SAMSON S.

ALCANTARA
Practicing Lawyer, Professor of Law
and Bar Reviewer

and

SAMSON B. ALCANTARA, JR.

PARTNER

Nisce Mamuric Guinto Rivera and Alcantara Law Offices

2004 EDITION _

REVISED AND ENLARGED

WITH 2007 SUPPLEMENT
 PHILIPPINE COPYRIGHT

2004

by

SAM SO N S. ALCANTARA

REPRODUCTION OF THIS W O RK WITH THE USE

OF COPYING MACHINES OR ANY OTHER
MEANS OR DEVICE IS FORBIDDEN.
PERPETRATORS W ILL BE SUBJECTED
TO CRIMINAL PROSECUTION.

ISBN 971 - 0 3 7 3 - 11 - 0

A genuine cop
and an ai

Serial No.

Published by:

THE PHILIPPINES LABOR RELATIONS JOURNAL

No. 3 Cadang Street, Barangay Masambong,
San Francisco del Monte, Quezon City 1115 Phils.
Tel. No.: (02)365-1025 Fax No.: (632)365-1025/(632)932-1316
Email: plrj@pacific.net.ph Website: www.aasjs-lex.com

2601 Edition — Supreme Court

Centennial Awardee
 PREFACE TO THE REVISED EDITION

This reviewer is intended as a supplem entary

reading material fo r the bar candidate; it should never
be used as the sole or basic text on the subject. The
reviewee must refer to the codal or statutory provi­
sions and to the books and notes that he used during
his undergraduate years.

This work gives emphasis to basic principles in

Labor and Social Legislation, matters which candi­
dates, in their eagerness to complete their review,
tend to overlook or simply assume to know. W hat may
seem to be a complete review is not necessarily a
thorough one. Besides, reviewees are fond of remem­
bering things which are minor or inconsequential, eas­
ily forgetting those which are basic or fundamental.

The reader must not of course confine himself to

the questions given in the book. He should try out
variations and answer them. In this way, the actual
bar questions have little chance of eluding him.

If after using this book the reviewee feels confident

that he can meet the challenge of the bar examination
on the subject, then the authors’ efforts would have
been sufficiently rewarded.

Good luck to all.

THE AUTHORS

Quezon City, Philippines

August 2004
 To the children
of

SAMSON S. ALCANTARA
and
EVELYN B: ALCANTARA

on
their, shoulders will fall
the burden of revising this work
in the years to come.

(One of them, Samson B. Alcantara, Jr., has,

thanks be to GOD, become a lawyer
and will continue with this work.)
 TABLE OF CONTENTS
Chapter Title Page
I General Principles....................................... 1 -8 8
II The Labor C o d e ................ .......................... 8 9-109
III Recruitment and Placement of Workers .. . . 110-154
IV Human Resources Development.......... .. 155-169
V Hours of Work, Rest Periods, Holiday Pay,
Leaves and Service C harges................... . 170-221
VI W a g e s ......................................................... . 222-306
VII Working Women and M inors...................... . 307 - 326
VIII Househelpers and Homeworkers................. 327 - 333
IX Medical and Dental Services and
Occupational S a fe ty ................................ . 334 - 339
X Employees' Compensation and
State Insurance F u n d ............................... . 340 - 375
XI Right to Self-Organization.......................... . 376 - 433
XII Certification E lections........ ........................ . 434 - 484
XIII Collective Bargaining and Collective
Bargaining Agreem ent............................. . 485 - 521
XIV Strikes and Lockouts............................... . 522 - 588
XV Unfair Labor Practices................................ . 589 - 625
XVI Termination of Employment and
Retirem ent............................................... . 626 - 875
XVII Remedies....................... ......................... . 876 - 980
XVI11 The Social Security Law
(Republic Act No. 1161, as amended) . .. . 981-1019
XIX The Revised Government Service
Insurance Act (P. D. 1146) . . : .............. . 1020-1047
XX National Health Insurance Program
(R. A. No. 7 8 7 5 )..................................... . 1048- 1055
XXI Agrarian R e fo rm ......................................... . 1056 ■* 1085

Appendix
2003 Bar. Examination Questions in Labor and
Social Legislation (With Answ ers)............................. 1089 - 1100
 REVIEWER
IN
LABOR AND SOCIAL LEGISLATION
CHAPTER I

GENERAL PRINCIPLES
What matters may properly fall under the term “ labor
law"?

ANS. The term “labor law’ covers the following:

(a) Statutes passed by the state to promote the
welfare of workers and employees and regulate their
relations with their employers.
(b) Judicial decisions applying and interpreting the
aforesaid statutes.
(c) Rules and regulations issued by administrative
agencies, within their legal competence, to implement
labor statutes.

* * #

Classify labor statutes.

ANS. Labor statutes may be classified into: (a)

la b o r s ta n d a rd la w s - those that provide for the pay
and other legal benefits to which the worker, while at
work, is entitled to receive from his employer; (b)
w e lfa re le g is la tio n - those that require payment of
benefits by government agencies to the worker or his
fam ily when and while he cannot work, by reason of
sickness, disability, old age, death and sim ilar haz­
ards; and (c) la b o r re la tio n s la w s - those intended
to stabilize the relations of employees and their em­
ployers, adjust differences between them thru collec­
tive bargaining, and settle labor disputes through
conciliation, mediation, and arbitration.

1
 GENERAL PRINCIPLES

Cite examples of each o f the above classes of labor

statutes.

ANS. A law providing for the minimum rates of pay

to which workers are entitled for a day’s work is a labor
standard law. The Social Security Law (Rep. Act No.
1161, as amended) which provides for payment of
sickness, maternity, disability, old age and death ben­
efits is a welfare legislation. Book V of the Labor Code
of the Philippines (Articles 211 to 277) is a labor
relations law.
it it it

Are labor relations laws and labor standard laws mutu­

ally exclusive? (19S7 Bar)

ANS. No. Labor relations laws enable workers to

obtain from their employers more than the minimum
benefits set by labor standard laws.

* * *

How do the provisions of the law on labor relations

interrelate, if at all, with the provisions pertaining to
labor standards? (2003 Bar)

ANS. The law on labor relations provides for rights

and procedures by which workers may be able to
obtain from their employer benefits which are over and
above the minimum terms and conditions of employ­
ment set by labor standard laws. Labor standard laws
do not guarantee lasting industrial peace; labor rela­
tions laws, by enabling workers to obtain improves of
the benefits guaranteed by labor standard laws and by
providing for a mechanism by which disputes between
the employer and his employees are expeditiously
settled, can assure a stable and lasting industrial
peace.
 GENERAL PRINCIPLES

What do you understand by the term “ social legisla­

tio n ” ?

ANS. The term applies to all laws passed by the

State to promote public welfare. It includes statutes
intended to enhance the welfare of the people even
where there is no employer-employee relationship.
Agrarian reform laws are important pieces of social
legislation.
* * *

State the legal justification fo r the enactment of labor

and social legislation.

ANS. Labor and social legislation are enacted

pursuant to the police power of the state. This is its
inherent power to enact wholesome and reasonable
laws to promote order, safety, health, morals, and
general welfare of society. In its exercise, the state
may interfere with personal liberty, with property and
with business and occupation (Calalang vs. W illiams,
70 Phil. 726). Thus, tho Social Security Act, requiring
compulsory coverage of employers and employees
under a system providing for disability, death and
sim ilar benefits to the worker and his family, has been
sustained as a valid exercise of the power (Philippine
Blooming Mills Co., Inc. et al. vs. Social Security
System, G. R. No. L-21223, August 31, 1966).
Republic Act No. 809, regulating relationships among
persons engaged in the sugar industry and providing
for increased participation of laborers in the income
from the industry, has also been held valid on the
same ground (Association de Agricultures de Talisay-
Silay, Inc. vs. Talisay Milling Co., Inc. et al., G. R.
No. L-19937, February 19, 1979). Police power was
also relied upon to sustain the constitutionality of the
Code of Agrarian Reforms (Genuino vs. Court of
Agrarian Relations et al., G. R. Nos. L-25035-36,
February 26, 1968).
 GENERAL PRINCIPLES

Labor and social legislation oftentimes impose condi­

tions o f employment which may be onerous and unac­
ceptable to the employer. Is this not a violation o f due
process and the freedom of contract? Explain.

ANS. According to the Supreme Court, the school

of thought that resists the expansion of the social
rights of employees and workers is essentially capital­
istic, conservative, reactionary and selfish. The invo­
cation of the due process clause to challenge the
validity of social and labor legislation as violative of
the freedom of contract and an undue deprivation of
property had long been discarded in America since the
1937 case of West Coast Hotel vs. Pish (300 U. S.
379) affirming the validity of minimum age laws. In
our country, such a view was repudiated after the 1924
case of People vs. Pomar (46 Phil. 440). Hereafter,
other social legislations followed and survived the
constitutional test such as our own minimum wage law,
the 3-hour labor law, and various amendments to the
workmen’s compensation law and employer’s liability
act, law on maternity leave with pay, and laws for the
protection of women and minors employed in danger­
ous industries and occupations. Such statutes were
held not to trench upon the Constitution, even in the
states of the American Union whose constitutions do
not expressly guarantee social justice in favor of the
working class (Basa vs. Workmen’s Compensation
Commission, G. R. No. L-43425, January 22, 1980).

What is an “ employer” ?

ANS. An “employer* is one for whom employees

work in consideration of wages or salaries. An em­
ployer may either be a natural or juridical person.
 GENERAL PRINCIPLES

What is an “ employee” ?

ANS. An “employee" is one who works for an

employer, a person working for salary or wages, any
person in ths service of another under a contract for
hire, express or implied, oral or written. An employee
is always a natural person.

* * *

Describe briefly the relationship that arises between the

employer and an employee.

ANS. The employer-employee relationship is con­

tractual in character. It arises from the agreement of
the parties. But such relationship is so impressed with
public interest that labor contracts must yield to the
common good; they are subject to special laws on
labor unions, collective bargaining, strikes and lock­
outs, closed shop, wages, working conditions, hours of
labor and sim ilar subjects (Art. 1700, Civil Code). The
parties, furthermore, are enjoined not to act oppres­
sively against each other, or im pair the interest or
convenience of the public (Art. 1701, Civil Code).
* * *

Aside from being contractual, give other essential fea­

tures of the employer-employee relationship.

ANS. It is in personam, involves the rendition of

personal service by the employee, and partakes of
master and servant relationship.
* * *

In determining the existence of employer-employee re­

lationship, what are the elements that are generally
considered?

5
 GENERAL PRINCIPLES

ANS. The elements that are generally considered

are the following: (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 methods
by which the work is to be accomplished.

* * *

Among the foregoing elements, what constitutes the

most im portant index of the existence of the employer-
employee relationship?

ANS. It is the: so-called “control test”, and 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
(Investment Planning Corporation of the Philippines
vs. Social Security System, G. R. No. L-19124,
November 18, 1967). Stated otherwise, an employer-
empioyee 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 (Dy Keh Beng
vs. International Labor and Marine Union of the
Philippines et al., G. R. No. L-32205, May 25, 1979).
It is essentially the relationship of master and servant.

* * *

Why is it important to determine whether the relation­

ship between the parties is that of employer and em­
ployee or that o f principal and independent contractor?
Explain.

ANS. This is to determine what laws will govern

the rights and liabilities of the parties, and what
tribunal or court will have jurisdiction over their dis­
putes.

6
 GENERAL PRINCIPLES

Where there exists an employer-employee rela­

tionship, labor laws will govern the rights and liabilities
of the parties, and labor tribunals will have jurisdiction
over their disputes.
On the other hand, if the relationship be one of
principal and independent contractor, the ordinary
rules on obligations and contract will apply and the
regular courts w ill have jurisdiction over their disputes.

* it it

Twenty-two (22) workers are engaged under a pakiao

arrangement by G. whom the Philippine Refining Com­
pany considers as an independent contractor, to unload
copra from trucks of carriers, store it in PRC ware­
houses, and deliver it from the warehouses to the
company’s m ill. A company employee gives orders to
G. on where to store copra, when to bring out, how
much to load and where, and what class o f copra to
handle. The copra conveyor is owned by the company,
and the load it may carry as well as the time and manner
o f its operation are controlled by the latter. G. had no
office o f his own. Under the circumstances, are G. and
the pakiao workers considered as employees of PRC?
Explain.

ANS. Yes. Copra is the basic raw material of

PRC’s business. The company must have, and the
facts show that it has, positive and direct control over
the handling of copra prior to its being fed into the
manufacturing process. The control test is more than
satisfactorily met. G. and the pakiao workers are
employees of PRC. (Philippine Refining Co. vs.
Court of Appeals et al., G. R. No. L-29590,
September 30, 1982).
it it it

Dy Keh Beng was engaged ra the manufacture of bas­

kets known as kaing. He hired piece workers to make

7
 GENERAL PRINCIPLES

baskets subject to his specifications. Are these piece­

workers his employees? Why?

ANS. Yes. The fact that the making of the basket

is subject to Dy’s specifications indicates the existence
of control. And it should be borne in mind that the
control test calls merely for the.existence of the right
to control the manner of doing work, not the actual
exercise of the right (Dy Keh Beng vs. International
Labor and Marine Union of the Philippines et al., G. R.
No. L-32245, May 22, 1979).

* * *

IPC Company which was engaged in business manage­

ment and sale of securities had two classes o f agents
who sold its investment plan: (1) salaried employees
who kept definite hours and worked under the control
and supervision o f the company; and (2) registered
representatives who worked on commission basis. The
company had, with the latter, an agreement to the effect,
among others, that the agent is paid compensation fo r
services in the form o f commission, that he is subject to
a set of rules and regulations governing the perfor­
mance o f his duties under the agreement; that he w ill
put up a performance bond, and that his services may
be terminated fo r ccrtain causes. U was also estab­
lished that the agent was not required to report fo r work
at any time, that he did not have to devote his time
exclusively fo r the company; that the time and the effort
he spent in his work depended entirely upon his own
w ill and initiative, that he was not required to account
fo r his time nor submit a record of his activities, and
that he was paid commission based on a certain per­
cent o f his sales. Most agents were regularly employed
in the government or private enterprises. Were these
representatives»considered employees of the company?
Explain.

ANS. The contract between the company and the

agents contains nothing to indicate that the latter are
 GENERAL PRINCIPLES

under the control of the form er in respect of the means

and methods they employ in the performance of their
work. The fact that for certain specified causes the
relationship may be terminated (e. g., failure to meet
the annual quota of sales, inability to make sales
production during a six-month period, conduct detri­
mental to the company etc.) does not mean that such
control exists, fo r the causes of term ination thus
specified have no relation to the means and methods
of work that are ordinarily required of or imposed upon
the employee (Investment Planning Corporation of the
Philippines vs. Social Security System, G. R. No.
L-19124, November 18, 1967).
* * #

Manila Cosmos Aerated Water Factory, Inc. (Cosmos)

entered into an Agreement to Peddle Soft Drinks with
certain individuals (peddlers). The said agreement pro­
vided among others that Cosmos would provide the
peddler with a delivery truck to be used by the latter
under his own responsibility, exclusively fo r sale o f
products purchased by him from Cosmos; that the
peddler shall him self drive the truck carefully and in
strict observance o f traffic rules and regulations; that
should he employ a driver or helpers, they shall be his
employees and he shall pay their compensation; that he
shall be responsible fo r any damage to property, death,
o r injuries to persons resulting from his own acts or
that o f his driver o r helpers; that he shall secure at his
own expense all necessary licenses and permits re­
quired by law or ordinance and shall bear all expenses
incurred in the sale o f the products of Cosmos; that all
soft drinks purchased by him shall be charged to him at
factory price o r with dealer's discount; that he shall
post a cash bond to answer fo r unpaid accounts or
damage to the truck; that he shall liquidate and pay his
account at the end of each day; and that the agreement
is effective only up to a certain date but may even be
terminated earlier upon seven (7) days prior notice by

9
 ( fig GENtRAL,PRINCIPLES;

on© party to the other. Are the peddlers independent

contractors and not employees o f Cosmos? Why?

ANS. in determining whether the relationship is

that of employer and employee or whether one is an
ind^pj||i4gnt).;jGO,nt>C9.c^p^ each case must be deter-
m ijje^j on i its :Qwnr facts and all the features of the:
r°lationshiR M e to be iConsidered. >ln the instant case,
the peddling , cQntraet did not create an employer^:
lam ploye^rpl^tipftsbip^rather, it made the peddler an
independent contractor (Social Security System vs.
Court of Appeals et al.. G. R. No. 55764, February
16, 1982).

* * *

A shipping company entered in to a c o n tra c tw ith a

private security agency fors the latter to guard and
protect the former’s vessels while they were m oored in
the Port o f Manila.*. I t was stipulated in the contract that
sts term was fo r one (1) year com m encingfrom the date
of its execution and ct can be terrninated by either party
upon 30 days notice to the other. The relationship of
the parties was such th a t it was the security agency
who hired and assigned the guards who kept watch
over the vessels. The guards were not known to the
shipping company fo r the latter dealt only w ith the
agency on matters pertaining to the service o f the
guards. A Jump sum would be paid fay the, company to
the agency who in turn determined and paid the com­
pensation o f the individual watchmen. Are the watch­
men considered employees of the shipping company?
Explain.

ANS. Under the circumstances, the guards cannot

be considered as employees of the shipping company.
It is the security agency that recruits, hires and assigns
the work of the watchmen. Hence, a watchman cannot
perform any security service for the company's vessels
unless the agency first accepts him as its watchman.

10
 GENERAL PRINCIPLES

With respect to his wages, the amount to be paid to a

security guard is beyond the power of the company to
determins. Certainly, the lump sum amount paid by
the company to the agency in consideration of the
latter's service is much more than the wages of any
one watchman. In point of fact, it is the agency that
quantifies and pays the wages to which the watchman
is entitled.
Neither does the company have any power to
dismiss the security guards. It is true that it may
request the agency to change a particular guard. B ut
this precisely is proof that the power lies in the hands
of the agency.
Since the company has to deal with the agency,
and not with the individual watchmen, on matters
pertaining to the contracted task, it stands to reason
that the company does not exercise any power over
the watchmen's conduct. Always, the agency stands
between the company and the watchmen; and it is the
agency that is answerable to the company for the
conduct of its guards. (American President Lines vs.
Honorable Clave et al., G. R. No. L-51641, June 29,
1982).

.. . * * 'fit ........ . , , ....

Shipside, Inc. (SHIPSIDE), which operated harbor and

wharfage facilities in* La Union, entered in 1963 into a <•
“ Contract fo r Services” with La Union Stevedores; Inc ;
(STEVEDORES) providing among others that the latter
would furnish all the labor needed fo r the stevedoring
work in the piers and wharves controlled by the form er
and that the net balance o f the stevedoring charges
collected by the operator, after deducting payroll and
other operating expenses, shall be divided equally be­
tween the parties. In 1974, the said contract was term i­
nated because o f financial reverses. As a result o f such
termination, several stevedores and personnel o f La
Union Stevedores, Inc. lost their jobs. They filed a
complaint against both companies to collect severance

11
 GENERAL PRINCIPLES

compensation. Is Shipside, Inc. liable fo r the claim?

Explain.

ANS. No. The records do not show any participa­

tion on the part of SHIPSIDE with respect to the
selection and engagement of the individual stevedores
who will constitute the labor force of STEVEDORES.
Who the individual stevedores will be and under what
terms and conditions their services w ill be rendered
are matters determined not by SHIPSIDE, but by
STEVEDORES. Neither is there any direct employ­
ment relationship between SHIPSIDE and the steve­
dores. The form er has no separate individual con­
tracts with the latter whose only possible connection
with SHIPSIDE is through STEVEDORES which con­
tracted them and in whose favor their services were
rendered, thus enabling STEVEDORES to fu lfill its
contractual obligations with SHIPSIDE. W ithal, the
individual stevedores, who were not known to SHIP­
SIDE which dealt only with STEVEDORES on matters
pertaining to the contracted task, cannot perform any
stevedoring service for the SHIPSIDE unless STEVE­
DORES first accepts them as such.
Under the arrangement between SHIPSIDE and
STEVEDORES, the form er has no hand in deciding
how much salary is to be paid each of the individual
stevedores. Payment of such salary is made not by
SHIPSIDE, but by STEVEDORES power of SHIPSIDE
to determine, which merely paid STEVEDORES the
aggregate amount as indicated in the payroll of the
latter presented after every operation to th e form er for
payment, pursuant to their contract for services. Nei­
ther does SHIPSIDE reserve the power to dismiss the
individual stevedores, as We fail to see only evidence
on record that it wielded such power.
We likewise found nothing in the records which
would indicate that the stevedores were under the
control of SHIPSIDE in respect to the means and
methods they employed in the performance of their
work, to be considered as the employees of the latter.
On the contrary, it is sufficiently established that

12
 GENERAL PRINCIPLES

STEVEDORES exercised supervision and control over

its labor force. If in the course of the stevedores'
work, SHIPSIDE occasionally issued instruction to
them, that alone does not in the least detract from the
fact that only STEVEDORES is their employer, for in
legal contemplation, such instruction carry on more
weight than mere requests the privity of contract being
between SHIPSIDE and STEVEDORES, not between
the form er and the worker. Corollarily, such giving of
instruction inevitably springs from SHIPSIDE's right
predicated on the “Contract for Services’ entered into
by it with STEVEDORES (Shipside, Inc. vs. NLRC et
al., G. R. No. L-50358, November 2, 1982).
* *

Under the dealership agreement, it is stipulated, among

others that the company has “ appointed” the applicant
as one o f its dealers; that the dealer shall handle the
products in accordance with existing laws and regula­
tions; that he shall send his orders to the factory plant
in cash in any amount or on credit up to the amount of
not more than P i0,000.00 only at any given time; that
the factory shall supply the dealer with a truck or a
panel delivery and all expenses fo r repairs shall be
borne by the factory; that the dealer shall not receive
any commission but shall be given a discount fo r all
sales and said discount shall be decided by the factory
from time to time; that the dealer alone shall be respon­
sible fo r any violation of any law; that he shall be
assigned to a particular territory which the factory may
decide from time to time; that he shall sell the products
at the price agreed upon between the parties; and that
the dealer shall post a surety bond o f not less than
P10,000.00 to guarantee and secure complete and faith­
ful performance.
The agreement also provided that either party may
terminate the contract without cause by giving 15 days
notice in w riting; however, in the event o f breach or
failure to comply with any of the conditions, the com-

13
 GENERAL PRINCIPLES

pany may terminate or rescind the contract immedi­

ately. No such word as <!to hire or employ” are used,
and no mention is made o f any wages of the dealer.
Is th@ dealer an employee o f the company?

ANS. The terms and conditions of the dealership

agreement are the usual and common stipulations in
independent contractorship agreements. In any event,
the contention that the totality of the powers expressly
reserved to the company establish company control
over the manner and details of performance is merely
speculative and conjectural (La Suerte Cigar and
Cigarette Factory vs. Director of Labor Relations et
al., G. R. No. L-55674, July 25, 1983).

* * *

Tailors, pressers, stitchers, and sim ilar workers worked

in the tailoring department of Manila COD Department
Store. Some had worked there since 1969 until their
separation on January 2,1978. For their services, they
were paid weekly wages on piecework basis, m inus the
w ithholding tax per Bureau o f Internal Revenue (BIR)
rules. Further, they were registered w ith the Social
Security System (SSS) as employees o f the company
and premiums were deducted from their wages; they
were also members of the Avenida-Cubao COD Depart­
ment Store Labor Union which has a Collective Bargain­
ing Agreement with the company; and, they were re-'
quired to report fo r work from Monday through Satur­
day and to stay in the tailoring shop fo r no less than
eight (8) hours a day, unless no jo b order was given
them after waiting fo r two to three hours, in which case,
they may leave and may come back in the afternoon.
Their attendance was recorded through a bundy clock
ju s t like the other employees of the company. A master
cutter distributes jo b orders equally, supervises the
work and sess to it thai they were finished as soon as
possible.

14
 GENERAL PRINCIPLES

They claimed fo r their i 3th month -pay and emergency

cost o f living allowances; the Company set up the
defense that they are not its employees. Decide.

ANS. They are employees of Maniia COD Depart­

ment Storev In the first place, the workers’ conduct in
the performance of their work was controlled by the
company; this is shown by, among others, the require­
ment that they work from Monday through Saturday
and to stay in the premises for no less than eight (8)
hours a day if there is work to do, and the fact that the
master cutter supervised their work and saw to it that
the same were finished as soon as possible. Besides,
they received their weekly wages from the employer;
though this is on piecework basis, the same falls within
the scope and meaning of the term wage as defined in
Article 97 of the Labor Code. There is also ample
basis fo r holding that the company exercised the
power of selection,, hiring and dismissal (Rosario
Brothers, Inc. vs. Hon. B. Ople et af., G. R. No.
L-53590, July 31, 1984).

* IV *

Petitioners worked fo r about seven (7) years as

“ cargadores” and “ pahinantes” at the San Miguei
Parola Glass Factory. They were recruited by labor
contractors. Their work consisted of loading, unload­
ing, piling o r palleting empty bottles and wooden shells
to and from company trucks and warehouses. Orders
as to where, when and what to load, unload, pile, pallet
or clean came from the superintendent-in-charge of
SMC. They also used the tools, equipment and para­
phernalia provided by the company. They were paid on
a piece rate basis, that is, according to the number of
cartons and wooden shells they were able to load,
unload or pile. They received their pay from their group
leaders who also got a percentage o f their earnings.
The alleged independent contractors received lump
sum payment from SMC, arrived at by adding the

15
 GENERAL PRINCIPLES

salaries o f the workers based on payrolls, reports and

statements prepared by the group leaders. SMC how­
ever claims that petitioners are employees of an inde­
pendent labor contracting firm. Decide.

ANS. Petitioners are employees of SMC. The

evidence firm ly establishes the control exercised by
SMC over the petitioners, that is, control in the means,
method or manner by which the latter are to go about
their work, as well as disciplinary measures imposed
by it.
It is also clear that the labor contractor that re­
cruited the workers has neither substantial capital nor
investment to qualify as an independent contractor
under the law. The premises, tools, equipment and
paraphernalia used by petitioners in their jobs are
admittedly all supplied by the company. It is only the
manpower or labor force which the alleged contractors
supply, suggesting the existence of a “labor-only"
contracting scheme prohibited by Articles 106 and 109
of the Labor Code (Brotherhood Labor Unity Movement
of the Philippines et al. vs. Hon. Ronaldo B. Zamora
et al., G. R. No. L-48645, January 7, 1987).

* ★ ★

The shoe shiners at Besa’s Custombuilt Shoes had

their own customers from whom they collected the fee
fo r the job; they then divided the proceeds share and
share alike w ith Besa. Are they piece workers o f Besa?
Explain.

ANS. No. A piece worker is paid fo r work

accomplished and does not contribute anything to the
capital of the employer other than his service. It is the
employer of the piece worker who pays his wages,
while the shoe shiner in this instance is paid directly by
his customer. The piece worker is paid for work
accomplished without regard or concern to the profit
as derived by his employer, but in the case of the shoe
shiners, the proceeds derived from the trade are

16
 GENERAL PRINCIPLES

always divided share and share alike with Besa. The

shoe shiner can take his share of the proceeds every­
day if he wanted to or weekly. The employer of the
piece worker supervises and controls the latter’s work,
but in the case of the shoe shiner, Besa does not
exercise any degree of control or supervision over his
work. The shoe shiner, in relation to Besa, is a partner
in the trade (Mamerto S. Besa etc. vs. Hon. C.
Trajano et al., G. R. No. L-72409, December 29,
1986).

* * *

Philippine Bank of Communications and Corporate Ex­

ecutive Research, Inc. (CESI) entered into a letter of
agreement under which the latter undertook to provide
temporary services to the form er consisting of eleven
(11) messengers. The letter agreement provided among
others that the messengers would remain employees of
CESI. With respect to the wages o f the messengers, the
bank remitted to CESI amounts corresponding to their
daily service rates; CESI in turn paid the messengers
the wages pertaining to them; their names did not
appear in the payrolls of the bank. With respect to the
power o f dismissal, the bank would request CESI to
withdraw the assignment o f a messenger and CESI
would in fact withdraw such assignment. The messen­
gers performed th e ir functions w ith in the bank’s
premise? and not w ithin the office premises o f CESI.
Who is the employer of the messengers? Why?

ANS. The bank is the employer of the messen­

gers; CESI is considered merely as a “labor-only"
contractor, a supplier of workers, and the agent or
intermediary of the bank. It cannot be considered a
“job contractor' because its undertaking is not the
performance of a specific job; it merely undertook to
provide the bank with a certain number of persons able
to carry out the work of messengers. And it seems
unreasonable to suppose that the bank would have

17
 GENERAL PRINGIPLES

allowed the messengers to remain within the bank’s

premises and there render services to the bank without
subjecting them to a substantial measure of control
and supervision, whether in respect of the manner in
which they discharged their functions, or in respect of
the end results of their functions or activities, or both
(Philippine Bank of Communications vs. NLRC et al.,
G. R. No. 66598, December 19, 1986).
* * *

QTC, as vendor, entered into a contract w ith Carreon,

as vendee, whereby the latter would sell the cigarette
products o f the former. The follow ing facts regarding
the relationship were however undisputed: (a) QTC
assigned a definite sales territory fo r Romeo Carreon;
(b) QTC provided Romeo Carreon with a delivery track
fo r the exclusive use of the latter in his sales activities;
(c) QTC dictated the price of the cigarettes sold by
Romeo Carreon; (d) QTC prescribed what brand of
cigarette Romeo Carreon could sell; (e) QTC deter­
mined the persons to whom Romeo Carreon could seii;
(f) QTC issued circulars and memoranda relative to
Romeo Carreon’s sales activities; (g) QTC required
Romeo Carreon to subm it to it daily, weekly and
m onthly reports; (h) QTC grounded Romeo Carreon fo r
six months in 1966; (i) Romeo Carreon was supervised
by sales coordinators of QTC; (j) Romeo Carreon was
subject to payment of damages and loss fo r any viola­
tion o f instructions made by QTC in relation to his sales
activities; and (k) Romeo Carreon was paid an al­
lowance by QTC.
Is Carreon an employee o f QTC or an independent
contractor? Why?

ANS. Carreon is an employee. The undisputed

facts establish that QTC exercised control over
Carreon as to how he will perform the work (Social
Security System vs. Court of Appeals et al., G. R.
No. L-46058, December 14, 1981).

18
 GENERAL PRINCIPLES

Under the “ Work Contract” entered into between “ A” as

“ contractor” and the m otor shop, “ A” undertook to
supply labor and supervision (over his “ contract work­
ers” ) in the performance o f automotive body painting
work which the latter may from tim e to time award to
him, and to hire and bring in additional wbrkers asi may
be required by the company to handle additional work
load. “ A ” and his men were compensated fo r the jobs
they performed in lump sum payments described as
“ payment fo r sub-contract painting” , the company sup­
plied the tools, equipment, machinery and materials
necessary fo r “ A ” and his men to carry out the painting
jobs. Moreover, the jo bs were done w ithin the premises
owned and maintained by the company. Are “ A ” and
his men considered employees o f the company? Why?

ANS. Yes. “A ” is a “labor-only” contractor; the law

attributes employer-emplbyee relationship between the
owner and the “labor-only" contractor including the
latter’s workers. And aside from the fact that the
company exercised control and direction over the work
done by “A" and his men, the line of work-automobile
painting was directly related to, if not an integral part
altogether, of the regular business of the motor shop
(Broadway Motors, Inc. vs. NLRC et al., G. R. No.
78382, December 14, 1987).

* * *

Mrs. L. S., a prominent social figure, had an agreement

w ith Tourist W orld Service, Inc. to the effect that she
would act as the “ branch manager” of the office o f the
latter in Ermita; that she would be entitled to a part of
the commission given by the airline companies on the
sales o f tickets; and that she would share the expenses
of m aintaining the office. She was also a signatory to
the lease agreement covering the premises, holding
herself solidarily liable with Tourist World Service, Inc.
fo r the prom pt payment of rentals thereof. Is Mrs. L. S.
an employee of Tourist World Service, Inc.?

19
 GENERAL PRINCIPLES

ANS. No. Mrs. L. S. was not subject to the

control by Tourist World Service, Inc. either as to the
result of the enterprise or as to the means used in
connection therewith. And a true employee cannot be
made to part with his own money in pursuance of his
employer’s business, or otherwise assume any liability
thereof. The services rendered by Mrs. L. S. must
have been done by her pursuant to a contract of
agency (Sevilla vs. Court of Appeals et al., G. R.
Nos. L-41182-3, April 15, 1988).

4r 4 4r

At the tim e Nasayao was hired as a plant manager, the

marble company was about to close in a few m onths’
time due to business losses; he decided fo r him self on
what was to be done and worked at his own pleasure;
he was not subject to definite hours or conditions of
work and was entitled to a percentage o f the net profits
that the company realized, if any. May Nasayao be
considered an employee of the marble company?

ANS. No. The marble company had no power to

control Nasayao with respect to the means and meth­
ods by which his work was to be accomplished. He
was merely a party to a joint venture (Continental
Marble Corporation et al. vs. NLRC et al., G. R. No.
L-43825, May 9, 1988).
★ ★ *

Fishermen-crew members of a trawl fishing vessel were

directly hired by the general manager and operations
manager o f the fishing enterprise; they worked fo r the
company from 8 to 15 years in various capacities; the
operations manager supervised and controlled the con­
duct o f their fishing operations as to the fixing o f the
schedule of the fishing trips, the direction of the fishing
vessel, the volume or number of tubes of the fish catch,
and the time to return to the fishing port which were

20
 GENERAL PRINCIPLES

communicated to the patron/pilot by radio; they were

siot allowed to jo in other outfits w ithout the permission
o f the operations manager; and they were compensated
on percentage commission basis on the gross sales o f
the fish-catch. which were delivered to them in cash by
the cashier o f the company. The company maintains
that these fishermen-crew members are partners in a
“jo in t fishing venture” and not its employees. Decide.

ANS. The fishermen-crew members are employ­

ees of the fishing enterprise. The conduct of the
fishing operations was under the control and supervi­
sion of the operations manager of the company. The
fishermen-crew members were required to remain in
the outfit for definite periods; as a matter of fact, they
worked in the company for a period of 8-15 years.
Furthermore, they were engaged to perform activities
usually necessary or desirable in the usual fishing
business or occupation of the company. Finally, the
compensation received by them on a percentage basis
falls within the scope and meaning of the term “wage"
as defined in Article 97 (f) of the Labor Code (Ruga et
al. vs. NLRC et al., G. R. Nos. 72654-61, January
22, 1990).
* * *

Lipercon Services, Inc., engaged in business as a ser­

vice contractor providing workers fo r other companies,
hired helpers, janitors, firemen and mechanics and as­
signed them to work fo r Novelty Philippines, Inc., a
corporation engaged in the garment manufacturing
business. The agreement between Lipercon
(“ Contractor” ) and Novelty (“ Company” ) stipulated
among others that the “ Contractors” shall provide the
“ Company” w ith workers as requested by the latter; the
“ Company” shall pay the “ Contractor” a fee based on
rates fixed in the agreement; there is no employer-
employee relationship between the “ Company” and the
workers assigned by the “ Contractor” , who shall be
responsible fo r the salaries of the workers; and the

21
 GENERAL PRINCIPLES

“ Contractor” shall have exclusive discretion in the se­

lection, engagement and discharge o f its personnel and
the latter shall be w ithin its fu ll control.
(a) Are the workers supplied by Lipercon to Novelty
employees o f the latter? Why?

ANS. Yes. Lipercon is a “labor-only’ contractor; it

is merely an agent of Novelty to procure workers for
the latter, the real employer.

(b) Are the services of the workers supplied by Liper­

con directly related to the business of Novelty, which is
garment manufacturing?

ANS. Yes. The proper m aintenance of the

premises and the machineries as well as the protection
of the factory against fires are directly related to the
daily operations of Novelty (Guarin et al. vs. NLRC et
al., G. R. No. 86010, October 13, 1989).
............ * * *

Under the contract between Basiao and the Insular Life

Assurance Co., Ltd., Basiao was authorized to solicit
w ithin the Philippines applications fo r insurance po­
lices and annuities in accordance with existing rules
and regulations of the company; Basiao would receive
compensation in the form o f commissions; he was free
to exercise his own judgm ent as to time, place and
means o f soliciting insurance, but he must observe and
conform to all rules and regulations prescribed by the
company; he was prohibited from giving rebates in any
form, or from making any misrepresentation o r over­
selling and in general from doing or com mitting acts
prohibited in the Agent’s Manual and in Circulars o f the
Office o f the Insurance Commissioner; and the com­
pany may terminate the contract at w ill, w ithout any
previous notice to the agent, fo r specified causes.
(a) Is there an employer-employee relationship between
the insurance company and Basiao? Explain.

22
 GENERAL PRINCIPLES

ANS. None. Basiao was not effectively controlled

or restricted by the company as to his methods of
selling insurance. Under the contract, he was free to
exercise his own Judgment as to the tim e, place and
means of soliciting insurance. He was the master of
his own time and selling methods. He is an indepen­
dent contractor.

(b) What form o f control w ill establish em ployer-

employee relationship?

ANS. The line should be drawn between 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; and
those that control or fix the methodology and bind or
restrict the party hired to the use of such means; The
first, which aim only to promote the result, create no
employer-employee relationship unlike the second,
which address both the result and the means to
achieve it (Insular Life Assurance Co., Ltd. vs. NLRC
et al., G. R. No. 84484, November 15, 1989).

* * *

In 1992 Insular Life Assurance Co. entered into an

agency contract with Pantaleon delos Reyes authoriz­
ing the latter to solicit w ithin the Philippines applica­
tions fo r life insurance and annuities fo r which he
would be paid compensation in the form o f commis­
sions. The agency contract contained among others
the stipulation that no employer-employee relationship
was created between the parties and that the agent was
free to exercise his own judgm ent as to time, place and
means of soliciting insurance. Delos Reyes was prohib­
ited by the company from working fo r any other life
insurance company, and violation of this stipulation
was sufficient ground fo r termination of the contract.

In 1993, the company and Delos Reyes entered into

another contract where the latter was appointed, upon

23
 GENERAL PRINCIPLES

recommendation o f the District Manager, as Acting Unit

Manager with the duties and responsibilities which,
among others, included the recruitment, training, orga­
nizational and development o f underwriters participa­
tion in the preservation and maintenance o f existing
insurance policies; and acceptance o f moneys duly
receipted on agent’s receipts fo r remittance to the com­
pany. He was prohibited from working fo r other life
insurance companies or with the government. Aside
from being granted override commissions, the acting
unit manager was given production bonus, develop­
ment allowance and a development-financing scheme
termed “ finance assistance” . He was required to meet
certain manpower and production quotas.
(a) Is Delos Reyes an employee of the insurance com­
pany? Why?

ANS. Yes. The provisions of the contract entered

into by the parties in 1993 indicate the existence of the
power of control of the company over the acting unit
manager.

(b) Distinguish the instant case from the case o f Insular

Life Assurance Co., Ltd. vs. NLRC and Basiao, G. R.
No. 84484, November 15,1989.

ANS. In Basiao. the agent was appointed agency

manager under an Agency Manager Contract and he
was a master of his own time and selling methods, and
was not given any accomplishment quotas.

On the other hand, in the instant case, delos Reyes

was appointed Acting Unit Manager, and the company
provided him a place and table at its office where he
reported for and worked whenever he was not out in
the field. He was required to work exclusively for the
company in Nfe insurance solicitation and was imposed
premium production quotas. (Insular Life Insurance
Co. Ltd. vs. NLRC et al., G. R. No. 119930, March
12, 1998).
 GENERAL PRINCIPLES

Tailors, seamstresses, sewers, basters (manliiilip) and

“ plantsadoras" worked in a haberdashery and were
paid on a piece-rate basis. They were required to work
from or before 9:30 a. m. up to 6:00 or 7:00 p. m. from
Monday to Saturday and during peak period even on
Sundays and holidays. They were directed by the
proprietor o f the establishment to cut, sew or iron the
pants, coat o r shirt as specified by the customers. They
were required to finish the jo b orders one day before
the due date. Are these individuals independent con­
tractors? Why?

ANS. No. They are employees of the haberdash­

ery. They did not exercise independence in their own
methods, but on the contrary were subject to the
control of the establishment from the beginning of their
task to their completion. And unlike independent
contractors who generally rely on their own resources,
the equipment, tools, accessories and paraphernalia
used by them were supplied by the haberdashery
(Makati Haberdashery, Inc. et al. vs. NLRC et al., G.
R. No. 83380-81, November 15, 1989).
ie it it

Livi Manpower Services, Inc. (Livi) had a manpower

supply agreement w ith California Manufacturing Co.
(California) pursuant to which workers were assigned
by Livi to work as promotional merchandisers fo r Cali­
fornia. Among other things, the agreement provided
that California had no control or supervision over L ivi’s
workers with respect to how they accomplish their
work; that Livi was an independent contractor; that it
was L ivi’s responsibility to comply w ith labor laws; that
the assignment o f workers to California would be on a
seasonal and contractual basis; that the cost o f living
allowance and regular holiday pay would be charged to
California; and that the payroll fo r the preceding week
would be delivered by Livi at California’s premises.
(a) Is there an employer-employee relationship between
California and the workers supplied by Livi?

25
 GENERAL PRINCIPLES

ANS. Yes. The existence of an employer-

employee relationship is a question of law and cannot
be made the subject of agreement. At any rate, since
the agreement was between Livi and California, they
alone are bound by it, and the workers cannot be made
to suffer from its adverse consequences.
Livi is a labor-only contractor. The workers it
supplied worked to promote the products of California;
this is an activity which is an integral part of the
manufacturing business.
The nature of one's business is not determined by
self-serving appellations one attaches thereto but by
the tests provided by statute and prevailing case law.

(b) Who are liable fo r the claims of the workers sup­

plied by Livi?

ANS. Livi and California are jointly and severally

liable. This is provided for in Article 106 of the Labor
Code. (T a b a s e ta l. vs. California Manufacturing Co.
et al., G. R. No. 80680, January 26. 1989).
* * *

Singer Sewing Machine Co. entered into a “ collection

agency agreement” w ith collectors providing among
others that the collector is to be considered at all times
to be an independent contractor and not an employee of
the company; collection o f all installment accounts are
to be made m onthly or oftener; he shall only use receipt
form s authorized and issued by the company; he has to
subm it and deliver at least once a week or as often as
required a report of all collections made using report
form s furnished by the company; he m ust meet a
m onthly collection quota; he is paid his compensation
fo r service in the form of a commission of 6% of all
collections made and turned over plus a bonus on said
collections; he must post a cash bond of P3.000.00 to
assure faithful performance and observance o f the
terms and conditions under the agreement; he is sub­

26
 GENERAL PRINCIPLES

ject to all the terms and conditions in the agreement;

the agreement is effective fo r one year from the date of
its execution and renewable on a yearly basis; and his
services shall be terminated in case of failure to satisfy
the minimum m onthly collection performance required,
failure to post a cash bond, or cancellation o f the
agreement at the instance of either party unless he has
pending obligation or indebtedness in favor o f the
company.
The agent was not required to observe office hours or
report to Singer’s office everyday except fo r the pur­
pose o f remitting his collections. He did not have to
devote his time exclusively fo r Singer. The manner and
method o f collection were left solely to the discretion o f
the agent, and he shouldered his transportation ex­
penses.
(a) Is the collector considered an employee o f Singer
Sewing Machine Co.?

ANS. No. The agreement provided that the

collector is an independent contractor. It did not fix an
amount of wages or require working hours. The agent
worked more or less at his own pleasure. And there is
nothing in the agreement which implies control by the
company over the means and methods in achieving
the end.

(b) May the collector be considered an employee of

Singer under Article 280 of the Labor Code?

ANS. No. Article 280 is not the yardstick for

determ ination of the existence of an employment
relationship because it merely distinguishes between
two kinds of employees, i. e., regular employees and
casual employee; for purposes of determining the right
of an employee to certain benefits and to security of
tenure (Singer Sewing Machine Co. vs. Hon. F.
Drilon et al., G. R. No. 91307, January 24, 1991).

27
 GENERAL PRINCIPLES

Janitors were hired by Contemporary Services, inc.

(CSI) and assigned to Union Carbide. They drew their
salaries from CSI and not from Union Carbide. CSI
exercised control over them through a CSI employee
who gave orders and instructions. Moreover, CSI had
the power to assign its janitors to various clients and to
pull them out, as it had done in a number o f occasions,
any of the janitors working at Union Carbide.
CSI was registered as a service contractor and did
business as such with a number o f known companies in
the country, it maintains its own office and had its own
office equipment. It furnished its janitors the cleaning
equipment such as carpet vacuums and polishing ma­
chines.
(a) Are the janitors assigned by CSI to Union Carbide
considered employees of the latter? Why?

ANS. No. CSI is a job contractor, not a labor only

contractor; hence, the janitors are its own employees.

(b) As later on Union Carbide sold its agricultural-

chemical divisions to Rhone-Poulenc, is the latter
bound by the janitorial service agreement between the
form er and CSI? Why?

ANS. No. As new owner, Rhone-Poulenc had

every right to choose it's own service contractor.
(Rhone-Poulenc Agrochemicals Phils., Inc. vs. NLRC
et al., G. R. Nos. 102633-35, January 19, 1993)

* * *

Feliciano, doing business under the name “ JFS Repair

and Maintenance Service” , was hired by Pilipinas Shell
to conduct a hydro-pressure test of the underground
storage tank o f a Shell gasoline station. He was to be
paid a lump sum fo r the work he and his men accom­
plished. He utilized his own tools and equipment. He
accepted business from other oil companies. He was
not controlled by Pilipinas Shell with regard to the

28
 GENERAL PRINCIPLES

manner in which he conducted the hydro-pressure test.

When Feliciano conducted the test, no Shell representa­
tive was ever present. Is Feliciano an employee of
Pilipinas Shell? Why?

ANS. No. Pilipinas Shell did not control Feliciano

as to the performance of the hydro-pressure test. It
takes more than mere hiring to establish the employer-
employee relationship. Feliciano is an independent
contractor (Pilipinas Shell Petroleum Corporation vs.
Court of Appeals et al., G. R. No. 104658, April 7,
1993).

Building Care Corporation (BCC), capitalized at P1 m il­

lion which was fu lly subscribed and paid fo r provided
janitorial and other specific services to various firm s. It
hired Virginia Neri and Jose Cabelin and assigned them
to work in the Cagayan de Oro City Branch of Far East
Bank and Trust Co. (FEBTC) to work as radio/telex
operator and as janitor, respectively. They reported fo r
work wearing the prescribed uniform o f BBC; their
leaves o f absence were filed directly with BCC; and
their salaries were drawn only from BCC. FEBTC how­
ever issued a jo b description which detailed the func­
tions of Neri as a radio/telex operator.
(a) Who is the employer of Neri and Cabelin?

ANS. Applying the “control test”, BBC is the

employer of Neri and Cabelin. BCC maintained super­
vision, an.d control over them through its Housekeep­
ing and Special Services Division.

(b) Does the issuance by FEBTC o f a jo b description

which detailed the functions o f Neri establish employer-
employee relationship between FEBTC and Neri?

ANS. No. A cursory reading of the job description

shows that what was sought to be controlled by FEBTC

29
 GENERAL PRINCIPLES

was actually the e n d -re s u lt of the task, e. g., that the

daily incoming and outgoing telegraphic transfer of
funds received and relayed by her, respectively, tallies
w ith that of the re g is te r. The guidelines were laid
down merely to ensure that the desired end-result was
achieved. It did not, however, tell Neri how the
radio/telex machine should be operated.

(c) May BCC be deemed a jo b contractor considering

that there was no evidence that it had investment in the
form of tools, equipment, machineries, work premises
among others? Why?

ANS. Yes. It had substantial capital. Article 106

of the Labor Code does not require that the contractor
has both substantial capital and investment in the form
of tools etc. It uses the word “or", not “and". (Neri, et
al. vs. NLRC, et al., G- R- Nos- 97008-09, July 23,
1993)
* * *

Hyatt Terraces Baguio and Vallum Security Services

entered into a contract fo r security services under, the
terms o f which Vallum agreed to protect the properties
and premises of Hyatt Baguio by providing security
guards on a 24-hour basis.
The security guards filled up Hyatt employment applica­
tion form s and submitted the forms directly to the
Security Department of the hotel. Their wages were
paid directly by Hyatt using pay slips bearing the ho­
tel’s logo. The assignments, promotions, supervision
and dismissals of the guards were approved or ratified
by the Chief Security Officer of Hyatt.
May Hyatt Terrace Baguio be considered the employer
o f the Vallum security guards? Why?

ANS. Ye%s. This is shown by the exercise by Hyatt

of the power%
of selection and engagement, payment of
wages, dismissal, and control over the activities of the

30
 GENERAL PRINCIPLES

security guards (Vallum Security Services et al. vs.

N L R C e ta l., G. R. Nos. 97320-27, July 30, 1993).

♦ ★ *

Is there any specific form o f evidence required to prove

the existence o f an employer-employee relationship?
Explain.

ANS. None. Any competent and relevant evi­

dence to prove the relationship may be admitted. If
only documentary evidence were admissible to show
the existence of the relationship, no scheming em­
ployer would ever be brought before the bar of justice
as no employer would wish to come out with any trace
of the illegality he has authored considering that it
should take much w eightier proof to invalidate a
written instrument. The absence of time sheet, time
record or payroll is inconsequential where the relation­
ship is sufficiently proved by testimonial evidence.
And for a payroll to be utilized to disprove the employ­
ment of a person, it must contain a true and complete
list of the employees (Opulencia Ice Plant and Storage
etc. vs. NLRC et al., G. R. No. 98368, December
15,1993).

* ★ *

Atty. Sales was appointed by a savings and loan

association, through its Board of Directors, as Notarial
and Legal Counsel fo r a term -of three (3) years unless
sooner terminated from office fo r cause or as may be
deemed necessary by the Board fo r the interest o f the
association. Hiis duties were prescribed by the associa­
tion, to w it: to act on all legal matters pertinent to his
office; to seek remedies to effect collection of overdue
accounts; and to defend by all means all suits against
the association. May Atty. Sales be considered an
employee o f the savings and loan association?

31
 GENERAL PRINCIPLES

ANS. Yes. His selection as the company counsel

was done by the board of directors of the association.
He was paid a monthly compensation/retainer’s fee for
his services. Though his appointment was for a fixed
term of three years, the association reserved its power
of dismissal. And the association exercised its power
of control over Atty. Sales by defining his duties and
functions as its legal counsel.
A lawyer, like any other professional, may very
well be an employee of a private corporation or even
the government. It is not unusual for a big corporation
to have a staff of lawyers as its in-house counsel, pay
them regular salaries, rank them in its table organiza­
tion, and otherwise treat them like other officers and
employees. At the same time, it may also contract a
law firm to act as outside counsel on a retainer basis
(Air Material Wing Savings and Loan Association, Inc.
vs. NLRC et al., G. R. No. 111870, June 30,1994).
• * * *

Llamar worked as a caddy in the Manila G olf and

Country Club. His fees were paid by the g o lf players
and not by the club. The club promulgated rules and
regulations on the assignment, deportment and con­
duct o f caddies; they are designed, to improve personal
discipline among the caddies but not to direct or con­
duct their actual work. A golf player is at liberty to
choose a caddy of his preference regardless o f the
club’s group rotation system and has the discretion on
whether or not to pay a caddy. The income of the caddy
depended on the number of players engaging their
services and the liberality of the latter. The club has no
means of compelling the presence of a caddy; the latter
is not required to exercise his occupation only in the
club; he may work with any other golf club or he may
seek employment as a caddy or otherwise with any
entity or individual w ithout restriction by the club.
Is Llamar, under the circumstances, considered an em­
ployee of the golf club? Why?
 GENERAL PRINCIPLES

ANS. No. He had the freedom of choice as to the

manner of carrying out his services as caddy. He did
not observe any working hours; he was free to leave
any time he pleased and to stay away as long as he
liked. The club did not have the measure of control
over the incidents of the caddy’s work and compensa­
tion that an employer would possess (Manila Golf and
Country Club, Inc. vs. Intermediate Appellate Court
and Fermin Llamar, G. R. No. 64948, September 27,
1994).

* ★ #

Balbastro was engaged by MAM Realty Development

Corporation as a pump operator o f the Rancho Estates
Subdivision. His work was to open and close on a daily
basis the water supply system on the different phases
o f the subdivision in accordance with its water ra­
tioning scheme. He worked fo r only a m afm um period
o f three(3 ) hours a day, and he made use of his free
time by offering plumbing services to the residents of
the subdivision. His work could also be done by
another person hired by MAM or a security guard of the
subdivision. Is Balbastro employee of MAM Realty
Development Corporation? Why?

ANS. Yes. The power of control, the most

important feature of that relationship, controversy,
refers merely to the existence of the power and not the
actual exercise thereof. It is not essential for the
employer to actually supervise the performance of
duties of the employee; it is enough that the former
has a right to wield the power. (Mam Realty Develop­
ment Corp. vs. National Labor Relations Commission
et al., G. R. No. 114787, June 2, 1995)
★ i*r *

Limjoco was a Sales Division Manager of Encyclopae­

dia Britannica and was in charge of selling the latter’s
 GENERAL PRINCIPLES

products through sales representatives. As compensa­

tion, Limjoco received commissions from products sold
by his agents. He had his own separate office, financed
the business expenses, and maintained his own work­
force. The salaries of his secretary, utility man and
sales representatives were chargeable to his commis­
sions. He had free rein in the means and methods of
conducting his marketing operations. He was also an
officer o f a rural bank. The company however issued
memoranda to Limjoco regarding company policies.
Was Limjoco an employee o f Encyclopaedia Britan-
nica? Explain.

ANS. No. Limjoco was not controlled by the

company as to the means and methods of conducting
his marketing operations. He was an independent
dealer. (Encyclopaedia Britannica (Phils.); Inc. vs.
NLRC et al., G. R. No. 87098, Nov. 4, 1996)
* * *

Bustamante, an insurance underwriter, had a Sales

Agent’s Agreement w ith AFP Mutual Benefit Associa­
tion, Inc. which provided among others that Busta­
mante shall solicit exclusively fo r AFPMBAI and shall be
bound by the latter’s policies, memo circulars, rules
and regulations; that Bustamante shall confine his busi­
ness activities fo r AFPMBAI while inside any m ilitary
camp; installation or residence of m ilitary personnel;
that he is free to solicit in the area fo r which he is
licensed and as authorized, provided, however, that
AFPMBAI may from time to time, assign him a specific
area o f responsibility and a production quota on a case
to case basis; that Bustamante shall be entitled to the
commission due fo r all premiums actually due and
received by AFPMBAI out o f policies solicited and ob­
tained by him; and that there is no employer-employee
relationship between the parties, the agent being
deemed an independent contractor. The exclusively
restriction in the agreement was required by the Insur­
 GENERAL PRINCIPLES

ance Commission; and the policies, memo/circular as

well as the rules and regulations referred to therein
pertained to payment of agents’ accountabilities, avail-
ment o f sales agents o f cash advances fo r sorties,
circulars on incentives and awards to be given based
on production, and other matters concerning the selling
o f insurance, in accordance with the rules promulgated
by the Insurance Commission.
(a) Is Bustamante an employee of AFPMBAI? Why?

ANS. No. He was not controlled by AFPMBAI as

to the means and methods of accomplishment of the
work. By the nature of the business of soliciting
insurance, agents are normally left free to devise ways
and means of persuading people to take out insurance.
The restrictions imposed by AFPMBAI merely serve as
guidelines towards the achievement of the mutually
desired result. Bustamante is an independent contrac­
tor.

(b) Does the labor arbiter have jurisdiction over the

claim of Bustamante fo r unpaid commissions? Why?

ANS. No. The labor arbiter has jurisdiction over

claim s arising out of or in connection with an
employer-employee relationship. As Bustamante can­
not be considered an employee of AFPMBAI, his claim
for unpaid commission should be litigated in an ordi­
nary civil action. (AFP Mutual Benefit Association,
Inc. vs. NLRC, et al., G. R. No. 102199, January
28, 1997)

* * *

Dagui was hired as a stay-in worker performing carpen­

try, plumbing, electrical and other work necessary in
the repairs of various apartments i r d other properties
of the Tanjangcos, who were engaged in the leasing of
residential and apartment-buildings. He was paid a
daily wage, and was required to report fo r work from

35
 GENERAL PRINCIPLES

7:00 o’clock in the morning until 4:00 o’clock in the

afternoon. After working fo r the Tanjangcos fo r about
thirty-eight (38) years and when he was already sixty-
two (62) years old, Dagui was summarily dismissed by
the adm inistrator of the buildings. In the illegal dis­
missal case filed by Dagui, the employer interposed the
defense that no proof was adduced to show that the
latter actually exercised control over the performance of
his work. Resolve.

ANS. The power of control refers merely to the

existence of the power and not to the actual exercise
thereof. It is not essential for the employer to actually
supervise the performance of duties of the employee;
it is enough that the form er has a right to wield the
power. Since in the instant case it is not disputed that
as maintenance man Dagui had to perform his work
within the premises of the employer and was required
to observe definite working hours, it is not far-fetched
to infer that the Tanjangcos could easily exercise
control on him whenever they please. (Aurora Land
Projects Corporation et al. vs. NLRC et a!., G. R.
No. 114733, January 2, 1997)

* * *

Mapa worked as a volunteer reporter o f radio station

DZRC. He did not receive any salary from the station;
his pay came from business establishments that he
mentioned in his field reports. Unlike regular reporters
o f DZRC, Mapa was not required to adhere to a program
schedule and the station did not have editorial rights
over his reports. He had no fixed day or time fo r making
his reports; in fact he was not required to report any­
thing at ail. Is Mapa an employee of the radio station?
Why?

ANS. No. The elements of employer-employee

relationship, such as payment of wages and control
are not present. (Filipinas Broadcasting Network, Inc.
vs. NLRC et al., G. R. No. 118891, March 11, 1998)

36
 GENERAL PRINCIPLES

RS was appointed vice-president fo r the legal depart­

ment of Equitable Banking Corporation, with a fixed
monthly salary plus allowance and a Christmas bonus
equivalent to his salary fo r two months. He was also
designated later on as bank’s general counsel. Among
his duties and responsibilities were to provide legal
advice to the Board of Directors and Management o f the
bank, to take charge of all bank cases and insure
effective conduct of litigation, to render legal opinions
of questions o f law affecting the bank and its subsidiary
corporations, to supervise the staff o f the Legal Depart­
ment and recommend appointments, promotions, trans­
fers and disciplinary actions involving personnel of the
said department, and to perform such other functions
as may be assigned to him by the President o f the bank
or by the Board of Directors.
RS was given the usual payslips to evidence his
monthly gross compensation, and the bank withheld
taxes due to the BIR from his salary. The bank enrolled
RS as its employee in the SSS and Medicare Programs.
Inasmuch as RS and the lawyers in the Legal Depart­
ment were receiving salaries and other benefits as other
bank officers and employees, the attorneys fees, docu­
mentary and notarial fees earned in the exercise o f their
profession as in-house lawyers were not given to or
even shared with them but were all credited to the
income of the bank. RS was even authorized by the
President to sign fo r and in behalf o f the bank contracts
covering legal services of lawyers to be retained fo r the
bank’s branches on periodical retainer basis. Is RS an
employee of the bank? Why?

ANS. Yes. The elements that are indicative of the

existence of employer-employee relationship are pre­
sent in the instant case, including the power of control
over the employee’s conduct. Such element refers to
the existence of the power and not necessarily to the
actual exercise thereof. (Equitable Banking Corpora­
tion et al. vs. NLRC et al., G. R. No. 102467, June
13, 1997)

37
 GENERAL PRINCIPLES

Viva Productions, Inc. is engaged in the business of

making movies. It has producers and associate produc­
ers who must work w ithin the lim its of the budget given
by VIVA. To insure that quality film s are produced, the
company employs a supervising producer, a project
accountant, and a shooting unit supervisor.
The shooting unit supervisor o f VIVA recruited
Maraguinot and Enero as part of the film ing crew. They
were paid a weekly salary. Their tasks consisted of
loading, unloading and arranging movie equipment in
the shooting area as instructed by the cameraman,
returning the equipment to Viva Films warehouse, as­
sisting in the fixing of the lighting system, and perform­
ing other tasks that the cameraman and/or director may
assign. They were required to observe the rules and
regulations o f VIVA.
(a) Are Maraguinot and Enero considered employees o f
VIVA? Why?

ANS. Yes. They were recruited by the shooting

unit supervisor of VIVA. And they were subject to the
control of VIVA through the movie director whose
position is akin to a supervisor who merely overseas
the activities of rank-and-file employees with control
ultim ately resting on the employer.

(b) Maraguinot was employed fo r some three (3) years

and worked on at least twenty-three (23) film s, while
Enero was employed fo r a total of tw o (2) years and
engaged in at least eighteen (18) film s. Are they consid­
ered project employees? Why?

ANS. No. While they may be considered as

members of a work pool, they have acquired the status
of regular employees because of their continuous
rehiring even after the cessation of a project, and the
tasks that they performed were vital, necessary and
indispensable to the usual business or trade of the
employer. (Maraguinot et al. vs. NLRC, et al., G. R.
No. 120969, January 22. 1998)

38
 GENERAL PRINCIPLES

Is a physician who is a member o f the specialist staff of

a hospital as a “ consultant” considered an employee of
the hospital? Explain.

ANS. There is no employer-employee relationship

between the hospital and a medical consultant. The
admission of a physician to membership in the hospi­
ta l’s medical staff as active or visiting consultant is
first decided upon by the Credentials Comm ittee
thereof, which is composed of the heads of the various
specialty departments such as the Department of
Obstetrics and Gynecology, Pediatrics, Surgery with
the department head of the particular specialty applied
for as chairman. The Credentials Committee then
recommends to the Medical Director or Hospital Ad­
m inistrator the acceptance or rejection of the applicant
physician, and said director or administrator validates
the com m ittee’s recommendation. Similarly, in cases
where a disciplinary action is lodged against a consul­
tant, the same is initiated by the department to whom
the consultant concerned belongs and filed with the
Ethics Committee consisting of the department spe­
cialty heads. The medical director/hospital adminis­
trator merely acts as ex-officio member of said com­
mittee.
Neither is there any showing that it is the hospital
which pays any of its consultants for medical services
rendered by the latter to their respective patients.
Moreover, the contract between the consultant in the
hospital and his patient is separate and distinct from
the contract between the respondent hospital and said
patient. The first has for its object the rendition of
medical services by the consultant to the patient, while
the second concerns the provision by the hospital of
facilities and services by its staff such as nurses and
laboratory personnel necessary for the proper treat­
ment of the patient. (Ramos et al vs. Court of
Appeals et al., G. R. No. 14354, April 11, 2002;
Resolution on Motion for Reconsideration)

★ ★ *

39
 GENERAL PRINCIPLES

Ushio Marketing had a car spare parts and accessory

shop along Banavve, Quezon City. It had a handful of
regular employees, such as sales persons, account
officers, clerks and the like. It also allowed free lance
operators to position themselves proximate to the com­
pany premises to wait on company customers who
would be requiring their services. The company col­
lected the service fees from the customers and gave
them back to the operators at the end of each week.
The operators were not subject to regular hours and
days o f work and could come and go as they wished.
Their services were available to and were actually uti­
lized by customers of other establishments in the area
w ithout prior permission from Ushio Marketing. Would
these free lance operators, like an auto electrician, be
considered employees o f Ushio Marketing? Explain.

ANS. No. The company had no control and did

not restrict the methodology or the means and manner
by which they performed their work. Their services
were enjoyed by the customers and not by the estab­
lishment. Likewise, their earnings came from the
customers. (Ushio Marketing vs. NLRC et al.,G. R.
No. 124551, August 28, 1990)

* * *

After the death of Martinez, taxicab operator, his drivers

on the “ boundary system” filed a complaint against his
mother fo r the collection of their 13th month pay. The
m other raised the follow ing defenses; that the drivers
were not employees of her deceased son; that the
drivers’ claim fo r 13th month pay did not survive the
death o f her son; that she could not be considered the
employer o f the drivers of her son.
(a) Rule on the defenses raised by the mother of
Martinez.

ANS. The drivers were employee;; of the de­

ceased, although they were paid on the boui.r,t’ rv

40
 GENERAL PRINCIPLES

system. The ruling in National Labor Union vs. Din-

glasan, 98 Phil. 648 (reiterated in Magboo vs.
Bernardo, 7 SCRA 952, Lantard Sr. vs. Llamas, 108
SCRA 502), where jeepney drivers under the boundary
system were held to be employees, not lessees, of the
jeepney operators, as the latter exercised supervision
and control over the former, can be applied by anal­
ogy.
The claim for 13th month pay pertains to the
personal obligation of Martinez which did not survive
his death. Such claim should have been filed instead
in the intestate proceedings involving the estate of
Martinez. And unless expressly assumed, labor con­
tracts are not enforceable against the transferee of an
enterprise.
The continuance of an employer-employee rela­
tionship between the driver and the mother of the
deceased cannot simply be assumed. Mere allega­
tions in the position paper of the drivers are not
sufficient.

(b) What particular form o f evidence is required to

prove the existence o f the employer-employee relation­
ship?

ANS. No particular form of evidence is required to

prove the existence of the employer-employee rela­
tionship. Any competent and relevant evidence to
prove such relationship may be admitted. This may
entirely be testimonial. (Martinez vs. NLRC et al., G.
R. No. 117495, May 29, 1997)

* * *

Are jeepney drivers on the “ boundary system" consid­

ered employees of the jeepney owners/operators? Ex­
plain.

ANS. Yes. The jeepney owners/operators exer­

cise supervision and control over the jeepney drivers.
The management of the business is in the owner’s

41
 GENERAL PRINCIPLES

hands. The owner as holder of the certificate of public

convenience must see to it that the driver follows the
route prescribed by the franchising authority and the
rules promulgated as regards its operation. The fac;
that the driver does not receive fixed wanes but gets
only that in excess of the so-called- “boundary” they
pay to the owner/operator is not sufficient to withdraw
the relationship between thsm from that of employe:
and employee. The rule has been applied by analogy
to the relationship between taxi owners/operators and
taxi drivers. (Jardin et. aS vs. NLRC et al., G. R. N.
119268, February 23, 2000)

Ss documentary evidence required to prove 'she exis­

tence o f employ&r-eroployee relationship? Explain?

ANS. No. [\to particular form of proof is.requsrec’

to prove tne existence of an employer employee
relationship. Any competent and relevant evidence
may show the relationship, if only documentary evi­
dence would be required to demonstrate the relation­
ship, no schemmg employer would be brought before
the bar of justice. (Vinoya vs. NLRC ot al., G. R . No.
126586, February 2, 2000)
Where the driver worked for a family-owned truck­
ing business for thirty-six (36) years, and no written
agreement was presented to show that he was an
industrial partner thereof, it was ruled that he was an
employee; no proof was presented that he received a
share in the company's profits, nor was there anything
to show that he had any participation with respect to
the running of the business. He merely followed trie
instructions of the company; he did not have the
freedom to determine where he would go, what he
would do, and how he would do it. (Sy et a! vs. Court
of Appeals et a!., G. R. No. 142293, February 27,
2003)
■& *

42
 GENERAL PRINCIPLES

Peter, a barber, worked in Cesar’s Palace Barbershop,

not only as a barber but a caretaker of the shop. The
owners and the barbers shared in the earning o f the
shop, two-thirds (2/3) o f the fee paid fo r every haircut or
sharing jo b went to the barber, while one-third (1/3)
went to the owners any m alfunction o f the aircondition-
ing units and/or any interruption in the water or electric
power supply; to call the laundry woman to wash dirty
linen; to recommend applicants fo r interview and hir­
ing; and to attend to other needs o f the shop. Being the
one entrusted w ith the key to the shop, he had to be at
9:09 a. m. and could only leave at 9:00 p. m, For this
additional job, he was given an honorarium equivalent
to one-third (1/3) o f the net income of the shop. The
owners contended that Peter was tfteir 'partner in trade”
and not their employee. Decide.

ANS. Peter is an employee of the barbershop.

The duties imposed upon him as caretaker show that
the owners controlled his work performance. Such
duties were also crucial to the business operations of
the shop. (Jo et al vs. NLRC et al., G. R. No.
121605, February 2, 2000}
* * *

Lagrama, a painter, was engaged by Tan, the president

o f a theater corporation to make ad billboards and
m ira ls fo r the motion pictures shown at the tatter's
three (3) movie theaters. He performed his work in a
designated work area inside one o f the theaters o f the
corporation, subject to prescribed rules which included
the observance of cieanliness and hygiene and a prohi­
bition against urinating in the work area and any place
other than She toilet or the rest rooms. Tan supplied the
materials used fo r the paintings. Lag ram a was paid
PI ,475.00 per week fo r the murals for the three theaters
which he usually finished fa 3 to 4 days in one week. He
also rendered services fo r other theater owners. After
more than ten (10) years, he was dismissed by Tan fo r
urinating in the work area.

43
 GENERAL PRINCIPLES

(a) Tan claimed that Lagrama was not his employee.

Decide.

ANS. Lagrama was an employee of Tan. He was

subject to the control of the latter as to the means and
methods by which he accomplished his work. This is
aside from the fact that it was Tan who hired Lagrama,
paid his wages and who had the authority to dismiss
him.

(b) May Lagrama be considered a regular employee of

Tan, considering that he worked only fo r 3 to 4 days in
one week? Why?

ANS. Yes. The fact that Lagrama worked fo r at

least 3 to 4 days a week proves regularity in his
employment. Furthermore, there is reasonable con­
nection between his job and the business of Tan. To
let the people know what movie was to be shown in a
movie theater requires billboards. (Tan vs. Lagrama
e ta l., G. R. No. 151228, August 15, 2002)

* * *

Pablo was a farm-hand in a plantation owned by ABC &

Co., working approximately 6 days a week fo r a good 15
years. Upon Pablo’s death, his widow filed a claim fo r
burial grant and pension benefits with the Social Secu­
rity System (SSS). The claim was denied on the ground
that Pablo had not been a registered member-employee.
Pablo’s w idow filed a petition before the SSS, asking
that ABC & Co. be directed to pay the premium contri­
butions o f Pablo and that his name be reported fo r SSS
coverage. ABC & Co. countered that Pablo was hired
to plow, harrow and burrow, using his own carabao and
other implements and follow ing his own schedule of
work hours, w ithout any supervision from the company,
if proven, would this factual setting advanced by ABC &
Co. be valid defense against the petition? (2003 Bar)

44
 GENERAL PRINCIPLES

ANS. No. From the facts given in question, Pablo

was an employee of ABC & Co. He worked within the
plantation itself, six (6) days a week for fifteen (15)
years; he could have easily been subjected to control
by the company.

For the employer-employee relationship to arise, it

is not necessary that the employer actually exercises
the power of control over the employee; it is sufficient
that such power could have under the circumstances
been exercised. (Aurora Land Projects Corporation et
al vs. NLRC et al., G. R. No. 114733, January 2,
1997; MAM Realty Development Corp. vs. NLRC et
al., G. R. No. 114787, June 2, 1995)

* * *

Is the purchaser of the assets o f an employer corpora­

tion considered a successor employer of the latter’s
employees? Explain.

ANS. No. The rule is that unless expressly

assumed, labor contracts such as employment con­
tracts 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 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 em­
ployer 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.
As a general rule, there is no law requiring a bona
fid e purchaser of assets of an on-going concern to
absorb in it employ the employee of the latter.
However, although the purchaser of the assets or
enterprise is not legally bound to absorb in its employ
the employees of the seller of such assets or enter­
prise, the parties are liable to the employees if the

45
 GENERAL PRINCIPLES

transaction between the parties is colored or clothed

with bad faith (Sundowner Development Corporation
vs. Hon. F. Drilon et al., G. R. No. 82341,
December 6, 1989).

* * *

Give the effects o f the absorption cv employees by a

successor employer.

