100 Notes on Labor Law / 2007 / Marlon J.

Manuel
EMPLOYER-EMPLOYEE RELATIONSHIP

1. It is possible for a “dual juridical relationship” to exist – that of employer-employee

and vendor-vendee, or that of employer-employee and corporation-stockholder. Control
of the employee’s conduct is the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. The existence of a different kind of
juridical relationship between the parties does not necessarily extinguish the employer-
employee relationship. In the same way, the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract.

2. The submission of reports and recommendations regarding work progress on a

regular basis does not amount to control over the means and methods of work. Not all
rules are equivalent to control, that gives rise to an employer-employee relationship.
There is a difference between rules and guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party
hired to the use of such means. The first create no employer-employee relationship.

3. Exclusivity of service does not necessarily mean that the purported employer
exercised control over the means and methods of the purported employee’s work. This
feature is not meant to change the nature of the relationship between the parties, nor
does it necessarily imbue such relationship with the quality of control envisioned by law as
giving rise to an employer-employee relationship.

4. A person may be paid on the basis of results or time expended on the work, and
may or may not acquire an employment status. Payment by results is merely a method of
computing compensation and not a basis for determining the existence of employer-
employee relationship. Hence, payment by commission or on per-trip basis will not
negate the existence of an employer-employee relationship.

5. A party may render services for another, no matter how necessary for the latter’s
business, even without being hired as an employee. The fact that the worker performs
work that is usually necessary and desirable to the business of the employer is not
determinative of the existence of an employer-employee relationship. Article 280 of the
Labor Code is not the yardstick for determining the existence of an employer-employee
relationship. The provision merely distinguishes between the two (2) kinds of employees
(regular and non-regular), in an employment relationship that is not in dispute.

6. The mere presence of the contractor’s supervisor in the work premises does not
necessarily mean that the contractor had control over the work of the employees. The
test to determine the existence of independent contractorship is whether one claming to
be an independent contractor has contracted to do the work on its own account, under its
own responsibility, according to its own methods and without being subject to the control
of the principal, except only as to the results.

7. It is not enough to show substantial capitalization or investment in the form of tools

and equipment, to be considered as an independent contractor. In determining the
existence of an independent contractor relationship, several factors might be considered
such as: whether the contractor is carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of specified pieces of work, the control and supervision of the
workers; the power of the employer with respect to hiring, firing and payment of the
workers of the contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of payment.

8. In legitimate job-contracting, the law creates an employer-employee 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. In
labor-only contracting, the law 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 contractor as if such employees had been directly employed by the
principal.

9. For employees in a contracting arrangement, the actual source of the payment of

their wage does not matter as long as they are paid. As creditors, the employees may

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collect from anyone of the solidary debtors. Solidary liability does not mean that two
solidary debtors are liable for only half of the payment. The employees’ immediate
recourse, however, is with their direct employer.

10. The Constitution declares that the State affirms labor as a primary social economic
force. It shall protect the rights of workers and promote their welfare. 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.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
CLASSES OF EMPLOYEES

1. What determines whether a certain employment is regular or not is not the will and
word of the employer but the nature of the activities performed by the employee. The
primary standard of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual
business or trade of the employer. The test is whether the former is usually necessary or
desirable in the usual trade or business of the employer.

2. Whether one’s employment is regular is not determined by the number of hours one
works. Hence, part-time work does not necessarily negate regular employment. Regular
employment status is likewise not determined by the manner of compensation. Hence,
an employee whose mode of compensation is on a “per-piece basis” can still be a regular
employee.

3. 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 s/he can acquire a
regular status. A person becomes a regular employee by operation of law. Thus, the
status of regular employment attaches to a casual employee on the day immediately after
the end of his first year of service.

4. For seasonal employees to be excluded from those classified as regular employees,

it is not enough that they perform work that is seasonal in nature. They must have been
employed only for the duration of one season. If seasonal workers perform the same
tasks for the employer every season for several years, they will be considered regular
employees for their respective tasks. Seasonal workers who are called to work from time
to time and are temporarily laid off during off-season are not separated from service, but
merely considered on leave until re-employed.

5. Project employment contemplates an activity which is not commonly or habitually

performed or such type of work which is not done on a daily basis but only for a specific
duration of time or until completion, in which case, the services of an employee are
necessary and desirable in the employer’s usual business only for the period of time it
takes to complete the project. A project could also refer to a particular job or undertaking
that is within the regular or usual business of the employer, but which is distinct and
separate, and identifiable as such, from the other undertakings of the employer.

