's
management prerogatives so long as they are exercised in good
faith for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements.
2.9 Criminal Case
Dismissal - Criminal Case

LACORTE V INCIONG (ESTRELLA, ASEAN FABRICATORS INC)
166 SCRA 1
- Sea-Land Service, Inc. v. NLRC: The conviction of an employee
in a criminal case is not indispensable to warrant his dismissal,
and the fact that a criminal complaint against the employee has
been dropped by the fiscal is not binding and conclusive upon a
labor tribunal.
Guilt or Innocence
CHUA V NLRC
218 SCRA 545
- Private respondent's guilt or innocence in the criminal case is
not determinative of the existence of a just or authorized cause
for his dismissal. This doctrine follows from the principle that the
quantum and weight of evidence necessary to sustain conviction
in criminal cases are quite different from the quantum of
evidence necessary for affirmance of a decision of the Labor
Arbiter and of the NLRC.
2.10 Moonlighting
AGABON V NLRC
2.11 Suspicion
EASTERN TELECOMMUNICATIONS PHILS INC V DIAMSE
491 SCRA 239
LOSS OF TRUST AND CONFIDENCE v. SUSPICION
- To be a valid cause for dismissal, the loss of trust and confidence
must be based on a willful breach and founded on clearly
established facts. 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. Loss of trust and confidence must
rest on substantial grounds and not on the employer's
arbitrariness, whims, caprices or suspicion, otherwise, the
employee would eternally remain at the mercy of the employer.
Suspicion has never been a valid ground for dismissal and the
employee's fate cannot, in justice, be hinged upon conjectures
and surmises.
2.12 Acting Appointment
Effect of Acquittal
RAMOS V NLRC
298 SCRA 225
- Similarly, it is a well established rule that the dismissal of the
criminal case against an employee shall not necessarily be a bar
to his dismissal from employment on the ground of loss of trust
and confidence.
2.13 Graceful Exit
14.06 Transfers - Discharge and Suspension

LANZADERAS V AMETHYST SECURITY AND GENERAL SERVICES INC
404 SCRA 505
Conviction
SAMPAGUITA GARMENTS CORP V NLRC (SANTOS)
233 SCRA 260
- Once judgment has become final and executory, it can no longer
be disturbed except only for correction of clerical errors or where
supervening events render its execution impossible or unjust.
- Security of tenure, although provided in the Constitution, does

not give an employee an absolute vested right in a position as
would deprive the company of its prerogative to change their
assignment or transfer them where they will be most useful.
When a transfer is not unreasonable, nor inconvenient, nor
prejudicial to an employee; and it does not involve a demotion in
rank or diminution of his pay, benefits, and other privileges, the
employee may not complain that it amounts to a constructive
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dismissal.
- Case law recognizes the employer's right to transfer or assign
employees from one area of operation to another, or one office
to another or in pursuit of its legitimate business interest,
provided there is no demotion in rank or diminution of salary,
benefits and other privileges and not motivated by discrimination
or made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. This matter is a prerogative
inherent in the employer's right to effectively control and manage
the enterprise.
WESTIN PHIL PLAZA HOTEL V NLRC (RODRIGUEZ)
306 SCRA 631
- It must be emphasized that this Court has recognized and
upheld the prerogative of management to transfer an employee
from one office to another within the business establishment,
provided that there is no demotion in rank or a diminution of his
salary, benefits and other privileges.
- This is a privilege inherent in the employer's right to control and
manage its enterprise effectively.
- Besides, it is the employer's prerogative, based on its
assessment and perception of its employee's qualifications,
aptitudes and competence, to move him around in the various
areas of its business operations in order to ascertain where the
employee will function with utmost efficiency and maximum
productivity or 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.
CASTILLO V NLRC (PCIB)
308 SCRA 326
The Court, as a rule, will not interfere with an employers
prerogative to regulate all aspects of employment which includes
among others, work assignment, working methods, and place and
manner of work. It is the prerogative of the employer to transfer
and reassign employees for valid reasons and according to the
requirement of its business, provided that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee, and
that there is no demotion in rank or a diminution of his salary,
benefits and other privileges. An employees 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.
- Constructive dismissal: The employer has the burden of proving
that the transfer and demotion of an employee are for valid and
legitimate grounds. Where the employer fails to overcome this
burden of proof, the employees demotion shall no doubt be
tantamount to unlawful constructive dismissal.
OSS SECURITY & ALLIED SERVICES INC V NLRC (LEGASPI)
325 SCRA 157
Service-oriented enterprises, such as petitioner's business of
providing security services, generally adhere to the business
adage that "the customer or client is always right". To satisfy the
interests, conform to the needs, and cater to the whims and
wishes of its clients, along with its zeal to gain substantial returns
on its investments, employers adopt means designed towards
these ends. These are called management prerogatives in which
the free will of management to conduct its own affairs to achieve
its purpose, takes from. Accordingly, an employer can regulate,
generally without restraint, according to its own discretion and
judgment, every aspect of business.
- In the employment of personnel, the employer can prescribe
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 work, subject only to limitations

imposed by laws.
- Thus, the transfer of an employee ordinarily lies within the
ambit of management prerogatives. However, a transfer amounts
to constructive dismissal when the transfer is unreasonable,
inconvenient, or prejudicial to the employee, and it involves a
demotion in rank or diminution of salaries, benefits and other
privileges. In the case at bench, nowhere in the record does it
show that that the transfer of Legaspi was anything but done in
good faith, without grave abuse of discretion, and in the best
interest of the business enterprise.
- No malice should be imputed from the fact that Legaspi was
relieved of her assignment and, a day later, assigned a new post.
We must bear in mind that, unlike other contracts of service, the
availability of assignment for security guards is primarily at heart
subservient to the contracts entered into by the security agency
with its client-third parties. As such, being sidelined temporarily is
a standard stipulation in employment contracts. When a security
guard is placed "off detail" or on "floating" status, in security
agency parlance, it means "waiting to be posted." Legaspi has not
even been "off detail" for a week when she filed her complaint.
MENDOZA V RURAL BANK OF LUCBAN
433 SCRA 756
In the pursuit of its legitimate business interest, management has
the prerogative to transfer or assign employees 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, made in bad faith,
or effected as a form of punishment or demotion without
sufficient cause. This privilege is inherent in the right of
employers to control and manage their enterprise effectively. The
right of employees 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 them.
-Managerial prerogatives, however, are subject to limitations
provided by law, collective bargaining agreements, and general
principles of fair play and justice.
-TEST of validity of transfer of employees (Blue Dairy Corporation
v. NLRC): "The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion, bearing in mind
the basic elements of justice and fair play. Having the right
should not be confused with the manner in which that right is
exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In particular,
the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. Should the employer fail to
overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been defined as
a quitting because continued employment is rendered impossible,
unreasonable or unlikely; as an offer involving a demotion in rank
and diminution in pay. Likewise, constructive dismissal exists
when an act of clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee leaving him
with no option but to forego with his continued employment."
- Employees may be transferred based on their qualifications,
aptitudes and competencies to positions in which they can
function with maximum benefit to the company.
Resignation and Effectivity

EMCO PLYWOOD CORP V ABELGAS
SHIE JIE CORP/SEASTER EX-IM CORP V NATIONAL FEDERATION OF
LABOR
463 SCRA 569
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- Voluntary resignation is defined as the act of an employee, who

finds himself in a situation in which he believes that personal
service; thus, he has no other choice but to disassociate himself
from his employment. Acceptance of a resignation tendered by
an employee is necessary to make the resignation effective,
which was not shown in the instant case.
- To constitute a resignation, it must be unconditional and with
the intent to operate as such. There must be an intention to
relinquish a portion of the term of office accompanied by an act
of relinquishment.
- There is constructive dismissal when there is a demotion in rank

and/or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to
the employee.
MOBILE PROTECTIVE AND DETECTIVE AGENCY V OMPAD
458 SCRA 308
- In an illegal dismissal case, the onus probandi is on the
employer to prove that the dismissal was in fact for valid cause. It
was in this case also the burden of Mobile to submit evidence
that the resignation was voluntary on the part of Ompad.
Abolition of Position
BENGUET ELECTRIC COOPERATIVE V FIANZA
425 SCRA 41
The abolition of a position deemed no longer necessary is a

management prerogative, and this Court, absent any findings of
malice and arbitrariness on the part of management, will not
efface such privilege if only to protect the person holding that
office.
Dishonesty
NAGUIT V NLRC (MANILA ELECTRIC)
408 SCRA 617
- Petitioner thus committed dishonesty and breached MERALCOs
trust, which dishonesty calls for reprimand to dismissal under
MERALCOs rules.
- Dismissal is, however, too severe as a penalty in petitioners
case, given his 32 years of service during which he had no
derogatory record.
Constructive Discharge
Defined
PHIL JAPAN ACTIVE CARBON CORP V NLRC (QUINANOLA)

171 SCRA 164
- A constructive discharge is defined as: "A quitting because
continued employment is rendered impossible, unreasonable or
unlikely; as, an offer involving a demotion in rank and a
diminution in pay." In this case, Quinanolas assignment as
Production Secretary of the Production Department was not
unreasonable as it did not involve a demotion in rank (her rank
was still that of a department secretary) nor a change in her place
of work (the office is in the same building), nor a diminution in
pay, benefits, and privileges. It did not constitute a constructive
dismissal.
- It is the employer's prerogative, based on its assessment and
perception of its employees' qualifications, aptitudes, and
competence, to move them 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 complain that it amounts to a constructive
dismissal.
DUSIT HOTEL NIKKO V NUWHRAIN
466 SCRA 374
DUNCAN ASSOCIATION V GLAXO WELLCOME

R.P. DINGLASAN CONSTRUCTION INC V ATIENZA
433 SCRA 263
Constructive dismissal is defined as quitting when continued
employment is rendered impossible, unreasonable or unlikely as
the offer of employment involves a demotion in rank and
diminution of pay.
GO V CA (MOLDEX PRODUCTS INC)
430 SCRA 358
Constructive dismissal exists where there is a cessation of work
because continued employment is rendered impossible,
unreasonable or unlikely. It is present when an employees
functions, which were originally supervisory in nature, were
reduced, and such reduction is not grounded on valid grounds
such as genuine business necessity.
ACUNA V CA
POSEIDON FISHING V NLRC
Constructive Discharge and Illegal Dismissal

MARK ROCHE V NLRC
313 SCRA 356
- Constructive dismissal or a constructive discharge has been
defined as a quitting because continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay.
GLOBE TELECOM INC V FLORENDO
390 SCRA 201
Constructive dismissal exists where there is cessation of work
because "continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank
and a diminution in pay."
Preventive Suspension
GLOBE-MACKAY CABLE AND RADIO CORP V NLRC (SALAZAR)

206 SCRA 702
By itself, preventive suspension does, not signify that the
company has adjudged the employee guilty of the charges she
was asked to answer and explain. Such disciplinary measure is
resorted to for the protection of the company's property pending
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investigation any alleged malfeasance or misfeasance committed

by the employee.
allowable period of suspension in such a case is only 30 days as

provided by the Implementing Rules.
PHIL AIRLINES INC V NLRC (CASTRO)

292 SCRA 40
- The rules are rather clear under Secs. 3 and 4, Rule XIV of the
Omnibus Rules Implementing the Labor Code:
Sec.3. Preventive suspension. The employer can place the worker
concerned under preventive suspension if his continued
employment poses a serious and imminent threat to the life or
property of the employer or of his co-workers
Sec.4. Period of suspension. No preventive suspension shall last
longer than 30 days. The employer shall thereafter reinstate the
worker in his former or in a substantially equivalent position or
the employer may extend the period of suspension provided that
during the period of extension, he pays the wages and other
benefits due to the workers. In such case, the worker, shall not be
bound to reimburse the amount paid to him during the extension
if the employer decides, after completion of the hearing, to
dismiss the worker.
As held in Beja Sr. v CA: Imposed during the pendency of an
administrative investigation, preventive suspension is not a
penalty in itself. It is merely a measure of precaution so that the
employee who is charged may be separated, for obvious reasons,
from the scene of his alleged misfeasance while the same is being
investigated. While the former may be imposed on a respondent
during the investigation of the charges against him, the latter is
the penalty which may only be meted upon him at the
termination of the investigation or the final disposition of the
case.
VALIAO V CA
Rationale
KWIKWAY ENGG WORKS V NLRC (VARGAS)
195 SCRA 526
Preventive Suspension
- Further, the preventive suspension of respondent Vargas for an
indefinite period amounted to a dismissal and is violative of
Section 4, Rule XIV of the Implementing Rules of the Labor Code
which limits the preventive suspension to thirty (30) days. The
said rule also provides that "the employer shall thereafter
reinstate the worker in his former or in a substantially equivalent
position or the employer may extend the period of suspension
provided that during the period of extension, he pays the wages
and other benefits due to the worker." (Pacific Cement Company
Inc. v. NLRC
GATBONTON V NLRC (MIT, CALDERON)
479 SCRA 416
Preventive suspension is a disciplinary measure for the protection
of the companys property pending investigation of any alleged
malfeasance or misfeasance committed by the employee. The
employer may place the worker concerned under preventive
suspension if his continued employment poses a serious and
imminent threat to the life or property of the employer or of his
co-workers. However, when it is determined that there is no
sufficient basis to justify an employees preventive suspension,
the latter is entitled to the payment of salaries during the time of
preventive suspension.
Number of Offenses
CADIZ V CA
MARICALUM MINING CORP V DECORION
487 SCRA 182
- Sections 8 and 9 of Rule XXIII, Book V of the Implementing Rules
provide:
Section 8. Preventive suspension. The employer may place the
worker concerned under preventive suspension if his continued
employment poses a serious and imminent threat to the life or
property of the employer or his co-workers.
Section 9. Period of Suspension No preventive suspension
shall last longer than thirty (30) days. The employer shall
thereafter reinstate the worker in his former or in a substantially
equivalent position or the employer may extend the period of
suspension provided that during the period of extension, he pays
the wages and other benefits due to the worker. In such case, the
worker shall not be bound to reimburse the amount paid to him
during the extension if the employer decides, after completion of
the hearing, to dismiss the worker.
- Preventive suspension is justified where the employee's
continued employment poses a serious and imminent threat to
the life or property of the employer or of the employee's coworkers. Without this kind of threat, preventive suspension is not
proper.
- Article 286 of the Labor Code, which provides that the bona fide
suspension of the operation of a business or undertaking for a
period not exceeding six (6) months shall not terminate
employment, may not be applied in this case. The instant case
involves the preventive suspension of an employee not by reason
of the suspension of the business operations of the employer but
because of the employee's failure to attend a meeting. The
Other Causes. Business Related Causes

Recognition of Right - Business Related Causes/ Protection
AGABON V NLRC
UICHICO V NLRC
273 SCRA 35
- Article 283 of the Labor Code covers retrenchment.
Retrenchment, or "lay-off" in layman's parlance, is the
termination of employment initiated by the employer through no
fault of the employee's and without prejudice to the latter,
resorted to by the management during periods of business
recession, industrial depression, or seasonal fluctuations, or
during lulls occasioned by lack of orders, shortage of materials,
conversion of a plant for a new production program or the
introduction of new methods or more efficient machinery, or of
automation.
Simply put, it is an act of employer of dismissing employees
because of losses in the operation of a business, lack of work, and
considerable reduction on the volume of his business, a right
consistently recognized and affirmed by this court.
- Any claim of actual or potential business losses must satisfy
certain established standards before any reduction of personnel
becomes legal, viz:
1. The losses expected and sought to be avoided must be
substantial and not merely de minimis in extent;
2. The substantial losses apprehended must be reasonably
imminent, as such imminence can be perceived objectively and in
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good faith by the employer;