ANS. The rights and privileges of the employees

absorbed survive so as to be operative against the
successor-employer. (International Container Term i­
nal Services, Inc. vs. NLRC et al., G. R. Nos.
98295-99, April 10, 1996)
* * *

The San Felipe Neri School o f Mandaluyong, Inc. sold

its school building, library books, equipment, tables,
desks, chairs, blackboards and other personal proper­
ties to the Roman Catholic Archbishop o f Manila
(RCAM). The RCAM thereafter continued to operate the
school, but applied fo r a new permit to operate the
same. It did not however undertake to continue em­
ploying the teachers hired by the transferor. Is the
employment o f the teachers deemed terminated? Ex­
plain.

ANS. Yes. There was in effect a closure of the

business of San Felipe Neri School of Mandaluyong,
inc. The teachers affected are however entitled to
severance pay. Their right to this benefit is made
more cogent by the fact that they were not form ally
notified of the sale of the assets and properties of the
school to RCAM (San Felipe Neri School of Mandaiuy-
ong, Inc. vs. NLRC et al., G. R. No. 78350,
September 11, 1991).
* * *

46
 GENERAL PRINCIPLES

; > '.ijxe Bacani was the sole proprietor of a sect’rp

known as “Bacani Security and Protei t
Agency”. On October 28, 1989, he and others, inciuum^
mrpe members of his family, formed a corpcraitofs?
earned “Bacani Sscurity and Allied Services Co., 5nc,i:’
(BASED) to engage in the business of providing sm »~
•sty and allied services. On December 31, 1989 Feiipfc
$u<cani retired his business and < d operations ef~
n * tive on that day. Fifteen fi§l days Safer, he dieti.
f:;v«nie ©f the guards of the sole proprietorship were
employed by the corporation.
(a) May the claims of the employees ©f Bacani Security
add Protective Agency (the sol® proprietorship) fo r
overtime and holiday pay b© enforced against BASEC
the corporation? Why?

AMS. No. BASEC is an entity separate and

dis^it-a from the soie proprietorship owned and oper­
ated by Felipe Bacani. The debts and obligations of
the sole proprietorship were the personal obligations of
its owner. These did not survive the death of Felipe
Bacani and should have been filed in the intestate
proceedings involving the estate of the said decedent.

(b) May the veil of corporate entity be pierced in order

to holtS SASHC liable for the obligations of Felipe Ba­
cani?

AH S. U,->, The doctrine of piercing the veil of

corpo.'d'e ' f irty does no! apply where the purpose is to
r<o!d tm . o-Tioration liable for the obligations of a
stockhofc*.- or stockholders; it is resorted to where
individual stockholdt3rs are sought be held liable for
the obligations of the corporation.
Further, BASEC came into existence prior to reib s-
ment of the sole proprietorship as a business concern;
Felipe Bacani was only one of the incorporators of
BASEC and he owned the least number of shares; and
the assets of the sole proprietorship were not trans­
ferred to B ASEC (Robledo et al. vs. NLRC et al., G.
R. No. 110358, November 3, 1994).
 GENERAL PRINCIPLES

Cite instances where the doctrinal o f “ piercing the veil

o f corporate fictio n ” has been applied in connection
with employer-employee relationship.

ANS. Where the gaugau factory and a coffee

factory, which was an incorporated business, were
owned by one fam ily, had one office and management
though they used two separate trade names, and the
laborers of the form er were sometimes transferred to
the latter, it was held that the corporate personality of
the coffee factory may be disregarded and both facto­
ries treated as one in order to avoid circumvention of
the laws governing, labor relations. (La Campana
Coffee Factory, Inc. et al vs. Kaisahan ng mga
Manggagawa sa La Campana and CIR, G. R. No.
L-5677, May 25, 1953)

Where the incorporation papers of Shoemart and

Moris Industries show that the except for one (1)
incorporator the other five (5) incorporators and direc­
tors of Moris were major stockholders of Shoemart;
Shoemart was the exclusive buyer of all Moris prod­
ucts; both were housed in one building and Moris for
many years used the payrolls of Shoemart; and Moris
used to be the production division of Shoemart; it was
ruled that “piercing the veil of corporate fiction’ as
regards Moris was justified. (Shoemart, Inc. vs.
NLRC et al., G. R. Nos. 90795-96, August 13, 1993)

Where Pepsi Cola Bottling Company of the Philip­

pines, Inc. ceased operations and a new company,
Pepsi Cola Products Philippines, Inc. was formed to
continue with the sale of Pepsi Cola Products in the
Philippines with the use of Pepsi's local bottling plant,
transport vehicles and warehouse, and the “new" com­
pany absorbed the employees of the old Pepsi compa­
nies, it was* held that the liability arising from the
illegal dismissal of an employee of the latter is en­
forceable against the “new" Pepsi company. (San
Antonio vs. NLRC et al., G. R. No. 1000829,
November 28, 1995)
 GENERAL PRINCIPLES

Where Avon Dale Garments, Inc. continued the

operations of the Avon Dale Shirt Factory under the
same owners, the same business ventures, at the
same address and even continued to hire the same
employees, it was held conformably with established
jurisprudence that the two entities cannot be deemed
as separate and distinct and that consequently the
workers’ employment with Avon Dale Shirt Factory
should be included in computing their separation pay
payable by Avon Dale Garments, Inc. (Avon Dale
Garments, Inc. vs. NLRC et alM G. R. No. 117932,
July 20, 1995)

Where the chairman of the board and president of

the corporation owned 1,993 of the 2,000 shares of the
corporation, the said officer may be held personally
liable for the payment of the backwages of the em­
ployee who was illegally dismissed. (Valderama vs.
NLRC et al., G. R. No. 98239, April 25, 1996)

* * *

State the “ LABOR” provisions o f the 1987 Constitution.

ANS. Section 3 of Article XIII (Social Justice and

Human Rights) provides:
'The State shall afford full protection to labor, local
and overseas, organized and unorganized, and pro­
mote full employment and equality of employment
opportunities for all.
“It shall guarantee the rights of all workers to
self-organization, collective bargaining and negotia­
tions 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 jiv in g wage. They shall also participate in
policy and 'decision-making processes affecting their
rights and benefits as may be provided by law.
“The State shall promote the principle of shared
responsibility between workers and employers and the
preferential use of voluntary modes in settling dis­

49
 GENERAL PRINCIPLES

putes, including conciliation, and shall enforce their

mutual compliance therewith to foster industrial peace.
T h e State shall regulate the relations between
womers and employers, recognizing the right of labor
to its just share in the fruits o f production and the right
oi enterprises to reasonable returns on investments,
ana to expansion and growth.”
* *

Under the 1987 Constitution, what does social justice

envision?

ANS. It envisions equitable diffusion of wealth and

political power for the common good, regulation of the
acquisition, ownership, use and disposition of property
and its increments; and creation of economic opportu­
nities based on freedom of initiative and self-reliance
(Section 1 & 2, Article XIII).
* * *

May social justice as a Quidinc^ principle in labor taw

so used by the courts in sympathy w ith She working
man if it collides with the equal protection clause of the
Constitution? Explain. (2003 Bar)

ANS. Yes. Social justice is a means to insure

equality between labor and capital. Labor occupies a
position which is weaker than capital. Through social
justice, the State is able to make labor as strong as
capital, thereby providing equal protection. Social
justice is a means to insure equal protection.
•fr * *

Give other provisions of the 1987 Constitution govern­

ing labor and capital.

ANS. “The State affirm s labor as a primary social

economic force. It shall protect the rights of workers
and promote their welfare." (Sec. 18, Article II)

50
 GENERAL PRINCIPLES

“The right of the people, including those employed

in the public and private sectors, to form unions,
association or societies for purposes not contrary to
law shall not be abrid ged/ (Sec. 8, Article III)
"The right to self-organization shall not be denied
to government employees." (Sec. 2b, Article IXB)
“The State shall protect working women by provid­
ing safe and healthful working conditions, taking into
account their maternal functions, and such facilities
and opportunities that will enhance their welfare and
enable them to realize their full potential in the service
of the nation." (Sec. 14, Article XIII)

* * *

Unlike the 1935 and 1973 Constitutions, the 1937 Con­

stitution does not contain any provision expressly rec­
ognizing the power o f com pulsory arbitration. May
such power be nevertheless exercised to settle dispute
between labor and capital?

ANS. Yes. Recognition of the power of compul­

sory arbitration is im plicit in the constitution provision
mandating the State to “regulate the relations between
workers and employers’ (Sec. 3, Article XIII).
The Supreme Court has ruled that the exercise .of
compulsory arbitration can be justified under the police
power of the State (Union of Filipro Employees [UFE]
et al. vs. Nestle Philippines et al., G. R. Nos.
88710-13, December 10, 1990).

★ *

At the time D and Q were employed by A, no law

provided fo r payment of severance pay to employees
who are separated by reason of the total closure or
complete cessation of the employer’s business. How­
ever, at the time o f the cessation of A’s business in
1980, there was already Article 284 (now Art. 283) of the
Labor Code providing fo r payment o f severance pay by

51
 GENERAL PRINCIPLES

reason of such cessation o f business. But A contends

that to &pply Article 284 in her case would im pair the
obligation o f contracts. Decide.

ANS. A ’s contention is not tenable. What the

Constitution prohibits is unreasonable im pairm ent
only. Legislation appropriate to safeguard the people's
vital interests may modify or abrogate contracts al­
ready in effect. Reservation of essential attributes of
sovereign power is read into contracts as postulate of
the legal order. All contracts made with reference to
any m atter that is subject to regulation under the
police power must be understood as made in reference
to the possible exercise of that power (Abella/Hda.
Danao-Ramona vs. NLRC et al., G. R. No. 71813,
July 20, 1987).

* * ft

Discuss briefly the applicability o r relevance of

“ compassionate justice” in labor cases.

ANS. Relying on the constitutional mandate on

protection to labor, courts and labor tribunals have
dispensed what is known as “compassionate justice",
disregarding rigid rules and giving due weight to all the
equities of the case. For labor law determinations are
not only secum du m ra tio n e m but se cu n d u m c a ri-
ta te m (Almira et al. vs. B. F. Goodrich Philippines,
Inc. et al., G. R. No. L-34974, July 25, 1974).
Compassionate justice has been applied to bar the
dismissal of workers guilty of certain offenses but who
have rendered long year of service and without previ­
ous derogatory records. (Philippine Airlines, Inc. vs.
Philippine Airlines Employee Association et al., G. R.
No. L-24626, June*28, 1974; Sampang vs. Inciong et
al., G. R. No. L-50992, June 14, 1985; Gelmart
Industries Phils., Inc. vs. NLRC et al., G. R. No.
85668, August 10, 1989)
The dismissal of the branch accountant of a bank,
for violation of the bank’s housing plan for employees

52
 GENERAL PRINCIPLES

has been ruled to be unduly harsh in view of the

accountant’s eight (8) years of service with no previ­
ous derogatory record and considering that he repaid
the loaned amount in full. (Yap vs. NLRC et al., G.
R. No. 123492, August 21, 1997)
The dismissal of an employee for theft of lighter
fluid valued at P8.00 has been held to be too severe,
in view of his length of service (8 years) and lack of
previous derogatory record, and considering that the
company did not lose anything as the bottle of lighter
fluid was retrieved on time, that there was no showing
that the employee’s retention in the service would work
undue prejudice to the viability of the employer’s
operations or is patently inimical to its interest, and
that he had been preventively suspended and had
undergone mental torture. (Caltex Refine Employees’
Association vs. NLRC et al., G. R. No. 102993, July
14, 1995)
After seventeen (17) years of untarnished service,
an employee in the production department of a phar­
maceutical firm was dismissed for allegedly being
caught in possession of a plastic bag which belonged
to the company. Under company rules, unauthorized
possession of company property was punishable by
outright dismissal. But even assuming that the offense
was committed, the penalty of dismissal is unduly
harsh and grossly disproportionate to the act done.
(De la Cruz vs. NLRC et al., G. R. No. 119536,
February 17, 1997)
The dismissal of an employee of a food company
for theft of fifteen (15) pieces of hamburger patties,
one (1) pair of boots, and one (1) empty aluminum
container has been held to be harsh, in view of his two
(2) years of service without previous derogatory
record. (Associated Labor Unions,et al. vs. NLRC et
al., G. R. No. 120450, February 10, 1999)
Although an employee has been validly dismissed,
the employer may still be required to pay the form er
severance compensation as a measure of compassion­
ate justice as long as the dismissal is not for serious
misconduct or for reasons reflecting on the employee’s
moral character (Philippine Long Distance Telephone

53
 GENERAL PRINCIPLES

Co. vs. NLRC et al., G. R. No. 80609, August 23,

1988).
It has been rule that although the dismissal of a
bus conductor for gross negligence was justified, he
should be given financial assistance taking into ac­
count his twenty (20) years of service and there being
no showing of dishonesty on his part. (Philippine
Rabbit Bus Lines, Inc. vs. NLRC et al., G. R. No.
98137, September 15, 1997)

* * *

May the State regulate the relations between employer

and employee? Explain.

ANS. Yes. Under Section 3 of Article XIII of the

Constitution, the State is mandated to regulate the
relations between the workers and employers. And to
speedily settle controversies or disputes between
them, the State under the same constitutional provi­
sion may exercise the power of compulsory arbitration.
Stability in the relations between workers and employ­
ers is indispensable to the peace, order and economic
progress of the State.

* * *

The legislature enacts a law providing that employers

should give to their employees, in addition to the lat-
ter’s wages, one percent (1%) o f annual company prof­
its. Can you cite a constitutional provision th a t can
sustain the validity of such law?

ANS. Paragraph 4, Section 3, Article XIII, of the

1987 Constitution provides:

'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,
and to expansion and growth.

54
 GENERAL PRINCIPLES

The legislature enacts a law providing that the workers’

representative shall ba entitled to a seat in the board of
directors of corporations. Would you consider this law
valid in the lig h t of the constitutional guarantee in
Section 3 of Article XIII o f the workers’ right to partici­
pate in policy and decision-making processes affecting
their rights and benefits?

ANS. No. The constitutional guarantee does not

include the workers’ right to participate in the manage­
ment of the enterprise; that is the swle prerogative of
the employer.

* * it

What is social justice?

ANS. Social justice is neither communism, nor

despotism, nor atomism, nor anarchy, but the human­
ization of laws and the equalization of the sociai
economic forces by the State so that justice in its
rational and objectively secular conception may at
least be approximated. Social justice means the
promotion of the welfare of all the people, the adoption
by the Government, of measures calculated to insure
economic stability of all the component elements of
society, through the maintenance of proper economic
and social equilibrium in the interrelations of the
members of the community; constitutionally, through
the adoption of the measures legally justifiable; or
extra-constitutionally, through the exercise of powers
underlying the existence of all governments on the
time-honored principle of s a lu s p o p u li e st suprem a
lex (Calalang vs. W illiams, 70 Phil. 726).
* * *

What does social justice guarantee?

ANS. Social justice does not champion division of

property or equality of economic status; what it and the

55
 GENERAL PRINCIPLES

Constitution do guarantee are equality of opportunity,

equality of political rights, equality before the law,
equality between values given and received, equitable
sharing of the social and material goods on the basis
of efforts exerted in their production. It is a command
to devise social measures; but it cannot be used to
trample upon the rights of others (Guido vs. Rural
Progress Administration, G. R. No. L-2089, October
31, 1949).
* * *

Give the true concept of social justice.

ANS. In our scheme of government, social justice

as a fundamental principle enshrined in the 1935
Constitution, reiterated and revitalized in the 1973
Constitution, is formulated and implemented by the
legislative and the executive departments, respec­
tively. It is the specific duty of the judiciary in turn to
examine and determine - in appropriate cases coming
before the courts - the intendment and scope - or the
constitutionality, where raised - of tenancy, labor and
other social legislation and/or measures. This respon­
sibility the judiciary has discharged, ever mindful and
always aware in proper cases that in the words of the
famous grass-roots slogan of the late President
Magsaysay “... those who have less in life should
have more in law.* A cursory study of the long line of
decisions on social justice will readily reveal, however,
that the concept has been fleshed out - the principle,
conceptualized - as Justice Laurel enjoined in the
celebrated case of Calalang vs. W illiams - not thru
mistaken sympathy for or misplaced antipathy against
any group - whether labor or capital, landlord or tenant
- but even-handedly and fairly, thru the observance of
the principle of “equal justice under the law” , for all
and each and every element of the body politic
(Cabatan vs. Cdurt of Appeals, G. R. Nos. L-44875-
76; L-45160; L-46211-12, January 22, 1980).

56
 GENERAL PRINCIPLES

Should the policy of social justice countenance w rong­

doing by the underprivileged?

ANS. The policy of social justice is not intended to

countenance wrongdoing simply because it is commit­
ted by the underprivileged. At best it may mitigate the
penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every
humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social ju s­
tice 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
th e ir motives blameless and not simply because they
happen to be poor. This great policy of our Constitu­
tion is not meant for the protection of those who have
proved they are not worthy of it, like the workers who
have tainted the cause of labor with the blemishes of
th e ir own character (PLDT Co. vs. NLRC et al., G. R.
No. L-80609, August 23, 1988).

* * *

W hy m ust the State afford protection to labor?

ANS. Labor, by reason of its economic depen­

dence upon capital, is deemed the weaker of the two
and needs the protection of the State. W ithout such
protection, workers are easy objects of exploitation.
Oppression, without redress, may force workers to
take the law into their own hands.

* * *

Give three (3) aggregates of power against w hich the

individual employee needs protection.

ANS. The individual employee, at various tim es in

his working life, is confronted by two aggregates of

57
 GENERAL PRINCIPLES

power, collective labor, directed by a union, and

collective capital, directed by management. The
union, an institution developed to organize labor into a
collective force and thus protect the employee from
the power o f collective capital is paradoxically both the
champion of employees rights, and a new source of
their frustration. Moreover when the union interacts
with management, it produces yet a third aggregate of
group strength from which the individual also needs
protection - the collective bargaining relationship
(Benjamin Victoriano vs. Elizalde Rope W orkers’
Union et al., G. R. No. L-25246, September 12,
1974).
* * *

Does protection to labor mean destruction o f the em­

ployer?

ANS. No. The law, while protecting the rights of

laborers, does not authorize the oppression or destruc­
tion of the employer. The latter is also a component
element of our society. Its rights must be respected.

* * *

Can the employer invoke the laissez-faire principle to

resist State regulation o f employer-employee relations?

ANS. No. The laissez-faire (let people do as they

please) principle, or doctrine of free enterprise, never
found full acceptance in this jurisdiction. Our funda­
mental law imposes upon the State the responsibility
to cope with social and economic problems and pro­
mote the general welfare through governmental action
(Agricultural Credit Cooperative Financing Administra­
tion vs. Confederation of Unions in Government
Corporations and Offices, G. R. No. L-21484,
November 29, 1969).

58
 GENERAL PRINCIPLES

How are labor and social legislation construed?

ANS. Labor and social laws, being remedial in

character, should be liberally construed in order to
further their purposes. They cannot be given a narrow
and limited interpretation (A. L. Ammen Transporta­
tion Co., Inc. et al. vs. Borja, G. R. No. L-1775G,
August 31, 1962).
* * *

How should doubts in labor legislation o r labor con­

tracts be resolved?

ANS. Article 1702 of the C ivil Code provides:

"In case of doubt, all labor legislation and all labor

contracts shall be construed in favor of the safety and
decent living of the laborer.’

And Article 4 of the Labor Code provides:

‘ C o n s tru c tio n in fa v o r o f la b o r. - All doubts in

the implementation and interpretation of the provisions
of this Code, including it implementing rules and
regulations, shall be resolved in favor o f labor.’

* * *

The company’s retrenchment program bases the com­

putation o f separation benefits on “ every year o f com­
pleted/credited service." Should th is phrase be under­
stood as requiring that the service be continuous?

ANS. No. In the interpretation of an em ployer’s

retrenchment program providing fo r separation bene­
fits, all doubts should be resolved in favor of the
underprivileged worker. There should thus be no
prohibition for the cumulation of the services rendered
by qualified employees. (Philippine National Con­

59
 GENERAL PRINCIPLES

struction Corporation vs. NLRC et al., G. R. No.

107307, August 11, 1997)

* * *

A company guard signed an employment contract

which provides fo r a m onthly pay which is over the
legal minimum wage rate but which requires him to
work fo r twelve (12) hours a day. Is the company guard
entitled to overtime pay in addition to his m onthly pay
in case he worked fo r twelve (12) hours a day? Why?

ANS. Yes. The contract does not specifically

provide that his monthly pay which is over the legal
minimum wage, includes his overtime compensation.
Doubts in the employment contract are resolved in
favor of the worker. (PAL Savings and Loan Associa­
tion, Inc. vs. NLRC et al., G. R. No. 105963, August
22, 1996)

* * Hr

An employer assails the validity of Article 1702 of the

Civil Code and Article 4 of the Labor Code on the
ground that the said provisions violate the equal pro­
tection clause of the Constitution. Is this contention
tenable? Why?

ANS. The contention of the employer is not

tenable. The employer and the laborer do not stand on
equal footing; to insure equality, the latter must be
afforded protection.

Insofar as labor contracts are concerned, the same

are usually drafted and prepared by the employer. All
doubts in their provisions should therefore be resolved
against it.

* * *

60
 GENERAL PRINCIPLES

Does the establishment of the employer-employee rela­

tionship confer upon the employee any property right?
Explain.

ANS. Yes. This property right is often referred to

as the worker’s right to labor, It is the right to his job,
to his means of livelihood, and it is deemed property
in the constitutional sense. He cannot be deprived of
his labor or work without due process of law. (Phil.
Movie Pictures Workers Association vs. Premiere
Productions, Inc., G. R. No. L-5261, March 25,
1953). Sumnriary and unjust dismissal of the employee
from his work amounts to deprivation of property
without due process of law (Batangas-Laguna-Tayabas
Bus Co. vs. Court of Appeals et al., G. R. No.
L-38482, June 18, 1976).
★ * *

Callanta, a national promoter salesman o f Distilleria

Limtuaco, tendered his resignation after a spot audit
was conducted and he was found to have a tentative
shortage in the amount of P49,005.59. Seven months
later, he wrote the company complaining about his false
resignation and then filed a complaint fo r illegal dis­
missal. He claimed he was forced to resign as the
company threatened to prosecute him fo r estafa. May
the resignation o f Callanta, a man of high educational
attainment, be considered involuntary? Why?

ANS. No. The threat or intimidation, to vitiate

consent, must be of an unjust act. The threat to
prosecute for estafa is not an unjust act; it is a valid
claim through competent authority. Furthermore, it is
unbelievable that Callanta, occupying a responsible
position and with high education attainment, can be
rattled and confused into signing a resignation letter
on account of a mere spot audit report (Callanta vs.
NLRC et al., G. R. No. 105083, August 20, 1993).

61
 GENERAL PRINCIPLES

Zurbano, the sole bread-winner o f a fam ily o f 14,

worked fo r San Miguel Corporation as a truck helper
from 1958 to 1985. In 1980, he was hospitalized several
times fo r work-related accidents. In May 1985, he was
told by his immediate supervisor and an SMC personnel
officer to retire otherwise he would be dismissed and
get nothing. They also promised to employ one of his
children. Zurbano, a man with only a first-grade educa­
tion, signed a previously prepared retirement letter pro­
vided by the two SMC officers and two quitclaims. He
received P76,501.88 as retirement benefits.
(a) Was the retirement o f Zurbano voluntary? Why?

ANS. No. The retirement was made under threat

of dismissal. And such threat was clear and present
considering that the same was made by SMC officers
who had the power and authority to enforce it.

(b) Did his acceptance of retirement benefits preclude

the filin g o f a complaint fo r illegal dismissal against
SMC? Why?

ANS. No. He found him self in no position to resist

money proffered. His, then, was a case of adherence,
not of choice (Zurbano vs. NLRC et al., G. R. No.
103679, December 17, 1993).

* * *

The manager told the messenger, who had been with

the company fo r five (5) years, to resign otherwise “ I
w ill file charges against you” and “ I have a very good
lawyer.” The form er even threatened to block the
messenger’s future employment should the latter not
file his resignation. The manager even provided the
pen and paper on which the messenger wrote and
signed the resignation letter dictated by the former. Is
the resignation of the messenger voluntary? Why?

ANS. No. T|)ere was intimidation which vitiated

consent. The threat as unjust since the messenger

62
 GENERAL PRINCIPLES

had not committed any unlawful act, and it was made

by a person of influence and with capacity to make
good his threat by refusing to give a favorable recom­
mendation on the messenger's performance. The
messenger was not even a college graduate and with
his lim ited skills and the scarcity o f employment
opportunities, it would be difficult fo r him to find a job
if the m anager blocked his future employment
(Guatson International Travel and Tours, Inc. et al.
vs. NLRC et al., G. R. No. 100322, March 9, 1994).

it it it

May the employee waive any right conferred to him by

labor statutes o r acquired by him under a labor con­
tract?

ANS. The waiver, if supported by adequate and

valuable consideration and not in contravention of law,
morals, good customs or public policy, is valid and
binding upon the employee.

it it it

Are all waivers and quitclaims executed by workers

considered invalid? Explain.

ANS. Not all waivers and quitclaims are invalid as

against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it
is binding on the parties and may not later be dis­
owned simply because of a change of mind. It is only
where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person, or the terms
of settlement are unconscionable on its face, that the
law will step in to annul the questionable transaction.
But where it is shown that the person making the
waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction

63
 GENERAL PRINCIPLES

must be recognized as a valid and binding undertak­

ing.
Where an employee was ordered reinstated but
instead of demanding it she entered into a compromise
agreement not to be reinstated and accepted a sum of
money as backpay, she cannot, several years later,
attack the validity thereof (Periquet vs. NLRC et al.,
G. R. No. 91298, June 22, 1990).
Where, after the rendition of a judgment by the
NLRC, ordering payment of their monetary claims as
well as their reinstatement with full backwages, com­
plainants entered into a compromise agreement to
which they received substantial amounts as settlement
of their claims, it was held that the agreement is valid
and binding (Montilla vs. NLRC et al., G. R. No.
71504, December 17, 1993).
W hile it the court’s duty to prevent the exploitation
of employees, it must also protect the sanctity of
contracts that do not contravene the laws, such as
those embodying separation benefits that are well
beyond what the company was legally required to give
to the employees. (Asian Alcohol Corporation vs.
NLRC et al., G. R. No. 131108, March 25, 1999)

★ * *

At the time o f his employment, Pedro Reyes executed a

document expressing deep gratitude to his employer
fo r giving him a jo b and binding himself not to claim fo r
underpayment o f his wages o r non-payment o f overtime
work that he may render in the course o f his employ­
ment. Pedro Reyes later on files a claim against his
employer fo r underpayment of wages and non-payment
o f overtime compensation. The employer interposes
the defense that Pedro Reyes has waived the said claim.
Decide.

ANS. The waiver of future benefits is not valid and

binding. It contravenes public policy. It encourages
the employer to violate with impunity the laws on
wages and overtime work.

RA
 GENERAL PRINCIPLES

Juan Magaling signed a contract w ith Space Satellite

Corporation binding himself to work fo r the latter fo r a
fixed period o f five years. In the first year o f his
employment he was sent to the U. S. at company
expense fo r further training. A few months after he
came back to the Philippines, he transferred to and was
employed by another company. Considering that he
breached his contract by getting employed in another
firm, can he be compelled to go back to Space Satellite
Corporation to work fo r the unexpired portion o f his
contract? Why?

ANS. Juan Magaling may be held liable for dam­

ages by virtue of his breach of employment contract.
But he cannot be compelled against his will to continue
working fo r Space Satellite Corporation as this would
constitute involuntary servitude.

★ * *

An employee, dismissed due to his m ilitant union activi­

ties, accepts amounts proffered by the employer as
severance compensation and signs a renunciation of
any claim against the company. He later on files a
charge fo r unfair labor practice against the employer,
but the latter sets up the defense that by accepting
severance pay the form er waived his right to file the
charge fo r unfair labor practice. Is the contention o f the
employer tenable? Explain.

ANS. No. The acceptance by the employee of

separation pay and his signing a renunciation of any
claim against the company has, been held not to
preclude the filing of a charge of unfair labor practice.
Employer and employee do not stand on the same
footing. The employer often drives the employee to
the wall. The latter must get hold of the money for
himself and his family. He is in no position to resist
money proffered. His case is one of adherence, not of
choice. (Carino vs. ACCFA, G. R. No. L-19808,

65
 GENERAL PRINCIPLES

September 19, 1965; AFP Mutual Benefit Association

vs. AFP Mutual Benefit Association, Inc. Employees
Union et al., G. R. No. L-39146, May 17, 1980).

* * *

A bank instituted an action against a number of its

employees to recover P25 m illion o f bank funds which
the latter allegedly embezzled. The defendant employ­
ees on the other hand agreed to resign and to waive all
rights and benefits due them by reason o f their employ­
ment in consideration fo r the dismissal of the case and
their discharge from all obligations and liabilities there­
under. Is the waiver valid and binding? Why?

ANS. Yes. It is not contrary to law, morals, good

customs or public policy. The consideration for the
waiver is adequate. Under this reciprocal undertaking,
the employees were not placed at a disadvantage; on
the contrary, they were able to avoid liability for such
an enormous sum (Philippine Bank of Communications
vs. Hon. Echiverri et al., G. R. No. L-41795, August
29, 1980).

* * *

After the rendition by the industrial relations court of a

decision ordering a sugar m ill to pay wage differentials
and fringe benefits to some of its workers, the latter
executed a quitclaim waiving their rights, benefits and
privileges under the decision. The waiver specifically
provides among others:

“ 3. Nothing herein stipulated shall be construed as an

admission and/or recognition by the Party of the Sec­
ond Part of its failure, refusal and/or omission as em­
ployer, to faithfully comply with the pertinent laws,
rules and regulations and/or agreements, nor its liability
therefor and thereunder.”

66
 GENERAL PRINCIPLES

Is the quitclaim legal and binding? Explain.

ANS. The quitclaim is null and void.

It obliges the workers to forego their benefits while
at the same tim e exempting the employer from any
liability it may choose to reject. This runs counter to
Article 22 of the Civil Code which provides that no one
shall be unjustly enriched at the expense of another.
The quitclaim also contravenes public policy.
Once a civil action is filed in court, the cause of action
may not be the subject of compromise unless the same
is by leave of the court concerned. Otherwise, this will
render the entire judicial system irrelevant to the
prejudice of the national interest. Parties to litigations
cannot be allowed to trifle with the judicial system by
coming to court and later on agreeing to a compromise
without the knowledge and approval of the court. This
converts the judiciary into a mere tool of party-litigants
who act according to their whims and caprices. This is
more so when the court has already rendered its
decision on the issues submitted (Pampanpa Sugar
Development Co., Inc. vs. CIR & Sugar Workers
Associations, G. R. No. L-39387, June 29, 1982).
it * *

Ediquillo, hired to work as a cook in the company’s

project in Saudi Arabia, was repatriated to the Philip­
pines because o f an illness requiring surgical treat­
ment. But after he was declared fit fo r duty, the com­
pany refused to reemploy him. He filed a complaint for
illegal dismissal but the company setup the defense
that he had executed a quitclaim wherein fo r and incon­
sideration of the return travel fund he waived, released
and forever discharged the form er from any and all
claims arising from his employment. Is the quitclaim
valid and binding? Why?

ANS. It is not valid and binding. There was no

consideration for the same; what was actually paid to
the employee was the Return and Travel Fund which

67
 GENERAL PRINCIPLES

had been regularly deducted from his wages. Besides,

the quitclaim is inequitable and incongruous to the
declared policy of the State to afford protection to
labor and to assure the right of workers to security of
tenure (E. Guales vs. NLRC et al., G. R. No. 56379,
April 18, 1983).

* * *

The Supreme Court ordered the payment to employees

of bjackwages which roughly amounted to PI ,248.00
each. A union to which some of the employees trans­
ferred was however able to obtain quitclaims or re­
leases wherein some accepted the sum o f P300.00 or
P500.00 as fu ll and final payment of their backwages.
Are the waivers valid? Why?

ANS. No. The employees did not have any other

' choice than to accept the payment because they were
in a tight financial situation. Besides, to validate the
waivers would leave compliance with the award of
backwages to the whim of the losing company. Fi­
nally, if such act is countenanced, the sanctity of the
contract entered into by the parties and interpreted by
the Court would be violated (Philippine Apparel Work­
ers Union vs. NLRC et al., G. R. No. L-50320,
October 27, 1983).

•St * *

The National Seamen Board (now the POEA) awarded in

favor o f seaman Brigido Samson disability benefits in
the sum o f US$3,800.00 or its equivalent in Philippine
currency. His employer however appealed the decision
to the NLRC. During the pendency of the appeal, as he
needed funds fo r his on-going medical treatment,
Brigido Samson executed a “ Release” whereby fo r the
sum of P18,000 00 he recognized the legality of his
repatriation and waived all claims he had against his
employer. The employer did not however move to

68
 GENERAL PRINCIPLES

dismiss the appeal or to declare it terminated due to the

satisfaction of the judgment. It only interposed the
defense that the claim has been satisfied when the
judgm ent of the NLSB, affirmed by the NLRC, was being
executed. W ill the “ Release” executed by the seaman
bar the execution of the judgment? Why?

ANS. No. The fact that the employee has signed

a satisfaction receipt does not result in waiver; the law
does not consider as valid any agreement to receive
less compensation than what the workers should re­
ceive. It is also clear that the worker was constrained
to accept the payment of P18;000.00 out of necessity
as he was undergoing medical treatment. Finally, the
failure of the employer to move for the dismissal of the
appeal or to have it declared terminated by reason of
the release executed by the claimant negates any
inference that the parties had actually agreed that the
payment of P18,000.00 would be equivalent to a full
satisfaction of the award and/or waiver of the balance
thereof (Philippine International Shipping Corporation
vs. NLRC et al., G. R. No. L-63535, May 27, 1985).
* * *

On April 7, 1982, a bank and the association of its

employees, through the mediation o f the MOLE, entered
into a collective bargaining agreement retroactive to
May 1,1981, providing among others that the associa­
tion shall withdraw the pending cases filed by it fo r
non-payment o f the P60.00 ECOLA under P. D. 1614.
Although the CBA was ratified in w riting by the employ­
ees o f the bank, including the officers of the associa­
tion, the latter did not withdraw its claim fo r alleged
non-payment of the ECOLA under P. D. 1614. Is the
association bound by its undertaking in the CBA to
withdraw the said claim?

ANS. The CBA which includes a withdrawal of the

union's complaint in respect of P. D. !\'o, 1614 i

69
 GENERAL PRINCIPLES

valid. There is nothing in it which contravenes the law,

morals, good customs, public order, or pubic policy. In
fact the provision on withdrawal of the complaint is
encouraged by law for it is a compromise to put an end
to litigation already commenced. And the Labor Code
itself directs:

“ART. 227. C o m p ro m ise agreem ent. - Any

compromise agreement, including those involving la­
bor standard laws, voluntarily agreed upon by the
parties with the assistance of the Bureau or the re­
gional 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 a prima facie
evidence that the settlement was obtained through
fraud, misrepresentation, or coercion.’

The terms and conditions of a collective bargaining

contract constitute the law between the parties and an
employer who bargains in good faith has a right to rely
on the agreement (Monte de Piedad & Savings Bank
vs. MOLE et al., G. R. No. 69372, July 11, 1985).

<r * *

After the finality o f the judgm ent awarding them sever­

ance compensation and 13th month pay, the workers
executed quitclaims under which they agreed to receive
amounts less than what they should get under the
judgment. The quitclaims were executed before labor
arbiters who had no participation in any aspect of the
case. Are the quitclaims considered as valid com pro­
mises? Why?

ANS. No. While the Labor Code encourages all

efforts toward the amicable settlement of a labor
dispute, and a quitclaim partakes of the nature of a
compromise, the implementing rules require that such
a settlement shall be approved by the labor arbiter

70
 GENERAL PRINCIPLES

before whom the case is pending after being satisfied

that it was voluntarily entered into by the parties and
after having explained to them the terms and conse­
quences thereof. The labor arbiter before whom the
case is pending would be in a better position than just
any labor arbiter to personally determine the voluntari­
ness of the agreement and certify its validity (St.
Gothard Pub & Restaurant et al. vs. NLRC et al., G.
R. No. 102570, February 1, 1993).

A A A

Is “ dire necessity” a ground to annul waivers or re­

leases executed by workers? Why

ANS. “Dire necessity” is not an acceptable ground

to annul releases unless there is a showing that
workers were forced to execute them or that the
considerations for the quitclaims are unconscionably
low and the workers were tricked into accepting them.
It has therefore been held that an experienced
lawyer specializing in labor relations cannot claim that
he signed the waiver due to “dire necessity” as he
even successfully negotiated for higher separation
benefits (Sicangco vs. NLRC et al., G. R. No.
110261, August 4, 1994).

* * *

During the pendency o f their appeal before the NLRC

from a decision of the Labor Arbiter awarding them
severance pay, the workers executed affidavits declar­
ing among others their intention to withdraw their ap­
peal since they had already received the separation pay
decreed in the decision of the Labor Arbiter. These
affidavits, subscribed and sworn to before the Labor
Arbiter were not however brought to the attention o f the
NLRC. Unaware o f the affidavits, the NLRC rendered a
decision ordering reinstatement of the * and
payment of backwages. !n view of the exe­

71
 GENERAL PRINCIPLES

cuted by the workers, may the decision o f the NLRC be

enforced? Why?

ANS. No. The validity and conclusiveness of

compromise agreements as a means to end a labor
dispute is recognized by Article 227 of the Labor Code.
In a suppletory manner, Article 2037 of the C ivil Code
states that a compromise has upon the parties the
effect and authority of res judicata. The affidavits
were executed voluntarily and knowingly in the pres­
ence of the Labor Arbiter.
These are legitim ate waivers that represent a
voluntary settlement of laborer’s claims that should be
respected by the courts as the law between the parties.
And while in a dispute between management and labor
the latter’s rights are always extended protection by
the State, the picture changes completely where labor
no longer recognizes honor and a sense of commit­
ment in solemn agreements. This is a case in point
(Olaybar et al. vs. NLRC et al., G. R. No. 108713,
October 28, 1994).

* * *

Santos worked fo r thirty-one (31) years fo r a bank,

occupying various positions the last o f which was that
o f department manager. Upon his retirement, he re­
ceived a gratuity pay of P434,468.52, in consideration of
which he signed a “ Release, Waiver and Quitclaim.”
But he later on filed a complaint fo r underpayment of
gratuity pay, non-payment o f accumulated sick and
vacation leaves, mid-year and year end bonus, and
financial assistance, alleging that he should have been
paid a total of P908.022.65, instead of P434,468.52, and
that follow ing established bank practice his gratuity pay
should have been computed on the basis of the salary
rate o f the next higher rank.
(a) Considering that Santos had occupied responsible
positions in tjte bank and was undoubtedly highly
educated, would the “ Release, Waiver and Quitclaim”
that he signed bar his claim? Why?

72
 GENERAL PRINCIPLES

ANS. No. The fact that the amount given, in

exchange for the waiver is very much less than the
amount claimed renders the waiver null and void. By
reason of public policy, quitclaims are ineffective to
bar recovery for the full measure of the worker’s rights.

(b) Is the claim o f Santos that his gratuity benefits be

computed on the basis o f the salary rate of the next
higher rank m eritorious? Explain.

ANS. Yes. The bank had consistently and deliber­

ately adopted this practice. The same has ripened into
a company policy which can no longer be peremptorily
withdrawn.

(c) Distinguish between gratuity pay and salary.

ANS. Gratuity pay is given to the beneficiary for

the past services or favor rendered purely out of the
generosity o f the giver. Salary, on the other hand, is
payment for actual services rendered by the worker.
Gratuity is bounty given to reward employees who
have rendered satisfactory service to the company.
(Republic Planters Bank vs. NLRC et al., G. R. No.
117460, January 6, 1997)

* * Hr

The decision o f the labor arbiter ordered the reinstate­

ment of the workers and payment o f backwages in the
total amount o f P3,223,261.00, or P I 07,380.00 fo r each
complainant. During the pendency of the appeal of the
employer before the NLRC, the workers executed quit­
claims pursuant to w hich each o f them received
P12,000.00 in settlement of their claims, in their quit­
claims, they expressly declared their awareness that the
amount they received was unjust and insufficient to
answer fo r their ju s t claims and the award o f the labor
arbiter, but due to destitution caused by their protracted
unemployment they decided to accept the P12,000.00 in
the meantime.

73
 GENERAL PRINCIPLES

(a) is the compromise agreement valid and binding?

Why?

ANS. No. The undisputed and concurrent circum­

stances of dire necessity and uncortscioriabilitv obtain­
ing in this case constitute mofe than sufficient ground
to invalidate the compromise agreement.

(b) When is dire necessity deemed unacceptable to

invalidate a compromise agreement?

ANS. The existence of a voluntary acceptance of

the agreement and the reasonable consideration for it
make the agreement intrinsically valid and binding,
and render the dire necessity excuse immaterial and
irrelevant (Galicia et al. vs. NLRC, et al., G. R. No.
110649, July 28, 1997)

* * *

Who has the burden of establishing the voluntariness

of the worker’s waiver?

ANS. Where the worker alleges that he signed and

wherein he supposedly worked his right to reinstate­
ment was executed through misrepresentation, it is
incumbent upon the employer to prove the quitclaim
was voluntarily entered into by the worker. (Philippine
Carpet Employees Association et al. vs. Philippine
Carpet Manufacturing Corporation et al., G. R. No.
140269, September 14, 2000)
* * *

Before their repatriation to the Philippines from Korea,

the members of a band were made by their Korean
employer to sign a statement which expressed their
agreement to go back home due to some difficulties in
their contractual undertaking and another statement
which contained their promise to refund to their agency

74
 GENERAL PRINCIPLES

the sum o f one hundred fo rty thousand won

(W140,000.00) representing the balance o f their pro­
cessing fee. Are the quitclaims valid? Why?

ANS. No. It is incredible that, after all the

expense and trouble they went through in seeking
greener pastures abroad, the workers would suddenly
and without reason decide to return home and face, as
jobless people, a staggering debt of W140,000.00.
They had no choice but to sign. They were stranded in
a foreign land with no work and no income, and with
their employer threatening not to give them their return
tickets to Manila if they refused to sign. (JMM
Promotions and Management, Inc. vs. Court of
Appeals et al., G. R. No. 139401, October 2, 2002)

* * *

If the worker has his right to labor, does the employer

have property rights? Explain.

ANS. Yes. As owner of the business, the em­

ployer enjoys what are commonly known as manage­
ment prerogatives. Among these are the right to
select the persons to be hired and to discharge them
for just and valid cause; to promulgate and enforce
reasonable employment rules and regulations and to
modify, amend or revoke the same; to designate the
work as well as the employee or employees to perform
it; to transfer and promote employees; to schedule,
direct, curtail or control company operations; to intro­
duce or install new or improved money saving meth­
ods, facilities or devices; to create, merge, divide,
reclassify and abolish departments or positions in the
company; and to sell or close the business. The
exercise of these rights must however be always in
good faith, without discrimination and without abuse of
discretion.
The rule is well-settled that labor laws discourage
interference with an employer’s judgment in the con­
duct of his business. Even as the law is solicitous of

75
 GENERAL PRINCIPLES

the welfare of employees, it must also protect the right

of an employer to exercise what are clearly manage­
ment prerogatives. As long as the employer’s exercise
of the same is in good faith to advance its interests
and not for the purpose of defeating or circumventing
the rights of employees under the laws or valid agree­
ments, such exercise will be upheld (Maya Farms
Employees Organization et al. vs. NLRC-et al., G. R.
No. 106256, December 28, 1994).

* * *

Can the employer adopt measures to maximize profits?

ANS. The employer has the right to adopt all

reasonable measures to make his business operations
as profitable as possible. After all, he put up the
business in order to earn profits. The law encourages
private initiative. Profits may however be equitably
diffused pursuant to the social justice clause of the
Constitution.
* * *

Among the prerogatives o f the employer is the preroga­

tive to select his employees.. Is this prerogative abso­
lute? Explain.

ANS. No. The exercise of this prerogative is

subject to constitutional and statutory limitations.

Among the constitutional restrictions are the poli­

cies on the promotion of equality of employment for all
(Sec. 3, Article XIII) and on the fundamental equality
before the law of men and women (Sec. 14, Article II).

Among the statutory restrictions are Article 3 of the

Labor Code on equal work opportunities, regardless of
race, sex or creed; Article 135 of the Labor Code
prohibiting discrimination against a woman employee

76
 GENERAL PRINCIPLES

solely on account of her sex; Article 21 of the Civil

Code on abuse of right; Republic Act No. 7277
prohibiting discrimination against qualified disabled
workers; and Republic Act No. 8504 penalizing dis­
crimination in any form against HIV-positive individu­
als.
* 4t ★

After operating a profitable trucking business fo r

twenty-five years, the owner announces to his employ­
ees that he is tired and w ill close it shortly. The
employees object to the closure, contending that since
he is not losing, he has no ground to stop operations.
Is the contention o f the employees well-founded? Why?

ANS. No. As long as the closure is in good faith,

the employees have no ground to complain. The fact
that the business is profitable is not a ground to
compel the employer to continue operations. As the
owner, he has the right to close the business. The
closure is however without prejudice to the employees’
right to separation pay. Under Article 284 (now 283) of
the Labor Code, where the closure of the business or
undertaking is. not due to serious business losses or
financial reverses the employees are entitled to sepa­
ration pay equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service,
whichever is higher.

* * *

Does promotion o f an employee automatically entitle

him to an increase in his salary? Explain.

ANS. No. While promotion is usually accompa­

nied by an increase in salary, such increase is depen­
dent upon the employer in the absence of a contractual
stipulation or established company policy. Promotion
may denote an advancement merely in rank without an

77
 GENERAL PRINCIPLES

equivalent increase in salary. The matter of salary

increases is a management prerogative (National Fed­
eration of Labor Unions et al. vs. NLRC et al., G. R.
No. 90739, O ctobers, 1991).

* * *

Paguio, who was illegally transferred, claimed fo r the

payment of the salary increases that he would have
supposedly received had he not been transferred. He
alleged that prior to his illegal transfer, he had been
consistently increased, and that it is probable that he
would sim ilarly have been given high ratings and salary
increases but fo r his transfer to another position in the
company, is the claim of Paguio meritorious? Explain.

ANS. No. His claim is based merely on specula­

tion. The mere fact that he had been previously
granted salary increases by reason of his excellent
performance does not necessarily guarantee that he
would have performed in the same manner and, there­
fore, qualify for the said increase later. What is more,
his claim is tantamount to saying that he had a vested
right to remain as head of his department and given
salary increases simply because he had performed
well in such position, and thus should not be moved to
any other position where management would require
his services. (Paguio vs. Philippine Long Distance
Telephone Co., Inc. et al,, G. R. No. 154072,
December 3, 2002)

•* * *

Cite an example of a discriminatory exercise of manage­

ment prerogatives.

ANS. The employer’s right to terminate the ser­

vices of employees on account of retrenchment; to
prevent losses or closure of the business operations is
recognized by law. But it may not pay separation

78
 GENERAL PRINCIPLES

benefits unequally for such discrimination breeds re­

sentment and ill-w ill among those who have been
treated less generously than others. There was conse­
quently impermissible discrimination in a case where
the employer paid severance pay at the rate of one-
half month pay for every year of service to retrenched
employees, and at the rate of one month for every
year of service to employees dismissed because of the
closure of the establishment (Businessday Information
Systems and Services, Inc. et al. vs. NLRC et al., G.
R. No. 103575, April 5, 1993).

* "ft *

May the employer be compelled to share w ith its em­

ployees the prerogative of form ulating a code of disci­
pline? Is a code of discipline unilaterally formulated by
the employer enforceable? Explain.

ANS. The employer has the obligation to share

with its employees its prerogative of formulating a
code of discipline. This is in compliance with the
State’s policy stated in Article 211 of the Labor Code,
to ensure the participation of workers in decision and
policy-making processes affecting their rights, duties
and welfare. The exercise of management preroga­
tives has, furthermore, never been considered to be
boundless. This obligation is not dispensed with by a
provision in the collective bargaining agreement rec­
ognizing the exclusive right of the employer to make
and enforce company rules and regulations to carry
out the functions of management without having to
discuss the same with the union and much less obtain
the latter’s conformity thereto.
But a line must be drawn between management
prerogatives regarding business operations per se and
those which affect the right of employees and have
repercussions on their right to security of tenure. In
treating the latter, management should see to it that at
least its employees are properly informed of its deci­
sions or modes of action.
 GENERAL PRINCIPLES

A code of discipline unilaterally formulated and

promulgated by the employer would be unenforceable
(Philippine Airlines, Inc. vs. NLRC et al., G. R. No.
August 13, 1993).

* * *

May an employer transfer an employee on the ground

that it feels “ uncomfortable” w ith the latter?

ANS. No. This is a grave abuse of the employer’s

discretion and the prerogative to transfer and reassign
employees. This can be a mere subterfuge on the part
of an employer to rid itself of employees (Pocketbell
Philippines, Inc. vs. NLRC et al., G. R. No. 106843,
January 20, 1995).

* * *

The American Home Assurance Co. offered a Special

Early Retirement Program (SERP) to all its regular em­
ployees. The program called fo r the voluntary separa­
tion/retirement of the employee in exchange fo r cash
payments consisting of two months basic salary fo r
every year o f service and a lump sum payment of
P50,000.00. The company however reserved fo r itself
the sole discretion to approve or deny applications
under the program.
De Leon, a branch manager o f the company, applied fo r
early retirement under the SERP twice, but his applica­
tions were denied on the ground that the operational
requirements o f the company needed his continuous
employment. He was however ultimately dismissed on
the ground of redundancy; he was paid two months
basic pay fo r every year o f service; he was not however
paid the lump sum bonus of P50,000.00 under the
SERP. He contended that he was entitled to the bonus
because the ground of his dismissal was precisely a
ground fo r management to accept his application fo r
retirement under the SERP.

80
 GENERAL PRINCIPLES

(a) Is De Leon entitled to the lump sum bonus of

P50,000.00? Why?

ANS. Yes. Employees have a vested and de-

mandable right over existing benefits voluntarily
granted to them by their employer. Such right cannot
be curtailed or diminished by the employer by retaining
an unreasonable option to do so.

(b) Is De Leon estopped from claiming the bonus

considering that he signed a document of waiver and
quitclaim? Why?

ANS. No. The law does not consider as valid any

agreement to receive less compensation than what a
worker is entitled to recover nor prevent him from
demanding benefits to which he is entitled. Quitclaims
executed by employees are commonly frowned upon
as contrary to public policy considering the economic
disadvantage of the employee and the inevitable pres­
sure upon him by financial necessity. (American
Home Assurance Co. et al. vs. NLRC et al., G. R.
No. 120043, July 24, 1996)

* * *

Margot, the chief chemist o f a mining company, re­

signed after eleven and one-half (11 1/2) years of ser­
vice. The company had spent P175,000.00 fo r her
training in Japan. She demanded fo r payment of sever­
ance compensation; the company countered that man­
agerial employees who resigned were not entitled to
severance compensation. In at least four (4) instances,
the company had however paid severance compensa­
tion to managerial employees who resigned. Is the
claim of Margot tenable? Why?

ANS. Yes. There is clearly an established em­

ployer practice for the payment of severance compen­
sation to employees who voluntary resign. To hold

81
 GENERAL PRINCIPLES

that Margot is not entitled to separation pay would

unduly discriminate against her. (Hinatuan Mining
Corporation vs. NLRC et al., G. R. No. 117394,
February 21, 1997)

* * *

Is the implementation o f a jo b evaluation program or a

reorganization resulting in adjustments o f salaries and
other benefits, or abolition of positions a valid exercise
o f management prerogatives?

ANS. This has been recognized as valid as long as

it is not contrary to law, morals or pubic policy.
In Batonobacal vs. Associated Bank et al.. G. R.
No. 72977. December 21. 1988. involving the dis­
missal of an assistant vice-president for refusing to
tender his courtesy resignation which the bank re­
quired in line with its reorganization plan, the Supreme
Court held among others that it was not prepared to
preempt the employer’s prerogative to grant salary
increases to its employees by virtue of the implemen­
tation of the reorganization plan which thereby caused
a distortion in salaries, despite the semblance of
discrimination in this aspect of the bank’s organiza­
tional setup.
•n National Sugar Refineries Corporation vs.
NLRC et al.. G. R. No. 161761. March 24. 1993. the
validity of a job evaluation program which involved the
ranking of jobs according to effort, responsibility,
training and working conditions and relative worth of
the job, was upheld as the same resulted in salary
adjustments and increases in benefits to the workers
commensurate to their actual duties and functions.
Ir> Aurelio vs. NLRC et al.. G. R. No. 99034.
April 12. 1993. the reorganization of the corporation,
including the abolition of various positions was ruled to
be implied or incidental to power of the corporation to
conduct its regular business affairs.
In Arrieta vs. NLRC et al.. G. R. No. 126230.
September 18. 1997. the abolition of all positions in

82
 GENERAL PRINCIPLES

the old plantilla of a cooperative and the adoption

exercise of management prerogative, there being no
showing that the abolition of positions was made to
force the employee out of employment; the initiative of
reorganization cannot be denied the employer simply
to protect the person holding the position.
In Honakona and Shanghai Banking Corporation
Employees Union vs. NLRC et al.. G. R. No. 125038.
November 6. 1997. the Supreme Court saw nothing
wrong in the bank’s job evaluation program lowering
the starting salaries of future employees, resulting
from the changes made in the job grades and struc­
tures.
* * *

The International School classified its faculty into

“foreign-hires" and “ local hires” and granted the form er
benefits not accorded the latter, including housing,
transportation, shipping costs, taxes, and house leave
travel allowance. Foreign hires were also paid a salary
rate twenty-five percent (25%) more than local-hires.
The school justified the difference on the foreign-hires
“ dislocation factor” and limited tenure.
(a) Is the grant of a higher salary rate to the foreign
hires justified? Why?

ANS. No. It is discriminatory. There should be

equal pay for equal work. The Philippine Constitution
and statutes as well as international law abhor inequal­
ity and discrimination. In the workplace, where the
relations between capital and labor are often skewed
in favor of capital, inequality and discrimination by the
employer are all the more reprehensible.

(b) Do the local hires who claimed discrim ination have

the duty to adduce evidence that they perform work
equal to that o f foreign-hires? Why?

ANS. No. If an employer accords the same

position and rank, the presumption is that these em­

83
 GENERAL PRINCIPLES

ployees perform equal work. This presumption is

borne by logic and human expsrience. If the employer
pays one employee less than the rest, it is not for that
employee to explain why he receives less or why the
others receive more. That would be adding insult to
injury. (International School Alliance of Educators vs.
Quisumbing et al., G. R. No. 128845, June 1, 2000)

* * *

Discuss briefly the employer’s prerogative to transfer

and reassign employees.

ANS. W ell-settled is the rule that it is the preroga­

tive of the employer to transfer and reassign employ­
ees fo r valid reasons and according to the require­
ments of its business, provided there is no demotion in
rank or diminution of his salary, benefits and other
privileges. And in case of a constructive dismissal,
the em ployer has the burden of proving that the
transfer and demotion of an employee are fo r valid
and legitimate grounds and not unreasonable, incon­
venient or prejudicial to the employee. It has been
ruled that the transfer of a bank’s foreign remittance
clerk for payment order/collection to foreign remit­
tance clerk for inquiry was a lawful exercise of man­
agement prerogative since these positions were of
co-equal footing and co-important and the transfer did
not entail any reduction of wages and other benefits.
(Castillo vs. NLRC et al., G. R. No. 104319, June
17, 1999)

The transfer of a lady security guard from her post

in Makati to Taytay, Rizal has been upheld as a valid
exercise of management prerogative where it appears
that the same was prompted by the request of the
agency’s client for a more disciplined service of the
guards on detail, and the renewal of the security
contract hinged on the action taken by the agency on
the client's request; this, notwithstanding that the lady
guard lived in Sta. Mesa and now she had to travel to
 GENERAL PRINCIPLES

a farther place of work. (OSS Security and Allied

Services, Inc. et al., vs. NLRC et al., G. R. No.
112752, February 9, 2000)

The transfer of an accountant of Allied Bank from

Cebu City to Tagbilaran City was held to be valid and
reasonable where it was established that his employ­
ment contract stipulated that the bank had the right to
transfer or assign him to other departm ents or
branches of the bank as the need arises and in the
interest of maintaining an uninterrupted service to the
public; that the constant transfer of bank officers and
personnel with accounting responsibilities from one
branch to another was a standard practice of the bank
which had more than a hundred branches throughout
the country; that the Bangko Sentral ng Pilipinas, in its
Manual of Regulations for Banks and Other Financial
Intermediaries, required the rotation of these person­
nel and that such rotation should be irregular, unan­
nounced and long enough to permit disclosure of any
irregularities or manipulations; that as a matter of fact,
the accountant was due for transfer as he had already
served in Cebu City for seven (7) years; and that other
branch accountants were also transferred to new as­
signments. (Allied Banking Corporation vs. Court of
Appeals et al., G. R. No. 144412, November 18,
2003)
* * *

PT & T, engaged in the business of providing telegraph

and communication services thru its branches ail over
the country, embarked on a relocation and restructuring
program designed to sustain its retail operations, de-
congest surplus workforce in some branches, promote
efficiency and productivity, lower expenses incidental
hiring and training new personnel, and avoid retrench­
ment of employees occupying redundant positions.
P irsuant to the program, seven (7) employees were
n >tified of their reassignment to other jo b locations and
tha*. t ^ s e who agreed would be considered promoted.

85
 GENERAL PRINCIPLES

The employees however rejected the reassignments, as

these would require separation from their respective
families. The company considered the employees’ re­
fusal as insubordination and w illfu l disobedience to a
lawful order and dismissed them.
(a) Is the dismissal valid?

ANS. No. The proposed transfers were in the

nature of a promotion; the personnel movement was
not merely lateral but of scalar ascent of their job
grades, with increase in salaries. An employee cannot
be promoted, even if merely as a result of a transfer,
without his consent. There is no law that compels an
employee to accept a promotion for the reason that a
promotion is in the nature of a gift or reward, which a
person has a right to refuse.

(b) Is increase in salary an indispensable element of

prom otion?

ANS. No. An increase in salary is merely inciden­

tal but never determinative of whether or not a promo­
tion is bestowed upon an employee. The indispens­
able element is the upward vertical movement of the
employee’s rank or position. (Philippine Telegraph &
Telephone Corporation vs. Court of Appeals et al., G.
R. No. 152057, September 29, 2003)

it it it

Philippine Airlines, Inc. paid year-end bonus, in addi­

tion the 13th month pay, to all its employees except the
pilots.
(a) Is this practice lawful? Why?

ANS. There is no rational basis for withholding

from the members of ALPAP the benefit of a year-end
bonus in addition to the thirteenth month pay, while the
same is being granted to the other rank and file
employees of PAL. PAL’s failure to extend the same

QC
 GENERAL PRINCIPLES

benefits to its pilots is a blatant act of discrimination

and is grossly unfair to the latter considering the heavy
and delicate responsibility that they bear in the airline
business, particularly ensuring the safety and comfort
Of thousand of passengers. They are the lifeblood of
every airline company..

(b) PAL maintains fo r the first time on appeal that the

pilots cannot be classified as rank and file employees
since the nature o f their jo b includes the exercise of
supervision over the cabin crew and the power to
recommend disciplinary actions over the latter. Decide.

ANS. PAL is barred from raising this issue. The

rule is well-settled that points of law, theories, issues
and arguments not adequately brought to the attention
of the trial court need not be, and ordinarily w ill not be
considered by a reviewing court; this would be viola­
tive of the basic rules of fa ir play, justice and due
process. (Philippine Airlines, Inc. vs. NLRC et al., G.
R. No. 114280, July 26, 1996)

* * *

Eva Airways Corporation (Eva Air) abolished the posi­

tion o f Assistant Station Manager and kept the position
o f Station Manager vacant, in view o f the inability o f the
Manila office to attain the targeted passenger load. The
operation o f the airline was taken over by the Eva Taipei
Representative. Is the abolition o f the position a valid
exercise o f management prerogative? Why?

ANS. Yes. It is a management prerogative to

abolish a position which it deems no longer necessary
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. In the present case, the position of
Assistant Station Manager was deemed a superfluity
as the functions of the said office could be performed
by trained personnel already in the company’s employ.

87
 GENERAL PRINCIPLES

Moreover, the abolition of the position was seen as a

cost-effective measure to cut operational expenses so
as not to incur further losses already suffered by the
company’s Manila office on account of low passenger
yield. Certainly, the position was not abolished be­
cause the functions of the position had become redun­
dant and unnecessary. Verily, therefore, the deletion
of the petitioner’s position should be accepted and
validated as a valid exercise of management preroga­
tive. (Cosico vs. NLRC et al., G. R. No. 118432,
May 23, 1997)
* * *

Do management prerogatives have any relevance to the

in personam character of the employer-employee rela­
tionship? Explain.

ANS. Yes. The employer has the prerogative to

select his employees. The purchaser of a business
cannot therefore be compelled to continue with the
services of the employees of the seller as this would
deprive him of the prerogative to select his own
employees. But he cannot compel the workers of the
seller to work for him against their will, as this would
violate the constitutional guarantee against involuntary
servitude.
 CHAPTER If

THE LABOR CODE

When did the Labor Cods of the Philippines take effect?

ANS. The Labor Code of the Philippines

(Presidential Decree No. 442) was enacted on May 1,
1974 and, pursuant to Article 2 thereof, took effect six
(6) months thereafter, or on November 1, 1974.

* * *

What are the reasons as announced in its title fo r the

enactment o f the Labor Code?

ANS. According to its title, Pres. Decree No. 442

instituted a Labor Code, thereby revising and consoli­
dating labor and social laws to afford prolection to
labor, promote employment and human resources de­
velopment and insure industrial peace based on social
justice.
* iSf *

Into how many books is the Labor Code divided?

ANS. The Labor Code, now consisting of 305

(including Arts. 353-A, 262-A and 262-B) articles, is
divided into the following books:
(a) Book I, from Articles 12 to 42, on Pre­
employment;
(b) Book II, from Articles 43 to 81, on Human
Resources Development Program-;
(c) Book III, from Articles 82 to 155, on Conditions
of Employment;
(d) Book IV, from Articles 156 to 210, on Health,
Safety and Social W elfare Benefits;
(e) Book V, from Articles 211 to 277, on Labor
Relations;

88
 THE LABOR CODE

(f) Book VI, from Articles 278 to 287, on Post

Employment; and
(g) Book VII, from Article 288 to 302, containing
Penal Provisions, Prescriptions, Transitory and Final
Provisions.

* * it

Article 5 o f the Labor Code empowers the Department of

Labor and Employment and other government agencies
charged w ith the administration and enforcement o f the
same to promulgate the necessary implementing rules
and regulations. Describe briefly the scope or extent of
this power.
7

ANS. This power is limited to the promulgation of

rules and regulations to effectuate the policies of the
Code. Such rfiles and regulations must conform to the
terms and standards prescribed in the statute. They
cannot supplant its plain and explicit command.

* * *

Article 223 o f the Labor Code, prior to its amendment,

provided that appeals from the decisions o f labor ar­
biters may be taken to the National Labor Relations
Commission w ithin ten (10) days from receipt o f the
same. The Minister of Labor and Employment however
promulgated a rule (formerly Section 7, Rule XIII, Book
V, o f the Implementing Rules) providing that the ten day
period specified in Article 223 refers to “ w orking’’ days.
Is such a rule valid? Why?

ANS. The rule is not valid. The Minister of Labor

may not, under the guise of issuing implementing rules
of a law as authorized by the law itself, go beyond the
clear and unmistakable language of the law and ex­
pand it at his discretion. The period fixed by Article
223 contemplates c a le n d a r days. It is in the interest
of labor that labor cases be promptly, if not perempto­

90
 THE LABOR CODE

rily, decided (Vir-jen Shipping and Marine Services,

Inc. vs. NLRC et al., G. R. No. L-58011, July 20,
1982).
★ * *

Article 94 o f the Labor Code excepts from the enjoy­

ment o f holiday pay workers in retail and service estab­
lishments regularly employing less than ten (10) work­
ers. The M inister o f Labor and Employment, by author­
ity o f Article 5 o f the Code, however promulgated a rule,
implementing Article 94, which states:

"Sec. 2. Status of employees paid b y the

month. - Employees who are uniformly paid by
the month, irrespective of the number of work­
ing days therein, with a salary of not less than
the statutory established minimum wage shall
be presumed to be paid for all days in the month
whether worked or not
“Fo r this purpose, the monthly minimum
wage shall not be less than the statutory mini­
mum wage multiplied by 365 days divided by
twelve.”

Is the aforesaid implementing rule valid? Why?

ANS. No. It is null and void. In the guise of

clarifying the Labor Code’s provisions on holiday pay,
it in effect amended them by enlarging the scope of
their exclusion. Article 94 does not except employees
paid by the month from enjoyment of the benefit.
Regulations adopted under legislative authority must
be in harmony with the provisions of the law; they
cannot extend it (Insular Bank of Asia and America
Employees Union vs. Inciong et al., G. R. No.
L-52415, October 23, 1984).

★ * ★

91
 THE LABOR CODE

Section 2(c), Rule V, Book V, of the implementing ruies

o f Republic Act No. 8715, amending the Labor Code,
provides that the appropriate bargaining unit of the
rank-and-file employees shall not in d ud e security
guard. Is this rule valid? W hy?

ANS. No. It is not germane to the object and

purposes of Executive Order 111 and R. A. No. 6715
which have eliminated the disqualification of security
guards to join unions. The rule is violative of the
constitutional right of security guards to se lf­
organization (Manila Electric Company vs. The Honor­
able Secretary of Labor and Employment et al., G. R.
No. 91902, May 20, 1991).

* "it iSf

Section 5(a) o f the Revised Guidelines on the implemen­

tation of the 13th Month Pay Law (P. D. 851) included
commissions in the computation of the 13th month pay.
Is this justified? Why?

ANS. No. It unduly expanded the concept of

“basic salary” as defined in P. D. 851. It is a
fundamental rule that implementing rules cannot add
or detract from the provisions of the law it is designed
to implement (Boie-Takeda Chemicals, Inc. vs. De la
Serna, G. R. No. 92174, December 10, 1993).

* fr *

On April 12, 1988, the Secretary of Labor issued Policy

Instruction No. 54 which provided that health person­
nel in hospitals/clinics with a bed capacity of 100 or
more as well as those located in cities and m unicipali­
ties with a population of one m illion or more shall be
entitled to a fu ll weekly wage fo r seven (7) days if they
have completed the 40-hour/5-day workweek. This is
purportedly to implement Article 83 of the Labor Code.
Is the policy instruction valid? Why?

92
 THE LABOR CODE

ANS. No. A cursory reading of Article 83 of the

Labor Code betrays the DOLE Secretary’s theory that
hospital employe&s are entitled to a full weekly salary
with paid two (2) days' otf if they i;ave completed the
40-hour/5-day workweek. What Article 83 merely
provides are: (1) the regular office hour of eight hours
a day, (2) five days per week for health personnel, and
(3) where the exigencies of service require that health
personnel work for six days or forty-eight hours then
they shall be entitled to an additional compensation of
at least thirty percent of their regular wage for work on
the sixth day. There is nothing in the law which
supports the DOLE Secretary’s position. Needless to
state, the DOLE Secretary exceeded his authority by
including a two-day o ff with pay in contravention of the
clear mandate of the statute. Policy Instruction No.
54 is void. (San Juan De Dios Hospital Employees’
Association-AFW et al. vs. NLRC et al., G. R. No.
126383, November 28, 1997)
* * *

May the Labor Code be made to apply to employment

contracts already existing at the time of its enactment?
Explain.

ANS. It is well-settled that police power legislation

like the Labor Code, intended to promote public wel­
fare, being remedial in nature, cover existing con­
tracts; otherwise, it will be self-defeating. It must be
made clear that the constitutional guaranty of non­
impairment of the obligation of contracts is limited by
the exercise of the police power of the State, in the
interest of public health, safety, morals and general
welfare (Allied Investigation Bureau, Inc. vs. Ople et
al., G. R. No. L-49678, June 29, 1979).

* * *

What are the main objectives of the Labor Code accord­

ing to then President Marcos, who promulgated it?

93
 THE LABOR CODE

ANS. The Labor Code aims to attain the following

three major objectives; First, industrial peace based
on social justice and maximum protection of the rights
of labor; second, industrial development based on the
trisectoral cooperation of labor, management and gov­
ernment, and third, the promotion of interests and
welfare of labor, particularly through trade unionism,
better wages, manpower development and employ­
ment placements. (Marcos, Ferdinand E. “Progress
and Martial Law’ )
* * *

What are the fundamental reforms introduced by the

Labor Code?

ANS. In his speech entitled “Labor - Our Greatest

W eapon’ delivered on May 1, 1974 when he signed the
Labor Code into law, Presidt it Marcos announced the
following reforms (a) re-orieiitation of labor laws to­
wards development by purging them of built-in lever­
ages fo r graft on the part of labor law enforcers and
fly-by-night labor leaders, by removing archaic and
unworkable provisions, and by eliminating the permit
system; (b) the establishment of the National Labor
Relations Commission in place of the Court of Indus­
trial RelaY ns ' assure speedy settlement of labor
disputes, iiimpaired by legal and judicial technicali­
ties, (c^ * - integration of the workmen’s compensation
system : fo rh* social security system to be adminis­
tered "y the SSS for the private sector and by the
GSIS far the public sector; (d) the establishment of
boards 2 a* icies to undertake the systematic
employment of F .pi.os overseas and optimize the
benefits therefrom in the form of dollar remittances
and improved skills and technology; (e) the placing of
employees of government-owned and controlled cor­
porations under the Civil Service Commission and
providing that the terms and conditions of their em­
ployment are to be fixed by law and not subject to
collective bargaining; (f) the restructuring of the Philip­
 THE LABOR CODE

pine labor movement along the one-union and one-

industry concept to eliminate inter-union and intra­
union rivalries; and (g) the inclusion within its purview
of the agrarian reform initiated under Presidential
Decree No. 27.
* *

What is the basic policy o f the State declared in Article

3 o f the Labor Code?

ANS. Article 3 of the Labor Code provides:

The State shall afford protection to labor, promote

full employment, ensure equal work opportunities re­
gardless 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. [NOTE: See also Article
XIII, Sec. 3, 1987 Constitution]

* * *

Give the other provisions of the Labor Code declaring

policies or objectives o f the State.

ANS. Other provisions of the Code declaring

policies or objectives of the State are Article 12 (Book
I) on matters concerning pre-employment; Article 43
(Book II) on human resources development, allocation
and utilization; Article 57 (Book II) on apprenticeship;
Article 166 (Book IV) on the promotion and develop­
ment of a tax-exempt employee^’ compensation pro­
gram; Article 211 (Book V) on the promotion of free
collective bargaining and free trade unionism, and
other matters concerning labor relations; Article 263
(Book V) on encouragement of free trade unions and
free collective bargaining; and Article 275 (Book V) on
tripartism in labor relations and representation of

95
 THE LABOR CODE

workers and employers in policy-making bodies in

government.

* * *

Am agricultural workers entitled to the rights and bene­

fits under the Labor Code?

ANS. Article 6 of the Labor Code provides:

A p p lic a b ility . - All rights and benefits granted to

workers under this Code, shall except as may other­
wise be provided herein, apply alike to all workers,
whether agricultural or non-agricultural.

* * *

What is an agricultural or farm worker?

ANS. An agricultural or farm worker is one em­

ployed in an agricultural or farm enterprise and as­
signed to perform tasks which are directly related to
the agricultural activities of the employer, such as
cultivation and tillage of the soil, dairying, growing and
harvesting of any agricultural and horticultural com­
modities, the raising of livestock or poultry and any
activities performed by a farmer on a farm as an
incident to or in conjunction with such farming opera­
tions.

& *

Aside from agricultural and non-agricultural workers,

are there other classes of workers mentioned in the
Labor Code?

ANS. Yes, they are the following:

(a) Apprentices, learners and handicapped work­

ers provided for in Articles 59 to 81;

Qfi
 THE LABOR CODE

(b) Managerial employees defined in Articles 82

and 212;
(c) Workers paid by result mentioned in Articles 82
and 101;
(d) Women, minors, househelpers and homework­
ers covered by Article 130 to 155; and
(e) Regular, casual, and probationary employees
provided for in Articles 280 and 281.