6. Length of service of a project employee is not the controlling test of employment

classification. Whether one is employed as a project employee or not would depend on
whether s/he was hired to carry out a specific project or undertaking, the duration and
scope of which were specified at the time his/her services were engaged. If there is no
specification of the duration and scope, and the work to be undertaken is usually
necessary or desirable in the usual business or trade of the employer, then it is regular
employment. In project employment, the employment is coterminous with the project.

7. A project employee may acquire the status of a regular employee when the
following concur: (a) there is a continuous rehiring of project employees even after the
cessation of a project for the same tasks or nature of tasks; and (b) the tasks performed
by the employees are vital, necessary and indispensable to the usual trade or business of
the employer. The length of time during which the employee was continuously rehired is
not controlling, but serves as a badge of regular employment.

8. For fixed-term employment to be valid: (a) the fixed period of employment must be
knowingly and voluntarily agreed upon by the parties without any force, duress, or
improper pressure brought to bear upon the employee and absent any other
circumstances vitiating his/her consent; (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 on the latter; and (c) the fixed-term employment is not used by
the employer to circumvent the employee’s right to security of tenure. Utilizing a series of
employment contracts of short duration can be considered circumvention.

9. The essence of probationary employment lies in the purpose or objective sought to

be attained, i.e., primarily for the employer to determine whether or not the employee is
qualified for permanent employment. The word “probationary” implies the purpose of the
term, but not its length. The probationary employee is not entitled to the completion of
the probationary period and can be terminated prior to that completion for a just cause or

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for failure to qualify as a regular employee in accordance with reasonable standards made
known to the employee at the time of engagement.

10. A part-time teacher cannot acquire permanent status despite the length of service.
Only when a teacher has served as a full-time employee can such teacher acquire
permanent or regular status. Semesters served as part-time lecturer cannot be credited
in computing the number of years the teacher has served to qualify for regular status.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
LABOR STANDARDS

1. The “floor wage” method involves the fixing of a determinate amount to be added
to the prevailing statutory minimum wage rates. The “salary-ceiling” method mandates a
wage adjustment that will be applied to employees receiving a certain denominated salary
ceiling. In the “salary-ceiling” method, workers already receiving more than the existing
minimum wage (up to a certain amount stated in the Wage Order – the “ceiling”) are also
to be given a wage increase.

2. The cause of action of an entitled employee to claim the service incentive leave pay
(SIL) 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 the leave
credits and opts for its commutation upon his/her resignation or separation, the cause of
action to claim the whole amount of the SIL shall arise when the employer fails to pay such
amount at the time of the resignation or separation from employment. The 3 year
prescriptive period commences from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the employee’s
services.

3. The criterion in making a distinction between a supplement and a facility does not
so much lie in the kind but the purpose. Food or snacks or other convenience provided by
the employers are deemed as supplements if they are granted for the convenience of the
employer.

4. Earnings and other remunerations which are not part of the basic salary shall not be
included in the computation of the 13th month pay. Management’s practice of including
non-basic benefits in the computation of the 13th month pay for two years, despite the
clarity of the law on this, constitutes voluntary employer practice which cannot be
unilaterally withdrawn by the employer.

5. The mere factual existence of a wage distortion does not ipso facto result to an
obligation to rectify it absent a law or other source of obligation which requires
rectification. The Labor Code’s mandate for the correction of a wage distortion
contemplates a wage distortion due to a prescribed law or wage order. It does not cover
voluntary and unilateral increases by the employer in fixing hiring rates.

6. The granting of a bonus is basically a management prerogative which cannot be

forced upon the employer who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employee’s basic salaries or wages,
especially so if it is incapable of doing so. As an exception, a bonus is demandable only
when there is clear proof that it is made part of the wage or salary or compensation (e.g.,
salary is partly fixed amount and partly incentive bonus).

7. A policy requiring employees to remain single and providing that they will be
separated from the service once they marry was declared void, it being violative of the
Labor Code’s policy with regard to discrimination against marriage. A policy prohibiting
employees from marrying co-employees, and requiring one of the spouses to resign from
the company, was likewise held invalid. However, a policy prohibiting employees from
marrying employees of a competitor company was upheld.