3. The retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses.
4. The alleged losses. If already realized, and the expected
imminent losses sought to be forestalled, must be proved by
sufficient and convincing evidence
FILIPINAS V GATLABAYAN
487 SCRA 673
There is likewise no evidence on record that petitioners complied
with the requirements of Article 283 of the Labor Code of the
Philippines, which reads:
Article 283. Closure of establishment and reduction of personnel
The employer may also terminate the employment of any
employee due to the installment 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 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 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.
- The general standards in retrenchment are: firstly, the losses
expected should be substantial and not merely de minimis in
extent. If the loss purportedly sought to be forestalled by
retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bona fide nature of the
retrenchment would appear to be seriously in question. Secondly,
the substantial loss apprehended must be reasonably imminent,
as such imminence can be perceived objectively and in good faith
by the employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is after all a
drastic recourse with serious consequences for the livelihood of
the employees retired or otherwise laid-off. Because of the
consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the
expected losses. The employer should have taken other measures
prior or parallel to retrenchment to forestall losses, i.e., cut other
costs than labor costs. An employer who, for instance, lays off
substantial numbers of workers while continuing to dispense fat
executive bonuses and perquisites or so-called golden
parachutes, can scarcely claim to be retrenching in good faith to
avoid losses. The employers prerogative to bring down labor
costs by retrenching after less drastic means e.g., reduction of
both management and rank-and-file bonuses and salaries, going
on reduced time, improving manufacturing efficiencies, trimming
of marketing and advertising costs, etc. have been tried and
found wanting.
- Alleged losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring this quantum of
proof is readily apparent: any less exacting standard of proof
would render too easy the abuse of this ground for termination of
services of employees.
BUSINESS SERVICES OF THE FUTURE TODAY INC V CA
480 SCRA 571
Article 283 of the Labor Code is the applicable law. It states,
ART. 283. 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 worker 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 as one (1)
whole year.
- For the cessation of business operations due to serious business
losses or financial reverses to be valid, the employer must give
the employee and the DOLE written notices 30 days prior to the
effectivity of his separation.
- However. in Agabon v. National Labor Relations
Commission,[15] we ruled that where the dismissal is for an
authorized cause, the lack of statutory due process should not
nullify the dismissal, or render it illegal, or ineffectual. However,
the employer should indemnify the employee, in the form of
nominal damages, for the violation of his right to statutory due
process. The amount of such damages is addressed to the sound
discretion of the Court, taking into account the relevant
circumstances.
A. Installation of Labor Saving Devices

B. Redundancy
ART. 283. 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.
Business Judgment
WILTSHIRE FILE CO INC V NLRC
193 SCRA 665
Redundancy, for purposes of our Labor Code, exists where the
services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, 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 overhiring of workers, decreased
volume of business, or dropping of a particular product line or
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service activity previously manufactured or undertaken by the

enterprise. 4 The employer has no legal obligation to keep in its
payroll more employees than are necessarily for the operation of
its business.
ASUFRIN JR V SAN MIGUEL CORP
425 SCRA 270
- Dole Philippines, Inc. v. NLRC, citing the leading case of Wiltshire
File Co., Inc. v. NLRC:
redundancy in an employers personnel force necessarily or
even ordinarily refers to duplication of work. That no other
person was holding the same position that private respondent
held prior to the termination of his services, does not show that
his position had not become redundant. Indeed, in any wellorganized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work of
one person. We believe that redundancy, for purposes of the
Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, 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
overhiring of workers, decreased volume of business, or dropping
of a particular product line or service activity previously
manufactured or undertaken by the enterprise.
- The determination that employees services are no longer
necessary or sustainable and, therefore, properly terminable is an
exercise of business judgment of the employer.
- The wisdom or soundness of this judgment is not subject to
discretionary review of the Labor Arbiter and the NLRC, provided
there is no violation of law and no showing that it was prompted
by an arbitrary or malicious act.
- It is not enough for a company to merely declare that it has
become overmanned. It must produce adequate proof that such
is the actual situation to justify the dismissal of the affected
employees for redundancy.
- Whether it be by redundancy or retrenchment or any of the
other authorized causes, no employee may be dismissed without
observance of the fundamentals of good faith.
- It is not difficult for employers to abolish positions in the guise
of a cost-cutting measure and we should not be easily swayed by
such schemes which all too often reduce to near nothing what is
left of the rubble of rights of our exploited workers.
- As has been said: We do not treat our workers as merchandise
and their right to security of tenure cannot be valued in precise
peso-and-centavo terms. It is a right which cannot be allowed to
be devalued by the purchasing power of employers who are only
too willing to bankroll the separation pay of their illegally
dismissed employees to get rid of them.
- This right will never be respected by the employer if we merely
honor it with a price tag. The policy of dismiss now and pay
later favors moneyed employers and is a mockery of the right of
employees to social justice.
Financial Loss
ESCAREAL V NLRC (PHILIPPINE REFINING CO INC)
213 SCRA 472
- Wiltshire File Co., Inc. vs. NLRC: Redundancy, for purposes of the
Labor Code, exists where the services of an employee are in
requirements of the enterprise; a position is redundant when it is
superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as 257the overhiring of
workers, a decreased volume of business or the dropping of a
particular product line or service activity previously manufactured
or undertaken by the enterprise.

- Redundancy in an employer's personnel force, however, does
not necessarily or even ordinarily refer to duplication of work.
That no other person was holding the same position which the
dismissed employee held prior to the termination of his services
does not show that his position had not become redundant.
- While concededly, Article 283 of the Labor Code does not
require that the employer should be suffering financial losses
before he can terminate the services of the employee on the
ground of redundancy, it does not mean either that a company
which is doing well can effect such a dismissal whimsically or
capriciously. The fact that a company is suffering from business
losses merely provides stronger justification for the termination.
Law Required Position

ESCAREAL V NLRC
When Redundancy
LOPEZ SUGAR CORP V FRANCO

TIERRA INTERNATIONAL CONSTRUCTION CORP V NLRC (OLIVAR)
211 SCRA 73
- Termination of an employee's services because of a reduction of
work force due to a decrease in the scope or volume of work of
the employer is synonymous to, or a shade of termination
because of redundancy under Article 283 of the Labor Code.
- Redundancy exists where the services of an employee are in
requirements of the enterprise. 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 over-hiring of
workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured
or undertaken by the enterprise.
ESCAREAL V NLRC
EDGE APPAREL INC V NLRC
349 PHIL 972
Redundancy exists where the services of an employee are in
excess of what would reasonably be demanded by the actual
requirements of the enterprise. A position is redundant when it is
superfluous, and superfluity of a position or positions could be
the result of a number of factors, such as the overhiring of
workers, a decrease in the volume of business or the dropping of
a particular line or service previously manufactured or
undertaken by the enterprise. An employer has no legal
obligation to keep on the payroll employees more than the
number needed for the operation of the business. Retrenchment,
in contrast to redundancy, is an economic ground to reduce the
number of employees. A dismissal due to redundancy entitles the
worker to separation pay equivalent to 1 month pay for every
year of service. When the termination of employment is due to
retrenchment to prevent losses, the separation pay is only an
equivalent of 1/2 month pay for every year of service. In the
above instances, a fraction of at least 6 months is considered as 1
whole year.
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Criteria - Selection of Employee

PANLILIO V NLRC (FINDSTAFF PLACEMENT SERVICES INC, OMAN
SHERATON HOTEL INC)
281 SCRA 53
- We have held that it is important for a company to have fair and
reasonable criteria in implementing its redundancy program, such
as but not limited to, (a) preferred status, (b) efficiency and (c)
seniority.
GOLDEN THREAD KNITTING INDUSTRIES INC V NLRC
TANJUAN V PHIL POSTAL SAVINGS BANK
411 SCRA 168
-Thus, the requisites for valid retrenchment are the following: (1)
necessity of the retrenchment to prevent losses, and proof of
such losses; (2) written notice to the employees and to the
Department of Labor and Employment (DOLE) at least one month
prior to the intended date of retrenchment; and (3) payment of
separation pay equivalent to one-month pay or at least one-half
month pay for every year of service, whichever is higher.
As this Court has held, before any reduction of personnel
becomes legal, any claim of actual or potential business losses
must satisfy established standards as follows: (1) the losses
incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is
reasonably necessary and is likely to be effective in preventing
the expected losses; and (4) the alleged losses, if already incurred,
or the expected imminent losses sought to be forestalled are
proven by sufficient and convincing evidence. The employer has
the burden of proving that the losses are serious, actual and real.
- The Court had previously ruled that financial statements audited
by independent external auditors constituted the normal method
of proof of the profit-and-loss performance of a company.
LOPEZ SUGAR CORP V FRANCO
Employment of Independent Contractor - Effect

ASIAN ALCOHOL CORPORATION V NLRC
305 SCRA 416
- On Effect of Employment of Independent Contractor: An
employer's good faith in implementing a redundancy program is
not necessarily destroyed by availment of the services of an
independent contractor to replace the services of the terminated
employees. We have previously ruled that the reduction of the
number of workers in a company made necessary by the
introduction of an independent contractor is justified when the
latter is undertaken in order to effectuate more economic and
efficient methods of production. In the case at bar, private
respondents failed to proffer any proof that the management
acted in a malicious or arbitrary manner in engaging the services
of an independent contractor to operate the Laura wells. Absent
such proof, the Court has no basis to interfere with the bona fide
decision of management to effect more economic and efficient
methods of production.
Procedure - Requirement
ASIAN ALCOHOL CORP V NLRC
Hearing

Venue of Complaint
C. Retrenchment to Prevent Losses

Defined
FF MARINE CORP V NLRC
455 SCRA 154
- Retrenchment is the termination of employment initiated by the
employer through no fault of the employees and without
prejudice to the latter, resorted to by management during
periods of business recession, industrial depression, or seasonal
fluctuations or during lulls occasioned by lack of orders, shortage
of materials, conversion of the plant for a new production
program or the introduction of new methods or more efficient
machinery, or of automation
- There are three (3) basic requisites for a valid retrenchment to
exist, to wit: (a) the retrenchment is necessary to prevent losses
and such losses are proven; (b) written notice to the employees
and to the DOLE at least one (1) month prior to the intended date
of retrenchment; and (c) payment of separation pay equivalent to
one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher
- Also according to jurisprudence: the employers prerogative to
bring down labor costs by retrenching must be exercised
essentially as a measure of last resort, after less drastic means
alleged losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and
convincing evidence
- The law recognizes this under Article 283 of the Labor Code.
However, the employer bears the burden to prove his allegation
of economic or business reverses.
Distinction Redundancy and Retrenchment

AG&P UNITED RANK AND FILE ASSN V NLRC (ATLANTIC GULF AND
PACIFIC COMPANY OF MANILA INC)
265 SCRA 159
- It is necessary to distinguish "redundancy" from
"retrenchment." Both are mentioned in Art. 283 of the Labor
Code as just causes for the closing of establishments or reduction
of personnel. "Redundancy" exists when the services of an
employee are in excess of what is required by an enterprise.
"Retrenchment," on the other hand, is one of the economic
grounds for dismissing employees and is resorted to primarily to
avoid or minimize business losses. Private respondent's
"redundancy program, " while denominated as such, is more
precisely termed "retrenchment" because it is primarily intended
to prevent serious business losses.
- The Labor Code recognizes retrenchment as one of the
authorized causes for terminating the employer-employee
relationship and the decision to retrench or not to retrench is a
management prerogative. In the case at bar, the company losses
were duly established by the financial statements presented by
both parties.
Distinction Closure and Retrenchment

JAT GEN SERVICES V NLRC (MASCARINAS)
421 SCRA 78
- Closure of business, on one hand, is the reversal of fortune of
the employer whereby there is a complete cessation of business
operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business
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as an authorized cause for termination of employment aims to

prevent further financial drain upon an employer who cannot pay
anymore his employees since business has already stopped.
- On the other hand, retrenchment is reduction of personnel
usually due to poor financial returns so as to cut down on costs of
operations in terms of salaries and wages to prevent bankruptcy
of the company. It issometimes also referred to as downsizing.
Retrenchment is an authorized cause for termination of
employment which the law accords an employer who is not
making good in its operations in order to cut back on expenses for
salaries and wages by laying off some employees. The purpose of
retrenchment is to save a financially ailing business establishment
from eventually collapsing.
ALABANG COUNTRY CLUB V NLRC (ALABANG COUNTRY CLUB
INDEPENDENT EMPLOYEES UNION)
466 SCRA 329
- The court first distinguished between retrenchment and closure
of a business undertaking, because the respondents were relying
on a case (Lopez Sugar Corp. v Federation of Free Workers)
involving retrenchment on the ground of serious business losses
being allowed subject to certain conditions.
- The court, however, viewed this case as one involving closure of
business undertaking.
- **Retrenchment is the reduction of personnel for the purpose
of cutting down on costs of operations in terms of salaries and
wages resorted to by an employer because of losses in operation
of a business occasioned by lack of work and considerable
reduction in the volume of business.
- **Closure of a business or undertaking due to business losses is
the reversal of fortune of the employer whereby there is a
complete cessation of business operations to prevent further
financial drain upon an employer who cannot pay anymore his
employees since business has already stopped.
- While the Labor Code provides for the payment of separation
package in case of retrenchment to prevent losses, it does not
obligate the employer for the payment thereof if there is closure
of business due to serious losses.
Coverage
PHILIPPINE TUBERCULOSIS SOCIETY INC V NLRC
294 SCRA 567
- Clearly (under the Labor Code), retrenchment or reduction of
the workforce in cases of financial difficulties is recognized as a
ground for the termination of employment.
- Although petitioner is a non-stock and non-profit organization,
retrenchment as a measure adopted to stave off threats to its
existence is available to it.
- Firstly, the losses expected should be substantial and not merely
de minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bonafide nature of the
retrenchment would appear to be seriously in question.
Secondly, the substantial loss apprehended must be reasonably
good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all
a drastic recourse with serious consequences for the livelihood of
the employees retired or otherwise laid-off. Because of the
consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the
costs than labor costs. An employer who, for instance, lays off
substantial numbers of workers while continuing to dispense fat
executive bonuses and perquisites or so-called golden
parachutes, can scarcely claim to be retrenching in good faith to
avoid losses. To impart operational meaning to the constitutional
policy of providing full protection to labor, the employers

prerogative to bring down labor costs by retrenching must be
exercised essentially as a measure of last resort, after less drastic
means - e.g., reduction of both management and rank-and-file
bonuses and salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising
costs, etc. - have been tried and found wanting.
- Lastly, but certainly not the least important, alleged losses if
already realized, and the expected imminent losses sought to be
forestalled, must be proved by sufficient and convincing evidence.
The reason for requiring this quantum of proof is readily
apparent: any less exacting standard of proof would render too
easy the abuse of this ground for termination of services of
employees.
- In addition to the above, the retrenchment must be
implemented in a just and proper manner. As held in Asiaworld
Publishing House, Inc. v. Ople:
there must be fair and reasonable criteria to be used in
selecting employees to be dismissed, such as: (a) less preferred
status (e.g. temporary employee); (b) efficiency rating; and (c)
seniority.
BALBALEC V NLRC (RURAL BANK OF BANGUED)
251 SCRA 399
The law recognizes the right of every business entity to reduce its
workforce if the same is made necessary by compelling economic
factors which would endanger its existence or stability. In spite of
overwhelming support granted by the social justice provisions of
our Constitution in favor of labor, the fundamental law itself
guarantees, even during the process of tilting the scales of social
justice towards workers and employees, "the right of enterprises
to reasonable returns of investment and to expansion and
growth." [quoting Art XIII, Sec 3, last paragraph of the Consti]
- The article not only contemplates the termination of
employment of workers or employees to minimize established
business losses but also to prevent impending losses, for the law's
phraseology explicitly uses the phrase "retrenchment to prevent
losses." However, retrenchment strikes at the very core of an
individual's employment and the burden clearly falls upon the
employer to prove economic or business losses with appropriate
supporting evidence. After all, not every asserted potential loss is
sufficient legal warrant for a reduction of personnel and the
evidence adduced in support of a claim of actual or potential
business losses should satisfy certain established standards, to
wit:
1. The losses expected and sought to be avoided must be
substantial and not merely de minimis;
2. The apprehended substantial losses must be reasonably
good faith by the employer;
3. The retrenchment should reasonably be necessary and likely to
prevent effectively the expected losses;
4. The losses, both the past and forthcoming, must be proven by
sufficient and convincing evidence.
Procedure
MAYON HOTEL & RESTAURANT V ADANA
458 SCRA 609
- Serious business losses do not excuse the employer from
complying with the clearance or report required under Article 283
of the Labor Code and its implementing rules before terminating
the employment of its workers. In the absence of justifying
circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their
actuations with bad faith, especially since they claimed that they
have been experiencing losses in the three years before 1997.
-Even assuming that the closure was due to a reason beyond the
control of the employer, it still has to accord its employees some
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relief in the form of severance pay.