* * *

You hire a famous painter to do your portrait. W ill your

relationship be governed by the Labor Code?

ANS. No. There is no employer-employee rela­

tionship as I do not control his means or methods of
painting my portrait. I hired him precisely because of
his well known ability to paint. He is an independent
contractor. Our relationship will be governed by the
provisions of the C ivil Code on obligations and con­
tracts.

* * *

What is the policy o f the State on pre-employment?

ANS. Article 12 of the Labor Code provides that it

is the policy of the State:

(a) To promote and maintain a state of full

employment thrcugh improved manpower training, al­
location 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 employ­
ment 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;

97
 THE LABOR CODE

(e) To regulate employment of aliens, including

the establishment of registration and/or work permit
system;
(f) To strengthen the network of public employ­
ment offices and rationalize the participation of the
private sector in recruitment and placement of work­
ers, locally and overseas, to serve national develop­
ment objectives; and
(g) To insure careful selection of Filipino workers
for overseas employment in order to protect the good
name of the Philippines abroad.
* * *

What is the policy of the State on human resources

development and utilization?

ANS. Article 43 of the Labor Code provides:

It is the objective of this Title to develop human

resources, establish training institutions, and formulate
such plans and programs, as will ensure efficient
allocation, development and utilization of the nation’s
manpower and thereby promote and accelerate eco­
nomic and social growth.
* * *

What is the policy of the State on apprenticeship?

ANS. Article 57 of the Labor Code states that it is

the aim of the law:

(1) To help meet the demand of the economy for

trained manpower;
(2) To establish a national apprenticeship program
through participation of employers, workers, and gov­
ernment and non-government agencies; and
(3) To establish apprenticeship standards for the
protection of apprentices.

98
 THE LABOR CODE

What is the policy o f the state on the employees’ com­

pensation program?

ANS. Article 166 of the Labor Code provides:

P o lic y . - The State shall promote and develop a

tax-exem pt em ployees’ compensation program
whereby employees and their dependents, in the event
of work-connected disability or death, may promptly
secure adequate income benefit, and medical or re­
lated benefits.

* * *

What is the policy of the State on collective bargaining,

trade unionism and other matters concerning labor
relations?

ANS. Article 211 of the Labor Code as amended

by Rep. Art No. 6715, states that it is the policy of the
State:
(a) To promote and emphasize the primacy of free
collective bargaining and negotiations, including vol­
untary arbitration, m ediation and conciliation, as
modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instru­
ment fo r the enhancement of democracy and the
promotion of social justice and development;
(c) To foster the free and voluntary organization of
a strong and united labor movement;
(d) To promote the enlightenment o f workers
concerning their rights and obligations as union mem­
bers and as employees;
(e) To provide an adequate administrative ma­
chinery for the expeditious settlement of labor or
industrial disputes;
(f) To ensure a stable but dynamic and just
industrial peace; and
(g) To ensure the participation of workers, in
decision and policy-making processes affecting their
rights, duties and welfare.

QQ
 THE LABOR CODE

B. To encourage a truly democratic method of

regulating the relations between the employers and
employees by means of agreements freely entered into
through collective bargaining, no court, administrative
agency or official shall have the power to set or fix
wages, rates of pay, hours of work or other terms and
conditions of employment, except as otherwise pro­
vided under this Code. (As amended by R. A. 6715)

Article 263 provides:

(a) It is the policy of the State to encourage free

trade unionism and free collective bargaining.

Article 275 provides that:

(a) Tripartism in labor relations is hereby declared

a State policy. Towards this end, workers and employ­
ers shall, as far as practicable, be represented in
decision and policy-making bodies of the government.
“(b) The Secretary of Labor and Employment or
his duly authorized representatives may from time to
tim e call a national, regional, or industrial tripartite
conference of representatives of government, workers
and employers for the consideration and adoption of
voluntary codes of principles designed to promote
industrial peace based on social justice or to align
labor movement relations with established priorities in
economic and social development. In calling such
conference, the Secretary of Labor and Employment
may consult with accredited representatives of workers
and em ployers' (As amended by Rep. Act 6715).

* * *

Under the Labor Code, tripartism in labor relations is

declared a State policy. What is the significance of this
policy and how has it been implemented?

( ANS. The* adoption of tripartism indicates our

1 realization, as other Asian countries, that labor dis­

mn
 THE LABOR CODE

putes are not so much a question of administering

justice in the legal sense of the term, but that they
have far reaching developmental repercussions and do
in many cases take on the character of decisions on
labor policy issues (Schregle, Labor Law in Southeast
Asia; Some Topical Issues). The implementation of
such decisions will be easier if those who w ill be
affected thereby - the workers and the employers -
have participation or responsibility in making the
same.
The policy of tripartism has been implemented by
providing for employee and employer representation in
such bodies as the National Labor Relations Commis­
sion, the National Manpower and Youth Council, the
Employees Compensation Commission, and the Social
Security Commission.
* * *

Do the courts or administrative bodies have the power

to set or fix wages, rates of pay, hours of work o r other
terms and conditions of employment?

ANS. As a rule, courts or administrative bodies

cannot fix terms and conditions of employment. A rti­
cle 211(B) of the Labor Code, as amended by R. A.
6715 provides:

“B. To encourage a truly democratic method of

regulating the relations between the employers and
employees by means of agreements freely entered into
through collective bargaining, no court or administra­
tive agency or official shall have the power to set or fix
wages, rates of pay, hours of work or other terms and
conditions of employment, except as otherwise pro­
vided under this Code."
* * *

Is the compensation o f government employees covered

by the Labor Code?

101
 THE LABOR CODE

ANS. It is the Congress that determines the

compensation of government officials and employees.
Section 5, Article IX-B of the 1987 Constitution pro­
vides:

“The Congress shall provide for the standardiza­

tion of compensation of government officials and
employees, including those in government-owned or
controlled corporations with original charters, taking
into account the nature of the responsibilities pertain­
ing to, and the qualification required for their posi­
tions."

★ * *

What is a government-owned or controlled corporation

with an original charter? Give examples.

ANS. It is a government-owned or controlled

corporation with a legislative charter. Example: So­
cial Security System, Development Bank of the Philip­
pines (DBP), Philippine Amusement and Gaming Cor­
poration (PAGCOR).

* * *

Does a subsidiary of the Philippine National Bank orga­

nized under the general corporation law belong to the
civil service?

ANS. No. Under Section 2(1), Article IX-B, 1987

Constitution, the civil service only embraces all
branches, subdivisions, instrumentalities, and agen­
cies of the government including government-owned
or controlled corporations with o r ig in a l c h a rte rs
(National Service Corporation et al. vs. NLRC et al.,
G. R. No. 69870, November 29, 1988).

* * ★

102
 THE LABOR CODE

Are employees of the Bliss Development Corporation, a

government-owned corporation created under the Cor­
poration law, required to register their union under
Executive Order No. ISO as a pre-condition for filing a
petition for certification election? v¥hy?

ANS. No. Bliss Development Corporation is

without a charter, governed by the Labor Code and not
by the Civil Service Law, hence, Executive Order No.
180 does not apply to it (Bliss Development Corpora­
tion Employees Union vs. Caileja et a!., G. R. No.
80887, September 30, 1994).

'ft & ft

Benjamin Juco, a project engineer of the National Hous­

ing Authority (NHA) filed a com plaint fo r illegal dis­
missal against NHA before the Labor Arbiter. He ob­
tained a favorable ruling but the same was on appeal
reversed by the NLRC on the ground of lack of ju risd ic­
tion.
(a) Is the NLRC ruling correct?

ANS. No, the NHC (now National Housing Author-

ityj was incorporated under the corporation law and
has no original charter, its employees are subject to
the provisions of the Labor Code. The Civil Service
covers only government-owned or controlled corpora­
tions with original charters.

(b) Is the ruling in National Housing Corporation vs.

Juco. 134 SCRA 172 f1985> stili applicable?

ANS. No more. The ruling jn said case to the

effect that government-owned or controlled corpora­
tions, whether created by special law or formed as
subsidiaries under the general corporation law, are
governed by the Civil Service Law and not by the
Labor Code has been supplanted by the 1987 Constitu­
tion under which only corporations with original char­

103
 THE LABOR CODE

ters are deemed embraced within the civil service.

(Juco vs. NLRC et al., G. R. No. 98107, August 18,
1997)

* * *

Classify the employments covered by the Labor Code.

ANS. (a) As to the nature of activities the workers

are engaged in, agricultural or non-agricultural (Art.
6 ).
(b) As to the nature of the worker’s responsibili­
ties, managerial, supervisory and rank-and-file (Arts.
82, 212[m])
(c) As to the method of determining the worker’s
wages, workers who are paid on the time basis and
workers who are paid by results. (Arts. 97, 99, 101)
(d) As to the importance of the workers’ functions
to the business or undertaking of the employer, regular
and casual (Art. 280)
(e) As to the period of employment, employment
for an indefinite period, employment for a fixed term,
project, specific undertaking, or particular season.
(Art. 280) and probationary employment (Art. 281)
* * *

Hacienda Fatima hired sugarcane workers repeatedly

fo r several years to perform the same phase o f the
agricultural activity. Their services were not however
continuous; they were limited to a particular season.
(a) Are the sugarcane workers considered regular em­
ployees?

ANS. Yes. They were engaged to perform ser­

vices usually necessary or desirable in the usual
business of the hacienda. Furthermore, they were
repeatedly hired for several seasons. To exclude
them from those classified as regular employees, it is
not enough that they perform work or services that are

104
 THE LABOR CODE

seasonal in nature. They must have also been em­

ployed only for the duration of one season.

(b) Compare this case w ith the case of Mercado vs.

NLRC (201 SCRA 332)

ANS. In Mercado, the workers were required to

perform phases of agricultural work for a definite
period of time, after which their services would be
available to any other farm owner. They were not
hired regularly and repeatedly for the same phase/s of
agricultural work, but on and o ff for any single phase
thereof. On the other hand, the workers in the instant
case performed the same tasks for the hacienda every
season for several years. (Hacienda Fatima et al vs.
National, Federation of Sugarcane Workers-Food and
General Trade, G. R. No. 149440, January 28, 2003)
★ ★ *

The Benguet Electric Cooperative, Inc. (BENECO) hired

meter readers fo r a period hardly a m onth’s duration, or
from October 8 to 31, 1990. But after the expiration of
the period, they were allowed to continue working until
January 2, 1991. On January 3, 1991, they were each
served identical notices o f termination allegedly due to
overstaffing.
(a) Are the meter readers considered regular employ­
ees? Explain.

ANS. Yes. They were engaged to perform activi­

ties that are necessary to the usual business of the
electric cooperative. Unless a meter reader records
the electric consumption of th6 subscribing public,
there could not be a valid basis for billing the cus­
tomers of the cooperative. Furthermore, they were
allowed to continue working after the expiration of
their employment contracts; this proves the necessity
and desirability of their service to the cooperative’s
business.

105
 THE LABOR CODE

(b) Was the original employment of the meter readers

considered probationary?

ANS. No. There was nothing in their letter of

appointment to indicate that their employment was on
a probationary basis. There is even no showing that
they were informed, at the tim e of their employment,
of the reasonable standards under which they could
qualify as regular employees.

(c) Was their dismissal lawful?

ANS. No. No valid reason existed for the term ina­

tion of their regular employment. Besides, the proce­
dure laid down by law to effect their dismissal was not
followed. (Viernes et al vs. NLRC, et ah; No
108405, April 4, 2003)

* * *

Paguio had five (5) agreements with Metromedia Times

Corporation, publisher o f “ The Manila Times” , whereby
he was appointed an account executive o f the firm.
Each agreement was fo r a period o f twelve (12) months
and expressly provided that Paguio was not an em­
ployee o f Metromedia. He was to solicit advertisements
and was to receive compensation consisting of a com­
m ission and a m onthly allowance of P2.000.00 provided
that he met a specified m onthly quota. He was required
to subm it a daily sales activity report and a m onthly
sales report.
(a) Is Paguio considered a regular employee o f Metro­
media? Why?

ANS. Yes. He performed activities which were

necessary and desirable to the business of the em­
ployer, and the same went on for more than a year.
The income generated from paid advertisements was
the lifeblood of the newspaper’s existence. Implicitly,
the corporation recognized Paguio’s invaluable contri­
 THE LABOR CODE

bution of its business when it renewed, not only once

but five times, its contract with him.

(b) Is the nature o f the relationship between the parties

to be determined solely on the basis of the terms of
their agreement? Explain.

ANS. No. The law, in defining their contractual

relationship, does so, not necessarily or exclusively
upon the tenor of their written or oral contract, but also
on the basis of the nature of the work petitioner has
been called upon to perform. The law affords protec­
tion to an employee, and it will not countenance any
attempt to subvert its spirit and intent. A stipulation in
an agreement can be ignored as and when it is utilized
to deprive the employee of his security of tenure. The
sheer inequality that characterizes employer-employee
relations, where the scales generally tip against the
employee, often scarcely provides him real and better
options. (Paguio vs. NLRC et al., G. R. No. 147816,
May 9, 2003)

★ it ft

Coca-Cola Bottlers Phils., Inc. engaged the services of

“ sales route helpers” fo r a limited period of five (5)
months, and thereafter on a day-to-day basis, where the
workers would wait every m orning outside the gate of
the sales office o f the company and if hired would then
be paid their wages at the end of the day. The workers
would go with route salesmen on board delivery trucks
and undertake the task o f loading and unloading soft-
drink products of the company to various delivery
points.
(a) Are the “ sales route helpers” considered regular
employees? Why?

ANS. Yes. They perform activities necessary or

desirable in the usual business or trade of the em­
ployer. Such fact can be assessed by looking into the

107
 THE LABOR CODE

nature of the services rendered and its relation to the

_ genera! scheme under which the business or trade is
pursued in the usual course.

(b) The company argued that its usual trade or busi­

ness is soft drinks manufacturing, that the work as­
signed to the sales route helpers involved merely “ post
production activities” and not indispensable in the
manufacture of its products, hence the workers’ status
could not be regular. Decide.

ANS. The argument is not persuasive. The

company maintained regular truck sales route helpers.
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.

(c) Comment on ihe scheme adopted by Coca-Cola

Bottlers Phiis., Inc. in hiring the “ sales route helpers.”

ANS. The pernicious practice of having employ­

ees, workers and laborers, engaged for a fixed period
of few months, short of the normal six-month and
thereafter to be hired on a day-to-day basis, mocks the
law. Any obvious circumvention of law cannot be
countenanced. The fact that respondent workers have
agreed to be employed on such basis and to forego the
protection given to them on their security of tenure,
demonstrate nothing more than the serious problem of
impoverishment of so many of our people and the
resulting unevenness between labor and capital. A
contract of employment is impressed with public inter­
est. The provisions of applicable statutes are deemed
written into the contract, and “the parties are not at
liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by
simply contracting with each other." (Magsalin et al
vs. National Organization of Working Men et al., G.
R. No. 148492, May 9, 2003)
* * *

108
 THE LABOR CODE

The Labor Code treats differently in various aspects the

employment o f (i) managerial employees, (ii) supervi­
sory employees, and (iii) rank-and-Jiie employees.
State the basic distinguishing features of each type of
employment. (2003 Bar)

ANS. Under Article 212 (m) of the Labor Code, a

managerial employee is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or hire, transfer, suspend, lay-off, recall
discharge, assign or discipline employees. Supervi­
sory employees are those who, in the interest of the
employer, effectively recommend such managerial
actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the sue of
independent judgment. Ali employees not failing
within any of the above definitions are considered
rank-and-file employees; they constitute the bulk of
the organization.

A managerial employee can lay down and execute

management policies and/or can perform or undertake
personnel actions such as hiring and firing employees.
Supervisory employees can only recommend that cer­
tain management policies or personnel actions be
taken.

Managerial employees cannot exercise the right to

self-organization for purposes of collective bargaining.
Supervisory and rank-and-file personnel can exercise
such right.

109
 CHAPTER III

RECRUITMENT AND PLACEMENT OF

WORKERS
What is recruitment and placement?

ANS. Article 13(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, contact ser­
vices, 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 place­
ment.

* * *

Abug was charged in court with violation o f Article 16 in

relation to Article 39 o f the Labor Code in that he
promised employment in Saudi Arabia and charged fees
and expenses from fo u r separate individuals. He
moved to quash the information on the ground that
under the provision in Article 13(b) of the Code, thftre
would be illegal recruitment only whenever two or more
persons are in any manner promised or offered any
employment fo r a fee. Decide.

ANS. 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 recruit­
ment 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

110
 RECRUITMENT AND PLACEMENT OF WORKERS

entity dealing with them shall be deemed to be en­

gaged in the act of recruitment and placement. The
words ‘shall be deemed" create that presumption
(People of the Philippines vs. Domingo Panis et al.,
G. R. Nos. L-58674-77, July 11, 1986).

* * O

Who can engage in or undertake recruitment and place­

ment?

ANS. As recruitment and placement activities are

subject to strict government regulation to prevent
exploitation of Filipino workers and to minimize loss of
employment opportunities, only individuals or entities
who have been issued the appropriate “authority” or
“license" can engage in or undertake recruitment and
placement.

* * ft

Distinguish “ authority” from “ license” .

ANS. “Authority” means a document issued by the

Secretary of Labor and Employment authorizing a
person or association to engage in recruitment and
placement activities as a private recruitment entity;
while a "license” is the document issued to a person or
entity to operate a private employment agency.
(Article 13, Labor Code).

* * ft

Define the follow ing: contract worker, name hire, man­

ning agency, placement fee, service fee, overseas em­
ployment, valid employment contract, principal.

ANS. Under Rule II, Book I, of the POEA Rules

and Regulations, as amended, the above-mentioned
terms are defined as follows:

111
 RECRUITMENT AND PLACEMENT OF WORKERS

Contract W orker is any person working or who has

worked overseas under a valid employment contract.

Name Hire is a worker who is able to secure

employment overseas on his own without the assis­
tance or participation of any agency.

Manning Agency is any person, partnership or

corporation duly licensed by the Secretary to recruit
seafarers for vessels plying international waters and
for related maritime activities.

Placement Fee is the amount charged by a private

employment agency from a worker for its services in
securing employment.

Service Fee is the amount charged by a licensee

from its foreign employer principal as payment for
actual services rendered in relation to the recruitment
and employment of workers for said principal.

Overseas Employment means employment of a

worker outside the Philippines, including employment
on board vessels plying international waters, covered
by a valid employment contract.

Valid Employment Contract is a written agreement

entered into by and between the employer and/or the
local agency and the overseas contract worker con­
taining the terms and conditions of employment that
are in consonance with the master employment con­
tract as approved by the Administration.

Principal is any foreign person, partnership, or

corporation hiring Filipino workers through an agency.

A * *

fs there any citizenship qualification fo r a person or

entity engaged in the recruitment and placement of
workers?

112
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. Yes. Article 27 of the Labor Code provides:

C itiz e n s h ip R e q u ire m e n ts. - Only Filipino citi­

zens 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.
* * *

Who are qualified to participate in the overseas employ­

ment program?

ANS. Only applicants who possess the following

qualifications may be permitted to participate in the
overseas employment program:

a) Filipino citizens, partnership or corporations at

least seventy five percent (75%) of the authorized and
voting capital stock of which is owned and controlled
by Filipino citizens.

b) A minimum capitalization of Two Million Pesos

(P2,000,000.00) in case of a single proprietorship or
partnership and a minimum paid-up capital of Two
Million Pesos (P2,000,000.00) in case of a corporation;
and

c) Those not otherwise disqualified by law or

guidelines to engage in the recruitment and placement
of workers for overseas employment. (Section I, Rule
I, Book II, Amended Rules and Regulations Governing
Overseas Employment)

* * *

Who are not qualified to participate in the recruitment

and placement of Filipino workers fo r overseas employ­
ment?

113
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. Under Section 2, Rule I, Book II, of the

Amended Rules and Regulation on Overseas Employ­
ment, the following are not qualified for overseas
employment:

a) Travel agencies and sales agencies of airline

companies;

b) Officers or members of Board of any corpora­

tion or members in a partnership engaged in the
business of travel agency;

c) Corporations and partnerships, when any of its

officers, members of the board or partners, is also an
officer, member of the board or partner of a corpora­
tion or partnership engaged in the business of a travel
agency;

d) Persons, partnership or corporations with

derogatory records such as, but not limited to, over­
charging of placement or documentation fees, false
documentation, illegal recruitment and swindling or
estafa, or those convicted of crimes involving moral
turpitude;

e) Persons employed in the Department or in other

government offices directly involved in the overseas
employment program, and their relatives within the
fourth degree of consanguinity or affinity; and

f) Persons, partners, officers and directors of

corporation whose license has been previously can­
celed or revoked for violation of the Labor Code, or its
implementing mles, or other relevant laws, decrees,
and regulations, and issuances.

* * *

What government entity is charged with the implemen­

tation and enforcement of the laws on recruitment and
placement?

114
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. The Philippine Overseas Employment Ad­

ministration (POEA) established on May 1, 1982 by
Executive Order No. 797. It integrated the powers
and responsibilities of the Overseas Employment De­
velopment Board (OEDB), the National Seamen Board
(NSB) and the Bureau of Employment Services (BES)
with the aim of providing efficient control and delivery
of employment and contracting services.

* * *

Describe the proceedings before the Philippine Over­

seas Employment Administration (POEA).

ANS. The proceedings before the POEA are

nonlitigious in nature and the technicalities of law and
procedure, and the rules obtaining in the Courts of law
are not applicable.
It has thus been held that affidavits may be admit­
ted by the POEA as evidence despite the fact that the
affiants were not presented for cross-examination by
the counsel for the adverse party. To require other­
wise would be to negate the rationale and purpose of
the summary nature of the adm inistrative proceedings
and to make mandatory the application of the technical
rules of evidence. What the other party should do is
to present counter-affidavits instead of merely object­
ing on the ground that the affidavits are hearsay (Rase
et al. vs. NLRC et al., G. R. No. 110637, October
7, 1994).

★ * *

May a foreign-based employer or principal hire a Fil­

ipino worker fo r overseas employment w ithout the in­
tervention o f the government or private entities autho­
rized to engage in recruitment and placement?

ANS. Article 18 of the Labor Code provides:

115
 RECRUITMENT AND PLACEMENT OF WORKERS

Ban on direct hiring. - No employer may hire a

Filipino worker fo r overseas em ployment except
through the Boards or entities authorized by the Secre­
tary of Labor. Direct-hiring by members of the diplo­
matic organizations, international organizations and
such other employers as may be allowed by the
Secretary of Labor is exempted from this provision.

* * *

What are the reasons fo r the ban on direct-hiring?

ANS. A Filipino worker hired directly by a foreign

employer, without government intervention, may not
be assured of the best possible terms and conditions
of employment. He is not in a position to know the
financial condition of the foreign employer and the
prevailing terms and conditions of employment in the
host country. On the other hand, the Philippine
government through its various listening posts abroad
(embassies, consular offices, etc.) has up-io-dste and
more or less accurate information on the conditions
prevailing in foreign countries. As the Filipino workar
may be overeagerto find employment abroad, govern­
ment intervention is necessary to protect him from
exploitation by foreign employers.
The foreign employer must also be protected.
W ithout government intervention, it may be entering
into a contract with a Filipino worker who does not
really possess the skills or the qualifications he claims
to possess. A sad experience on the part of the
foreign employer may scare him off; he will not employ
Filipino workers again. The intervention of the govern­
ment is thus necessary in order not to jeopardize the
opportunities of Filipino workers for overseas employ­
ment.
Finally, the mandatory requirement for remittance
to the Philippines of a portion of the worker’s foreign
exchange earnings can easily be evaded by a worker
who is directly hired.

116
 RECRUITMENT AND PLACEMENT OF WORKERS

To assure protection to Filipino workers recruited fo r

overseas employment, what must their employment
contracts contain?

ANS. Seciion 2, Rule II, Book V, of the Imple­

menting Rules and Regulations provides that the fo l­
lowing shall be considered as minimum requirements
for contracts where applicable:

(a) Guaranteed wages for regular working hours

and overtime pay for services rendered in excess of
basic working hours in accordance with the standards
established by the Ministry;
(b) Free transportation from point of hire to site of
employment and return;
(c) Free emergency medical and dental treatment
and facilities;
(d) Just causes for the termination of the contract
or of the service of the workers;
(e) Workmens compensation benefits and war
hazard protection;
(f) Repatriation of worker’s remains and properties
in case of death to the point of hire, or if this is not
possible under the circumstances, the proper disposi­
tion thereof, upon prior arrangement with the worker’s
next-of-kin and the nearest Philippine Embassy or
Consulate through the Office of the Labor Attache;
(g) Assistance on remittance of worker’s salaries,
allowances or allotments to his beneficiaries; and
(h) Free and adequate board and lodging facilities
or compensatory food allowance at prevailing cost of
living standards at the job site.
* * *

In case o f breach of the employment contract by the

foreign-based employer, may the private employment
agency or private recruitment entity be held liable there­
for? Explain.

ANS. Yes. An applicant for a license or authority

undertakes under oath to assume full and complete

117
 RECRUITMENT AND PLACEMENT OF WORKERS

responsibility for all claims and liabilities which may

arise in connection with the use of the license or
authority and the implementation of the contract of
employment; and guarantees compliance with existing
labor and social legislation of the Philippines and of
the country of employment of recruited workers. (Sec.
1, Rule II, Book II, Implementing Rules and Regula­
tions)

* * *

What is the nature o f the liability of the recruitment and

placement agency and its principal?

ANS. A person licensed or authorized to recruit is

jointly and severally liable with the principal or foreign-
based employer for any of the violations of-recruitment
agreement and contracts of employment (Ambraque
International Placement and Services vs. NLRC et al.,
G. R. No. L-77970, January 28, 1988; Catan vs.
NLRC et al., G. R. No. L-77279, April 15, 1988).
The manning agency is jo intly and severally liable
with its principal for the claims of overseas worker.
Such liability is meant to assure aggrieved workers of
immediate and sufficient payment of what is due them.
The fact that the agent and its principal have already
terminated their agency agreement, due to the unilat­
eral decision of the shipowner to alter the use of the
vessel from overseas service to coastwise shipping,
does not relieve the agent of its liability. (OSM
Shipping Philippines, Inc. vs. N L R C e ta l.,G . R. No.
138193, March 5, 2003)

* * *

“ I” , “ P” , “ C” and “ H" filed w ith the POEA separate

com plaints against Pan Pacific Overseas Recruiting
Services, Inc. a private employment agency, fo r viola­
tions o f Articles 32 and 34(o) of the Labor Code; they
alleged that Pan Pacific charged and collected place­

118
 RECRUITMENT AND PLACEMENT OF WORKERS

ment fees from them but did not secure employment fo r

them. The POEA Adm inistrator motu proprio impleaded
‘T inm a n” , the insurance company that posted that
surety bond in behalf o f Pan Pacific as required by
Article 31 o f the Code. “ Finman" however contended
that POEA or the Secretary of Labor had no authority to
implead it in the proceedings and that it is the insur­
ance Commission o r the regular courts that have au­
thority to hold it liable on its bond.
Is the contention of “ Finman” correct? Why?

ANS. No. Article 31 of the Labor Code gives to

the Secretary of Labor the exclusive power to deter­
mine decide, order or direct payment from, or applica­
tion of the cash or surety bond for any claim covered
and guaranteed by the bonds.
Besides, to compel the POEA and the claimants to
go to the Insurance Commissioner or to the regular
courts of law to enforce the bond would be to collide
with the public policy which requires prompt resolution
of claims against private recruitment and placement
agencies (Finman General Assurance Corporation vs.
Inoccencion et al., G. R. Nos. 90273-75, November
15,1989).
★ * ★

Pursuant to a special agreement between the shipowner

and the International Transport Workers Federation,
Filipino seamen on board the M/V Woermann Sanaga, a
Dutch vessel, were paid salaries higher than the rates
stipulated in th e ir shipboard employment contracts.
For receiving higher rates, the seamen were dismissed
prior to the expiration of their contracts. Is their dis­
missal legal?

ANS. No. The seamen should not be blamed for

accepting higher salaries since it is but human for
them to grab every opportunity which would improve
their working conditions and earning capacity.

119
 RECRUITMENT AND PLACEMENT OF WORKERS

And even assuming that they aired some threats of

ITF boycott in pressing for compliance with tho special
agreement, such behavior should not be censurod
because it is but natural for them to employ some
means of pressing their demands (Wallem Philippines
Shipping, Inc. vs. Hon. Minister of Labor et al., G.
R. Nos. L-50734-37, February 20, 1981).

* * *

In December, 1978 Vir-jen Shipping and Marine Ser­

vices, Inc. entered into separate contracts o f employ­
ment w ith some seamen, engaging them to work on
board the M/T “ Jannu” fo r a period o f twelve (12)
months. After verification and approval o f their con­
tracts by the NSB, the seamen boarded their vessel in
Japan. While the vessel was on its way to Australia, an
ITF-controlled port, the seamen, in answer to cables
from Vir-jen Shipping, demanded fo r 50% increase of
their basic salary. In reply, Vir-jen proposed a 25%
increase, which proposal was accepted by the seamen.
Accordingly, the seamen were paid their new salary
rates. But soon thereafter the contracts were term i­
nated by Vir-jen Shipping, claiming that its principals
canceled their manning agreement because o f the actu­
ations o f the seamen. It is contended that the seamen
cannot, during the period fixed in their employment
contracts, demand fo r higher pay. Decide.

ANS. The form contracts approved by the National

Seamen Board are designed to protect Filipino sea­
men, not foreign shipowners who can lake care of
themselves. The standard forms embody ihe basic
minimums which must be incorporated as parts of the
employment contract. (Sec. 15, Rule V, Rules and
Regulations Implementing the Labor Code). They are
not collective bargaining agreements or immutable
contracts which the parties cannot improve upon or
modify in the course of the agreed period of tim e. To
state, therefore, that the affected seamen cannot
 RECRUITMENT AND PLACEMENT OF WORKERS

petition their employer for higher salaries during the

12 months duration of the contracts runs counter to
established principles of labor legislation (Vir-jen Ship­
ping and Marine Services, Inc. vs. NLRC et al., G. R.
Nos. L-58011-12, November 18, 1983).

* * *

A group o f Filipino seamen, covered by employment

contracts duly approved by the National Seamen Board,
were paid additional wages under rates prescribed by
the International Transport W orkers' Federation (ITF),
while their vessel was in Vancouver, Canada. The
additional wages were paid by the shipowner because
the ITF intimated the possibility o f interdiction of the
vessel; The seamen themselves manifested their con­
form ity to the ITF demand fo r higher wages by means o f
placards; they however continued working and going
about their chores.
(a) Are the seamen obliged to return the additional
wages paid to them?

ANS. No. They did not employ force or violence

in demanding for additional wages. In using placards,
the seamen were merely exercising their freedom of
expression.

(b) Is the intimation o f interdiction by the ITF illegal?

ANS. No. It is merely an application of effective

pressure to secure an upward adjustment of the rates
of the seamen.

(c) May the NSB-approved contracts o f the seamen be

amended w ithout the pnor approval of the NSB?

ANS. Yes. The NSB-approved form contracts are

not unalterable contracts that can have no room for
improvement during their effectivity or which ban any
amendments during th e ir term (Suzara et al. vs.
NLRC et al., G. R. Nos. 64781-99, August 15, 1989).
 RECRUITMENT AND PLACEMENT OF WORKERS

After his contract was finished, Jeremias, who had

worked as oiler on board a foreign vessel, was repatri­
ated from the port of Dubai. He was suffering from
mental disorders. During a stop over in Bangkok, he
left the airport, wandered around the city, and was shot
and killed when he tried to attack a Thai policeman.
(a) His mother claimed fo r death compensation. The
manning agency and its foreign principal interposed
the defense that under the POEA standard format no
compensation shall be payable by reason of incapacity,
disability or death resulting from the seaman’s own
deliberate o r w illfu l act on his own life. Decide.

ANS. The claim should be granted. The death of

Jeremias was not due to his deliberate act. The fact
that the deceased suffered from mental disorder at the
tim e of his repatriation means that he must have been
deprived of the full use of his reason, and that thereby,
his will must have been impaired, at the very least.
And considering his m ental state, his em ployers
should have observed some precautionary measures
and should not have allowed him to travel alone.

(b) Distinguish this case from Mabuhav Shipping Ser­

vices. Inc. vs. NLRC et al.. 193 SCRA 141.

ANS. In Mabuhav. the deceased Sentina was in a

state of intoxication, then ran amuck and inflicted
injury upon another person, so that the latter in his own
defense fought back and in the process killed Sentina.
There was no proof of mental disorder on the part of
the deceased. His death was categorized as a deliber­
ate and w illful act on his own life directly attributable
to him.

(c) Considering that the contract of Joremias was

already terminated, what would be the basis o f his
mother’s claim fo r death benefits?

ANS. The claim is based on the responsibility of

the foreign employer together with the local agency for

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 RECRUITMENT AND PLACEMENT OF WORKERS

the safety of the employee during his repatriation and

until his arrival in the Philippines, i. e., the point of
hire. As a m atter fact, the mandated insurance
coverage for accidental death, dismemberment and
disability Of overseas workers extends to sixty (60)
calendar days after termination of the contract of
employment. (Interorient Maritime Enterprises, Inc.
et al. vs. NLRC et. al., G. R. No. 115497,
September 16, 1996)

* * *

Give instances where the supposed suicide of the sea­

man did not exempt the employer from liability fo r death
benefits.

ANS. The vessel’s chief steward fatally stabbed

the second cook during a quarrel while the vessel was
plying its sea route. The culprit ran to the deck from
where he jumped or fell overboard. His body was
never seen again and he was declared dead. It was
ruled that the death of the chief steward was compens­
able notwithstanding the claim that he committed
suicide; that it made no difference whether he inten­
tionally took his own life or he killed him self in a
moment of temporary aberration triggered by remorse
over the killing of the second cook, or he accidentally
fell overboard while trying to flee from imagined
pursuit. Indeed, the events surrounding his death were
not established with certitude. (NAESS Shipping
Philippines, Inc. vs. NLRC et al., G. R. No. 73441,
September 4, 1987)
The lifeless body of a Filipino seaman was found
hanging by the neck from the ceiling of an abandoned
warehouse in Quebec, Canada; found in pocket was
US $2,000.00. According to the coroner’s report
probable cause of death was asphyxiation by hanging
under circumstances following self-destruction. Exam­
ination by the NBI in Manila however disclosed the
presence of abrasions on the elbow, contusions on the
forehead, hematoma and ligature marks on the neck;

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 RECRUITMENT AND PLACEMENT OF WORKERS

such findings were inconsistent with suicide. Prior to

his death, there was constant exchange of letters
between him and his family; he seemed excited to go
home; and he did not appear to have any serious
personal or professional problem. It was ruled that the
employer failed to discharge its burden of proving that
the death of the seaman was due to suicide. The
employer was held liable for death benefits. (Lapid vs.
NLRC et al., G. R. No. 117518, April 29, 1999)
* * *

May compensation benefits be awarded the Filipino

seaman or his heirs if the ailment was contracted prior
to his employment? Explain.

ANS. Yes. For what matters is that his work had

contributed, even in a small degree, to the develop­
ment of the disease and in bringing about his eventual
death. Neither is it necessary, in order to recover
compensation, that the employee must have been in
perfect health at the time he contracted the disease. A
worker brings with him possible infirm ities in the
course of his employment, and while the employer is
not the insurer of the health of the employees, he
takes them as he finds them and assumes the risk of
liability. If the disease is the proximate cause of the
employee’s death for which compensation is sought,
the previous physical condition of the employee is
unimportant, and recovery may be had for said death,
independent of any pre-existing disease. (More Mar­
itime Agencies, Inc. vs. NLRC, G. R. No. 124927,
May 18, 1999; W allen Maritime Services Inc. vs.
NLRC, G. R. No. 130772, November 19, 1999)

* * *

May disability o r death benefits be awarded to a Filipino

seaman or his heirs under the POEA standard form at
contract o f employment although the illness or death is
not work connected? Explain.

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 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. Yes. Under the contract, compensability of

the illness or death of the seaman need not depend on
whether the illness is work connected or not. It is
sufficient that the illness occurred during the term of
the employment contract. (Seagull Shipmanagement
and Transport, Inc. vs. NLRC et al., G. R. No.
123619, June 8, 2000)

* * *

Is the death o f seamen due to their w illfu l and deliberate

act compensable under the Standard Employment Con­
tract Governing the Employment o f All Filipino Seamen
on Board Ocean-Going Vessels o f the POEA?

ANS. No. However, the employer must establish

by substantial evidence that the death of the seamen
is by virtue of their own willful and deliberate act.
Where there was proof that two (2) seamen im­
planted fragments of the horn of a reindeer or antelope
in their sexual organs and both of them later on died of
bronchitis or tetanus, it was nonetheless held that their
death was compensable considering that the evidence
presented by the employers did not substantially prove
that they contracted tetanus as a result of the unsani­
tary surgical procedures they performed on their bod­
ies. (NFD International Manning Agents et al. vs.
NLRC, et al., G. R. No. 116629, January 16, 1998)

* * *

While the M/V White Castle was in Long Beach, Califor­

nia, loading its cargo of citrus, thirteen (13) Filipino
crew members left the vessel w ithout the master’s per­
mission and sought the assistance of the Center of
Seamens Rights (CSR) of the ITF regarding their com­
plaints about unpaid wages, double bookkeeping and
poor working conditions. Is this activity a ju s t cause to
terminate their employment? Why?

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 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. No. This is a protected activity under the

freedom of expression. It cannot also be considered
as abandonment or desertion in the absence of sub­
stantial evidence that they disembarked from the
vessel with the intention never to return to their posts.
(De la Cruz et al. vs. NLRC et al., G. R. No. 115527,
August 18, 1997)

* * *

What is desertion? When is this a ground to dismiss a

seaman? Discuss briefly?

ANS. Desertion has been defined as (1) a sea­

man’s abandonment of duty by quitting ship, not only
without leave or permission but without justifiable
cause, before termination of employment; and (2) with
the intent of not returning to ship’s duty. It is essential
that there be an animo non revertendi, an intent not to
return. The seaman may be dismissed by the master
for desertion, or he may be suspended by the POEA
for three years as minimum penalty or delisted from
the POEA registry as maximum penalty.
It has however been held that the act of the ship’s
radio operator in leaving the vessel after a heated
argument with the ship captain and after hitting the
boatswain with a pistol does not indicate his firm
intention to leave and not to return to his job. He
could not therefore be dismissed for desertion or
abandonment. But he may be validly dismissed for
gross disrespect, insubordination and serious miscon­
duct. (Singa Ship Management Phils. Inc. vs. NLRC
et al., G. R. No. 120276, July 24, 1997)
* * *

Does the Labor Arbiter have jurisdiction over claims of

overseas Filipino workers?

ANS. Yes. Section 10 of Republic Act No. 8042,

1?fi
 RECRUITMENT AND PLACEMENT OF WORKERS

otherwise known as the Migrant W orkers and Overseas

Filipinos Act of 1995 in part provides:
Notwithstanding any provision of law to the con­
trary, the Labor Arbiters of the National Labor Rela­
tions Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety
(90) calendar days after filing of the complaint, the
claims arising out of an employer-employee relation­
ship or by virtue of any law or contract involving
Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of
damages.
The liability of the principal/em ployer 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 prece­
dent for its approval. The performance bond to be
filed by the recruitment/placement agency, as pro­
vided 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 directors and partners, as
the case may be, shall themselves be jo intly 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 m odification 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 four (4) months
from the approval of the settlement by the appropriate
authority.
* * *

In case of illegal termination of the employment of the

overseas Filipino worker, what relief should be granted
to him?

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 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. In case of termination of overseas employ­

ment without just, valid or authorized cause as defined
by law or contract, the worker shall be entitled to the
full reimbursement of his placement fee with interest
at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract
or for three (3) months for every year of the unexpired
term, whichever is less. (Section 10, R. A. 8042)

* * *

Who is responsible fo r the repatriation of the overseas

Filipino worker?

ANS. The repatriation of the worker and the

transport of his personal belongings shall be the
primary responsibility of the agency which recruited or
deployed the worker overseas. All costs attendant to
repatriation shall be borne by or charged to the agency
concerned and/or its principal. Likewise, the repatria­
tion of remains and transport of the personal belong­
ings of the deceased worker and all costs attendant
thereto shall be borne by the principal and/or the local
agency. However, in the cases where the termination
of employment is due solely to the fault of the worker,
the principal/employer or agency shall not in any
manner be responsible for the repatriation of the
form er and/or his belongings.
The Overseas W orkers W elfare Adm inistration
(OWWA), in coordination with appropriate interna­
tional agencies, shall undertake the repatriation of
workers in cases of war, epidemic, disasters or calam i­
ties, natural or man-made, and other sim ilar events
without prejudice to reimbursement by the responsible
principal or recruitment agency. However, in cases
where the principal or agency cannot be identified, all
costs attendant to repatriation shall be borne by the
OWWA. (Section 15, R. A. 8042)

* * ★

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 RECRUITMENT AND PLACEMENT GF WORKERS

To boost our foreign exchange reserves, Article 22 of

the Labor Code requires all Filipino recruited and
placed overseas employment t o rem its- portion o f their
foreign exchange earnings to their families and/or bene­
ficiaries in the country. What is the amount and form of
such remittance?

ANS. Under Section 3, Rule VIII, Book VIII, of the

Implementing Rules and Regulations, the percentage
of remittance is as follows:

(a) Seamen or mariners: eighty percent (80%) of

the basic salary;
(b) Workers of Filipino contractors and construc­
tion companies: seventy percent (70%) of the basic
salary;
(c) Doctors, engineers, teachers, nurses and other
professional workers whose employment contracts pro­
vide for free board and lodging: seventy percent
(70%) of the basic salary;
(d) All other professionals whose employment
contracts do nr provide free board and lodging fa cili­
ties: fifty percent (50%) of the basic salary;
(e) Domestic and other service workers: fifty
percent (50%) of.basic salary;
(f) All other workers not falling under the afore­
mentioned categories: fifty percent (50%) of basic
salary.
* * *

What are the prohibited practices in connection with

recruitment and placement?

ANS. Article 34 of the Labor Code provides:

P ro h ib ite d p ra c tic e s . - 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

129
 RECRUITMENT AND PLACEMENT OF WORKERS

to make a worker pay any amount greater than actually

received by him ais 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 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 a worker from oppressive terms and conditions
of employment;
(e) To influence or attempt to influence any person
or entity not to employ any worker who has not applied
for employment through his agency;
(t) To engage in the recruitment or placement o f
workers in jobs harmful to public health or m orality or
to the dignity of the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by
the Secretary of Labor or his duly authorized represen­
tatives;
(h) To fail to file reports on the status of employ­
ment, placement, vacancies, remittances of foreign
exchange earnings, separation from jobs, departures
and such other matters or information as may be
required by the Secretary of Labor;
(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 period of expiration of the
same without the approval of the Department 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 regula­
tions.

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 4

RECRUITMENT AND PLACEMENT OF WORKERS

When is illegal recruitment considered a crime o f eco­

nom ic sabotage and punishable w ith life im prison­
ment?

ANS. Under Articles 38 and 39 of the Labor Code

as amended by P. D. 2018, effective January 26,
1986, illegal recruitment when committed by a syndi­
cate or in large scale is considered an offense involv­
ing economic sabotage and penalized with life impris­
onment.
It 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 in the first paragraph of Article 38. It
is deemed committed in large scale if committed
against three (3) or more persons individually or as a
group. (See People vs. Duque, G. R. No. 100285,
August 13, 1992)
ft # *

Give the elements o f illegal recruitment as a criminal

offense.

ANS. The crime of illegal recruitment has two

elements, viz: (1) that the offender is a non-licensee
or non-holder of authority to lawfully engage in the
recruitment and placement of workers; and (2) that the
Offender undertakes any of the recruitment activities
defined under Article 13(b) of the Labor Code, as
amended, or any prohibited practices enumerated
under Article 34 of the same Code (People vs. Coral,
G. R. Nos. 97849-54, March 1, ,1994).

* * ft

G, his wife M, and C, convinced F and his sister S, that

fo r a fee they (F & S) could be employed in Italy and in
France, respectively. The father o f F and S paid

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 RECRUITMENT AND PLACEMENT OF WORKERS

P70,000.00 to G and his companions. But F and S were

never able to jsavfe for alsroad. G and M were also able
to persuade A, who was desirous to travel to Canada,
that they could work for the former’s visa application,
they were able So get from -A, downpayment of
P2S,000.00; other . payments, were Safer, mad©.; by A’s
mother. But nothing happened to A ’sj/isa .application.
G and M did not have any license orauthority to re cru it
(a) . Pay G - b® charged-.and.-convicted of large-scale
illegal recruitment? Why?

ANS. Yes. He did not h a v e -the license ' or

authority to recruit, and yet recruited at least.three-(3)
persons. His acts and those of- his wife constituted
enlisting, contracting or procuring workers or promis­
ing them overseas employment.

{is) fiay G te also charged and convicted-^ o f estafa?

Why? - :-‘ '

ANS. Yes. C onviction fo r illegal recruitment does

not preclude punishm ent for other crimes committed in
trie process. And not.all acts which constitute estafa
necessarily establish' illegal'recruitment,' for estafa-; is
wider In scope and covers deceits whether or not
related to recruitment activities. More importantly, the
elem ent o f dar.ua'j, „vhich is -essentia! to estafa cases,
is.Immaterial in illegal recruitment; and while estafa is
malum in se, iie^a! recruitment is maiurn prohibitum
(People vs. Turda, G. R. Nos. 97044-48, July 6,
1994).

When the seaman was already on toard the vessel, a

supplementary contract of "employment was executed
which provided among others that the employer shall
insure the seaman against death o r--permanent.invalid­
ity caused on board the vessel. Th e said contract was
however neither approved nor verified b yth e POEA... Is

132;
 RECRUITMENT AND PLACEMENT OF WORKERS

the '''Supplementary- contract nevertheless' valid and

binding, or is if violative of Article 34{i) of the Labor
Code prohibiting substitution or alteration of employ­
ment contracts approved and verified by the Depart­
ment of Labor? .

. ANS. . T h e supplementary contract is valid and

binding. The purpose of Article 34(i) of the Labor
Code is to insure that the employee shall not be placed,
at a disadvantageous position. Where the supplemen­
tary contract affords greater benefits to the employee,
it is valid and enforceable although the same was not
submitted to the POEA for approval (Seagull Maritime
Corporation et a!, vs. Balatongan et a!., G. R. No.
82252, February 28, 1989).

Prieto, Canil.io and'Azuel.a were recruited by AR and

Sons International Development Corporation to work
for Saudi Services and Operating Co., Ltd. for 24
months.' Their contracts were approved by the POEA.
They were however later coerced into signing another
employment contract with Saudi Arabia Morrison with­
out the knowledge and approval of the POEA. Still,
when they were already jn-Jeddah, they were asked to
sign another,, contract reducing their salaries. They
refused. By reason of such refusal they were- not given
any work and later summarily dismissed and repatriated
to the Philippines.
(a) Are the overseas contract workers entitled to pay
although they did not render any service? Why?

ANS. Yes. The principle of “do work, no pay” does

not apply in this case. The fact that they did not work
ct the jobsite was not of their own doing. They were
justified in refusing to sign the third contract providing
for another lowering of their salaries jn violation of
their agreement as approved by the POEA. Tibev had
thg dght to insist on the higher salaries agreed upon in
the original'contract. "'

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 RECRUITMENT AND PLACEMENT OF WORKERS

(b) Es AR and Sons liable fo r the claims o f the contract

workers?

ANS. Yes. A private employment agency is

obliged to assume joint and solidary liability with the
employer for all claims and liabilities that may arise in
connection with the implementation of the contracts
including but not limited to payment of wages, health
and disability compensation and repatriation (Prieto et
al. vs. NLRC et al., G. R. No. 93694, September 10,
1993).

* * *

Esaiyn Chavez, an entertainment dancer, signed a stan­

dard employment contract providing fo r a m onthly com­
pensation of US$1,500.00. This contract was approved
by the POEA. Subsequently, Esaiyn executed a side
agreement w ith her Japanese employer providing that
her m onthly salary would be US$750.00 and authorizing
the deduction therefrom o f US$250.00 as m onthly com­
mission fo r her talent manager. Is this side agreement
valid and binding? Why?

ANS. No. It constituted an alteration or change of

the original contract without prior approval of the
POEA. It is against existing laws, morals and public
policy. (Chavez vs. Hon. Edna Bonto-Perez et al., G.
R. .No. 109808, March 1, 1995)

* * *

NATO, a duly registered national union fo r teachers,

upon learning that some of its members had been
victimized by recruitment agencies, directly contacted
other teachers organizations in foreign countries fo r
placement abroad of its own members. Through its
efforts, NATO was able to find jo bs abroad fo r its
members, w ithout charging additional fees.
NATO did not secure any license (as a recruiter) from
the M inistry o f Labor and Employment (MOLE) on its

134
 RECRUITMENT AND PLACEMENT OF WORKERS

claim that this an activity designed to benefit and

protect its o w n members, and therefore, a part of its
r ig h ts a n d prerogatives as a duly registered labor orga­
nization.
Can its claim be sustained? Reasons. (1981 BAR)

ANS. No. Only persons or entities with appropri­

ate license or authority can engage in recruitment and
placement of workers. Contact services, it should be
remembered, are activities that fall within the scope of
recruitment and placement. It is of no moment that
N A TO did not collect any additional fees for its ser­
vices; recruitment and placement activities may be for
profit or not.

* * *

The Super Travel Corporation advertises fo r young

women between ages of 18 to 23 to work as domestic
helpers in Hongkong. Many women, including those
who are presently employed, apply. They are told to
ieave their employment fo r better opportunities await
them in Hongkong. Through connections o f the travel
agency in the Ministry of Foreign Affairs, Ministry of
Labor and Employment, and airline companies, five (S)
young women who resigned their employment as teach­
ers, are able to leave fo r Hongkong. They are however
brought to prostitution houses. Have the officers of
Super Travel Corporation committed any unlawful acts?
Explain.

ANS. Yes. They violated the following provisions

of the Labor Code:

(a) Article 26 prohibiting a travel agency from

engaging in the business of recruitment and placement
of workers for overseas employment.
(b) Article 34(d) making it unlawful for anyone to
induce or attempt to induce a worker already employed
to quit his employment in order to offer him to another

135
 RECRUITMENT AND PLACEMENT OF WORKERS

unless the transfer is designed,to liberate a worker

from oppressive terms and conditions of employment.
(c) Article 34(0 making it unlawful for any person
to engage in the recruitment and placement of workers
in jobs harmful to pubiic health or morality or to* the
dignity of the Republic of the Philippines.

* a *

What is the purpose of the surety bond required of

recruitment agencies under Article 31 o f the Labor
Code?

ANS. It is intended for the protection of Filipino

citizens who are engaged for overseas employment by
foreign companies. The purpose is to insure that if the
rights of these overseas workers are violated by their
employers recourse would still be available to them
against the local companies that recruited them for the
foreign principal. The foreign principal is outside the
jurisdiction of our courts and would probably have no
properties in this country against which an adverse
judgment can be enforced. This difficulty is corrected
by the bond, which can be proceeded against to satisfy
the judgm ent. And the bond may be proceeded
against even if the surety company was never im­
pleaded in the POEA case (Stronghold Insurance Co.,
Inc. vs. Hon. Court of Appeals et al., G. R. No.
88050, January 30, 1992).

* ★ ★

When may placement fees be collected from the

worker?

ANS. Article 32 of the Labor Code provides that

the worker shall not be charged any placement fee by
the employment agency until the former has obtained
employment through the latter's efforts or has actually
commenced employment.

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 RECRUITMENT AND PLACEMENT OF WORKERS

Give the scope of “ illegal recruitment” under Article 38

o f the Labor Code as amended by P. D. No. 1920
effective May 1,1984.

ANS. Article 38, as amended by P. D. No. 1920,

provides:

Ille g a l re c ru itm e n t. - (a) Any recruitment activi­

ties, including the prohibited practices enumerated in
Article 34 of this Code, to be undertaken by non­
licensees or non-holders of authority shall be deemed
illegal and punishable under Article 39 of this Code.
The Ministry of Labor and Employment or any law
enforcement officers may initiate complaints under
this Article.
(b) The Minister of Labor and Employment or his
duly authorized representatives shall have the power
to cause the arrest and detention of such (abrogated
under the 1987 Constitution) of such non-licensee or
non-holder of authority if after proper investigation it is
determined that his activities constitute a danger to
national security and public order or will lead to further
exploitation of job-seekers. The M inister shall order
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.

Section 6, R. A. 8042, otherwise known as the

“Migrant Workers and Overseas fiiip in o Act of 1995"
provides:

Section 6. Definition. — For purposes of this Act,

illegal recruitment means any act of canvassing, en­
listing, contracting, transporting, utilizing hiring, or
procuring workers and includes referring, contract
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 (b) of Presidential Decree No. 442, as
amended, otherwise known as the Labor Code of the

137
 RECRUITMENT AND PLACEMENT OF WORKERS

Philippines: Provided, That any 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 person,
whether a non-licensee, non-holder 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
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, informa­
tion or document or commit any act of misrepresenta­
tion 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;
(e) To influence or attempt to influence any person
or entity not to employ any worker who has not applied
for employment through his agency;
(f) To engage in the recruitment or placement of
workers in jobs harmful to public health or m orality or
to the dignity of the Republic of the Philippines;
(g) To obstruct or attempi to obstruci 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, remittance of for­
eign exchange earnings, separation from jobs, depar­
tures 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

1M
 RECRUITMENT AND PLACEMENT OF WORKERS

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 or indirectly in the manage­
ment 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;
(I)* Failure to actually deploy without valid reason
as determined by the Department of Labor and Em­
ployment; and
(m) Failure to reimburse expenses incurred by the
worker in connection with his documentation and pro­
cessing fo r 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 a large scale shall be considered
an offense involving economic sabotage.
Illegal recruitm ent is deemed committed by a
syndicate if carried out by a group of three (3) or more
persons conspiring confederating with one another. It
is deemed committed in large scale if committed
against three (3) or more persons individually or as a
group.
The persons crim inally liable for the above of­
fenses are the principals, accomplices and acces­
sories. In case of juridical persons, the officers having
control, management or direction of their business
shall be liable.
* * *

A Filipina, single, w ith Bachelor o f Science in Education

degree, was recruited by a local private employment
agency w ith contracts abroad fo r a jo b of tutoring in an

139
 . il'TMEMT AND PLACEMENT OF WORKERS

exclusive private school abroad. Upon arrival in the

place o f employment, the Filipina was given work as a
housemaid, doing household work in a mansion owned
by a wealthy family. She couia not ieave her employ­
ment as a representative o f her recruiter informed her
that her transportation fare was advanced by her em­
ployer, not to mention her own obligations w ith the
recruiter representing a certain percentage o f her
m onthly wage, if this incident has come to your own
attention, what advice w ill you give the Filipina? (1979
BAR)

ANS. I w ill advise the Filipina to commence a

criminal action against the employment agency for
violation of Article 34 of the Labor Code. She was
recruited under false pretense; she was told that she
would work as a tutor in an exclusive private school
abroad, however, she was made to work as a maid.
I will also tell her that the employer is not entitled
to reimbursement of her transportation expenses as
the latter is obliged under the contract to pay for the
same, and that the employment agency is not entitled
to any portion of her wages.
* * *

The Secretary o f Labor and Employment issued Depart­

ment Order No. 3, s. 1994, establishing various proce­
dures and requirements fo r screening perform ing
artists under a new system of training, testing, certifica­
tion and depioyment of the former. Performing artists
successfully hurdling the test, training and certification
requirement were to be issued an Artist’s Record Book
(ARB), a necessary prerequisite to processing of any
contract of employment by the POEA. Later, the DOLE
issued Department Order Nos. 3-A to 3-F, fine-tuning
and implementing the new system.
The Federation of Entertainment Talent Managers o f the
Philippines assailed the department orders on the
ground were that they violated the constitutional right
 RECRUITMENT AND PLACEMENT OF WORKERS

to travel, abridged existing contracts o f employment,

deprived individual artists of their licenses w ithout due
process o f law, were discriminatory and in gross viola­
tion o f the right to life, liberty and property. Decide.

ANS. The issuances constitute a valid exercise by

the State of the police power. The new scheme lim it
deployment to only those individuals adequately pre­
pared for the unpredictable demands of employment
as artists abroad; it lessens the room for exploitation
by unscrupulous individuals and agencies. It also
segregates real artists from those passing themselves
o ff as such, eager to accept any available job and
therefore exposing themselves to possible exploita­
tion. (JMM Promotion and Management, Inc. et al.
vs. Hon. Court of Appeals et. al., G. R. No. 120095,
August 5, 1996)

* * *

What law should be applied to determine that amount of

disability or death benefits payable in case of disability
o r death o f a Filipino seaman recruited in the Philip­
pines to work overseas on board a vessel of foreign
registry?

ANS. The law provided fo r in the shipboard

employment contract should apply. Thus, it has been
he!d that where the contract provided that compensa­
tion shall be paid under Philippine Law or the law of
the, country where the vessel is registered (Singapore)
whichever is greater, Singaporean Law which provided
for a greater benefit should apply (Norse Management
Co. et al. vs. NSE et al., ,G. R. No. L-54204,
September 30, 1982). In the absence of stipulation,
the amount fixed in the contract will be followed
(Bagong Filipino Overseas Corporation et al. vs.
NLRC et al., G. R. No. L-66006, February 28, 1985).

141
 RECRUITMENT AND PLACEMENT OF WORKERS

The contracts signed by overseas workers provided

that the of the host country become applicable to said
contracts if they offer terms and conditions more favor­
able than those stipulated therein. Amiri Decree No. 23,
the Labour l_aw fo r the Private Sector in the State of
Bahrain (the host country) provided fo r benefits higher
than those provided fo r in the contracts.
(a) Are the workers entitled to the benefits provided fo r
in the aforesaid decree? Why?

ANS. Yes. Under the terms of the overseas

employment contracts, the provisions of the decree
were made part and parcel thereof. The parties to a
contract may select the law by which it is to be
governed. basic policy of contract is to protect the
expectation of the parties.

(b) The decree provided that a claim arising from a

contract of employment shall prescribe after one (1)
year from the date of the expiry of the contract. Is this
provision enforceable as regards the claims o f the
overseas contract workers? Why?

ANS. No. This provision is obnoxious to the

forum ’s public policy on protection to labor. Philippine
laws provide for a longer period of prescription.

(c) What Philippine law on prescription should apply to

the claims o f the overseas contract workers in this
case?

ANS. Article 291 of the Labor Code which pro­

vides that money claim s arising from em ployer-
employee relations shall be filed within three (3) years
from the time the cause of action accrues. This is
broader in scope than claims arising from a specific
law or from a collective bargaining agreement (Cadalin
et al. vs. NLRC et al., G. R. No. 104776, December
5, 1994).

142
 RECRUITMENT AND PLACEMENT OF WORKERS

Five (5) Filipinos, recruited to work in the King Faisai

Military Academy in.Saudi Arabia, Filed claims with the
POEA fo r salary differential and overtime pay. They
could not however present any documentary evidence
to substantiate their claim fo r overtime; they merely
stated under oath that they were frequently made to
work overtime but were not given the corresponding
overtime pay despite repeated demands. The agent on
the ^ th e r hand denied the claim but failed to subm it
evidence, like records and logbooks, to refute it. Is an
award in favor o f the workers fo r overtime pay proper?
Explain.

ANS. Yes. The claim of Filipino overseas against

foreign employers should not be subjected to the rules
of evidence and procedure that are usually applied to
other complainants who have more facility in obtaining
the required evidence to prove their demands. It
should be noted that they worked in a m ilitary camp
and their employer was no less than the Saudi Arabia
Armed Forces.
Overseas workers have no compatriot-lawyers to
consult and no labor unions to support them in the
foreign land. Philippine embassies and consulates
have often not been available or ready to give them
assistance. Their claims should therefore be received
with sympathy, and allowed if warranted, conformably
to the constitutional mandate for the protection of the
working class. (Cuadra et al. vs. NLRC et al., G. R.
No. 98030, March 17, 1992)
* * *

Romel, a seaman, was mauled by unidentified person

on board the vessel where he worked as wiper. As a
result of the incident, where he was hit in the face; and
lumbar region, he was hospitalized and diagnosed as
suffering from epilepsy. Thereafter, he started to have
psychiatric problems characterized as schizophrenic
form disorder. Is he entitled to permanent total disabil­
ity benefits as provided fo r in his employment contract?

143
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. Yes. The employer failed to negate the

causal confluence of the mauling of the employee
during his employment, the contusions he suffered, the
epilepsy caused by the mauling and the schizophrenia
which subsequently developed as the principal factor
in the permanent total disability of the latter. Strict
rules of evidence are not applicable in claims for
compensation and disability benefits. Probability and
not certainty is the test of proof in compensation
proceedings. (NFD International Manning Agents, Inc.
vs. NLRC et al., G. R. No. 107131, March 13, 1997)

★ * *

What is the duration of a license to recruit?

ANS. A license is valid for a period of two (2)

years from the date of issuance unless sooner can­
celed, revoked or suspended by the Administration for
violation of the Labor Code or its implementing rules
and regulations. (Section 5, Rule II, Implementing
Rules and Regulations)

Is a license o r authority transferable?

ANS. No license or authority shall be transferred,

conveyed or assigned to any other person or entity, or
used in any place other than that stated in the license
(Section 6, Rule II, Implementing Rules and Regula­
tions)
it it it

A recruitment and placement agency declared voluntary

bankruptcy. Among its assets is its license to engage
in business.
Is the license o f the bankrupt agency an asset which
can be sold at public auction by the liquidator? (1998
Bar)

144
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. No. The license, being a mere privilege

granted to the holder based on qualifications required
by law, is non-transferable. As a m atter of fact, Article
29 of the Labor Code provides that no license or
authority shall be used directly or indirectly by any
person other than the one in whose favor it was issued.

* * *

How should the monetary award o f the POEA against a

recruiter be enforced?

ANS. A judgment against a recruiter should ini­

tially be enforced against the cash and surety bonds
filed with the POEA. These bonds answer for all sorts
of liabilities o f the recruiter to the worker and to the
POEA. The obligations they guarantee are continuing;
they are subject to replenishment when they are
garnished and failure to replenish shall, cause the
suspension or cancellation of the recruiter’s license.
Furthermore, a cash bond shall be refunded to a
recruiter who surrenders his license only upon posting
of a surety bond of sim ilar amount valid for three (3)
years (Del Rosario vs. NLRC et al., G. R. No.
85416, July 24, 1990).

* * *

Is an appeal bond necessary in appeals from a decision

o f the POEA considering that the licensed recruiter has
already posted cash and surety bonds as required by
POEA Rules?

ANS. Yes. The appeal bond is required by Section

6, Rule V, Book VII of the POEA Rules. This bond,
equivalent to the monetary award, is intended to
further insure the payment of the monetary award in
favor of the employee if it is eventually affirmed on
appeal by the NLRC (JMM Promotions and Manage­
ment, Inc. vs. NLRC et al., G. R. No. 109835,
November 22, 1993).

145
 RECRUITMENT AND PLACEMENT OF WORKERS

As a result o f published stories regarding abuses suf­

fered by Filipino housemaids employed in Hongkong,
the DOLE Secretary issued Department Order Mo. 16,
Series o f 1991, temporarily suspending the recruitment
by private employment agencies o f Filipino domestic
helpers to said place. The DOLE itself, through the
POEA, took over the business o f deploying such
Hongkong-bound workers. Justify the actions taken by
the DOLE.

ANS. The administrative issuances were within the

power of the Secretary of Labor, by Article 36 of the
Labor Code, to restrict and regulate the recruitment
and placement activities of agencies. Article 36 is an
exercise of the police power of the State (Philippine
Association of Service Exporters vs. Hon. R. D.
Torres et al., G. R. No. 101279, August 6, 1992).

* * *

Millares and Lagda worked fo r twenty (20) years in

various capacities in the vessels of ESSO International.
They were employed by ESSO through its local man­
ning agency, Trans-Global Maritime Agency, Inc. They
signed numerous eight (8) month employment con­
tracts w ith ESSO. The last position that they held was
that o f Chief Engineer. But the NLRC was o f the view
that they were contractual employees whose employ­
ments terminated every time their contracts o f employ­
ment expired. Is the NLRC correct? Explain.

ANS. No. Their employment is governed by the

contracts they sign every tim e they are rehired and
their employment is terminated when the contract
expires. Their employment is fixed fo r a specific
project or undertaking the completion or term ination of
which has been determined at the time of the engage­
ment of the employee. Moreover, it is an accepted
maritime industry practice that employment of seafar­
ers are for a fixed period only. (Millares and Lagda vs.

146
 RECRUITMENT AND PLACEMENT OF WORKERS

NLRC et al., G. R. No. 110524, July 29, 2002;

Resolution on Motion for Reconsideration)

* * *

What is the amount o f indemnity in case o f pretenmina-

tion o f the employment contract o f the OFW?

ANS. Section 10 of Republic Act No. 8042 partly

provides:

“x x x

“ In case of termination of overseas employ­

ment without just, valid or authorized cause as
defined by law or contract, the worker shall be
entitled to the full reimbursement of his place­
ment fee 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."

“X X X . ”

Under the foregoing provision, where the actual

employment of the overseas contract worker was only
for twenty one (21) days, it was ruled that she was
entitled only to an amount corresponding to her three
(3) months salary, which is obviously less than her
salaries for the unexpired portion of her one-year
employment contract. (Olarte etc. vs. Nayona, G. R.
No. 148407, November 12, 2003)

A paper manufacturing company in Cainta, Rizal would

like to know if it has to obtain a license o r authority
before it can recruit factory workers fo r its plant. What
would be your advice?

147
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. No license or authority is necessary. The

paper manufacturing company is not engaged in the
business of recruitment and placement of workers. It
is not recruiting workers to be employed by others; it
does not represent a principal. It is recruiting its own
workers.

May an employer in the Philippines employ a worker

who is not a Filipino citizen?

ANS. As a rule, an employer in the Philippines is

not prohibited from employing workers who are not
Filipino citizens. However, Section 2-A of the Anti-
Dummy Law (Com. Act No. 108 as amended by P. D.
No, 715) prohibits the employment of aliens in estab­
lishments or entities which have under their name or
control a right, franchise, privilege, property or busi­
ness the exercise or enjoyment of which is expressly
reserved by the Constitution or the laws to citizens of
the Philippines or to corporations or associations at
least sixty (60) per centum of the capital of which is
owned by such citizens. These entities are engaged in
what are referred to as nationalized activities.

* * *

Cite examples o f entities engaged in nationalized activi-

’ ties.'

ANS. The Constitution provides that an authority

to operate a public utility or to develop, exploit and
utilize natural resources can be granted only to citi­
zens of the Philippines or to corporations or associa­
tions at least sixty per centum of the capital of which
is owned by such citizens. The ownership and man­
agement of mass media is limited to citizens of the
Philippines or to corporations or associations wholly
owned and managed by them. And only Filipino

148
 RECRUITMENT AND PLACEMENT OF WORKERS

citizens or entities at least seventy percent of the

capital of which is owned by such citizens shall be
allowed to engage in the advertising industry.
The Retail Trade Nationalization Law provides that
no person who is not a citizen of the Philippines and
no association, partnership or corporation the capital
of which is directly or indirectly in the retail business.
Republic Act No. 5980, otherwise known as the
“Finance Company Act” requires that at least 60% of
the capital stock of financing companies should be
owned by citizens of the Philippines/

* * *

Is the employment of foreign nationals; allowed; under

the Omnibus Investments Code of 1987?

ANS. Yes, under the: conditions specified under

Article 76 of the said Code (E O 226). The second
paragraph of Article 76 provides:

Subject to the provisions o f Section 29 of Com­

monwealth Act No. 613* as a m e n d e d , a n enterprise, a
zone registered enterprise m a y employ fofeign nation­
als in supervisory, technical o r advisory positions fo r a
period not exceeding five (5) y e a rs from its registra­
tion, extendible for limited periods at the discretion of
the Authority: Provided, however, That when the
m ajority of the capital stock of a zone registered
enterprise is owned by foreign nationals, the positions
of president, treasurer and general manager or their
equivalents may be retained by foreign nationals be­
yond the period set forth herein."

* * *

A Chinese daily in the Philippines seeks your opinion

on whether it can employ as its Editor-in-Chief writer
residing in Taiwan. Will your opinion be that employ­
ment is legally feasible? Explain.
 RECRUITMENT AND PLACEMENT OF WORKERS

ANS. No. Under Section 11 of Article XVI of the

Constitution, the ownership and management of mass
media is limited to citizens of the Philippines or to
corporations or associations wholly owned and man­
aged by Filipino citizens.

♦ * ★

Are there any exceptions to the prohibition against

employment o f aliens in entities engaged in national­
ized activities?

ANS. Aliens may however be employed in entities

engaged in nationalized activities (a) where the Secre­
tary of Justice specifically authorizes the employment
of technical personnel or (b) where the aliens are
elected members of the board of directors or govern­
ing body of corporations or associations in proportion
to their allowable participation in the capital of such
entities.
Some special laws also authorize the employment
of foreign personnel in certain nationalized areas of
investment. Under the Petroleum Act of 1949, the
Energy Development Board is empowered to approve
the employment of foreign personnel or executive or
technical work and for all other works selected by
petroleum concessionaires. The employment of non-
Filipinos for technical and specialized work in the
exploitation or development of mining claims is also
allowed by the mining laws.

* * * :

A company operating a petrochemical plant w ith highly

sophisticated machinery and equipment from France
desires to employ French technicians to operate such
machinery and equipment. Is such employment legally
possible? Why?

ANS. Article 40 of the Labor Code provides:

150
 RECRUITMENT AND PLACEMENT OF WORKERS

“ E m p lo ym e n t p e rm it f o r n o n -re s id e n t a lie n s.
- Any alien seeking admission to the Philippines for
employment purposes and any domestic or foreign
employer who desires to engage an alien for employ­
ment in the Philippines shall obtain an employment
permit from the Department of Labor.
“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
tim e of application to perform the services for which
the alien is desired.
“For an enterprise registered in preferred areas of
investment, said employment permit may be issued
upon recommendation of the governm ent agency
charged with the supervision of said registered enter­
prise."

If there are persons in the Philippines who are

competent, able and willing to perform the services,
then the French technicians cannot be employed.
* * *

Aside from the non-availability o f a person in the Philip­

pines who is competent, able and w illing to perform the
services fo r which the non-resident alien is desired, are
there other conditions fo r the issuance of the employ­
ment permit?

ANS. The non-resident alien worker and his em­

ployer must bind themselves to train at least two (2)
Filipino understudies fo ra period to be determined by
the Secretary of Labor and Employment. Such under­
studies shall be the most ranking regular employees in
the section or department for which the expatriate is
being hired to insure the actual transfer of technology
(Section 5, Rule XIV, Book I, Implementing Rules and
Regulations).

* * *

151
 RECRUITMENT AND PLACEMENT OF WORKERS

What is the duration of an employment permit?

ANS. Section 7, Rule XIV, Book I of the Imple­

menting Rules and Regulations provides:

Duration of employment permit. - subject to re­

newal upon showing of good cause, the employment
permit shall be valid for a minimum period of one (1)
year starting from the date of its issuance, unless
sooner revoked by the Minister for violation of any
applicable provision of the Code or of these Rules.

During this period, he cannot engage in any gainful

employment other than that for which he was issued a
permit.
* * *

Why is regulation of the employment o f non-resident

aliens necessary?

ANS. To protect local employment opportunities

from invasion by foreigners. These opportunities must
be preserved in favor of qualified local workers.

Article 40 of the Labor Code requires an alien to obtain

an employment permit from the Department of Labor
before he may be employed in the Philippines.
(a) What class o f aliens are subject to this requirement?

ANS. Non-resident aliens. A long time resident of

the Philippines is not subject to this requirement.