8. “Field personnel” are 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. If
required to be at specific places at specific times, the employees cannot be considered to
be field personnel. The definition is not merely concerned with the location where the
employee regularly performs his duties but also with the fact that the employee’s
performance is unsupervised by the employer.

9. Fixing of the work schedule of employees is the employer’s prerogative. Absent

discrimination, as in a situation where the change effected by management with regard to
working time is made to apply to all employees whether or not they are members of the
union, it cannot be said that the new schedule prejudices the right to self-organization.

10. Transfer of employees is within the inherent right of employers to manage their
business. This is subject to the condition that it must not be motivated by discrimination
or bad faith. Furthermore, the transfer may amount to constructive dismissal when the

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transfer is unreasonable, inconvenient, or prejudicial to the employee, and involves a
demotion in rank or diminution of salaries, benefits, and other privileges. An act of clear
discrimination, insensibility, or disdain by an employer may become so unbearable on the
part of the employee that it will force the employee to quit work.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
RECRUITMENT & SSS

1. The term “migrant worker” includes a Filipino who is hired by a Philippine

corporation to work for its branch abroad, even when the hiring was done through the
branch office while the employee was on a tourist status in the foreign country. Whether
employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding.
Obtaining a work permit in a foreign country does not necessarily mean a waiver of one’s
national laws on labor. That permit does not automatically mean that the non-citizen is
thereby bound by local laws only, i.e., by the laws of the country of work.

2. The obligation of the recruitment agency and the foreign principal to the employee
does not end upon the expiration of their contract (manning agreement between agency
and principal) but continues up to the termination of the employment contract. In fact,
such liability does not necessarily end upon the termination of employment but upon the
repatriation of the employee to the Philippines.

3. When after the termination of the original employment contract, the foreign
principal directly negotiated with the migrant worker and entered into a new and separate
employment contract, without the knowledge and consent of the recruitment agency, the
agency cannot be held liable for the worker’s claims arising from the contract extension.

4. The solidary nature of the relationship between the local recruitment agency and
the foreign principal makes them solidarily liable for any violation of the recruitment
agreement or the employment contract.

5. In illegal recruitment, the recruiter gives the impression that s/he has the power to
send workers abroad. The number of persons dealt with is not an essential ingredient of
the act of recruitment and placement. There can be recruitment even if only one
prospective worker is involved. Recruitment is deemed committed in large scale,
however, if committed against three (3) or more persons individually or as a group.

6. Under the “country-team approach,” all officers, representatives and personnel of

the Philippine government posted abroad regardless of their mother agencies shall, on a
per country basis, act as one country-team with a mission under the leadership of the
ambassador.

7. Total disability means the disablement of an employee to earn wages in the same
kind of work or similar nature that s/he was trained for, or accustomed to perform, or any
kind of work which a person of his/her mentality and attainment could do. It does not
mean absolute helplessness. In disability compensation, it is not the injury which is
compensated, but rather it is the incapacity to work resulting in the impairment of one’s
earning capacity. The fact that the employee was able to work again after a few years
will not negate total disability. It is of no consequence that the employee was cured after
a couple of years. The law does not require that the illness should be incurable.

8. The mandatory coverage of SSS is premised on the existence of an employer-

employee relationship. Regardless of the nature of employment, whether it is regular or
project, employees are subject of the compulsory coverage under the SSS law, unless their
employment falls under the specific exceptions provided by the law. By express provision
of law, casual employees are not subject to compulsory coverage of SSS.

9. The term “primary beneficiaries as of the date of his retirement” should include a
dependent spouse who was married to the member after the retirement of the latter.
Classifying dependent spouses and determining their entitlement to survivor’s pension
based on whether the marriage was contracted before or after the retirement of the other
spouse, regardless of the duration of the said marriage, bears no relation to the
achievement of the policy objective of the law.

10. Voluntary coverage of the SSS includes Filipinos recruited in the Philippines by
foreign-based employers for employment abroad, and spouses who devote full time to
managing the household and family affairs.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
RIGHT TO SELF-ORGANIZATION

1. The inclusion in a union of disqualified employees cannot be used as a ground for a

petition for cancellation of union registration, unless such inclusion is due to
misrepresentation, false statement or fraud, in connection with the adoption or ratification
of the constitution and by-laws, the minutes of ratification, and the list of members who
took part in the ratification; or in connection with the election of officers, minutes of the
election, and the list of voters. The alleged misrepresentation of a union by making it
appear that its membership was composed purely of rank-and-file employees is not the
misrepresentation that amounts to a ground for cancellation of registration.