- While we recognize the right of the employer to terminate the
services of an employee for a just or authorized cause, the
dismissal of employees must be made within the parameters of
law and pursuant to the tenets of fair play. And in termination
disputes, the burden of proof is always on the employer to prove
that the dismissal was for a just or authorized cause. Where there
is no showing of a clear, valid and legal cause for termination of
employment, the law considers the case a matter of illegal
dismissal.
Temporary Retrenchment
SEBUGERO V NLRC (GTI SPORTSWEAR)
248 SCRA 532
- Redundancy exists where the services of an employee are in
requirements of the enterprise.
- Retrenchment on the other hand, is used interchangeably with
the term "lay-off." It is the termination of employment initiated
by the employer through no fault of the employee's and without
prejudice to the latter, resorted to by management during
periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls
Requirements - Standards
LOPEZ SUGAR CORP V FED OF FREE WORKERS PHILIPPINE LABOR
UNION ASSOCIATION (PLUA-NACUSIP)
189 SCRA 179
- The general standards in terms of which the acts of petitioner
employer must be appraised:
1) the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be forestalled
by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bona fide nature of the
retrenchment would appear to be seriously in question.
2) The substantial loss apprehended must be reasonably
good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all
a drastic recourse with serious consequences for the livelihood of
the employees retired or otherwise laid-off.
3) Because of the consequential nature of retrenchment, it must
be reasonably necessary and likely to effectively prevent the
costs than labor costs. To impart operational meaning to the
constitutional policy of providing "full protection" to labor, the
employer's prerogative to bring down labor costs by retrenching
must be exercised essentially as a measure of last resort, after
less drastic means e.g., reduction of both management and
rank-and-file bonuses and salaries, going on reduced time,
improving manufacturing efficiencies, trimming of marketing and
advertising costs, etc. have been tried and found wanting.
4) If already realized, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and convincing
evidence. The reason for requiring this quantum of proof is
readily apparent: any less exacting standard of proof would
render too easy the abuse of this ground for termination of
services of employees.
-Garcia v. National Labor Relations Commissions:
. . . But it is essentially required that the alleged losses in business
operations must be prove[n] (NAFLU vs. Ople, [1986]). Otherwise,
said ground for termination would be susceptible to abuse by
scheming employers who might be merely feigning business
losses or reverses in their business ventures in order to ease out
employees.
BLUCOR MINERALS CORP V AMARILLA

458 SCRA 37
- Before any reduction of personnel becomes legal, any claim of
actual or potential business losses must satisfy the following
established standards: (1) the losses incurred are substantial, not
de minimis; (2) the losses are actual or reasonably imminent; (3)
the retrenchment can be fairly regarded as necessary and likely to
be effective in preventing the expected losses; and (4) sufficient
and convincing evidence prove the alleged losses, if already
incurred, or the expected imminent losses sought to be
forestalled are proven.
- It is a well-settled rule that the employer bears the burden of
proving the existence or the imminence of substantial losses, a
burden that is by nature an affirmative defense. It is the duty of
the employer to prove with clear and satisfactory evidence that
legitimate business reasons exist to justify retrenchment; failure
to do so necessarily results in a finding that the dismissal was
unjustified. Absent any convincing evidence that the alleged
losses are substantial and actual, the dismissal of employees
would be unjustified.
SAN MIGUEL CORP V ABELLA
PHIL CARPET EMPLOYEES ASSN V STO TOMAS
483 SCRA 128
- The requirements are:
(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 1/2 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.
- What the law speaks of is serious business losses or financial
reverses. Sliding incomes or decreasing gross revenues are not
necessarily losses, much less serious business losses within the
meaning of the law. The bare fact that an employer may have
sustained a net loss, such loss, per se, absent any other evidence
on its impact on the business, nor on expected losses that would
have been incurred had operations been continued, may not
amount to serious business losses mentioned in the law. 50 The
employer must also show that its losses increased through a
period of time and that the condition of the company will not
likely improve in the near future.
Nature of Loss
LOPEZ SUGAR CORP V FEDERATION OF FREE WORKERS
EDGE APPAREL INC V NLRC
BOGO-MEDELLIN SUGARCANE PLANTERS ASSN V NLRC (ALU,
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MONTILLA)
296 SCRA 108
- In a number of cases, the Court has laid down the following
requisites of a valid retrenchment: (1) the losses incurred are
substantial and not de minimis; (2) the losses are actual or
reasonably imminent; (3) the retrenchment is reasonably
necessary and is likely to be effective in preventing the expected
losses; and (d) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled, are proven by
sufficient and convincing evidence. In the present case,
petitioners miserably failed to prove (1) substantial losses and (2)
the reasonable necessity of the retrenchment.
No Sufficient and Substantial
Evidence of Business Loss
- To justify retrenchment, the employer must prove serious
business losses. Indeed, not all business losses suffered by the
employer would justify retrenchment under this article. The Court
has held that the "'loss' referred to in Article 283 cannot be just
any kind or amount of loss; otherwise, a company could easily
feign excuses to suit its whims and prejudices or to rid itself of
unwanted employees."
CAMA V JONIS FOOD SERVICES
425 SCRA 259
- The Constitution, while affording full protection to labor,
nonetheless, recognizes the right of enterprises to reasonable
returns on investments, and to expansion and growth.
- In line with this protection afforded to business by the
fundamental law, Article 283 of the Labor Code clearly makes a
policy distinction. It is only in instances 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 that employees whose employment
has been terminated as a result are entitled to separation pay.
- In other words, Article 283 of the Labor Code does not obligate
an employer to pay separation benefits when the closure is due
to serious losses. To require an employer to be generous when it
is no longer in a position to do so, in our view, would be unduly
oppressive, unjust, and unfair to the employer.
PHILIPPINE CARPET V STO. TOMAS
Sliding Income
SAN MIGUEL JEEPENEY SERVICE V NLRC
265 SCRA 35
What the law speaks of is serious business losses or financial
reverses. Clearly, sliding incomes (decreasing gross revenues) are
not necessarily losses, much less serious business losses within
the meaning of the law.
- Requisites of a valid retrenchment: (a) the losses expected
should be substantial and not merely de minimis in extent; (b) the
substantial losses apprehended must be reasonably imminent; (c)
the retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; and (d) the alleged losses,
if already incurred, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and convincing
evidence.
Proof of Loss
BOGO-MEDELLIN SUGAR CANE PLANTERS ASSN INC V NLRC
MITSUBISHI MOTORS V CHRYSLER
DANZAS INTERCONTINENTAL INC V DAGUMAN

456 SCRA 383
For instance, the requirements for a valid retrenchment which
must be proved by clear and convincing evidence are: (1) that
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 (1) month pay or at
least one-half () 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,
efficiency, seniority, physical fitness, age, and financial hardship
for certain workers.
- The condition of business losses justifying retrenchment is
normally shown by audited financial documents like yearly
balance sheets and profit and loss statements as well as annual
income tax returns. Financial statements must be prepared and
signed by independent auditors. Otherwise, they may be assailed
as self-serving. Since the losses incurred must be substantial and
actual or reasonably imminent, it is necessary that the employer
show that the losses increased through a period of time and that
the condition of the company is not likely to improve in the near
future.
- The same evidence is generally required when the termination
of employees is by reason of closure of the establishment or a
division thereof for economic reasons, although the more
overriding consideration is, of course, good faith. The employer
must prove that the cessation of or withdrawal from business
operations was bona fide in character and not impelled by a
motive to defeat or circumvent the tenurial rights of employees.
Parenthetically, if the business losses that justify the closure of
the establishment are duly proved, the right of affected
employees to separation pay is lost for obvious reasons.
Otherwise, the employer closing his business is obligated to pay
his employees their separation pay.
- It is worth noting in this regard that the employers prerogative
to close or abolish a department or section of his establishment
for economic reasons such as to minimize expenses and reduce
capitalization is as much recognized as managements prerogative
to close the entire establishment and cease operations due to
adverse economic conditions. In the instant case, petitioners
presented in evidence an affidavit of the companys financial
comptroller, financial statements for the year 1999 and a
quarterly report in support of the companys claim of losses.
Petitioners maintain that they were not given an opportunity to
present the companys audited financial statements before the
NLRC because private respondents appeal thereto was dismissed
without notice to petitioners. Since the case was brought to the
CA on certiorari, the audited financial statements attached to
petitioners Comment on Petition were no longer considered.
Consequently, the CA ruled that the financial documents
presented by petitioners are insufficient to prove their claim of
business losses.
- As they have the burden of proving the existence of an
authorized cause, petitioners should have presented the
companys audited financial statements before the labor arbiter
who is in the position to evaluate evidence. That they failed to do
so and only presented these documents to the CA on certiorari is
lamentable considering that the admission of evidence is outside
the sphere of the CAs certiorari jurisdiction. Neither can this
Court in the present petition admit in evidence the companys
audited financial statements much more make a ruling on the
question of whether the company incurred substantial losses
justifying retrenchment on the basis thereof as this Court is not a
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trier of facts. Besides, it cannot even be ascertained from the

audited financial statements attached to the instant petition
whether the losses incurred by the company were indeed
attributable to the brokerage department. We therefore agree
with the appellate court that petitioners failed to substantiate
their claim of valid retrenchment.
451 SCRA 70
To be valid, three requisites must concur, as provided in Article
283 of the Labor Code, as amended, namely: (1) The
retrenchment is necessary to prevent losses and the same is
proven; (2) Written notice to the employees and to the DOLE at
least one month prior to the intended date thereof; and (3)
Payment of separation pay equivalent to one month pay or at
least month pay for every year of service, whichever is higher.
Procedure (For Both Retrenchment and Redundancy)

Burden of Proof
SY V CA (SAHOT)
398 SCRA 301
In termination cases, the burden is upon the employer to show by
substantial evidence that the termination was for lawful cause
and validly made. A277, LC puts the burden of proving that the
dismissal of an employee was for a valid or authorized cause on
the employer, without distinction whether the employer admits
or does not admit the dismissal. For an employees dismissal to
be valid, (a) the dismissal must be for a valid cause, and (b) the
employee must be afforded due process.
- ON VALID CAUSE: if disease as a ground for termination, refer to
A284, LC and Sec8, Book VI, Rule I of the Omnibus Implementing
Rules of the Labor Code where a certification by 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 6 months even
with proper medical treatment. If curable, then employee would
be required to take a leave, then reinstate to formal position
upon restoration of his normal health. The requirement for a
medical certificate cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employees illness and
thus defeat the public policy in the protection of labor.
as applied in the case: petitioners did not comply with the
medical certificate requirement before Sahots dismissal was
effected
- ON DUE PROCESS: The employer is required to furnish an
employee with 2 written notices before the latter is dismissed: (1)
the notice to apprise the employee of the particular acts or
omissions for which his dismissal is sought, which is the
equivalent of a charge; and (2) the notice informing the employee
of his dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his
defense.
as applied in the case: No notice given, but instead what they
did to threaten the employee with dismissal, then actually
implement the threat when the occasion presented itself because
of private respondents painful left thigh
NATIONAL BOOKSTORE INC V CA (YMASA, GABRIEL)
378 SCRA 194
- The onus of proving that the dismissal of the employee was for a
valid and authorized cause rests on the employer. Failure to
discharge the same would mean the dismissal was not justified
and therefore illegal.
- The requisites for a valid dismissal are (a) the employee must be
afforded due process (b) the dismissal must be for a valid cause.
Petitioner complied with the first requisite by furnishing the
employees with written notices stating cause for termination, and
having decided to do so, the reasons therefor.
When Effected
CAJUCOM V TPI
SEBUGERO V NLRC
INDUSTRIAL TIMBER CORP V ABABON
480 SCRA
- In sum, under Art 283 LC, three requirements are necessary for a
valid cessation of business operations: (a) service of a written
notice to the employees and to the DOLE at least one month
before the intended date thereof; (b) the cessation of business
must be bona fide in character; and (c) payment to the employees
of termination pay amounting to one month pay or at least onehalf month pay for every year of service, whichever is higher.
Re-Hiring Effect
ATLANTIC GULF AND PACIFIC CO V NLRC (GAMBOA, TUASON)
307 SCRA 714
- Petitioners contend that the redundancy program was actually
a union-busting scheme of management, aimed at removing
union officers who had declared a strike. This contention cannot
stand in the face of evidence of substantial losses suffered by the
company. Moreover, while it is true that the company rehired or
reemployed some of the dismissed workers, it has been shown
that such action was made only as company projects became
available and that this was done in pursuance of the companys
policy of giving preference to its former workers in the hiring of
project employees. The rehiring or reemployment does not
negate the imminence to (sic) losses, which prompted private
respondent to retrench.
Liability
CAPITOL MEDICAL CENTER V MERIS
470 SCRA 236
The right to close the operation of an establishment or
undertaking is explicitly recognized under the Labor Code as one
of the authorized causes in terminating employment of workers,
the only limitation being that the closure must not be for the
purpose of circumventing the provisions on termination of
employment embodied in the Labor Code. The phrase closures
or cessation of operations of establishment or undertaking
includes a partial or total closure or cessation. And the phrase
closures or cessation x x x not due to serious business losses or
financial reverses recognizes the right of the employer to close
or cease his business operations or undertaking even if he is not
suffering from serious business losses or financial reverses, as
long as he pays his employees their termination pay in the
amount corresponding to their length of service.
- As long as the companys exercise of the same is in good faith to
advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid
agreement, such exercise will be upheld.
- The ultimate test of the validity of closure or cessation of
establishment or undertaking is that it must be bona fide in
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character.[39] And the burden of proving such falls upon the

employer.
Extent/ Degree of Partial Closure

D. Closing of Business
ART. 283., supra
Right
MAC ADAMS METAL V MAC ADAM METAL ENGINEERING

414 SCRA 411
The owner of a business can lawfully close his shop. No law can
force anyone to go into business, no law can compel anyone to
continue the same. It would be stretching the intent and spirit of
the law if the government were to unjustly interfere with the
managements prerogative to close or cease its business
operations, just because said business is not suffering from losses
or simply to provide the workers the continued employment.
- The governing article under the labor code with regard closure is
Article 283. Under this article, it seems clear that business
closures will not be interfered with provided however that what is
considered as due to workers be complied with. In addition to
the separation pay required to be paid, the establishment would
also have to serve the workers and the the DOLE notice one
month before the intended date of closure.
CATATISTA V NLRC (VICTORIAS MILLING CO INC)
247 SCRA 46
- In any case, Article 283 of the Labor Code is clear that an
employer may close or cease his business operations or
undertaking even if he is not suffering from serious business
losses or financial reverses, as long as he pays his employees their
termination pay in the amount corresponding to their length of
service. It would, indeed, be stretching the intent and spirit of the
law, if we were to unjustly interfere in management's prerogative
to close or cease its business operations just because said
business operation or undertaking is not suffering from any loss.
This Court, in the case of
- Maya Farms Employees Organization, et al. v. NLRC
"The rule is well-settled that labor laws discourage interference
with an employer's judgment in the conduct of his business. Even
as the law is solicitous of the welfare of employees, it must also
protect the right of an employer to exercise what are clearly
management prerogatives. As long as the company's exercise of
the same is in good faith to advance its interest and not for the
purpose of defeating or circumventing the rights of employees
under the laws or valid agreements, such exercise will be upheld."
- Dangan v. NLRC > management's prerogative to close or abolish
a department or section of the employer's establishment for
economic reasons. We reasoned out that since the greater right
to close the entire establishment and cease operations due to
adverse economic conditions is granted an employer, the closure
of a part thereof to minimize expenses and reduce capitalization
should similarly be recognized.
ALABANG COUNTRY CLUB INC V NLRC