(b) Is this provision an impairment of the obligations of

contracts?

ANS. No. It is firmly settled that provisions of

applicable laws, especially provisions relating to mat­
 RECRUITMENT AND PLACEMENT OF WORKERS

ters affected with public policy, are deemed written

into contracts. Private parties cannot constitutionally
contract away the otherwise applicable provisions of
law.

(c) Is the Secretary of Labor an determining whether or

not to issue the employment permit authorized to take
into account the question of whether or not employ­
ment of an alien would “ redound to the national inter­
est” considering that Article 40 does not explicitly refer
to such assessment? Why?

ANS. Yes. The permissive language used in

Article 40 indicates that the authority granted involves
the exercise of discretion on the part of the issuing
authority. Furthermore, Article 12 of the Labor Code
sets forth a statement of objectives that the Secretary
of Labor should take into account in exercising his
authority and jurisdiction granted by the Labor Code.
Among these objectives is the regulation of the em­
ployment of aliens (General Milling Corporation and
Earl Timothy Cone vs. Hon. R. D. Torres et al., G.
R. No. 93666, April 22, 1991; see also Almodiel vs.
NLRC et al., G. R. No. 100641, June 14, 1993).
4r 4r

Phii-Norksgard Company, Inc., a domestic corporation

engaged in the optics business, imported from Sweden
highly sophisticated and sensitive instruments fo r its
laboratory. To install the instrum ents and operate
them, the company intends to employ Borja Anders, a
Swedish technician sojourning as a tourist in the Philip­
pines.
As a lawyer of the company, what measures w ill you
take to ensure the legitimate employment o f Borja An­
ders and at the same time protect Philippine labor?
Discuss fully. (1999 Bar)

ANS. I will advise the company to advertise for

Filipino workers who can perform the job. If no

153
 RECRUITMENT AND PLACEMENT OF WORKERS

Filipino technician is available willing and competent

to do the job, the company will then apply with the
Department of Labor and Employment for an employ­
ment permit in favor of Anders.
For the protection of Philippine labor, the employ­
ment of Anders is allowed only for short period and he
has to train at least two (2) Filipino understudies.
 CHAPTER IV

HUMAN RESOURCES DEVELOPMENT

What is human resources development?

ANS. Human resources development refers to the

process by which the actual and potential labor force
is made systematically to acquire greater knowledge,
skills and capabilities for the nation’s sustained eco­
nomic and social growth (Section 1, Rule I, Book II,
Implementing Rules and Regulations).
* * *

Why is human resources development important?

ANS., Human resources development will produce

skilled and capable workers. These have better oppor­
tunities for employment. And with abundance of
skilled workers, industry can operate efficiently and
continuously. Economic and social growth is thus
assured.
★ * ★

Define m anpower

ANS. Manpower is that portion of the population

which has actual or potential capability to contribute to
the production of goods and services (Section 1(c),
Rule f, Book II, Implementing Rules Regulations).
★ * *

Is human resources o r manpower development in­

tended solely to train workers to serve employers?

ANS. No. Manpower development also means

training for self-employment or of organizing, financ­
ing and/or managing an enterprise. This is known as

155
 HUMAIN RESOURCES DEVELOPMENT

“entrepreneurship” (Article 44(b); Labor Code; Section

G), Rule I, Book II, Implementing Rules and Regula­
tions).

* * *

What is a “ National Manpower Plan” ?

ANS. National Manpower Plan refers to the plan

formulated by the Council on the systematic determi­
nation of manpower requirements and supply of the
sectors of the economy over a future period of time. It
shall embody policies and strategies on how human
resources can be improved in quality and productivity,
how they can be efficiently allocated to various em­
ployments, with a vjew to accelerating the attainment
of the country’s over-al! economic arid social objec­
tives (Section 1(d), Rule I, Book II, Implementing
Rules and Regulations).

* tfr *

How Is manpower development achieved?

ANS. It is achieved primarily through training

programs conducted by the National Manpower and
Youth Council or by private employers,; associations or
civic groups. All manpower training schemes must
however be coordinated with the Council. Among the
trainingi schemes; frequently:; undertaken by private
employers are the apprenticeship and learnership pro­
grams.;,;^: -'sw;-: ; ■ a : ;n
* ’
■ ft' *

What is the Technical Education and Skills Develop­

ment Authority (TESDA)?

ANS. It is the body created under Republic Act No.

7796 (Tesda Act of 1994) to replace and absorb the
National Manpower and Youth Council, the Bureau of
 HUMAN RESOURCES DEVELOPMENT

Technical and Vocational Education and the personnel

and functions pertaining to technicalTVOcatjonal educa­
tion in ; the regional, offices of thev Departments of
Education, Culture and Sports and the apprenticeship
program of the Bureau of Local Employment: of the
Department of Labor and Employment
. "ft it if

What is “ dual system/training” ?

ANS. It refers to a delivery system of quality

technical and vocational : education which requires
training to be carried out alternately in two (2) venues:
in school and in the production plant. In-school
training provides the trainee the theoretical founda­
tion, basic training, guidance and human foundation;
while in-plant training develops his skills and profi­
ciency- in,actual work conditions as it continues per­
sonal discipline and work values (Section 4(p), R. A.
7796)

* * *

What is apprenticeship?

ANS. Apprenticeship means practical training on

the job supplemented by related theoretical instruction
involving apprenticeable occupations and trades as
may b e ; approved, by the Secretary of Labor and
Employment (Article 58(a), Labor Code as amended by
E. O. 111).
It is training within employment with compulsory
related theoretical instructions involving a contract
between an apprentice and an employer on an ap­
proved apprenticeable occupation (Section 40), R. A.
No. 7796).
.................... ..................* * & ■ . ■

A five-star hotel would like to have an lapprenticesf-ip

program covering dishwashers. Will this be allowed?

151
 HUMAN RESOURCES DEVELOPMENT

ANS. Apprenticeship is allowed only in a trade

form of employment or occupation which requires for
proficiency more than three (3) months of practical
training on the job supplemented by related theoretical
instruction and only in ‘ highly technical industries."
This is referred to as an apprenticeable occupation
(Article 58(c), Labor Code). The Secretary of Labor
and Employment by appropriate orders determines
what trades or occupations are apprenticeable.
In the present problem, the work of dishwasher
cannot be deemed apprenticeable. Proficiency therein
can be attained within a very short period. Besides,
the hotel industry is not highly technical.

* # *

What are “ highly technical industries"?

ANS. They are industries engaged in the applica­

tion of advanced technology (Section 2, Rule IV, Book
II, Implementing Rules and Regulations).
* * *

What is an “ apprenticeable occupation” under the

TESDA Law?

ANS. It is an occupation officially endorsed by a

tripartite body and approved for apprenticeship by the
Authority (Section 4(m), R. A. 7796).

* * *

Capili was hired by Nitto Enterprises as an apprentice

machinist, molder and core maker as evidenced by an
apprenticeship agreement The said agreement was
enforced on the same day it was signed; it was subm it­
ted later to the Department o f Labor and Employment.
Did an employer-apprentice relationship arise between
the parties? Why? <

158
 HUMAN RESOURCES DEVELOPMENT

ANS. No. Prior approval by the DOLE of the

proposed apprenticeship program is a condition sine
qua non before an apprenticeship agreement can be
validly entered into. The filing of the proposed ap­
prenticeship program with the DOLE is merely a pre­
liminary step towards its final approval and does not
instantaneously give rise to an employer-apprentice
relationship. Capili should rightly be considered as a
regular employee. (Nitto Enterprises vs. NLRC et al.,
G. R. No. 114337, September 29, 1995)
* * *

Is it compulsory on the part o f an employer to undertake

an apprenticeship program?

ANS. Article 70 of the Labor Code provides:

V o lu n ta ry O rg a n iz a tio n o f A p p re n tic e s h ip
P rogram s; E xe m p tio n s. -
(a) The organization of apprenticeship programs
shall be primarily a voluntary undertaking of employ­
ers;
(b) When national security or particular require­
ments of economic development so demand, the Pres­
ident of the Philippines may require compulsory train­
ing apprentices in certain trades, occupations/ jobs or
employment levels where the shortage of trained man­
power is deemed critical as determined by the Secre­
tary of Labor. Appropriate rules in this connections
shall be promulgated by the Secretary of Labor 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.
* * *

What are the incentives that the law gives to an em­

ployer who undertakes an apprenticeship program?

159
 HUMAN RESOURCES DEVELOPMENT

ANS; The employer is allowed to pay his appren­

tices wageirates below- but not lower than 75% of, the
legaLminimurn wage; (Article 61, Labor Code).
H e is also entitled to an additional deduction from
taxable income; of; onerhalf (1/2) of the value of labor
training expenses incurred for developing the produc­
tivity of apprentices; provided, that the apprenticeship
program is recognized by the Department of Labor and
Employment; provided further, tlja t such deduction
shall not exceed ten percent (10%) of direct labor
wage; and provided, finally that the employer pays his
apprentices the minimum wage (Article 71, Labor
Code).
" ...... ' :' 'it * *

May the hiring of apprentices w ithout compensation

authorized?

ANS. The Secretary of Labor may authorize the

hiring without compensation of apprentices whose
training on the job isrequired by the school or training
program curriculum or as a requisite for graduation or
board examination (Article 72, Labor Code).
* * *

Give the qualifications o f an apprentice.

ANS. To qualify as an apprentice, an applicant

shall:
(a) Be at least fifteen years of age; provided those
who are at least fifteen years of age but less than
eighteen may be eligible for apprenticeship only in
non-hazardous occupations;
(b) Be physically fit for the occupation in which he
desires to be trained;
(c) Possess vocational, aptitude and capacity for
the particular occupation as (established through ap­
propriate tests; and
(d) Possess the ability to comprehend and follow
oral and written instructions (Section 11, Rule VI, Book
II, Implementing Rules and Regulations).
 HUMAN RESOURCES DEVELOPMENT

What is the apprenticeship period?

ANS. The period of apprenticeship shall not

exceed six (6) months (Article 61, Labor Code, as
amended by E. O. 111).
* * *

After working fo r one (1) month as an apprentice, Pedro

is dismissed by the empSoyer w ithout any cause, fs the
dismissal legal? Why?

ANS. The dismissal is not legal. After the proba­

tionary period of one (1) month the apprenticeship
agreement may be terminated only for the following
causes:

By th e e m p lo ye r. - (a) Habitual absenteeism in

on-the-job training and related instructions;
(b) W illful disobedience of company rules or
insubordination to lawful order of a superior;
(c) • Poor physical condition, permanent disability
or prolonged illness which incapacitates the apprentice
from working;
(d) Theft or malicious destruction of company
property and/or equipment;
(e) Poor efficiency of performance on the job or in
the classroom for a prolonged period despite warnings
duly given to the apprentice; and
(f) Engaging in violence or other forms of gross
misconduct inside the employer's premises.

By th e a p p re n tic e , - (a) Substandard or deleteri­

ous working conditions within the employer’s premises;
(b) Repeated violations by the employer of the
terms of the apprenticeship agreement;
(c) Cruel or inhuman treatment by the employer or
his subordinates;
(d) Personal problems which in the opinion of the
apprentice shall prevent him from a satisfactory per­
formance on his job; and
Bad health or continuing illness (Section 25, Rule
VI, Book II, Implementing Rules).

161
 HUMAN RESOURCES DEVELOPMENT

Although under the apprenticeship agreement the pe­

riod of apprenticeship w ill be six (8) months, the em­
ployer dismissed the apprentice without any good rea­
son w ithin one (1) month from th * start of the appren­
ticeship period. Is the action of the employer legal?
Why?

ANS. Yes. The apprentice is still in his probation­

ary period. During this time, either party may summar­
ily terminate the agreement (Secs. 18 and 19, Rule
VI, Book II, Implementing Rules and Regulations).

it ☆ *

After w orking fo r three m onths as an apprentice,

Roberto had a quarrel with his wife and this resulted in
their separation. Since he could not concentrate on his
work,-he,terminated the apprenticeship agreement. Is
he liable fo r damages fo r such termination? Why?

ANS. No. Among the valid causes for the term ina­
tion of the apprenticeship agreement by the app­
rentice is “personal problems which in the opinion of
the apprentice shall prevent him from satisfactory
performance of this jo b ” (Section 25, Rule VI, Book II,
Implementing Rules and Regulations).

* * *

What are the hours of work of an apprentice?

ANS. Hours of work of the apprentice shall not

exceed the maximum number of hours of work pre­
scribed by law, if any, for a worker of his age and sex.
Time spent in related theoretical instructions shall be
considered as hours of work and shall be reckoned
jointly with on-the-job training time in computing in the
agreement the appropriate periods for giving wage
increase to the apprentice.
An apprentice not otherwise barred by law from
working eight hours a day may be requested by his
 HUMAN RESOURCES DEVELOPMENT

employer to work overtime and paid accordingly pro­

vided there are no available regular workers to do the
job, and the overtime work thus rendered is duly
credited toward his training time (Section 20, Rule VI,
Book II, Implementing Rules and Regulations).
Ratio of theoretical and on-the-job training. - The
normal ration is one hundred (100) hours of theoretical
instructions for every two thousand (2,000) hours of
practical or on-the-job training. Theoretical instruction
time for occupations requiring less than two thousand
hours for proficiency shall be computed on the basis of
such ration (Section 28, Rule VI, Book II, Implement­
ing, Rules and Regulations).
* * *

Is the apprentice entitled to any wage increase during

the apprenticeship period?

ANS. The wage increase for apprentices shall be

according ^ 0 the graduated scale of wages included in
the written program in the apprenticeship agreement
between the apprentice and the employer.
The graduated scale of wages is a schedule of
commensurate increase in wages given to the appren­
tice of regular intervals, conditioned on his satisfactory
performance.
Whenever there is any change of the statutory
minimum wage, a corresponding change shall likewise
be made in the wages of apprentices. Also, an
apprentice shall enjoy commensurate increase at peri­
odic intervals until he starts receiving the prevailing
minimum wage at the last stage of the training (Policy
Instructions No. 18, effective May 1, 1976).
* * *

Marivic a fresh graduate from a secretarial school, ap­

plies fo r a jo b as a steno-typist in X & Co. She is
accepted but the personnel manager informs her that
since she has no experience she w ill start as an appren­
tice and be compensated at the rate of 75% of the

4CO
 HUMAN RESOURCES DEVELOPMENT

minimum wage. Without signing any document to

evidence her employment, Mariysc starts working. Is
her employment as an apprentice effective? Why?

ANS. No. Marivic and X & Co. should first

execute an apprenticeship agreement, furnishing a
copy thereof to the Regional Office. If the agreement
is found defective and serious damage would be
sustained by either or both parties if such defect is not
corrected, the Regional Office shall advise the em­
ployer not to implement the agreement pending
amendment thereof.
* i: *

After the apprenticeship period, Is the employer obliged

to continue employing the apprentice?

ANS. Unless the apprenticeship agreement stipu­

late otherwise, the employer is not obliged to employ
the apprentice after the completion of his training.
' ■ tt * *

Elena Honasan applied for employment with the Holiday

Inn and was accepted for “on-the-job training” as a
telephone operator for a period of three (3) weeks. For
her services, she received food and transportation al­
lowance. After the completion of her training, she was
employed on a “probationary basis” for a period of six
(6) months. Four (4) days before the expiration o f the
aforesaid period, Holiday Inn notified her of her dis­
missal on the ground that her performance had not
come up to the standards of the hotel. Was the dis­
missal of Elena lawful? Why?

ANS. No. At the time of her dismissal she had

become a regular employee and could no longer be
dismissed on the ground relied upon by the hotel. Her
“on-the-job training” for three weeks was in itself a
probationary period. She was certainly under observa­
 HUMAN RESOURCES DEVELOPMENT

tion during that time. If her services proved unsatis­

factory then, she could have been dropped as early as
during that period. But she was not.
Even if it be supposed that the probation did not
end with the three-week period of on-the-job training,
there is no reason why that period should not be
included in the stipulated six-month period of proba­
tion. Consequently, at the time of her dismissal, the
probationary period of six-months had expired and she
had become a regular employee. (Holiday Inn Manila,
etc. vs. NLRC, et al., G. R. No. 109114, September
14, 1993)

it * *

What are learners? When may they be hired?

ANS. 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 relatively short period of
time which shall not exceed three (3) months (Article
73, Labor Code).
They may be hired 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 competi­
tion in terms of labor costs or impair or lower working
standards (Article 74, Labor Code).
Learnership programs must be approved by the
TE S D A (Section 4(n), R. A. 7796).

* * *

Compare teamership with apprenticeship.

ANS. Both learnership and apprenticeship pro­

grams must be approved by the Regional Office, (now
TE SD A)
The learner and the apprentice may be paid wages
not less than 75% of the applicable minimum wage.
 HUMAN RESOURCES DEVELOPMENT

The duration of the learnership period does not

exceed three (3) months, while the apprenticeship is
always over three (3) months.
In learnership agreement, the employer must make
a commitment to employ the learners, if they so
desire, as regular employees upon completion of the
learnership. This is not required in apprenticeship.
* * *

Give examples of leamable trades.

ANS. Candle maker, office secretary, waiter.

* * *

Give examples of apprenticeable trades.

ANS: Integrated circuit assembler, general main­

tenance mechanic.
* * *

Employer Jack entered into a learnership agreement

with Antonio fo r a period of three (3) months. At the
end o f two (2) months, the employer terminated the
agreement when he was not satisfied with the progress
of learning of the learners. Antonio asked fo r a chance
to prove his worth, and the employer acceded to let him
finish the three (3) months period on conditions that hs
should improve his learning performance. At the end of
the three (3) months, the employer refused to hirs
A ntonio because the latter did not improve as
promised.
Is the stand of employer Jack sustainable? Reasons.
<1981 BAR)

ANS. No. Employer Jack has a commitment under

the learnership agreement to employ Antonio as a
regular worker upon the completion of the learnership.
He should not have allowed Antonio to finish the
learnership period.

166
 HUMAN RESOURCES DEVELOPMENT

What are handicapped workers and when ars they errs-

pioyabls? What is their rate of pay?

ANS. Handicapped workers are those whose earn ­

ing capacity is impaired by age or physical or mental
deficiency or injury (Article 78, Labor Code). Section
5 of Republic Act No. 6640 defines a handicapped
worker as one whose efficiency or quality of work is
impaired by his disability in relation to the work
performed.
They may be employed when their employment is
necessary to prevent curtailment of employment op­
portunities and when it does not create unfair competi­
tion in labor costs or impair or lower working standards
(Article 79, Labor Code).
The rate to be paid the handicapped workers shall
not be less than seventy five percent (75%) of the
applicable legal minimum wage (Article 80, Labor
Code).
* it *

May handicapped workers be employed as apprentices

or learners?

ANS. Yes, provided their handicap is not such as

to effectively impede the performance of job opera­
tions in the particular occupations for which they are
hired (Article 81, Labor Code).

* ft

A lady worker was born with a physical deformity,

specifically, hard of hearing, speech impaired and color
blind. However, these deficiesrscies do not impair tier
working ability.
Can the employer classify the lady worker as a handi­
capped worker so that her daily wage will only be
seventy-five percent (75%) of the applicable daily mini­
mum wage? (1998 Bar)

167
 HUMAN RESOURCES DEVELOPMENT

ANS. No. The lady worker cannot be classified as

a handicapped worker because deficiencies do not
impair her working ability. And as her earning capacity
is not impaired, she cannot be classified as handi­
capped worksr.
* it iftr

Ana Cruz has a low IQ. She has to be told at least three
times before she understands her daily work assign­
ment. However, her work output is at least equal to the
output of the least efficient worker in her work section.
Is Ms. Cruz a handicapped worker? Explain. (2009 Bar)

ANS. No. Ms. Cruz is not a handicapped worker.

Her earning capacity is not impaired by age or physical
or mental deficiency or injury. (Art. 78, Labor Code)
Despite her low IQ, she can still perform the work
assigned to tier. Her supposed deficiency is only wilft
respect to her understanding of her daily work assign­
ment and not with respect to the accomplishment of
her work.
it it it

The Far East Bank and Trust Co., upon the request of
some government officials and civic-minded citizens,
hired by way o f “ accommodation” deaf-mutes ®s money
sorters counters. The contracts of employment pro­
vided fo r a fixed period of six (6) months, and unless
renewed by the employer the same would automatically
expire at the end of the term. The bank informed them
from the start that they could not become regular em­
ployees because there were no plantilla positions of
“ money sorters” whose task used to be performed by
tellers. Their contracts were renewed several times
allegedly not because of need but merely fo r humanitar­
ian reasons.
(a) Are the deaf-mutes considered handicapped work­
ers whose terms and conditions of employment are
governed by Article 80 of the Labot'Cods? Why?
 HUMAN RESOURCES DEVELOPMENT

ANS. No. Their disability did not render them

unqualified or unfit for the tasks assigned to them.
They are qualified disabled workers who, under the
Magna Carta for Disabled Persons (R. A. 7277), are
entitled to terms and conditions of employment en­
joyed by qualified able-bodied individuals.

(b) May the deaf-mutes be considered regular employ­

ees o f the bank? Why?

ANS. Yes. The repeated renewal of their con­

tracts lead to the conclusion that their tasks were
beneficial, necessary and desirable to the business of
the bank.

(c) Does the conform ity of the deaf-mutes to the stipu­

lation in the contract that they couid not become regu­
lar employees preclude them from becoming regular
employees? Why?

ANS. No. The well-settled rule is that the charac­

ter of employment is determined not by stipulations in
the contract, but by the nature of the work performed.

(d) Is the non-renewal of their contracts had to perform

their work at night, and were exposed to risks, tenable?
Why?

ANS. No. Traveling at night involves risks to

disabled and able-bodied persons alike. This excuse
cannot justify the termination of their employment.
(Bernardo et al vs. NLRC et al., G. R. No. 122917,
July 12, 1999)

■ICO
 CHAPTERV

HOURS OF WORK, REST PERIODS,

HOLIDAY PAY, LEAVES, AND
SERVICE CHARGES
State the legal provision fixing the normal hours of
work of an employee.

ANS. Article 83 of the Labor Code provides:

N orm al h o u rs o f w o rk. - The normal hours of

work of an employee shall not exceed eight (8) hours
a day.
Health personnel in cities and m unicipalities 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, or a total of
forty (40) hours a week, exclusive of tim e 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 per cent
(30%) of their regular wage for work on the sixth day.
For purposes of 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.

* * *

May the normal hours fixed in Article 83 be reduced by

the employer? Explain.

ANS. The present article provides that the normal

hours of work of an employee shall not exceed eight
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

(8) hours a day. This implies that the employer, in the

exercise of its management prerogatives, may sched­
ule a work shift consisting of less than eight hours.
And following the principle of “a fa ir day's wage for a
fa ir day’s labor", the employer is not obliged to pay an
employee, working for less than eight hours a day, the
wages due for eight hours work. Nonetheless, if by
voluntary practice or policy, the employer for a consid­
erable period of tim e has been paying his employees
wages due for eight hours work although the work shift
is less than eight hours (for example, seven) it cannot
later on increase the working hours without an in­
crease in the pay of the employees affected. An
employer is not allowed to withdraw a benefit which he
has voluntarily given.
* * *

“ Y” Corporation is engaged in the manufacture o f can­

dles. As company policy, it requires its employee to
render only six (6) hours o f work daily, but pays them
the minimum wage corresponding to 8 hours work. Due
to the demand fo r increased production, the fu ll eight-
hours-a-day work was required w ithout any increase in
the wages. Believing that they are entitled to overtime
pay fo r the extra-two-hour-work, the employees filed a
claim with the Labor Arbiter fo r payment o f overtime
pay. Rule on the matter. (1982 Bar)

ANS. The employees are entitled to overtime pay

for the extra two-hour work. Through voluntary prac­
tice or policy, the company has fixed the normal
workday at six (6) hours. It now constitutes part of the
terms and conditions of employment and cannot be
unilaterally withdrawn by the employer.

* * *

Josefa Lim, a pharmacist employed by the Makati Medi­

cal Center, works fo r eight hours a day, six (6) days a
week. Is she entitled to overtime compensation? Why?

171
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

ANS. Yes. Josefa Lim is covered by the term

“health personnel” mentioned in Article 83 of the Labor
Code and whose normal work hours, if they are em­
ployed in cities or m unicipalities 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
be eight (3) hours a day for five (5) days a week, for a
total of forty (40) hours a week. Since she works for
forty-eight (48) hours a week, she is entitled to over­
time compensation (30% additional) corresponding to
eight (8) hours.
* * *

What are considered compensable hours worked?

ANS. Article 84 of the Labor Code provides:

H ours w o rke d . - Hours worked shall include (a)

all time during which an employee is required to be on
duty or to be at the employer’s premises, or to be at a
prescribed workplace, and (b) all time during which an
employee is suffered or permitted to work.
Rest period of short duration during working hours
shall be counted as hours worked.
* * *

State the general principles to be considered in deter­

m ining whether the time spent by an employee is to be
considered compensable hours of work.

ANS. The following general principle shall govern

in determining whether the time spent by an employee
is considered hours worked:

(a) All hours are hours worked which the employee

is required to give his employer, regardless of whether
or not such hours are spent in productive labor or
involve physical or mental exertion;

17?
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

(b) An employee need not leave the premises of

the workplace in order that his rest period shall not be
counted, it being enough that he stops working, may
rest completely and may leave his workplace;
(c) If the work performed was necessary, or it
benefited the employer, or the employee could not
abandon his work at the end of his normal working
hours because he had no replacement, all time spent
for such work shall be considered as hours worked, if
the work was with the knowledge of his employer or
immediate supervisor;
(d) The time during which an employee is inactive
by reason of interruptions in his work beyond his
control shall be considered working time either if the
imminence of the resumption of work requires the
employee’s presence at the place of work or if the
interval is too brief to be utilized effectively and
gainfully in the employee’s own interest (Section 4,
Rule J, Book III, Implementing Rules and Regulations).

* ft iV

Is waiting time spent by an employee considered as

working time? Explain.

ANS. Section 5, Rule I, Book III of the Implement­

ing Rules and Regulations provides:

W a itin g tim e. - (a) W aiting time spent by an

employee shall be considered as working tim e if
waiting time is an integral part of his work or the
employee is required or engaged by the employer to
wait.
(b) An employee who is required to remain on call
in the employer’s premises or so close thereto that he
cannot use the tim e effectively and gainfully for his
own purposes shall be considered as working while on
call.
An employee who is not required to leave word at
his home or with company officials where he may be
reached is not working on call.

173
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

Sergio, a company driver, is assigned to drive fo r the

general manager. His work schedule is as follow s: 8:30
a. m., he must be at the residence o f the general
manager so he can bring the latter to the office; 9:00 a.
m., he arrives with the general manager at the company
premises where he stays up to 12:00 noon doing noth­
ing and sometimes sleeping inside the car; 12:00 noon
to 1:00 p. m., lunch break; 1:00 p. m., to 5:00 p. m. he
brings the general manager to conferences; 5:00 p. m.,
he goes home. The company however refuses to pay
him fo r the period from 9:00 a. m. to 12:00 noon,
contending that he does not do anything productive
during such time. Is the contention o f the company
tenable? Explain your answer.

ANS. The contention of the company is not

tenable. Although Sergio does not perform any driving
from 9:00 a. m. to 12:00 noon, he is not free to make
use of. his tim e effectively and gainfully for his own
purposes. He must remain in the premises as at
anytime he may be called to drive for the general
manager.
* * *

Miss A, employed as an accountant in a manufacturing

firm , has the follow ing work schedule: 8:00 a. m. to
12:00 noon, then 1:00 p. m. to 5:00 p. m. At times,
where there are no company papers to work on w ithin
her work schedule she devotes her time working on
papers o f other firm s fo r which she receives remunera­
tion from the latter. Is her employer obliged to pay her
salary corresponding to the period she spends working
on the papers o f other companies? Why?

ANS. Yes. Although she is working on the papers

pf other companies, she has no absolute control over
her time. Her employer may at any time require her to
do some work. She cannot furthermore leave the
place of work during her work schedule.

174
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

To enhance efficiency and productivity, a company

conducts seminars on weekends at the Batulao Country
Club and considers as one of the factors fo r promotion
attendance thereat. Eager fo r promotion, Roberto, a
clerk-typist in the company, attends the seminars. How­
ever, as he was not given any promotion, he claims fo r
salary corresponding to his period o f attendance at the
seminars. Decide.

ANS. Roberto is not entitled to compensation. His

attendance at the seminars is outside his regular
working hours; it is purely voluntary on his part, and he
does not perform any productive work during such
attendance (Section 6, Rule I, Book III, Implementing
Rules and Regulations).

* * *

What is overtime work and how is it compensated?

ANS. Overtime work is work rendered by the

employee beyond the normal hours as fixed by law or
by employer voluntary practice or policy. An em­
ployee who renders overtime work on regular days is
entitled for such work to an additional compensation
equivalent to his regular wage plus at least twenty-five
per cent (25%) thereof. Overtime work on a holiday or
rest day shall be paid an additional compensation
equivalent to the rate for the employee’s normal work
hours on a holiday or rest day plus thirty percent (30%)
thereof (Article 87, Labor Cod#). .
* * *

Distinguish overtime pay from premium pay.

ANS. Overtime pay is additional compensation for

work done beyond the normal work hours on ordinary
working days. Premium pay, on the other hand, is
additional compensation fo r work rendered by the

175
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

employee on days normally he should not be working,

such as special holidays and weekly rest days. But
additional compensation for work rendered by the
employee in excess of eight (8) hours on such days is
also considered overtime pay.

* * *

Give reasons fo r the requirement o f overtime pay.

ANS. Legal requirement for the payment of addi­

tional compensation for work beyond the normal work­
day discourages the employer from requiring such
work and thus protect the health and well-being of the
workers. The worker is not to be regarded as simply
another element of production; he needs rest, recre­
ation and spare time to attend to fam ily and religious
needs. An overworked worker cannot furthermore be
efficient. ■ .
Overtime laws also tend to remedy unemployment
by encouraging employers to employ other workers to
do what cannot be accomplished during the normal
hours of work.
* * *

May an employee be compelled to render overtime

work?

ANS. As a general rule, an employee cannot be

compelled to render overtime work. He is entitled to
rest or utilize his time for his own purposes. However,
under A rticle 89 of the Labor Code, he may be
required by the employer to perform overtime work in
any of the following cases:

(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;
(b) When it is necessary to prevent loss of life or
property or in case of imminent danger to the public

176
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

safety due to an actual or impending emergency in the

locality caused by serious accidents, fire, flood, ty­
phoon, earthquake, epidem ic or other disaster or
calamity;
(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 sim ilar nature;
(d) When the work is necessary to prevent loss or
damage to perishable goods; and
(e) Where the completion or continuation of the
work started before the eighth hour is necessary to
prevent serious obstruction or prejudice to the busi­
ness operations of the employer.

* * *

Are there employees who are not entitled to overtime

pay provided fo r under the Labor Code?

ANS. Yes. They are the following: (a) govern­

ment employees; (b) managerial employees; (c) non-
agricultural field personnel; (d) members of the fam ily
of the employer who are dependent upon him for
support; (e) domestic helpers and persons in the
personal service of another; and (f) workers who are
paid by results, such as those paid on piece rate or
task basis (Article 82, Labor Code).

* * *

Give the reasons fo r the exceptions.

ANS. (a) Government employees. - Under Article

276, the terms and conditions of their employment are
governed by the Civil Service Law, rules and regula­
tions.
(b) Managerial employees. - They are employed
by reason of their special training, expertise or knowl­
edge and for positions requiring the exercise of discre­

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tion and independent judgment. The value of their

work cannot be measured in terms of hours.
(c) Non-agricultural field personnel. - These
employees regularly perform their duties away from
the principal or branch office or place of business of
the employer; they are on their own in the field and the
number of hours of actual work they render cannot be
reasonably ascertained; it would therefore be grossly
unfair to require the employer to pay them benefits
such as overtime compensation.
(d) Members of the fam ily of the employer who are
dependent upon him for support. - The amounts given
by the employer by way of support may far exceed the
benefits to which the employees are entitled under the
laws on overtime.
(e) Domestic heipers and persons in the personal
service of another. - The terms and conditions of their
employment are governed by the provisions of Chapter
III, Titl6 IH of Book III of the Labor Code. They
m inister to the personal needs and comfort of the
employer and his family; they are not industrial em­
ployees.
(f) W orkers who are paid by results, such as those
paid on piece rate or task basis. - Their compensation
is computed on the basis of the work they accomplish
and not on the time they spend in accomplishing the
work.

* * *

What is the scope o f the term “ managerial employees” ?

Who are considered “ officers o r members o f the man­
agerial staff” ?

ANS. The term ‘ managerial em ployees' refers to

those whose primary duty consist 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 (Article
82, Labor Code).

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Managerial employees must meet all of the follow­

ing conditions, namely:

(a) Their primary duty consists of the management

of the establishment in which they are employed o f a
department or subdivision thereof;
(b) They customarily and regularly direct the work
of two or more employees therein;
(c) 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.
Officers or members of the managerial staff per­
form the following duties and responsibilities:
(a) The primary duty consists of the performance
of work directly related to management policies of
their employer;
(b) Customarily and regularly exercise discretion
and independent judgment;
(c) (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 a subdivision thereof; (ii) execute under
general supervision work along specialized or techni­
cal lines requiring special training, experience or
knowledge; (iii) execute under general supervision
special assignments and tasks; and
(d) 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 (a), (b) and (c)
above (Section 2, Rule I, Book III, Implementing Rules
and Regulations).

* * *

A company designates some o f its employees as office

manager, chief mechanic, and head salesman. Are
these managerial employees? Why?

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ANS. The function of a managerial employee

requires the use of discretion and independent judg­
ment as to whether an individual is a managerial
employee depends upon the nature of his functions;
the title or appellation given to his position does not
matter. Thus, it has been held that the mere designa­
tion of certain employees as chief mechanic, chief
welder, chief painter and chief carpenter does not
indicate more than the fact thabthey are number one
mechanic, welder, painter or carpenter among the
many of the same category, and does not make them
managerial employees where the exercise of indepen­
dent judgm ent is not present (National Merchandising
Corporation vs. CIR et al., G. R. No. L-13710,
March 30, 1963). Similarly, it has been ruled than an
accountant in a small outfit, consisting only of eleven
personnel including one president and general man­
ager and one executive vice president, sometime
performing clerical functions is not a managerial em­
ployee, although her position carried the high-
sounding title of office manager (Esser A. Sierra vs.
G & A Realty Corp., NLRC Case No. RB-14-20643-78,
January 14, 1980).

* * *

Mang Celso has worked in the painting department o f a

car assembly plant fo r twenty-five years. In age and in
length o f service he is the most senior among the
twenty painters in the department. By reason o f his age
and experience, the company designated him as
“ foreman", the younger employees in his department
often consult him on the best methods o f car painting.
As he often worked more than eight hours a day, he
now claims fo r his overtime pay. Is his claim justified?
Why?

ANS. His claim is justified. Although the Company

designated him a foreman, this does not make him a
managerial employee. Besides, seniority and length of
service are nor factors to be considered in determining

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whether an employee is managerial or not. Thje nature

of his functions, not his title or appellation, determines
whether or not he is a managerial employee.

* * *

Inspectors, forem an and supervisors o f the com pany

were given powers to recommend the hiring, firin g , o r
suspension o f subordinate employees. The ultim ate
power to hire, fire o r suspend however rested in the
plant personnel manager. Are the inspectors, foremen
and supervisors considered m anagerial em ployees?
Explain.

ANS. No. The test of “supervisory" or “managerial

status" depends on whether a person possesses au­
thority to act in the interest of his employer in the
matter specified in Article 212(k) of the Labor Code
and Section 1(m) of its Im plem enting Rules and
whether such authority is not merely routinary or
clerical in nature, but requires the use of independent
judgment. Thus, where such recommendatory powers
as in the case at bar, are subject to evaluation, review
and final action by the department heads and other
higher executives of the company, the same, although
present, are not effective and not an exercise of
independent judgment as required by law.
Furthermore, subject employees are not manage­
rial employees because they do not participate in
policy making but are given ready policies to execute
and standard practices to observe, thus having little
freedom of action (Franklin Baker Company of the
Philippines vs. Hon. Cresencio B. Trajano et al., G.
R. No. 75039, January 28, 1988):

★ * *

Supervisory employees o f the company are given, pur­

suant to a Job Evaluation Program, the follow ing duties
and functions: assist the departm ent superintendent in

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planning o f system s and procedures, organizing and

scheduling o f w ork a ctivitie s o f the departm ent,
decision-m aking by providing relevant inform ation data
and other inputs, giving fu ll support to attainm ent o f
com pany goals and objectives, selecting the appropri­
ate man to handle the jo b , preparing annual departm en­
ta l budget; observe, fo llo w and im plem ent com pany
policies at a ll tim es and recommends d isciplina ry ac­
tio n on erring subordinates o r prom otion o f deserving
personnel; tra in and guide subordinates on how to
assume responsibilities and become more productive
and evaluate th e ir perform ance; coordinate and com-
m unicate w ith other supervisors; recommend measures
to im prove w ork m ethod and equipm ent perform ance;
see to it th a t safety rules and regulations are im ple­
m ented; supervise the activities o f subordinates; and
perform other related tasks as may be assigned by his
im m ediate superior.
(a) Are the foregoing em ployees entitled to overtim e
com pensation? Why?

ANS. No. They discharge duties and responsibili­

ties which qualify them as officers or members of the
managerial staff as defined in Section 2, Rule 1, Book
III of the Rules to Implement the Labor Code.

(b) If, p rio r to the im plem entation o f Job Evaluation

Program, the supervisors were receiving overtim e and
other benefits paid to rank-and-file w orkers, should
such benefit^ continue to be paid to them even after the
said program ? Explain.

ANS. No. By Virtue of their promotion to the

managerial staff, they ceased to be entitled to the
benefits given to rank-and-file workers. If they wanted
to continue receiving the benefits which attached to
their form er positions, they should have refused to
accept their promotion. They should not, as a simple
m atter of law and fairness, get the best of both worlds
at the expense of the company.

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 HOURS OF WORK, REST PERIODS,
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Prom otion of em ployees is one o f the

jurisprudentially-recognized exclusive prerogatives of
management, provided it is done in good faith.

(c) is the rule on “ long practice” applicable? W hy?

ANS. No. The employees were paid benefits

because they were entitled thereto under the law. The
test or rationale of the rule on long practice requires
an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that the
employees are not covered by the law requiring pay­
ment thereof. Payments constitutive of voluntary
employer practice, which cannot be unilaterally w ith­
drawn, must be shown to have been practiced consis­
tently and deliberately over a long period of time.
(National Sugar Refineries Corp. vs. NLRC, et al., G.
R. No. 101761, March 24, 1993)
* * *

V illuga was em ployed as a cutte r in a ta ilo rin g shop.

When both the shop’s manager and assistant manager
were absent, he was assigned the chore o f d istrib u tin g
w ork to the shop’s ta ilo rs and sewers. He saw to it that
th e ir w ork conform ed w ith the pattern he had prepared
and if not, he had them redone, repaired o r resewn. He
was paid a fixed m onthly salary plus transportation
allowance.
(a) Is V illuga a managerial employee and therefore not
entitled to overtim e, holiday, and rest day benefits and
service incentive leave? Why?

ANS. Villuga is not a managerial employee. He

did not participate in policy-making. It is true that in
the absence of the manager and assistant manager, he
distributes and assigns work to employees but such
duty though involving discretion is occasional and not
regular or customary.

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(b) Since he received a fixed m onthly salary, is he

disqualified from the enjoym ent o f regular holiday ben­
efits?

ANS. No. The fact that he is uniformly paid by the

month does not exclude him from the benefits of
regular holiday pay (Villuga et al. vs. NLRC et al., 6 .
R. No. 75038, August 23, 1993).

* * *

The em ploym ent contract between Engineering Equip­

m ent Inc. and Aspera, a m echanical engineer, provided
th a t w hile in Saudi Arabia the latter shall w ork in a six
day work-week basis, w ith a w orking day consisting o f
ten (10) hours. Aspera however exercised control and
supervision over the rank-and-file em ployees o f the
com pany, w ith power to recommend d isciplina ry action
o r th e ir dism issal. Furtherm ore, his basic m onthly pay
was adjusted to reflect the higher am ount covering the
guaranteed tw o-hour extra tim e whether worked o r un­
worked. In addition to his salary, Aspera was given free
board and lodging w hich in Saudi Arabia and free
transportation in going to and returning from the coun­
try. Under the circum stances, and considering that the
em ploym ent contract was approved by the MOLE, is
Aspera entitled to overtim e com pensation fo r the w ork
rendered beyond eight (8) hours per day? Is the stipula­
tio n that Aspera shall w ork fo r ten (10) hours a day valid
and legal? Explain.

ANS. Aspera is not entitled to overtime compensa­

tion. He is a managerial employee; under Article 82 of
the Labor Code, managerial employees are among
those who are not entitled to overtime compensation.
Moreover, the employment contract was approved by
MOLE; the employer acted in good faith in enforcing
the same. W ithout such approval, it would not have
stipulated the ten-hour work schedule and would have
provided for a lower basic salary for an eight-hour

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 HOURS OF WORK, REST PERIODS,
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working day. The stipulation that Aspera shall work

ten (10) hours a day is, under the circumstances, valid
and binding (Engineering Equipment, Inc. vs. Minis­
ter of Labor et al., G. R. No. 64967, September 25,
1985).
it & *

What are “field personnel”? Give examples.

ANS. They 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 (Article 82, Labor
Code).
Salesmen, collectors or credit investigators on
provincial assignment, reporting to the office only on
weekends, are field personnel.

* * *

X is a field salesman with a fixed monthly pay plus a

commission of F0.15 per case of soft drinks sold by
him. After punching his card in the morning, he would
go on his sales route which is so planned that he can
cover it in about eight (8) hours. In his desire to earn
more, X puts in from nine to ten hours of work each day.
For the extra hours o? work rendered, X asks for over­
time pay. Is he entitled to overtime pay? Reason out
your answer. (1976 Bar)

ANS. X is not entitled to overtime pay. He fails

under the category of field personnel. He regularly
works outside and away from the'office of his em­
ployer. There is no way of knowing whether the extra
hours are spent for the benefit of the company; as a
matter of fact, according to the question, he puts in the
extra hours in his desire to earn more. At any rate,
any extra work rendered by him would be compensated
by his commissions.

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Rita Romero works as a cSerk-typist in the Good Shep­

herd Orphanage, a private charitable institution that
subsists on donations o r voluntary contributions. She
works fo r ten (10) hours a day. Is sho entitled to
overtime compensation? Why?

ANS. She is entitled to overtime compensation for

two hours daily. The fact that her employer is a
charitable and a non-profit institution is of no signifi­
cance. The provision of the Labor Code on overtime
covers both profit, and non-profit establishments or
undertakings.

* * *

Some sales personnel o f Nestle Philippines, Inc. start

their field work at 8:00 a. m. after reporting to the office,
and come back to the office at 4:00 p. m. o f the same
day.
(a) Are the sales personnel considered as field person­
nel under Article 82 o f the Labor Code? Why?

ANS. Yes. Their actual hours of work in the field

cannot be determined with reasonable certainty. The
period between 8:00 a. m. and 4:00 p. m. comprises
their hours of work in the field, the extent or scope and
result of which are subject to their individual capacity
and industry. In deciding whether or not an em­
ployee’s actual working hours in the field can be
determined with reasonable certainty, query must be
made as to whether or not such employee’s time and
performance is constantly supervised by the employer.

(b) Are the sales personnel entitled to regular holiday

pay? Why?

ANS. No. Field personnel are not entitled to

regular holiday pay. (Union of Filipro Employees vs.
V iv a rJ r. et al., G. R. No. 79255, January 20, 1992)

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Agao worked as a “ bodegero” o r ship’s quarter master

in the vessel o f a fishing corporation. Since he per­
formed his work away from the principal place o f busi­
ness o f the corporation, is Agao considered “ field per­
sonnel” not entitled to service incentive leave? Why?

ANS. No. Throughout the fishing voyage, h«

remained under the effective control and supervision
of the vessel’s patron or master of the vessel. The
company therefore could determine with reasonable
certainty the actual hours of work of Agao in the
vessel. (Mercidar Fishing Corporation vs. NLRC et
aL, G. R. No. 112574, October 8, 1998)
* * *

Jose works as a ja n ito r in a private school. His hours of

work are form 8:00 a. m. to 12:00 noon and then from
1:00 p. m. to 5:00 p. m. But sometimes he continues
sweeping floors and cleaning the com fort rooms after
5:00 p. m. The principal is aware o f this, but he does
not do anything to stop Jose from doing work after 5:00
p. m. If Jose claims fo r overtime compensation fo r
such work, w ill his action prosper? Why?

ANS. Although Jose was not instructed expressly

to render overtime work, he was im pliedly allowed to
do so by the failure of the employer to warn him
against rendering such work. Besides, the work ren­
dered by Jose benefited the school. His claim for
overtime compensation will therefore prosper.

* * *

Thirty (30) minutes prior to the start o f the scheduled

working hours, the workers o f an agricultural enterprise
assemble at a designated area to answer the roll call
and get their individual work assignment from the fore­
man, accomplish their work report, go to the stockroom
to get their tools, and then travel to the field. As their

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houses are situated right on the area where the farms

are located, the workers can go back to their houses
after the roll call to do some chores,
is the “ assembly time” considered working time? Why?

ANS. No. The workers are not subject to the

absolute control of the company during this period,
and there showing that their failure to report during the
assembly time would justify the company to impose
disciplinary measures. The period was not primarily
for the interest of the employer but ultimately for the
employees to indicate their availability or non­
availability for work during every working day (Arica et
al. vs. NLRC et al., G. R. No. 78210, February 28,
1989).

* * *

Proculo works as a security guard fo r a bank. His work

schedule is from 8:00 a. m. to 4:00 p. m. w ithout any
break, since his work is sim ply going around o r stand­
ing in the premises. But he is told to be in the premises
fifteen (15) minutes before 8:00 a. m. so he can conduct
an inspection o f the premises together with the guard
whom he relieves. Frequently, the guard to relieve him
does not arrive on time and he has to stay in the
premises after 4:00 p. rn. to waif fo r the form er as the
premises would otherwise be left unguarded. Can
Proculo recover overtime pay from the bank? Explain.

ANS. Yes. Proculo works for more than eight (8)

hours a day. His work actually starts at 7:45 a. m. or
fifteen (15) minutes to 8:00 a. m. And the time that
he spends waiting for his reliever is also deemed hours
worked since he cannot leave the bank premises until
the latter arrives. If he abandons the premises before
his replacement arrives, a robbery might take place.

* * *

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X is employed as a mechanic by the Golden Taxi Cab

Co. working from 8:00 a. m. to 12:00 noon and .from
1:00 p. m. to 5:00 p. m. During lunchtime he is
required to stand by fo r emergency call. On many
occasions he is called fo r some emergency work even
while taking his meals. Because he is working up to
8:00 p. m., he files a claim fo r overtime pay. In
computing his overtime he includes the one-hour al­
lowed fo r lunchtime as part o f his working time. Is X
correct? Reason out your answer. (1976 Bar)

ANS. Yes. Even during lunchtime, X is not free to

make use of his time for his exclusive benefit or
purpose. He is required to stand by for emergency
calls. It is considered working time.
* * *

Due to increased demands fo r its meat products and to

prevent deterioration o f meat under process, a food
manufacturing company issues a memorandum requir­
ing employees in the processing department to render
overtime work tw o (2) hours each day. An employee
refuses to com ply with the said memorandum. May the
company subject him to disciplinary action? Explain.

ANS. The general rule is that an employee cannot

be compelled to render overtime work. However,
under Article 89 of the Labor Code, an employee may
be required in certain instances to render overtime
work.
Among these is when the work is necessary to
prevent loss or damage to perishable goods. In the
instant case, the overtime work is necessary to pre­
vent damage to meat under process. The employee’s
refusal to obey the memorandum constitutes insubor­
dination for which he may be subjected to disciplinary
action.

* * *

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 HOURS OF WORK, REST PERIODS,
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May under time incurred by an employee on any partic-

ular day be offset by overtime work on any other day?
Why?

ANS. Article 88 of the Labor Code provides:

U n d e r tim e n o t o ffs e t b y o v e rtim e . - Undertime

work on any particular day shall not be offset by
overtim e work on any other day. Permission given to
the employee to go on leave on some other day of the
week shall not exempt the employer from paying
additional compensation required in this Chapter.

To aliow undertime work on a particular day to be

offset by overtim e work on any other day would
prejudice the employee. He would be deprived of the
additional pay for the overtime work he has rendered
and which is utilized to offset the undertime he may
have incurred.
* * *

A’s work schedule is as follow s: 8:00 a. m. to 12:00

noon and then 1:00 p. m. to 5:00 p. m. One day, he
was late; he worked from 9:00 a. m. to 12:00 noon; took
his lunch break; then again worked from 1:00 p. m. to
6:00 p. m. He agrees that his undertime should be
deducted but claims that he must be paid overtime
compensation fo r the work he rendered from 5:00 p. m.
to 6:00 p. m. Is this claim meritorious? Reason out
your answer.

ANS. A ’s claim is not meritorious. The prohibition

to offset overtime against undertime applies to under­
tim e incurred and overtime work rendered on different
days. An employee cannot have undertime and over­
tim e on the same day. In the case of A, although on
that day he worked up to 6:00 p. m., his work did not
exceed eight (8) hours.

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 HOURS OF WORK, REST PERIODS,
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In computing the overtime compensation o f its waiters,

a restaurant used as basis the amount o f their wages
after deducting the fa ir and reasonable valuation of
board and lodging furnished them. Is this method
legal? Why?

ANS, Article 90 of the Labor Code provides that

fo r purposes of computing overtim e, the “regular
wage" of an employee includes the cash wage only,
without deduction on account of facilities provided by
the employer. The basis of the computation made by
the restaurant is incorrect and very disadvantageous
to the waiters. The deduction on account of facilities
reduces the cash wage.

* * *

Tomas, a machine operator in a plastic manufacturing

plant, has the follow ing work schedule: 7:00 a. m. to
12:00 noon, 1:00 p. m. to 4:00 p. m. From 3:00 p. m.
to 4:00 one day, there was a b ro w n o u t Since the
machine could not be operated during the brownout,
the management told Tomas to work from 4:00 p. m. to
5:00 p. m.
(a) Assuming that Tomas works from 4:00 p. m. to 5:00
p. m. as required by the employer, is he entitled to
overtime compensation fo r such work? Why?

ANS. Yes. This hour is already the ninth (9th)

hour. The brownout period from 3:00 p. m. to 4:00 p.
m. is deemed working time. In the first place, the
interruption was not due to the fault of Tomas. Be­
sides, a one hour interval is too brief to be utilized
effectively and gainfully for his own interest.

(b) May Tomas legaHy refuse to work from 4:00 p. m.

to 5:00 p. m.? Why?

ANS. No. Tomas cannot legally refuse to work

from 4:00 p. m. to 5:00 p. m. The employer is

4 CM
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

authorized under Memorandum Circular No. 1 issued

on September 12, 1973 by the Minister of Labor and
Employment to extend the working hours, in case of
power interruptions or brownouts, to compensate for
the loss of productive manhours due to such interrup­
tions.

* * *

A manufacturing company requires Its employees to

work 8 hours a day from Monday to Saturday, or a total
of 48 hours a week. To save on energy cost for the
employer, and transportafion/mea! expenses for the
employees, the management and the union agreed that
instead of the employee working for 8 hours on Satur­
days, they would work for 9.5 hours from Monday to
Friday or a total of 47.5 hours per week, without over­
time pay.
If some of the workers claim overtime pay for work
rendered beyond 8 hours a day, would the claim be
valid? Why? (1984 Bar)

ANS. Yes, the claim for overtime pay for work

rendered beyond 8 hours will prosper. Article 83 of the
Labor Code, in relation to Article 87 of the same law,
provides that work may be performed beyond 8 hours
a day provided that the employee is paid an additional
compensation equivalent to his regular wage plus 25%
thereof. The agreement between the union and the
company whereby no overtime pay will be paid is
contrary to law and public policy and therefore null and
void.

* * tf

Rada was employed as a driver fo r fixed periods by

Philnor, a company engaged in providing supervision
in the construction of the Manila Worth Expressway
Extension in Pampanga. Office hours observed in the
project were from 7:00 a. m. to 4:00 p. m. The

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 HOURS OF WORK, REST PERIODS,
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company however had the policy o f allow ing employees

to bring home project vehicles to afford free and fast
transportation to and from the project fie ld office. Rada
him self was allowed to use one o f the vehicles w hich he
used to pick up and drop o ff some ten em ployees along
EDSA on his way home to M arikina. When he was
absent o r on leave, another employee livin g in Metro
Manila used the same vehicle in transporting the same
employees. The tim e used by Rada to and from his
residence to the project site was from 5:30 a. m. to 7:00
a. m. and from 4:00 p. m. to 6:00 p. m., o r three (3)
hours daily. Should these three (3) hours be consid­
ered as overtim e? Why?

ANS. Yes. The transportation arrangement was

adopted prim arily for the benefit of the employer, to
avoid delays resulting from em ployees’ tardiness.
Driving employees to and from the project site was
part of Rada’s work. This is shown by the fact that
when he was absent or on leave, another employee
was assigned to do the job. (Rada vs. NLRC et al., G.
R. No. 96078, January 9, 1992)

* * *

What is the “ compressed workweek” ?

ANS. Under Department Order No. 21, Series of

1990, the Department of Labor and Employment rec­
ommended the adoption by enterprises on a voluntary
basis of the compressed workweek. Under this
scheme, the generally observed workweek of six (6)
days shortened to five (5) days but prolonging the
working hours from Monday to Friday without the
employer being obliged to pay overtime compensation
for work performed in excess of eight (8) hours on
weekdays, in exchange for benefits like savings on
transportation and meal expenses, longer weekends,
more time to be devoted to personal and fam ily
matters, and reduction of commuting inconveniences.

1<W
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

The following concurring conditions should how­

ever be met:
1) The employers voluntarily agree to work more
than eight (8) hours a day the total in a week of which
shall not exceed their normal weekly hours of work
prior to adoption of the compressed workweek ar­
rangement;
2) There will not be any diminution whatsoever in
the weekly or monthly take-home pay and fringe
benefits of the employees;
3) If an employee is permitted or required to work
in excess of his normal weekly hours of work prior to
the adoption of the compressed workweek scheme, all
such work shall be compensated in accordance with
the provisions of the Labor Code or applicable Collec­
tive Bargaining Agreement (CBA).
4) Appropriate waivers with respect to overtime
premium pay for work performed in excess of eight (8)
hours a day may be devised by the parties to the
agreement.
5) The effectivity and implementation of the new
working time arrangement shall be by agreement of
the parties.
Employers adopting the compressed workweek
scheme shall submit a report to the Department of
Labor and Employment or to its nearest Regional
Office not later than ten (10) days from the adoption of
the scheme.

* * *

Give the duty o f the employer in connection w ith the

meal periods o f his employees.

ANS. Under Article 85 of the Labor Code, it is the

duty of every employer to give his employees regard­
less of sex, not less than sixty (60) minutes time o ff for
their regular meals. These meal periods are not
however compensable hours of work. The regular
meals are breakfast, lunch and supper. Coffee breaks
or rest periods running from five (5) to twenty (20)
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

minutes are not included; they are considered as

compensable working time.
it "ft it

May the employer shorten the mea! period to less than

one (1) hour? Explain.

ANS. Yes. The employer may shorten the meal

period to not less than twenty (20) minutes, such
period being credited as compensable hours, in the
following cases:
(a) Where the work is non-manual in nature or
does not involve strenuous physical exertion;
(b) Where the establishment regularly operates
not less than sixteen hours a day;
(c) in cases 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. (Section 7, Rule I,
Book III, Implementing Rules and Regulations).
* * *

Rosita works as a saleslady in a big department store.

Her schedule is as follows: 10:00 a. m. to 1:00 p. m.,
1:00 p. m. to 1:30 p. m. meal break; then 1:30 p. m. to
6:30 p. m. Is her meal break from 1:00 p. m. to 1:30 p.
m. considered working time? Why?

ANS. Yes. While the employer may fix the meal

period to less than one (1) hour considering that
Rosita's work does not involve strenuous physical
exertion, such shortened period is to be credited as
compensable working time. This is only just since the
shortening of the period to less than one (1) hour is for
the benefit of the department store.

19S
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

May the employe® leave the company premises during

the meal period?

ANS. Yes. Nowhere in ihe law may it be inferred

that employees must take their meals within the com­
pany premises. Employees are not prohibited from
getting out of the premises as long as they return to
their posts on time. A company physician’s act of
leaving the premises to have his meal in his home
which was only a few minutes drive away from the
clinic has therefore been ruled as not constituting
abandonment. (Philippine Airlines, Inc. vs. NLRC
al., G. R. No. 132805, February 2, 1999)
* * *

Who are entitled to night shift differential? Also give the

exceptions', if any.

ANS. A night shift differential of not less than ten

percent (10%) of regular wage must be paid to any
employee fo r work between 10:00 o’clock in the
evening and 6:00 o’clock in the morning the following
day (Article 86, Labor Code).
The following employees are not however entitled
to this benefit:

(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 III of
this Code;
(e) Field personnel and other employees whose
time and performance are unsupervised by the em­
ployer, including those who are engaged on task or
contract basis, purely commission basis, or those who
are paid a fixed amount fo r performance thereof

1%
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

(Section 1, Rule II, Book 111, Implementing Rules and

Regulations).
* * VSf

X works as a helper in gasoline station which is open 24

hours a day. The establishment has only five (5) em­
ployees. If X is assigned to the work shift which starts
from 10:00 o’clock in the evening and ends at 7:00
o’clock in the m orning of the follow ing day, w ill he be
entitled to any night shift differential? Why?

ANS. X is not entitled to night shift differential.

He works in a retail establishment employing not more
than five (5) workers.

tSr * *

What is a retail or service establishment? Give exam­

ples.

ANS. A retail establishment is one open to the

general consuming public for the sale of goods that are
commonly bought by end-users for personal or house­
hold use. A grocery or restaurant can be classified as
a retail establishment. But a dealer of diesel parts
cannot be considered as such.
A service establishment is one engaged predomi­
nantly in the sale of services to individuals for their
own or household use. A television and radio repair
shop can be categorized as a service establishment.
But a travel agency does not fall under this classifica­
tion.
The exercise of a profession is neither service ncr
retail.

* it &

King’s Minimarts, Inc. operates ten (10) outlets that are

open twenty-four hours a day. Each outlet is manned

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

by four (4) employees. Are the employees who are

assigned to the nigh® shift (10:00 p. m. to 6:00 a. m.)
entitled to night shift differential? Why?

ANS. Yes. Although each outlet is manned by not

more than five (5) employees, the total number of
employees of King’s Minimarts, Inc., assigned to all
the outlets, exceeds five (5). It is at least forty (40).
The exemption from the payment of the night shift
differential is intended to benefit only the small outfits,
with the total number of employees not exceeding five
(5).
* *

State the duty of the employer to provide fo r rest days.

ANS. Article 91 of the Labor Code provides:

R ig h t to w e e kly re s t day. - (a) It shall be the

duty of every employer, whether operating for profit or
not, to provide each of his emoio^ses a res! period of
not less than twenty-four (24) hours aster every six (8)
consecutive normal working days.
(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 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.

* * -it

May an employee be required to work on his rest day?

State the rule and the exceptions, if any.

ANS. As a general rule, an employee cannot be

compelled to work on his scheduled rest day as this
would defeat the very purpose of the benefit. But the

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

employer is authorized to require work even on rest

days in any of the following cases:
(a) In case of actual or impending emergencies
caused by serious accident, fire, flood, typhoon, earth­
quake, 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 seri­
ous 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 serious loss to perishable goods;
(e) Where the nature of work is such that the
employees have 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 sim ilar
cases; and *
(f) When the work is necessary to avail of favor­
able weather or environmental conditions where per­
formance or quality of work is dependent thereon
(Article 92, Labor Code; Section 6, Rule III, Book III,
Implementing Rules and Regulations).

* * *

If an employee works on his rest day, is he entitled to

additional com pensation? How much?

ANS. Where an employee is made or permitted to

work on his scheduled rest day, he shall be paid an
additional compensation o f at least thirty percent
(30%) of his regular wage. An employee shall be
entitled to such additional compensation for work
performed on Sunday only when it is his established
rest day. Where the employee works on his scheduled
rest day which is also a special non-working holiday,
he shall be entitled to an additional compensation of at
least fifty percent (50%) of his regular wage (Article
93, Labor Code). If the scheduled rest day when he

199
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

works is a regular holiday, he is entitled to an addi­

tional premium pay of at least thirty percent (30%) of
his regular holiday rate of 200% based on his regular
wage rate (Section 4, Rule IV, Book III, Implementing
Rules and Regulations).
* * *

A manufacturing Firm with 500 employees as the latter’*

rest day. Fifty (50) workers who are seventh-day adven­
tists and two hundred (200) workers who belong to the
Iglesia ni Kristo object and propose that their rest days
be scheduled on Saturdays and Thursdays, respec­
tively. The company claims that the proposed schedule
w ill seriously prejudice o r obstruct its manufacturing
operatiqns and refuses to re-schedule the rest day as
requested.
(a) Do the seventh-day adventists and members o f the
Iglesia ni Kristo have any right to choose their own rest
days?

ANS. The employer, under the law, is required to

respect the preference of the employee if the same is
based on religious grounds (Section 4, Rule III, Book
I, Implementing Rules and Regulations).

(b) Assuming that the claim o f the employer is well-

founded, can it legally refuse to re-schedule the rest day
of the employees involved?

ANS. If the employer cannot resort to other

remedial measure, it may schedule the rest days of the
employees involved on the days of their choice fo r at
least two (2) days in a month. The other rest days
within the month w ill have to be taken on Sundays
(Section 4, Rule 111, Book III, Implementing Rules and
Regulations).

ft ft ft

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

Vicente Puti works on board the IAN Starfish, a fishing

boat, as fish catcher. Sometimes, the boat remains at
sea fo r tw o weeks then returns to port to unload the
catch. While the vessel is in port, Vicente Puti disem­
barks, stays: home with his family fo r a few days, then
reports back fo r duty. There are also occasions when
due to bad weather the vessel returns to port after only
a few days at sea, Vicente Puti wants to know whether
he can claim fo r additional compensation fo r w ork on a
rest day. What is your opinion? Explain.

ANS. Vicente Puti’s work is of such nature that no

regular work days and no rest days can be scheduled.
In such cases, the law provides that if he performs
work on Sundays and holidays, he shall be paid an
additional compensation of at least thirty percent
(30%) of his regular wage (Article 93(b), Labor Code;
Section 7(b), Rule III, Book III, Implementing Rules
and Regulations).

* * *

Enumerate the regular holidays.

ANS. Pursuant to Letter o f Instructions No. 814 as

amended by Letter of Instructions No. 1087, and
Executive Order 203 and Rep. Act No. 9177, there
are eleven (11) regular holidays, exclusive of the days
for elections, plebiscites and referendums. These are
(1) New Year’s Day - January 1st; (2) Maundy Thurs­
day - Date not fixed; (3) Good Friday - Date not fixed;
(4) Bataan Day - April 9; (5) Labor Day - May 1st; (6)
Independence Day - June 12th; (7) National Heroes
Day - Last Sunday of August; (8) Bonifacio Day -
November 30; (9) Christmas Day - December 25; (10)
Rizal Day - December 30; and (11) Eidul Fitr - Date
not fixed
* * *

OM
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

State the rule on Muslim holidays.

ANS. Muslim holidays are provided under Presi­

dential Decree No. 1083, otherwise known as the
Code of Muslim Personal Laws. This should be read
in conjunction with Article 94 of the Labor Code on
workers’ right to holiday pay. Muslim holidays shall be
officially observed in the provinces of Basilan, Lanao
del Norte, Lanao del Sur, Maguindanao, North Cota-
bato, lligan, Marawi, Pagadian, Zamboanga and such
other Muslim provinces and cities as may hereafter be
created. Holiday pay must be given, in accordance
with Article 94 of the Labor Code, for the five (5)
official Muslim holidays to ail workers, whether Muslim
or not, in designated Muslim areas. (San Miguel
Corporation vs. Court of Appeals et al., G. R. No.
146775, January 30, 2002)
* <r *

Are November 1 (Ail Saints’ Day) and December 31 (last

day of the year) holidays?

ANS. Yes. They are nationwide special holidays.

(Sec. 26, Chapter 7, Book I, Adm. Code of 1987)
* * \V

If an employee does not work on a regular holiday, is he

entitled to any pay?

ANS. Yes. Article 94 of the Labor Code provides

that a worker shall be paid his regular daily wage
during regular holidays. The following are not however
entitled to holiday pay:

(a) Those of the government and any of its

political subdivisions, including government owned
and controlled corporations;
(b) Those of retail and service establishments
regularly employing less than ten (10) workers;

"M'S
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

(c) Domestic helpers and persons in the personal

service of another;
(d) Managerial employees as defined in Book III of
the Labor 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.

* * *

X, a machine operator in a tire company receiving a

daily rate o f P300.00 is required by his employer to work
on May 1. How much w ill he get fo r eight hours work on
such day?

ANS. X will get P600.00. The employer may

require an employee to work on a regular holiday, but
such employee shall be paid a compensation equiva­
lent to twice his regular rate (Article 94, Labor Code).
* * *

Luisa works as a salesgirl in the Reliance Grocery, an

establishment w ith a work force o f seven (7). She is
required to report fo r work on Christmas Day. Is she
entitled to holiday pay? Why?

ANS. Luisa works in a retail establishment regu­

larly employing less than ten (10) employees. Her
employer is exempted by law from paying its employ­
ees holiday pay. She will only get her regular pay, not
twice such amount.

# * *

X, whose daily rate is P300.00 and whose rest day falls

on a Sunday, is told by his employer to work on a
National Heroes Day, which is also a Sunday.

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 HOURS OF WORK, REST PERIODS,
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(a) Assuming that X is entitled to holiday pay and he

works on National Heroes Day for eight (8) hours, what
will be his total compensation for such work?

ANS. X will get 200% of Siis daily rate of P300.00,

or P600.00, plus 30% thereof, or a total of P780.00.
This is following the rule that if the holiday work falls
on the scheduled rest day of the employee, he shall be
entitled, for work not exceeding eight (8) hours, to an
additional premium pay of at least 30% of his regular
holiday rate of 200% based on his regular wage rate
(Section 4, Rule IV, Book HI, Implementing Rules and;
Regulations).

(b) If X works fo r over eight (8) hours on National

Heroes Day, how much w ill he get fo r such work?

ANS. X will get, for each hour in excess of eight

(8) hours, P75.00 which is his hourly rate for the first
eight hours plus thirty percent (30%) thereof or a total
of P97.50. The rules provide that for work performed
in excess of eight (8) hours on a regular holiday rest
day, the employee shall be paid an additional compen­
sation for the overtime work equivalent to his regular
holiday rest day rate for the first eight (8) hours plus
30% thereof (Section 5, Rule IV, Book III, Implement­
ing Rules and Regulations).

* *.V

This year, National Heroes Day (August 25) falls on a

Sunday. Sunday is the rest day of Bonifacio whose
daily rate is P50G.00.
(a) If Bonifacio is required by his employer to work on
that day fo r eight (8) hours, how much should he be
paid fo r his work? Explain. (2002 Bar)

ANS. Bonifacio shouid get P1,300.00 for eight (8)

hours of work on Sunday, August 25 (National Heroes
Day), which also happens to be his rest day. The work
is on a regular holiday; Bonifacio gets twice his regular

204
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

daily rate or P1,000.00. Bui since the work occurs on

his rest day, he is further entitled to 30% of P1,000.00,
or a total of P1.300.00. (Arts. 91 and 94, Labor Code)

(b) If he works for ten (10) hours on that day, how much
should be receive for his wotrOT Explain,

ANS. He should get PI ,722.50 for ten (10) hours.

He rendered two (2) hours overtime work, for which he
should be paid the amount of P162.50 per hour plus
30% overtime pay (48.75), or a total of P422.50. (Art.
87, Labor Code)

* * *

Ramon works as a spinner in a textile firm. During Holy

Week, he reported fo r work only on Monday and Tues­
day; on Wednesday he went home to the province with
his family w ithout even notifying his employer.
(a) Is he entitled to holiday pay on Maundy Thursday
and Good Friday? Why?

ANS. 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 (Section 10, Rule IV, Book III,
Implementing Rules and Regulations).
Ramon is not therefore entitled to the holiday pay
for either Maundy Thursday or Good Friday. He was
absent without permission on Wednesday, the day
immediately preceding the first' holiday, Maundy
Thursday.

(b) Would your answer be the same if Ramon was

absent with pay on Wednesday or did not report fo r
work because it was his rest day?

205
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

ANS. My answer would not be the same; Ramon

would be entitled to holiday pay. Employees who are
on leave of absence with pay are entitled to holiday
pay. And where the day immediately preceding the
holiday is the scheduled rest day of the employee, he
shall 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
rest day (Section 6, Rule IV, Book III, Implementing
Rules and Regulations).

* * ft

A textile firm stops operation yearly, from December 15

to 31, fo r the purpose o f cleaning its machineries and
equipment. Are its employees entitled to holiday pay
fo r December 25 and 30?

ANS. Yes. In case 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 as provided by law
(Section 7, Rule IV, Book III, Implementing Rules and
Regulations).

* * *

In February 1976 the M inister of Labor issued an imple­

menting rule and policy instruction (Section 2, Rule IV,
Book II; Policy Instruction No. 9) to the effect that
employees who are uniform ly paid by the month, irre­
spective o f the working days therein, w ith a salary of
not less than the statutory or established minimum
wages, shall be presumed to be paid fo r all days in the
month, whether worked o r not. In March, 1976 the
Oceanic Pharmacal, Inc. sent a letter to the union o f its
employees confirm ing among others its undertaking to
continue giving holiday pay to monthly-salaried em­
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

ployees. But in October, 1976 the company gave notice

o f the discontinuance of the holiday pay in view of the
aforesaid implementing rule and policy instruction. The
union objected. Decide with reasons.

ANS. The company must continue giving holiday

pay to monthly salaried employees. It made the
commitment to continue giving the benefit notwith­
standing its knowledge that it was not legally obliged
to do so. What it has voluntarily given cannot be
unilaterally withdrawn. Besides, the implementing
rules are explicit to the effect that nothing therein shall
justify an employer in withdrawing or reducing bene­
fits, supplements or payments for unworked holidays
provided in existing individual or collective agreement
or employer practice or policy (Oceanic Pharmacal
Employees Union vs. Hon. A. Inciong et al., G. R.
No. L-50568, November 7, 1979).

* ☆ ft

In 1975 the Citibank Phils. Employees Union filed a

claim against Citibank fo r the regular holiday pay of
paid on the m onthly basis. The controversy was re­
ferred to a voluntary arbitrator who, in December o f the
same year (1975), rendered an award holding that the
monthly salary o f said employees did not include their
pay fo r unworked holidays and that the latter were
therefore entitled to the payment of the same. The
Citibank partially implemented the award. However,
after the promulgation of the Implementing Rules and
Regulations o f the Labor Code and Policy instruction
No. 9 in 1976 which established the rule that m onthly-
salaried employees with pay not less than the minimum
wage rate are presumed to be paid fo r al! days in the
month whether worked o r not, the employer stopped
the payments. Is the act of the bank legal? Explain.

ANS. No. The award of the voluntary arbitrator is

binding and conclusive upon the parties and cannot be
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

altered, modified, and much less abrogated, by a

subsequent issuance by the Minister of Labor. To hole
otherwise would violate the proscription of the Consti­
tution against impairment of the obligation of con­
tracts. And for an employer to agree either sponta­
neously or through arbitration to pay its workers’
compensation higher than that provided by law cannot
obviously be against public policy but, on the contrary,
is a magnificent contribution to the attainment of the
social justice objectives envisioned in the Constitution
(Citibank Phils. Employees Union vs. Minister of
Labor et al., G. R. No. L-50184, April 11, 1980).