2. The test of supervisory or managerial status depends on whether a person

possesses authority to act in the interest of his/her employer and whether such authority
is not merely routinary or clerical in nature but requires the use of independent judgment.
“Policy-determining” refers to policy-determination in matters that may be the subject of
negotiation between management and labor.

3. The prohibition in Art. 245 is not confined to a case of individual employees (rank-
and-file and supervisors) co-mingling in the same union. The prohibition extends to a
supervisors’ union joining a national federation the members of which include unions of
rank-and-file employees of the same employer unit. For this extension of the prohibition
in Article 245 to apply, however, two conditions must concur: (a) the rank-and-file
employees are directly under the authority of the supervisory employees; and (b) the
national federation is actively involved in union activities in the company. Even the
membership of a rank-and-file union and a supervisory union of the same company in two
separate federations with a common set of officers was held to be prohibited co-mingling.

4. The prohibition to join labor organizations extends to confidential employees or

those who by reason of their positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees. Two criteria must concur for an employee to
be considered a confidential employee: (a) the confidential relationship must exist
between the employee and his superior officer; and (b) the officer must handle
responsibilities relating to labor relations. A key element that must be considered is the
employee’s necessary access to confidential labor relations information - access must not
only be incidental but must be necessary in the performance of the employee’s duties.

5. False statements made by union officers before and during a certification election –
that the union is independent and not affiliated with a national federation – interfere with
the free choice of the employees, and can be a valid ground for a protest. A certification
election may be set aside for misstatements made during the campaign, where (1) a
material fact has been misrepresented; (2) an opportunity for reply has been lacking; and
(3) the misrepresentation has had an impact on the free choice of the employees in the
election.

6. After a certificate of registration is issued to a union, its legal personality cannot be

subject to collateral attack. It may be questioned only in an independent petition for
cancellation.

7. The pendency of a petition for cancellation of a union’s registration will not suspend
an ongoing certification election case. Neither will such petition for cancellation preclude
or suspend collective bargaining. The pendency of a petition for cancellation is not a
ground for the employer to refuse to bargain with the certified bargaining agent.

8. The test of whether an employer has interfered with and coerced employees in the
exercise of their rights to self-organization is whether the employer has engaged in
conduct which it may reasonably be said tends to interfere with the free exercise of the
employees’ rights. It is not necessary that there be direct evidence that any employee
was in fact coerced. It is only necessary that there is a reasonable inference that anti-
union conduct of the employer does have an adverse effect on self-organization and
collective bargaining. Under the “totality of conduct doctrine,” the culpability of the
employer should be evaluated against the background of and in conjunction with all
collateral circumstances.

9. Report of violations of rights and conditions of union membership does not always
require the support of 30% of the union membership. A report of a violation of rights and
conditions of membership in a labor organization may be made by any member or
members especially concerned.

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10. 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 on investments. Workers shall participate in policy and decision-
making processes affecting their rights and benefits as may be provided by law.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
COLLECTIVE BARGAINING

1. Collective bargaining is a mutual responsibility of the employer and the union and is
characterized as a legal obligation. The employer’s refusal to make a counter-proposal to
the union’s proposed CBA is an indication of bad faith and constitutes an unfair labor
practice. As a result of the employer’s refusal to bargain, the union’s proposal shall be
considered as the CBA between the parties. This principle applies to a situation where
there is no existing CBA, and the parties are required to negotiate one, and also, to a
situation where there is an existing CBA, and the parties are mandated to renegotiate its
provisions not later than 3 years from the start of its effectivity.

2. The choice of a collective bargaining agent is the sole concern of the employees.
The only exception to this rule is where the employer has to file the petition for
certification election because it was requested to bargain collectively. The employer has
no legal standing in a certification election as it cannot oppose the petition or appeal the
Med-Arbiter/Secretary’s orders related thereto.

3. The law has fixed the term of CBAs to a period of five years, in so far as the
representation aspect is concerned. There is no fixed period for the other provisions of
the CBA but the parties are mandated to renegotiate the non-representation provisions
not later than 3 years from the start of the CBA. In case of expiration of a CBA, the “hold-
over principle” applies, i.e., the CBA that has expired shall continue in full force and effect
until a new CBA is reached by the parties.