CAPITOL MEDICAL CENTER INC V MERIS
INDUSTRIAL TIMBER CORP V ABABON
JAT GENERAL SERVICE V NLRC

CHENIVER DECO PRINT TECHNICS CORP V NLRC (CFWMAGKAKAISANG LAKAS NG MGA MANGGAGAWA SA CHENIVER)
325 SCRA 758
- there appears no complete dissolution of Chenivers business
undertaking but the relocation of its plant to Batangas, in our
view, amounts to cessation of petitioner's business operations in
Makati. It must be stressed that the phrase closure or cessation
of operation of an establishment or undertaking not due to
serious business losses or reverses under Art. 283 includes both
complete cessation of all business operations and the cessation of
only part of a company's business
Requisite
ME-SHURN CORP V ME-SHURN WORKERS UNION

448 SCRA 41
- To justify the closure of a business and the termination of the
services of the concerned employees, the law requires the
employer to prove that it suffered substantial actual losses. The
cessation of a companys operations shortly after the organization
of a labor union, as well as the resumption of business barely a
month after, gives credence to the employees claim that the
closure was meant to discourage union membership and to
interfere in union activities. These acts constitute unfair labor
practices.
Temporary Cessation of Operation
ART. 283., supra
Basis
SAN PEDRO HOSPITAL OF DIGOS INC V SEC OF LABOR
263 SCRA 98
Temporary suspension of operations is a valid exercise of
management prerogative provided it is not carried out in order to
circumvent the provisions of the Labor Code or to defeat the
rights of the employees under the Code. The determination to
suspend operations is a management prerogative that the State
usually does not interfere with, as no business can be required to
continue operating at a loss simply to maintain the workers in
employment. To require such continued operation would be
tantamount to a taking of property without due process, which
the employer has a right to resist. But where it is shown that the
closure is motivated not by a desire to prevent further losses, but
to discourage the workers from organizing themselves into a
union for more effective negotiation with management, the State
is bound to intervene.
- The burden of proving that such a temporary suspension is bona
fide falls upon the employer. In this instance, the HOSPITAL had
to establish the fact of its precarious financial health; that its
cessation of operation was really necessitated by its financial
condition; and that said condition would probably be improved by
such suspension.
- Art. 286 of the Code provides that "bona fide suspension for a
period not exceeding 6 months . . . shall not terminate
employment." Sec.12, Rule 1, Book VI of the Omnibus Rules
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provides that the employer-employee relationship shall be

deemed suspended in case of the suspension referred to above, it
being implicitly assumed that once operations are resumed, the
employment relationship is revived. If a valid suspension of
operation merely suspends the relationship, with more reason
will an illegal suspension, as in this case, not affect the
employment relationship.
creates an action in personam and does not create any real right
which should be respected by third parties. This conclusion draws
its force from the right of an employer to select his employees
and to decide when to engage them as protected under our
Constitution, and the same can only be restricted by law through
the exercise of the police power.
H. Procedural Due Process - Nature and Requirements

JAT GENERAL SERVICES V NLRC
MAYON HOTEL & RESTAURANT V ADONA
ME-SHURN CORP V ME-SHURN WORKERS UNION
Effect on Employer-Employee Relationship

SAN PEDRO HOSPITAL OF DIGOS V SEC OF LABOR
ART. 277 (b), supra
Book VI, Rule 1. Sec. 2d?
1. Requirements
In General
AGABON V NLRC
Essence of Due Process
E. Installation Labor Saving Device

ABAPO V CA (SAN MIGUEL CORP)
439 SCRA 594
In a similar case (involving the same issue the validity of the
termination of SMC employees at the Mandaue Brewery), it was
held that the installation of labor-saving devices by SMC at the
Mandaue plant was a proper ground for terminating
employment.
CENTRAL PANGASINAN ELEC COOP V MACARAEG

VALIAO V CA
F. Floating Status
Right to Counsel
Disease
ART. 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 coemployees: 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.
SALAW V NLRC (ASSOCIATED BANK, TENGCO, TUAZON)

202 SCRA 7
- Section 5 (of Rule 14, Book 5 of the IRR of the Labor Code) of the
said Rule requires that "the employer shall afford the worker
ample opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires."
Notice
SY V CA
G. Special Case of Business Transfers: Read: Cesar Villanueva,

Corporation Law Aspect of Corporate Reorganization, Effects of
Transfers on Employees of the Business, Philippine Corporate
Law, pp. 618-633, Library File
Nature of Labor Contract
SUNDOWNER DEV CORP V DRILON (NUWHRAIN, PENANO)
180 SCRA 14
- Nature of labor contract: The rule is that unless expressly
assumed, labor contracts such as employment contracts and
collective bargaining agreements are not enforceable against a
transferee of an enterprise, labor contracts being in personam,
thus binding only between the parties. A labor contract merely
STA. CATALINA COLLEGE V NLRC (TERCERO)

416 SCRA 233
- It should be noted that when Hilaria abandoned her teaching
position in 1971, the law in force was Republic Act 1052 or the
Termination Pay Law, as amended by Republic Act 1787, Section 1
of which provides:
SEC. 1. In cases of employment, without a definite period, in a
commercial, industrial, or agricultural establishment or
enterprise, the employer or the employee may terminate at any
time the employment with just cause; or without just cause in the
case of an employee by serving written notice on the employer at
least one month in advance, or in the case of an employer, by
serving such notice to the employee at least one month in
advance or one-half month for every year of service of the
115 | P
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employee, whichever is longer, a fraction of at least six months

being considered as one whole year.
The employer, upon whom no such notice was served in case of
termination of employment without just cause may hold the
employee liable for damages.
The employee, upon whom no such notice was served in case of
termination of employment without just cause shall be entitled to
compensation from the date of termination of his employment in
an amount equivalent to his salaries or wages corresponding to
the required period of notice.
xxx
- Above-stated law should thus apply in the case at bar.
Abandonment of work being a just cause for terminating the
services of Hilaria, petitioner school was under no obligation to
serve a written notice to her.
Two Notice Rule

AGABON V NLRC
if the dismissal was for cause, the lack of statutory due process
should not nullify the dismissal, or render it illegal or ineffectual.
But the violation of the petitioners right to statutory due process
by respondents warrants the payment of indemnity in the form of
nominal damage.
CAINGAT V NLRC
453 SCRA 142
The due process prescribed in Article 277 of the Labor Code, as
amended, and in Sections 2 and 7, Rule I, Book VI of the
Implementing Rules of the Labor Code, are mandatory. Two
notices should be sent to the employee. The first notice apprises
the employee of the particular acts or omissions for which his
dismissal is sought; while the second informs the employee of the
employers decision to dismiss him. The latter must come after
the employee is given a reasonable period from receipt of the
first notice within which to answer the charge, and ample
opportunity to be heard and defend himself with the assistance
of his representative, if he so desires. In this case, the
respondents only sent the first notice, gleaned from the June 20,
1996 memorandum. There was no second notice. Neither the
public notice in the Philippine Daily Inquirer, a newspaper of
general circulation, nor the demand letter could constitute
substantial compliance. What the public notice did was to inform
the public that petitioner was already separated as of June 20,
1996, the same day he was suspended.
his responsibility for the act he was accused of. Even though
petitioner in this case never admitted the accusations of
dishonesty against him, he impliedly acknowledged his
insubordination as shown in his petition.
CAURDANETAAN PIECE WORKERS UNION V LAGUESMA
285 SCRA 291
- It is to be borne in mind that proceedings before labor agencies
merely require the parties to submit their respective affidavits
and position papers. Adversarial trial is addressed to the sound
discretion of the labor arbiter. To establish a cause of action, only
substantial evidence is necessary; i.e., such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion, even if other minds equally reasonable might
conceivably opine otherwise.
- As ruled in Manalo vs. Roldan-Confesor:
"Clear and convincing proof is '. . . more than mere
preponderance, but not to extent of such certainty as is required
beyond reasonable doubt as in criminal cases . . .'while
substantial evidence '. . . consists of more than a mere scintilla of
evidence but may be somewhat less than a preponderance . . .'
Consequently, in the hierarchy of evidentiary values, We find
proof beyond reasonable doubt at the highest level, followed by
clear and convincing evidence, preponderance of evidence, and
substantial evidence, in that order."
- It must be stressed that labor laws mandate the speedy
administration of justice, with least attention to technicalities but
without sacrificing the fundamental requisites of due process. In
this light, the NLRC, like the labor arbiter, is authorized to decide
cases based on the position papers and other documents
submitted, without resorting to the technical rules of evidence.
Verily, Respondent NLRC noted several documentary evidence
sufficient to arrive at a just decision. Indeed, the evidence on
record clearly supports the conclusion of the labor arbiter that
the petitioners were employees of respondent, and that they
were illegally dismissed.
NATIONAL SEMICONDUCTOR (HK) DISTRIBUTION, LTD V NLRC
(SANTOS)
291 SCRA 348
.
- The essence of due process is simply an opportunity to be heard,
or as applied to administrative proceedings, an opportunity to
explain ones side.
In Agabon v. NLRC, we said that if the dismissal was for cause, the
lack of statutory due process should not nullify the dismissal, or
render it illegal or ineffectual. But the violation of the petitioners
right to statutory due process by respondents warrants the
payment of indemnity in the form of nominal damage.
- A formal or trial type hearing is not at all times and in all

instances essential to due process, the requirements of which are
satisfied where the parties are afforded fair and reasonable
opportunity to explain their side of the controversy. It is deemed
sufficient for the employer to follow the natural sequence of
notice, hearing and judgment.
HAYLIFT MANILA INC V CA

LA CARLOTA PLANTERS ASSN INC V NLRC


LAVADOR V J MARKETING CORP

497 SCRA
- Section 2, Rule XXIII, Book V of the Implementing Rules of the
Labor Code provides fro the standards of due process and
requirements of notice to be followed in all cases of termination
of employment.
- Santos vs. San Miguel Corporation: Procedural due process
requires the employer to give the employee two notices. First is
the notice apprising him of the particular acts or omissions for
which his dismissal is sought. Second is the subsequent notice
informing him of the employers decision to dismiss him.
- Homeowners Savings and Loan Association, Inc. vs. NLRC: Actual
adversarial proceeding becomes necessary only for clarification or
when there is a need to propound searching questions to unclear
witnesses. This is a procedural right which the employee must,
Hearing
MAGOS V NLRC
300 SCRA 484
- Both the NLC and the Labor Arbiter found that no formal hearing
was conducted regarding petitioner's dismissal. Although a
hearing is essential to due process, we did hold that no formal
hearing was necessary when the petitioner had already admitted
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however, ask for. It is not an inherent right.

- Agabon vs. National Labor Relations Commission: Procedurally,
(1) if the dismissal is based on a just cause under Article 282, the
employer must give the employee two written notices and a
hearing or opportunity to be heard if requested by the employee
before terminating the employment: a notice specifying the
grounds for which dismissal is sought, a hearing or an opportunity
to be heard and after hearing or opportunity to be heard, a notice
of the decision to dismiss; x x x.
Position Paper
SHOPPES MANILA INC V NLRC (CAYUCA & TORNO)
419 SCRA 354
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.
- 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.
- Pursuant to Section 5, Rule V of the New Rules of Procedure of
the NLRC, the labor arbiter has the authority to determine
whether or not there is a necessity to conduct formal hearings in
cases brought before him for adjudication.
- It is entirely within the authority of the labor arbiter to decide a
labor case before him, based on the position papers and
supporting documents of the parties, without a trial or formal
hearing.
453 SCRA 256

YES, since there was substantial compliance through the
memoranda.
- In the present case, petitioner sent respondents a total of three
Memoranda stating that their stubborn refusal to comply with
the car policy and to surrender the subject vehicle constituted
gross insubordination, for which they could be dismissed. The
December 5, 1990 Memorandum sent to Respondent De Guzman
specified her acts that constituted gross insubordination.
- Neither Section 2 of Book V of Rule XXIII nor Section 2(d) of Rule
1 of Book VI of the Implementing Rules require strict literal
compliance with the stated procedure; only substantial
compliance is needed. On this basis, the Memoranda sent to
respondents may be deemed to have sufficiently conformed to
the first notice required under the Implementing Rules. The
Memoranda served the purpose of informing them of the
pending matters beclouding their employment and of extending
to them an opportunity to clear the air. In fact, not only were
respondents duly informed of the particular acts for which their
dismissal was sought; they were, in truth and in fact, able to
defend themselves and to respond to the charges with the
assistance of a counsel of their own choosing.
- Agabon v. NLRC effectively reverted to Wenphil and ruled that a
dismissal due to abandonment -- a just cause -- was not illegal or
ineffectual, even if done without due process; but that the
employer should indemnify the employee with nominal damages
for non-compliance with statutory due process.
2. Other Procedural Matters

Burden and Degree of Proof
C.F. SHARP & CO V ZIALCITA

495 SCRA 387
Burden
Trial-type hearings are not required in labor cases and these may
be decided on verified position papers, with supporting
documents and their affidavits. It is not necessary for the affiants
to appear and testify and be cross-examined by the counsel for
the adverse party.
Cross Examination
Failure of Due Process
EQUITABLE PCI BANK V CAGUIOA

466 SCRA 658
- It is not necessary that the affidavits and other documents
presented conform with the technical rules of evidence since in
labor cases the rules of evidence prevailing in courts of law or
equity are not controlling. 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.
- See A221 of LC and Sec 3 of Rule V of the New Rules of
Procedure of the NLRC
Effect of Failure - Substantive - Procedural

CF SHARP & CO INC V ZIALCITA
AGABON V NLRC
ALADDIN V CA
460 SCRA 234
- Recently, this Court has had occasion to revisit the Serrano
doctrine and the present rule is set forth in the Agabon v. NLRC,
et al.,[5] namely, that where the dismissal is based on a just
cause, the failure to give the required notice does not invalidate
the same, but merely holds the employer liable for damages for
violating said notice of requirement. The amount of damages was
fixed at Thirty Thousand Pesos (P30,000) by way of nominal
damages.
GLAXO WELLCOME PHILIPPINES
EMPLEYADO NG WELLCOME-DFA
INC
Degree
CENTRAL PANGASINAN ELEC COOP INC V MACARAEG
SALVADOR V PHIL MINING SERVICE CORP
Prescription Period
NAGKAKAISANG
AZCOR MANUFACTURING INC V NLRC
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Offer to Reinstate
RANARA V NLRC
212 SCRA 631
- On Offer to Reinstate: The fact that his employer later made an
offer to re-employ him did not cure the vice of his earlier arbitrary
dismissal. The wrong had been committed and the harm done.
Notably, it was only after the complaint had been filed that it
occurred to Chang, in belated gesture of good will, to invite
Ranara back to work in his store. Chang's sincerity is suspect. We
doubt if his offer would have been made if Ranara had not
complained against him. At any rate, sincere or not, the offer of
reinstatement could not correct the earlier illegal dismissal of the
petitioner.
SANCTIONS AND REMEDIES