* * *

In 1975, Chartered Bank Employees Association, in

representation of its members who are m onthly paid,
filed a complaint against the Chartered Bank fo r the
payment, among others, of ten (10) unworked legal
holidays. The Minister of Labor, upon appeal from the
NLRC, ruled that the claim lacked merit in view of Policy
Instruction No. 9 and Section 2, Rule IV, Book I!!, of the
Implementing Rules and Regulations which provides
that:

“ Section 2. Status of employees paid by the month -

Employees who are uniform ly paid by the month, irre­
spective of the number of working days therein, with a
salary of not less than the statutory or established
minimum wage, shall be presumed to be paid fo r ail
days in the month whether worked or not.”
(a) Is the ruling of the Minister of Labor correct?

ANS. No. The abovementioned implementing rule

and policy instruction are contrary to the provisions of
the Labor Code; the latter are clear and explicit as to
who are entitled to or excluded from the benefit.
Policy Instruction No. 9 categorically states that the
benefit is principally intended for daily paid employees
when the law clearly states that every worker shall be

208
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

paid their regular holiday pay. This is a flagrant

violation of the mandatory directive of Article 4 of the
Labor Code that all doubts in the implementatfon and
interpretation of the provisions of the Code, including
its implementing rules and regulations, shall be re­
solved in favor of labor. Obviously, the M inister of
Labor has exceeded his statutory authority granted by
Article 5 of the Labor Code to promulgate the neces­
sary implementing rules and regulations.

(b) Is the fact that an employee is already highly paid a

ground to exclude him from entitlement to holiday pay?

ANS. No. When the law provides benefits for

employees in all establishments and undertakings,
whether for profit or not and lists specifically the
employees not entitled to those benefits, the adminis­
trative agency implementing the law cannot exclude
certain employees from its coverage simply because
they are paid by the month or because they are highly
paid. The remedy lies in a clear redrafting of the
collective bargaining agreement with a statement that
their monthly pay already includes holiday pay or an
amendment of the law to that effect but not an admin­
istrative rule or a policy instruction (The Chartered
Bank Employees Association vs. Ople et al., G. R.
No. L-44717, August 28, 1985).

ft ft ft

In computing overtime compensation fo r its employees

who are uniform ly paid by the month, the company
uses a “ divisor” of days. However in com puting em­
ployees’ absences from work, the employer uses 363 as
divisor. Under these practices, would you say that the
monthly salaries o f employees are so computed as to
already include the holiday pay provided by law? Why?

ANS. No. 251 working days divisor is the result of

subtracting all Saturdays, Sundays and the ten (10)
regular holidays from the total number of calendar

209
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

days in a year. If the employees are already paid for

all non-working days, the divisor should be 365 and not,
251. Of course, the situation is muddled somewhat by
the fact that, in computing the employees’ absences
from work, the company uses 365 as divisor. Any
slight doubt, however, must be resolved in favor of the
workers. This is in keeping with the constitutional
mandate of promoting social justice and affording
protection to labor (The Chartered Bank Employees
Association vs. Ople et al., G. R. No. L-44717,
August 28, 1985).
it it -it

At the time of his employment, a worker is informed by

his employer that his m onthly pay already includes his
pay fo r any unworked regular holiday w ithin the month.
Is this arrangement legal?

ANS. Yes. Although it cannot be presumed that

the monthly pay of an employee already includes his
pay for unworked regular holidays during the month,
the employer can impose, the condition that such
monthly pay already includes the employee’s regular
holiday pay. This is a management prerogative; the
monthly pay should however comply with at least the
minimum rates prescribed under the minimum wage
laws.

* * *

Trans-Asia used the divisor “ 286” days in the computa­

tion of the benefits and deductions from the m onthly
salaries of its employees. The employees were required
to work fo r five and one-half days (from Monday to
Saturday) a week. Their rest day was Sunday.
(a) The workers contended that since these was no
express stipulation that their monthly pay included their
regular holiday pay they should be paid this benefit, in
addition to their monthly pay. Decide.

04(\
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

ANS. The claim is not meritorious. The inclusion

of holiday pay in the workers’ monthly salary is estab­
lished by the company’s consistent use of the divisor
“286” days in the computation of their benefits and
deductions. With the use of this divisor, the ten (10)
regular days in a year are already accounted for. If
one is to deduct the unworked 52 Sundays and 26
Saturdays (derived by dividing 52 Saturdays in half
since the workers were required to work half-day on
Saturdays) from the 365 calendar days in a year, the
resulting divisor would be 286 days (should actually be
287 days). Since the ten (10) legal holidays were
never included in subtracting the unworked and unpaid
days in a calendar year, the only logical conclusion
would be that the payment for holiday pay was already
incorporated into the said divisor.

(b) Is there a need to adjust the divisor So “ 287” instead

of only ‘.‘285”?

ANS. Yes. This is to account for the entirety of

regular holidays and special days in a year as pre­
scribed by Executive Order No. 203 and the Rules
Implementing Republic Act 6727, prescribing “262°
days as the divisor for workers who not do work and
are not considered paid on Saturdays and Sundays or
rest days.
Since the workers were required to work half-day
on Saturdays, 26 days should be added to the divisor
of 262 days thus resulting to 288 days. However, due
to the fact that the rest days of the workers fall on a
Sunday, the number of unworked but paid legal holi­
days should be reduced to nine (9) instead of ten (10),
since one legal holiday under E. O. No. 203 is always
on the last Sunday of August, National Heroes Day.
Thus, the divisor to be used should be “287” days.
However, the “286” divisor should be retained for
purposes of overtime pay, and holiday pay, and leave
conversions. This is to prevent diminution of benefits.
The “287” divisor should be used only for deductions
for absences. (Trans-Asia Phils. Employees Associa-

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

tion et al vs. NLRC et al., G. R. No. 118289,

December 13, 1999)

* * *

Faculty members o f a non-profit educational institution

are paid by the hour and are obliged to work and
consent to be paid o r-y fo r work actually done. Are
they entitled to holiday pay fo r unworked regular holi­
days?

ANS. No. Regular holidays specified as such by

law are known to both school and faculty members as
“no class days", certainly the latter do not expect
payment for said unworked days, and this was clearly
in their minds when they entered into the teaching
contracts. There is no diminution of the income of the
faculty member (Jose Rizal College vs. NLRC et al.,
G. R. No; L-65482, December 1, 1987).
* * ★

Are employees entitled to any pay on special public

holidays? Explain.

ANS. Pursuant to LOI 814 as amended by LOI

1087, there are two (2) classes of special public
holidays: these are the nationwide special public
holidays and the local special public holidays.
Under the aforesaid LOI, local special public holi­
days are treated as regular working days, while nation­
wide special public holidays are non-working days
except when otherwise declared by the President.
Employees, whether monthly or daily paid, who are
not required or permitted to work on nationwide special
public holidays are not entitled to any pay on such
days, and the employer may deduct from the salary of
monthly paid employees their equivalent daily salary
therefore. This is without prejudice however to exist­
ing practice of the employer. Where the employer has

7i7
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

not been making deductions in the past foe unworked

nationwide special holidays, he cannot now make any
such deductions; this has become a benefit which can
no longer be withdrawn. But if the employee is
required or permitted to work on nationwide special
public holidays he shall be entitled to his regular daily
salary plus thirty percent (30%) thereof as premium
pay.
Nationwide special public holidays being non­
working days, an employee may not be compelled to
work if he does not want to except in the cases or
instances specifically provided by law.
On the other hand, local special public holidays
and nationwide special public holidays declared by the
President as regular working holidays are treated as
regular working days. The employees are not entitled
to premium pay for working on such days, and if they
do not report for work, they lose the right to be paid
their salary under the principle of no work no pay.
A monthly paid employee who is permitted or
required to work on nationwide special public holiday
is entitled to a premium pay equivalent to thirty
percent (30%) of his daily rate in addition to his
monthly salary. This is so because his pay for that day
is already included in his monthly salary. A daily paid
employee who works on such day shall be paid his
regular daily salary plus thirty percent (30%) thereof
as premium pay.
* * 4r

The collective bargaining agreement provides that the

“ days designated by law fo r holding referendum and
local/national election shall be considered paid regular
holidays” and any employee required to w ork on these
holidays shall be paid at least tw o hundred percent
(200%) o f his daily wage. Is the “ special day” pro­
claim ed by the President o f the Philippines fo r the
holding o f election fo r Sangguniang Kabataan (SK)
throughout the nation covered by the CBA provision?
Why?

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

ANS. Yes. The Sangguniang Kabataan (SK) is

part of the local government structure. Hence the
election for members thereof may properly be consid­
ered as a local election (Associated Labor Unions etc.
vs. Voluntary Arbitrator Montejo et al., G. R. No.
111988, October 14, 1994).

* * *

The W ellington Flour Mills paid some o f its employees

a fixed m onthly compensation which actually covered
payment fo r 314 days o f the year, including regular and
special holidays, as well as days when no work was
done by reason o f fortuitous cause o r causes not at­
tributable to the employees. The “ 314 factor” used by
W ellington excluded the 51 Sundays from the 365 days
normally com prising a year. If a regular holiday fell on
a Sunday, would the m onthly salaried employees be
entitled to an additional pay fo r such holiday? Why?

ANS. No. There is no provision in the Labor Code

requiring the employer to give additional compensa­
tion to his monthly paid employees in the event that a
legal holiday should fall on a Sunday in a particular
month. The so-called “314 factor’ furthermore, ac­
counts fo r ail 365 days of a year, if leaves no days
unaccounted for; all days of the year are paid with the
exception only of the 51 Sundays. A contrary holding
would make a year when a legal holiday falls on a
Sunday more than 365 days. (Wellington Investment
and Manufacturing Corp. vs. Trajano et al., G. R.
No. 114698, July 3, 1995)

* * *

Describe briefly the benefit known as “ service incentive

leave” and state who are and who are not entitled to the
same.

ANS. The service incentive leave is a yearly leave

benefit of five (5) days with pay. It is enjoyed by an

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

employee who has rendered at least one (1) year of

service, except the following:

(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 III of
this Code;
(d) Field personnel and other employees whose
performance is unsupervised by the employer includ­
ing 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;
(e) Those who are already enjoying the benefit
herein provided;
(f) Those enjoying vacation leave with pay of at
least five (5) days; and
(g) Those employed in establishments regularly
employing less than ten (10) employees. (Article 95,
Labor Code; Section 1, Rule V, Book III, Implementing
Rules and Regulations).

For purposes o f entitlement to the service incentive

leave, when is an employe® considered to have ren­
dered “ at least one year of service” ?

ANS. The term “at least one year of service" shall

mean service within 12 months, whether continuous or
broken, reckoned from the date th^ employee started
working, including authorized absences and paid regu­
lar holidays unless the working days in the establish­
ment as a matter of practice or policy, or that provided
in the employment contract are less than 12 months, in
which case said period shall be considered as one
year. (Section 3, Rule V, Book III, Implementing Rules
and Regulations).

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 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

After rendering three (3) yearn o f continuous service, an

employee claims fo r vacation and sick leave benefits
from his employer, is there any legal basis fo r the
claim? Explain.

ANS. Vacation and sick leave benefits except

those provided for in Article 95 of the Labor Code and
the m aternity leave benefit fo r women employees
granted by Section 14-A of the Social Security Law,
and the paternity leave under R. A. No. 8187, are the
result of collective bargaining negotiations or estab­
lished employer practice or policy. The mere fact that
an employee has rendered a certain number of years
of service does not automatically entitle him to vaca­
tion and sick leave benefits. The employer must bind
itself under a contract or unilaterally undertake to
grant the same.

* * *

Are vacation and sick leave benefits cumulative and

commutative? Why?

ANS. Unless otherwise stipulated in a labor con­

tract or established employer practice or policy, the
annual vacation or sick leave benefits must be claimed
and enjoyed by the employee within the year; other­
wise, they are considered waived or forfeited. Like­
wise, these benefits are not generally convertible to
cash; the vacation leave is intended to give the
employee a respite from the monotony and rigors of
his daily work; and the sick leave is meant to be
enjoyed only during actual illness. Allowing the con­
version of these benefits into cash tempts the em­
ployee to get their money value and forego his much
needed rest or report fo r work even in tim es of actual
illness.
"S$ * Tfr
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

Describe b rie fly the nature o f sick leave, m aternity

leave, and vacation leave benefits.

ANS. Sick leave, maternity leave, and vacation

leave benefits are intended to be replacements for
regular income which otherwise would be earned be­
cause an employee is not working during the period of
said leaves. If an employee is on leave for 100 days,
he gets his solely for 100 days without having to work
during those days. There is absolutely no connection
between expenditures for sickness, childbirth, or vaca­
tion trips and the amount of sick leave, maternity
leave, or vacation leave benefits. Thus, if a company
grants sick leave or full pay during the period when an
employee is sick and at the same tim e grants hospital
or medical expenses incurred as a result of the sick­
ness, there is no incongruity or conflict between the
two types of privileges - one is sick leave while the
other is medical benefits. In the same manner, there
is no conflict between maternity leave benefits which
are nothing else but full salaries fo r a number of days
and the hospitalization and surgical benefits fo r ex­
penses incurred during the same period for hospital­
ization and surgery.
By analogy, qualified workers in the private sector
are given sickness benefits under the Social Security
Act, as amended, as well as medicare benefits under
the Medicare Law, sickness benefits are intended to
replace, even if only partially, lost income during the
period of sickness while medicare benefits partially
defray the cost of hospitalization and surgical care.
One benefit does not exclude the other (Singapore
Airlines Local Employees Association vs. NLRC et al.,
G. R. No. L-65786, July 16, 1984).
* * *

W hat is “ paternity leave” ?

ANS. Paternity leave refers to the benefits granted

to a married male allowing him not to report for work

217
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

for seven (7) days but continues to earn the compen­

sation, provided that his spouse has delivered or
suffered a miscarriage for purposes of enabling him ?o
actively lend support to his wife in her perioo f
recovery and/or in the nursing of the newly-born m iio .
(Section 3, R. A. 8187)
Paternity leave is granted to the male employee for
the first four (4) deliveries o f his legitimate spouse
with whom he is cohabiting. The male employee
applying fo r paternity leave shall notify his employer of
the pregnancy of his legitim ate spouse and the ex­
pected date of such delivery. (Section 2, R. A. 8187)
* * *

How many times may a male employee go on Paternity

Leave? Can he avail him self o f this benefit, fo r example,
SO days after the first delivery by his wife? (2002 Bar)

ANS. Under Republic Act No. 8187, paternity

leave may be granted to a male employee fo r the first
four (4) deliveries of his legitim ate spouse with whom
he is cohabiting. He may avail him self of this benefit
within sixty (60) days from the first delivery of his wife.
* * *

What is the parental leave? Give the conditions fo r its

enjoyment.

ANS. 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. (Sec. 8, R. A. No. 8972)

Under the Rules and Regulations implementing the

“Solo Parents W elfare Act of 2000’ , the solo parent
must have notified his/her employer of the availment
o f the leave within a reasonable period, and has
presented a Solo Parent Identification Card. If there is

‘Mfi
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

an existing or sim ilar benefit under a company policy,

collective bargaining or negotiation agreement, the
same shall be credited as parental leave. If the same
is greater than the seven (7) days provided fo r in the
Act, the greater benefit shall prevail. The leave is not
convertible to cash, unless specifically agreed upon
previously, and it is non-cumulative. (Sections 10-21,
Rules and Regulations Implementing R. A. 8972)
* * *

A restaurant collects from its custom ers service

charges equivalent to ten percent (10%) o f the cost o f
food and drinks. Are the employees o f the restaurant
entitled to any participation in the service charges?
Explain.

ANS. Employees of establishm ents collecting

service charges such as hotels, restaurants, lodging
houses, night clubs, cocktail lounges, massage clinics,
bars, casino and gambling houses and sim ilar enter­
prises, including those entities operating as private
subsidiaries of the government, are - regardless of
their positions, designations or employment status and
irrespective of the method by which their wages are
paid - entitled to participation in the service charges
collected by their employer. The service charges shall
be distributed at the rate of eighty-five percent (85%)
for all employees and fifteen percent (15%) shall be
for the disposition by management to answer fo r
losses and breakages and distribution to managerial
employees at the discretion of the management in the
latter case. (Article 96, Labor Code; Rule IV, Book III,
Implementing Rules and Regulations, as amended by
Department Order No. 5-A, April 13, 1988).
* * *

Maria Luisa’s Restaurant had been collecting service

charges fo r distribution to its waiters. After two years,
a rival restaurant was set up nearby. Because it did not

219
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

collect service charges, it took away a substantial por­

tion o f the business o f Maria Luisa's Restaurant. To be
able to get back its business, Maria Luisa’s Restaurant
secured an agreement from its waiters forth® discontin­
uation o f the service charges;
As a result, the take-home pay o f tft® waiters was
reduced by around P100.00 a week. Lit© one of the
waiters, asked his employer to continue paying ham this
lost amount.
Is Lito entitled to it? State your reasons. (1981 Bar)

ANS. Yes, Article 96 of the Labor Code provides

that in case the service charge is abolished, the share
o f the covered employees shall be considered inte­
grated in their wages. The agreement secured by the
restaurant from its waiters for the discontinuation of
the service charges cannot free the employer from
complying with the aforesaid provision. As a matter of
fact, the restaurant could have abolished the service
charge even without conformity of the waiters. But
such abolition cannot reduce the take-home pay of the
latter; the employer is obliged to integrate their share
in their wages.

The waiters o f a restaurant with a m onthly wage of

P500.00 were receiving P50.00 a month representing
50%of th e ir share in the service charge, collected from
customers. After two years, the management stopped
the collection. (1980 Bar)
(a) Were the waiters paid the right amount equivalent to
their share in the service charge?

ANS. No. Under Article 96 of the Labor Code,

they are entitled to eighty-five percent (85%) of the
service charge, not fifty percent (50%).

(b) Are the waiters entitled to any benefits as a result of

the abolition o f the service charge?

220
 HOURS OF WORK, REST PERIODS,
HOLIDAY PAY, LEAVES AND SERVICE CHARGES

ANS. Yes. Under Article 96 of the Labor Code, in

case the service charge is abolished, the share of the
covered employees shall be considered integrated in
their wages.

* * *

Distinguish between service charges and “ tip s” .

ANS. Service charges are collected by the man­

agement from the customers. “Tips* are voluntary
payments made by the customers to the employees for
excellent service.

* * *

Is an establishment required by law to collect service

charges?

ANS. No. The collection of service charges is a

management decision, not a requirement of the law.

* * *

Do service charges form part o f the benefits to which an

illegally dismissed employee is entitled to fu ll back­
wages? Why?

ANS. Yes. The employee's share in the service

charges is part of the other benefits to which he is
entitled, in addition to full backwages. (Maranaw
Hotels and Resort Corporation vs. NLRC et al., G. R.
No. 123880, February 23, 1999)
 CHAPTER VI

WAGES
Define “ wage” .

ANS. “Wage" paid to any employee shall mean the

remuneration or earnings, however designated, capa­
ble of being expressed in terms of money, whether
fixed or ascertained on a tim e, task, piece, or commis­
sion 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, 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. (Art. 97(j),
Labor Code)
* * *

W hat is “ salary” ?

ANS. Broadly, the word “salary” means a recom­

pense or consideration made to a person for his pains
or industry in another man’s business. W hether 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 ren­
dered. Indeed, there is eminent authority fo r holding
that the words “wages’ and “salary” are in essence
synonymous (Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing Hopkins vs. Cromweil, 85 N.Y.S.
839, 841, 89 App. Div. 481; 38 Am. Jur. 498).
“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
 WAGES

“wagen". Both words generally refer to one and the

same meaning, that is, a reward or recompense f o r ,
services performed. Likewise, “pay" is the synonym of
“wages’ and “salary" (Black’s Law Dictionary, 5th Ed.).
(Songco vs. National Labor Relations Commission, G.
R. Nos. 50999-51000, March 23, 1990)
/:

d- * *

What is “ basic salary” ?

ANS. In its common, generally accepted meaning,

it is the rate o f pay fo r a standard work period
exclusive of such additional payments as bonuses and
overtime. (Boie-Takeda Chemicals, Inc. vs. De la
Serna, G. R. No. 92174, December 10, 1993)
* it *

May “ separation pay" be considered as “ wages” ?

ANS. Yes. It is additional remuneration for

services rendered; as a matter of fact, it is measured
by the amount (i. e., length) of the services rendered.
(Republic of the Philippines, etc. vs. Hon. E. L.
Peralta, et al., G. R. No. L-56568, May 20, 1987)
•Ar it it

Distinguish between gratuity pay and salary.

ANS. Gratuity pay is given to the beneficiary for

the past services or favor rendered purely out of the
generosity of the giver. Salary, on the other hand, is
payment for actual services rendered by the worker.
Gratuity is bounty given to reward employees who
have rendered satisfactory service to the company.
(Republic Planters Bank vs. NLRC et al., G. R. No.
117460, January 6, 1997)
 WAGES

May the em ployer and the em ployee agree on any rate

o f pay fo r the latter?

ANS. The employer and the employee may fix any

rate of pay for the latter, provided such rate is not
below the minimum established by law.

H * *

W hat is the purpose o f fixin g a m inimum wage?

ANS. The fixing of a minimum wage, though not

necessarily a living or decent wage, benefits wage
earners by providing a rock bottom wage to be paid to
them by employers and below which the rule must not
fall. The laborer is thus protected from sweat shop
operators.
The establishment of a minimum wage also gives
protection to the enlightened employer who without
any legal compulsion voluntarily pays a decent wage
to his workers against the competition of the employer
who pays his workers inadequate wages and thus
operate at a lower cost and sell his products at lower
prices.
* * *

Explain the rule “ A fa ir day’s wage fo r a fa ir day’s

labor” .

ANS. Unless specifically required by law, contract

or established policy or practice, the employer is not
bound to pay wages to a worker who has not actually
rendered any service. T ’ e worker is entitled only to
payment of such work as he has actually done. If he
is absent from work on a certain day, he is not as a
rule to be paid wages for that day. And if the
employee has worked only for a portion of a day, he is
not as a rule entitled to the pay corresponding to the
full day. A contrary rule would ultimately result in the

00A
 WAGES

destruction of the employer. (Caltex Refinery Employ­

ees Association vs. Hon. J. Brillante et al., G. R.
No. 123782, September 16, 1997)

The age-old rule governing the relation between

labor and capital, or management and employee of a
“fair day’s wage for a fa ir day’s labor” remains as the
basic factor in determining employees' wages. 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,
suspended or dismissed, or otherwise illegally pre­
vented from working. Where, for instance, the em­
ployer temporarily transferred its main offices from
Lezo, Aklan to Kalibo, but some of the employees
refused without justifiable reason to report for work in
the new location, it was ruled that the workers we’re
not entitled to any pay as they did not render any
service in the new location. (Aklan Electric Coopera­
tive Incorporated vs. NLRC et al., G. R. No. 121439,
January 25, 2000)

* * *

W hat body has the power to fix m inim um wage rates?

ANS. Under Article 122 of the Labor Code, as

amended by Republic Act No. 6727, approved on
June 9, 1989, the Regional Tripartite Wages and
Productivity Boards have the power to fix minimum
wage rates applicable in their region, provinces or
industries therein and to issue wage orders, subject to
guidelines issued by the National Wages and Produc­
tivity Commission.
* * *

May the Regional T ripartite Wages and P roductivity

Board, established pursuant to Republic Act No. 6727,
validly prom ulgate a wage order requiring em ployers to
 WAGES

pay their srsspSoyses ars jyscreas© ®bov@ the statutory

minimum wag® raf@s? Enpiaio.

ANS. Yes. Hiss is following the '‘salary-ceiling"

method, rather than the “floor-wage" method, in the
adjustment of the minimum wage. This method re­
duces disputes arising from wags distortions.
Republic; Act No. 8727 intended the boards to be
creative in resolving the question of wages without
labor and management knocking on the legislative’s
door at every turn, if ths Act intended the boards
alone to set floor wages, there would ba no need for a
board but an accountant to keep track of the latest
consumer price index, or better, would have Congress
done it as the need arises, as the legislature, prior to
the Act, has done so for years. The fact of the matter
is that the Act sought a "thinking" grogp of men and
women bound by statutory standards^ (Employers
Confederation of the Philippines vs. National Wages
and Productivity Commission, et al., G. R. No.
98169, September 24, 1991)
i

•ftr ☆ iJr
i

Discuss briie% the effects o f a wage order issued by the

Regional Wag® Board w ithout prior public hearings and
consultations arid w hich was not published in a news­
paper of general circulation in the region.

ANS. The wage order is null and void. Article 123

of the Labor Code requires the Board, in the perfor­
mance of its wage-fixing functions, to conduct public
hearings/consultations with prior notices to employees’
and employers’ groups and other interested parties. It
further provides that the 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 wage-fixing, factors such as fa ir return of
capital invested, the need to induce industries to
invest in the countryside and the capacity of employ­
ers to pay are, among others, taken into consideration.
 WAGES

Hence, iho law provides for the creation of Regional

Tripartite Boards composed of representatives from
the government, the workers and the employers to
determine the appropriate wage rates per region to
ensure that ail sides are heard. For the same reason,
Article 123 of the Labor Code also 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. >t is a fundamental rule,
borne out of a sense of fairness, that the public is first
notified of a law or wage order before it can be held
liable for violation thereof. (Cagayan Sugar Milling
Company vs. Secretary of Labor and Employment, et
al., G. R. No. 128399, January 15, 199Q)
■k * -Ar

Give soms legislation on mimsmim wages.

ANS. Republic Act No. 6840, approved on De­

cember 10, 1987. It provides that all workers and
employees in the public or government sector on a
daily wage basis shall receive an increase in the sum
often (P10.00) pesos a day, and that workers and
employees in the private sector, whether agricultural
or non-agricultural, shall receive an increase of ten
(P10.00) pesos per day, except non-agricultural work­
ers and employees outside Metro Manila who shall
receive an increase of eleven (P11.00) pesos per day,
provided that those already receiving above foe mini­
mum wage up to one hundred ( P I 00.00) pesos shall
receive an increase often (P10.00) per day.
Republic Act No. 6727, the “Wage Rationalization
Act” approved on June 9, 1989, increased subject to
certain exceptions minimum wage rates by P25.00 per
day of workers and employees in the private sector.
Several wage orders increasing wages have also
been issued by the Regional Tripartite Wages and
Productivity Boards.
 WAGES

Are there,.employers wh© ars exssnpt from the coverage

o f minimum wags laws?

ANS. Yes. A duly registered 8M 3E (Barangay

Micro Business Enterprise) is under Section 8 of
Republic Act No. 9178, known as the “Barangay Micro
Business Enterprise (BMBEs) Act of 2002° exempt
from the coverage of the Minimum Wage Law, but the
employees therein are nonetheless entitled to the
same benefits given to any regular employee such as
social security and healthcare benefits.
A BMBE is a business entity or enterprise engaged
in the production, processing or manufacturing of
products or commodities, including processing, trading
and services, whose total assets including those aris­
ing from loans but exclusive of the land on which the
business entity’s office, plant and equipment are situ­
ated, shail not be more than Three Million Pesos
(P3,000,000.00) (Section 3(a), R. A. No. 9178)
* * *

in a case involving claims of workers fo r non-payment

by the company of the increases required by a wage
order, the company interposed the defense that the
workers had in the CBA condoned such non-payment.
The labor arbiter however declared the provision on
condonation in the CBA as null and void and granted
th® claim fo r underpayment of wagss. Is the decision of
the labor arbiter cotTeci? Explain.

ANS. Yes. The provision of the CBA on condona­

tion is contrary to the mandate in the wage order.
Besides; it is only the Tripartite Wage Productivity
Board that can approve an exemption of an establish­
ment from coverage of a wage order. (Manila Fash­
ions, Inc. vs. NLRC et al., G. R. No. 117878,
November 13, 1998)

* * *

998
 WAGES

Give the two (2) aspects o f “ agricttfturo” .

ANS. Agriculture has two aspscts, name !y, pri­

mary and secondary. The primary aspect covers the
cultivation and tillage of the soil, dairying, the produc­
tion, cultivation, growing and haa'esting of any agri­
cultural and horticultural commodities, and the raising
of livestock or poultry; while the secondary aspect
covers any practices performed by a farmer on a farm
as an incident to or in conjunction with the farming
operations.

vV -x ft

Give examples o f activities which am considered agri­

cultural.

ANS. Where an experimental station operates a

farm comprising 960 hectares, and through its employ­
ees and laborers actually tills the soil, introduces and
plants seeds of the best crop (principally cacao) vari­
eties found by it after study and experiment, raises
said crops in the best approved methods of cultivation,
including the spacing of each plant or seedling and the
amount of water needed through irrigation weeding,
etc. and the proper harvesting of the crops, including
the timing methods, discovers plant pests and their
eradication by means of treatment with the proper
insecticides, and thereafter, extracts the seeds from
the harvest for sale and distribution of farmers, there
can be no question that ail these acts and functions
are agricultural as distinguished from non-agricultural
functions. (Celestial, ei al. vs. The Southern Min­
danao Experimental Station, et al., 57 O. G. 8461).
Similarly, where the plantation was engaged in ramie
culture and the whole process consisted of the prepa­
ration of the soil, planting of ramie roots and caring for
them for at least one hundred days, cutting ramie
stalks and delivering them to the stripping sheds where
they are stripped with the use of decorticating ma­
chines powered by electricity, drying them under the

229
 WAGES

sun for one day and then finally putting them through
the brasher to cleanse them of impurities, ;i was heid
that the activity was purely agricultural. (Rifoco, Snc.
vs. Mindanao Congress of Labor, G. H. No. L-
22243, November 29, 1963).

A company that owns a rice hires workers to

repair its dikes and fences, Ar® these agriculture
workere? Why?

ANS. Yes, they are agricultural workers. They are

hired to perform work falling finder the secondary
aspect of agriculture. Repair of dikes end fences srs
incidental to the farming operations.
W "M

The worters testified: that they are employed by “8 ”,

who owns and lives on a five-hectare tend iirrLa Union;
that they cultivate the soil and plant and harvest to­
bacco; that fluey are paid the minimum wag© for agricu2~
tural workers; that because they cut big trees grown on
the land which they use for feu--ing and for repair of the
owner’s house their work is legally non-agricultural and
their pay ssiiotsSd he increased accordingly.
Jrs yoisr opinion, are they agricultural or non-agricultural
worters? (1920 Bar)

ANS. They are agricultural workers. They perform

activities which fall under the primary aspect of agri­
culture, such as cultivation of the soil, as well as
planting and harvesting tobacco. And the cutting of
trees grown on land to be used for fencing and for the
owner’s house is incidental to or done in conjunction
with the farming operations; it falls under the sec­
ondary aspect of agriculture.

* it

230
 WAGES

An employer pays his employees P3O0.00 a'day, exclud­

ing smergeno/ cost o f Saving allowances. This Ss above
the minimum fixed by law. in the event that such
minimum wage ss increased but would still be below
P300.00 can the employer decrease the pay of his em­
ployees so long as the same doss not go under the
minimum rate? Why?

ANS. The employer has voluntarily fixed the pay

of his employees at P300.00 & day. The decrease wii!
amount to the withdrawal or diminution of a benefit
that he has voluntarily given. The fact that the wages
would not go under the minimum rate cannot justify the
reduction. The employer is prohibited from eliminating
or diminishing benefits or supplements being enjoyed
by his employees. (Art. 100, Labor Code)

* * *

What are “facilities'’ and how is their " M r and reason­

able value” fixed?

ANS. The term “facilities" as used in this Rule

shall include articles or sen/ices for the benefit of the
employee or his family but shall not Include toois of
the trade or articles or services primarily for the
benefit of the employer or necessary to the conduct of
the employer’s business. (Section 5, Rule VII, Book
III, Implementing Rules and Regulations)

V a lue of facilities. - The Secretary of Labor may

from time to time fix in appropriate issuances the fair
and reasonable value of board, lodging, and other
facilities customarily furnished by an employer to his
employees both in agricultural find non~agricuityral
enterprises.
The fa ir and reasonable value of facilities is
hereby determined to be the cost of operation and
maintenance, including adequate depreciation plus
reasonable allowances (but not more than 5-1/2%
interest on the depreciated amount of capital invested

231
 WAGES

by the employer); provided that if the total so com­

puted is more than the fa ir rental value (or fa ir price of
the commodities or facilities offered for sale) the fair
rental value (or the fa ir price of the commodities or
facilities offered for sale) shall be the reasonable cost
of the operation and maintenance. The rate of depre­
ciation and depreciated amount computed by the em­
ployer shall be those arrived at under good accounting
practices.
The term “good accounting practices” shall not
include accounting practices which have been rejected
by the Bureau of Internal Revenue for income tax
purposes. The term “depreciation" shall include obso­
lescence. (Section 6, Rule VII, Book 111, Implementing
Rules and Regulations)

* * *

Give articles o r services which are considered facilities.

ANS. Meals; housing for dwelling purposes; fuel,

including electricity, water, gas, furnished fo r the
non-commercial personal use of the employee; trans­
portation furnished to the employee between his home
and work where the travel time does not constitute
hours worked compensable under the Labor Code and
other laws; school, recreation and sanitation when
operated exclusively for the benefit of the worker or
worker’s family; medical and dental services rendered
to non-industrial cases; and other articles and services
given prim arily for the benefit of the worker or his
family.

* * ft

Give articles or services which are no| considered facili­

ties.

ANS. Emergency medical and dental services

furnished b^» employer by virtue of the requirement of
the Labor Code of the Philippines, as amended and its

232
 WAGES

Implementing Rules and Regulations; cost, rental and/

or laundry of uniform where the nature of the business
requires the employees to wear a uniform; transporta­
tion charges where such transportation is incident to or
necessary to the employment; shares of capital stock
of the employees in an employer's company; paid
vacation, sick and maternity leaves; and tools of the
trade or articles or services prim arily for the benefit of
the employer or necessary to the conduct of the
employer's business.
* * *

Distinguish between supplements and facilities.

ANS. S u p p le m e n ts are extra remuneration or

special privileges or benefits given to or received by
the worker over and above his ordinary earnings or
wages. F a c ilitie s , on the other hand, are items of
expense necessary for the laborer’s and his fam ily's
existence and subsistence; they form part of the wage
and when furnished by the employer are deductible
therefrom since if they are not furnished, the laborer
would spend and pay for them just the same.

* * *

During her employment with Hotel Supreme, Norma, a

chamber maid, was provided w ith meals, water, and
electricity and lodging. Are these items deemed facili­
ties? Explain.

ANS. No. The hotel failed to prove that these

items were customarily furnished by the trade, that the
employee voluntarily accepted the same in writing,
and that the value thereof is fair and reasonable. At
most, these items may be considered as supplements
as they were granted for the convenience of the
employer. Since hotel workers are required to work
different shifts and are expected to be available at

233
 WAGES

various odd hours, their ready availability is a neces­

sary matter in the operation of the hotel. (Mabeza vs.
NLRC et al., G. R. No. 118508, April 18. 1997)

* * %
'{

Tii© Gaiactica Microsystems, Inc. has ffim e (msgs that

are used to transport its workers, free of charge, from
the Magallanes Shopping Center in Makati to Its plant in
MuntinSups and bacEc.- After five fS) yesrs ttie buses
become dilapidated and the service is discontinued by
the company. The employees demand for their replace­
ment The company argues that since It furnished the
transportation free of charge and slaver considered the
cost thereof as part of their wages, it can discontinue
wiiii the seresos any time. Decide with reasons.

AMS. The company may be compelled to continue

providing the transportation service free of charge.
This can be considered as a supplement — a special
privilege or benefit given over and above the ordinary
earnings or wages of the workers. Once given, a
supplement cannot be eliminated or diminished.

* ?"?

What Is bonus?

AMS. A bonus is an amount granted and paid to an

employee for his industry and Royalty which contributed
to the success of the employer’s business and made
possible the realization of profits. While normally
discretionary, the. grant of a gratuity or bonus, by
reason of its Song and regular concession, may be­
come part of regular compensation.

* * *

May the amount of bonus fee tsn&tteraKy reduced by the

employer? Explain.
 WAGES

ANS. Where the matter of giving bonuses over

and above the employees’ lav/ful salaries and al­
lowances is entirely dependent on profils, the amount
thereof may be reduced if the employer’s financial
condition declines or weakens. The employer may not
be forced to distribute bonuses which it can no longer
afford to pay and in effect bs penalized for its past
generosity to its empioyees. The decrease in the
bonus cannot also bs considered as diminution of the
employees’ salaries for the form er is not part of labor
standards in the same class as salaries, cost of living
allowances, holiday pay, and leave benefits, which are
provided by the Labor Code. (Traders Royal Bank vs.
NLRC, et al., G. R. No. 88168, August 30, 1990)

☆ * -fir

When is bonus considered part o f the wage o f an

employee?

ANS. The genera! rule is that a bonus is a gratuity

or an act of liberality which the recipient has no right
to demand as a matter of right. If it is additional
compensation which the em ployer promised and
agreed to give without any condition 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. Increases given to supervisory
personnel as a m atter of company practice to correct
or minimize a wage distortion, is not a bonus which is
not demandable as a matter of right; it is an enforce­
able obligation of the employer and, considered part of
the wage structure of the supervisory personnel.
(Metro Transit Organization, Inc. vs. NLRC et al., G.
R. No. 116008, July 11, 1995)
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

235
 WAGES

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. (Marcos et al. vs. NLRC
et al., G. R. No. 111744, September 8, 1995)

☆ * *

Are emergency cost of Hiving allowances (ECOLA) con­

sidered part of regular wage?

ANS. Prior to Executive Order No. 178, the

emergency cost of living allowances granted by vari­
ous decrees or issuances (P. D. Nos. 1611, 1634,
1678, 1713 and Wage Orders Nos. 1 to 6) were not
considered part of the regular wage of the employee
and were not taken into account in determining over­
time and premium pay, fringe benefits, as well as
premium contributions to the State Insurance Fund,
sociai security, medicare, maternity pay, and private
welfare and retirement plans. However, under the
aforesaid executive order, the ECOLA now form part
of regular wage.
Under Wage Order NCR-09, covered employees
are entitled to their ECO LA during days that they
receive their basic wage even if no work is rendered.

tV *

Fishing operators employed batiltos to unload the fish

catch from the vessels and take them to the fish stalls.
The work ©f these batillos were limited to days of arrival
of the fishing vessels ^nd their working days in a month
were comparatively few. However, from 1978 to 1980,
the operators paid them a fixed monthly emergency
allowance which included non-working days. Can the
operators now discontinue this practice and pay the
batillos their allowances only for days when they actu­
ally work, following the principle of “no work, no pay”?
Why?
 WAGES

ANS. No. Benefits voluntarily given cannot be

unilaterally withdrawn by the employer. And Article
10G of the Labor Code prohibits the elimination or
diminution of existing benefits. (Tiongco, et al. vs.
Hon. V. Leogardo, et ai., G. R. No. 57636, May 16,
1983)

* * *

Descrsfos brssfSy the benefit called “fcfojrfeenth month

pay”.

ANS. Presidential Decree No. 851, promulgated

on December 16, 1975, requires an employer to pay its
employees receiving a basic salary of not more than
P1,000.00, regardless of the nature of "their employ­
ment, a 13th month pay not later than December 24,
every,year, provided they have worked for at least one
month during the calendar year. This “thirteenth
month pay” is one-twelfth (1/12) of the basic salary
earned by an employee within a calendar year. This
benefit is not credited as part of the regular wage of
the employees for purposes of determining overtime
and premium pay, fringe benefits, as well as premium
contributions to the State Insurance Fund, social secu­
rity, medicare, private welfare and retirement plans.
Earnings and other remunerations which are not
part of the basic salary, such as payments for vacation
and sick leaves, overtime pay, and premium for work
on rest days, are not included in the computation of
the 13th month pay. (San Miguel Corporation vs.
Inciong, et al., G. R. No. L-19774, February 24,
1981). But emergency cost of living allowances are
now part of regular wage. Under Memorandum Order
No. 28, effective August 13, 1986, the 13th month pay
is to be paid only to rank-and-file employees regard­
less of the amount of basic salary.

i?t * 'fir

237
 WAGES

A collective bargaining agreement already provides for

the payment o f Christmas, moling and amelioration
bonuses to the empioyees. Sinca these bonuses
amount to more than one (1) month pay of each and
every employee, is the compare still obliged to give
them the thirteenth (13th) month pay? Reasons.

ANS. No. Presidential Deeres No. 851 provides

that “employers already paying their employees a 13lsi
month pay or its equivalent are not covered by this
Decree." And the rules implementing the said decree
defines the scope of the term “equivalent” in this tenor:

“The term ‘its equivalent’ ... shall include Christ­

mas bonus, and mid-year bonus profit sharing pay­
ments 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 1/12th of the employee’s basic salary,
the employer shall pay the difference.”
Pragmatic considerations also weigh heavily in
fa vo r of crediting both voluntary and contractus!
bonuses for the purpose of determining liability for the
13th month pay. To require employers (already giving
their employees 13th month salary or its equivalent) to
give a second 13th month pay would be unfair and
productive of undesirable results. To the employer
who had acceded and is already bound to give
bonuses to his employees, the additional burden of a
13th month pay would amount to a penai?y for his
munificence or liberality. The probable reaction of ons
so circumstanced would be to withdraw the bonuses or
resist further voluntary grants for fear that if and when
a law is passed giving the same benefits, his prior
concessions might not be given due credit; and this
negative attitude would have an adverse impact on the
employees. (National Federation of Sugar Workers
vs. Ovejera, et al., G. R. No. L-5S743, May 31,
1982)

m
 WAGES

The collective bargaining agreement provides fo r the

payment of Christmas bonuses to aS! regular workers isi
the bargaining unit with at feast one |1| year of continu­
ous service. May the company treat this bonus as are
“equivalent” off the 13th month pay? Why?

AMS. No. The Christmas bonus provided in the

CBA accords a reward for loyalty to certain employees.
This is evident from the stipulation granting the bonus
in question to workers with at least, one (1) year o f
continuous service. This is a purpose not found in P.
D. 851. The bonus therefore is to be in addition to the
legal requirement. (Universal Corn Products vs.
NLRC, et al., G. R. No. 60337, August 21, 1987)

From 1975 to 1981, Davao Fruits Corporation included,

in the computation of the thirteenth-month pay o f its
employees, the payment fo r the letter's sick, vacation
and maternity leaves, premium fo r work on rest days
and special holidays. As early as 197S, the Secretary of
Labor issued implementing rules to the effect among
others, that the abovementioned items are excluded
from the “basic salary” which is the basis of the compu­
tation o f the thirteenth-month pay. In 1981, after the
promulgation o f the decision of the Supreme Court in
San Miguel Corporation vs. Inclong (103 SCRA 139), the
company discontinued the inclusion, of the aforemen­
tioned items in the thirteenth-month pay o f its employ­
ees.
(a) Is the action of the company justified? Why?

ANS. No. From 1975 to 1981, the company had

freely, voluntarily and continuously included in the
computation of its employees1 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 consider­
able length of time the questioned items had been
 WAGES

included by the company indicates a unilateral and

voluntary act on its part, sufficient in itself to negate
any claim of mistake.
A company practice favorable to ths 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.

(b) Is the principle of solutio indebiti applicable?

ANS. No. This civil law concept is not applicable

in labor law. Besides, in solutio indebiti. the obligee is
required to return to the obligor whatever he received
from the latter. The company, in the instant case,
does not demand the return of what it paid to the
employees from 1975 to 1981; it merely wants to
rectify the error it made over the years by excluding
unilaterally from the thirteenth month pay in 1982 the
items subject of litigation. (Davao Fruits Corporation
vs. ALU, et al., G. R. No. 85073, August 24, 1993)
it it it

State the rule on voluntary grants and give the excep­

tions thereto.

ANS. W hatever the em ployer has voluntarily

granted to his employees as benefits (but which are
not required by law) and enjoyed by the latter for a
considerable period of time, cannot later on be unilat­
erally withdrawn. These benefits become part of the
terms and conditions of employment and may only be
diminished or withdrawn by mutual agreement freely
entered into. They constitute inducements for the
workers to render loyal and efficient service and to
remain in the company.
But payment of benefits through an erroneous
application of the law due to absence of clear adminis­
trative guidelines is not considered a voluntary grant

240
 WAGES

which cannot be unilaterally discontinued. The pay­

ment is not deliberate. (Globe Mackay Cable and
Radio Corporation et al. vs. NLRC et al., G. R. No.
L-74156, June 29, 1981)
And where the giving of bonus is made to depend
upon the profitability of the employer’s business and
the employees are fully aware of such condition, the
latter cannot insist on the' continued payment of the
benefit in case the business weakens. (Traders Royal
Bank vs. NLRC et al., G. R. No. 88168, August 30,
1990)

* *

Trans-Asia used the divisor “ 286” days in the computa­

tion of the benefits and deductions from the m onthly
salaries of its employees. The employees were required
to work fo r five one-half days (from Monday to Satur­
day) a week. Their rest day was Sunday.
(a) The workers contended that since there was no
express stipulation that their m onthly pay included their
regular holiday pay they should he paid this benefit, in
addition to their monthly pay. Decide.

ANS. The claim is not meritorious. The inclusion

of holiday pay in the workers’ monthly salary is estab­
lished by the company’s consistent use of the divisor
“286” days in the computation of their benefits and
deductions. With the use of this divisor, the ten (10)
regular days in a year are already accounted for. If
one is to deduct the unworked 52 Sundays and 26
Saturdays (derived by dividing 52 Saturdays in half
since the workers were required to work half-day on
Saturdays) from the 365 calendar, days in a year, the
resulting divisor would be 286 days (should actually be
287 days). Since the ten (10) legal holidays were
never included in subtracting the unworked and unpaid
days in a calendar year, the only logical conclusion
would be that the payment for holiday pay was already
incorporated into the said divisor.

241
 WAGES

(b) is there a need to adjust the divisor to “ 287” instead

of only “ 288” ?

ANS. Yes. This is to account for the entirety cf

regular holidays and special days in a year as pre­
scribed by Executive Order No. 203 in relation to
Section 6 of the Ruler* Implementing Republic Act
6727, prescribing “262“ days as the divisor for workers
who do not work and are not considered paid on
Saturdays and Sundays or rest days. Since the
workers were required to work half-day on Saturdays,
26 days should bp added to the divisor of 262 days
thus resulting to 288 days. However, due to the fact
that the rest days of the workers fall on a Sunday, the
number of unworked but paid legal holidays should be
reduced to nine (9) instead of ten (10), since one legal
holiday under E. O. 203 always on the last Sunday of
August, National Heroes Day. Thus, the divisor to be
used should be “287” days.
However, the “283” divisor should be retained for
purposes of overtime pay, holiday pay, and leava
conversions. This is to prevent diminution of benefits.
The “287° divisor should be used only for deductions
for absences. (Trans-Asia Phils. Employees Associa­
tion et al vs. NLRC et a!., G. R. No. 118283,
December 13, 1999)

* * •*?

Producers Bank of the Philippines, a banking institu­

tion, has been providing several benefits to s?s employ­
ees. since 1S71 when it started its operation. These
included a mid-year bonus equivalent to an employee’s
one-month basic pay and a Christmas bonus equivalent
to an employee’s one whole month salary (basic pay
plus allowance). When P. D. 351, the law granting a
13th month pay, tools effect in 1976, the basic pay
previously given as part of the Christmas bonus was
applied as compliance therewith. From 1S81 to 1983,
the bank continued giving one month basic pay ass

242
 WAGES

mid-year bonus, one month basic as 13** month pay but

the Christmas bonus was no longer based on the al­
lowance but on the basic pay of the employees which
was higher. In the early part of 1984, the Monetary
Board due to its depressed financial condition placed
the bank under conservatorship. Thereafter, the bene­
fits were either withdrawn or reduced. There was no
dispute that the bank sustained losses in the millions of
pesos.
(a) The union of bank employees contends that the
mid-year and Christmas bonuses, by virtue of their
having been given for thirteen 913) consecutive years,
have ripened into a vested right which can no longer b3
unilaterally withdrawn without violating Article 100 of
the Labor Code. Decide.

ANS. The grant of a bonus is an act of generosity

granted by an enlightened employer to spur the em­
ployee to greater efforts for the success of the busi­
ness and realization of bigger profits. However, an
employer cannot be forced to distribute bonuses which
it can no longer afford to pay. The grant of the
bonuses were not even provided for in the collective
bargaining agreement.

(b) May the mid-year "nd Christmas bonuses paid to

the employees be applied towards the satisfaction of
the 13th month pay required by F. D. No. 8S1? Why?

ANS. Yes. The total amount given by the bank as

bonuses would still exceed, or at ieast be equal, one
month basic salary, and thus may be considered as an
“equivalent” of the 13th month pay mandated by P. D.
851.

(c) May the increases provided for in the CBA of the

bank and the union of its employees be credited as the
bank’s compliance with the wage increases required by
Wage Order No. 6?

243
 WAGES

ANS. Yes. The creditabiiiiy provision in Wage

Order No. 6 is based on important public policy, that
is, the encouragement of employers to grant wage and
allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or
regulation. To compel employers simply to add the
legislated increases in salaries and allowances without
regard to what is already being paid would be to
penalize employers who grant their workers more than
the statutorily prescribed increases in salary or al­
lowances and pay their workers more than what the
law or regulations require.

Furthermore, the CBA unequivocally showed the

clear intent of the parties to apply the wage and
allowance increases stipulated therein to any statutory
wage and allowance adjustments issued during the
effectivity of such agreement.

(d) Where the divisor used by the bank in arriving at the

monthly salaried employees’ daily rat© for purposes of
computing salary-related benefits was 314,*while it used
the 303 divisor only to increase the overtime pay for
rank-and-file employees, would the monthly pay of the
employees be deemed as already including their pay for
the regular holidays provided for in Article 94 of the
Labor Code? Explain.

ANS. Yes. The divisor of 314 is arrived at by

subtracting al! Sundays from the total number of
calendar days in a year, since the bank considered
Saturdays as paid rest days; the use of the said divisor
leads to the inevitable conclusion that the ten legal
holidays are already included therein. Furthermore,
the use of the divisor 303 was only for the purpose of
increasing the employees’ overtime pay. (Producers
Bank of the Philippines vs. NLRC et a!., G. R. No.
100701, March 28, 2001)

•it •& &

244
 WAGES

Are the sales commissions of a salesman paid a guar­

anteed wage plus commissions included in the compu­
tation of his 13th month pay? Explain.

ANS. In P hilippine D uplicato rs, inc. vs.

N LR C , et al., 6 . R. No. 1100S8, fyovember 11,
1593, the Third Division of the Supreme Court,
through Justice Feliciano, ruled that the sales commis­
sions of the salesman should be included in the
computation of his 13th month pay. Tha Court was of
the view that the term “basic salary” includes commis­
sions.
However, in Bose-Tak'eda C hem icals, Inc. vs.
De la Serna, G . R. Mo. 92174, and P hilippine
Fuji Xerox C orporation vs. Tra jan o , et al., G . R.
No. 102552, both of which were promulgated on
December 10, 1993, the Second Division of the
Supreme Court, through Chief Justice Narvasa, ruled
that “basic salary” does not include commissions and
Section 5(a) of the Revised Guidelines on the Imple­
mentation of the 13th Month Pay Law issued on
November 16, 1987 by then D OLE Secretary Franklin
M. Drilon, which included commissions as part of
“basic salary", is null and void. The Court held that:

“In remunerative schemes of a fixed or guaranteed

wage plus commissions, the fixed or guaranteed wage
is patently the “basic salary” for this is what the
employee receives for a standard work period. Com­
missions are given for extra efforts exerted in consum­
mating 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.”

In P hilippine D uplicators, Inc. vs. N LR C et

al.,G . R. No. 110068, February 15, 1995, the
Supreme Court en banc reconciled the foregoing doc­
trines by holding that the sales commissions received
by tlTe salesmen of duplicating machines comprised an
automatic increment to the monetary value initially
assigned to each unit of work rendered by a salesman;

245
 WAGES

that the fixed or guaranteed portion of the wages paid

to the salesmen represented only 15% - 30% of an
employee’s total earnings in a year; that on the other
hand the commissions paid to or received by medical
representatives of 3oie-Takeda were productivity
bonuses which ciosely resemble profit-sharing pay­
ments and have no clear direct or necessary relation
to the amount of work actually done by each individual
employee; and that these medical representatives are
not salesmen as they do not sell the pharmaceutical
products or medical devices to the physicians.
* * *

Distinguish “ Monthly-Paid” from “ Daily-Paid” Employ­

ees.

ANS. A m onthly-paid employee is one who is

paid everyday of the month although he does not
regularly work on his rest day or Sundays and/or
regular holidays and special holidays. In other words,
a monthly-paid employee is one who is paid a fixed
amount per month irrespective of the number of work­
ing days therein and is considered paid during rest
days or holidays even if not worked. To get his fixed
monthly salary the factor generally used in 365 days
which is multiplied by the applicable daily rate over 12
months.
On the other hand, a daily-paid employee is one
who is paid only on the days he actually works, except
on unworked regular holidays where he is paid his
basic wage if he is present or on leave of absence with
pay on the working day immediately preceding the
regular holiday. The factors that may be applied is
either 314 days, 262 days, or any other factor depend­
ing on the worker’s actual working days and the
circumstances obtaining in the establishment. Under
the rules implementing wage legislation, factor 314 is
used for those who do not work and are not considered
paid on Sundays or rest days; whereas, factor 262 is
used for those who do not work and are not considered
 WAGES

paid on Saturdays and Sundays or rest days. These

suggested factors, however, are without prejutflcs to
existing company practice or policy which is more
beneficiai to. the employees.
When an employs© is paid a fixed monthly salary
rate or is paid every 15th and end of each month, this
does not necessarily mean that he Ls a monthly-paid
employee as defined above. Tho fixod monthly rate
he receives may merely represent the payments for al!
the days actually worked, including tsnworked regular
holidays within a month and may no! include the rest
days and special days within the period which are
unworked,

* & vV

May the wages of an employs® bs paid by results?

Explain.

ANS. Yes, the wages of an employee may be paid

on ihe basis of results, including pr.kyao,- piecework
and other non-time work. This system of payment is
judicially recognized. (Sunripe Coconut Products Co.,
Inc. vs. Court of industrial Relations, 83 Phil. 518,
523; Dy Keh Beng vs. international Labor and Marine
Union of the Philippines, et a!., G. R. Mo. L-32245,
May 25, 1979). The Secretary of Labor is however
empowered to regulate the payment of wages by
results, through time and motion studies or in consul­
tation with representatives of workers’ and employers’
organizations. (Article 101, Labor Code).
Employees paid by results should receive not less
than ihe applicable wage rates provided for eight (8)
hours work a day, except in cases where the payment
by result rate has been established by the Secretary of
Labor.

A * *

What is the cSuty of the employer with respect to tha

fixing of the wags rats of piece rate workers? Explain.

247
 WAGES

ANS. It is the responsibility of an employer

employing piece-rate workers to inquire from the
DOLE Secretary about their prescribed specific wage
rates. And if there are no such prescribed rates, the
employer, after consultation with its workers, should
submit for the DOLE Secretary’s approval time and
motion studies as basis for the wage rates of its
employees.
In the absence of wage rates based on time and
motion studies determined by the Secretary of Labor
and Employment or submitted by the employer to the
latter for approval, wage rates of piece-rate workers
must be based on the applicable daily minimum wage
determined by the Regional Tripartite Wages and
Productivity Board. (Pulp and Paper, Inc. vs. NLRC
et al., G. R. No. 116593, September 24, 1997)
rt * *

Distinguish piece work from task work.

ANS. In piece work, the stress is placed on the

unit of work produced, or the quantity thereof; a
uniform amount is paid per unit accomplished. On the
other hand, in the case of task work, the emphasis is
on the task itself; payment is not reckoned in terms of
numbers of unit produced, but in terms of completion
of the work. Thus, it has been held that trailer drivers
who are paid varying amounts from trip to trip depend­
ing on the length of each trip and such other factors as
road and traffic conditions are more of task workers
than piece workers. Necessarily, the rate of pay is not
computed on the basis of the number of trips
(multiplying that number by a specific rate), but on the
basis rather of the sum of the rates per trip (adding the
different rates earned from different trips).

* * ft

A plastic company manufactures containers for baby

talcum powder. It has a department where the contain-

•>/(»
 WAGES

ers are cleaned and inspected for defects before pack­

ing. The workers in this department are paid a daily rate
o f P150.00. Despite repeated appeals from manage­
ment, a worker can only clean and inspect 250 contain­
ers fo r eight (8) hours. Through time and m otion
studies in accordance with standards set by the Min­
istry of Labor and Employment, the company was able
to ascertain that an ordinary w orker of minimum skill or
ability can clean and inspect 450 containers fo r eight
hours. The company therefore changed the mode of
payment of the wages of the workers in the cleaning
and inspection department from time basis to piece­
work, at P0.40 per container cleaned and inspected.
The workers assail this move on the part o f the em­
ployer as violative o f their rights. Decide.

ANS. The company has the right to change the

basis of the payment of the wages of the workers.
This is to increase production. The workers would not
suffer as it is within their capability to clean and
inspect the number of containers needed to enable
them to at least earn the rate they were receiving at
the tim e the change was effected. They cannot
however be deprived of the benefits they were already
enjoying as employees paid on the time basis at the
time of such change.

Miss X works as a manicurist in the D’Style Barbershop

which has twenty (20) barbers and manicurists. She is
paid P5.00 per manicure that she performs. Sometimes
she earns P90.00 per day, but there are also occasions
when there are no customers. Is she entitled to holiday
pay? Explain.

ANS. Miss X is an employee who is paid by results

and she works in a service establishment employing
more than ten (10) persons. She is entitled to holiday
pay which shall not be less than her average daily

249
 WAGES

earnings fo r the last seven (7) actual working days

preceding the regular holiday and in no case less than
the applicable statutory minimum wage rate. (Section
8, Rule IV, Book lil, Implementing Rules and Regula­
tions)

* * *

A clerk in the College o f Law o f a University worked

w ithout pay but was allowed to take up no more than
three (3) units o f law subjects per semester free o f
charge. Realizing it would take a very long time to
finish the course, he resigned at the end o f the school
year and demanded payment o f unpaid wages. The
university refused to pay contending th a t there was no
employer-employee relationship between them.
Is the clerk entitled to backwages? (1930 Bar)

ANS. Yes. Under Section 14, Rule X, Book III, of

the Rules and Regulations Implementing the Labor
Code, there is no employer-employee relationship
between students on the one hand and schools, col­
leges or universities on the other, where students work
for the latter in exchange for the privilege to study free
of charge, only in instances where the students are
given real opportunity, including such facilities as may
be reasonably necessary to finish their chosen courses
under such arrangement. In the problem given, it
cannot be said that the clerk was given real opportu­
nity to finish law as he was allowed to take up no more
than three (3) units of law subjects per semester.
There is therefore em ployer-employee relationship
between the clerk and the university.

* * *

After rendering twenty-five (25) years o f service fo r a

manufacturing firm, Mang Celo retires. A few weeks
thereafter, the company proposes that he hires and
pays in his ow n name persons to work in its painting

250
 WAGES

department; that the company would reimburse him fo r

whatever he pays as wages to the workers; and that fo r
his services he would be entitled to a sum equivalent to
10% of whatever amounts are paid to the workers. If
Mang Celo fails to pay the wages o f the workers, can
the latter claim from the company? Explain.

ANS. Yes. For Mang Celo is merely a “labor only"

contractor. He supplies workers to an employer but he
does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed
perform activities directly related to the principal busi­
ness of the employer. He is considered merely 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 it. (Article 106, Labor
Code).
* * *

The Prompt Service Corporation renders janitorial ser­

vice? by its own means and methods to several estab­
lishments in Metro Manila. It has more than 200 ja n i­
tors, maintains an office where its tools and cleaning
equipment are kept and where the janitors assemble
before going to the establishments where they are
assigned, and charges its client a fixed amount per
janitor assigned to them.
(a) Is the Prompt Service Corporation a “labor-only”
contractor? Explain.

ANS. No. It carries on an independent business

and undertakes the janitorial service on its own ac­
count under its own responsibility, according to its own
manner and method free from the control and direction
of its clients in all matters connected with the perfor­
mance of the work except as to the result thereof. It
has substantial capital or investment in the form of
tools and equipment and maintains its own office. It is

251
 WAGES

an independent or job contractor. (Sec. 8, Rule VIII,

Implementing Rules and Regulations)

(b) if Prompt Service Corporation fails to pay the wages

o f a janitor, is the establishment to which the latter is
assigned liable therefor? Why?

ANS. Yes. According to Article 106 of the Labor

Code in the event that the contractor or sub-contractor
fails to pay the wages of his employees in accordance
with the Code, the em ployer shall be jo in tly and
severally liable with his contractor or sub-contractor 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. It
cannot be denied that the em ployer is the party
benefited by the services of the employees.

(c) Would you change your answer if the establishment

can prove that it has fu lly paid Prompt Service Corpora­
tio n under their agreement?

ANS. No. I would not change my answer. The

establishment will still be liable for the unpaid wages
o f the janitor. The obligation of the establishment to
pay is imposed by law. W hether or not Prompt Service
Corporation has received full payment of its contract is
not the concern of the worker.
* * *

Ace Building Care (ABC) and the Philippines Tuberculo­

sis Society (PTS) entered into a contract under which
the form er would provide the latter w ith janitorial and
allied services fo r a stipulated consideration,subject to
such adjustment as m ight be subsequently required by
law. Subsequently, forty-one (41) janitors ABC had
detailed to PTS filed a com plaint with the NLRC against
both ABC and PTS fo r unpaid wage differentials under
wage orders, holiday pay, damages, reimbursement of

252
 WAGES

cash bond, incentive leave pay, bonus and separation

pay.
(a) What is the nature o f the liability o f ABC and PTS for
the claims o f the janitors?

ANS. Under Article 106 of the Labor Code, ABC

and PTS are jo intly and severally liable fo r the claims
of the janitors.

(b) PTS however contends that it is not liable because

the wage orders are applicable only to employers and
employees in the private sector and that under Book IV
o f the Labor Code (Employees Compensation Program)
it is specifically mentioned as an employer in the public
sector. Is this contention tenable? Why?

ANS. No. W hile the wage orders do not apply to

the d ire c t employees of PTS who in fact are members
of the GSIS, the janitors employed by ABC are consid­
ered in d ire c t employees of PTS and as such are
entitled to hold it liable, solidarity with their direct
employer, for their unpaid wage differentials. In this
sense, the PTS is correctly classified as an employer
coming under the private sector. The reference to it
as belonging to the public sector relates only to its
direct employees for purposes of the employees com­
pensation program and not to its indirect employees
coming from the private sector. (Rabago, et al. vs.
NLRC, et al., G. R. No. 82868, August 5, 1991, citing
Eagle Security Agency, Inc. vs. NLRC, et al., 173
SCRA 479)
* * *

Mr. and Mrs. Lim enter into a contract w ith Reliable

Construction Co., whereby fo r a fixed sum the latter,
supplying labor and materials, w ill put up their residen­
tial house. Some workers employed by Reliable Con­
struction Co. in the construction are not paid their
wages. Are Mr. and Mrs. Lim liable therefor? Explain.

in
 WAGES

ANS. Yes. Under Article 101 of the Labor Code, a

person, partnership; association or corporation which,
not being an employer, contracts with an independent
contractor for the performance of any work, task, job
or project, is jo intly and solidarity liable with the
independent contractor for the wages employed by the
latter. Mr. and Mrs. Lim are indirect employers.
Besides Article 1729 of the Civil Code provides that
those who put their labor for a piece of work under­
taken by a contractor have an action against the owner
up to the amount owing from the latter to the contrac­
tor at the tim e the claim is made.
* * *

S, who was engaged in the, buy and soli o f paiay rice,

entered into a verbal agreement with A, whereby it was
agreed that the latter would be paid a commission fo r
milled rice she sold or palay purchased fo r the former.
It was further agreed that A would spend her own
money fo r the undertaking, but to enable her to carry
out the agreement more effectively, she was authorized
to borrow money from other persons, subject to reim­
bursement from S, and that either o f them may term i­
nate the business arrangement at w ill, w ith o r w ithout
cause.
May A be considered an independent contractor?

ANS. Yes. Under the condition set forth in their

agreement, private respondent was an independent
contractor, who exercising independent employment,
contracted to do a piece of work according to her own
method and without being subject to the control of her
employer except as to the result of her work. She was
paid fo r the result of her labor, unlike an employee
who is paid for the labor he performs. (Sara et al. vs.
Agarrado, et al., G. R. No. 73199, October 26, 1988).
* * *

254
 WAGES

Feliciano Lupo, a building contractor, entered into a

contract with General M illing Corporation (GMC), a cor­
poration engaged in flo u r and feeds manufacturing, fo r
the construction of an annex building inside the latter's
plant in Cebu City. In connection w ith the aforesaid
contract, Lupo hired carpenters, masons, and laborers.
(a) Is GMC considered an “ indirect em ployer" o f the
workers of Lupo?

ANS. On the assumption that Lupo is a job-

contractor, as distinguished from a labor-only contrac­
tor, GMC is deemed an “indirect employer’ of Lupo’s
workers pursuant to Article 107 of the Labor Code.

(b) May GMC be held liable fo r unpaid wages, and other

monetary claims o f Lupo’s workers?

ANS. Yes. Under Article 109 of the Labor Code,

the employer or indirect employer is jo intly and sever­
ally liable with his contractor or sub-contractor for any
violation of any provision of the Labor Code. (Baguio,
et al. vs. NLRC, et al., G. R. Nos. 79004-09,
October 4, 1991)
* * *

Is the jo in t and several liability o f the principal and the

jo b contractor under Articles 107 and 109, in relation to
Article 106, of the Labor Code, dependent upon the
insolvency or unwillingness to pay on the part o f the
contractor o r direct employer?

ANS. No. Nothing in Article 106 indicates that

insolvency or unwillingness to pay by the contractor or
direct employer is a prerequisite for the jo in t and
several liability of the principal or indirect employer.
This joint and several liability facilitates, if not guaran­
tees, payment of the workers’ performance of any
work, task, job or project, thus giving the workers
ample protection as mandated by the 1987 Constitu-

255
 WAGES

lion. (Development Bank of the Philippines vs. NLRC,

et al., G. R. Nos. 100376-771, June 17, 1994)

* * *

Janitors were hired by Contemporary Services, Inc.

(CSI) and assigned to Union Carbide. They drew their
salaries from CSI and not from Union Carbide. CSI
exercised control over them through a CSI employee
who gave orders and instructions. Moreover, CSI had
the power to assign its janitors to various clients and to
pull them out, as it had done in a number o f occasions,
any of the janitors working at Union Carbide.
CSI was registered as a service contractor and did
business as such with a number of know a companies in
the country. It maintains its own office and had its own
office equipment. It furnished its janitors the cleaning
equipment such as carpet vacuums and polishing ma­
chines.
(a) Are the janitors assigned by CSI to Union Carbide
considered employees o f the latter? Why?

ANS. No. CSI is a job contractor, not a labor-only

contractor; hence, the janitors are its own employees.

(b) As later on Union Carbide sold its agricultural-

chemical divisions to Rhone-Poulenc, is the latter
bound by the janitorial service agreement between the
form er and CSI? Why?

ANS. No. As new owner, Rhone-Poulenc had

every right to choose its own service contractor.
(Rhone-Poulenc Agrochemicals Phils., inc. vs. NLRC,
et al., G. R. Nos. 102633-35, January 19, 1993)

* * *

Building Care Corporation (BCC), capitalized at P1 m il­

lion which was lawfully subscribed and paid for, pro­
vided janitorial and other specific services to various
 WAGES

firms. It hired Virginia Neri and Jose Cabelin and

assigned them to work in the Cagayan de Oro City
Branch of Far East Bank and Trust Co (FE B TC ) to work
as radio/telex operator and as janitor, respectively.
They reported fo r work wearing the prescribed uniform
o f BCC; their leaves of absence war® filed directly with
BCC; and their salaries were drawn only from BCC.
FEBTC however issued a jo b description which detailed
the functions of Neri as a radio/telex operator.
(a) Who is the employer of Neri and Cabelin?

ANS. Applying the “control test", BCC is the

employer of Neri and Cabelin. BCC maintained super­
vision and control over them through its Housekeeping
and Special Services Division.

(b) Does the issuance by FEBTC o f a jo b description

which detailed the function o f Neri establish employer-
employee relationship between FEBTC and Neri?

ANS. No. A cursory reading of the job description

shows that what was sought to be controlled by FEBTC
was actually the end-result of the task, e. g., that the
daily incoming and outgoing telegraphic transfer of
funds received and relayed by her, respectively, tallies
with that of the register. The guidelines were laid
down merely to ensure that the desired end-result was
achieved. It did not, however, tell TJeri how the
radio/telex machine should be operated.

(c) May BCC be deemed a jo b contractor considering

that there was no evidence that it had investment in the
form o f tools, equipment, machineries, work premises,
among others? Why?

ANS. Yes. It had substantial capital. Article 106

of the Labor Code does not require that the contractor
has both substantial capital and investment in the form
of tools, etc. It uses the word “or” , not “and” . (Neri et
al. vs. NLRC, et al., G. R. Nos. 97008-09, July 23,
1993)

257
 WAGES

The Philippine Geothermal inc. (PGI) entered into an

agreement (denominated as Job Contracting Agree­
ment) with Build O. Weld' Service Co. (BOWSC) for
work on patts and phases of the former’s operations in
Tiwi, Albay, and which provided that PGI shall provide
the plans and determine the work specifications o f each
jo b to be contracted; that BOWSC shall be responsible
fo r the completion of each jo b according to the afore­
said plans and specifications and within the tim e set fo r
its completion; that BOWSC shall provide itself w ith the
equipment, tools and implements needed fo r carrying
out each order, except those highly technical equip­
ment required for drilling and other phases o f opera­
tions; that BOWSC will be responsible fo r the recruit­
ment, hiring, placement, assignment, supervision, pro­
motion, discipline and termination or lay-off o f its em­
ployees assigned to the jo b contracts, t and fo r the
payment o f th e ir salaries and other benefits as well as
their SSS and Medicare membership; that PGI w ill pay
the fees due BOWSC fo r services rendered thru
progress billing or at the end of each billing period; and
BOWSC shall at all times have a competent superinten­
dent on the jo b site and who w ill be in complete control
o f the work. The employees hired by BOWSC were
required by PGI to subm it progress reports and register
their arrivals and departures through individual time
cards.
fa) Is BOWSC a jo b contractor? Why?'

ANS. Yes. It performed the stipulated services to

PGI without being subject to the control of the latter,
except only as to result of the work to be performed.
The requirement for the submission of progress re­
ports and the filling out of individual time cards does
not enough indicator to demonstrate control of PGI
over the employees of BOWSC; at most, the same
merely ensure order in the project site.

fb) Are the workers engaged by BOWSC pursuant to

contract w ith PGI regular employees, considering that

0«!R
 WAGES

they worked fo r more than one (1) year and that they
were never issued any written contracts o? employment.

ANS. No. They are project workers of BOWSC.

They were employed only for the PGI project and were
terminated upon the completion of the project or the
phase for which their services were engaged. And the
law does not require that an employer issue any
written contracts of employment to project employees
to which the employees are being assigned. (Bordeos
et al. vs. NLRC, et al., G. R. Nos. 115314-23,
September 26, 1996)

■it * *

FYLS8N, w hich is engaged in the manufacture o f

polyester fiber, entered into a contract w ith DE LIMA
GENERAL SERVICES whereby the latter undertook to
perform specific janitorial services at the form er’s plant
in Sta. Rosa, Laguna, DE LIMA was capitalized at
P1,600,000.00, P400,000.00 o f which was actually sub­
scribed.
(a) May DE LIMA be considered as a labor-only contrac­
tor? Why?

ANS. No. It is a highly capitalized venture.

Besides, the janitors of DE LIMA render services which
are merely incidental, not integral, to the business
operations of FYLSIN; the latter's production and sales
will not suffer even in the absence of janitorial ser­
vices. DE LIMA is an independent contractor.

(b) May FYLSIN be held liable jo in tly and severally with

DE LIMA fo r the claim of a ja nitor fo r backwages arising
from illegal dismissal? Why?