4. If an employer interferes in the selection of the union’s negotiators or coerces the

union to exclude from its panel of negotiators a representative of the union, and if it can
be inferred that the employer adopted the said act to yield adverse effects on the free
exercise of the right to self-organization and to collective bargaining, the employer
commits an unfair labor practice. Substantial evidence of the coercion is necessary.

5. The employees sought to be represented by the collective bargaining agent must

have substantial mutual interests in terms of employment and working conditions. The
express exclusion of certain groups of employees from the bargaining unit in a previous
CBA does not bar any renegotiation for the future inclusion of said employees in the unit.

6. A certified bargaining agent has the right to be furnished by the employer with the
annual audited financial statements, including the balance sheet and the profit and loss
statement, within thirty (30) calendar days from the date of receipt of the request. The
law requires a written request from the union as a precondition for this right.

7. The terms and conditions of a CBA constitute the law between the parties. A
unilateral policy of the employer that is contrary to the CBA cannot prevail over the
provisions of the CBA.

8. Under D.O. 40-03, a petition for certification election is barred when the duly
certified bargaining agent has commenced negotiations in good faith with the employer
within one year from the certification election and has sustained such negotiations (even
beyond one year), also in good faith.

9. The intention of the law is to limit the grounds for appeal that may stay the holding
of a certification election. Interlocutory orders of the Med-Arbiter are not appealable.
The Med-Arbiter’s order granting the conduct of a certification election in an unorganized
establishment shall not be subject to appeal. Any issue arising therefrom may be raised
by means of protest on the conduct and results of the certification election. All other
orders of the Med-Arbiter granting or denying a petition for certification election shall be
subject to appeal.

10. Where a petition for certification election has been filed and upon the Med-Arbiter’s
intercession, the parties agree to hold a consent election, the results thereof shall
constitute a bar to future petitions for certification election, in the same manner as a
certification election. The same principle applies to a consent election conducted with the
intercession of the Regional Office, even if no petition for certification election was filed.
If an election is conducted upon agreement by the parties but without the participation of
the Regional Office, such election will not serve as a bar to future petitions for certification
election.

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STRIKES

1. A strike is a temporary stoppage of work by the concerted action of the employees,

as a result of a labor dispute. A “picket” may be considered a strike if it causes a work
stoppage (such as when the picketers block the delivery of supplies or prevents other
employees from reporting for work). Even if the employer had shut down the operation
of one department prior to the picket, if the other departments that were still operating
were adversely affected by the picket in such a way that there was work stoppage, the
“picket” amounted to a strike. An “overtime boycott” or the concerted refusal of the
union members to render overtime work, after years of regularly having the said
arrangement, was also considered a strike.

2. To be valid, a strike must have as ground either ULP or bargaining deadlock. As an

exception, even if no ULP is committed by the employer, if the employees believe in good
faith that ULP acts exist so as to constitute a valid ground to strike, then the strike held
pursuant to that belief may be legal as a “good faith strike.” A mere claim of good faith,
however, will not be enough. In addition to such good faith, circumstances must have
warranted such belief.

3. In addition to the existence of a valid ground, the strike must likewise comply with
the procedural requirements (notice of strike, notice of the conduct of strike vote, actual
strike vote, notice of results of vote, cooling-off period, 7-day strike ban). The procedural
requirements are mandatory and the failure of a union to comply with the requirements
will render the strike illegal. This strict policy applies even to the 24-hour notice to the
NCMB of the conduct of the strike vote.

4. When the NCMB issues a notice converting the dispute into a preventive mediation
case, the said conversion has the effect of dismissing the notice of strike that has been
filed. If the union still proceeds with the strike, after such conversion, then the strike is an
illegal strike because the union, at that time, has already lost the notice of strike.

5. As a general rule, the Labor Code prohibits the issuance of injunctions or restraining
orders in any case growing out of labor disputes. Exceptions to these are the following:
(a) the NLRC’s power to enjoin or restrain actual and threatened commission of any or all
prohibited or unlawful acts, or to require the performance of a particular act which, if not
restrained or performed forthwith, may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party; and (b) the Secretary of Labor’s
(and the President’s) powers to issue assumption or certification orders. In some cases,
the Court has said that the coercive measure of injunction may also be used to restrain an
actual or threatened unlawful strike, not just the illegal acts attendant to the strike.