14.07 General Rule
Nature of Remedies - Twin Remedies
PHESCHEM V MOLDEZ
458 SCRA 339
- The legal consequences of an illegal dismissal are reinstatement
of the employee without loss of seniority rights and other
privileges, and payment of his full backwages, inclusive of
allowances, and other benefits or their monetary equivalent. The
law intended reinstatement to be the general rule. It is only when
reinstatement is no longer feasible that payment of separation
pay is awarded to an illegally dismissed employee
- Payment of separation pay as a substitute for reinstatement is
allowed only under exceptional circumstances, (1) when reasons
exist which are not attributable to the fault or beyond the control
of the employer, such as, when the employer, who is in severe
financial strait and has suffered serious business losses, has
ceased operations, implemented retrenchment, or abolished the
position due to the installation of labor-saving devices; (2) when
the illegally dismissed employee has contracted a disease and his
reinstatement will endanger the safety of his co-employees; or,
(3) where strained relationship exists between the employer and
the dismissed employee
unmistakable failure or miscarriage of justice, technicalities

should be transgressed in order to resolve the case. (Fulgencio v
NLRC)
- Under the existing law, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of
seniority rights. It must be emphasized, though, that the Court
has declared that there are specific circumstances obtaining
where reinstatement is not a practicable remedy, as when the
relations between the employer and the employee have been so
severely strained that it is no longer fitting to order reinstatement
or when the employee decides not to be reinstated. It must be
stressed that the petitioner was charged by the respondent
spouses with qualified theft and was even coerced into
withdrawing the labor case against them. No other conclusion
may be deduced other than the categorical fact that antagonism
already caused a severe strain in the relationship between
respondent spouses and petitioner. Separation pay is the amount
that an employee receives at the time of his severance from the
service and is designed to provide the employee with the
wherewithal during the period that he is seeking another
employment. The grant of separation pay does not impede an
award for backwages as the latter represents the amount of
earning lost by reason of unjustified dismissal. A more equitable
settlement, therefore, would be an award of separation pay
equivalent to at least one month pay for every year of service in
addition to his full backwages, allowances and other benefits.
TRIAD SECURITY & ALLIED SERVICES INC V ORTEGA
481 SCRA 591
- As the law now stands, an illegally dismissed employee is
entitled to two reliefs, namely: backwages and reinstatement.
These are separate and distinct from each other. However,
separation pay is granted where reinstatement is no longer
feasible because of strained relations between the employee and
the employer. In effect, an illegally dismissed employee is
entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable and backwages.
- Backwages and separation pay are, therefore, distinct reliefs
granted to one who was illegally dismissed from employment.
The award of one does not preclude that of the other as this
court had, in proper cases, ordered the payment of both.
expenses and risks."
Rationale for Remedies

GLOBE MACKAY V
14.08 Reinstatement
NUEVA ECIJA ELECTRIC CORP V NLRC
LAKPUE DRUG INC V BELGA
GREAT SOUTHERN MARITIME SERVICES CORP V ACUNA
425 SCRA 422
- As the Court eloquently stated in the case of Aguam vs. Court of
Appeals It is a far better and more prudent course of action for
the court to excuse a technical lapse and afford the parties a
review of the case on appeal to attain the ends of justice rather
than dispose of the case on technicality and cause a grave
injustice to the parties, giving a false impression of speedy
disposal of cases while actually resulting in more delay, if not a
miscarriage of justice.
CABATULAN V BUAT
451 SCRA 234
Where an ironhanded application of the rules will result in an
Defined
UNION OF SUPERVISORS V SEC OF LABOR
128 SCRA 442
- In its generally accepted sense, reinstatement is a restoration to
a state from which one has been removed or separated. It is the
return to the position from which he was removed (San Miguel
Brewery, Inc. v. Santos and CIR, 112 Phil. 986) and assuming again
the functions of the office already held (Abeto v. Rodas, 82 Phil.
67).
- Reinstatement pre-supposes that the previous position from
which one had been removed still exists, or that there is an
unfilled position more or less of a similar nature as the one
previously occupied by the employee.
And, Section 4, Rule 1, Book VI of the implementing Rules and
Regulations of the Labor Code states, to wit:
"An employee who is separated from work without just cause
should be reinstated to his former position, unless such position
no longer exists, at the time of his reinstatement, in which case
118 | P
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he shall be given a substantially equivalent position in the same

establishment without loss of seniority rights"
- The Labor Code provision on reinstatement, to wit:
"Art. 280. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights
and to his backwages computed from the time his compensation
was withheld from him up to the time of his reinstatement."
- Reinstatement is aimed to restore the situation as nearly as
possible to status quo ante the unfair labor practice. This requires
that those deprived of a recognized and protected interest by
violations of the law should be made whole so as to prevent the
violator from profiting from his misdeeds Yet the reinstatement
remedy must always be adapted to economic-business
conditions.
PHESCHEM INDUSTRIAL CORP V MOLDEZ
Employee Right
QUIJANO V MERCURY DRUG
292 SCRA 109
The doctrine of "strained relations" should be strictly applied so
as not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in
"strained relations", and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed
employee can never be reinstated.
- An illegally dismissed employee is entitled to reinstatement as a
matter of right. Where reinstatement is not feasible, expedient or
practical, as where reinstatement would only exacerbate the
tension and strained relations between the parties, or where the
relationship between the employer and employee has been
unduly strained by reason of their irreconcilable differences,
particularly where the illegally dismissed employee held a
managerial or key position in the company, it would be more
prudent to order payment of separation pay instead of
reinstatement. Unscrupulous employers, however, have taken
advantage of the overgrowth of this doctrine of "strained
relations" by using it as a cover to get rid of its employees and
thus defeat their right to job security. - Mercury Drugs charges of
misbehavior against Quijano cannot serve as basis to justify his
dismissal, let alone his non-reinstatement. These charges had
been found to be baseless and both the labor arbiter and the
NLRC agreed that there was no just cause for petitioner's
dismissal. It can even be granted in arguendo that a certain
antagonism may characterize the relationship of petitioner and
the respondents. However, the antagonism was caused
substantially if not solely by the misdeeds of respondent's
superiors. The arbiter found as a fact that the false charges were
filed against Quijano by two of his superiors to punish him for
exposing their usurious loan operations. Hence, to deny his
reinstatement due to the "strained relations" with his accusers
whose charges were found to be false would result in rewarding
the accusers and penalizing the victim. This would set a bad
precedent for no employer should be allowed to profit from his
own misdeed. In addition, it is most inequitable to rule that the
antagonism engendered by Quijanos performance of his legal
right to expose the usurious lending operations of some
warehouse officers will cause him to lose the security of his job.
The expose is work related and is intended to protect the
economic welfare of employees, and hence its exercise cannot be
visited by any punishment especially by the supreme penalty of
separation from service. Again, it bears emphasis that the State
guarantees a worker security of tenure which can well be his
most precious economic right. Thus, all efforts must be exerted to
protect him from unjust deprivation of his job.
- The alleged antagonism is a mere conclusion bereft of
evidentiary support. Mercury Drug did not raise the defense of

strained relationship before the labor arbiter. Consequently, this
issue which is factual in nature was not the subject of evidence on
the part of both the petitioner and the respondent. There is thus
no competent evidence upon which to base the conclusion that
the relationship between the petitioner and the respondent has
reached the point where it is now best to sever their employment
relationship. The NLRC's ruling on the alleged brewing
antagonism between the petitioner and the respondent is a mere
guesswork and cannot justify the non-reinstatement of petitioner
to his job.
ROSARIO V VICTORY RICEMILL
397 SCRA 760
- To effect the dismissal of an employee the law requires not only
that there be just and valid cause as provided under Article 282. It
likewise enjoins the employer to afford the employee the
opportunity to be heard and to defend himself. The employer is
mandated to furnish the employee with two written notices: (a) a
written notice containing a statement of the cause for the
termination to afford the employee ample opportunity to be
heard and defend himself with the assistance of his
representative, if he so desires; (b) if the employer decides to
terminate the services of the employee, the employer must notify
him in writing of the decision to dismiss him, stating clearly the
reason therefore
- When the dismissal is effected for a just and valid cause, the
failure to observe procedural requirements does not invalidate
nor nullify the dismissal of an employee. The consequence of the
failure either of the employer or the employee to live up to this
precept is to make him liable in damages, not to render his act
void. The measure of damages is the amount of wages the
employee should have received were it not for the termination of
his employment without prior notice. If warranted, nominal and
moral damages may also be awarded.
- Under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an
employee illegal.
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 to
and to his full backwages, inclusive of allowances, and to his other
actual reinstatement.
- Thus, only if the termination of employment is not for any of the
causes provided by law is it illegal and, therefore, the employee
should be reinstated and paid backwages.
- On the other hand, if it is shown that the employee was
dismissed for any of the just causes mentioned in said Art. 282,
then, in accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his
employment was terminated until it is determined that the
termination of employment is for a just cause because the failure
to hear him before he is dismissed renders the termination of his
employment without legal effect. .
Effect of Failure to Ask Relief

GENERAL BAPTIST BIBLE COLLEGE V NLRC (BASA)
219 SCRA 549
- Basas failure to specifically pray for reinstatement is a
119 | P
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procedural lapse which cannot put to naught a right which he is

entitled under a substantive law.
- But due to animosity and antagonism, College must not be
compelled to reinstate Basa but it must be given option to give
separation pay in lieu thereof.
PHESCHEM INDUSTRIAL V MOLDEZ
Rules on Reinstatement
Rationale
which one had been removed still exists, or that there is an

unfilled position more or less of a similar nature as this previously
occupied by the employee.
- Accordingly, an employee who is separated from his
employment on a false or nonexistent cause is entitled to be
reinstated to his former position because the separation is illegal.
If the position is no longer available for any other valid and
justifiable reason, however, the reinstatement of the illegally
dismissed employee to his former position would neither be fair
nor just. The law itself can not exact compliance with what is
impossible. Ad imposible tenetur. The employers remedy is to
reinstate the employee to a substantially equivalent position
without loss of seniority rights as provided for above.
ROQUERO V PHILIPPINE AIRLINES INC

401 SCRA 424
- The rationale of the law has been explained in Aris (Phil.) Inc. vs.
NLRC:
In authorizing execution pending appeal of the reinstatement
aspect of a decision of the Labor Arbiter reinstating a dismissed or
separated employee, the law itself has laid down a
compassionate policy which, once more, vivifies and enhances
the provisions of the 1987 Constitution on labor and the working
man.
xxx
xxx
xxx
These duties and responsibilities of the State are imposed not so
much to express sympathy for the workingman as to forcefully
and meaningfully underscore labor as a primary social and
economic force, which the Constitution also expressly affirms
with equal intensity. Labor is an indispensable partner for the
nations progress and stability.
xxx
xxx
xxx
x x x In short, with respect to decisions reinstating employees, the
law itself has determined a sufficiently overwhelming reason for
its execution pending appeal.
xxx
xxx
xxx
x x x Then, by and pursuant to the same power (police power),
the State may authorize an immediate implementation, pending
appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although
temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even
the life of the dismissed or separated employee and his family.
PNOC-EDP V ABELLA
448 SCRA 549
- The issue of reinstatement is addressed by paragraph three of
Article 223 of the Labor Code, to wit:
ART. 223. Appeal . . . .
In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer
shall not stay the execution for reinstatement provided herein.
- The above-stated provision of the Labor Code, however, must
be read in conjunction with the implementing rules and
regulations of the said law. Sec. 4(a) of Rule 1, Book VI of the
Rules and Regulations Implementing the Labor Code, provides
that:
SEC. 4. Reinstatement to former position. (a) An employee who
is separated from work without just cause shall be reinstated to
his former position, unless such position no longer exists at the
time of his reinstatement, in which case he shall be given a
substantially equivalent position in the same establishment
without loss of seniority rights. [Emphasis supplied.]
- Reinstatement presupposes that the previous position from
Exceptions
Business Conditions
UNION OF SUPERVISORS V SEC OF LABOR
[See Digests List Page]
ESPEJO V NLRC (COOP INSURANCE SYSTEM OF THE PHILS)
255 SCRA 430
- The law recognizes as valid any retirement plan, agreement or
management policy regarding retirement at an earlier or older
age.
Sec. 13, Book IV, of the Omnibus Rules Implementing the Labor
Code provides that in the absence of a retirement plan,
agreement or policy an employee may be retired upon reaching
the age of sixty (60) years. Construing this provision, an employee
may retire, or may be retired by his employer, upon reaching sixty
(60). Thus, an employee held to be illegally dismissed cannot be
reinstated if he had already reached the age of sixty (60) years at
the time of his complaint. NLRC therefore did not err in denying
the reinstatement of petitioner.
Strained Relations
PEARL S. BUCK FOUNDATION INC V NLRC
COMMERCIAL MOTORS CORP V NLRC (UMLAS)
192 SCRA 191
- It would seem, however, that the circumstances of this case
render inapproriate Umlas' reinstatement to his former position,
as an item of relief. A more equitable disposition is that which this
Court has more than once made in other cases of the same
nature: the award, in lieu of reinstatement, of separation pay at
the rate of one month's salary for every year of service, "so that .
. . (the employee) can be spared the agony of having to work
anew with . . . (the employer) under an atmosphere of antipathy
and antagonism, and the . . . (latter) does not have to endure the
continued service of . . . (the former) in whom it has lost
confidence."
SIBAL V NOTRE DAME OF GREATER MANILA
182 SCRA 538
- Moreover, it should be emphasized, that no strained relations
should arise from a valid and legal act of asserting ones right,
such as in the instant case, for otherwise, an employee who shall
assert his/ her right could be easily separated from the service by
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merely paying his/her separation pay on the pretext that his/her

relationship with his/her employer had already become strained.
- To Our mind, strained relations in order that it may justify the
award of separation pay in lieu of reinstatement with backwages,
should be such, that they are so compelling and so serious in
character, that the continued employment of an employee is so
obnoxious to the person or business of the employer, and that
the continuation of such employment has become inconsistent
with peace and tranquility which is an Ideal atmosphere in every
workplace
NAGA COLLEGE FOUNDATION EDUCATION WORKERS ORG V BOSE
289 SCRA 274
- Principle of Strained Relations: This cannot be applied
indiscriminately. 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. Besides,
no strained relations should arise from a valid and legal act of
asserting ones right; otherwise an employee 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
employer had already become strained. (Globe-Mackay Cable and
Radio Corp. v. NLRC)
BASCON V CA
CABATULAN V BUAT
ACESITE CORP V NLRC
- In illegal dismissal cases, reinstatement to an illegally dismissed
employees former position may be excused on the ground of
strained relations. This may be invoked against employees
whose positions demand trust and confidence, or whose
differences with their employer are of such nature or degree as to
preclude reinstatement. In the case at bar, Gonzales was Chief of
Security, whose duty was to manage the operation of the
security areas of the hotel to provide and ensure the safety and
security of the hotel guests, visitors, management, staff and their
properties according to company policies and local laws. It
cannot be gainsaid that Gonzales position is one of trust and
confidence, he being in charge of the over-all security of said
hotel. Thus, reinstatement is no longer possible.
BPI EMPLOYEES UNION V BPI
454 SCRA 357
- Mere allegation of strained relations to bar reinstatement is
frowned upon. Besides, the members of the management
involved in the case are no longer in the Escolta branch so no
more reason for strained relations.
The strained relations doctrine should be strictly applied so as not
to deprive an illegally dismissed employee of his right to
reinstatement.
- Well-entrenched is the rule that an illegally dismissed employee
is entitled to reinstatement as a matter of right. Over the years,
however, the case law developed that where reinstatement is not
feasible, expedient or practical, as where reinstatement would
only exacerbate the tension and strained relations between the
parties, or where the relationship between the employer and
employee has been unduly strained by reason of their
irreconcilable differences, particularly where the illegally
dismissed employee held a managerial or key position in the
company, it would be more prudent to order payment of
separation pay instead of reinstatement. Some unscrupulous
employers, however, have taken advantage of the overgrowth of
this doctrine of strained relations by using it as a cover to get
rid of its employees and thus defeat their right to job security.
-To protect labors security of tenure, we emphasize that the
doctrine of strained relations should be strictly applied so as

not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in
strained relations and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed
employee can never be reinstated.
- This Court is cognizant of managements right to select the
people who will manage its business as well as its right to dismiss
them. However, this right cannot be abused. Its exercise must
always be tempered with compassion and understanding.
-Where penalty less severe would suffice, whatever missteps may
be committed by labor ought not to be visited with consequence
so severe. It is not only because of the laws concern for the
workingmen. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those
dependent on the wage-earner. The misery and pain attendant
on the loss of jobs then could be avoided if there be acceptance
of the view that under all the circumstances of a case, the
workers should not be deprived of their means of livelihood. Nor
is this to condone what has been done by them.
SAGUM V CA (INST OF INTEGRATED ELECTRICAL ENGINEERS)