ANS. Yes. This is pursuant to Article 109 of the

Labor Code which makes the principal of the indepen­
dent contractor liable jo intly and severally with the
latter for any violation of any provision of the said

259
 WAGES

Code. (Pilipinas Synthetic Fiber Corporation vs.

NLRC et al., G. R. No. 113347, June 14, 1996)

Philippine Commercial International Bank (PCIB) en­

tered into a.n' agreement with Prime Manpower Re­
sources Development, Inc. (Prime) which provided
among others that Prime shall provide qualified and
adequate personnel services required by PCIB; that
PCIB shall have the right to select, refuse o r change
personnel assigned by Prime; that PCIB shall be re­
sponsible in supervising the personnel assigned to it
by Prime; that the personnel assigned by Prime to PCIB
shall not be considered employees o f the latter; and
, that PCIB shall pay Prime specific hourly rates per Job
category and status for the assigned personnel and
overtime fo r work they render in excess o f regular work
periods.
is Prime a job contractor? Why?

ANS. No. Prime is a labor only contractor. It

merely acted as a placement agency providing man­
power to PCIB. The service rendered by Prime was
not the performance of a specific job, but the supply of
qualified personnel.
The legitimate job contractor provides services
while the labor-only contractor only provides man­
power. The form er undertakes to perform a specific
job, while the latter merely provides the personnel to
work for the empicyer. (PCi Automation Center, inc.
vs. NLRC et al., G. R. No. 115920, January 24,
1996)

* *

Fuji Xerox entered into an agreement w ith Skill Power

under which the latter supplied workers to operate
copier machines o f the former as part o f its (Fuji Xerox)
“ Xerox Copier Project” in its sales offices. Among the

260
 WAGES

workers assigned bw Skillpow er to F u ji'X e ro x was

Garacio. , He, was hared by Skillpower, but fo r five (5)
years he was. assigned to Fuji Xerox and was never
assigned to any other client of Skillpower. He became
a member o f the union o f employees ©f Fuji Xerox, but
he received his pay from Skillpower. He was also
subjected to administrative investigation by the Indus­
trial Relations Department o f Fuji Xerox. The order fo r
his dismissal was however issued by SkiiiSpower.
(a), Is Skillpower the employer o f Garado? Why?

ANS. No. Skillpower acted as a mere labor-only

contractor, a supplier of manpower and an agent of
Fuji Xerox, who must be considered the employer of
Garado.

(b) 3t is however pointed out that Skillpower is a

highly-capitalized business venture, registered with the
SEC and the DOLE as an “ independent employer” , and
SSS member, with assets exceeding PS m illion pesos
and at least 20 typewriters, office equipment and ser­
vice vehicles, employees o f its own and a pool o f 25
clerks assigned to clients on a temporary basis. W ill
these facts make Skillpower a Job contractor o f Fuji
Xerox?

ANS. No. The service rendered by Garado was

not a specific job or special skill that Skillpower was in
the business of providing.
Furthermore, the typewriters and vehicle of
S killpow er bore no direct relationship to the job of
operating copier machines and offering copying ser­
vices to the public. It did not have copying machines
of its own. The tools, equipm ent,m achineries etc.
provided for in the implementing rules of the Labor
Code must be directly related to the business the
contractor has undertaken to render.

(c) The agreement between Fuji Xerox and Skillpower

provided that Skillpower is an independent contractor,
that the workers hired by it shall not be considered as

261
 WAGES

employees of Fuji Xerox, and that Fuji Xerox has no

control or supervision whatsoever over the conduct of
the contractor or any of its worker in respect to how
they accomplish their work or perform the contractor’s
obligation under the agreement. Does this stipulation
make Skillpower an independent contractor? Why?

ANS. No. The nature of one’s business is not

determined by self-serving appellations one attaches
thereto but by the tests provided by statute and
prevailing case law. The relations of parties must be
judged from case to case and the decree of law, and
not by declaration of parties. (Philippine Fuji Xerox
Corporation et al. vs. NLRC et al., G. R. No.
111501, March 5, 1996)
* * *

Peninsula Manpower Company, Inc. (PMCI) had a

“ Contract of Service” w ith Regent Food Corporation
(RFC), pursuant to which the former, supposedly an
independent contractor, would provide temporary man­
power services to the fatter. Amwsg the westers hired
and utilized by PMCI in connection w ith Us c o n tr o l
with RFC was Virtoya, a sales representative, who how­
ever came under the control and supervision o f RFC.
PMCI was capitalized at P1 m illion o f which
P75.000.00 was actually paid up. May PMCI be consid­
ered a jo b contractor? Why?

ANS. No. PMCI does not have substantial capital­

ization; its paid-up capital of P75,000.00 cannot be
considered as such. It did not also carry on an
independent business nor did it undertake the perfor­
mance of its contract according to its own manner and
method, free from the control and supervision of RFC;
the Contract of Service itself provided that RFC can
require the workers assigned by PMCI to render ser­
vices even beyond the eight hour working day when
deemed necessary. Likewise, PMCi was not engaged
to perform a specific and special job or service but

282
 WAGES

undertook merely to provide RFC with temporary work­

force to carry out whatever service may be required of
it; obviously, PMC! acted m erely as a recruitment
agency for RFC. Finally, Vinoya, the worker placed by
PMCI with RFC performed services directly related to
the business of RFC; being in the business of food
manufacturing, it was necessary for RFC to hire a
sales representative to book saies orders and collect
payments therefor. (Vinoya vs. NLRC et at., G. R.
No. 126586, February 2, 2000)
iSr"' if . *

Donna Louise Advertising a n d ' Marketing Associates,

inc. (DL Admarfc) had a service contract with California '
Manufacturing Corporation (CMC) whereby the former
undertook to supply sales promoting and merchandis­
ing services to the latter, which is a corporation en­
gaged in the manufacture of v'ood products and distri­
bution of such products to wholesalers and retailers.
DL Admarfc was registered w ith the SEC as a firm
engaged in promotional, advertising, marketing and
merchandising activities. It Srad several merchandising
contracts with companies Site Purefoods, Corona Sup­
ply, Nabisco Biscuits, and Ueson. It was likewise en­
gaged in the publication ljusiness,
St had assets amounting I© P6 million, owned several
motor vehicles and otlser tools, materials and equip­
ment to service its clients, it had an authorized capital
stock of PS00,000.00 and paid monthly rentals of
P30,020.00 for the office space it occupied.
It hired the workers that it utilized in fu lfillin g its service
contract w ith CMC, paid their wages, and had the power
to terminate their services. No evidence was presented
that would suggest that it was CMC that supervised and
controlled the workers.
(a) Is DL Admark a labor only contractor? Why?

ANS. No. It is a job contractor. It carried on a

distinct and independent business and undertook the

263
 WAGES

contract work on its own account and responsibility

according to its own manner and method free from the
control and direction of CMC. It also had substantial
capital as well as investment necessary in the conduct
of its business.

(b) Who is considered the employer o f the merchandis­

ers hired by DL Admark?

ANS. They are considered employees of DL

Admark. Under the four-fold test used in determining
employer-employee relationship, the status of DL Ad­
mark as the true employer of the workers is clearly
established. (Escario et al vs. NLRC et al., G. R.
No. 124055, June 8, 2000)

* * *

The Cotabato Timberiand Co., Inc. (CTCI), which is

engaged in plywood manufacturing had a contract w ith
Arabi fo r the m illing, piling and bundling o f log ends or
sawn lumber in small scale, as well as clearing and
hauling o f firewood or waste firewood. Arabi had no
equipment, tools and capital of his own; CTCI lent him
the tools and equipment to his m illing, p iling and
bundling work. Majority o f the workers that he hired to
accomplish the work were his neighbors, friends and
province mates; their wages came from the money paid
by CTCI to Arabi based on sawmill production and/or
number o f workers or time used in a certain jo b o r area
o f operation. Work activities and schedules were set by
CTCI.
fa) §s Arabi a job contractor? Why?

ANS. No. He is a labor-only contractor. He acted

merely as a recruiter or supplier of manpower. He did
not have substantial capital or equipment or tools to
accomplish the work. His supposed workers were
subject to the control of CTCI.

264
 WAGES

(b) Who is liable fo r the claims o f the workers hired by

Arabi? Why?

ANS. CTCI, not Arabi, is responsible for the

claims of the workers hired by Arabi. Arabi was a
mere agent of CTCI.

(c) Were the work/job activities performed by the work­

ers hired by Arabi necessary to CTCI’s principal busi­
ness?

ANS. Yes. The workers performed usual regular

and necessary services fo r CTCi’s production o f ply­
wood. (Lim et al vs. NLRC et al., G. R. No. 124630,
February 12, 1999)

* * *

Philippine Airlines, Inc. (PAL) and Stellar Industrial

Services, Inc. (STELLAR) entered into an agreement to
the effect that STELLAR w ill provide PAL with cleaning
and janitorial maintenance services; that STELLAR w ill
utilize its personnel, equipment, supplies and materials
to carry out its undertakings; that STELLAR warrants
that the persons it shall employ to perform the work are
honest, reliable and in possession of health certificates
and police clearances and that the materials it w ill use
are o f high quality anc{ w ill not cause any damage to
PAL’s premises; that in consideration o f the services to
be rendered by STELLAR, PAL w ill pay STELLAR the
sum o f P3,840.00 per person per month; that STELLAR
shall select, engage and discharge its employees, shall
have direct control o f their services, and shall deter­
mine their rate o f wages.
(a) Considering that it has sufficient capital in the form
o f tools and equipment, like vacuum cleaners and pol­
ishers, and it has clients other than PAL, like San
Miguel Corporation, Hongkong and Shanghai Bank and
Japan Airlines, is STELLAR a jo b contractor? Why?
 WAGES

ANS. Yes. The circumstances establish that

STELLA R undertook to perform the services on its own
account, under its own responsibility, according to its
own manner and method, and free from the control and
direction of PAL. The janitorial services agreement
between STELLAR and PAL is a case of permissible
job contracting.

(b) Is PAL considered the employ,r of the janitors hired .

by STELLAR? Why?

A N S. No. in legitimate job contracting, no

employer-employee relation exists between the princi­
pal and the job contractor’s employees. In any case,
■STELLAR had the power of selection and engagement
of the janitors; it paid their wages; it had authority to
dismiss them; and it had control over their conduct.
(Philippine Airlines, Inc. vs. NLRC et al., G. R. No.
128792, November 9, 1998)

* ■&

Banco d© Manila and the Ang Husay Janitorial and Pest

Control Agency entered Into an independent.Contractor
Agreement w ith the usual stipulations; specifically, the
absence of. .esroplbyer-smpioyee’ relationship, and .the
relief from liability clauses. Can the Bank, as a client,
and .the>Agency, as tin, independent contractor, stipulate
that no employer-employee .relationship exists between
the Bank, and the employees of the Agency who may be
assigned to work In the Bank? Reason, (2000 Bar),;.

ANS. It depends. When the employees to be

assigned to work in the bank by ■the agency :will
become subject to the control and supervision of the
bank, the stipulation would not. be valid. The arrange-,
men! would in effect be merely labor only contracting,
and the employees would.be considered as employees
of the bank. (Phil. Bank of Communications vs.
NLRC et al.', G. R. No. L-66598, December 19, 1986)
 WAGES

On the other hand, where the employees will not

become subject to the control and supervision of the
bank, the stipulation would be valid. In this case,
there is job contracting; the employees of the contrac­
tor do not become employees of the principal. (See
Article 106, Labor Code)

* * *

Metro Grocery Inc. arranged with Mr. Juan Dado, a

Barangay Chairman, to provide the grocery w ith w ork­
ers who w ill work as cashiers, bag boys, shelf counter
helpers and sanitation workers. The grocery w ill pay
Mr. Dado an amount equivalent to the direct and hidden
costs o f the wages o f each worker assigned, plus ten
percent (10%) to cover the administrative costs related
to their arrangement. Mr. Dado, in turn, w ill pay
directly the workers their wages. As far as the workers
are concerned, Mr. Dado is their employer. A group o f
concerned workers consulted you if Mr. Dado is really
under the law their employer. (2000 Bar)
(a) How w ill you analyze the problem in order to
formulate your answer?

ANS. The issues presented involve employer-

employee relationship, as well as “job contracting* and
“labor -only contracting."
To resolve these issues, the tests to determine the
existence of employer-employee relationship must be
utilized, including the control test, which is the most
important test in the determination of whether such a
relationship exists.
The provisions of the Labor Code on “job contract­
ing’ and “labor only contracting’ (Articles 106 to 109)
must also be applied. For if Mr. Dado is merely a
labor only contractor, the workers that he provided the
grocery would be considered employees of the latter.
At any rate, under the facts given in the question,
Mr. Dado is merely a labor only contractor.

267
 WAGES

(b) What is the legal significance, if any, o f the question

of tSi© concerned workers as to who is their employer?

ANS. The relationship between the concerned

workers and their employer will be governed by labor
and social legislations; and not by ordinary rules on
obligations and contracts.
Their claims arising from employer-employee rela­
tionship will fall under the jurisdiction of labor tri­
bunals, like the National Labor Relations Commission,
and not under that of ordinary courts.
* * *

The evidence on record shows that Delos Santos, a

janitor, was hired by CAMARA STEEL after undergoing
an interview with a timekeeper who worked under the
direct supervision o f a supervisor o f the company, that
he filled up time records which although bearing the
heading and logo of TOPFLITE (a supposed jo b con­
tractor) were signed by officers o f CAMARA STEEL, that
TOPFLITE requested CAMARA STEEL to dismiss Delos
Santos, and that the contract between TOPFLITE and
CAMARA STEEL stipulated that the form er shall
“ provide” workers to the latter.
(a) Who is considered the employer o f Delos Santos?
Why?

ANS. CAMARA STEEL. It exercised control and

supervision over Delos'Santos. This is shown by the
fact that the worker’s time records were signed be
officers of CAMARA STEEL. The company also had
the power to dismiss the worker; this is shown by the
fact that TOPFLITE “retHJested" it to dismiss Delos
Santos.

(b) Is TOPFLITE a job-contractor? Why?

ANS. No. It is merely a labor-only contractor. It

did not adduce evidence that it had substantial capital­

288
 WAGES

ization to undertake an independent business. Delos

Santos also performed activities directly related to ihe
daily operations of the steel factory. (Deios Santos et
al vs. NLRC et al., G. R. No. 121327, December 20,
2001 )
* * *

San Miguel Corporation (SMC) had a Contract of'Ser­

vices with Maerc Integrated Services, Inc. (MAERC) in
connection with the washing and segregation of vari­
ous kinds of empty bottles used fey SMC in the sate and
distribution of its beverages to the consuming public in
Cebu. MAERC was set up to meet the pressing needs of.
SMC which was then having labor problems in its
segregation division. MAERC’s investments in the form
of buildings, tools and equipment amounted to more
that P4 million, but it was SMC that required such
investments with the understanding that their business
relationship would £se on a long term basis. SMC paid
MAERC a lump sum for the workers" wages, but as­
sumed responsibility of paying their overtime, holiday
rest day, benefits, 13® month pay, service incentive
leaves as well as the employer’s share in their SSS and
Medicare contributions. The workers performed their
work in premises controlled by SMC and in the pres­
ence of SMC checkers, must undergo and pass eye
examination don® by SMC EEN T company doctor.
None of the workers of MAERC was ever assigned to
other companies.
(a) Is MAERC a job-contractor?

ANS. No. It displayed the characteristics of a

labor-only contractor.

(b) The contract of services between MAERC and SMC

provided that MAERC was an independent contractor
and that the workers hired by it shall not in any manner
and under any circumstances be considered employees
of SMC and that SMC has no control over the conduct
of MAERC or any of its workers in respect to how they

289
 WAGES

accomplish their work or perform MAERC’s obligations

under the contract. Are the supposed workers of
MAERC considered workers of SMC?

ANS. Yes. In deciding the question of control, the

language of the contract is not determinative of the
parties’ relationship; rather, it is the totality of the facts
and surrounding circumstances of each case.

(c) After more than three (3) years, SSV8G terminated the
service contract because of the phase out of its segre­
gation activities due to the installation o f labor and
cost-saving devices. Is SMC liable for the payment of
separation pay and indemnity to the workers?

ANS. Yes. Being considered the direct employer

of the workers of MAERC, SMC is liable for the
payment of separation pay to the former. It is also
liable for payment of indemnity for its failure to com­
pany with the requirement of written notice to boiii the
workers concerned and the DOLE which must be given
at least one (1) month before the intended date of
dismissal. (San Miguel Corporation vs. MAERC
Integrated Services, Inc. et a!., G. R. No. 144672,
July 10, 2003)

* * *

Give the concept of “contracting” or “subcontracting.”

ANS. “Contracting” or “subcontracting0 refers to an

arrangement whereby an employer, known as the
“principal," agrees to put out or farm out with a
contractor or subcontractor the performance or com­
pletion. of a specific job, work or service within a
definite or predetermined period, regardless of
whether such job, work or service is to be performed or
completed within or outside the premises of the princi­
pal. (Section 4[d], DOLE Department Order No. 10,
Series of 1997)

270
 WAGES

Describe the -relationship arising from contracting ar­

rangements;

ANS. In legitimate contracting, there exists a

trilateral relationship under which there is a contract
for a specific job, work or service between the princi­
pal and the contractor or subcontractor, and a contract
of employment between the contractor or subcontrac­
tor and its workers. Hence,; there are three parties
involved in these arrangements, the principal which,
decides to farm out a;job or service t o c o n t r a c t o r or
subcontractor, the contractor or subcontractor which
has the capacity to independently undertake the per­
formance of the job, work or service, and the contrac­
tual workers engaged by the contractor or subcontrac­
to r to accomplish the job, work or service. (Sec. 3,
DOLE D epartm ent O rder Mg . 18-02)

* T'r -k

What are the rights o f contractual employees?

AM8. The contractual employee shall be entitled

"to all the. rights and privileges due to a regular em­
ployee as provided fo r in the Labor Code, as amended,
to include the follow ing:

(a) Safe and healthful working conditions;

(b) Labor, standards such • as 'service incentive
leave,- rest days, overtim e pay, holiday pay,
13th month pay and separation pay; ,
(c) Social security and w elfare benefits;
(d) Self-organization, c o lle c tiv e bargaining and
peaceful concerted action; and
(e) Security of tenure. (Sec. ,8, DOLE Department
Order No. 18-02)

Give the effects o f termination o f contractual employ-

ment.
j

271
 WAGES

ANS. In cases of termination of employment prior

to the expiration of the contract between the principal
and the contractor or subcontractor, the right of the
contractual employee to separation pay or other re­
lated benefits shall be governed by the applicable laws
and jurisprudence on termination of employment.

Where the termination results from the expiration

of the contract between the principal and the contrac­
tor or subcontractor, or from the completion of the
phase of the job, work or service for which the contrac­
tual employee is engaged, the latter shall not be
entitled to separation pay. However, this shall be
without prejudice to completion bonuses or other emol­
uments, including retirement pay as may be provided
by law or in the contract between the principal and the
contractor or subcontractor. (Sec. 10, DOLE Depart­
ment Order No. 18-02)
* * *

Distinguish between job contracting and labor only

contracting.

ANS, Job contracting is legally recognized; labor

only contracting is prohibited.
In job contracting, the contractor has substantial
capital or investment in the form of tools, equipment,
machinery, and work premises; in labor only contract­
ing, the contractor does not have substantial capital or
investment.
In job contracting, the employees utilized, by the
contractor are deemed his own employees; in labor
only contracting, the employees of the contractor are
actually the employees of the principal.

it * it

Why is labor only contracting prohibited?

272
 WAGES

ANS. Labor only contracting gives rise to confu­

sion as to who is the real employer of the workers and
who is liable for their claims.
This scheme also deprives workers of the opportu­
nity to become regular employees and to acquire
security of tenure.
* 1te *

Give the extent of the liability o f the principal regarding

the claims o f the employees of the jo b contractor. Cite
instances.

ANS. Pursuant to legitimate job contracting, the

job contractor and the principal are jo intly and sever­
ally liable in the payment of the wages of the form er’s
employees, and for violation of any provision of the
Labor Code. This includes the payment of salary
differential and separation pay. (United Special
Welchman Agency vs. The Court of Appeals et al., G.
R. No. 152476, July 8, 2003)

Nilo Layno Builders, specializing in concrete

works, form works and steel rebar works, was engaged
by New City Builders and Development Corporation, to
perform works in" the construction of an office and
residential condominium. Nilo Layno Builders hired its
own employees, directed them in the performance of
their work, except that from time to tim e the engineers
of New Golden City Builders visited the site to check
whether the work was in.accord with the plans and
specification of the said principal, paid their salaries,
and had the authority to dismiss them fo r just and valid
cause. It was ruled that Nilo Layno Builders was a job
contractor. Nevertheless, in accordance with Article
106 of the Labor Code, the principal (New Golden City
Builders) is jointly and severally liable with Nilo Layno
Builders for the payment of the employees’ wages,
including service incentive leave and 13 month pay,
during the tim e they were working at the project. So
long as the work, task, job or project has been per­

273
 WAGES

formed for the principal’s benefit or on its behalf, the

liability accrues for such period even if, later on, the
employees are eventually transferred or reassigned
elsewhere. (New Golden City Builders & Development
Corporation et al vs. Court of Appeals et al., G. R.
Wo. 154715, December 11, 2003)

VJf ifr

if an" employer Ibscomes feaoknupt or liquidates its busi­

ness, do its workers enjoy any prcferesiee as regards
their unpaid' wages?

AMS. Article 110 of the Labor Code provides that:

In the event of bankruptcy or liquidation of an

employer’s business, his workers shall enjoy first pref­
erence as regards their unpaid wages and other mone­
tary claims, any provision of law to the contrary
notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the ciaims .of the
Government and other creditors may be paid. (As
amended by Rep. Act 6715)

xfc •St tfr

Give the .reasons fo r the preference.

AMS. The reason behind the” provisions of the

Labor Code giving preference to claims of labor in the
liquidation of a business or industrial concern is patent
and manifest, it is but humane and partakes of the
divine that labor, as human beings, must be treated
over and above chattels, machineries and other kinds
of properties and the interests of the employer who
can afford and survive the hardships of life better than
their workers. Universal sense of human justice, not
to speak of our specific social justice and protection to
labor, constitutional injunctions dictate the preference
that the above provisions accord to labor. (Philippine

274
 WAGES

Gommercia! and Industrial Bank and The Manila Bank­

ing Corporation vs. The National Mines & Allied
Workers Union (NAMAVt?U-MIF), National Labor Rela­
tions Commission (RegionaiBranch No. IV) and Atlas
Consolidated Mining & Development Corporation, G.
R. No. L-50402, August 19, 1932)

tit •St tis

Under what condition may the workers’ preference un­

der Article 110 of the Labor God® bs enforced?

ANS. A declaration of bankruptcy or a judicial

liquidation must be present before the workers’ prefer­
ence under Article 110 of the Labor Code may be
enforced. T h e said article cannot be viewed in isola­
tion; it must always be read in relation to the provi­
sions of the C ivil Code concerning the classification,
concurrence and preference of credits. (Development
Bank of the Philippines vs. Hon. A. C. Santos, et a!.,
G. R. Nos. 78281-82, March 8, 1989).

* * *

Why Is the application of Article 11® contingent upon

the institution o f bankruptcy or judicial! liquidation pro­
ceedings against fh© employer?

ANS. The rationale for making the application of

Article 110 of the Labor Code contingent upon the
institution of bankruptcy or judicial liquidation pro­
ceedings against the employer is premised upon the
very nature of a preferential right of credit. A prefer­
ence of credit bestows upon the preferred creditor an
advantage of having his credit satisfied first ahead of
other claims which may be established against the
debtor. Logically, it becomes material only when the
properties and assets of the debtor are insufficient to
pay his debts in full; for if the debtor is amply able to
pay his various creditors in full, how can the necessity
exist to determine which of his creditors shall be paid

275
 WAGES

first or whether they shall be paid out of the proceeds

of the sale of the debtor’s specific property? Indu­
bitably, the preferential right of credit attains signifi­
cance only after the properties of the debtor have been
inventoried and liquidated, and the claims held by his
various creditors have been established (Kuenzle &
Streiff (Ltd.) vs. Villanueva, 41 Phil. 611 (1916);
Barretto vs. Villanueva, G. R. No. L-14938,
December 29, 1962, 6 SCRA 928; Philippine Savings
Bank vs. Lantin, G. R. No. L-33929, September 2,
1983, 124 SCRA 476).
In this jurisdiction, bankruptcy, insolvency and
general judicial liquidation proceedings provide the
only proper venue for the enforcement of a creditor’s
preferential right such as that established in Article
110 of the Labor Code, for these are in rem proceed­
ings binding against the whole world where all persons
having any interest in the assets of the debtor are
given the opportunity to establish their respective
credits (Development Bank of the Philippines vs. Hon.
A. C. Santos et al., G. R. Nos. 78261-62, March 8,
1989).

ft iSt

On December 22, 197S, the National Mines and Allied

Workers Union obtained a judgm ent from the NLRC in
an unfair labor practice case ordering the Philippine
iron Mines to pay to the union severance compensation
of its members by reason o f the closure o f the company
due to bankruptcy. Two days before, or on December
20,1975, the Philippine Commercial and Industrial Bank
and the Manila Banking Corporation, mortgage credi­
tors o f Philippine Iron Mines, foreclosed all mortgages
in their favor; as they were the only bidders at the
auction sale, they eventually received final conveyance
in their favor o f the properties. The properties were
later sold by the banks to Atlas Consolidated Mining
and Development Corporation. But the union sought to
garnish in its favor a portion o f the purchase price due
from Atlas to the banks. Are the banks, as auction

276
 WAGES

purchasers of the properties o f Philippine Iron Mines

mortgaged to them and. as sellers thereof to Atlas,
subject to the claims of the union finally adjudged by
the NLRC? Explain.

ANS. Yes. Under Article 110 of the Labor Code

workers enjoy first preference as regards wages owed
them for services rendered during the period prior to
the bankruptcy or liquidation. (Philippine Commercial
and Industrial Bank, et al. vs. The National Mines and
Allied Workers Union, et al., G. R. No. L-50402,
August 19, 1982)
* * *

Atlas Textile Development Corporation mortgaged its

assets to the Development Bank o f the Philippines.
After Atlas defaulted in its obligations, DBP foreclosed
on the mortgage in March, 1985 and acquired the m ort­
gaged assets by virtue o f the foreclosure Sale. In Octo­
ber 1985 employees filed a complaint With the labor
arbiter against both Atlas and DBP fo r wage differen­
tials, illegal Salary deductions, separation pay and sim i­
lar money claims. The labor arbiter as well as the NLRC
ruled in favor o f the employees, holding that the work­
ers preference under Article 110 o f the Labor Code
prevails over DBP's mortgage lien.
(a) Are the labor arbiter and NLRC correct in holding
DBP liable? Why?

ANS. No. Article 110 does not create a lien in

favor of the workers. Besides, the monetary claims of
the workers of Atlas are not involved in judicial pro­
ceedings in rem in adjudication of claims of creditors
vis-a-vis the assets of the debtor, nor have such
claims accrued after the effectivity of Republic Act No.
6715.

(b) State the rules governing the application o f Article

110 o f the Labor Code.

277
 WAGES

ANS. (1) Article 110, as amended, must be

viewed and read in conjunction with the provisions of
the Civil Code on concurrence and preference of
crediis;
(2) The aforesaid provisions of the Civil Code,
including Article 110 of the Labor Code, require ju d i­
cial proceedings in rem in adjudication of creditors’
claims against the debtors’ assets to become opera­
tive;
(3) Republic Act No. 6715 has the effect of
expanding the “worker preference” to cover not only
unpaid wages but also other monetary claims of labor­
ers, to which even claims of the Government must be
deemed subordinate; and
(4) The amendatory provisions of Republic Act
6715, which took effect on March 21, 1989, should
only be given prospective application. (Development
Bank of the Philippines vs. NLRC, et al., G. R. No.
86227, January 9, 1994)

* * .■ *

The Commissioner of Internal Revenue issued warrants

o f distraint against barges of the Maritime Company o f
the Philippines to satisfy assessments fo r deficiency
common carrier’s tax, fixed tax, commercial broker’s
tax, documentary stamp tax, income tax and w ithhold­
ing taxes. About six (6) months thereafter, a deputy
sheriff o f Manila levied upon and sold the barges at
public auction to satisfy the claims o f employees o f the
shipping company which were adjudicated in an NLRC
case. Is the levy and sale justified under Article 110 of
the Labor Code? Why? i

ANS. No. The claim of the Bureau of Interna!

Revenue for unpaid internal revenue taxes gives rise
to a tax lien upon all the properties, movable and
immovable, of the insolvent taxpayer.
Article 110 does not purport to create a lien in
favor of workers for unpaid wages either upon ail of
the properties or upon any particular property owned

278
 WAGES

by their employer. Furthermore, the said provision

applies only in case of bankruptcy or judicial liquida­
tion of the employer. (Commissioner of Internal Rev­
enue vs. NLRC, et al., G. R. No. 74965, November
9, 1994)
* * tt

Does the workers’ preference defeat a mortgagee’s

claim over the mortgaged property?

ANS. Under Article 110 of the Labor Code, the

workers shall enjoy first preference as regards their
unpaid wages and other monetary benefits in the event
of bankruptcy or liquidation of their employer’s busi­
ness.
The said article establishes merely a rule of prefer­
ence, and does not create a lien in favor of the
workers. W orkers’ claims for unpaid wages and other
monetary benefit's cannot prevail over a mortgagee’s
lien. Furthermore, there should be bankruptcy or
judicial liquidation. (DBP vs. NLRC, G. ft. No.
108031, March 1, 1995)
* * *

Does the preferential right of worker and employees

under Article 110 o f the Labor Code apply to rehabilita­
tion proceedings involving the employer? Explain.

ANS. No. The preferential right of workers and

employees under Article 110 of the Labor Code may
be invoked only upon the institution of insolvency or
judicial proceedings. Indeed, it "'is'well-settled that “a
declaration of bankruptcy or a judicial liquidation must
be present biefore preferences over various money
claims miay be enforced.” But debtors resort to prefer­
ence of credit — giving preferred creditors the right to
have their claim s paid ahead of those o f other
claimants -r- only when their assets are insufficient to

279
 WAGES

pay their debts fully. The purpose of rehabilitation

proceedings is precisely to enable the company to gain
a new lease on life and thereby allow creditors to be
paid their claims from its earnings. In insolvency
proceedings, on the other hand, the company stops
operating, and the claims of creditors are satisfied
from the assets of the insolvent corporation.
(Rubberworld (Phils.) Inc. vs. NLRC et al., G. R. No.
126773, April 14, 1993); see also Rubberworld (Phils.)
Inc. vs. NLRC et al., G. R. No. 128003, July 26,
2000)
tfr * *

In what form should the wages o f a worker be paid?

ANS. The worker’s wages should be paid in legal

tender. The employer is prohibited from paying 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 re­
quested by the latter. (Art. 102, Labor Code)

* * *

May the employer pay the wages o f an employee by

means o f bank checks, postal checks or money orders?
Explain.

ANS. 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 stipulated in a
collective bargaining agreement, or where all of the
following conditions are met:
(1) There is a bank or other facility for encash­
ment within a radius of one (1) kilom eter from the
workplace;
(2) The employer, or any of his agents or repre­
sentatives, does not receive any pecuniary benefit
directly or indirectly from the arrangement;

280
 WAGES

(3) The employees are given reasonable tim e

during banking hours to withdraw th e ir wages from the
bank which tim e shall be considered as compensable
hours worked if done during their working hours; and
(4) 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 (Sec. 2, Rule VIII, Book III,
Implementing Rules and Regulations)
* * *

May the employer be compelled by its employees to pay

their wages in the form o f goods? Why?

ANS. No, the employer cannot be compelled to

pay wages by means of goods. It has the right to
discharge its obligation to pay wages in the manner
recognized by law. This w ill prevent any controversy
that may later on arise as to whether its workers have
been legally and fully paid their wages. Article 102 of
the Labor Code is very explicit to the effect that the
employer cannot pay the wages of his employees by
means other than legal tender, even when expressly
requested by the latter.
Therefore, payment of the laborer's wages by
means of legal tender combined with tunal liver and
intestines is not lawful even where such method of
payment was not only agreed upon but expressly
requested by the laborers. (Congson vs. NLRC et ai.,
G. R. No. 114250, April 5, 1995)
* * *

A meat processing company has among others a prod­

uct called “ True Corned Beer’ which sells at P10.00 per
can. Under company rules, any o f its employees is
entitled to purchase on credit the said product at 25%
discount, but said purchases on credit w ill be consid­
ered as part payment o f his wages. An employee
purchases on credit ten (10) cans o f “ True Corned B e ef’

281
 WAGES

fesjt ofejjgete to tli© application of his purchases as part

o f his wages. Is his objection valid? Why?

ANS. The objection of the employee is valid. The

application of his purchases on credit as part of his
wages would amount to compelling him to receive as
wages food in lieu of legal tender. It would also
constitute as an interference by the employer with the
employee’s freedom to dispose of his wages. This is
prohibited by Article 112 of the Labor Code, which
provides:

W on-fn terfere nce in d is p o s a l o f w ages. — No

employer shall lim it 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 the employer or from other per­
sons, or otherwise make use of any store or services
of such employer or any other person.
☆ ifr it

How often should the wages of the employee be paid?

ANS. Article 103 of the Labor Code provides:

T im e ' of. paym ent. — 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
employer’s 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;

282
 WAGES

(1) That payments are made at intervals not

exceeding sixteen (16) days, in proportion to the
amount of work completed; and
(2) That fina! settlement is made upon completion
of the work.
* * *

Where should the wages be paid?

ANS. As a general rule, the place of payment shall

be at or near the place of undertaking. Payment in a
place other than the workplace shall be permissible
only under the following circumstances:
(1) 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 fir©, flood, epi­
demic or other calamity rendering payment thereat
impossible;
(2) When the employer provides free transporta­
tion to the employees back and forth; and •
(3) Under any other analogous circumstances;
provided that the time spent by the employees in
collecting their wages shall be considered as com­
pensable hours worked.
(4) No employer shall pay his employees, in any
bar, night or day club, drinking establishment, mas­
sage clinic, dance hall, or other sim ilar 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. (Sec. 4, Rule VIII,
Book III, Implementing Rules and Regulations)
* * * '

Under what conditions may an employer pay his em­

ployees’ wages through a bank?

ANS. Section 7 of Republic Act No. 6727 pro­

vides:

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 WAGES

“Upon written permission of the m ajority of the

employees or workers concerned, all private establish­
ments, companies, businesses and other entities with
twenty five (25) or more employees and located within
one (1) kilom eter 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.”
* * *

By reason of insurgency and other peace and order

problems, the employees o f North Davao Mining Corpo­
ration had to collect their salaries at a bank in Tagum,
Davao del Norte, some 58 kilometers from fheir w ork­
place and about 2 1/2 hours’ travel tiirie by public
transportation.
fa) Is the travel time spent by the workers in collecting
their wages considered working time? Why?

ANS. Yes. This is pursuant to Sec. 4, Rule VIH,

Book III of the Rules Implementing of the Labor Code.

(b) Are the employees entitled to reimbursement of

their transportation expenses (round trip fare) in col­
lecting their wages?

ANS. Yes, for equitable reasons. (North Davao

Mining Corporation et al. vs. NLRC, et al., G. R. No.
112546, March 13, 1996)

* * *

To whom should the wages be paid?

ANS. Article 105 of the Labor Code states:

D ire c t p aym en t o f w ages. — Wages shall be

paid directly to the workers to whom they are due,
except:

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 WAGES

(a) In cases of force majeure rendering such

payment impossible or render other special circum ­
stances to be determined by the Secretary of Labor 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 died, in which case the
employer may pay the wages of the deceased worker
to the heirs of the latter without the necessity of
interstate proceeding. The claimants, if they are all o f
age, shall execute an affidavit attesting to their rela­
tionship 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 or his
representative. The representative of the Secretary of
Labor shall act as referee in dividing the amount paid
among the heirs. The payment of wages under this
Article shall absolve the em ployer of any further
liability with respect to the amount paid.

* * *

May an employer make any deduction from the wages

o f his employees?

ANS. As a rule, the employer cannot, in his own

behalf or in behalf of any person, make any deduction
from the wages of his employees. The exceptions are
the following:

(a) Deductions of SSS, Medicare and Pag-ibig

premiums;
(b) Taxes withheld from wages pursuant to the Tax
Code;
(c) Deductions for reimbursement of insurance
premium advanced by the employer where the worker
is insured with his consent by the former;
(d) Deductions for union dues where the right to
check-off has been recognized by the employer or

285
 WAGES

authorized in writing by the individual employee him­

self;
(e) Deductions made with the written authorization
of the employee for payment to a third person and the
em ployer agrees to do so, provided that the latter does
not receive any pecuniary benefit, directly or indi­
rectly, from the transaction;
(f) Deductions for reimbursement of loss or dam­
age to tools, materials, or equipment supplied by the
employer to the employee, in trades, occupations or
businesses where the practice of making such deduc­
tions is recognized;
(g) Deductions as a disciplinary measure for
habitual tardiness;
(h) Agency fees under Article 248, paragraph (e),
of the Code;
(i) Dcsductions for debts due the employer from the
employee.

* * #

Juan w orks as dishwasher in a big restaurant. At the

time o f his employment he was told that the manage­
ment w ould deduct from his wage® the value o f plates
or glasses that may be broken by him while in the
performance o f his woric. He did not however give his
conform ity to th is rule. One day, Juan broke three (3)
glasses. May the management deduct the value of
these items from the wages of Juan? Explain.

ANS. Even without the consent of Juan, the

management can effect the deductions provided the
following conditions are met:

(a) Juan is clearly shown to be responsible for the

loss or damage;
(b) He is given reasonable opportunity to show
cause why the deduction should not be made;
(c) The amount of the deductions is fa ir and
reasonable and does not exceed the actual loss or
damage; and

286
 WAGES

(d) The deduction does not exceed 20% of Juan’s

wages in a week. (Article 114, Labor Code; Section
14, Rule VIII, Book III, Implementing Rules and Regu­
lations)
* * *

The wife o f an employee fells the manager that her

husband has not been giving support to her and their
children, ta k in g pity, the manager instructs the com­
pany cashier to deduct one-third o f the employee’s pay
and give the same to the wife. Is the action o f the
company legal? Explain.

ANS. No. The employee concerned did not give

his written authorization for the deduction. The ques­
tion of support is a matter between the employee and
his fam ily; the employer has no authority to determine
who is entitled to support from the employes.
* * *

Z borrowed from his employer P500.00 to be repaid after

three (3) months. When the loan became due, Z did not
pay his employer. May the employer, w ithout the w rit­
ten consent of Z, deduct the loan from the latter’s
wages? Why?

ANS. Yes. The employer can effect the deduction

pursuant to Article 1706 of the Civil Code which allows
the withholding of wages fo r a “debt due". The consent
of the employee is not necessary; the employer and
the employees are debtors and creditors of each other.
Compensation takes place.
* * *

Because he lives fifty (50) kilometers from his place of

work, X asked permission from his employer to sleep in
the factory premises. The latter agreed but w ith the
condition that X pay the sum o f P5.00 a night fo r the

287
 WAGES

privilege. On payday, X discovered that his employer

had deducted from his pay the amount representing the
charges fo r his stay in the premises. When confronted
by X, the employer said that the amount deducted
represents the value o f facilities furnished him by the
latter. Is the deduction legal? Reason out your answer.

ANS. The deduction is not legal. Lodging is not

customarily furnished by the employer of X to his
employees; the case of X is an isolated one. The
deduction, furthermore is not within the written consent
of X.
* * *

A marketing firm retains five (5%) percent o f the weekly

salary o f its collectors as a deposit to answer fo r any
shortage in their collections. These are refunded at the
end o f the month if no shortages are incurred. Is this
practice legal? Explain.

ANS. Yes. It is a recognized practice of employ­

ers to require deposits or bonds from employees
entrusted with company funds. The sum retained is
not excessive and is kept by the employer only for a
reasonable period.
* * *

A taxicab company required its taxi drivers to make

deposits to defray any deficiency which the latter may
incur in the remittance o f their “ boundary” and to cover
car wash payments. Is this requirement authorized
under Article 114 o f the Labor Code? Explain.

ANS. The requirement for deposit to defray any

deficiency in the remittance of drivers’ “boundary" is
not lawful. Article 114, which provides the rule on
deposits for loss or damage to tools, materials or
equipments supplied by the employer, does not apply
to or permit such kind of deposit.

288
 WAGES

But the requirement for deposit for car wash pay­

ments is lawful. There is no dispute that as a matter
of practice in the taxi industry, after a tour of duty, it is
incumbent upon the driver to restore the unit he has
driven to the same clean condition when he took it out.
Furthermore, the amounts doled out were paid directly
to the persons who washed the units. Finally, it w ill be
noted that there was nothing to prevent the drivers
from cleaning the taxi units themselves, if they wanted
their car wash payments. (Five J Taxi, etc. vs. NLRC,
et al., G. R. No. 111474, August 22, 1994)

* * *

Give two (2) classes o f documents to be kept and

maintained by the employer in connection with the
payment of wages to its employees, and state how long
such records shall be preserved by the former.

ANS. Payrolls and time records. They shall be

preserved by the employer for at least three (3) years
from the date of the last entry therein. (Sections 6, 7,
and 12, Rule X, Book III, Implementing Rules and
Regulations)

* * *

Does a Regional Director o f the Department of Labor

hav* any power to adjudicate on claims fo r unpaid
wages?

ANS. Yes. Under Article 129 of the Labor Code as

amended by Rep. Act 6715, a Regional Director is
empowered through summary proceedings and after
due notice, to hear and decide any matter involving
recovery of wages and other monetary claims not
exceeding P5.000.00 for each worker, provided there
is no claim for reinstatement.

* * *

289
 WAGES

Six (6) workers filed a claim before the Regional Office

against their employer fo r unpaid night shift differential,
service incentive leave, premium pay fo r rest day, and
overtime pay. Each worker had a claim in excess of
P5.000.00. W ithout first conducting an inspection, the
Regional Director required the parties to subm it their
respective position papers and documentary evidence.
The employer denied the claim. But the Regional Direc­
to r issued an order requiring him to pay his workers
benefits in the total sum o f P206,136.60. Did the Re­
gional Director have jurisdiction over the claim? Why?

ANS. No. Aside from the fact that the aggregate

claims of each worker involve an amount in excess of
P5.000.00, the issues raised therein from both sides
are best ventilated and resolved in a more formal and
extensive proceeding before the Labor Arbiter.
(Baritua vs. Secretary of Labor and Employment, et
al., G. R. No. 89362, November 29, 1991)
* * *

After an on-the-spot inspection and examination o f the

payrolls o f Red V. Coconut Products, Ltd., labor stan­
dards and welfare officers o f the DOLE Regional Office
reported that the company failed to pay its workers
wage increases and allowances am ounting to
P106,027.87. After hearing the workers’ union and the
company, the Assistant Regional Director issued an
order directing the company to pay the aforesaid aggre­
gate amount o f P106,027.87 to the worker’s. The claim
of each worker did not exceed P5,000.00.
(a) Did the Assistant Regional Director have jurisdiction
to issue the order? Why?

ANS. Yes. The amount of the claim of each

worker did not exceed P5,000.00. Besides, under
Article 128 (b) of the Labor Code, he has the power to
issue orders requiring employers to comply with labor
standard provisions of the Code and other labor legis­
lation.

290
 WAGES

(b) Under what circumstances, if any, may the Regional

Director be divested o f his jurisdiction under Article 128
(b) o f the Labor Code?

ANS. They are the following: (a) the employer

contests the findings of the labor regulations officer
and raises issues thereon; (b) in order to resolve such
issue, there is a need to examine evidentiary matters;
and (c) such matters are not verifiable in the normal
course of inspection. (Red V. Coconut Products, Ltd.
vs. Hon. V. Leogardo, et al., G. R. No. 72247, April
10, 1992)
* * Or

The Regional Director o f the Department o f Labor and

Employment issued an order requiring the employer to
pay to eighty-six (86) employees over P800,000.00 repre­
senting their monetary claims covering a three-year
period. Each employee was entitled to an aggregate
amount of about P10,000.00. The order was issued
follow ing an inspection conducted by labor standards
and welfare officers, and it was based solely on the
affidavits submitted by the employees.
(a) Is the order o f the Regional Director valid and
enforceable? Why?

ANS. No. It was issued without jurisdiction. The

claim of each employee exceeds P5.000.00. This falls
under the original and exclusive jurisdiction of the
Labor Arbiter to hear and decide as provided for in
Article 217 of the Labor Code.

(b) May not the order be justified upder the visitorial

power of the Secretary o f Labor and Employment?

ANS. No. To construe the visitorial power of the

Secretary of Labor to order and enforce compliance
with labor laws as including the power to hear and
decide cases involving employees’ claims for wages
arising from employer-employee relations, even if

291
 WAGES

the.amount of said claims exceeds P5.000.00 for each

employee, would emasculate and render meaningless,
if not useless, the provisions of Article 217(a)(6) and
Article 129 of the Labor Cods which confer exclusive
jurisdiction on such claims.
The proceeding before the Secretary of Labor (or
his agents) exercising his visitoriai powers is summary
in nature. When the employee’s claim is less than
P5.000.00 a summary procedure for its settlement can
be justified, but not when a claim is more or less
substantial.
if Article 128(b) of the Labor Code were to be
construed as empowering the Secretary of Labor,
under his visitoriai powsr, to hear and decide all types
of employees’ claims, including those exceeding
P5,0Q0.00 for. each employee, then Article 129
(limiting the Regional Director’s jurisdiction to a claim
not exceeding PS,000.00) becomes useless surplusage
in the Labor Code.
The mere fact that Article 129 limits the jurisdiction
o f the Regional Director to “complaints of any inter­
ested party” seeking an amount not more than
P5.000.00, for each employee, does not necessarily
mean that because of the absence of any complaint
from any interested party, he or the Secretary of Labor
is motu probio empowered to hear and decide a claim
of more than P5.000.00 for each employee. (Fermin
vs. Secretary of Labor arid Employment, et al., G. R.
No. 83105, October 21, 1992; but see R. A. 7730,
amending Art. 128, approved on June 2, 1994)
•A’

On March 14, 1903, employees of a hotel filed a com­

plains with the Regional Office of the Department of
Labor and Employment for underpayment of wages and
non-payment of service incentive leaves. The Regional
Office ordered an inspection of the employment records
of the hotel; the latter objected on 4h® ground that the
employer-employee relationship had been severed be­
cause of the closure of business and that the claim of
each worter exceeded P5.OOO.08, On September 25,

292
1989, the Regions! Director issued'ars order recjuirirsg
the hotel to pay ihe sum of P287,141.55, representing
underpayment of n.inireum wage and P3,840.00 as ser­
vice incentive leave.
(a) Did the Regional Director have jurisdiction to issue
the order? Why?

ANS. No. The Regional Director can assume

authority only upon the concurrence of these requi­
sites:
(1) The claim is presented by an employee or
person employed in domestic or household service, or
househeloer under the Code;
(2) The claimant, no longer being employed, does
not seek reinstatement; and
(3) The aggregate money claim of the employee or
househeiper does no? exceed five thousand pesos
(P5.000.00).
Under Article 217 of the Labor Code, as amended
by Republic Act 6715, tfte case falls within the jurisdic­
tion of the Labor Arbiter.

(b) Will the foregoing rote apply where the .claim arose
prior to the effeeJivity c ? Republic Act 6715 on March 21,
1989? Explain.

ANS. Yes. Republic Act No. 6715, amending

among others Article 217 of the Labor Code is in the
nature of a curative act with retroactive operation to
pending proceedings. The application of the said
amendatory law to pending cases has been recognized
in the South Motorist case, 181 SCRA 3S6. (Rajah
Humabon Hotel, inc., et al. vs. Hon. C. Trajano, et
al., G. R. No. 100222-23, September 14, 1993)
* * *

Is Republic Act No. @715, which took effect on March

21, 1989, applies^* to cases for illegal dismissal and
money claims for ovsr 1*5,390.00 per employee brought
 WAGES

before the Office of the Regional Director o f the then

M inistry of Labor and Employment in 1980? Explain.

ANS. Yes. At the time the cases were filed in

1980, the Regional Director had no jurisdiction over
the claims; this pertained to the Labor Arbiter who,
under Article 217 of the Labor Code, as amended by P.
D. 1691. Republic Act No. 6715, amending among
others Article 217 of the Labor Code which confers
original and exclusive jurisdiction upon labor arbiters
over money claims in excess of P5,000.00 and for
claims for reinstatement is a curative act and can be
applied retroactively.
The cases must therefore be referred to the labor
arbiter for appropriate disposition. The pendency of
the cases before the Regional Director, the Office of
the Secretary of Labor, and the Supreme Court is
deemed to have tolled the running of the prescriptive
period.
The employer cannot be considered estopped from
raising the issue of lack of jurisdiction of the Regional
Director because it never sought affirm ative relief or
submit evidence before the said officer. It also raised
the issue of jurisdiction before the DOLE (Ubay Arras-
tre and Stevedoring Services, Inc. et al. vs. Trajano
et al., G. R. No. 106813, November 25, 1993).

* * *

M. Ramirez Industries is engaged in the manufacture of

handmade rattan baskets fo r export abroad. On April 1,
1986, Carolyn Alfonso and 260 other employees filed
com plaint w ith the Regional Office No. VII of the
Department o f Labor in Cebu City, alleging nonpayment
of minimum wage, living allowances and noncom pli-
ance with other labor standard laws against M. Ramirez
Industries and/or Manny Ramirez, its proprietor. Peti­
tioner filed a motion to remand the case to the National
Labor Relations Commission, contending that the m at'
ter was outside the jurisdiction o f the Regional Director.
W ithout acting on the motion, the Regional Director on

294
 WAGES

July 18, 1986 ordered petitioner to pay private respon­

dents the total amount of P430,901.75. Petitioner
moved fo r a reconsideration o f the Regional Director’s
order, which was treated as an appeal to the Secretary
o f Labor and Employment. On May 12,1989, the Secre­
tary issued an order affirming the Regional Director’s
order. Petitioner filed a motion fo r reconsideration, but
its motion was denied on August 22, 1989. Martinez
contends that the Regional Director has no jurisdiction
to take cognizance of the case. Decide.

ANS. The Regional Director has jurisdiction over

the case. Martinez Contends that the case falls within
the original and exclusive jurisdiction of the Labor
Arbiter, citing in support of its contention Art. 217 of
the Labor Code, which, before its amendment by R. A.
No. 6715 on March 21, 1989,provided:

Art. 217. Jurisdiction of Labor Arbiter and the

Commission.

(a) The Labor Arbiters shall have the original and

exclusive jurisdiction to hear and decide within thirty
(30) working days after submission of the case by the
parties for decision, the following cases involving all
workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that workers may file involving wages,
hours of work and other terms and conditions o f
employment;
3. All money claims of workers, including those
based on nonpayment or underpayment of wages,
overtime compensation, separation pay and other ben­
efits provided by law or appropriate agreement, except
claims for employees’ compensation, social security
medical and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265
of this Code, including questions involving the legality
of strikes and lockouts.

295
 WAGES

(b) The Commission shall have exclusive appel­

late jurisdiction over all cases decided by Labor Ar­
biters.

It is true that on April 1, 1986, when this case was

filed in the Regional Office, Labor Arbiters had original
and exclusive jurisdiction over money claims of labor­
ers pursuant to Art. 217(a)(3) of the Labor Code as
quoted above. On March 3, 1987, however, President
Corazon C. Aquino, issued E. O. No. 111, conferring
jurisdiction over money claims of laborers on Regional
Directors, concurrently with Labor Arbiters.
In “Briad Agro Dev. Corp. v. Dela Serna," this
Court, after declaring E. O. No. 111 to be in the
nature of a curative statute, gave it retroactive appli­
cation with respect to claims filed in 1982 and 1987.
Then on March 21, 1989, R. A. No. 6715 was
enacted, amending the Labor Code so that, so far as
pertinent, it now provides: '

Art. 129. Recovery of wages simple money

claims and other benefits. - Upon complaint of any
interested party, the regional director of the Depart­
ment of Labor and Employment or any of the duly
authorized hearing officers of the Department is em­
powered, 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 em­
ployee 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

296
 WAGES

and Employment or the regional director directly to the

employee or househelper concerned....

Art. 217. Jurisdiction of Labor Arbiters and the

Commission.

- ( a) Except as otherwise provided under this Code

the Labor Arbiter shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calen­
dar days after the submission of the case by the
parties for decision without extension, even in the
absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-
agricultural.

6. Except claims for Employees Compensation,

Social Security, Medicare and maternity benefits, all
other claims arising from employer-employee rela­
tions, including those of persons in domestic or house­
hold service, involving an amount exceeding five
thousand pesos (P5.000.00) regardless or whether
accompanied with a claim for reinstatement...."

Like E. O. No. 111, this amendatory statute was

also retroactively applied to cases where the money
claims of laborers were filed in 1980, 1986, 1987 and
1989, i. e., long before the enactment of said statute
on March 21, 1989. As we have construed the above
provisions of the Labor Code, as thus amended, the
Regional Director has the power to decide the cases
involving money claims of laborers where the following
requisites concur: (1) the claim must arise from
employer-employee relationship; (2) the claimant does
not seek reinstatement; and (3) the aggregate money
claim of each employee does not exceed P5.000.00
and, even if they do not, if they include claims for
■veinstatement, the matter falls within the original and
'■exclusive jurisdiction of the Labor Arbiter.
It is not disputed that the time of the filing of the
complaint, private respondents were employees of
petitioner and that said relationship gave rise to pri­

297
 WAGES

vate respondents’ claim for wage differentials. Al­

though no longer employees of petitioner, private
respondents do not seek reinstatement and the aggre­
gate money claim of each of them does not exceed
P5.000.00. As a matter of fact, the Regional Director’s
order shows that the aggregate claim of each of the
261 femployees involved does not exceed P2.500.00.
(M. Ramirez Industries et al. vs. Hon. Secretary of
Labor and Employment et al., G. R. No. 89894,
January 3, 1997)

★ * *

Wh&t is a “ wage distortion” ?

ANS. A w age d is to r tio n 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 be­
tween and among employee groups in an establish­
ment as to effectively obliterate the distinctions em­
bodied in such wage structure based on skills, length
of service, or other logical bases of differentiation.
(Art. 124, Labor Code)
★ * *

For a wage distortion to arise, is it necessary that there

be an elim ination or total abrogation o f quantitative
wage o r salary differences? Explain.
ANS. No. A severe contraction of the wage or
salary differences is enough. Thus, where the quanti­
tative difference between the wages of regular and
non-regular employees, as provided in the CBA has,
by reason of the grant of mandated wage increase of
P25.00 per day, been reduced from P900.00 to barely
P150.00, it has been held that a severe contraction
has arisen warranting correction by the NLRC.
Such correction, however, need not necessarily be
an across-the-board increase; a fa ir and equitable
formula may be the following:

OQfi
 WAGES

Minimum Wage % x Prescribed

Adjustment Actual Increase
Salary

= Distortion

(Metropolitan Bank and Trust Co. Employees

Union, et al. vs. NLRC, et al., G. R. No. 102636,
September 10, 1993)

Franklin Baker Company o f the Philippines (Davao) had

tw o (2) sets o f workers, namely, regular and non-
regular. Prior to the effectivity o f Wage Orders Nos. 3,
4 and 5, in 1983 and 1984, there existed a positive
differential between the two (2) groups in the amount o f
P4.56. After the implementation o f the aforesaid wage
orders, the gap was obliterated and reduced to zero.
Did a “ wage distortion” arise? Explain.

ANS. Yes. There existed a two-fold classification

of workers within the company into regular and non-
regular, and the classification was reflected in a differ­
ing wage rate for each group. Distortion, consisting of
complete elim ination of the wage rate differential,
occurred. (National Federation of Labor vs. NLRC, et
al., G. R. No. 103586, July 26, 1994)

* * *

May the increases provided fo r in a collective or other

voluntary agreement be taken into account in determin­
ing whether a wage distortion has been corrected,
considering that employee benefits derived from law
are exclusive, distinct and separate from those obtained
through negotiation and agreement? Explain.

ANS. Yes. Article 124 of the Labor Code, as

amended by Republic Act No. 6727, expressly pro­
vides that where the application of any prescribed

299
 WAGES

wage increase by virtue of a lav-/ 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 ihe distortions.
The Saw recognizes, therefore, the validity of negoti­
ated 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 wags distortions are in keeping with the
public policy of encouraging employers to grant wage
and allowances increases to their employees which are
higher than the minimum rates of increases prescribed
by statute or administrative regulation. (Associated
Labor Unions-TUCP, etc. vs. NLRC, et al., G. R. No.
109328, August 16, 1994)
\V Vf if.*

What am the points to remember with magard to wags

distortions?

ANS. (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 classifica­
tion is reflected in a differing wage rate for each of the
existing classes of employees.
(b) Wage distortions have often been the result of
government-decreed increases in minimum wages.
There are, however, other causes of wage distortions,
like the merger of two (2) companies (with differing
classifications of employees and different wage rates)
where the surviving company absorbs all the employ­
ees of the dissolved corporation.
(c) Should a wage distortion exist, there is no legal
requirement that, in the rectification of that distortion

300
 WAGES

by re-adjustment of the v;age rates of the differing

classes of employees, the yap which had previously or
historically existed be restored in precisely til© same
amount. In other words, correction of a wage distor­
tion may be done by reestablishing a substantial or
significant gap (as distinguished from the historical
gap) between the wage ratss of differing classes of
employees.
(d) The re-establishment of a significant differ­
ence in wage rates may be the result of resort to
grievance procedures or collective bargaining negotia­
tions. (Metro Transit Organization, Inc. vs. NLRC st
al., G. R. No. 116008, July 11, 1995; Manila
Mandarin Employees Union vs. NLRC et al., G. R.
No. 108556, November 19, 1996)
'S i & it

Does disparity in wages between employees holding

sim ilar positions bu£ in dsffarem eegfons of the country
constitute wage distortion as contemplated by taw?
Explain.

ANS. No. Varying in each region of the country

are controlling facts such as the cost of living; supply
and demand of basic goods, services and necessities;
and the purchasing power of the peso.. The wages in
different regions is not uniform. And the fact that a
person is receiving more in one region does not
necessarily mean that he or she is better off than a
person receiving less in another region.
Wage distortion presupposes an increase in the
compensation of the lower ranks in an office hierarchy
without a corresponding raise for higher-tiered employ­
ees in the same region of the country, resulting in the
elimination or the severe diminution of the distinction
between the two groups. (Prubankers Association vs.
Prudential Bank and Trust Co., G. R. No. 131247,
January 25, 1999)
•St >; *t

301
 WAGES

How is a wage distortion resolved?

ANS. Under Article 124 of the Labor Code, where

the application of any prescribed increase by virtue of
law or Wage Order results in wage distortions within an
establishment, the employer and the union shall nego­
tiate 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 arbitration. Unless otherwise agreed by the
paities 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 arbitra­
tion.
In cases where there are no collective bargaining
agreements or recognized labor unions, the employers
and workers shall endeavor to correct such distortions.
Any dispute arising therefrom shall be settled through
the NCMB and, if it remains unresolved after ten (10)
calendar days of conciliation, it shall be referred to the
appropriate branch of the NLRC.

* * *

Is the classification based on rank covered by the

concept of “ wage distortion” ?

ANS. The formulation of a wage structure through

the classification of employees is a matter of manage­
ment judgm ent and discretion. This may be a subject
of collective bargaining. It falls outside the concept of
“wage distortion.*
Where the classification under the wage structure
is based on rank of an employee, not on seniority,
wage distortion will not result from an increase in the
rates of a newly hired employee in the same rank,
absent any showing that the same is due to a law or
wage order.
If the compulsory mandate under Article 124 to
correct “wage distortion’ is applied to voluntary and
 WAGES

unilateral increases by the employer in fixing hiring

rates which is inherently a business judgment preroga­
tive, then the hands of the employer would be com­
pletely tied even in cases where an increase in wages
of a particular group is justified due to a re-evaluation
of the high productivity o f a particular group. An
employer would be discouraged from adjusting the
salary rates of a particular group o f employees for fear
that it would result to a demand by all employees fo r a
sim ilar increase, especially if the financial conditions
of the business cannot address an across-the-board
increase. (Bankard Employees Union - W orkers A l­
liance Trade Unions vs. NLRC et al., G. R. No.
140689, February 17, 2004)
tV * *

Give fo u r (4) instances where the visitorial power o f the

Secretary o f Labor may be exercised under the Labor
Code.

ANS. U n d e r A rtic le 37, 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 engaged in recruitment and
placement, require it to submit reports regularly on
prescribed forms, and act on violations of any provi­
sions of Code on recruitment and placement.
A rtic le 128 empowers the Secretary of Labor or
his duly authorized representative to have access to
employers’ records and premises to determine viola­
tions of or enforce the Code and any labor law, wage
order rules and regulations issued pursuant thereto.
The Department o f Labor, u n d e r A rtic le 165, is
empowered to conduct industrial safety inspections of
establishments.
A rtic le 274 empowers the Secretary of Labor or
his duly authorized representative to inquire into the
financial activities of legitimate labor organizations
and examine their books of accounts upon the filing of
a complaint under oath and duly supported by the

303
 WAGES

written consent of at least twenty (20%) percent of the

total membership of the labor organization concerned.

it * *

State the provision o f Article 123(b) oif th© Labor Code

as amended by Republic Act No. 7730, approved on
June 2,1994.

ANS. ‘ Art. 128. V is ito r ia l and E n fo rc e m e n t

Power. -

“ (b) Notwithstanding the provisions of Article 129

and 217 of this Code to the contrary; and in case
where the relationship of employer-employee still ex­
ists, 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 enforce­
ment of their orders, except in cases where the em­
ployer 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.
“An order issued by the duly authorized representa­
tive 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 .’
& it it

304
 WAGES

Based on a Notice of Inspection Results of a senior

labor enforcement officer, the Regional Director issued
an order requiring Allied Investigation Bureau, Inc. (a
security agency) to pay to ninety-two (92) employees
the sum o f P807,570.36 representing wage differentials.
The company however assailed the order on the ground
that the Regional Director did not have the power to
adjudicate money claims where the aggregate amount
fo r each employee exceeds P5,000.00. Decide.

ANS. The contention of the company is not

tenable. The order was issued pursuant to Article 123
of the Labor Code, as amended by R. A. No. 7730,
granting to the Secretary of Labor or his duly autho­
rized representatives the visitoriai and enforcement
power.
While it is true that under Articles 129 and 217 of
the Labor Code, the Labor Arbiter has jurisdiction to
hear and decide cases where the aggregate money
claims of each employee exceeds P5.000.00, said
provisions do not contemplate nor cover the visitoriai
and enforcement powers of the Secretary of Labor and
Employment or his duly authorized representatives
under Article 128 (b). This provision explicitly ex­
cludes Article 129 and 217 of the Labor Code by the
phrase “Notwithstanding the provisions of Article 129
and 217 of this Code to the contrary x x x .' (Allied
Investigation Bureau, Inc. vs. Secretary of Labor and
Employment et al., G. R. No. 122006, November 24,
1999, citing Lord and Lady Salon etc. vs. Hon. R.
Young et al., G. R. No. 123258, November 11, 1996)
Similarly, it has been held that a claim of the
workers of mining company for unpaid salaries, 13th
month pay, vacation/sick leave benefits, totaling more
than P4 m illion may be taken cognizance of by the
DOLE Regional Director in the exercise of his visitoriai
power under Art. 128 (b) of the Labor Code, as
amended by Republic Act No. 7730. The said
amendatory law dispensed with the jurisdictional cap
of P5.000.00 per worker, imposed by the Servando
ruling. It is considered a curative act and even apply
to cases pending at the time of its enactment in 1994.

305
 WAGES

(Batong Buhay Gold Mines, Inc. vs. Hon. Dionisio

dela Serna et at., G. R. No. 86963, August 1999)

* * *

Who has the burden o f proving payment o f monetary

claims o f employees? Explain.

ANS. The burden rests on the employer. This is

because the pertinent personnel files, payrolls,
records, rem ittances and other sim ilar documents
which w ill show that the claims have been paid are not
in the possession of the worker but in the custody and
absolute control of the employer. (National Semicon­
ductor, Ltd. vs. NLRC, G. R. No. 123520, June
26,1998; Jimenez vs. NLRC, G. R. No. 116960,
April 2, 1996; Villa et al vs. NLRC et al., G. R. No.
130935, May 11, 2000)

* * *

felay attorney’s fees he awarded in cases involving

recovery o f wages? Explain.

ANS. Yes. Article 111 of the Labor Code provides

that in cases of “unlawful withholding of wages the
culpable party may be assessed attorney’s fees equiv­
alent to ten (10%) percent of the amount of wages
recovered. The said article further provides that it is
unlawful for any person to demand or accept, in any
judicial or administrative proceedings for the recovery
of wages, attorney’s fees which exceed ten percent of
the amount of wages recovered.
The above-mentioned amount constitutes indem­
nity for damages sustained by and payable to the
prevailing party; it is not attorney’s fees payable by a
party to his lawyer. (Traders Royal Bank Employees
Union vs. NLRC et al., G. R. No. 120592, March 14,
1997)

306
 CHAPTER VII

WORKING WOMEN AND MINORS

Give the rules governing nightworfc o f women employ­
ees.

ANS. Article 130 of the Labor Code provides:

“N ig h tw o rk p r o h ib itio n . — No woman, regard­

less of age, shall be employed or permitted or suffered
to work, with or without compensation:
(a) In an industrial undertaking or branch thereof
between ten o’clock at night and six o’clock in the
morning of the following day; or
(b) In any commercial or non-industrial undertak­
ing or branch thereof, other than agricultural, between
m idnight and six o’clock 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.”

However, the foregoing prohibitions do not apply in

the following cases:

(a) in cases of actual or impending emergencies

caused by serious accident, fire, flood, typhoon, earth­
quake, epidemic or other disaster or calam ity, to
prevent loss of life 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 installation, to avoid seri­
ous loss which the employer would otherwise suffer.
(c) where the work is necessary to prevent serious
loss of perishable goods;
(d) where the woman employee holds a responsi­
ble position of a managerial or technical nature or
where the woman employee has been engaged to
provide health and welfare services;

Art
 WORKING WOMEN AND MINORS

(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 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 fam ily operating the establishment or
undertaking. (Sec. 5, Rule XI, Book III, Implementing
Rules and Regulations).

* * *

The Lady Godiva Garments Factory, Inc., a manufac­

turer and exporter o f jeans, has a 3-shift work schedule
but maintains a policy o f not assigning women sewers
to w ork in the third shift from 10:00 p. m. to 6:00 a. m.
the follow ing day. This policy is assailed as discrim ina­
tory by women sewers who want to work in the third
sh ift and get the night shift differential. Is the policy
discrim inatory? Why?

ANS. Yes. The women sewers, by reason of their

sex, are denied the opportunity to earn additional pay.
The employer is not prohibited from assigning them to
the third shift. The nature of the work requires the
manual skill or dexterity of women workers and cannot
be performed with equal efficiency by male workers.
This is one of the exceptions to the prohibition against
the assignment of women to night-work. (Article 131
paragraph (e), Labor Code)

* * *

To insure the safety and health o f women employees,

what facilities may the employer be required to pro­
vide?

ANS. Article 132 of the Labor Code empowers the

Secretary of Labor and Employment to require, in
appropriate cases, the employer to:

308
 WORKING WOMEN AND MINORS

(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 e ffi­
ciency;
(b) To establish separate toilet rooms and lavato­
ries for men and women and provide at least a
dressing room for women;
(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 term ination in special
occupations such as those of flight attendants and the
like.
* * *

Is the employer required by law to give maternity leave

benefits to its female workers? Explain.

ANS. No. Maternity leave benefits are to be paid

in appropriate instances by the Social Security Sys­
tem. The employer is obliged to contribute maternity
leave benefit premiums to the SSS and to advance the
benefit to the employee, subject to reimbursement by
the SSS.
The employer, by contractor by voluntary practice
e or policy, may however bind itself to give maternity
leave benefits in addition to that provided for in the
SSS law.
* * *

Cite the provision o? the Labor Code on population

control.

ANS. Article 134. F a m ily p la n n in g s e rv ic e ;

in c e n tiv e s fo r fa m ily p la n n in g . — (a) Establish­
ments which are required by law to maintain a clinic or
infirmary shall provide free fam ily planning services to

309
 WORKING WOMEN AND MINORS

their employees which shall include, but not limited to,

the application or use of contraceptive pills and in­
trauterine devices.

(b) In coordination with other agencies of the

Government engaged in the promotion of fam ily plan­
ning, the Department of Labor shall develop and
prescribe incentive bonus schemes to encourage fam ­
ily planning among female workers in any establish­
ment or enterprise.
* * *

A security agency employing male and female security

guards has a policy to the effect that female guards be
paid less than the men. Is this policy valid? Why?

ANS. The policy is not valid. It is discriminatory

against female guards simply by reason of their sex.
There should be equal pay for both men and women
for work of equal value. (Art. 135, Labor Code). The
rule is also violative of the policy of the State to insure
fundamental equality before the law of women and
men. (Article II, Section 14, Constitution)
* * *

Give the acts of the employer which are considered

discrim inatory against a woman employee.

ANS. Article 135 of the Labor Code provides:

It shall be unlawful for any employer to discrim i­

nate 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) 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

310
 WORKING WOMEN AND MINORS

(b) Favoring a male employee over a female

employee with respect to promotion, training-opportu­
nities, study and scholarship grants solely on account
of their sexes.

Criminal liability for the w illful commission of any

unlawful act as provided in this article or any violation
o f 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 sepa­
rate and distinct action for money claims, which may
include claims fo r damages and other affirm ative
reliefs. The actions hereby authorized shall proceed
independently of each other. [As amended by R. A.
6725].
* * *

Before accepting female workers fo r employment, a

company requires them to sign an undertaking that
during their employment they w ill not get married, and
that if they get married, they w ill be deemed resigned or
separated from work. Is this undertaking binding?
Why?

ANS. No. The Labor Code provides that:

Article 136. S tip u la tio n a g a in s t m arria ge. — It

shall be unlawful for an employer to require as a
condition of employment or for continuation of employ­
ment that a woman employee shall not get married, or
to stipulate expressly or tacitly that upon getting
married a woman employee shall be deemed resigned
or separated, or to actually dismiss, discharge, dis­
criminate or otherwise prejudice a woman employee
merely be reason of her marriage.
To give validity to such an undertaking w ill drive
the women employees to enter into relationships with­
out the benefit of marriage. It is not conducive to the

311
 WORKING WOMEN AND MINORS

establishment of the legitimate family, which is the

foundation of society.
Furthermore, the married woman should be given
an opportunity to pursue a career and contribute her
talents to national development.
* * *

Grace de Guzman was hired as a probationary em­

ployee by Philippine Telegraph and Telephone Co.
(PT&T) in September 1991. In her jo b application form,
she indicated that she was single although she had
contracted marriage a few months earlier. As PT&T had
a policy o f not hiring married women, Grace de Guzman
was dismissed, ju s t as she was about to complete her
probationary employment due to dishonesty in conceal­
ing her true marital status.
(a) Is the dismissal of Grace lawful?

ANS. No. It is violative of Article 136 of the Labor

Code which makes it unlawful for an employer to
require as a condition of employment or continuation
o f employment that a woman 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, discrim i­
nate or otherwise prejudice a woman employee merely
by reason of marriage.

(b) Should Grace de Guzman be penalized fo r conceal­

ing her true marital status?

ANS. Yes. She committed dishonesty albeit under

the compulsion or an unlawful imposition of the em­
ployer. A three (3) month suspension is appropriate.
This is to obviate the impression that such act should
be condoned.

(c) Under what conditions may a requirement that a

woman employee remain unmarried be justified?

312
 WORKING WOMEN AND MINORS

ANS. Such requirement may be valid if it reflects

an inherent quality reasonably necessary for satisfac­
tory job performance. Only then may the same be a
“bona fide occupational qualification" or BFOQ.
(Philippine Telegraph and Telephone Co. vs. NLRC
et al., G. R. No, 118978, May 23, 1997)
* * *

To minimize immorality among its female employees,

the company lays down a rale that any unmarried
female employee v/ho gets pregnant w ill be dismissed.
Is this rule valid? Why?