6. When an assumption order (or certification order) is issued, it should mandate the
return to work of the strikers, and the actual reinstatement of the returning strikers.
Payroll reinstatement is not contemplated by the law. Reinstatement must be to the
same position of the strikers before the strike and this order acts as a limitation on the
managerial prerogative to transfer and reassign employees. The order to reinstate the
returning strikers must cover all strikers and must not be limited to a group of strikers. In
one case, the Court even allowed the assumption order to cover striking employees whose
membership in the bargaining unit was in question.

7. The mere posting of an assumption order in conspicuous places in the picket area
does not satisfy the rigid requirement for proper service. The union affected could not be
adjudged to have defied such order since it was not properly apprised thereof.

8. Mere finding of the illegality of a strike should not be automatically followed by

wholesale dismissal of the strikers from employment. A union officer who knowingly
participates in an illegal strike and any worker or union officer who knowingly participates
in the commission of illegal acts during the strike may be declared to have lost their
employment status. An ordinary striking employee cannot be terminated for mere
participation in an illegal strike.

9. The Secretary has the prerogative to temper the consequence of the defiance of an
assumption order. The Secretary may merely suspend rather than dismiss the employees

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involved. Labor laws frown upon dismissal. Where a penalty less punitive would suffice,
an employee should not be sanctioned with a consequence so severe.

10. An “innocent bystander” who seeks an injunction from the regular court against a
labor strike must show that it is entirely different from, without any connection whatsoever
to, either party to the dispute, and, therefore, its interests are totally foreign to the
context thereof.

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TERMINATION DISPUTES (Causes)

1. Gross misconduct is 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. The misconduct
must be of such a grave and aggravated character and not merely trivial and unimportant.
The misconduct must be work-related. Failure to formally inform the employer of the
employee’s pregnancy cannot be considered grave misconduct.

2. Willful disobedience, to justify termination, requires the concurrence of two factors:

(a) the employee’s conduct must have been willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude; and (b) the order violated must have
been reasonable, lawful, made known to the employee and must pertain to the duties of
the employee.

3. Gross negligence implies a want or absence of or failure to exercise slight care or

diligence, or the entire absence of care. It is a thoughtless disregard of consequences
without exerting any effort to avoid them. To constitute a valid ground for dismissal, the
negligence must not only be gross, it should also be habitual in character. A first time
infraction will not justify termination. Poor performance does not necessarily amount to
gross and habitual negligence.

4. Loss of trust and confidence applies only when the employee concerned holds a
position of trust and confidence. It is the breach of this trust that results in the employer’s
loss of confidence. The breach of trust must be related to the performance of the
employee’s function and must be willful. A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse, as opposed to an act done carelessly
or inadvertently. The allegation of breach of trust must rest on substantial ground and
cannot be dependent on the employer’s arbitrariness. It should be genuine and not
simulated; not a mere afterthought to justify earlier termination or a subterfuge for causes
which are improper, illegal, unjustified.

5. There is a difference in the treatment of managerial employees from that of rank-

and-file employees, insofar as the application of loss of trust and confidence is concerned.
For rank-and-file employees, loss of trust requires proof of involvement in the events in
question. As regards managerial employees, mere existence of reasonable basis for
believing that the employee has breached the trust of the employer would suffice.

6. Abandonment means the deliberate, unjustified refusal of the employee to resume

his/her employment. For abandonment to be a valid ground for termination, two
elements must concur: (a) the employee’s intention to abandon; and (b) overt act from
which it may be inferred that the employee has no more intent to resume his/her work.
The immediate filing of an illegal dismissal complaint generally negates the employer’s
claim of abandonment. As an exception, this principle does not apply when the employee
does not ask for reinstatement in his/her complaint for illegal dismissal.

7. Retrenchment is a management prerogative resorted to by employers to avoid or

minimize business losses. To justify retrenchment, the employer must prove by sufficient
and convincing evidence: (a) the losses expected, which must be substantial; (b) the
reasonable imminence of the losses and the urgency of the retrenchment; and (c) other
measures taken by the employer prior or parallel to the retrenchment. For retrenchment
to be valid, there must be fair and reasonable criteria in the selection of employees who
will be affected by the retrenchment program.