459 SCRA 223
- Article 279 and Sec. 2 of the Omnibus Rules Implementing the
Labor Code both provide that a regular employee may not be
terminated without just cause. Article 279 and Sec. 3 of the
Omnibus further that an employee unjustly dismissed is entitled
to reinstatement. However, it has been held that where
reinstatement would only exacerbate tension and strained
relations between the parties by reason of irreconcilable
differences, especially where the employee held a managerial or
key position, it would be more prudent to order payment of
separation pay instead of reinstatement.
- Some employers have abused the doctrine of strained
relations to defeat their employees security of tenure. To
protect the latter, the doctrine must be strictly applied and
cannot be given an overarching interpretation. Since almost every
labor dispute results in some strain, a liberal interpretation of the
doctrine would mean an unjustly dismissed employee could never
be reinstated.
- The existence of strained relations is a factual finding and should
be initially raised, argued and proven before the Labor Arbiter. In
the instant case, the defense was not raised by respondents
before the Labor Arbiter and was not subject of the evidence
raised by either party. There is thus no evidentiary support to the
parties strained relations and NLRCs ruling on the alleged
antagonism between them was mere guesswork. There is no hard
evidence to prove that the parties relationship has reached the
point where it is best to sever their employment relationship.
Implementation = Options and Rationale

Options and Rationale
JARDINE DAVIES V NLRC (SALUTIN)
225 SCRA 757
For abandonment to constitute a valid cause for termination of
employment there must be a deliberate unjustified refusal of the
employee to resume his employment.
- The order of immediate reinstatement pending appeal, in cases
of illegal dismissal is an ancillary relief under R.A. 6715 granted to
a dismissed employee to cushion him and his family against the
impact of economic dislocation or abrupt loss of earnings. If the
employee chooses not to report for work pending resolution of
the case on appeal, he foregoes such a temporary relief and is not
paid of his salary.
** underlined portion really obiter, but most relevant to our
topic.
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PIONEER TEXTURIZING CORP V NLRC (PTWU & DE JESUS)

280 SCRA 806
- The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To
require the application for and issuance of a writ of execution as
prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of
Article 223, i. e., the immediate execution of a reinstatement
order. The reason is simple. An application for a writ of execution
and its issuance Could be delayed for numerous reasons. A mere
continuance or postponement of a scheduled hearing, for
instance, or an inaction on the part of the Labor Arbiter or the
NLRC could easily delay the issuance of the writ thereby setting
at naught the strict mandate and noble put-pose envisioned by
Article 223. In other words, if the requirements of Article 224
were to govern, as we so declared in Maranaw, then the
executory nature of a reinstatement order or award
contemplated by Article 223 will be unduly circumscribed and
rendered ineffectual.
INTERNATIONAL CONTAINER SERVICES V NLRC (TANPEINGCO)
300 SCRA 335
- Art. 224 states that the need for a writ of execution applies only
within (5) years from the date a decision, an order or award
becomes final and executory. It cannot relate to an award or
order of reinstatement still to be appealed or pending appeal
which Art. 223 contemplates. The provision is clear that an award
for reinstatement shall be immediately executory even pending
appeal and the posting of a bond by the employer shall not stay
the execution for reinstatement. The legislative intent is quite
obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for
an issuance of a writ of execution as prerequisites for the
execution of a reinstatement award would certainly betray and
run counter to the very object and intent of Art. 223, i.e., the
immediate execution of a reinstatement order. An application for
a writ of execution and its issuance could be delayed for
numerous reasons. In other words, if the requirements of Art.
224 were to govern, then the executory nature of a reinstatement
order or order contemplated by Art. 223 will be unduly
circumscribed and rendered ineffectual. In enacting the law, the
legislature is presumed to have ordained a valid and sensible law,
one which operates no further than may be necessary to achieve
a specific purpose x x x x In introducing a new rule on the
reinstatement aspect of a labor decision under R. A. No. 6715,
Congress should not be considered to be indulging in mere
semantic exercise. On appeal, however, the appellate tribunal
concerned may enjoin or suspend the reinstatement order in the
exercise of its sound discretion.
KIAMCO V NLRC
14.09 Backwages
Definition
EQUITABLE BANKING CORP V SADAC
ST. THERESAS SCHOOL OF NOVALICHES FOUNDATION V NLRC
(ESTHER REYES)
289 SCRA 110
The term backwages has been defined as that for earnings lost
by a worker due to his illegal dismissal. Backwages are generally
granted on grounds of equity. Payment thereof is a form of relief
that restores the income lost by reason of such unlawful
dismissal. It is not private compensation or damages, but is
awarded in furtherance and effectuation of the public objectives

of the Labor Code. Nor is it a redress of a private right but, rather,
in the nature of a command to the employer to make public
reparation for dismissing an employee, either due to the formers
unlawful act or bad faith.
- Jurisprudence is filled to the brim with cases wherein backwages
were awarded to an employee illegally dismissed. But where, as
in this case of a pitiful employee rendered hapless by her lawyers
inaction or ignorance, the dismissal has been adjudged valid and
lawful, the challenged award of backwages is decidedly improper
and contrary to law and jurisprudence.
GENERAL BAPTIST BIBLE COLLEGE V NLRC
VIERNES V NLRC
Nature - Purpose
CLAUDIO V CA (NATIVIDAD)
423 SCRA 122
- 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
employee 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 Labor Code. Nor is
it a redress of a private right but rather in the nature of a
command to the employer to make public reparation for
dismissing an employee either due to the formers unlawful act or
bad faith.
Effect Failure to Claim

DELA CRUZ V NLRC (LO)
290 SCRA 1
- Article 279 of the Labor Code mandates that petitioner who was
unjustly dismissed from work is entitled to reinstatement without
loss of seniority rights and other privileges and to full back pay,
inclusive of allowances, and to other benefits or their monetary
equivalent computed from the time compensation was withheld
up to time of actual reinstatement. The grant of back wages
allows the unjustly and illegally dismissed employee to recover
from the employer that which the former lost by way of wages as
a result of his dismissal from employment.
- Apparently, the form used in filing the case did not include a box
for back wages and hence the petitioner had to particular item to
tick off. The court ruled that award of back wages resulting from
the illegal dismissal of an employee is a substantial right. Thus,
the failure to claim back wages in a complaint is a mere
procedural lapse which cannot defeat a right granted under
substantive law.
Effect Failure to Order

AURORA LAND PROJECTS CORP V NLRC (DAGUL)
266 SCRA 48
- It must be remembered that backwages and reinstatement are
two reliefs should be given to an illegally dismissed employee.
They are separate and distinct from each other. In the event that
reinstatement is no longer possible, as in this case, separation pay
is awarded to the employee. The award separation pay is lieu of
reinstatement and not of backwages. In other words, an illegally
dismissed employee is entitled to (1) either reinstatement, if
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viable, or separation pay if reinstatement is no longer viable, and

(2) backwages. Payment of backwages is specifically designed to
restore an employee's that was lost because of his unjust
dismissal. On the other hand, payment of separation pay is
intended to provide the employee money during the period in
which he will be looking for another employment
of the decision, MERCURY is to pay DAYAO backwages equivalent

to 1 year, 11 months, and 15 days without further
disqualifications.
PINES CITY EDUCATIONAL CENTER V NLRC (BENTREZ, PICART, ET
AL)
227 SCRA 655
Period - Compensation
ITOGON-SUYOC MINES INC V
SAGILOITOGON WORKERS UNION
24 SCRA 873
First. To be deducted from the back wages accruing to each of the
laborers to be reinstated is the total amount of earnings obtained
by him from other employment(s) from the date of dismissal to
the date of reinstatement. Should the laborer decide that it is
preferable not to return to work, the deduction should be made
up to the time judgment becomes final. And these, for the reason
that employees should not be permitted to enrich themselves at
the expense of their employer.
Second. Likewise, in mitigation of the damages that the dismissed
respondents are entitled to, account should be taken of whether
in the exercise of due diligence respondents might have obtained
income from suitable remunerative employment. We are
prompted to give out this last reminder because it is really unjust
that a discharged employee should, with folded arms, remain
inactive in the expectation that a windfall would come to him. A
contrary view would breed idleness; it is conducive to lack of
initiative on the part of a laborer. Both bear the stamp of
undesirability.
**note: the real issue in this case is really WON there was unfair
labor practice. The SC found that there was, and just affirmed the
judgment of the CIR. The topic of determination of back wages
was just obiter, with neither party raising such issue. The court
just wanted to say it.
FEATI UNIVERSITY FACULTY CLUB V FEATI UNIVERSITY
85 SCRA 395
Apply the ruling in Mercury Drug Co. V CIR
onable level
without qualification or deduction so as to avoid protracted delay
in the execution of the award due to extended hearings and
unavoidable delays and difficulties encountered in determining
the earnings of the laid off employees ordered to be reinstated
with backwages during the pendency of the case for purposes of
deducting the same from the gross backwages awarded.
their earnings during their lay off and the employees from
submitting counter proofs and obviates win evil s of idleness on
the part of the employee who would with folded arms remain
inactive in the that a windfall would come to him and attrition
and protracted delay in satisfying such award on the part of the
unscrupulous employers who have seized upon the further
proceedings which would practically render nugatory such award
and compel the employees to agree to unconscionable
settlements of backwages in order to satisfy their dire needs.
MERCURY DRUG CO INC V CIR (DAYAO)
56 SCRA 694
- As stated, the shortest prescriptive period for the filing of all
other actions for which the statute of limitations does not fix a
period, is four years. The period of delay in instituting this ULP
charge with claim for reinstatement and back wages, although
within the prescriptive period, should be deducted from the
liability of MERCURY to DAYAO for backwages. In order that the
employee, however, should be relieved from proving his income
during the period he was out of the service and the employer
from submitting counter-proofs, which may delay the execution
- On Backwages However, in ascertaining the total amount of

backwages payable to them, we go back to the rule prior to the
Mercury Drug rule that the total amount derived from
employment elsewhere by the employee from the date of
dismissal up to the date of reinstatement, if any, should be
deducted therefrom. We restate the underlying reason that
employees should not be permitted to enrich themselves at the
expense of their employer. In addition, the law abhors double
compensation.
BUSTAMANTE V NLRC (EVERGREEN FARMS)
265 SCRA 1
Regular employees dismissed for no valid cause are entitled to full
backwages and other benefits from the time their compensation
was withheld from them up to the time of their actual
reinstatement.
TORRES V NLRC (E&R SECURITY AGENCY)

330 SCRA 311
The rule now is that back wages awarded to an illegally dismissed
employee shall not be diminished or reduced by the earnings
derived by him elsewhere during the period of his illegal
dismissal.
KAY PRODUCTS INC V CA (KAY PRODUCTS EMPLOYEES UNION,
ABILA)
464 SCRA 544
- As regular employees, the private respondents are entitled to
security of tenure provided under the labor laws and may only be
validly terminated from service upon compliance with the legal
requisites for dismissal and considering that they were illegally
dismissed, the private respondents should be reinstated, in
accordance with the provision of the Labor Code, as amended,
particularly Article 279, to wit:
Article 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 to
and to his full backwages, inclusive of allowances, and to his other
actual reinstatement
- Thus, the said provision provides that illegally dismissed
employees are entitled to backwages plus other benefits
computed from the time compensation was withheld up to the
time of actual reinstatement. An illegally dismissed employee
who, in contemplation of the law, never left his office, should be
granted the compensation which rightfully belongs to him from
the moment he was unduly deprived of it up to the time it was
restored to him; the backwages to be awarded should not be
diminished or reduced by earnings derived by the illegally
dismissed employee elsewhere during the term of his illegal
dismissal.
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STANDARD ELECTRIC MANUFACTURING CORP V STANDARD

ELECTRIC EMPLOYEES UNION
BPI EMPLOYEES UNION V BPI
FILIPINO PRE-FABRICATED BUILDING SYSTEMS INC V PUENTE
INTERCONTINENTAL BROADCASTING CORP V BENEDICTO
495 SCRA 561
- Benedicto was entitled to backwages only up to the time he
reached 65 years old, the compulsory retirement age under the
law. When Benedicto was illegally dismissed on October 11,
1994, he was already 64 years old. He turned 65 years old on
December 1, 1994 at which age he was deemed to have retired.
Since backwages are granted on grounds of equity for earnings
lost by an employee due to his illegal dismissal, Benedicto was
entitled to backwages only for the period he could have worked
had he not been illegally dismissed, i.e. from October 11, 1994 to
December 1, 1994.
TPI PHIL CEMENT CORP V CAJUCOM VII
483 SCRA 494
- It bears reiterating that under Article 283, in case of
retrenchment to prevent losses, respondent is entitled to an
award of separation pay equivalent to one-half (1/2) months pay
for every year of service.
Effect Inflation
LANTION V NLRC (MENESES)
181 SCRA 513
ON INFLATION
- In respect of the argument that the inflation that has
supervened justifies the imposition of interest, this Court has held
that the effects of extraordinary inflation are not to be applied
without an agreement between the parties and without an
official declaration thereof by competent authorities
14.10 Financial Assistance

Allowed Financial Assistance
PHIL LONG DISTANCE TELEPHONE CO V NLRC
SALAVARRIA V LETRAN COLLEGE
296 SCRA 184
"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 on his moral character. Where the
reason for the valid dismissal is, for example, habitual intoxication
or an offense involving moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may not be required
to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of
social justice.
GUSTILO V WYETH PHILIPPINES INC
PINERO V NLRC
437 SCRA 112
An employee who is dismissed for cause is generally not entitled
to any financial assistance. Equity considerations, however,

provide an exception. Equity has been defined as justice outside
law, being ethical rather than jural and belonging to the sphere of
morals than of law. It is grounded on the precepts of conscience
and not on any sanction of positive law, for equity finds no room
for application where there is law. Although meriting termination
of employment, Pieros infraction is not so reprehensible nor
unscrupulous as to warrant complete disregard of his long years
of service. Moreover, he has no previous derogatory records.
Weighed on the scales of justice, conscience and reason tip in
favor of granting financial assistance to support him in the
twilight of his life after long years of service.
Under the circumstances, social and compassionate justice
dictate that petitioner Piero be awarded financial assistance
equivalent to one-half (1/2) months pay for every year of service
computed from his date of employment up to October 28, 1994
when he was declared to have lost his employment status.
Indeed, equities of this case should be accorded due weight
because labor law determinations are not only secundum
rationem but also secundum caritatem.
EASTERN SHIPPING LINES INC V SEDAN
486 SCRA 565
AS REGARDS THE CAS GRANT of FINANCIAL ASSISTANCE
- Telefunken Semiconductors Employees Union-FFW v. Court of
Appeals (2000): financial assistance is allowed only in instances
where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character.
- Arc-Men Food Industries Corporation v. NLRC, and Lemery
Savings and Loan Bank v. NLRC: when there is no dismissal to
speak of, an award of financial assistance is not in order.
- Justice Sabino de Leon, Jr. IN TELEFUNKEN: financial assistance
may be allowed as a measure of social justice and exceptional
circumstances, and as an equitable concession.
- The instant case equally calls for balancing the interests of the
employer with those of the worker, if only to approximate what
Justice Laurel calls justice in its secular sense.
- In this instance, our attention has been called to the following
circumstances:
that Sedan joined the company when he was a young man of 25
years and stayed on until he was 48 years old; that he had given
to the company the best years of his youth, working on board
ship for almost 24 years; that in those years there was not a single
report of him transgressing any of the company rules and
regulations; that he applied for optional retirement under the
companys non-contributory plan when his daughter died and for
his own health reasons; and that it would appear that he had
served the company well, since even the company said that the
reason it refused his application for optional retirement was that
it still needed his services; that he denies receiving the telegram
asking him to report back to work; but that considering his age
and health, he preferred to stay home rather than risk further
working in a ship at sea.
- These circumstances indubitably merit equitable concessions,
via the principle of compassionate justice for the working class.
Not Allowed
PHILIPPINE NATIONAL CONSTRUCTION CORP V NLRC (MANREZA)
170 SCRA 207
- While it is true that in earlier cases, We held that employees
dismissed for cause are nevertheless entitled to separation pay
on the ground of social and compassionate justice, that doctrine
was abandoned in Philippine Long Distance Telephone Co. vs.
NLRC and Marilyn Bucay.
- Separation pay shall be allowed as measure of social justice only
in instances where employee is validly dismissed for causes other
than serious misconduct or those reflecting on his moral
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character. Where reason for valid dismissal is, for example,

habitual intoxication or offense involving moral turpitude,
employer may not be required to give separation pay or financial
assistance, or whatever other name it is called, on the ground of
social justice.
- Social justice is not intended to countenance wrongdoing simply
because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Social justice cannot be permitted to be the refuge of scoundrels
any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if
their hands are clean and their motives blameless and not simply
because they happen to be poor.
EASTERN PAPER MILLS INC V NLRC (MALABANAN)
170 SCRA 595
- The only cases when separation pay shall be paid, although the
employee was lawfully dismissed, are when the cause of
termination was not attributable to the employee's fault but due
to: (1) the installation of labor-saving devices, (2) redundancy, (3)
retrenchment, (4) cessation of the employer's business, or (5)
when the employee is suffering from a disease and his continued
employment is prohibited by law or is prejudicial to his health and
to the health of his co-employees. (Articles 283 and 284, Labor
Code.) Other than these cases, an employee who is dismissed for
a just and lawful cause is not entitled to separation pay even if
the award were to be called by another name.
CHUA V NLRC
14.11 Separation Pay