ANS. The rule is not valid. Under Article 137 of

the Labor Code, it is unlawful fo r an employer to
discharge a woman employee on account of her preg­
nancy.

* * *

An exclusive school fo r girls, run by a religious order,

dismissed tw o female faculty members on account cv
pregnancy out o f wedlock. Did the school violate any
provision o f th« Labor Code on the employment of
women? (2000 Bar)

ANS. No. The dismissal of the faculty members

was not due to their pregnancy alone; this is coupled
with another element, i. e., their pregnancy out of
wedlock. Teachers are role models. Pregnancy out of
wedlock would not be a good example for the girls to
follow. The dismissal in question is reasonably neces­
sary to protect the school and the students.

* ★ *

An exclusive school fo r girls, run by a religious order,

has a policy of not employing unwed mothers, women
with live-in partners, and lesbians. Is the policy viola­

313
 WORKING WOMEN AND MINORS

tive o f any provision of the Labor Code on employment

o f women? (2000 Bar)

ANS. No. The acts of discrimination against

women employees prohibited and penalized by Article
135 of the Labor Code must be solely on account of
their sex. In this case, the policy of the exclusive
school for girls is not premised solely on sex. The
school has the duty to protect its students from un­
wholesome influences.
* * it

Evelyn Chua, a 30-year old teacher, was dismissed by

the school soon after she got married to Bobby Qua, a
16-year old student in the sixth grade class o f which
she was the adviser. Is the dismissal lawful? Why?

ANS. No, in the absence of substantial evidence

to show that Evelyn Chua took advantage of her
position to court her student.
If the two eventually fell in love despite the dispar­
ity in their ages and academic levels, this only lends
substance to the truism that the heart has reasons of
its own which reason does not know. Yielding to this
gentle and universal emotion is not to be casually
equated with immorality. The deviation of the circum­
stances of their marriage from the usual societal
pattern cannot be considered as a defiance of contem­
porary social mores. (Evelyn Chua-Qua vs. Hon. J.
C. Clave, et al., G. R. No. 49549, August 30, 1990.)

★ * *

The Club Eternally employs Miss L as an ago-go

dancer. One of the conditions of her employment is
that once she gets pregnant her work would cease as it
would be awkward fo r her to be dancing before the
customers during her pregnancy and besides ago-go
dancing m ight induce abortion or miscarriage. After

314
 WORKING WOMEN AND MINORS

three months, Miss L becomes pregnant; the manage­

ment gives notice to her that she would no longer be
allowed to dance and that since there is no other work
available and for*w hich her talents are suitable, her
employment is in effect terminated. Is the action of the
management legal? Why?

ANS. The action of the company is legal. It is

both awkward and dangerous for her to dance during
her pregnancy. O f course, the employer has the
obligation to give her another job, but as stated in the
problem there is no other work for which her talents
are suited. It is not fair to require the employer to
continue employing her.

★ * *

A pharmaceutical company manufacturing contracep­

tive pills and fam ily planning devices advertises fo r
sales representatives to promote its products. Ten (10)
women, five (5) o f whom are on the fam ily way, apply fo r
employment. The company rejects the application of
the pregnant women and employs the rest. Is the action
o f the company legal? Explain.

ANS. Yes. The company has the prerogative to

select its employees. Besides, its refusal to employ
the pregnant applicants is reasonable; they cannot
effectively promote its products which are precisely
intended to prevent pregnancies. What is unlawful is
for the employer to discriminate against or dismiss a
woman employee by reason of her pregnancy.

* * *

Miss X works as a hostess in a nightclub along Roxas

Boulevard. The club requires her to be in the premises
at 8:00 o’clock in the evening and to stay up to 3:00
o’clock the follow ing morning. She is told to be nice to
customers and is paid a percentage of whatever is

315
 WORKING WOMEN AMD MINORS

collected by the club from the latter. There are nights

when she does not earn anything because there are no
customers. Is Miss X nevertheless an employee of the
nightclub? Why?

ANS. Yes. The Labor Code provides:

Article 138. C la s s ific a tio n o f c e rta in w om en

w o rk e rs . — Any woman who is permitted or suffered
to work, with or without compensation, in any night
club, cocktail lounge, massage clinic, bar or sim ilar
establishment, under the effective control or supervi­
sion of the employer for a substantial period of time as
determined by the Secretary of Labor shall be consid­
ered as an employee of such establishment for pur­
poses of labor and social legislation.

* * *

Oivina, a clerk typist, was invited by Mr. V., her boss in

the materials department of the company, and Mr. J.
fo r dinner together w ith some other employees. They
had a few drinks in the course of the dinner. Divina,
thereafter, rode in the car o f Mr. V. thinking that he
would bring her home, instead, Mr. V. drove info a
motel. The next day Divina reported the incident to the
company president and tendered her resignation. Is the
behavior of Mr. V. sufficient ground fo r his dismissal?
Why?

ANS. Yes. As a managerial employee, Mr. V. is

bound by a more exacting work ethics. He failed to
live up to this higher standard of responsibility when
he succumbed to his moral perversity. And when such
moral perversity is perpetrated against his subordi­
nate, he provides a justifiable ground for his dismissal
for lack of trust and confidence. It is the duty of every
employer to protect its employees from over sexed
superiors. (Villarama vs. NLRC, et al., G. R. No.
106341, September 2, 1994)

318
 WORKING WOMEN AND MINORS

What are the acts constituting sexual harassment under

Republic Act No. 7877, otherwise known as the Sexual
Harassment Act of 1995?

ANS. Section 3 of Republic Act No. 7877 pro­

vides:
SEC. 3. W ork, E d u c a tio n o r T ra in in g -re la te d
S exual H arassm ent D e fined. — 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, re­
quests 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:
(1) The sexual favor is made as a condition in the
hiring or in the employment, re-employment or contin­
ued emplovment of said individual, or in granting said
individual favorable compensation, terms, conditions,
promotions, or privileges, or the refusal to grant the
sexual favor results in limiting, segregating or classify­
ing the employee which in any way would discriminate,
deprive or diminish employment opportunities or other­
wise 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.

(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, appren­
ticeship or tutorship is entrusted to the offender;

317
 WORKING WOMEN AND MINORS

(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, al­
lowance or other benefits, privileges, or considera­
tions; or
(4) When the sexual advances result in an intim i­
dating, hostile or offensive environment for the stu­
dent, trainee or apprentice.

Any person who directs or induces another to

commit any act of sexual harassment as herein de­
fined, or who cooperates in the commission thereof by
another without which it would not have been commit­
ted, shall also be held liable under this Act.
* ★ *

A Personnel Manager, while interviewing an attractive

female applicant fo r employment, stared directly at her
fo r prolonged periods, albeit in a friendly manner. After
the interview, the manager accompanied the applicant
to the door, shook her hand and patted her on the
shoulder. He also asked the applicant if he can invite
her fo r dinner and dancing at some future time. Did the
Personnel Manager, by the above acts, commit sexual
harassment? Reason. (2000 Bar)

ANS. Yes. Under Section 3 of Republic Act No.

7877, otherwise known as the Anti-Sexual Harassment
Act of 1995, work-related sexual harassment is among
others committed by a manager, who demands, re­
quests, or otherwise requires any sexual favor from
another as a condition for hiring. In this case, while
the request for a sexual favor in exchange for employ­
ment was not expressly made, the same was clearly
implied from the actuations of the personnel manager.

* * *

In the course of an interview, another female applicant

inquired from the same Personnel Manager if she had

318
 WORKING WOMEN AND MINORS

the physical attributes required fo r the position she

applied for. The Personnel Manager replied: “ You w ill
be more attractive if you w ill wear micro-mini dresses
w ithout the undergarments that ladies normally wear.”
Did the Personnel Manager, by the above reply, commit
an act of sexual harassment? Reason. (2000 Bar)

ANS. No. There is no demand, express or

implied, for a sexual favor as a condition or in ex­
change fbr employment. It should also be noted that
the request for comment came from the applicant.
The remarks may be vexatious but they do not fall
under the purview of Republic Act No. 7877.
* * *

May sexual harassment be a ground fo r suspension?

ANS. Sexual harassment made by a manager to

his female secretary, consisting of touching her hand
and shoulder, caressing her nape and telling other
people that she was the one who hugged and kissed or
that she responded to the sexual advances, is a
ground for disciplinary action. The Anti-Sexual Ha­
rassment Act (R. A. 7877) cannot apply since the
harassment took place prior to the enactment of the
law. The manager was penalized with 30-day suspen­
sion. (Libres vs. NLRC et al., G. R. No. 123737,
May 28, 1999)

* * *

What are the duties of the employer relative to the

prevention or deterrence of the commission o f acts of
sexual harassment?

ANS. Section 4 of Republic Act No. 7877 pro­

vides:

SEC. 4. D u ty o f the E m p lo y e r o r Head o f

O ffic e in a W o rk -re la te d , E d u c a tio n o r T ra in in g

319
 WORKING WOMEN AND MINORS

E n v iro n m e n t. — It shall be the duty of the employer

or the head of the work-related, 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 jointly approved by the em­
ployees or students or trainees, through their duly
designated representatives, prescribing the procedure
for the investigation of sexual harassment cases and
the adm inistrative sanctions therefor.
Administrative sanctions shall not be a bar to
prosecution in the proper courts for unlawful acts of
sexual harassment.
The said rules and regulations issued pursuant to
this subsection (a) shall include, among others, guide­
lines on proper decorum in the workplace and educa­
tional or training institutions.
(b) Create a committee on decorum and investiga­
tion of cases on sexual harassment. The committee
shall conduct meetings, as the case may be, with
officers and employees, teachers, instructors, profes­
sors, coaches, trainors and students or trainees to
increase understanding and prevent incidents of sex­
ual 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 institu­
tion, the committee shall be composed of at least one
(1) representative from the administration, the train­
ors, teachers, instructors, professors or coaches and
students or trainees, as the case may be.
The employer or head of office, educational or
training institution shall disseminate or post a copy of
this Act for the information of ail concerned.

320
 WORKING WOMEN AND MINORS

What are the liabilities of an employer fo r sexual harass­

ment?

ANS. Republic Act No. 7877 provides:

SEC. 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 fo r damages arising from the
acts of sexual harassment committed in the employ­
ment, education or training environment if the em­
ployer of head of office, educational or training institu­
tion is informed of such acts by the offended party and
no immediate action is taken thereon.

SEC. 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 dam­
ages and other affirm ative relief.

SEC. 7. Penalties. — Any person who violates

the provisions of this Act shall, upon convicti.on, 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 provi­
sions of this Act shall prescribe in three (3) years.

* it *

An airline which flies both the international and domes­

tic routes requested the Secretary of Labor and Employ­
ment to approve the policy that all female flig h t atten­
dants upon reaching age forty (40) with at least fifteen
(15) years of service shall be com pulsorily retired; how­
ever, flig h t attendants who have reached age forty (40)
but have not worked fo r fifteen (15) years w ill be al­
lowed to continue working in order to qualify fo r retire­

321
 WORKING WOMEN AND MINORS

ment benefits, but in no case w ill the extension exceed

fo u r (4) years.
Does the Secretary o f Labor and Employment have the
authority to approve the policy? (1998 Bar)

ANS. Yes. Article 132 (d) of the Labpr Code

empowers the Secretary of Labor and Employment to
determine appropriate minimum age and other stan­
dards for retirement or termination in special occupa­
tions such as those of flight attendants and the like.
* * *

Can an individual, the sole proprietor o f a business

enterprise, be said to have violated the Anti-Sexual
Harassment Act o f 1995 if he clearly discriminates
against women in the adoption o f policy standards fo r
employment and prom otions in the enterprise? Explain.
(2003 Bar)

ANS. No. Violation of the Anti-Sexual Harass­

ment Act requires demand for a sexual favor.
The act of discrimination against women employ­
ees may however be a violation of Article 135 of the
Labor Code.
* * *

Give the conditions fo r the employment of children

below fifteen (15) years o f age.

ANS. Republic Act 7810 provides:

Sec. 12. E m p lo ym e n t o f C h ild re n . — Children

below fifteen (15) years of age may be employed:
Provided, That, the following minimum requirements
are present:
a) The employer shall secure for the child a work
permit from the Department of Labor and Employment;
b) The employer shall ensure the protection,
health, safety and morals of the child;

322
 WORKING WOMEN AND MINORS

c) The employer shall institute measures to pre­

vent exploitation or discrimination taking into account
the system and level of remuneration, and the duration
and arrangement of working time; and
d) The employer shall formulate and implement a
continuous program for training and skill acquisition of
the child.

XXX

Sec. 14. Prohibition on the Employment of

Children in Certain Advertisements. — No person
shall employ child models in all commercials or adver­
tisements promoting alcoholic beverages, intoxicating
drinks, tobacco and its by products, and violence.

* * *

/ ,

Give the conditions fo r the employment o f children

below fifteen (15) years of age under Republic Act No.
7658, approved on November 9,1993, further amending
Republic Act No. 7610.

ANS. Under Republic Act No. 7658, approved on

November 9, 1993, children below fifteen (15) years of
age shall not be employed except:

1) When a child works directly under the sole

responsibility of his parents or legal guardian and
where only members of the employer’s fam ily are
employed: Provided, however, That his employment
neither endangers his life, safety, health and morals,
nor impairs his normal development: Provided, fur­
ther, That the parent or legal guardian shall provide
the said minor child with the prescribed primary and/or
secondary education; or
2) Where a child’s employment participation in
public entertainment or information through cinema,
theater, radio or television is essential: Provided, The
employment contract is concluded by the child’s par­
ents or legal guardian, with the express agreement of
 WORKING WOMEN AND MINORS

the child concerned, if possible, and the approval of

the Department of Labor and Employment: and Pro­
vided, That the following requirements in all instances
are strictly complied with:

a) The employer shall ensure the protection;

health, safety, morals and normal development of the
child;
b) The employer shall institute measures to pre­
vent 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 se­
cure, before engaging such child, a work permit from
the Department of Labor and Employment which shall
ensure observance or the above requirements.
The Department of Labor and Employment shall
promulgate rules and regulations necessary for the
effective implementation of this Section.
* * *

What are the hours o f work of a working child?

ANS. (1) A child below fifteen (15) years of age

may be allowed to work for not more than twenty (20)
hours a week: Provided, That the work shall not be
more than four (4) hours at any given day; (2) a child
fifteen (15) years of age but below eighteen (18) shall
not be allowed to work for more than eight (8) hours a
day, and in no case beyond forty (40) hours a week;
(3) no child below fifteen (15) years of age shall be
allowed to work between eight o’clock in the evening
and six o’clock in the morning of the following day and
no child fifteen (15) years of age but below eighteen

11A
 WORKING WOMEN AND MINORS

(18) shall be allowed to work between ten o’clock in

the evening and six o’clock in the morning of the
following; day. (Sec. 12-A; Republic Act No. 9231)
* vV *

Little Lea Paloma is only ten ( W ) years o!d, but sha is

already an accom plished singer. Sh© is hired at
P5,000.00 a month by a carnival outfit which stages
shows wherever there is a town fiesta. Little Lea is
therefore always on the road, traveling to different parts
of the country. Is her employment lawful? Why?

ANS. Her employment is not legal. Such employ­

ment will endanger her health and impair her normal
development. She is also deprived of the opportunity
to get primary education as she is always traveling to
different parts of the country.
* *Y ☆

A m ining company seeks your opinion whether it can

employ persons aged eighteen (18) years as miners.
What would be your advice?

ANS. There is no prohibition against the employ­

ment of persons eighteen (18) years or over in under­
takings which are hazardous or deleterious in nature.
What is not allowed is the employment of a person
below eighteen (18) years of age in such undertakings.
(Art. 139, Labor Code)
* ft it

Mang Pedro who works as a cook in a restaurant has a

fourteen (14) year old son, Pedro Jr., who after coming
from school, goes to the restaurant to help his father in
his kitchen chores and learn the trade. Is Pedro Jr.
considered an employee of the restaurant?

325
 WORKING WOMEN AND MINORS

ANS. No. Where a child below fifteen (15) years

of age works under the direct responsibility of his
parents or guardian, he is not considered an employee
of the employer of his parents or guardian. (Section 2,
Rule XI, Book III, Implementing Rules and Regula­
tions)

* * *

Under Article 140 of the Labor Code, no employee shall

discriminate against any person in respect to terms and
conditions o f employment on account o f his age.
Would a company rule providing fo r lower wages fo r
workers below 18 years who are inexperienced violate
the prohibition? Why?

ANS. No. The payment of lower wages is by

reason of the worker’s inexperience, not his age.
There is no discrimination on account of the worker’s
minority.
 CHAPTER VIII

HOUSEHELPERS AND HOMEWORKERS

What is “ domestic or household service"?

ANS. “Domestic or household service’ shall mean

service in the employer’s home which is usually neces­
sary or desirable for the maintenance and enjoyment
thereof and includes ministering to the personal com­
fort and convenience of the members of the em­
ployer’s household, including services of fam ily
drivers. (Article 141, Labor Code).
* * *

Maria, who is fifteen (15) years old, is brought by her

parents to Manila to work as a maid in the house o f Mrs.
Lopez. They are paid in advance her salary fo r three (3)
years and agree that she w ill work fo r Mrs. Lopez fo r
the said period. Do you perceive any legal infirm ity in
this arrangement? Explain.

ANS. The period of the contract exceeds the

maximum set by law. Article 142 of the Labor Code
provides that the original contract of domestic service
shall not last for more than two (2) years, although it
may be renewed for such periods as may be agreed
upon by the parties. Maria's contract will therefore be
good for two (2) years onty.
* * *

A m ining company employs maids in the cottages in its

Baguio m ining site to attend to the needs of its execu­
tives o r guests who now and then visit the site. Are the
maids considered househelpers? Explain.

ANS. No. They are hired by an industrial concern

in eonnection with its operations. They attend to the
 HOUSEHELPERS AND HOMEWORKERS

needs of whoever may occupy the cottages, not any

particular person or family. Their job is no different
from the chambermaids in a hotel.
* * *

Sinclitica Candido was employed by Apex Mining Com­

pany, Inc. to perform laundry services at Its staff house
at Masara, Maco, Davao del Norte, th e staff house was
used by guests, officers and employees o f the com­
pany. Is Sinclitica a househelper or domestic servant?
Why?

ANS. No. The services of a househelper or

domestic servant are rendered exclusively for the
personal comfort and enjoyment of the fam ily of the
employer and are performed in the latter’s home.
Services rendered in a staffhouse within the business
premises of the company cannot be considered do­
mestic. SinGlitica must be considered as a regular
employee of the mining company. (Apex Mining
Company, Inc. vs. NLRC, et a l., G. R. No. 94951,
April 22, 1991)
* ft *

Nova Banking Corporation has resthouse and recre­

ational facility in the highlands of Tagaytay City fo r the
use of its top executives and corporate clients. The
rssthouse staff includes a caretaker, tw o cooks arid a
laundry woman. AH of them are reported to the Social
Security System as domestic or household employees
o f the resthouse and recreational facility and not o f the
bank. Can the bank legally consider the caretaker,
cooks and laundrywoman as domestic employiees of
the resthouse and not of the bank? (2000 Bar)

ANS. No. They cannot be considered as domestic

employees because they do not render services for a
particular fam ily in a private home. (Apex Mining

328
 HOUSEHELPERS AND HOMEWORKERS

Company Inc. vs. NLRC et al., G. R. No. 94951,

April 22, 1991) Their services are in furtherance of the
business activities of the bank.
it * -it

Aling Maria works as a live-in iabandera (laundry

woman) in the heme of Mr. and Mrs. U. Tang in Quezon
City. She starts working at 6:00 a. m., rests from 12:00
noon to 1:00 p. m., then resumes work until 10:00 p. m.
She is paid P800.00 a month. In your opinion, should
she receive more? Why?

ANS. Aling Maria should receive more. Although

she is merely a househelper, she should not be al­
lowed or suffered to work for more than ten (10) hours
a day (Article 1695, C ivil Code). Under the problem,
she works for fifteen (15) hours a day. Since P800.00
is her pay for working for ten (10) hours a day during
the month, she should be paid for the additional five
(5) hours work rendered daily.
* * *

What is the minimum wage fo r househelpers?

ANS. Article 143 of the Labor Code as amended

by R. A. 7655 provides that:

ART. 143. M inim u m 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 m unicipalities of Makati, San Juan, Man-
daluyong, Muntinlupa, Navotas, Malabon, Paraftaque,
Las Pifias, Pasig, Marikina, Valenzuela, Taguig and
Pateros in Metro Manila and in highly urbanized cities;
(2) Six hundred fifty pesos (P650.00) a month for
those in other chartered cities and first class munici­
palities; and
 HOUSEHELPERS AND HOMEWORKERS

(3) Five hundred fifty pesos (P550.00) a month for

those in other municipalities.
Provided, That the employers shall review the
employment contracts of their househelpers every
three (3) years with the end in view of improving the
terms and conditions thereof.
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 thereun­
der.’

Article 144 of the Labor Code also provides:

M inim u m cash wage. — The minimum cash

wage rates prescribed under this Chapter shall be the
basic cash wage which shall be paid to the house­
helpers in addition to lodging, food and medical atten­
dance.

* * ft

Mr. Tan lives in a compound where he also operates a

modest candy business. Sometimes when there is no
work in his house, his maids help in the packing of
candies; his family driver, after bringing Mr. Tan’s
children to school, drives the pick-up and delivers
candies to outlets. How should the work rendered by
the maids and the family driver in connection with Mr.
Tan’s candy business be compensated? Explain.

ANS. For work rendered by the maids and the

fam ily driver in connection with Mr. Tan’s candy
business, they should be paid at the rate prescribed by
law for non-agricultural workers. Article 145 of the
Labor Code provides that no househelper shall be
assigned to work in a commercial, industrial or agricul­
tural enterprise at a wage or salary rate lower than that
provided for agricultural or non-agricultural workers.
* * *

330
 HOUSEHELPERS AND HOMEWORKERS

Aside from the right to a minimum wage, what other

rights are enjoyed by a househelper?

ANS. The Labor Code provides:

Article 146. O p p o rtu n ity fo r e d u c a tio n . — If

the househelper is under the age of eighteen (18)
years, the employer shall give him or her an opportu­
nity for at least elementary education which shall be
part of the househelper’s compensation, unless there
is a stipulation to the contrary.
Article 147. T re a tm e n t o f h o u s e h e lp e rs . —
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. B oard, lo d g in g a nd m e d ic a l a tte n ­
dance. — The employer shall furnish the househelper
free of charge suitable and sanitary living quarters as
well as adequate food and medical attendance.
Article 149. In d e m n ity f o r u n ju s t te rm in a tio n
o f s e rv ic e s . — If the period of household service is
fixed, neither the employer nor the househelper may
term inate 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 com­
pensation already earned plus that for fifteen (15) days
by way of indemnity.
If the househelper leaves without justifiable rea­
son, he or she shall forfeit any unpaid salary due him
or her not exceeding fifteen (15) days.
* * *

May the relationship be terminated w ithout ju s t cause?

ANS. Article 150 of the Labor Code provides:

If the duration of the household service is not
determined either in stipulation or by the nature of the
service, the employer or the househelper may give
notice to put an end to the relationship five (5) days
before the intended termination of the service.

331
 HOUSEHELPERS AND HOMEWORKERS

Distinguish househelpers from homeworkers.

ANS. A househelper ministers to the personal

needs and comfort of his employer in the latter’s
home. A homeworker on the other hand performs in or
about his own home any processing or fabrication of
goods or materials, in whole or in part, which have
been furnished directly or indirectly, by an employer
and thereafter sold or returned to the latter.
* •
ct it

Who may be considered the employer of the home­

worker?

ANS. 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 any employee,
agent, contractor of 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 o f or distributed in accordance with his
directions: or
(2) Sells any goods, articles or materials for the
purpose of having the same processed or fabricated in
or about a home and then rebuys them after such
processing or fabrication, either hims®lf or through
some other person. (Article 155, Labor Code).

* * *

Mrs. Phyllis Simons represents in the Philippines the

Sears chain o f department stores in the U. S. She sells
wood and leather to housewives w ith the condition that
these materials be made by the latter in their respective
homes into wooden clogs according to patterns and
specifications given by her and that she w ill buy the

332
 HOUSEHELPERS AND HOMEWORKERS

wooden clogs at a specified price per pair. Is there an

employer-employee relationship between Mrs. Simons
and the housewives? Why?

ANS. Yes. This is one of the situations covered

by Article 155 of the Labor Code. The housewives are
considered homeworkers, and Mrs. Simons is their
employer.
* * *

Mrs. Josie Juan is the confidential secretary of

Chairman o f the Board of the bank. She is presently on
maternity leave. In an arrangement where the Chairman
of the Board can still have access to her services, the
bank allows her to work in her residence during her
leave. For this purpose, the bank installed a fax ma­
chine in her residence, and gave her a cellphone and a
beeper. Is Mrs. Juan a homeworker under the law?
Explain. (2000 Bar)

ANS. Mrs. Juan is not a homeworker. A home­

worker, under the Labor Code, is engaged in process­
ing or fabrication of materials in or about a place tfSed
regularly, in whole or in part, as a dwelling place
(Article 155, Labor Code) On the other hand, Mps.
Juan is engaged in providing secretarial services.
 CHAPTER IX

MEDICAL AND DENTAL SERVICES AND

OCCUPATIONAL SAFETY
Is the employer obliged to furnish his employees free
medicines and equipments as well as free medical and
dental services and facilities?

ANS. The employer is required to keep in his

establishment such first aid medicine and equipment
as the nature and condition of work may require, in
accordance with such regulations as the Ministry of
Labor and Employment may prescribe. (Article 165,
Labor Code).
He is also required to furnish his employees free
emergency medical and dental services and facilities.
These free medicines, equipment, services and
facilities are intended to provide immediate and nec­
essary treatment in case of injury or sudden illness of
the worker, whether the same is work-connected or not
before more extensive medical and/or dental treat­
ment can be secured.
The employer is not obliged to provide and spend
for the continued or follow-up treatment of the em-
r-'ioyee unless it has bound itself to do so by contract
or established practice or policy.
* * *

Describe briefly these free emergency medical, dental

services and facilities required to be furnished by the
employer.

ANS. (a) When the number of workers is from 10

to 50 in a workplace, the services of a first-aider shall
be provided who may be one of the workers in the
workplace and who has immediate access to the
first-aid medicines prescribed in Section 3 of this Rule.
 MEDICAL AND DENTAL SERVICES AND
OCCUPATIONAL SAFETY

(b) Where the number of workers exceeds 50 but

not more than 200 the services of a full-tim e registered
nurse shall be provided. However, if the workplace is
non-hazardous, the services of a full-tim e first-aider
may be provided if a nurse is not available.
(c) Where the number of workers in a workplace
exceeds 200 but not more than 300, the services of a
full-tim e registered nurse, a part-time physician and
part-time dentist, and an emergency clinic shall be
provided, regardless of the nature of the undertaking
therein. The physician and dentist engaged for such
workplace shall stay in the premises for at least two (2)
hours a day; Provided, however, That where the
establishment has more than one (1) workshift a day,
the required two-hour stay shall be devoted to the
workshift which has the biggest number of workers and
they shall, in addition to the requirements of this Rule,
be subject to call at anytime during the other work-
shifts to attend to emergency cases.
(d) Where the number of workers in a hazardous
workplace exceeds 300, the services of a full-tim e
nurse, a full-tim e physician, a full-tim e dentist, a
dental clinic and an infirmary or emergency hospital
with one bed capacity for every 100 workers shall be
provided. The physician and dentist shall stay in the
premises of the workplace for at least eight (8) hours
a day; Provided, however, That where the workplace
has more than one (1) workshift a day, they shall be at
the workplace during the workshift which has the
biggest number of workers and they shall be subject to
call at anytime during the other v/orkshifts to attend to
emergency cases. Where the undertaking in such a
workplace in non-hazardous in nature, the employer
may engage the services of a part-time physician and
a part-time dentist who shall'have the same responsi­
bilities as those provided in sub-section (c) of this
Section, and shall engage the services of a full-tim e
registered nurse.
(e) In all workplaces where there are more than
one (1) workshift in a day, the employer shall in
addition to the requirements of this Rule, provide the
services of a full-tim e first-aider for each workshift.

335
 MEDICAL AND DENTAL SERVICES AND
OCCUPATIONAL SAFETY

(Sec. 4, Rule I, Book IV, Implementing Rules and

Regulations).

Establishments which are required by law to main­

tain a clinic or infirmary shall provide free family
planning services to their employees which shall in­
clude but not limited to the appiication or use of
contraceptive pills and intra-uterine devices. (Article
134, Labor Code)

* tir *

What are the factors that make a workplace hazardous?

ANS. (a) Where the nature of the work exposes

the workers to dangerous environmental elements,
contaminants or work conditions including ionizing
radiations, chemicals, fire, flammable substances,
noxious components and the like.
(b) Where the workers are engaged in construction
work, logging, firefighting, mining, quarrying, blasting,
stevedoring, dock work, deep sea fishing and mecha­
nized farming.
(c) Where the workers are engaged in the manu­
facture or handling of explosive and other pyrotechnic
products.
(d) Where the workers use or are exposed to
heavy or power-driven machinery or equipment. (Sec.
8, Rule I, Book IV, Implementing Rules and Regula­
tions).

•* * *

When is the requirement fo r an emergency hospital or

dental clinic not applicable?

ANS. An employer need not put up an emergency

hospital or dental clinic in the workplace as required in
these regulations where there is a hospital or dental
clinic which is not more than five (5) kilometers away

336
 MEDICAL AND DENTAL SERVICES AND
OCCUPATIONAL SAFETY

from the workplace, if situated in any urban area or

which can be reached by motor vehicle in twenty-five
(25) minutes of travel; if situated in a rural area and
the employer has facilities readily available for trans­
porting a worker to the hospital or clinic in case of
emergency; Provided, That the employer shall enter
into a written contract with the hospital or dental clinic
for the use thereof in the treatment of workers in case
of emergency. (Sec. 5, Rule I, Book IV, Implementing
Rules and Regulations)

ik W *

The Abra Mining Corporation has a m ining site in tsis

mountain of Abra and employs thereof one hundred
fifty (150) miners. The miners complain that the com­
pany has employed a graduate first-aider on!y and r.ot a
full-tim e registered nurse. Is the com plaint well-
founded? Why?

ANS. The complaint of the miners is weil-founded.

Under Art. 157 of the Labor Code, where the number
of employees exceeds fifty (50) but not more than two
hundred (200) and the workplace is hazardous, the
services of a full-tim e registered nurse must be pro­
vided. A mining site is considered a hazardous
workplace.
* rt *

An auto repair shop has eight (8) employees. Whs':

medical and dental services or facilities mus2 be fu r­
nished by the owner to the latter?

ANS. Since the establishment employs less than

ten (10) workers, the owner is only obliged to keep in
the workplace first aid medicines.

* * *

337
 MEDICAL AND DENTAL SERVICES AND
OCCUPATIONAL SAFETY

Dr. Juan Trapper works as the company physician of

the iiocos Chemical Co., Inc. employing 1,000 workers.
Aside from providing medical services to the workers in
cases o f emergency, what are the other duties o? Dr.
Trapper?

ANS. (a) Conduct pre-employment medical exam­

ination, free of charge for the proper selection and
placement of workers;
(b) Conduct free of charge annual physical exami­
nation of the workers;
(c) Collaborate closely with the safety and techni­
cal personnel of the establishment to assure selection
and placement of workers from the standpoint of
physical, mental, physiological and psychological suit­
ability, including investigation of accidents where the
probable causes are exposure to occupational health
hazards; and
(d) Develop and implement comprehensive occu­
pational health program for the employees of the
establishment. A report shall be submitted annually to
the Bureau of Working Conditions describing the pro­
gram established and the implementation thereof.
(Sec. 9, Rule I, Book IV, Implementing Rules and
Regulations)
* * *

Aside from providing free emergency medical and den­

tal services and facilities, are there other obligations of
the employer in connection with health and safety o f his
employees?

ANS. The employer is obliged to keep and main­

tain his workplace free from hazards that are causing
or likely to cause physical harm to the workers or
damage to property. He must comply with the provi­
sions of the Occupational Health and Safety Code.
(Rule VI, Book IV, Implementing Rules and Regula­
tions)

338
 MEDICAL AND DENTAL SERVICES AND
OCCUPATIONAL SAFETY

Who is empowered to enforce and adm inister occupa­

tional safety and health laws?

ANS. Article 165 of the Labor Code provides:

A d m in is tra tio n o f s a fe ty and h e a lth la w s. —

(a) The Department of Labor shall be solely responsi­
ble for the administration and enforcement of occupa­
tional safety and health laws, regulations and stan­
dards in all establishments and workplaces wherever
they may be located; however, chartered cities may be
allowed to conduct industrial safety inspections of
establishm ents within th e ir respective jurisdiction
where they have adequate facilities and competent
personnel for the purpose as determined by the De­
partment of Labor and subject to national standards
established by the latter.
(b) The Secretary of Labor may, through appropri­
ate regulations, collect reasonable fees for the inspec­
tion of steam boilers, pressure vessels and pipings and
electrical installations, the test and approval fo r safe
use of materials, equipment and other safety devices
and the approval of plans fo r such materials, equip­
ment and devices. The fees so collected shall be
deposited in the national treasury to the credit of the
occupational safety and health fund and shall be
expended exclusively for the administration and en­
forcement of safety and other labor laws administered
by the Department o f Labor.
 CHAPTER X

EMPLOYEES’ COMPENSATION PROGRAi AND

STATE INSURANCE FUND

What is the employees’ compensation/program?

ANS. It is the program provided for in Article 166

to 208 of the Labor Code whereby a fund known as the
State Insurance Fund is established through premium
payments exacted from employers and from which
employees and their dependents in the event of work-
connected disability or death, may promptly secure
adequate income benefit, and medical or related bene­
fits.
* *V *

Give the characteristics o f the Employees’ Compensa­

tion Program under the Labor Code.

ANS. The Supreme Court has characterized tho

Employees Compensation Program established under
the Labor Code as follows:

a) it is tax exempt;
b) designed to ensure promptitude, in cases of
work-connected disability or death, in the award to
employees and their dependents of adequate income
benefit and medical or related benefits;
c) funded by monthly contributions of all covered
employers;
d) compulsory on all employers and their empioy-
ees not over 60 years of age;
e) the benefits of which are exclusive and in place
of all other liabilities of the employer to the employee,
his dependents or anyone otherwise entitled to receive
damages on behalf of the employee or his dependents;
f) having its own adjudication machinery with
original exclusive jurisdiction to settle any dispute with

340
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

respect to coverage, entitlement to benefits, collection

and payment of contributions and penalties thereon, or
any other matter related thereto, independent of other
tribunals except the Supreme Court. (San Miguel
Corporation vs. NLRC, et al., G. R. No. 57473,
August 15, 1988).
iSr * *

Who are subject to coverage under the employees’

compensation program?

ANS. Employers and their employees not over

sixty (60) years of age are subject to compulsory
coverage under this program.

The employer may belong to either:

(1) The public sector covered by the GSIS,
com prising the National Government, including
government-owned or controlled corporations, the
Philippine Tuberculosis Society, the Philippine Na­
tional Red Cross, and the Philippine Veterans Bank;
and
(2) The private sector covered by the SSS,
comprising all employers other than those defined in
the immediately preceding paragraph.

The employee may belong to either:

(1) The public sector comprising the employed
workers who are covered by the GSIS, including the
members of the Armed. Forces of the Philippines,
elective officials who are receiving regular salary and
any person employed as casual, emergency, tempo­
rary, substitute or contractual,
(2) The private sector comprising the employed
workers who are covered by the SSS.
* * *

When does such compulsory coverage take effect?

341
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

ANS. Coverage of an employer takes effect on the

first day of operation. Coverage of an employee takes
effect on the first day of employment.
* * *

On what grounds may a claim be made fo r benefits

under the employees compensation program?

ANS. They are the following:

(a) Sickness and the resulting disability or death
by reason of an employment accident; and
(b) Sickness and the resulting disability or death
by reason of an occupational disease.
* * *

What is an injury?

ANS. “Injury” means any harmful change in the

human organism from any accident arising out of and
in the course of employment. (Art. 167 (k), Labor
Code, as amended by P. D. 1921)
* * *

What is “ sickness” ?

ANS. “Sickness” means any illness definitely

accepted as an occupational disease listed by the
Commission or any illness caused by employment,
subject to proof that the risk of contracting the same is
increased by working conditions. For this purpose, the
Commission is empowered to determine and approve
occupational diseases and work-related illness that
may be considered compensable based on peculiar
hazards of employment. (Article 167 (I) of the Labor
Code, as amended by P. D. 1368)
* * *

What is an occupational disease?

 EMPLOYEES' COMPENSATION PROGRAM AND
STATE INSURANCE FUND

ANS. An occupational disease is one which results

from the nature of the employment, and by nature is
meant conditions to which all employees of a class are
subject and which produce the disease as a natural
incident of a particular occupation, and attach to that
occupation a hazard which distinguishes it from the
usual run of occupations and is in excess of the hazard
attending the employment in general.
To be occupational, the disease must be one
wholly due to causes and conditions which are normal
and constantly present and characteristic of the partic­
ular occupation; that is, those things which science
and industry have not yet learned how to eliminate.
Every plant of the same industry is alike constantly
exposed to the danger of contracting a particular
occupational disease,
An occupational disease is one which develops as
a result of hazards peculiar to certain occupations, due
to toxic substances (as in the organic solvents indus­
try), radiation (as in television repairmen), repeated
mechanical injury, emotional strain, etc. (Schm idt’s
Attorney’s Dictionary of Medicine, p. 561).
* * *

May an illness not listed by the Employees Compensa­

tion Commission as an occupational disease be com­
pensable? If so, cite examples.

ANS. Where the illness is not listed by the

Employees Compensation Commission as an occupa­
tional disease, it must be established that the risk of
contracting the same is increased by working condi­
tions.
Where there is ample proof that petitioner, a public
high school teacher, contracted rheumatoid arthritis
and pneumonitis due to her exposure to adverse
working conditions, it was held that such illnesses are
compensable although they are not listed by the Em­
ployees Compensation Commission as occupational
diseases. (Menez vs. Employees’ Compensation
Commission, et al., G. R. No. L-48488, April 25,

343
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

1980). Similarly, disability arising from tuberculosis,

an illness considered occupational only in employ­
ments involving the treatment or nursing of a person
suffering from such illness or work with material which
is a source of tuberculosis infection, has nevertheless
been held to be compensable where petitioner, as land
investigator of the Bureau of Lands, had to travel a lot
thereby exposing him self to dust, heat, cold and
hunger. (Corales vs. Em ployees’ Compensation
Commission, et al., G. R. No. L-44063, August 25,
1978). Death due to severe anemia secondary to
gastric malignancy has also been held to be compens­
able in a case where the nature of the duties of the
deceased as ditchtender must have subjected him to
heat and exposure to the elements which ultimately
weakened him. (Leal vs. Employees’ Compensation
Commission, et al., G. R. No. L-46546, October 30,
1980)
Where the work of the employee as a public school
teacher was not confined to the classroom but included
extra-curricular activities which exposed her to the
elements and weakened her resistance, her death due
to cancer of the liver is compensable. (Abadiano vs.
GSIS, et al., G. R. No. L-52254, January 30, 1982).
W hile until now the cause of cancer is not known,
cancer of the lungs is compensable where it is shown
that the work of the deceased as a librarian exposed
her to dusty books and other deleterious substances.
(Dator vs. Employees’ Compensation Commission, et
al., G. R. No. L-57416, January 30, 1982)
Senile cataract, though not listed as an occupa­
tional disease, is compensable where it is established
that petitioner’s duties as construction worker exposed
him to the heat of the sun. (Jarillo vs. Employees’
Compensation Commission, ei al., G. R. No. L-52058,
February 25, 1982)
Where the deceased was exposed to analgesics
and antibiotics by reason of treatment and hospitaliza­
tion for angina pectoris, coronary insufficiency, and
gouty arthritis (developed as a result of the perfor­
mance of his work as municipal judge), which expo­
sure can be reasonably held to have caused leukemia,
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

death resulting therefrom is compensable. (Duran vs.

Employees’ Compensation Commission, et al., G. R.
No. 52463, March 30, 1982).
* * *

Discuss briefly the theory of “ increased risk.”

ANS; The term “sickness” as defined in paragraph

(I) of Article 167 of the Labor Code includes “any
illness caused; by employment, subject to proof that
the risk of contracting the same is increased by
working conditions.” This is a recognition of the
th e o ry o f in cre a se d ris k . To establish compensabil­
ity under the same, the claimant must show substantial
proof o f work-connection, but what is required is
merely a re a so n a b le w o rk -c o n n e c tio n and not a
direct causal relation. (Jimenez vs. Employees’
Compensation Commission, et al., G. R. No. L-58176,
March 23, 1984; Cristobal vs. Employees’ Compensa­
tion Commission, et al., G. R. No. L-49280, February
26, 1981). Proof of actual cause of the ailment is not
necessary. The test of evidence of the relation of the
disease with the employment is p r o b a b ility and not
certainty. (Panotes vs. Employees’ Compensation
Commission, et al., G. R. No. L-64802, March 29,
1984). To require otherwise would not be consistent
with the liberal interpretation of the Labor Code and
the social justice guarantee.
* * *

Is cancer an occupational disease? Explain.

ANS. Although the cause of cancer is not yet

known, it has already been included as a qualified
occupational disease in certain cases. Thus, cancer of
the epithelial lining of the bladder is considered occu­
pational when contracted by employees engaged in
work involving exposure to alphanaphtylamine, be-
tanaptylamine, or benzidine or part of the salts, and
suramine or magenta; likewise, cancer of the skin or of

345
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

the corneal surface of the eye is considered occupa­

tional in work involving the use or handling of or
exposure to tar, pitch, bitumen, mineral oil including
paraffin, soot or any compound product or residue of
any of these substances. Cancer of the stomach and
other lymphatic and forming vessels, or of the nasal
cavity and sinuses is recognized as an occupational
disease among woodworkers, carpenters, loggers, and
employees in pulp, paper and plywood mills; while
cancer of the lungs, liver and brain is listed as an
occupational disease of vinyl chloride or plastic work­
ers.

* * *

F. C. worked in the printing department o f a govern­

ment agency. He handled various chemicals fo r print­
ing, ate w ithout washing his hands, and was exposed to
intense heat. He often neglected personal necessity
due to inadequate facilities in his place o f work. F. C.
later died o f rectal cancer. Is his death compensable?
Why?

ANS. Yes. Although rectal cancer is not listed as

an occupational disease, there is ample proof that the
risk of contracting the same was increased, if not
caused, by the working conditions prevailing in the
em ployer’s premises. (Cristobal vs. Employees’
Compensation Commission, et al., G. R. No. L-49280,
April 30, 1980)

•it it *

S., employed as a mechanic in a naval shipyard, died of

pyelonephritis (acute pyogenic infection of the kidney)
and bronchopneumonia (infection of the bronchi and
lung tissue). Is his death compensable? Why?

ANS. No. The diseases are not occupational with

respect to the work of the deceased. Besides, the risk
of contracting them was not increased by his working

346
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

conditions (Sulit vs. Employees’ Compensation Com­

mission, et al., G. R. No. L-48602, June 30, 1980).
* * *

Rino, a stevedore of Allied Port Services, Inc., died of

uremia secondary to chronic renal failure, and chronic
glomerulonephritis. Is the death o f Rino, due to the
aforesaid causes (not listed as occupational diseases)
compensable? Explain.

ANS. No. No proof was adduced to show reason­

able connection between the work of the deceased and
the cause of his death. There was no showing that the
progression of the disease was brought about early by
the conditions of his work. No medical history, records
or physician’s report were presented to substantiate
the claim that the conditions at the Port Area in­
creased the risk of uremia, renal failure or glomeru­
lonephritis. Such proof must constitute a reasonable
basis for concluding that the conditions of employment
of the deceased caused the ailment or aggravated the
risk of contracting the same. The evidence must be
real and substantial and not merely apparent; for the
duty to prove work-causation or work aggravation
imposed by existing law is real, not merely apparent.
(Rino vs. Employees’ Compensation Commission et
al., G. R. No. 132558, May 9, 2000)
* * ft

Is Hansen’s Disease (leprosy) compensable?

ANS. Yes, provided the illness is traceable to

employment. Leprosy, like tuberculosis, is a system
disease; its specific cause is bacteria and the same
can be acquired through body contact with a person
harboring the germs; and some of the participating
factors leading to the development of the disease are
exposure to sudden changes of environment and tem ­
perature and the lessening of the body resistance of
the person affected. (Better Buildings, Inc. vs.

347
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

Pucan, et al., G. R. No. L-42731, February 28; 1985;

Batangas Laguna Bus Co. vs. WCC, 99 SCRA 710).

* * *

Is the claimant under the Employees’ Compensation

Program required to present proof of causal relation or
aggravation where the cause or origin of the disease is
s till unknown?

ANS. Yes. If diseases not intended by law to be

compensated are inadvertently or recklessly included,
the integrity of the State Insurance Fur.d is endan­
gered. Compassion for the victim s o f diseases not
covered by the law ignores the need to show a greater
concern for the trust fund to which the tens of millions
o f workers and their fam ilies look for compensation
whenever accidents, disease, and deaths occur. Con­
sequently, disability of a clerk in the Bureau of Mines
and Geosciences due to brain tumor, and the death of
a driver of the Department of Public W orks and
Highways due to amyotrophic lateral sclerosis, have
been held not to be compensable, as the claimants
failed to submit such proof as would constitute a
reasonable basis for concluding either that the condi­
tions of employment of the claimants caused the
ailment or that such working conditions had aggra­
vated the risk of contracting those aiiments. (Raro vs.
Employees’ Compensation Commission, G. R. No.
58445, April 27, 1989; Sante vs. Employees’ Compen­
sation Commission, G. R. No. 34415, June 29, 1989)
But the law does not require a direct causal rela­
tion. It is enough that the hypothesis on which the
workman’s claim is based is probable. Medical opinion
to the contrary can be disregarded especially where
there is some basis in the facts for inferring work-
connection. (Salalirna vs. ECC & SSS, G. R. No.
146360, May 20, 2004)

ft ft ft

348
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

Is cirrhosis o f the liver contracted by a public school

teacher and which resulted in his death compensable?
Why?

ANS. Nd; The work of a public school teacher,

though underpaid and difficult, does not create haz­
ards which naturally cause liver sickness. The disease
is one to which mankind in general is exposed or
afflicted without regard to the nature of his work. It is
not caused by hard work because a rich man who does
not do any physical labor at all is susceptible to liver
cirrhosis. (Librea vs. Employees’ Compensation
Commission, et al., G. R. No. 58879, March 6, 1992)
........

A forty (40) year old public school teacher died due to

profuse bleeding resulting from a prolapsed uterus.
She had five (5) pregnancies. She had to take long
walks to and from her place o f teaching, an elementary
school on the side o f the Mayon Volcano. Is the death
o f the teacher compensable? Why?

A N S f Nov 'Prolapsed uterus is not among the

occupational diseases listed under Annex “A ” of the
Amended Rules on Employees’ Compensation. Be­
sides, this illness is the result of the physiological
structure and changes in the body on pregnancy and
childbirth. (Corporal vs. Employees’ Compensation
Commission and GSIS, G R. No. 86020, August 5,
1994)
* * *' '

Is ureterolithiasis (presence o f renal stones in the ureter

arid urinary stones) of a chemical laboratory technician
o f the NBI compensable under the employees’ compen­
sation program? Explain.

ANS. Yes. Though not expressly recognized as an

occupational disease, ureterolithiasis may be com­
pensable by reason of the theory of increased risk. It
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

is medically established that environment, water or

other fluid intake and the nature of the occupation are
im portant factors in the development or inhibition of
the disease.
The work of the NBI laboratory technician exposed
her to drugs, insecticides, volatile poisons, fuels and
inorganic compounds, and chemical laboratory equip­
ment. Moreover, she attended to field cases and
rendered holiday and night duties once a week and
helped the chemists in the examination of incoming
cases. She often missed some important health habits
such as regularly drinking water and urination in order
not to interrupt the flow of concentration.
Despite the abandonment of the presumption of
compensability established under old workmen’s com­
pensation law, the present law has not ceased to be a
social legislation; the liberality of the law in favor of
the working man or woman still prevails. (Employees’
Compensation Commission et al. vs. Court of Ap­
peals et al., G. R. No. 121545, November 14, 1996)
* * *

What defenses may be interposed by the State Insur­

ance Fund against a claim fo r compensation made by a
covered employee o r his dependents?

ANS. The following defenses may be set up:

(a) The injury is not work-connected or the sick­

ness is not occupational.
(b) The disability or death was occasioned by the
employee’s intoxication, willful intention to injure or
kill him self or another, or his notorious negligence.
(Article 172, Labor Code)
(c) No notice of sickness, injury or death was
given to the employer. (Article 206, Labor Code)
(d) The claim was filed beyond three (3) years
from the time the cause of action accrued. (Article
201 of the Labor Code, as amended by P. D. 1921)

4CA
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

What is notorious negligence? Give a brief discussion.

ANS. Notorious negligence is equivalent to gross

negligence; it is something more than mere careless­
ness or lack of foresight; it falls under the designation
of evident and manifest negligence; it signifies a
deliberate act of the employee to disregard his own
personal safety. Disobedience to rules, orders and/or
prohibition does not in itself constitute notorious negli­
gence, if no intention can be attributed to the injured
to end his life. (Caunan vs. Cia General de Tabacos,
56 Phil. 542; Paez vs. W orkmen’s Compensation
Commission, et al., infra).
Thus, the drowning of a sailor assigned to watch
and take care of a barge of the company, which
occurred while he was swimming with some compan­
ions somewhere in the Pasig river near the place
where the barge was moored, has been held not
arising from notorious negligence, notwithstanding the
fact that he was supposed to be on duty 24 hours a day
and that he could have taken a bath in a water tank on
the barge; it could have however been otherwise had
the deceased been one who did not know how to swim
or one not accustomed to the perils of the water.
(Luzon Stevedoring Co., Inc. vs. W orkmen’s Com­
pensation Commission, et al., G. R. No. L-19742,
January 21, 1964). Where the deceased driver, paid
on commission basis, left the truck assigned to him
and went to the other side of the river for the purpose
of advising the other truck driver to have all the palay
bought loaded early because he was in a hurry to go
back, and he (deceased), outside his regular duties,
even helped the other driver in the work, loading and
unloading the palay at the bank of the river to be
ferried to the other side where his truck was parked,
but said driver against the advice of the other truck
driver rode on the third banca which capsized and sunk
and he drowned, it was held that his disregard of a
warning merely constituted a miscalculation and not
notorious negligence. (Paez vs. W orkmen’s Compen­
sation Commission, et al., G. R. No. L-18438, March
30, 1963). Similarly, it has been held that the act of

351
 EMPLOYEES' COMPENSATION PROGRAM AND
STATE INSURANCE FUND

the deceased in drinking during a cold night oil of

wintergreen, believing it to be Tanduay Rhum, and
there being no warning made by his companions that
drinking the same could be fatal to him, cannot be
considered notorious negligence. (Luzon Stevedoring
Corporation vs. W orkmen’s Compensation Commis­
sion, et al., G. R. No. L-37896, July 22, 1981)
A * -k

Eddie Duque works as a delivery man in a construction

supply establishment owned by Mr. Ong, a chinaman
w ith a bad temper. One day, while Eddie was making
reports on his deliveries, he had an altercation with Mr.
Ong; irked by the disrespectful attitude o f his employee,
Mr. Ong pulled cu t his gun and shot Eddie, hitting him
in the spinal column and paralyzing him completely.
Mr. Ohg was prosecuted crim inally fo r the act.
(a) Is the disability suffered by Eddie Duque compens­
able?
ANS. Yes. The injury was sustained by Eddie
Duque in his place of work and while in the perfor­
mance of his official functions.

(b) If Eddie Duque recovers compensation from the

State Insurance Fund, can he still recover from Mr. Ong
damages in the criminal case? Why?

ANS. Eddie Duque can no longer recover dam­

ages in the criminal case. Article 173 of the Labor
Code, as amended by P. D; <1921v provides^
Unless otherwise provided, the liability, of the State
Insurance Fund under this Title shall be: exclusive-and
in place of all other liabilities of the employer to the
employee or his dependents or anyone otherwise
entitled to recover damages on behalf of the employee
or his dependents. The payment of compensation
under this Title shall not bar the recovery of benefits
as provided for in Section 699 of the Revised Adminis­
trative Code, Republic Act Numbered Eleven hundred
sixty-one, as amended, Commonwealth Act numbered

«9
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

one hundred eighty-six, as amended, Republic Act

numbered sixty-one hundred eleven, as amended,
Republic Act numbered six hundred ten, as amended,
Republic Act numbered forty-eight hundred sixty-four,
as amended, and other laws whose benefits are admin­
istered by the System, or by other agencies of the
government.
* * *

6 ., who worked in the weaving department o f a textile

firm, was stabbed to death by his fellow employee, L. L.
was convicted of homicide and sentenced to pay in­
demnity to the heirs of G. If the heirs recover from the
State Insurance Fund, can they still hold the employer
subsidiarily liable fo r the indemnity to be paid by L., in
the event the latter is unable to pay the same? Why?

ANS. The heirs can no longer recover indemnity

from the employer. The liability of the State Insurance
Fund is exclusive and in place of all other liabilities of
the employer to the employee and his dependents or
beneficiaries. (Article 173, Labor Code). This in­
cludes the subsidiary liability of the employer under
the Revised Penal Code. (Generoso vs. Universal
Textile Mills, Inc., G. R. No. L-28586, January 22,
1980)
* * *

As a result o f the cave-in o f the underground tunnel o f

a m ining company, several miners were buried alive.
Their heirs filed an action w ith the Regional Trial Court
fo r damages against the company, alleging that the
latter was in maintaining the underground tunnel negli­
gent and failed to comply with rules and regulations to
protect the lives o f its miners. The company moved to
dismiss the complaint on the ground that the claim
arising from the industrial accident is the exclusive
liability o f the State Insurance Fund pursuant to Article
173 o f the Labor Code.
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

(a) Ss the motion meritorious?

ANS. No, the motion to dismiss should be denied.

The action is for damages arising from breach of
contract. Such damages may be awarded pursuant to
Articles 2201 and 2232 of the Civil Code. The injured
employee or his heirs in case of death have a right of
selection or choice of action between availing them­
selves of the worker’s right under the employees’
compensation laws and suing in the regular courts
under the Civil Code for higher damages. To preclude
the filing of an action for damages would be a violation
of the constitutional guarantees on social justice and
protection to labor. They cannot however pursue both
courses of action simultaneously (Floresca, et al. vs.
Philex Mining Corporation, et al., G. R. No. L-30642,
April 30, 1985).

(b) Bn the event the injured employs® or his heirs fail to

recover damages in the civil case, may they still claim
from the State Insurance Fund? Why?

ANS. Yes. The rationale in awarding compensa­

tion under the compensation laws differs from that in
giving damages under the Civil Code. The compensa­
tion acts are based on a theory of compensation
distinct from the existing theories of damages, pay­
ments under the acts being made as compensation
and not as damages (39 C. J. 8. 53). Compensation
is given to mitigate the harshness and insecurity of
industrial life for the workman and his family. Hence,
an employer is liable whether negligence exists or not
since liability is created by law. Recovery under the
Act is not based on any theory of actionable wrong on
the part of the employer (99 C. ‘J. S. 36).
In other words, under the compensation acts, the
employer is liable to pay compensation benefits for
loss of income, as long as the death, sickness or injury
is work-connected or work-aggravated, even if the
death or injury is not due to the fault of the employer.
(Murillo vs. Mendoza, 68 Phil. 889). On the other
hand, damages are awarded to one as a vindication of

354
 EMPLOYEES’ COMPENSATION PROGRAM AND
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the wrongful invasion of his rights. It is the indemnity

recoverable by a person who has sustained injury
either in his person, property or relative rights, through
the act or default of another (25 C. J. S. 452).
* it *

If the injured worker or his heirs opted to claim and in

fact collected from the State Insurance Fund, can they
still maintain an action fo r damages against the em­
ployer? Why?

ANS. No. The claimant was initially free to

choose the remedy. W hile perhaps not as profitable,
the sm aller indemnity obtainable through this remedy
is balanced by the claim ant’s being relieved of the
burden of proving the causal connection between the
employer’s negligence and the resulting injury and of
having to establish the extent of the damage suffered;
issues that are apt to be troublesome to establish
satisfactorily. Having staked his fortunes on a particu­
lar remedy, the claimant is precluded from pursuing
the alternative remedy, at least until the prior claim is
rejected by the Compensation Commission. (Pacana
vs. Cebu Autobus Co., 32 SCRA 442)
it it it

Severo, a driver-mechanic, was killed when he tried to

fight unidentified men who carnapped the vehicle of his
employers. As a consequence of his death, his wife and
children filed an action fos death compensation and
damages before the Court of First Instance (now Re­
gional Trial Court) against his employers. The latter
however contended that the .complaint should be dis­
missed as the appropriate remedy is a claim under the
Workmen’s Compensation Program. Is the contention
of the employers correct? Explain.

ANS. No. The employee or his heirs have the

choice of cause of action and corresponding relief, i.
e., either an ordinary action for damages before the

355
 EMPLOYEES’ COMPENSATION PROGRAM AND
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regular courts or a special claim for limited compensa­

tion under the W orkmen’s Compensation Act (now
Employees’ Compensation Program under Book IV of
the Labor Code). The ordinary action for damages is
based on Article 1711 of the Civil Code. But the right
of choice is qualified in that the employee should be
held to the particular remedy in which he has staked
his fortune. (Julita T. Vda. de Severo, et al. vs. Go,
et al., G. R. No. L-44330, January 29, 1988)
* * ★

While on his way to deliver telegrams, a messenger o f a

telegraph company is fatally hit by a passenger jeepney.
If the beneficiaries o f the deceased recover from the
State Insurance Fund, can the latter in turn have any
right o f action against the driver and/or owner o f the
passenger jeepney? Explain.

ANS. The State Insurance Fund, through the SSS

or the GSIS, is subrogated to the rights of the benefi­
ciaries against the driver and/or owner of the vehicle:
On this matter, the Labor Code provides:

Article 174. L ia b ility o f th ir d p a rtie s . — (a)

When the disability or death is caused by circum­
stances creating a iegai liability against a third party,
the disabled employee or the dependents in case of his
death shall be paid by the System under this Title. In
case benefit is paid under this Title, the System shall
be subrogated to the rights of the disabled employee
or the dependents in case of his death in accordance
with the general law.
(b) Where the System recovers from such third
party damages in excess of those paid or allowed
under this Title, such excess shall be delivered to the
disabled employee or other persons entitled thereto,
after deducting the cost of proceedings and expenses
of the System.
* * *

35S
 EMPLOYEES’ COMPENSATION PROGRAM AND
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X, a truck driver employed by a loeaS construction

company, was injured in an accident white on assign­
ment in one o f Ills employer’s projects an Iraq. Consid­
ering that his injury was sustained in a foreign country,
is X entitled to benefits under the employees1 compen­
sation program? Explain.

ANS. Yes. Filipinos working abroad in the service

of an employer, domestic or foreign, who carries on in
the Philippines any trade, business, industry, undertak­
ing or activity of any kind, are covered by the employ­
ees’ compensation program. (Rule 1, Section 5, ECC
Rules; Articles 169, Labor Code)

•Ss * *

What is the “ going and coming role” ? Give the excep­

tions to the rule.

ANS. The general rule in workmen’s compensation

law known as the “going and coming rule”, simply
stated, is that in the absence of special circumstances,
an employee injured while going to or coming from his
place of work is excluded from ihe benefits of work­
men’s compensation acts. This rule, however, admits
of four well-recognized exceptions, to wit: (1) where
the employee is proceeding to or from his work on the
premises of his employer; (2) where the employee is
about to enter or about to leave the premises of his
employer by way of the exclusive or customary means
of ingress and egress (proximity rule); (3) where the
employee is charged, while on his way to or from his
place of employment or at his home, or during his
employment with some duty or special errand con­
nected with his employment; and (4) where the
employer as an incident of the employment provides
the means of transportation to and from the place of
employment. (8 Schneider, Workmen’s Compensa­
tion, p. 7-8)

* * *

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 EMPLOYEES' COMPENSATION PROGRAM AND
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Give some illustrations of the proximity rule.

ANS. Where the employee, while proceeding to

work and running to avoid the rain, slipped and fell into
a ditch fronting the main gate of the em ployer’s
factory, and as a result of which he died the next day,
it was held that the accident occurred within the zone
of employment and therefore compensable. (Phil.
Fiber Processing Co., Inc. vs. Ampil, 99 Phil. 1950).
The death of an employee has likewise been held to be
compensable where it occurred on a private road of
the company about 20 meters from the main gate,
while the employee was on his way home from work.
(Iloilo Dock and Engineering Co. vs. W orkmen’s
Compensation Commission, et cl., G. R. No. L-30341,
December 27, 1968)
The claim for death benefits has been sustained in
a case where a school principal dies in a vehicular
accident on his way from Bacolod City where he lived
to Hinigaran, Negros Occidental where the school of
which he is the principal is located and he had in his
possession at the time of the incident official papers
he had worked on in his residence on the eve of his
death. (Torbela vs. Employees’ Compensation Com­
mission, et al., G. R. No. L-42627, February 21,
1980)
* * *

Emelita Enao, a public school teacher, and some oth­

ers, were ambushed by unidentified men on their way
from her official station at Sergio Osmefta, Sr., Zam­
boanga del Norte, to Dipolog City, to procure supplies
and other training and school aids. The ambush, which
happened oil a Friday, resulted in injuries to Emelita.
Are such injuries work-connected and compensable?
Explain.

ANS. Yes. At the time of the ambush, Miss Enao

was in the actual performance of her official functions.
It hardly matters whether such task which she was
engaged in was not done during working hours and
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

outside her place of work. It is rather obvious that in

proceeding to purchase school materials in Dipolog
City, she would necessarily leave the school premises
and travel even outside her usual working hours.
(Enao vs. Employees’ Compensation Commission, G.
R. No. L-46048, April 15, 1985)

Dedication de Vera worked as school principal-.of a

community school In San Carlos City, Pangasinan. Her
to u r o f duty was from 7:30 a. m. to 5:30 p. m. On
ftavemfeer 29,1976 at 7:00 a. m., while she was waiting
fp r a ride at the plaza her way to the school, she was
bumped and run over by a speeding mini-bus. The
accident resulted in her instantaneous death. Is her
death compensable? Explain.

ANS. Yes. it is not disputed that the deceased

died while going to her place of work. She was at the
place where her job necessarily required her to be if
she was to reach her place of work on time. There was
nothing private or personal about the schooj principal’s
being at the place of the accident. She was there
because. her employment required her to be there.
(Alano vs. Employees’ Compensation Commission, G.
R. No. L-48594, March 16, 1988)
■ft- * *

Salvador Lazo, a security guard of the Central Bank of

the Philippines, rendered overtime duty up to 5:00
o’clock in the morning, because the guard who was to
relieve him failed to arrive. He then asked permission
from his-superior to leave efarly in order to take home
his sack of rice. On his way home, at about 6:00 o’
clock a. m., the passenger Jeepney he was riding on
turned turtle due to slippery road. He sustained injuries
as a result of the accident Are the injuries compens­
able? Why?

359
 EMPLOYEES’ COMPENSATION PROGRAM AND
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ANS. Yes. There is no reason, in principle, why

employees should not be protected for a reasonable
period of time prior to or after working hours and for a
reasonable distance before reaching or after leaving
the employer’s premises. There is furthermore no
evidence that Lazo deviated from his usual, regular
homeward route or that interruptions occurred in the
journey.
Although the presumption of compensability and
theory of aggravation under the Workmen’s Compen­
sation Act may have been aoandoned under the Labor
Code, the liberality of the law in genera! in favor of the
workingman still subsists (Lazo vs. Employees’ Com­
pensation Commission, et al., G. R. Mo. 78817, June
18, 1990; see also Vano vs. GSIS, et ai., G. R. No.
81327, December 4, 1989).

* * *

During the summer vacation, Pedro Lopez, a physics

teacher in a public high school!, was instructed by the
principal to prepare a mode! dam to be submitted as the
official entry of the school in a contest. As he was
given a deadline, Lopez brought th® project home so he
could finish it But early in the morning, white he was
engrossed in the project, he came in contact with a live
wire and was electrocuted, is the death of the teach?.?:
compensable? Explain.

ANS. Yes. While the death of Pedro Lopez took

place in his house and not in his officiai work station,
which is the school, he was still discharging his func­
tion as the one in-charge of the project. He was
constrained to finish the project within a specific
period of time and he could only do so if he worked
overtime in his house. The fact that he died during the
summer vacation is also of no moment. He was stil!
under the employ of the government. (Lopez vs.
Employees’ Compensation Commission, et a!., G. R.
No. 90267, December 21, 1993)

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 EMPLOYEES’ COMPENSATION PROGRAM AND
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P/Sgt. Alvaran, a member o f the Mandaluyong Police

Station assigned at the Pasig Provincial Jail, was shot
to death by a patrolman in front o f the Office of the
Criminal Investigation o f the said station. The shooting
incident stemmed from a stabbing by P/Sgt. Alvaran’s
son o f the patrolman’s nephew a day before the shoot­
ing. Although he was supposed to be on duty at the
Pasig Provincial Jail, P/Sgt. Alvaran was at the station
to accompany his son who was to be interviewed on the
stabbing incident. Is the death o f P/Sgt. Alvaran
work-connected and therefore compensable? Why?

ANS. Yes. A member of the national police is by

the nature of his functions technically on duty 24 hours
a day. Except when they are on vacation leave,
policemen are subject to call at any time and may be
asked by their superiors or by an distressed citizen to
assist in maintaining the peace and security of the
community.
Though P/Sgt. was not actually at his assigned
post at the Pasig Provincial Jail when he was attacked
and killed, it could not be denied that in bringing his
son to the station for questioning, he was not merely
acting as father but as peace officer.
Finally, in case o f doubt, the sympathy of the law
on social security is toward beneficiaries. (Employees’
Compensation Commission vs. Court o f Appeals et
al., G. R. No. 115858, June 28, 1996)
* * *

A sergeant o f the Philippine A ir Force, detailed with A ir

Base Wing, Clark A ir Base in Angeles City, was shot
near his quarter w ithin the base by another sergeant by
reason o f an old personal grudge. Is the sergeant’s
death compensable? Why?

ANS. Yes. The law does not require that the

direct and proximate cause of the decedent's death be
not personal in nature. The deceased was at a place
where his work required him to be, that is, at the Clark
A ir Base. And a soldier on active duty is really on a 24
 EMPLOYEES’ COMPENSATION-' PROGRAM AND
STATE INSURANCE FUND

hours a day official duty status. (Alangco vs: Employ­

ees’ Compensation Commission and GSIS, CA-G. R.
Noi- 36659, January 31, 1996)
.* * . iV . ..... .

Who are entitled to benefits under the employees’ com­

pensation program?

ANS. The covered employee, his dependents, and

in case of his death, his beneficiaries.
..... A*

Who are the “ dependents" o f the employee?

ANS. “Dependents” means the legitimate, legiti­

mated, legally adopted or acknowiedgedrnatural child
who is unmarried, not gainfully employed, andinot over
twenty-one (21) years of age; or ovefitwentytone (21)
years of agei provided he isi incapacitated and, inca­
pable o f self-support due :to> a Sphysiaa|i on mental
defect which is congenital; or acquired? during? minority;
the legitimate spouse living with; thesemployeeiuand
the parents of said employee wholly dependent upon
him fo r regular support. (Art. 167 (i) of the Labor
Code,, as amended by P. D. 1921)
* "St ft

Who are included under the term “ beneficiaries” ?

ANS. Article 167 of the Labor Code, as amended

by P. D. 1921, provides:

(j) “Beneficiaries” means the dependent spouse

until he remarries and dependent children, who are the
primary beneficiaries. In their absence, the dependent
parents and, subject to the restrictions, im posedion
dependent children, illegitim ate children; ando legiti­
mate descendants who are the secondary beneficia­
ries; Provided; that the dependent acknowledged
 EMPLOYEES' COMPENSATION PROGRAM AND
STATE INSURANCE FUND

natural child shall be considered a primary beneficiary

when there are no other dependent children who are
qualified and eligible for monthly income benefit.
* * *

Give the rules governing payment of death benefits to

the beneficiaries.

ANS. Rule XV of the ECC Rules provides:

Section 2. P rio rity . — (a) Primary beneficiaries

shall have priority claim to death benefits over sec­
ondary beneficiaries. W henever there are primary
beneficiaries, no death benefit shall be paid to his
secondary beneficiaries.
(b) If the deceased employee has no primary
beneficiaries at the time of his death, the death benefit
shall be paid to his secondary beneficiaries.
(c) If the deceased employee has no beneficiaries
at the time of his death, the death benefit shall accrue
to the Employees’ Compensation Fund.
Section 3. B e n e fits payable. — Primary benefi­
ciaries shall be entitled to a monthly income benefit.
In their absence, the secondary beneficiaries sh&ll be
entitled to a monthly income benefit not to exceed 60
months and the death benefit shall not be less than
P15,000.00. (ECC Resolution No. 2799 dated July
25. 1984)

* * *

Classify the benefits which may be enjoyed under the

State Insurance Fund.

ANS.

(a) Medical Benefits;

(b) Disability Benefits;
(c) Death Benefits; and
(d) Funeral Benefit.

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 EMPLOYEES’ COMPENSATION PROGRAM AND
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What are the medical benefits?

ANS. The medical benefits consist of medical

services and rehabilitation services. The Labor Code
provides:

Article 185. M edical se rv ic e s . — Immediately

after an employee contracts sickness or sustains an
injury, he shall be provided by the System during the
subsequent period of his disability with such medical
services and appliances as the nature of his sickness
or injury and progress of his recovery may require,
subject to the express limitation prescribed by the
Commission.

Article 190. R e h a b ilita tio n s e rvice s. — (a) The

System shall as soon as practicable, establish a con­
tinuing program for the rehabilitation of the injured and
handicapped employees who shall be entitled to reha­
bilitation services, which shall consist of medical,
surgical, or hospital treatment, including appliances if
he has been handicapped by injury, to help him
become physically independent.
(b) As soon as practicable, the System shall
establish centers equipped and staffed to provide a
balanced program of remedial treatment, vocational
assessment and preparation designed to meet the
individual needs of each handicapped employee to
restore him suitable employment, including assistance
as may be within its resources to help each rehabilitee
to develop his mental, vocational or social potential.
* * ■&

What are the conditions of entitlement to medicai ser­

vices?

ANS. For an employee to be entitled to medical

services, the following conditions must be satisfied:

(a) He has been duly reported to the System (SSS

or GSIS);
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

(b) He sustains an injury or contracts sickness;

and
(c) The System has been duly notified of the injury
or sickness.
* * ft

What are the conditions for entitlement to rehabilitation

services?

ANS. For an employee to be entitled to rehabilita­

tion services, the following conditions must be satis­
fied:

(a) He has been duly reported to the System (SSS

or GSIS);
(b) He sustains a permanent disability as a result
of an injury or sickness; and
(c) The System has been notified of the injury or
sickness which caused his disability.
*

What are the disability benefits?

ANS. They are income benefits in case of tempo­

rary total disability, permanent total disability and
permanent partial disability.
* * *

Describe briefly these income benefits.

ANS. In case of injury or sickness resulting in

temporary total disability the employee is entitled to a
daily income benefit equivalent to 90% of his average
daily salary credit but in no case less than P10.00 nor
more than P90.00, nor paid for continuous period
longer than 120 days except where such injury or
sickness still requires medical attendance beyond 120
days but not to exceed 240 days from onset of disabil­
ity. (Article 191, Labor Code; Section 2, Rule IV, ECC
Implementing Rules, as amended by E. O. 179).