8. Redundancy is a situation where the personnel complement of the employer is in

excess of the needs of its operations. Mere allegation of redundancy will not suffice.
There must be adequate proof of the redundancy. Like in retrenchment, the employer
must also prove that it applied fair and reasonable criteria in the implementation of the
redundancy program. Possible criteria include: (a) less preferred status, e.g. temporary
employee; (b) efficiency; and (c) seniority. If the employer violates its own criteria, then
the redundancy cannot be considered valid.

9. Resignation is defined as the voluntary act of an employee who finds himself/herself

in a situation where he/she believes that personal reasons cannot be sacrificed in favor of
the exigency of the service, and he/she has no other choice but to disassociate
himself/herself from employment. As a general rule, voluntary resignation is inconsistent
with the filing of a complaint for illegal dismissal.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel

10. For termination on the ground of disease to be valid, two requisites must concur: (a)
the disease cannot be cured within 6 months and the continued employment of the
concerned employee is prohibited by law or prejudicial to his/her health or to the health of
the co-employees; and (b) a certification to that effect must be issued by a competent
public health authority.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
TERMINATION DISPUTES (Procedure and Effects)

1. Termination for a just cause requires two notices to the employee: (a) the show-
cause letter requiring the employee to explain; and (b) the final notice informing the
employee of the termination. The first notice must apprise the employee that his/her
termination is being considered due to the acts stated in the notice. The notice must
clearly indicate the possibility of termination.

2. Retrenchment, even if temporary (based on the employer’s own program), must still
comply with the 30-day prior notice requirement. The law does not speak of temporary or
permanent retrenchment, hence, there is no need to qualify the term. When the law does
not distinguish, we must not distinguish.

3. 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 the
employee’s co-workers. Without this kind of threat, preventive suspension is not proper.
No preventive suspension shall last longer than 30 days. An extension of the suspension
beyond 30 days shall be with pay. Any violation of this requirement amounts to
constructive dismissal.

4. Even if the dismissal of an employee is conditioned not on the grounds for

termination under the Labor Code, but pursuant to the provisions of a CBA (eg., a union-
security clause), it is still necessary to observe substantive due process in order to
validate the dismissal. As applied to the Labor Code, adherence to substantive due
process is a requisite for a valid determination that just or authorized causes existed to
justify dismissal. As applied to the dismissals grounded on violations of the CBA,
observance of substantial due process is indispensable in establishing the presence of the
cause or causes for dismissal as provided for in the CBA.

5. Reinstatement is intended by law as the general rule, i.e., the primary remedy for
an illegally dismissed employee. It is only when reinstatement is not possible that
payment of separation pay is awarded to the employee. Payment of separation pay in
lieu of reinstatement is allowed due to: (a) reasons not attributable to the fault of the
employer, e.g., closure of the company; (b) the position has already been abolished and
reinstatement to an equivalent position is also not feasible; or (c) strained relationship
exists between the parties.

6. Substantial evidence is required to show that the relationship was indeed strained
as a necessary consequence of the judicial controversy. The principle of strained
relations should not be used so indiscriminately as to bar the reinstatement of illegally
dismissed workers. It must be alleged and proved during trial. Furthermore, the strained
relationship must be between the dismissed employee and the employer, not between the
dismissed employee and his/her co-employees.

7. 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. It
is not private compensation or damages but is awarded in furtherance of the public
objective of the law. It is not 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 former’s unlawful act or bad faith. Hence, the award of backwages is not
conditioned on the employee’s ability or inability to, in the interim, earn any income.
Income earned by the employee during the pendency of the case will not be deducted
from the backwages that the employee should receive. The employee’s inability to earn
during the period (e.g., due to imprisonment) will not negate the award of full backwages.

8. In computing full backwages, the base figure to be used is pegged at the wage rate
at the time of the employee’s dismissal, inclusive of regular allowances that the employee
had been receiving. Salary increases, unless mandated by law or wage order, are a mere
expectancy. Such prospective salary increases cannot be included in the computation of
the backwages.

9. If the dismissal is for just or authorized cause (proved during the trial), the
procedural infirmity in the termination, i.e., failure of the employer to comply with the
procedural requirements of termination, will not invalidate the dismissal. The employer
should be held liable, however, for non-compliance with the procedural requirements of
due process. Reinstatement will not be ordered. No backwages will be awarded. The
employee will only be awarded nominal damages. The amount of nominal damages

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
should be higher in dismissals due to authorized causes, compared to dismissals due to
just causes.