When - Alternative
COCA-COLA BOTTLERS PHILS V VITAL
438 SCRA 278
Respondent who was illegally dismissed from work is entitled to
reinstatement without loss of seniority rights, full backwages,
inclusive of allowances, and other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement
- The circumstances obtaining in this case do not warrant the
reinstatement of respondent. Antagonism caused a severe strain
in the relationship between him and petitioner company. A more
equitable disposition would be an award of separation pay
equivalent to at least one month pay, or one month pay for every
year of service, whichever is higher, (with a fraction of at least six
(6) months being considered as one (1) whole year), in addition to
his full backwages, allowances and other benefits.
GUSTILO V WYETH PHILIPPINES INC
NATIONAL FEDERATION OF LABOR V CA
- In cases of closures or cessation of operations of establishment
or undertaking not due to serious business losses or financial
reverses, the separation pay of employees shall be equivalent to 1
month pay or to at least month pay for every year of service,
whichever is higher. In no case will an employee get less than 1
month separation pay if the separation from the service is due to
the above stated causes, provided that he has already served for
at least 6 months. Thus, if an employee had been in the service
for at least 6 months, he is entitled to a full months pay as his
termination pay if his separation from the job is due to any of the
causes enumerated above. However, if he has to his credit 10
years of service, he is entitled to 5 months pay, this being higher
than one-month pay. Stated differently, the computation of

termination pay should be based on either 1 month or month
pay, whichever will yield to the employees higher separation pay,
taking into consideration his length of service.
PHESCHEM INDUSTRIAL CORP V MOLDEZ
ETCUBAN V SULPICIO LINES
448 SCRA 516
Well-settled is the rule that separation pay shall be allowed only
in those instances where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on his
moral character. Inasmuch as reason for which the petitioner was
validly separated involves his integrity, which is especially
required for the position of purser, he is not worthy of
compassion as to deserve at least separation pay for his length of
service
HANFORD PHIL INC V JOSEPH
454 SCRA 773
- due to the stipulation of the CBA. As held in Hinatuan Mining
Corporation and/or the Manager versus National Labor Relations
and Margo Batister, we held that while it is true that under the
Labor Code, an employee who voluntarily resigns may not be
granted separation pay, as in fact, the general rule is that an
employee who voluntarily resigns is not entitled to separation
pay, however, there is an exception, that is, when it is stipulated
in the employment contract or CBA or such payment is authorized
by the employers practice or policy, as in this case. As aptly held
by the Labor Arbiter, the NLRC and the CA, it is very clear from
the CBA that when an employee or worker voluntarily resigns due
to, among others, separation from the company without cause,
such as voluntary resignation, then he is entitled to a separation
pay. Moreover, records show that petitioners granted the
employees mentioned earlier their separation pay upon their
separation by reason of their retirement. Under the Labor Code,
retirement is not also a ground for the grant of separation pay. If
petitioners could be liberal to those employees who retired, there
is no reason why they should not also extend such liberality to
respondent considering that she served petitioner for twenty one
years.
Philippine National Construction vs. NLRC finds application:
In the interpretation of an employers program providing for
separation benefits, all doubts should be construed in favor of
labor. After all, workers are the intended beneficiaries of such
program and our Constitution mandates a clear bias in favor of
the working class.
When Not Allowed

NORTH DAVAO MINING CORPORATION V NLRC
254 SCRA 721
The underscored portion of Art. 283 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." Said provision does not obligate an employer
to pay separation benefits when the closure is due to losses.
[a] Where the closure was due to business losses as in the instant
case, in which the aggregate losses amounted to over P20 billion
the Labor Code does not impose any obligation upon the
employer to pay separation benefits, for obvious reasons. The
company's practice of giving one month's pay for every year of
service could no longer be continued precisely because the
company could not afford it anymore. It was forced to close down
on account of accumulated losses of over P20 billion
[b] In this case, the basis for the claim of the additional separation
benefit of 17.5 days is alleged discrimination, i.e., unequal
125 | P
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treatment of employees, which is proscribed as an unfair labor

practice by Art. 248 (e) of said Code. Under the facts and
circumstances of the present case, the grant of a lesser amount of
separation pay to private respondent was done, not by reason of
discrimination, but rather, out of sheer financial bankruptcy, a
fact that is not controlled by management prerogatives. Stated
differently, the total cessation of operation due to mind-boggling
losses was a supervening fact that prevented the company from
continuing to grant the more generous amount of separation pay.
The fact that North Davao at the point of its forced closure
voluntarily paid any separation benefits at all although not
required by law and 12.5-days worth at that, should have elicited
admiration instead of condemnation.
14.12 Damages
Moral/ Exemplary
COLEGIO SAN JUAN DE LETRAN-CALAMBA V VILLAS
ASIA PACIFIC CHARTERING (PHILS) INC V FAROLAN
VIERNES V NLRC
Computation
MILLARES V NLRC
Effect of Acceptance
ANINO V NLRC
TOLOSA V NLRC (QWANA KAIUN)

401 SCRA 391
- Claims for damages under paragraph 4 of Article 217 must have
a reasonable causal connection with any of the claims provided
for in the article in order to be cognizable by the labor arbiter.
Only if there is such a connection with the other claims can the
claim for damages be considered as arising from employeremployee relations. In the present case, petitioner's claim for
damages is not related to any other claim under Article 217, other
labor statutes, or collective bargaining agreements.
Liability of Corporate Officers

Liability Rule
MAQUILING V PHILIPPINE TUBERCULOSIS SOCIETY INC

450 SCRA 465
BOGO-MEDELLIN SUGARCANE PLANTERS ASSN INC V NLRC

KAY PRODUCTS INC V CA

NYK INDUSTRIAL V NLRC (PUBLICO)

397 SCRA 489
ACUNA V CA
- In A.C. Ransom Labor Union-CCLU v. NLRC, which held that since

a corporation is an artificial person, it must have an officer who
can be presumed to be the employer, being the person acting in
the interest of the employer.
- In other words the corporation, in the technical sense only, is
the employer. In a subsequent case, we ordered the corporate
officers of the employer corporation to pay jointly and solidarily
the private respondents monetary award. More recently, a
corporation and its president were directed by this Court to
jointly and severally reinstate the illegally dismissed employees to
their former positions and to pay the monetary awards.
- In this case Cathy Ng, admittedly, is the manager of NYK.
Conformably with our ruling in A. C. Ransom, she falls within the
meaning of an employer as contemplated by the Labor Code,
who may be held jointly and severally liable for the obligations of
the corporation to its dismissed employees. Pursuant to
prevailing jurisprudence, Cathy Ng, in her capacity as manager
and responsible officer of NYK, cannot be exonerated from her
joint and several liability in the payment of monetary award to
private respondent
ACESITE CORP V NLRC

TAN V TIMBAL, JR.

434 SCRA 381
- CA correctly cited ruling in MAM Realty Development
Corporation vs. NLRC, that in labor cases, corporate directors and
officers are solidarily liable with the corporation for the
termination of employment of corporate employees committed
with malice or bad faith. The ruling applies in a case where a
corporate officer acts with malice or bad faith in suspending an
employee. Whether or not the petitioner acted with malice or
bad faith in ordering the suspension of the respondent is a
question of fact submitted by the parties to the Labor Arbiter for
resolution.
ACESITE CORP V NLRC
SAGUM V CA
Nominal Damages
CENTRAL LUZON CONFERENCE V CA
466 SCRA 711
- The violation of the petitioners right to statutory due process by
the private respondent warrants the payment of indemnity in the
form of nominal damages. The amount of such damages is
addressed to the sound discretion of the court, taking into
account the relevant circumstances (Savellano v. Northwest
Airlines, G.R. No. 151783, 8 July 2003, 405 SCRA 416).
Considering the prevailing circumstances in the case at bar, we
deem it proper to fix it at P30,000.00. We believe this form of
damages would serve to deter employers from future violations
of the statutory due process rights of employees. At the very
least, it provides a vindication or recognition of this fundamental
right granted to the latter under the Labor Code and its
Implementing Rules
Section 15
RETIREMENT
Statutory Reference: Art. 187; Book VI, Rule II, Omnibus Rules;
R.A. No. 8558 (1998)
15.01 Retirement
ART. 287. Retirement. Any employee may be retired

upon reaching the retirement age established in the
126 | P
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collective bargaining agreement or other applicable

employment contract.
In case of retirement, the employee shall be entitled to
receive such retirement benefits as he may have earned
under existing laws and any collective bargaining
agreement and other agreements: Provided, however,
That an employee's retirement benefits under any
collective bargaining and other agreements shall not be
less than those provided herein.
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty
(60) years or more, but not beyond sixty-five (65) years
which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said
establishment, 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 (6)
months being considered as one whole year.
Unless the parties provide for broader inclusions, the term
one-half (1/2) month salary shall mean fifteen (15) 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.
An underground mining employee upon reaching the age
of fifty (50) years or more, but not beyond sixty (60) years
which is hereby declared the compulsory retirement age
for underground mine workers, who has served at least
five (5) years as underground mine worker, may retire and
shall be entitled to all the retirement benefits provided for
in this Article.
Retail, service and agricultural establishments or
operations employing not more than ten (10) employees
or workers are exempted from the coverage of this
provision.
Violation of this provision is hereby declared unlawful and
subject to the penal provisions provided under Article 288
of this Code.
Nothing in this Article shall deprive any employee of
benefits to which he may be entitled under existing laws
or company policies or practices. (as amended by R.A. No.
8558, February 26, 1998)
Definition
ARIOLA V PHILEX MINING CORP
Types
GERLACH V REUTERS
448 SCRA 335
There are three kinds of retirement schemes. The first type is
compulsory and contributory in character. The second type is one
set- up by agreement between the employer and the employees
in collective bargaining agreements or other agreements between
them. The third type is one that is voluntarily given by the

employer, expressly as in an announced company policy or
impliedly as in a failure to contest the employee's claim for
retirement benefits. It is this third type of retirement scheme
which covers respondents Plan.
- Article 287 of the Labor Code reads:
Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement
or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive
such retirement benefits as he may have earned under existing
laws and any collective bargaining agreement and other
agreements.
- The first paragraph of the above provisions deals with the
retirement age of an employee established in (a) a collective
bargaining agreement or (b) other applicable employment
contract. The second paragraph deals with the retirement
benefits to be received by a retiring employee which he may have
earned under (a) an existing law, (b) a collective bargaining or (c)
other agreements.
- Article 287 does not in itself purport to impose any obligation
upon employers to set up a retirement scheme for their
employees over and above that already established under
existing laws, like the Social Security Act. Nonetheless, Section
14(a), Rule 1 of the Rules and Regulations Implementing Book VI
of the Labor Code, provides:
Retirement benefits. (a) An employee who is retired pursuant
to a bona fide retirement plan or in accordance with the
applicable individual or collective agreement or established
employer policy shall be entitled to all the retirement benefits
provided therein . . ."
Basis
AQUINO V NLRC (OTIS ELEVATOR CO)
206 SCRA 118
- Retirement benefits, where not mandated by law, may be
granted by agreement of the employees and their employer or as
a voluntary act on the part of the employer. They are intended to
help the employee 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 employer.
GAMOGAMO V PNOC SHIPPING AND TRANSPORT CORP
Interpretation
LOPEZ V NATIONAL STEEL CORP
423 SCRA 109
- While retirement laws are liberally construed in favor of persons
intended to be benefited, such interpretation cannot be made in
light of clear lack of consensual and statutory basis of the grant of
retirement benefits to petitioner. There is no provision in the
CBA authorizing retirement benefits in addition to retrenchment
pay. Also, petitioner has not yet reached retirement age. Lastly,
the companys retirement plan precludes employees whose
services were terminated for cause, from availing retirement
benefits
SALOMON V ASSOCIATE OF INTERNATIONAL SHIPPING LINES INC
457 SCRA 254
- While it is axiomatic that retirement laws are liberally construed
in favor of the persons intended to be benefited, however, such
interpretation cannot be made in this case in light of the clear
lack of consensual and statutory basis of the grant of retirement
benefits to petitioner. (Philippine Scout Veterans Security &
Investigation Agency, Inc. vs. NLRC)
127 | P
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Age
MAI PHILIPPINES INC V NLRC (NOLASCO)
151 SCRA 196
Rationale
PRODUCERS BANK OF THE PHILS V NLRC (PRODUCERS BANK
EMPLOYEES ASSN)
298 SCRA 517
ROMERO
- The retirement of an employee does not, in itself, affect his
employment status especially when it involves all rights and
benefits due to him, since these must be protected as though
there had been no interruption of service. It must be borne in
mind that the retirement scheme was part of the employment
package and the benefits to be derived therefrom constituted, as
it were, a continuing consideration for services rendered, as well
as an effective inducement for remaining with the corporation. It
is intended to help the employee enjoy the remaining years of his
life, releasing him from the burden of worrying for his financial
support, and are a form of reward for his loyalty.
- When the retired employees were requesting that their
retirement benefits be granted, they were not pleading for
generosity but were merely demanding that their rights, as
embodied in the CBA, be recognized. Thus, when an employee
has retired but his benefits under the law or the CBA have not yet
been given, he still retains, for the purpose of prosecuting his
claims, the status of an employee entitled to the protection of the
Labor Code, one of which is the protection of the labor union.
Disposition Petition denied. NLRC decision affirmed.
- Retirement is a different specie of termination of employment

from dismissal for just or authorized causes under Articles 282
and 283 of the Labor Code.
- While in all three cases, the employee to be terminated may be
unwilling to part from service, there are eminently higher
standards to be met by the employer validly exercising the
prerogative to dismiss for just or authorized causes. In those two
instances, it is indispensable that the employer establish the
existence of just or authorized causes for dismissal as spelled out
in the Labor Code. Retirement, on the other hand, is the result of
a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter after reaching a
certain age agrees and/or consents to sever his employment with
the former.
- Article 287 of the Labor Code, as amended, governs retirement
of employees.
- Under Article 287 of the Labor Code, a CBA may validly accord
management the prerogative to optionally retire an employee
under the terms and conditions mutually agreed upon by
management and the bargaining union, even if such agreement
allows for retirement at an age lower than the optional
retirement age or the compulsory retirement age.
15.02 Accrual of Benefits

Accrual
CRUZ V PHIL GOLBAL COMMUNICATIONS INC
430 SCRA 184
Eligibility
The employees right to payment of retirement benefits and/or

separation pay is governed by the Retirement Plan of the parties.
Under the Retirement Plan before us, petitioners are not entitled
to both separation pay and retirement benefits.
BRION V SOUTH PHILIPPINE UNION MISSION OF THE SEVENTH

DAY ADVENTIST CHURCH
307 SCRA 497
- Sec.4 should not be interpreted singly but should be read

together with the other provisions of the Retirement Plan in
question to determine the intent of the Plan. Section 6(b) Article
XI, of the Retirement Plan is explicit and leaves no doubt as to the
intention to prohibit the recovery of both separation pay and
retirement benefits. NLRC correctly pointed out that the
payment of separation pay is a requirement of the law, i.e. the
Labor Code, which is a social legislation. The Retirement Plan
itself clearly sets forth the intention of the parties to entitle
employees only to whatever is greater between the Retirement
Benefits then due and that which the law requires to be given by
way of separation pay. To give way to complainants demands
would be to totally ignore the contractual obligations of the
parties in the Retirement Plan, and to distort the clear intent of
the parties as expressed in the terms and conditions contained in
such plan.
- Under Art 283 of the LC, affected employees, in case of
retrenchment or cessation of operations, are always given
termination or separation pay equivalent to one month pay or at
least month pay for every year of service, whichever is higher.
Under Sec 4, Art VI of respondents Retirement Plan, the
employees are entitled to a retirement pay equivalent to 1
months pay for every year of service computed on the basis of
their basic monthly salary at the time of retirement. Here,
respondent opted to pay petitioners separation benefits
computed under the Retirement Plan, the same being higher than
what Art 283 of the LC provides.
- The following provisions on retirement, contained in the General

Conference Working Policy of the SDA, are of primary importance
in resolving the issue at hand:
Beneficiaries of Retirement Plan The benefits of the retirement
plan are designed for those who have devoted their lives to the
work of the Seventh-day Adventist Church and are eligible to
retire for reasons of old age and/or disability.
xxx
xxx
xxx
- Termination of Benefits The benefits shall terminate with the
decease of the beneficiary, except where there is an eligible
surviving spouse and/or children.
- In the case at bar, the words are very clear. Benefits are only to
terminate upon death. The employer and employee are free to
stipulate on retirement benefits, as long as these do not fall
below the floor limits provided by law. Furthermore, pension and
retirement plans, in line with the Constitutional mandate of
affording full protection to labor, must be liberally construed in
favor of the employee, it being the general rule that pension
plans formulated by an employer are to be construed most
strongly against the employer. Again, while paying retirement
benefits to petitioner may be odious and abhorrent to the SDA, in
the absence of any other stipulation for the termination of
petitioner's retirement benefits, the SDA must comply with its
contractual obligations, the contract being the law between the
parties.
Ground Termination
CAINTA CATHOLIC SCHOOL V CAINTA CATHOLIC SCHOOL
EMPLOYEES UNION
489 SCRA 468
LLORA MOTORS INC V DRILON

179 SCRA 175
- Our Labor Code has only one article that deals with the subject
of "retirement from the service." Article 287 of the Code reads as
follows:
Article 287. Retirement. Any employee may be retired upon
128 | P
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reaching the retirement age established in the Collective

Bargaining Agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive
such retirement benefits as he may have earned under existing
laws and any collective bargaining or other agreement.
- Examination of Article 287 above shows that entitlement to
retirement benefits may accrue either (a) under existing laws or
(b) under a collective bargaining agreement or other employment
contract. It is at once apparent that Article 287 does not itself
purport to impose any obligation upon employers to set up a
retirement scheme for their employees over and above that
already established under existing laws. In other words, Article
287 recognizes that existing laws already provide for a scheme by
which retirement benefits may be earned or accrue in favor of
employees, as part of a broader social security system that
provides not only for retirement benefits but also death and
funeral benefits, permanent disability benefits, sickness benefits
and maternity leave benefits. As is commonplace knowledge, the
Social Security Act provides for retirement benefits which
essentially consist of the right to receive a monthly pension for
the rest of the covered employee's life provided that: (1) such
employee had paid at least 120 monthly contributions prior to
retirement; and (2) has reached the age of sixty (60) years (if his
salary is less than P300.00 a month) or 65 years. The retirement
scheme here 'established is compulsory and contributory in
character on the part of both the employer and the employee,
backed up by criminal sanctions and administered by a large and
elaborate bureaucracy.
- Article 287 of the Labor Code recognizes that employers and
employees may, by a collective bargaining or other agreement,
set up a retirement plan in addition to that established by the
Social Security law, but prescribes at the same time that such
consensual additional retirement plan cannot be substituted for
or reduce the retirement benefits available under the compulsory
scheme established by the Social Security law. Such is the thrust
of the second paragraph of Article 287 which directs that the
employee shall be entitled to receive retirement benefits earned
"under existing laws and any collective bargaining or other
agreement."
- It is also important here to examine Section 13 and 14 of Rule, I,
book VI of the Rules and Regulations Implementing the Labor
Code (hereafter, "Implementing rule I"). Implementing Rule I
deals with both termination of services and retirement, being
entitled "Termination of Employment and Retirement." But
Sections 13 and 14 of Implementing Rule I are the only provisions
which deal with retirement matters. Under Section 13 which
provides as follows:
Sec. 13. Retirement. In the absence of any collective bargaining
agreement or other applicable agreement concerning terms and
conditions of employment which provides for retirement at an
older age, an employee may be retired upon reaching the age of
sixty (60) years.
- where an additional retirement plan has been established by a
collective bargaining agreement, or other applicable agreement
(or, under Section 14, an "established employer policy"), but such
plan fails to specify another, older, age of retirement, an
employee may retire, and may in turn be retired by his employer,
upon reaching age sixty (60).
Sec. 14. Retirement benefits.
(a) An employee who is retired pursuant to a bona-fide
retirement plan or a in accordance with the applicable individual
or collective agreement or established employer policy shall be
entitled to all the retirement benefits provided therein or to
termination pay equivalent at least one-half month salary for
every year of service, whichever is higher, a fraction of at least six
(6) months being considered as one whole year.
(b) Where both the employer and the employee contribute to the
retirement plan, agreement or policy, the employer's total
contribution thereto shall not be less than the total termination
pay to which the employee would have been entitled had there
been no such retirement fund. In case the employer's
contribution is less than the termination pay the employee is
entitled to receive, the employer shall pay the deficiency upon
the retirement of the employee.

(c) This Section shall apply where the employee retires at the age
of sixty (60) years or older.
- Section 14 (a) refers to "termination pay equivalent to at least
one-half (1/2) month for every year of service" while Section 14
(b) mentions "termination pay to which the employee would have
been entitled had there been no such retirement fund" as well as
"termination pay the employee is entitled to receive." It should
be recalled that Sections 13 and 14 are found in Implementing
rule I which deals with both "termination of employment" and
"retirement." It is important to keep the two (2) concepts of
"termination pay" and "retirement benefits" separate and distinct
from each other. Termination pay or separation pay is required to
be paid by an employer in particular situations Identified by the
Labor Code itself or by Implementing rule I. Termination pay
where properly due and payable under some applicable provision
of the Labor Code or under Section 4 (b) of Implementing Rule 1,
must be paid whether or not an additional retirement plan has
been set up under an agreement with the employer or under an
"established employer policy."
- Section 14 of Implementing Rule 1, like Article 287 of the Labor
Code, does not purport to require "termination pay" to be paid to
an employee who may want to retire but for whom no additional
retirement plan had been set tip by prior agreement with the
employer. Thus, Section 14 itself speaks of an employee "who is
retired pursuant to a bona-fide retirement plan or in accordance
with the applicable individual or collective agreement or
established employer policy." What Section 14 of Implementing
Rule I may be seen to be saying is that where termination pay is
otherwise payable to an employee under an applicable provision
of the Labor Code, and an additional or consensual retirement
plan exists, then payments under such retirement plan may be
credited against the termination pay that is due, subject,
however, to certain conditions. These conditions are: (a) that
payments under the additional retirement plan cannot have the
effect of reducing the amount of termination pay due and
payable to less than one-half (1/2) month's salary for every year
of service; and (b) the employee cannot be made to contribute to
the termination pay that he is entitled to receive under some
provision of the Labor Code; in other words, the employee is
entitled to the full amount of his termination pay plus at least the
return of his own contributions to the additional retirement plan.
15.03 Private Plan

Employer Obligation
GVM SECURITY AND PROTECTIVE AGENCY V NLRC
224 SCRA 734
Under Article 287 of the Labor Code, entitlement of employees
to retirement benefits must be specifically granted under existing
laws, a collective bargaining agreement or employment contract
or an established employer policy [Llora Motors, Inc. v. Drilon].
- Article 287 does not in itself purport to impose any obligation
upon employers to set up a retirement scheme for their
employees over and above that already established under
existing laws, like the Social Security Act.
- EXPLANATION OF A287: The first paragraph of Article 287 deals
with the retirement age of an employee, which is the age
established in (a) a collective bargaining agreement or (b) other
applicable retirement contract. The second paragraph of said
Article deals with the retirement benefits to be received by a
retiring employee and which are the retirement benefits as the
employee may have earned under (a) an existing law, (b) a
collective bargaining or (c) other agreements.
- KINDS OF RETIREMENT SCHEMES: (1)compulsory and
contributory in character; (2) one set up by agreement between
the employer and the employees in collective bargaining
agreements or other agreements between them (Llora Motors,
Inc. v. Drilon, supra); (3) one that is voluntarily given by the
employer, expressly as in an announced company policy or
129 | P
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impliedly as in a failure to contest the employee's claim for

retirement benefits (Allied Investigation Bureau, Inc. v. Ople, 91
SCRA 265 [1979]).
- problema daw ng legislature yan!
15.04 Benefits and Gratuity

STA. CATALINA COLLEGE V NLRC
PART 3
SOCIAL LEGISLATION
Statutory Reference: Social Security Act of 1997 (R.A. No.
8282); Government Service Insurance Act of 1997 (R.A. No.
8291); Employees Compensation and State Insurance Fund,
Book IV, Labor Code of the Philippines, P.D. No. 442, as
amended; Limited Portability Scheme in Social Security
Insurance Systems (R.A. No. 7699); and National Health
Insurance Act of 1995 (R.A. No. 7878)
4. Beneficiaries
SSS - 8k
GSIS - 2g; 2h
ECSIF - 167j
NHIA - 4a
3.03 Coverage
SSS - Compulsory - 9; 9-A; Voluntary - 9c; 11; 11-A; 9b;
arrangement 8j(4); NHIA - 7
Coverage
A. Integrated Outline
Social Security Act; Government Service Insurance Act; and
Employees Compensation and State Insurance Fund; and
National Health Insurance Act
GSIS - 3
ECSIF - 169-170
3.01 Policy Objectives
3.04 Effect of Separation from Employment
SSS - 2
GSIS - Whereas Clauses
ECSIF - 166
NHIA - 2, 3, 5
SSS - 11-A
GSIS - V
ECSIF
3.05 Reporting Requirements
Law Concept
SSS - 24
GSIS - 6
ECSIF - 24, 25, 28, 29
3.02 Definitions
3.06 Funding
1. Employer
SSS - 18; 19; 8f

Fund Ownership
SSS - 8c
GSIS - 2c
ECSIF - 167f
NHIA - 4j
GSIS - 5; 8
ECSIF - 183c
2. Employee
3.07 Effect of Non-Remittance
SSS - 8(4) - See also 8j

GSIS - 2d
ECSIF - 167g
SSS - 22b
SSS Failure Remit
3. Dependent
SSS - 8(3)i; 8e(2) & (3)
GSIS - 2f
ECSIF - 167i
NHIA - 4f
130 | P
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GSIS
ECSIF - 196b
3.10 Prescriptive Period
3.08 Benefits
SSS - 12; 12-A; 12-(B); 13; 13-A; 13(B); 14; 14-A
GSIS - 24-27; 13-14; 15-19; 20-22; 11-12; 23; 3
ECSIF - 185; 191; 192; 193; 194(a-d); 175; 197
NHIA - 30-38
SSS - 1144(2), New Civil Code

ECSIF - 201
Remittance
GSIS Retirement Benefits

Registration
ECSIF Cases
Definition - Disability
Statute of Limitation
3.11 Exclusivity of Benefits
Manifestation
SSS GSIS - 55
ECSIF - 173
Exclusivity
Distinction - Disability
Official Functions
Permanent Total Disability
3.12 Benefit Protection

SSS - 15; 16; 17
GSIS - 39
ECSIF - 198; 203; 175
3.13 Dispute Settlement
Unknown Cause
Permanent - Total
SSS - 5
GSIS - 30; 31; 32
ECSIF - 180; 182
NHIA - 39-43
DISCLAIMER
Occupational Disease
The risk of use, non-use and misuse

of this material shall be borne solely by the user.
3.09 Basis of Claim

SSS - 2
GSIS - 15-17
ECSIF - 172; 174
Basis - Increased Risk
Coming and Going Rule

131 | P
LATON

LABOR STANDARDS LAWS EXPLAINED

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LABOR STANDARDS LAWS EXPLAINED

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LABOR STANDARDS

Professor: Prof. Domingo P. Disini

Constitution and constitutes a legitimate exercise of the police

1.04 Sources of Law

Batong Buhay Goldmines, Inc. v. De La Serna

Labor Relations - provide for the institutional relationship

ART. II, SEC. 18. The State affirms labor as a primary

CMS Estate, Inc. v. Social Security System

CONSTITUTION, Art. II, Sec. 18

ART.1305. A contract is a meeting of minds between

ART.1306. The contracting parties may establish such

Kasapian ng Malayang Manggagawa sa Coca-Cola v. CA

C. Collective Bargaining Agreement

1.03 Basis for Enactment (1987Constitution)

BOOK V, RULE I, SEC. 1 (J). Legitimate Labor

DOLE Phils. v. Pawis ng Malabayang Obrero

Legal implication of a labor contract: It will become the law

554 SCRA 111 (2008)

guiding principles stated in broad, long-range terms that express

1.05 Law and Worker

1.06 Labor Case

regulatory law; there must be a strict interpretation

1.07 Case Decision

1.08 Management Function

Areno, Jr. v. Skycable, etc

Star Paper Corp. v. Simpol

1.09 Compromise and Waiver

ART. 227. Any compromise settlement, including

Requisites for Validity of Compromise Agreement:

559 SCRA 221 (2008)

2.02 Nature of Provision

policy and decision-making processes affecting their

PAL, Inc. v. Santos

The State shall promote the principle of shared

PCL Shipping Phils., Inc. v. NLRC

2.03 1987 Constitution

ART. II, SEC. 18. The State affirms labor as a primary

ART. XIV, SEC. 6. The State shall afford protection to

ART. II, SEC. 9. The State shall afford protection to

ART. XIII, SEC. 1. The Congress shall give highest

As a corollary to the social justice provision of the 1935

To this end, the State shall regulate the acquisition,

The 1987 Constitution builds on previous provisions and

ART. XIII, SEC. 3. The State shall afford full protection

CONSTITUTION, Art. II, Sec. 18

ART. II, SEC. 18. The State affirms labor as a primary

CONSTITUTION, Art. XIII, Sec. 3

Lopez v. Metropolitan Waterworks and Sewerage Authority

ART. II, SEC. 6. The State shall promote social justice

ART. II, SEC. 18. The promotion of social justice to

ART. XIII, SEC. 1. The Congress shall give highest

ART. XIII, SEC. 2. The promotion of social justice shall

Definition - Social Justice

CONSTITUTION, Art. II, Sec. 18 (Bernas, pp. 1194-1197)

2.04 Constitutional Rights and Labor Law

Due Process Requirements

Equal Work Opportunities

Ang Tibay v. CIR

Liberty of Contract/ Laissez-faire and State Interference

Phil. Assn. of Service Exporters v. Drilon

Alalayan v. National Power Corporation

Participation in Decision Making Process

271 SCRA 275 (1997)