10. Separation pay as “financial assistance” may be granted to a legally dismissed

employee on the grounds of equity and social justice. This is not allowed, however, when
the dismissal is for serious misconduct or some other cause reflecting on the moral
character of the employee.

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
DISPUTE SETTLEMENT

1. Under Article 128 of the Labor Code, the Secretary of Labor or his/her duly
authorized representatives shall have the power to issue compliance orders to give effect
to the labor standards provisions of the Code and other labor legislation based on findings
of the labor employment and enforcement officers or industrial safety engineers made in
the course of inspection. The exercise of this visitorial and enforcement powers can be
exercised regardless of the amount of monetary claims of the employee/s concerned.
The P5,000 jurisdictional limitation applicable to employee complaints for simple money
claims under Article 129 does not apply.

2. Where the dispute is just in the interpretation, implementation or enforcement

stage, it may be referred to the grievance machinery set up in the CBA or by voluntary
arbitration. But where there is already an actual termination, it becomes a termination
dispute that is already cognizable by the Labor Arbiter. If there is a clear agreement
between the parties that a termination dispute will be submitted to voluntary arbitration,
then the voluntary arbitrator shall have jurisdiction since Article 262 states that “all other
disputes” can be referred by agreement to voluntary arbitration.

3. The original and exclusive jurisdiction of the Labor Arbiter for money claims is
limited only to those arising from statutes or contracts other than a CBA. The Voluntary
Arbitrator will have original and exclusive jurisdiction over money claims arising from the
interpretation or implementation of the CBA. Of course, this assumes that the dispute
should be submitted first to the grievance machinery before it can be brought to voluntary
arbitration.

4. The civil aspect of ULP including claims for damages can be within the jurisdiction of
the Labor Arbiter. The civil implications thereof do not necessarily defeat its nature as a
fundamental labor offense. The damages suffered only form part of the civil component of
the injury arising from ULP.

5. The holding of an adversarial trial is discretionary on the Labor Arbiter and the
parties cannot demand it as a matter of right. In administrative proceedings, technical
rules of procedure and evidence are not strictly applied; administrative due process
cannot be fully equated with due process in its strict judicial sense. The requirements of
due process are deemed to have been satisfied when parties are given the opportunity to
submit position papers.

6. A corporate officer’s dismissal is always a corporate act, or an intra-corporate

controversy, and the nature is not altered by the reason or wisdom with which the Board
of Directors may have in taking such action. Thus, a question involving the remuneration
of a person who is not a mere employee but a stockholder and officer, is not a simple labor
problem but a matter that comes within the area of corporate affairs and management. It
is a corporate controversy in contemplation of the Corporation Code. An “office” is
created by the charter of the corporation and the officer is elected by the directors or
stockholders.

7. The right to appeal is a statutory right and one who seeks to avail of the right must
comply with the statute or rules. The requirements for perfecting an appeal within the
reglementary period must be strictly followed as they are considered indispensable
interdictions against needless delays. The posting of a cash or surety bond is mandatory
for an appeal by the employer of the Labor Arbiter’s decision. It was intended to
discourage the employer from using an appeal to delay or evade its obligation, and to
assure the workers that they will receive the money judgment upon the dismissal of the
appeal. The perfection of an appeal in the manner and within the period prescribed by
law is not only mandatory but jurisdictional.

8. Legitimate waivers that represent a voluntary and reasonable settlement of a

worker’ claim should be respected as the law between the parties. Not all quitclaims are
per se invalid or against public policy, except: (a) where there is clear proof that the
waiver was wangled from an unsuspecting or gullible persons, or (b) where the terms of
settlement are unconscionable on their faces. In these cases, the law will step in to annul
the questionable transactions. Such quitclaims are regarded as ineffective to bar the
workers from claiming their full measure of their legal rights.

9. The authority of the Secretary of Labor to assume jurisdiction over a labor dispute
necessarily includes and extends to all questions and controversies arising therefrom,

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 100 Notes on Labor Law / 2007 / Marlon J. Manuel
including cases over which the labor arbiter has exclusive jurisdiction (like dismissal of
employees and illegality of the strike).

10. The decision of the Bureau of Labor Relations, which is made in the exercise of its
original jurisdiction, may be appealed to the Secretary of Labor. The BLR’s decision,
which is made in the exercise of its appellate jurisdiction over decisions of the Regional
Director, shall be final and executory.

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