365
 EMPLOYEES’ COMPENSATION PROGRAM AND
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In case of injury or sickness resulting in permanent

total disability, the employee shall, for each month
until his death, be paid during such disability an
amount equivalent to the monthly income benefit, plus
10% thereof for each dependent child, but not exceed­
ing five, beginning with the youngest and without
substitution: Provided, That the monthly income bene­
fit shall be the new amount of the monthly benefit for
all covered pensioners, effective upon approval of this
Decree. The monthly income benefit is guaranteed for
five (5) years and shall be suspended if the employee
is gainfully employed or recovers from his permanent
total disability, or fails to present himself fo r examina­
tion at least once a year upon notice by the System,
except as otherwise provided for in other laws, de­
crees, orders of Letters of Instructions. (Article 192 of
the Labor Code, as amended by P. D. 1641).
In case of injury or sickness resulting in permanent
partial disability, the employee shall for each month
not exceeding the period designated herein be paid by
the System during such a disability an income benefit
equivalent to the income benefit for permanent total
disability. (Article 193, Labor Code)

What are the disabilities that are considered total and

permanent?

ANS. The following disabilities shall be deemed

total and permanent:

(1) Temporary total disability tasting continuously

for more than one hundred twenty (120) days, except
as otherwise provided for in the Rules;
(2) Complete loss of sight of both eyes;
(3) Loss of two (2) limbs at or above the ankle or
wrist;
(4) Permanent complete paralysis of two (2) limbs;
(5) Brain injury resulting in incurable im becility or
insanity; and

*IKC
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

(6) 5 Such case's' asdetermined by the Medical

Director of the System and approved by the Commis­
sion. (Article 192 (c), Labor Code).:

For; how?lo n g :may. the. permanent .partial.disability In­

come benefit be enjoyed?

ANS The benefit shall be paid for not more than

the period designated in the following schedule:

COMPLETE AND PERMANENT NUMBER OF

; LOSS OF USE OF MONTHS
One thumb 10
One index finger 8
One middle fipger 6
One ring finger 5
One little finger 3
One big toe 6
Any toe 3
One arm 50
One hand 39
One foot 31
One leg 46
One ear 10
Both ears 20
Hearing of one ear , 10
Hearing of both ears 50
Sight of one eye 25

(Article 193 (b), Labor Code)

* * *

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 EMPLOYEES’ COMPENSATION PROGRAM AND
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May permanent partial disability be converted to perma­

nent total disability after the employee’s retirement?
Why? Cite an example.

ANS. Yes. This is in line with the social justice

provision in the Constitution.
After serving the government as an elementary
grade teacher for more than 34 years, Efrenia Celoso
retired due to poor health; she had pulmonary tubercu­
losis and Pott's disease (tuberculosis of the Spine). At
the time of her retirement at age 55 years, she was
awarded permanent partial disability benefits. There­
after, her condition worsened and she had to undergo
a spine operation; while still in the service, she had
suffered a fall and hit her back on the side of a desk
while demonstrating to her pupils the correct way of
scrubbing and sweeping the floor. Despite the opera­
tion, she became bedridden and could not do any
work. It was held that her permanent partial disability
benefits should be converted to permanent total dis­
ability benefits. (Government Service Insurance Sys­
tem vs. Court of Appeals et al, G. R. No. 116015,
July 31, 1996)
A person’s disability may not manifest itself fully at
one precise moment in time but rather over a period of
time. And disability should not be understood more on
its medical significance but on the loss of earning
capacity.
It has thus been held that the denial cf the claim
fo r permanent total disability of a cashier of the
National Housing Authority who, for 38 long years
during her prime had rendered service with an unblem­
ished record and who was compelled to retire on
account of her worsening condition but who was
granted only partial disability benefits, would indeed
subvert the salutary intentions of the law in favor of
the worker (Government Service Insurance System vs.
Court of Appeals et al., G. R. No. 117372, January
29, 1998).
* * *

368
 EMPLOYEES’ COMPENSATION PROGRAM AMD
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Cite an instance of conversion of partial disability to

total disability.

ANS. Where, for instance, a government agricul­

turist who had been granted permanent partial disabil­
ity benefit equivalent to thirty-eight (38) months for his
ischemic cardiomyopathy, later on contracted chronic
obstructive pulmonary disease, which rendered him
unable to engage in any gainful occupation for a
continuous period exceeding 120 days, it was held that
his disability became permanent total disability, al­
though he lost no use of any particular anatomical part
of his body. (Government Service Insurance System
vs. Court of Appeal, et al. , G. R. No. 132648, March
4, 1999)
■it *

A researcher,of the DECS retired at sixty (SO) years of

age after about thirty (30) years of service. While in the
service, he was diagnosed to have PTB Minimal and.
Emphysema. About three (3) years after his retirement,
he was hospitalized fo r PTB, and found to be suffering
permanent total disa b ility.' He filed with the 6SIS a
claim fo r disability .benefits under the Employees5Com­
pensation Program. •
{a} Should the claim be given dus -sours© considering'
that it was made long after-the employee had retsrsd
from the service?

ANS. Yes. The main consideration for compens­

ability is that the ailment was contracted during and by
reason of his employment.

(b) May permanent total disability arise although the

employee does not lose the use o f any part o f his body?

ANS. Yes. Where the employee is unable, by

reason of the injury or sickness, to perform his custom­
ary job for more than 120 days, permanent total
disability arises. (Ijares vs. Court of Appeals et al., G.
R. No. 105854, August 26, 1999)

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 EMPLOYEES' COMPENSATION PROGRAM AND
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What are ihe death benefits?

ANS. Article 194 of the Labor Code provides:

(a) Under such regulations as the Commission

may approve, the System shall pay? to the primary
beneficiaries upon the death of the covered employee
under this Title an amount equivalent to his monthly
income benefit, plus ten percent thereof for each
dependent chilti, but hot exceeding five, beginning
with the yburiigest and* without substitution; except as
provided for in paragraph (j) of Article 167 hereof:
Provided, However, That the monthly income benefit
shall be guaranteed-for five years: Provided, Further,
That if he has no primary beneficiary, the System shall
pay to his secondary beneficiaries the monthly income
benefit but not to exceed sixty months: Provided,
Finally, That the minimum death benefit shall not be
less than fifteen thousand pesos (P15.000.00).
(b) Under such regulations as the Commission
may approve, the System shall pay to the primary
beneficiaries upon the death of a covered employee
who is under permanent total disability under this Title,
eighty percent of the monthly income benefit and his
dependents to the dependents’ pension: Provided,
That the marriage must have been validly subsistingat
the time of disability: Provided, Further, That if he has
no primary beneficiary, the System shall pay to his
secondary beneficiaries the monthly pension excluding
the dependents pension, of the remaining balance of
the five-year guaranteed period: Provided, Finally,
That the minimum death benefit shall not be less than
fifteen thousand pesos. (As amended by P. D. 1911)
(c) The monthly income benefit provided herein
shall be the new amount of the monthly income benefit
for the surviving beneficiaries upon the approval of
this decree. (As amended by P. D. 1368)
(d) Funeral benefit. — A funeral benefit of Three
Thousand Pesos (P3.000.00) [eight thousand pesos
(P8.000.00) pursuant to ECC Resolution No. 92-07-
0032, dated July 8, 1992 which became effective May
1, 1992]; now P10,000.00) shall be paid upon the

37ft
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

death of a covered employee or permanently totally

disabled pensioner. (As amended by E. O. 179)

What are the conditions fo r entitlement to death bene­

fits?

ANS. The beneficiaries of a deceased employee

shall be entitled to an income benefit if all of the
following conditions are satisfied:

(1) The employee has been duly reported to the

System;
(2) He died as a result of an injury or sickness;
and
(3) The System has been duly notified of his
death, as well as the injury or sickness which caused
his death.

For how long are the primary beneficiaries entitled to

the death benefits?

ANS. The dependent spouse, until he or she

remarries; the dependent children until they get mar­
ried, or find gainful employment, or reach twenty-one
(21) years of age; and in the case of the child suffering
from physical or mental defect, when such defect
disappears.

* * *

If an employee suffers disability o r dies before he is

duly reported fo r coverage to the System (SSS or GSIS),
who w ill be liable fo r the benefits?

ANS. The employer, (Section 1, Rule X; Section 1,

Rule XI; Section 1, Rule II; Section 1, Rule XIII; ECC
Rules).

371
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

What is the funeral benefit?

ANS. A funeral benefit of P10,000.00 shai! be paid

upon the death of a covered employee or permanently
totally disabled pensioner.

* * *

When is the employer liable to pay a penalty to the State

Insurance Fund?

ANS. In case the employee’s injury or death was

due to the failure of the employer to comply with any
law, or to install and maintain safety devices, or take
other precautions for the prevention of injury, said
employer shall pay to the State Insurance Fund a
penalty of twenty-five percent (25%) of the lump sum
equivalent of the income benefit payable by the Sys­
tem to the employee. All employers, especially those
who should have been paying a rate of contribution
higher than required of them under this Title, are
enjoined lo undertake and strengthen measures for the
occupational health and safety of their employees.
'(Article 200, Labor Code)
* * *

Who am required to make contributions to the State

s j?i'S iliii« a e iiC 0

ANS. Contributions to ihe Stats Insurance Fund

shall bs paid in their entirety by the employer and any
contract or device for the deduction of any portion
thereof from the wages or salaries of the employees
shall be null and void. (Art. 183, par. (c), Labor Code)
The government accepts general responsibility for
the solvency of the State Insurance Fund. Any defi­
ciency will be covered by supplemental appropriations
from the National Government. (Art. 184, Labor Code)

* * *

372
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

Who has Jurisdiction over disputes under the employ­

ees’ compensation program with respect to coverage,
entitlement to benefits, collection and payment o f con­
tributions and penalties o r any other matter related
thereto?

ANS. The System (SSS or GSiS) has original and

exclusive jurisdiction, subject to appeal to the Employ­
ees’ Compensation Commission, which shall decide
appealed cases within twenty (20) working days from
the submission of the evidence. (Article 180, Labor
Code)
Decisions, awards, judgments, final orders or reso­
lutions of the Commission may be appealed to the
Court of Appeals within fifteen (15) days from notice of
the award, judgment, final order or resolution, whether
the appeal involves questions of fact, law, or mixed
questions of fact and law. (Rule 43, Sections [1], [3]
and [4], 1997 Rules of Civil Procedure)

* * it

When does the right to compensation or benefit fo r loss

or impairment o f an employee’s earning capacity due. to
work-related illness or injury arise?

ANS. It arises or accrues upon, and not before,

the happening of the contingency. Hence, an em­
ployee acquires no vested right to a program of
compensation benefits simply because it was opera­
tive at the time he became employed. Although said
program provides for better benefits than what may be
enjoyed under the Employees’ Compensation Pro­
gram, the employee can only claim for the benefits
under the latter if the illness or injury was sustained
while the ECC program was already in effect. Besides,
under Article 173 of the Labor Code, liability of the
State Insurance Fund is in place of all other liabilities
of the employer to the employee or his dependents.
(San Miguel Corporation vs. NLRC, et al., G. R. No.
57473, August 15, 1988)
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

Does recovery from the State Insurance Fund bar a

claim fo r benefits under the SSS Law? Why?

ANS. No. As expressly provided for in Article 173

of the Labor Code, payment of compensation under
the State Insurance Fund does not bar recovery of
benefits under the SSS Law, Republic Act No. 1161,
as amended. Benefits under the State Insurance Fund
accrue to the employees concerned due to hazards
involved and are made a burden on the employment
itself. On the other hand, social security benefits are
paid to SSS members by reason of their membership
therein for which they contribute their money to a
general fund. (Ma-ao Sugar Central Co., Inc., et al.
vs. Hon. Court of Appeals, et al., G. R. No. 83491,
August 27, 1990)

Aniban, a Filipino seaman, died on board the vessel of

his foreign employer due to myocardial infarction. His
heirs sought to recover death benefits under the collec­
tive bargaining agreement executed between the Asso­
ciated Marine Officers and Seaman’s Union o f the
Philippines (AMOSUP) and hist foreign employer which
provided fo r benefits, in addition to those provided by
the POEA rules and regulations, fo r death due to an
occupational disease.
(a) Does the Employees Compensation Commission
have ju risdictio n over the claim? Why?

ANS. No. The jurisdiction of the ECC comes into

play only when the liability of the State Insurance Fund
is in issue. And such jurisdiction is only appellate over
the decisions of the GSIS or SSS. The claim should
be filed with the POEA (now Labor Arbiter).

(b) Is myocardial infarction an occupational disease of

a seaman? Explain.

ANS. Yes. It is a matter of judicial notice that an

overseas worker, having to ward o ff homesickness by

374
 EMPLOYEES’ COMPENSATION PROGRAM AND
STATE INSURANCE FUND

reason of being physically separated from his family

for the entire duration of his contract, bears a great
degree of emotional strain while making an effort to
perform his work well. The strain is even greaier in
the case of a seaman who is constantly subjected to
the perils of the sea while at work abroad and away
from his family.
Probability and not certainty is the test of proof in
compensation proceedings. (Heirs of Aniban vs.
NLRC et al., G. R. No. 116354, December 4, 1997)
* *

A wood file r worked fo r a lumber company from 1986

until he was separated from employment on December
31,1991 due to pulmonary tuberculosis. On November
9, 1994, he filed a claim fp r employees' compensation
benefits. The claim was however dismissed as the
same was allegedly filed beyond three (3) years from the
time the cause of action accrued, i. e., from September
21, 1991 when his PTB first became manifest. Is the
dismissal of the claim due to prescription tenable?
Why?

ANS. No. The prescriptive period should be

reckoned from the time the employee lost his earning
capacity, i. e., terminated from employment due to
illness and not when the same first became manifest.
A liberal attitude should be adopted in favor of the
employee! The employees’ compensation law is a
social legislation to provide meaningful protection to
the working class against the hazards of disability,
illness and other contingencies resulting in the loss of
income! (Employees’ Compensation Commission vs.
Sanico, G. R. No. 134028, December 17, 1999)

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 CHAPTER X!

RIGHT TO SELF-ORGANIZATION
What is the employees’ right to self-organization?

ANS. It is the right of the employees to form, join

or assist in the formation of a labor organization of
their own choosing for purposes of collective bargain­
ing through representatives of their own choosing and
to engage in lawful concerted activities for purposes of
collective bargaining or for their mutual aid and pro­
tection (Article 248, Labor Code). It also includes the
freedom not to join a labor union.
The right to self-organization is expressly recog­
nized in Section 8, of Article III, and Section 3 of
Article XIII of the Constitution.

* ifr *

What is a labor organization?

ASMS. A labor organization is a union or associa­

tion of employees which exists in v/hole or in part for
the purpose of collective bargaining or dealing with
employers concerning terms and conditions of employ­
ment (Article 212 (e), Labor Code). If it is duly
registered with the Department of Labor and Employ­
ment, it is called a “legitimate labor organization”
(Article 212 (f), Labor Code).

* St *

What is a “ workers’ association"’?

ANS. It is an association of workers for the mutual

aid and protection of its members or for any legitimate
purpose other than collective bargaining. (Rule !,
Section 1(ccc), Book V, Implem enting Rules, as
amended by D. O. No. 40-03)

77K
 RIGHT TO SELF-ORGANIZATION

What is an “ independent union” ?

ANS. It is any labor organization operating at the

enterprise level whose legal personality is derived
through an independent action for registration pre­
scribed under Article 234 of the Labor Code and the
Rule III, Section 2-a of the implementing Rules. (Rule
I, Section 1[w], Book V, Im plem enting Rules, as
amended by D. O. No. 40-03)

* * *

What is a “ chartered ioca!” ?

ANS. “Chartered local” refers to a labor organiza­

tion in the private sector operating at the enterprise
level that acquired legal personality through the is­
suance of a charter certificate by a duly registered
federation or national union, and reported to the
Regional Office. (Rule I, Sec. 1(i), Book V, Imple­
menting Rules, as amended by D. O. No. 40-03)

it * *

What is an “ affiliate” ?

ANS. “A ffiliate” refers to an independent union

affiliated with a federation, national union or a char­
tered local, which was subsequently granted indepen­
dent registration but did not disaffiliate from its federa­
tion, reported to the Regional Office and the Buresu.
(Rule i, Sec. 1(a), Book V, Implementing Rules, as
amended by D. O. No. 40-03)
* * 5k

What is a “ national union” ?

“National Union’ or “Federation" refers to a group

of legitimate labor unions in a private establishment
organized fo r collective bargaining or for dealing with

377
 RIGHT TO SELF-ORGANIZATION

employees concerning terms and conditions of em­

ployment for their member unions or for participating
in the formulation of social employment policies, stan­
dards and programs, registered with the Bureau. (Rule
I, Sec. 1(kk), Book V, Implementing Rules, as
amended by D. O. No. 40-03)

* * *

Who are entitled under the Labor Code to exercise the

right to self-organization?

ANS. (a) AH persons employed in commercial,

industrial and agricultural enterprises and in religious,
charitable, medical or educational institutions whether
operating for profit or not;
(b) Ambulant, intermittent and itinerant workers,
self-employed people, rural workers and those without
any definite employer. (Article 243, Labor Code)

* * ★

Are government employees entitled to unionize?

ANS. Yes. Their right to form unions is guaran­

teed in Section 8 of Article III and Section 2 (5) of
Article IX-B of the 1987 Constitution. And Executive
Order No. 180, promulgated on June 1, 1987, pro­
vides:

“Section 2. All government employees can form,

join or assist employees’ organizations of their own
choosing for the furtherance and protection of their
interests. They can also form, in conjunction with
appropriate government authorities, labor-
management committees, works councils and other
forms of workers’ participation schemes to achieve the
same objectives.
“Section 3. High-level employees whose functions
are normally considered as policy-making or manage­
rial or whose duties are of a highly confidential nature

378
 RIGHT TO SELF-ORGANIZATION

shall not be eligible to join the organization of rank-

and-file government employees.
“Section 4. This Executive Order shall not apply to
the members of the Armed Forces of the Philippines,
including police officers, policemen, firemen and jail
guards.”

•ft * *

May managerial employees and supervisory personnel

form or jo in labor unions?

ANS. Under Article 245 of the Labor Code, as

amended by Rep. Act 6715, managerial employees
are not eligible to join, assist or form any labor
organization. However, supervisory employees may
join, assist or form labor organizations of their own but
they are not eligible for membership in a labor organi­
zation of the rank-and-file employees.

* * *

Should managerial employees be entitled to form

unions of their own? Why?

ANS. Yes. Section 3 of Article XIII of the 1987

Constitution mandates the State to guarantee to “all”
workers the right to self-organization. Section 8 of the
Bill of Rights (Article III) also recognizes the right of
those employed in the public and private sectors to
form unions. The said constitutional provisions do not
exclude or disqualify managerial employees from the
exercise of the right to self-organization. The debates
in the Constitutional Comimission also indicate the
intention of the members thereof to grant this right to
managerial employees.

* * *

The route manager of a softdrinks company had among

others the responsibility to achieve and meet the sales

379
 RIGHT TO SELF-ORGANIZATION

plan; to develop new business opportunities; to insure

that merchandising objectives are attained; to collect
receivables and delinquent accounts; to conduct route
rides to train, evaluate and develop route salesmen and
to ensures proper implementation o f various company
policies arsd procedures.
fa) is the route manager eligible fo r membership in a
labor union? Why?

ANS. No. He is a managerial employee. He is

responsible for the success of ihe company's main Sine
of business through management of his sales team.
He cannot possibly be classified as a mere supervisor
because his work does not only involve, but goes far
beyond, the simple direction or supervision of operat­
ing employees to accomplish objectives set by those
above him.
He is disqualified from joining a union pursuant to
Art. 245 of the Labor Code.

(b) Is Article 245 constitutional? Explain.

ANS. Yes. Under Section 8, Article III (Bill of

Rights) of the Constitution, the right to form unions
shouid be only for purposes not contrary to law. In the
case of Article 245, there is a rational basis for
prohibiting managerial employees from forming or
joining labor organizations, it is evident conflict of
interest; the union can never be assured of the loyalty
of managerial employees; it can also become
company-dominated with ihe presence of such em­
ployees in union membership. (United Pepsi-Cola
Supervisory Union vs. Laguesma et al., G. R. No.
122226, March 25, 1998)

* * *

Distinguish managerial employees from supervisory

personnel.

380
 RIGHT TO SELF-ORGANIZATION

ANS. Managerial employees are vested with pow­

ers or prerogatives to lay down and execute manage­
ment policies and/or hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees. Su­
pervisory personnel, on the other hand, are those who,
in the interest of the employer, effectively recommend
such managerial actions if the exercise of such author­
ity is not merely routinary or clerical in nature but
requires the use of independent judgment. (Art. 212
(m), Labor Code, as amended by R. A. 6715)
* * *

The m ajor patron’s duties include taking complete

charge and command of the ship and performing the
responsibilities and duties of a-ship.captain; the m inor
patron also commands the vessel, plying the lim its of
island waterway, ports and estuaries; the chiefmate
performs the functions o f an executive officer next in
command to the captain; and the chief marine engineer
takes over-all charge o f the operation o f the ship’s
mechanical and electrical equipment. May the aforesaid
officers be included in the bargaining unit o f rank-and-
file complement o f the vessel? Are they eligible to jo in
a union? Why?

ANS. No. The functions which these officers

discharge pertain to the navigation of the vessel.
Even if there are advanced communications equip­
ment on board, the importance of the position of the
officers in assessing risks and evaluating the vessel’s
situation remains indisputable. The exercise of discre­
tion and judgment in directing a ship’s course is as
much managerial in nature as/decisions arrived at in
the confines of the more conventional board room or
executive office. These officers are managerial em­
ployees of the marine or shipping corporation.
(Association of Marine Officers and Seamen of Reyes
and Lim Co. vs. Laguesma, et al., G. R. No. 107761,
December 27, 1994)

381
 RIGHT TO SELF-ORGANIZATION

“ Supervisors” of the company were given the jo b either

to “ assist the foreman in the effective dispatching/dis­
tribution of manpower and equipment to carryout ap­
proved w ork” o r “ execute and coordinate workplans
em anating from his supervisors.” Are these
“ supervisors” considered managerial o r supervisory
personnel? Why?

ANS. No. They only execute approved and

established policies leaving little or no discretion at all
whether to implement the said policies or not.
(Southern Philippines Federation of Labor vs. Hon. P.
F. Calleja, et al., G. R. No. 80882, April 24, 1989)

* * *

Philippine Phosphate Fertilizer Corporation had

“ professional/technical employees” (engineers, ana­
lysts, mechanics, accountants, nurses and midwives),
w ho performed work directly related to management
programs, exercised judgm ent in the application of
concepts, methods, systems and procedures in their
respective fields o f specialization, and regularly and
directly assisted a managerial and/or supervisory em­
ployee. They were under the direction and supervision
of supervisors or superintendents. They had no men
under them but were regularly called upon by their
supervisors or superintendents on some technical mat­
ters. Are the “ professional/technical employees” eligi­
ble to jo in a union of supervisors of the company?
Why?

ANS. No. These employees cannot be classified

as supervisors; they cannot effectively recommend
managerial actions with the use of independent judg­
ment as they are under the supervision of superinten­
dents and supervisors. They are consequently consid­
ered as rank-and-file employees.
The law prohibits the formation of a union whose
membership consists of supervisors and the rank-and-

382
 RIGHT TO SELF-ORGANIZATION

file employees, for conflict of interest may arise in the

areas of discipline,collective bargaining and strikes.
(Philippine Phosphate Fertilizer Corporation vs. Hon.
Ruben Torres, et al., G. R. No. 98050, March 1 7 ,
1994) :■■■'. ' :’j
* ff *

Among the members of the raink-and-file union of a

m otor company are engineers Who are responsible for
overseeing initial production o f new models, prepare
and m onitor construction schedules fo r new models,
identify manpower requirements fo r production, fa cili­
ties and equipment, and lay-out processes.
(a) Are the aforesaid engineers supervisory? Why?

ANS. Yes. Not only do they oversee production of

new models but also determine manpower require­
ments, thereby influencing important hiring decisions
at the highest levels. This determination is neither
routine nor clerical but involves the independent as­
sessment of factors affecting production which in turn
affect decisions to hire or transfer workers.

(b) Are the aforesaid engineers eligible to jo in the

rank-and-file union? •

ANS. No. The use of independent judgment in

making the decision to hire, fire or transfer in the
identification of manpower requirements would be
great impaired if the employee’s loyalties are torn
between the interests of the union and the interests of
management. The employee, would find it difficult to
objectively identify the exact manpower requirements
dictated by production demands.
This is precisely what the Labor Code, in requiring
separate unions among rank-and-file employees on
one hand, and supervisory employees on the other,
seeks to avoid. The rationale behind the Code’s
exclusion of supervisors from unions of rank-and-file
employees is that such employees, while in the perfor-

383
 RIGHT TO SELF-ORGANIZATION

mance of supervisory functions, become the alter ego

of management in the making and the implementing of
key decisions at the sub-managerial level.

(c) May a union with rank-and-file and supervisory

employees attain the status of a legitimate labor union?
Why?

ANS. No. The union’s composition is in violation

of the Labor Code’s prohibition of unions composed of
supervisory and rank-and-file employees. (Toyota
M otor Philippines Corporation vs. Toyota Motor
Philippines Corporation Labor Union et al., G. R. No.
121084, February 19, 1997)

★ * *

Under the decentralization and reorganization plan pro­

gram o f a paper and tim ber company, the positions of
section heads and supervisors were designated as sec­
tion managers and unit managers and converted into
managerial positions.
In a certification election in the bargaining unit of
supervisory and technical personnel o f the company,
the section managers and unit managers were sought
to be excluded as they were allegedly managerial em­
ployees. Decide.

ANS. The section manager and units manager

should not be excluded. They are not actually man­
agerial but only supervisory since they do not lay down
management policies. Their authority is not supreme
but merely advisory in character. The mere fact that
an employee is designated “manager" does not ipso
facto make him one; designation should be reconciled
with the actual job description of the employee.
(Paper Industries of the Philippines vs. Laguesma et
al., G. R. No. 101738, April 12, 2000)

M A
 RIGHT TO SELF-ORGANIZATION

The Branch Managers/OICs, Cashiers, and Controllers

of a bank have, pursuant to the Central Bank Manual,
control, custody and/or access to confidential matters
such as the branch’s cash position, statements of finan­
cial condition, vault combination, cash codes fo r tele­
graphic transfers, demand drafts and other negotiable
instruments. Are the said bank officers eligible to jo in a
union? Why?

ANS. No. They are confidential employees. A

confidential employee is one entrusted with confidence
on delicate matters, or with the custody, handling, or
care and protection of the employer's property.
While Article 245 of the Labor Code singles out
managerial employees as ineligible to join, assist or
form any labor organization, under the doctrine of
necessary implication, confidential employees are sim­
ilarly disqualified. The same reasons for the disquali­
fication of managerial employees apply to confidential
employees.
If confidential employees could unionize in order to
bargain for advantages for themselves, then they
could be governed by their own motives rather than
the interest of the employers. Moreover, unionization
of confidential employees for the purpose of collective
bargaining would mean the extension of the law to
persons or individuals who are supposed to act “in the
interest of" the employers. (National Association of
Trade Unions, etc. vs. Hon. R. Torres, et al., G. R.
No. 93468, December 29, 1994)

* * *

Are legal or executive rocretaries eligible to jo in the

rank-and-file union? Why?

ANS. No. While legal secretaries a.s. neither

managers nor supervisors as their work is basically
routinary and clerical, they nonetheless fall under4he
category of confidential employees and are ineligible
to join a labor union. (Pier 8 Arrastre & Stevedoring

385
 RIGHT TO SELF-ORGANIZATION

Services, Inc. vs. Confesor et al., G. R. No. 110854,

February 13, 1995)
Although Article 245 of the Labor Code limits the
ineligibility to join, form and assist any labor organiza­
tion to managerial employees, jurisprudence has ex­
tended this prohibition 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 and hence ere likewise privy
to sensitive and highly confidential records. Their
exclusion is justified on the ground of conflict of
interest and possibility of espionage. Executive secre­
taries of the general manager and the department
managers have consequently been held to be ineligi­
ble to join a union and should be excluded from the
bargaining unit of the rank-and-fils employees.
(Metrolab Industries, Inc. vs. Confesor et al., G. R.
No. 108855, February 28. 1996.)

* it *

San M igu#l Corporation Pou?try Products Plant had

supervisory personnel with the following functions: to
undertake decisions to discontinue/tem porarily stop
shift operations when situation require; to effectively
oversee the quality control function at the processing
lines in the storage of chicken and other products; to
administer efficient system of evaluation of products in
the outlets; to be directly responsible fo r the recall,
holding and rejection o f direct manufacturing materials;
and to recommend and initiate actions in the mainte­
nance o f sanitation and hygiene throughout the plant.
Are the supervisors considered confidential employ­
ees? Why?

ANS. No. From their functions it can be gleaned

that the confidential information said employees have
access to concern the employer's internal business
operations. As held in the Westinohouse Electric
Corporation vs. National Labor Relations Board (398
 RIGHT TO SELF-ORGANIZATION

F2nd 669). an employee may not be excluded from the

appropriate bargaining unit merely because he has
access to confidential information concerning the em­
ployer’s internal business operations and which is not
related to the field of labor relations. The information
the supervisors handle are properl> classifiable as
technical and internal business operations data which
has no relevance to negotiations and settlement of
grievances wherein the interests of a union and the
management are invariably adversarial.
Confidential employees who may be excluded from
the bargaining unit must be strictly defined so as not to
needlessly deprive many employees of their right to
bargain collectively through representatives of their
choosing. (San Miguel Corporation Supervisors and
Exempt Union et al. vs. Hon. B. Laguesma et al., G.
R. No. 110399, August 15, 1997)

The bank’s head of the loans department, initially ap­

proves loan applications before they are passed on to
the Board of Directors fo r confirmation; the cashier is
one o f the authorized signatories of the bank and ap­
proves the opening o f accounts withdrawals and en­
cashment, and acceptance of check deposits; while the
accountant is also one of the authorized signatories of
the bank, handles the financial reports and reviews the
debit/credit tickets submitted by the other departments.
(a) Are the foregoing officers o f the bank disqualified
from joining unions fo r being managerial employees?
Why?

ANS. No. They have no power to transfer,

suspend, lay-off, recall, discharge, assign or discipline
employees; neither do they formulate and execute
management policies.

(b) May they be disqualified from joining unions fo r

being confidential employees? Why?

387
 RIGHT TO SELF-ORGANIZATION

ANS. No. They have no access to confidential

labor relations information. (Sugbuanon Rural Bank,
Inc. vs. Hon. Undersecretary Bienvenido Laguesma
et al., G. R. No. 116194, February 2, 2000)

* * *

May aliens jo in labor unions in the Philippines?

ANS. As a general rule, aliens cannot join labor

unions in the Philippines; they are prohibited under
Article 269 of the Labor Code from engaging directly
or indirectly in all forms of trade union activities.
However, under the same article, as amended by Rep.
Act 6715, aliens working in the Philippines with valid
permits issued by the Department of Labor and Em­
ployment may exercise the right to self-organization
and join or assist labor organizations of their own
choosing for purposes of collective bargaining; pro­
vided, that said aliens are nationals of a country which
grants the same or similar rights to Filipino workers.

* * *

What are “ trade union activities” ?

ANS. “Trade union activities' shall mean:

(1) organization, formation and administration of

labor organizations;
(2) negotiation snd administration of collective
bargaining agreements;
(3) all forms of concerted union actions;
(4) organizing, managing, or assisting union con­
ventions, meetings, rallies, referenda, teach-ins, semi­
nars, conferences and institutes;
(5) any form of participation or involvement in
representation proceedings, representation elections,
consent elections, union elections; and
(6) other activities or actions analogous to the
foregoing. (Art. 270, Labor Code)

■jafl
 RIGHT TO SELF-ORGANIZATION

Are employees of a cooperative entitled io form a

union? Why?

ANS. Employees of a cooperative are entitled to

exercise their right to self-organization except those
who are members of the cooperative. The latter are
considered owners and certainly an owner cannot
bargain with himself or his co-owners. (Cooperative
Rural Bank of Davao City, Inc. vs. Calleja, et al., G.
R. No. 77951, September 26, 1988)

* * *

What is the purpose of the formation of a labor union?

ANS. The union has been evolved as an organiza­

tion of collective strength for the protection of the
workers against the unjust exactions of the employer
and for securing to its members fa ir and just wages
and good working conditions.
The individual, acting alone, cannot hope to wrest
from the employer as much concession as can be
exacted by the workers acting collectively. In a union
there is strength.
* * *

Cite features of the Labor Code that protect and

strengthen labor unions.

ANS. Among the features of the Labor Code that

protect and strengthen labor unions are its provisions
(a) on unfair labor practices of employers (Article 248,
Labor Code), (b) recognizing the right of labor organi­
zations to prescribe their own rules with respect to the
acquisition or retention of membership therein (Article
249 (a), Labor Code), (c) recognizing the validity of
closed shop, union shop and other union security
arrangements (Article 248 (e), Labor Code), (d) autho­
rizing deductions or check offs from the wages of an

389
 RIGHT TO SELF-ORGANIZATION

employee for union duos (Article 113 (b), Labor Code),

(e) allowing the imposition of an agency fee (Articlo
248 (e), Labor Code), and (f) prohibiting abridgment
of the right to seSf-organization (Article 246, Labor
Code).

* * *

When does a labor organization acquire legal personal­

ity and become entitled to the rights and privileges
granted by law to legitimate labor organizations?

ANS. Upon issuance of the certificate of registra­

tion. (Art. 234, Labor Code)'

* * *

Is the issuance o f a certificate o f registration to a

chapter o r local o f a federation o r national union a
condition fo r the legitimacy and acquisition by the
form er of legal personality? Explain.

ANS. No. A local or chapter becomes a legitimate

labor organization upon submission to the BLR of its
charter certificate, constitution and by-laws, a state­
ment on the set of officers, and the books o? accounts
The certificate of registration is not required.
The satisfaction of these requirements by the ioca!
or chapter shall vest upon it the status of legitimacy
with all its concomitant statutory privileges, one or
which is the right to be certified as the exclusive
representative of all the employees in an appropriate
bargaining unit. (San Miguel Foods, Inc. - Cebu
B-Meg Plant vs. Hon. B. Laguesma et al, G. R. No.
116172, October 10, 1996)
* * *

What is the purpose of registration of a labor organiza­

tion?

390
 RIGHT TO SELF-ORGANIZATION

ANS. The requirement of registration is not a

limitation on the right of assembly or association,
which may be exercised with or without said registra­
tion. The latter is merely a condition s in e qua non
for the acquisition of legal personality by labor organi­
zations, associations, or unions, and the possession of
the rights and privileges granted by law to legitimate
labor organizations. Registration is required to protect
both labor and the public pose as organizers, although
not truly accredited agents of the union they purport to
represent. Such requirement, is valid exercise of the
police power, because the activities in which labor
organizations, associations, and unions of workers are
engaged affect public interest and should be pro­
tected. (Phil. Association of Free Labor Unions
(PAFLU), et al. vs. The Secratary of Labor, et al., G.
R. No. L-22228, February 27, i9S9)
* * it

Give the requirements fo r the registration o f an inde­

pendent union and of a federation or national union.

ANS. The application for registration of an inde­

pendent union shall be accompanied by the following
documerrts:

1) the name of the applicant labor union, its

principal address, the name of its officers and
their respective addresses, approximate num­
ber of employees in the bargaining unit where
it seeks to operate, with a statement that it is
not reported as a chartered local o f any federa­
tion or national union;,
2) the minutes of the organizational rneeting(s)
and the list of employees wtio participated to
the said meeting(s);
3) the name of all its members comprising at least
20% of the employees in the bargaining unit;
4) the annual financial reports if the applicant has
been in existence for one or more years, unless

m
 RIGHT TO SELF-ORGANIZATION

it has not collected any amount from the mem­

bers, in which case a statement of this effect
shall be included in the application;
5) the applicant’s constitution and by-laws, min­
utes of its adoption or ratification, and the list
of the members who participated in it. The list
ratifying members shall be dispensed with
where the constitution and by-laws was ratified
or adopted during the organizational meeting.
In such a case, the factual circumstances of
the ratification shall be recorded in the minutes
— • of the organizational meeting(s).

The application for registration of federations and

national unions .shall be accompanied by the following
documents:

1) a statement indicating the name of the appli­

cant labor union, its principal address, the
name of its officers and their respective ad­
dresses;
2) the minutes of the organizational meeting(s)
and the list of employees who participated in
the said meeting(s);
3) the annual financial reports if the applicant
union has been in existence for one or more
years, unless it has not collected any amour?*
from the members, in which case a statement
to this effect shall be included in the applica­
tion;
4) the applicant union’s constitution and by-laws,
minutes of its adoption or ratification, and the
list of the members who participated in it. The
list of ratifying members shall be dispensed
with where the constitution and by-laws was
ratified or adopted during the organizational
meeting(s). In such a case, the factual circum­
stances of the ratification shall be recorded in
the minutes of the organizational meeting(s);
5) the resolution of affiliation of at least ten (10)
legitimate labor organizations, whether inde­
pendent unions or chartered locals, each of

392
 RIGHT TO SELF-ORGANIZATION

which must be a duly certified or recognized

bargaining agent in the establishment where it
seeks to operate; and
6) the name and addresses of the companies
where the affiliates operate and the list of all
the members in each company involved.

Labor organizations operating within an identified

industry may also apply for registration as a federation
or national union within the specified industry by
submitting to the Bureau the same set of documents.
(Sec. 2, Rule ill, Book V, Implementing Rules, as
amended by D. O. 40-03)
* * *

How should the requirements fo r union registration be

complied with?

ANS. The formal requirement for the registration

of a labor union must be strictly complied with; other­
wise the union does not acquire legal personality.
The submission of statements of accounts, in lieu
of the accounting books (journals, ledgers etc.) re­
quired under the Labor Code and its implementing
rules, is not considered sufficient compliance with the
law. (Protection Technology, Inc. vs. Honorable
Secretary of Labor et al., G. R. No. 117211, March
1,1995)
The registration of a local or chapter is not valid
where no books of accounts were filed before the BLR,
the constitution, by-laws and the list of members who
supposedly ratified the same were not attested to by
the union president, and the oonstitution and by-laws
were not verified under oath. (Phoenix Iron and Steel
Corporation vs. Secretary of Labor and Employment
et al.,G. R. No. 112141, May 16, 1995)

* * *

393
 RIGHT TO SELF-ORGANIZATION

!s the issuance of a certificate o f registration to the

union conclusive proof that it has the legal personality
to file a petition fo r certification election? Explain.

ANS. The issuance of a certificate of registration

in favor of a union is not an adequate and unassailable
proof that it possesses the requisite legal personality
to file a petition for certification election. If a labor
organization’s application for registration is vitiated by
falsification and serious irregularities, a labor organi­
zation should be denied recognition as a legitimate
labor organization. And if a certificate of registration
has been issued, the propriety of its registration could
be assailed directly through cancellation of registration
proceedings in accordance with Articles 238 and 239
of the Labor Code, or indirectly, by challenging its
petition for certification election. (Toyota Motors
Philippines Corporation Labor Union vs. Toyota Motor
Philippines Corporation Employees and Workers Union
et al., G. R. No. 135806, August 8, 2002)
fr * *

Give some principles relative to the right o f a local

union to disaffiliate from its mother federation.

ANS. The right of a local union to disaffiliate from

its mother federation is well-settled. A local union,
being a separate and voluntary association, is free to
serve the interest of all its members including the
freedom to disaffiliate when circumstances warrant.
This right is consistent with the constitutional guaran­
tee of freedom of association (Volkschel Labor Union
vs. Bureau of Labor Relations, No. L-45824, June 19,
1985, 137 SCRA 42).
When the local union withdrew from the old federa­
tion to join a new federation, it was merely exercising
its primary right to self-organization for the effective
enhancement of common interests. In the absence of
enforceable provisions in the federation's constitution
preventing disaffiliation of a local union, a local may

394
 RIGHT TO SELF-ORGANIZATION

sever its relationship with its parent (People’s Indus­

trial and Commercial Employees and Workers Organi­
zation (FFW) vs. People’s Industrial and Commercial
Corporation, No. 37687, March 15, 1982, 112 SCRA
440).
A local union owes its creation and continued
existence to the will of its members and not to the
federation to which it belongs. And the non-
compliance of the local union with the provision in the
constitution of the mother federation requiring the
service of three months notice of intention to withdrew
did not produce the effect of nullifying the disaffilia­
tion; this is purely a technical ground which cannot rise
above the fundam ental right to self-organization.
(Tropical Hut Employees Union-CGW, et al. vs.
Tropical Hut Food Market, Inc., et al., G. R. Nos.
43495-99, Januaiy 20, 1990)
But while it is true that a local union, being an
entity separate and distinct from the mother federa­
tion, is free to serve the interest of all its members and
enjoys the freedom to disaffiliate, such right may be
exercised and is thus considered a warranted by
circumstances. Generally a labor union may d isa ffili­
ate from the mother union to form a local or indepen­
dent union only during the 60-day freedom period
im m ediately preceding the expiration of the CBA.
Even before the onset of the freedom period (and
despite the closed-shop provision in the CBA between
the mother union and management) disaffiliation may
still be carried out, but such disaffiliation must be
effected by a majority of the members in the bargain­
ing unit. This happens when there is a substantial shift
in allegiance on the part of the majority or the mem­
bers of the union, 'n such a case, however, the CBA
continues to bind the members of the new or disaffili­
ated and independent union up !o the CBA’s expiration
date. (Associated Workers Union-PTGWO vs. NLRC,
et al., G. R. Nos. 87266-69, July 30, 1990)

it ft Jt

395
 RIGHT TO SELF-ORGANIZATION

The Philippine Sky landers Employees Association

(PSEA), a labor union affiliated w ith the Philippine
Association of Free Labor Unions (PAFLU) won in the
certification election conducted among the rank-and-
fiie employees of Philippine Skylanders, Inc. But the
rival union protested the result of the election before
the Secretary of Labor, Several months later, pending
settlement of the controversy, PSEA disaffiliated from
PAFLU allegedly for the letter's deliberate and habitual
dereliction of duty towards the former's members. More
than ninety percent (90%) of PSEA’s membership sup­
ported the disaffiliation. Is PSEA’s disaffiliation valid?
Discuss briefly.

ANS. There is nothing shown in the records nor is

it claimed by PAFLU that the local union was expressly
forbidden to disaffiliate from the former nor were there
any conditions imposed for a valid breakaway. The
pendency of an election protest involving both the
mother federation and the local union did not consti­
tute a bar to a valid disaffiliation. (Philippine Skylan­
ders, Inc. et al. vs. NLRC, et al., G. R. Nos.
127374 and 127431, January 3i, 2002)

•k •k it

What is the essence of affiliation?

ANS. The sole essence of affiliation is to increase,

by collective action, the common bargaining power of
local unions for the effective enhancement and protec­
tion of their interests. (Philippine Skylanders, Inc. et
al. vs. NLRC, et al., G. R. Nos. 127374 and 127431,
January 31, 2002)

•ft *

The union of the supervisory personnel of Atlas Litho­

graphic Services, Inc. affiliated with the Kaisahan ng
Manggagawang PiHpino (KAMPIL), a national federa­

396
 RIGHT TO SELF-ORGANIZATION

tion. The local union of ths rank-and-file was also

affiliated w ith the said national federation. When
KAMPIL filed a petition fo r certification election in be­
half of the supervisors’ union, the company opposed
the same on the ground that under Article 245 o f the
Labor Code, the said federation could not represent the
supervisory employees because it already represented
the union o f the rank-and-file employees, who were
directly under the supervisors composing the supervi­
sors’ union. Is the contention of the company tenable?
Explain.

ANS. Yes. Under Article 245 of the Labor Code,

supervisory employees are not eligible for membership
In a labor organization of the rank-and-file employees.
Supervisors should not be given an occasion to bar­
gain together with the rank-and-file against the inter­
ests of the employer regarding terms and conditions of
work.
Conflict of interest may arise. Members of the
supervisory union might refuse to carry disciplinary
measures against their co-member rank-and-file em­
ployees. In the area of bargaining, their interests are
not identical; the needs of one are different from those
of the other. And in the event of a strike, the national
federation might influence the supervisors' union to
conduct a sympathy strike on the sole bssis of a ffilia­
tion.
The prohibition in Article 245 extends to a supervi­
sors’ local union applying for membership in a national
federation the members of which include local unions
of rank-and-file employees. (Atlas Lithographic Ser­
vices, Inc. vs. Laguesma, et al., G. R. No. 96568,
January 6, 1992)

* * ft

The Macho Hair Saloon receives a set o f proposals fo r

collective bargaining from the Macho Barbers L ^ io r
composed of the eight (8) barbers in the establish
The owner refuses to bargain with the union because

397
 RIGHT TO SELF-ORGANIZATION

(1) the barbershop is sim ply a service establishment,

(2) the barbers are not paid on time basis but the sum
o f P4.00 per haircut, and (3) they cannot form a union
since they number less than ten. Which o f the forego­
ing grounds is tenable? Why?

ANS. None. Although the barbershop is simply a

service establishment, the employees therein are enti­
tled to exercise the right to self-organization. And the
fact that the members are paid by results (per haircut)
does not disqualify them from forming a union; if there
is control of the establishment over the means and
methods by which they do their work, they are consid­
ered employees of the former. Finally, the law does
not fix a minimum number o f employees for the
exercise of the right to self-organization.

★ it *

The faculty members in a school, run by a religious

missionary order, converted their faculty club into a
labor union and affiliated the same w ith a national
federation o f teachers’ unions.
The school, claiming that it was being run on a non-
profit basis, refused to recognize the union and instead
proposed that the local disaffiliate w ith the mother
federation and revert itself back to a mere faculty club.
Is there unfair labor practice on the part o f the school?
Give your reasons. (1981 Bar)

ANS. Yes, the school has interfered with the

exercise by the faculty members of their right to
self-organization. Even employees in non-profit or
religious organizations or establishments are entitled
to exercise this right. (Article 243, Labor Code)

* * *

What is the effect o f the registration o f a labor organiza­

tion?

ma
 RIGHT TO SELF-ORGANIZATION

ANS. The registration makes a labor organization

a “legitimate labor organization” and entitles it to the
following rights:
(a) To act as the representative of its members for
the purpose of collective bargaining;
(b) To be certified as the exclusive representative
of all the employees in an appropriate collective
bargaining unit for purposes of collective bargaining;
(c) To be furnished by the employer, upon written
request, with his 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, after the union has been
duly recognized b / the employer or certified as the
sole and exclusive bargaining representative of the
employees in the I'argaininfi unit, or within sixty (60)
calendar days before the expiration of the existing
collective bargaining at, eem ert;
(d) To own property, real or personal, for the use
and benefit of the labor organization and its members;
(e) To sue and be sued in its registered name;
(f) To undertake all other activities designed to
benefit the organization and its members, including
cooperative, housing, welfare and other projects, not
contrary to law.
(g) To be free, with respect to its income and
properties including grants, endowments, gifts, dona­
tions and contributions from fraternal and sim ilar orga­
nizations, local or foreign, which are actually, directly
and exclusively used for their lawful purposes, from
taxes, duties and other assessments (Art. 242, Labor
Code, as amended by R. A. 6715).
(h) To file a notice of strike in behalf of its
members on grounds of unfair labor practices, in the
absence of a duly certified ,or recognized bargaining
representative. (Art. 263, Labor Code)
(i) To collect reasonable membership fees, union
dues, assessments and fines and other contributions
for labor education and research, mutual death and
hospitalization benefits, welfare fund, strike fund and
credit and cooperative undertakings. (Art. 277 (a>,
Labor Code)

399
 RIGHT TO SELF-ORGANIZATION

May an employee be compelled to become a member of

a labor organization? Explain briefly.

ANS. An employee cannot be compelled to be­

come a member of a labor organization. The right to
self-organization includes the freedom not to join a
union. For a “right* comprehends at least two broad
notions, namely first, liberty or freedom, i. e., the
absence of legal restraint, and second, power,
whereby an employee may, as he pleases, join or
refrain from joining an association. (Victoriano vs.
Elizalde Rope Workers Union, et al., G. R. No.
L-25246, September 12, 1974)
However, by virtue of the operation or enforcement
of a closed shop or union shop clause in a collective
bargaining agreement, an employee may be influ­
enced, on pain of dismissal, into becoming a member
of a labor union.

* * *

May an employer impose as a condition fo r employment

that the applicant shall not jo in a labor organization or
shall withdraw from one to which he belongs? Explain.

ANS. No. Such a condition partakes of the nature

of a “yellow dog contract” and constitutes an unfair
labor practice (Article 248 (b), Labor Code). It is an
interference with the in dividual’s right to se lf­
organization.

* * *

Enumerate the rights of membership in a labor organi­

zation.

ANS. Article 241 of the Labor Code enumerates

the rights of membership in a labor organization. They
are:

400
 RIGHT TO SELF-ORGANIZATION

(a) Right against the imposition of arbitrary,

excessive, or oppressive initiation fees, fines and
forfeitures.
(b) Right to full and detailed reports from their
officers and representatives of all financial transac­
tions as provided for in the union’s constitution and
by-laws.
(c) Right to directly elect their officers, local or
national, by secret ballot at intervals of five (5) years.
(d) Right to determine by secret ballot, after due
deliberation, any question of major policy affecting the
entire membership of the organization, unless the
nature of the organization or fo rc e -m a je u re renders
such secret ballot impractical, in which case the board
of directors may make the decision in behalf of the
general membership.
(e) Right to inspect during office hours the books
of accounts and other records of the financial activities
of the organization.
(f) Right to be informed about the provisions of the
organization’s constitution and by-laws, collective bar­
gaining agreement, the prevailing labor relations sys­
tems, as well as rights and obligations under existing
labor laws.
(g) Right to report to the Bureau of Labor Rela­
tions any violation of the rights and conditions of
membership.

* * ifr

Union members filed a com plaint w ith the regional

office of the Ministry of Labor and Employment fo r the
expulsion o f their union officers fo r gross violation of
Article 242 (now Art. 241) o f the Labor Code and their
union’s constitution and by-laws. Instead of deciding
the case, the med-arbiter ordered the holding of a
referendum among the union members to decide on the
issue o f expulsion o f the officers from their respective
positions.
(a) Is the action taken by the med-arbiter proper?

401
 RIGHT TO SELF-ORGANIZATION

ANS. No. The m eo-arbiter must hear and decide

the case and impose th3 appropriate penalty; there is
no legal basis for the calling of a referendum.

(b) In case the union officers sought to be expelled get

re-elected during the pendency o f the expulsion pro­
ceedings, should the cas«? be dismissed?

ANS. Yes. Their re-election indicates that the

members have disregarded or have forgiven their
faults or misconduct. The will of the members should
not be frustrated. (Krpisanan ng Manggagawang
Pinagyakap (KMP), et al vs. Hon. C. Trajano, et al.,
G. R. No. L-62306, January 21, 1985, citing Duyag
vs. Inciong, 98 SCRA 522; and Pascual vs. Provincial
Board of Nueva Ecija, 106 Phil. 471)

* * *

May fees o r assessments be checked-off from the

wages o r other amounts due the employee w ithout his
written authorization? Explain.

ANS. As a general rule, fees and assessments due

the union cannot be deducted from his wages or other
amounts due him without his individual written autho­
rization. However, such deduction without written
authorization can be done in the following cases: (a)
for union dues in cases where the right to checkoff has
been recognized by the employer; and (b) for reason­
able assessments in connection with mandatory activi­
ties such as labor education and research and labor
relations seminars. (Article 241 (o), Labor Code)

* * *

What is “ check-off’? May an employer be held liable fo r

the payment o f union dues and agency fees not de­
ducted from the members’ wages pursuant to the
check-off provision in the CBA? Give a discussion.

402
 RIGHT TO SELF-ORGANIZATION

ANS. A check-off is a process or device whereby

the employer, on agreement with the union recognized
as the proper bargaining representative, or on prior
authorization from its employees, deducts union dues
or agency fees from the latter’s wages and remits them
directly to the union. Its desirability to a labor organi­
zation is quite evident; by it, it is assured of continu­
ous funding. Indeed, the system of check-off is
prim arily for the benefit of the union and, only indi­
rectly, of the individual laborers. When so stipulated
in a collective bargaining agreement, or authorized in
writing by the employees concerned — the Labor Code
and its Implementing Rules recognize it to be the duty
of the employer to deduct sums equivalent to the
amount of union dues from the employees’ wages for
direct remittance to the union, in order to facilitate the
collection of funds vital to the role of the union as
representative of employees in a bargaining unit if not,
indeed, to its very existence. And it may be mentioned
in this connection that the right to union dues deducted
pursuant to a check-off, pertains to the local union
which continues to represent the employees under the
terms of a CBA, and not to the parent association from
which it has disaffiliated.
The legal basis of check-off is thus found in statute
or in contract. Statutory lim itations on check-offs
generally require written authorization from each em­
ployee to deduct wages; however, a resolution ap­
proved and adopted by a m ajority of the union mem­
bers at a general meeting w ill suffice when the right to
check-off has been recognized by the employer, in­
cluding collection of reasonable assessments in con­
nection with mandatory activities of the union, or other
special assessments and extraordinary fees.
No provision of law mdkes the employer directly
liable fo r the payment to the labor organization of
union dues and assessments that the form er fails to
deduct from its employees* salaries and wages pur­
suant to a check-off stipulation. The em ployer’s
failure to make the requisite deductions may constitute
a violation of a contractual commitment fo r which it
may incur liability for unfair labor practice. But it does

403
 RIGHT TO SELF-ORGANIZATION

not by that omission, incur liability to the union for the

aggregate of dues or assessments uncollected from
the union members, or agency fees for non-union
employees.
Check-offs in truth impose an extra burden on ihe
employer in the form of additional administrative and
bookkeeping costs, ii is a burden assumed by man­
agement at ihe instance of the union and for its
benefits, in order to facilitate the collection of dues
necessary for the latter’s life and sustenance. But the
obligation to pay union dues and agency fees obvi­
ously devolves not upon the employer, but the individ­
ual employee. It is a personal obligation not demand-
able from the employer upon default or refusal of the
employee to consent to a check-off. The only obliga­
tion of the employer under a check-off is to effect the
deductions and remit the collections to the union. The
principle of unjust enrichment necessarily precludes
recovery of union dues — or agency fees — from the
employer, these being, to repeat, obligations pertain­
ing to the individual worker in favor of the bargaining
union. Where the employer fails or refuses to imple­
ment a check-off agreement, logic and prudence dic­
tate that the union itself undertake the collection of
union dues and assessments from its members (and
agency fees from non-union em ployees); this, of
course, without prejudice to suing the employer for
unfair labor practice. (Holy Cross of Davao College,
Inc. vs. Hon. J. Joaquin et al., G. R. No. 110007,
October 18, 1996)

* & tfr

Atty. ABX, the lawyer of Union Y on a retainer basis,

wiU have his birthday on November 6, 1983. In deep
appreciation fo r his faithful and courageous services to
tfts union, the board of directors passes a resolution
assessing every union member the sum of P2.00 to be
used in the purchase of a birthday gift fo r Atty. ABX.
Some union members refuse to pay tiv? assessment. Is
their refusal justified? Why?

J.M
 RIGHT TO SELF-ORGANIZATION

ANS. Yes, their refusal is justified. The assess­

ment was not authorized by a written resolution of a
majority of all the members at a general membership
meeting duly called for the purpose. The board of
directors has no power to impose the assessment.

ft ft ft

May a union collect “ union service fee” fo r its appear­

ances in labor proceedings?

ANS. Yes. This is in accordance with the liberal­

ized scheme and theory of representation for labor
adopted in the Labor Code. It should be noted that
Article 222 of the Code allows non-lawyers to repre­
sent their organization or members thereof. (Radio
Communications of the Philippines, Inc. vs. The Sec­
retary of Labor and Employment, et al., G. R. No.
77959, January 9, 1989)

ft ft ft

At a general membership meeting called fo r the purpose

o f raising funds to finance a projected strike, a m ajority
o f the members o f the union voted fo r a written resolu­
tion assessing each member the sum of P5.00. Later on
a member who did not vote affirmatively fo r the resolu­
tion and did not execute an individual written authoriza­
tion fo r the deduction o f the assessment from his
wages refused to pay the same. Is his refusal justified?
Reason out your answer.

ANS. No, his refusal is not justified. He is bound

by the resolution. To be valid and enforceable, a
resolution levying special assessments or other ex­
traordinary fees need not be approved unanimously by
the members; a majority vote of all the members is
sufficient. The absence of a written check o ff autho­
rization will only mean that the assessment cannot be
deducted by the employer from his wages or other

405
 RIGHT TO SELF-ORGANIZATION

amounts due him, but he is still obliged to pay the

same.
* * *

Atty. Saavedra was hired by a bank union to assist its

president in negotiating a collective bargaining agree­
ment w ith the bank. After the execution o f the CBA,
Atty. Saavedra sought to collect his attorney’s fees out
o f the benefits due the employees by virtue o f the
agreement. Is this proper? Why?

ANS. No. Atty. Saavedra's claim for attorney’s

fees should be satisfied out of funds of the union. This
is in accordance with Article 222 of the Labor Code
which provides in part:

ART. 222. Appearance and Fees. — x x x (b) No

attorney’s fees, negotiation fees or sim ilar charges of
any kind arising from any collective bargaining negoti­
ations or conclusion of the collective agreement shall
be imposed on any individual member of the contract­
ing union: Provided, however, that attorney’s fees
may be charged against union funds in an amount to
be agreed upon by the parties. Any contract, agree­
ment or arrangement of any sort to the contrary shall
be null and void. (Pacific Banking Corporation vs.
Clave, et al., No. L-56965, March 7, 1984)
The deduction from the workers’ benefits would
however be valid if authorized by a resolution individu­
ally signed by them. (Associated Labor Union et al.
vs. NLRC et al., G. R. Nos. 76916-17, March 31,
1989)

it * *

Cruz and Associates, a law firm, had a retainer agree­

ment w ith a union o f bank employees whereby it under­
took and committed to render to the latter legal ser­
vices, when required or necessary, in consideration o f a

406
 RIGHT TO SELF-ORGANIZATION

m onthly retainer fee o f P3.000.00. Actual litigation

would however be the subject o f special billings.
The law firm handled in behalf o f the union a claim fo r
holiday pay as well as mid-year and year-end bonus.
No agreement was however made as to the attorney’s
fees o f the law firm. A judgm ent in favor o f the union
fo r P175,794.32 was obtained in the case.
(a) Considering that no agreement as to the amount of
attorney’s fees was entered into, is the law firm entitled
to ten percent (10%) o f the award as attorney’s fees, in
accordance with Article 111 o f the Labor Code? Why?

ANS. No. The fees mentioned in Article 111 of the

Labor Code are the extraordinary attorney's fees re­
coverable as indemnity for damages sustained by and
payable to the prevailing party; it is not attorney’s fees
payable by a party to his lawyer. Besides, the ten
percent (10%) is the maximum amount of the award
that may be granted.

(b) Is the law firm nonetheless entitled to attorney’s

fees? Why?

ANS. Yes. On the basis of quantum meruit (as

much as he deserves). This is to prevent undue
enrichment. An award of P10,000.00 is fa ir and
reasonable under the circumstances. (Traders Royal
Bank Employees Union vs. NLRC et al., G. R. No.
120592, March 14, 1997)
* * *

Give the rules governing the collection and disburse­

ment o f funds o f a labor organization.

ANS. Article 241 of the Labor Code provides in

part;

(g) No officer, agent or member of a labor organi­

zation shar collect fees, dues or other contributions in
its behalf o. make any disbursement of its money or

407
 RIGHT TO SELF-ORGANIZATION

funds unless he is duly authorized pursuant to its

constitution and by-laws;
(h) Every payment of fees, dues or other contribu­
tions by a member shall be evidenced by a receipt,
signed by the officer or agent making the collections
and entered in the records of the organization to be
kept and maintained for the purpose;
(i) The funds of the organization shall not be
applied for any purpose or object other than those
expressly authorized by written resolution adopted by
the m ajority of the members at a general meeting duly
called for the purpose;
(j) Every income or revenue of the organization
shall be evidenced by a record showing its source, and
every expenditure of its funds shall be evidenced by a
receipt from the person to whom the payment is made
which shall state the date, place, and purpose of such
payment. Such record and receipt shall form part of
the financial records of the organization;
Any action involving the funds of the organization
shall prescribe after three (3) years from the date of
submission of the annual financial report to the De­
partment of Labor and Employment or from the date
the same should have been submitted as required by
law, whichever comes earlier. P ro vid e d , That this
provision shall apply only to a legitimate labor organi­
zation which has submitted the financial report re­
quirements under this Code: P ro v id e d , fu rth e r, That
failure of any labor organization to comply with the
periodic financial reports required by law and such
rules and regulations promulgated thereunder six (6)
months after the effectivity of this Act shall automati­
cally result in the cancellation of union registration of
such labor organization. (As amended by R. A. 6715)
(k) The officers of any labor organization shall not
be paid compensation other than the salaries and
expenses due to their positions as specifically pro­
vided for in its constitution and by-laws or in a written
resolution duly authorized by a m ajority of ail the
members at a general membership meeting duly called
for the purpose. The minutes of the meeting and the
list of participants and ballots cast shall be subject to

AHA
 RIGHT TO SELF-ORGANIZATION

inspection by the Secretary of Labor or his duly

authorized representatives. Any irregularity in the
approval of the resolutions shall be a ground for
impeachment or expulsion from the organization;
(I) The treasurer of any labor organization or any
officer thereof who is responsible for the accounts of
such organization or for the collection, management,
disbursement, custody or control of the funds, moneys
and other properties of the organization, shall render
to the organization and to its members a true and
correct account of all moneys received and paid by
him since he assumed office or since the last date on
which he rendered such account, and of the balance
remaining in his hands at the time of rendering such
account, and of all bonds, securities, and other proper­
ties of the organization, entrusted to his custody or
under his control. The rendering of such account shall
be made:

(1) At least once a year within thirty (30) days

after the close of its fiscal year;
(2) At such other times as may be required by a
resolution of the m ajority of the members of the
organization; and
(3) Upon vacating his office.
The account shall be duly audited and verified by
affidavit and copy thereof shall be furnished the Sec­
retary of Labor.
* it *

The union sought to collect a 10% special assessment

from the CBA lump-sum granted to union members.
The purpose o f the special assessment was to put up a
cooperative and credit union, purchase vehicles and
other items needed fo r the benefit o f the officers and
the general membership, and fo r the payment o f ser­
vices rendered by union officers/consultants and oth­
ers. The levy was however contested on the grounds
that the same was approved in separate local member­
ship meetings on various dates and not in a general

409
 RIGHT TO SELF-ORGANIZATION

membership meeting as required by Articie 241 (n); that

the check-off authorizations required by Article 241 (o)
were withdrawn; and that Article 222 (b) prohibits the
special assessment, considering the purpose thereof.
Decide.

ANS. The special assessment must be struck

down.
Article 241 (n) requires that the special assess­
ment be authorized by a written resolution of a major­
ity of all the members at a general membership
meeting duly called for the purpose; local membership
meetings on separate occasions, on different dates
and at various venues would not be sufficient. In
addition, the secretary of the organization must record
the minutes of the meeting which, in turn, must in­
clude, among others, the list of all the members
present as well as the votes cast.
Article 241 (o) requires an individual written check­
off authorization duly signed by every employee in
order that a special assessment may be validly
checked-off. A withdrawal of individual authorizations
is equivalent to no authorization at all.
Article 222 (b) prohibits attorney's fees, negotiation
fees and similar charges arising out of the conclusion
of a collective bargaining agreement from being im­
posed on any individual union member. The collection
of the special assessment partly as payment for ser­
vices rendered by union officers, consultants and
others is an exaction which fall within the category of
a “similar charge" and therefore within the prohibition
in the aforementioned article.
The failure of the union to comply strictly with the
requirements set out by the law invalidates the ques­
tioned special assessment. Substantial compliance is
not enough in view of the fact that the special assess­
ment will diminish the compensation of the union
members. The steps required by law must be followed
to the letter; no shortcuts are allowed. (Palacol, et al.
vs. Pura Ffirrer-Calleja, et al., G. R. No. 85333,
February 26, 1990)
 RIGHT TO SELF-ORGANIZATION

May a deduction for death as$ benefits bs made from

the wages of the union members by means of a board
resolution of the directors of the union?

ANS. No. The deduction for death aid benefits

pursuant to a resolution of the board of directors of the
union cannot be lawfully mjide from the wages of the
member. Such deduction can be characterized as a
special assessment. A mere board resolution of the
directors, and not by the majority of ali the members,
is not sufficient. Also a written individual authorization
duly signed by the employee concerned, is a condition
sine qua non therefor. (Stellar industrial Services, inc.
vs. NLRC et al., G. R. No. 117418, January 24,
1998)

•ft Vr *

What are the requisites for tbs validity of special as­

sessments?

ANS. Article 241 of the Labor Code mentions

three (3) requisites that must be complied with in order
that the special assessment for the union’s incidental
expenses, attorney’s fees and representation ex­
penses as stipulated in the CBA may be valid and
upheld, namely: 1) authorization by a written resolu­
tion of the majority of ail the members at the genera!
membership meeting duly called for the purpose; (2)
secretary’s record of the minutes of the meeting; and
(3) individual written authorization for check-off duly
signed by the employees concerned.
To illustrate: The ABS-CB N Supervisors Union
held a general membership, meeting whereat it was
agreed that a ten percent (10%) special assessment
from the tots! economic package due to every member
would be checked-off to cover expenses for negotia­
tion, other miscellaneous expenses end attorney’s
fees. The minutes of the said meeting were recorded
by the union’s secretary, end noted by the union
president. Eighty-five (G5) moml'ers of the union
 RIGHT TO SELF-ORGANIZATION

executed individual written authorizations for check-off

for regular union dyes and for incidental expenses
such as attorney’s fees, representation and other
miscellaneous expenses. It was ruled that the special
assessment is valid except that no deductions shall be
taken from the workers who did not give their individ­
ual written check-off authorization. (ABS-CBN Super­
visors Employees Union Members vs. ABS-CBN
Broadcasting Corporation et al., G. R. No. 106518,
March 11, 1999)

* * *

Who are disqualified from election or appointment as a

union officer?

ANS. (a) A person who has been convicted of a

crime involving moral turpitude. (Article 241 (f), Labor
Code).
(b) A person who is not an employee or worker of
the company or establishment. (Sec. 4 (f), Rule III,
Rules Implementing P. D. 1391)
* * *

Will failure to comply with the technical requirements or

form alities in relation to the election o f union officers
invalidate the election? Explain.

ANS. No, as long as it does not appear that such

failure resulted in the deprivation of any substantial
right or prerogative of anyone, or caused the perpetra­
tion of fraud or other serious anomaly, or preclude the
expression and ascertainment of the popular will in the
choice of officers. (Timbungco vs. Hon. Ricardo
Castro, et al., G. R. No. 76111, March 14, 1990)

* * *

In a general assembly, faculty members of the Univer­

sity o f Santo Tomas called by the secretary general of

412
 RIGHT TO SELF-ORGANIZATION

the university fo r the purpose o f discussing the unsatis­

fied CBA and the states and election o f officers of the
union, a new set o f union officers was elected by
acclamation and clapping o f hands. The union’s con­
stitution and by-laws however provided, in connection
with union elections, that a committee on election be
constituted at least thirty (30) days before the election
and that the election be done by secret balloting. But
the constitution and by laws was allegedly suspended
by the members during the assembly.
(a) Was the election o f the officers by acclamation and
clapping o f hands valid? Why?

ANS. No. In the first place, the assembly was not

called by the union but by the university; it was merely
a convocation of faculty clubs. In the second place, no
commission on elections, as mandated by the union’s
constitution and by-laws, was formed prior to the
election. Finally, the purported election was not done
through secret balloting, as required by the union's
constitution and by-law. Members of the union are
bound and must respect the latter’s rules and regula­
tions.

(b) Would years o f inaction and mismanagement on the

part o f the old set of officers ju stify the election o f the
new set of officers in violation of the union's constitu­
tion and by-law? Why?

ANS. No. The members should have followed the

procedure provided for in the union’s constitution and
by-laws as well as the Labor Code for the redress of
their grievances.

(c) Did the ratification by the union members of the

collective bargaining agreement entered into by the
university and the new set of officers validate the elec­
tion of the latter? Why?

ANS. No. The ratification referred to the terms of

the contract, and not to the issue of union leadership,

413
 RIGHT TO SELF-ORGANIZATION

which is a matter that should be decided only by unton

triembers in the proper forucn at the proper time and
after observance of proper procedures. (U S T Faculty
Union et ai vs. Bitonio et a!., G. R. No. 131235,
November 1G, 1998)

>Y *.v- 1*T

The Associated Labor Union for ftfoittal Workers

(ALUMETAL) and fits affiliate, Volkschel Labor Union,
jo in tly entered Into a e le c tiv e bargaining agreement
witE*i the DMG group of companies. The CBA provided
among others that the employers would make payroll
deductions for union dues covered by the individual
cSe^ck-off authorization of the union memiiers and remit
the* same to the 5ocal union and to ALUMETAL. About
seven (7) months after the execution o? the CBA,
VoJkschel Labor Union disaffiliated from ALUMETAL
a?3egptfSy because of the tetter’s d&iiberate and habitual
dereliction of duties towards its affiliate. Ths union
members accordingly revoked their check-off authoriza­
tion ?.i favor o f ALUMETAL.
(a) is tr=s dteaffiHIation of VoSkschel Labor Union from
ALUMETAL valid and lawful?

ANS. Yes. The right of a local union to disaffiliate

from its mother union is well-settled. A local union,
being a separate and voluntary association, is free to
serve the interest of all Us members including the
freedom to disaffiliate when circumstances warrant.
This right \3 consistent with the constitutional guaran­
tee of freedom of association.

(b) Is the CBA a bar to the disaffiliation of the Ioca! •

union?

ANS. No. It would go against the spirit of the

labor law to restrict the affiliate’s right to seff-
orgsnization due to the existence of the CBA. The
working man’s welfare should be the primordial or
paramount consideration.

A '■i
 RIGHT TO SELF-ORGANIZATION

(c) Are the companies entitled o r obliged to effect

collection o f union dues intended fo r £JLUiV5ETAL de­
spite revocation by t?;e employees o f the check-off
authorization in favor o f said fecVsration.

ANS. No. ALUMETAL’s right to the union dues

ceased upon the disaffiliation of the local union and
the revocation of the check-off authorization in its
favor. W ithout the affiliation of the local union, the
employer has no link to the mother union, th e
obligation of an employee to pay union dues is co-
ter-r,inus with his affiliation or membership, ev*n if the
check-off authorization was made irrevocable. And a
contract between an employer and the parent organi­
zation as bargaining agent for the employees is term i­
nated by the disaffiliation of the local of which tho
employees are members.

(d) is Volkschel Labor Union still entitled to the pay­

ment o f dues?

ANS. Yes. A local union which has validly

withdrawn from its affiliation with the parent associa­
tion and which continues to represent the employee of
an employer is entitled to the check-off of dues under
a collective bargaining contract. (Volkschel Labor
Union vs. BLR, et al., G. R. No. L-45824, June 19,
1985)

* * *

Because Atty. Ravelo won a big case fo r the union at

the University of the West, he became very popular with
the union members. He was persuaded to run as union
President but this was opposed by David Eduardo,
incumbent union President, on the ground that Atty.
Ravelo was not an employee of the University.
When Atty. Ravelo was sought to be disqualified on
this technicality, the issue was thrown fo r decision by
the general membership. After due deliberation, the

415
 RIGHT TO SELF-ORGANIZATION

general membership, by secret ballot, declared him

qualified. Overwhelmingly, he won the election.
May Atty. Ravelo serve as union President? Amplify.
(1981 Bar)

ANS. No. Atty. Ravelo is not an employee of the

University of the West; he is disqualified from becom­
ing an officer of any union therein. The act of the
general membership in declaring him qualified has no
legal effect. It cannot cure the ineligibility of Atty.
Ravelo.
★ hi ht

Z is a member of the local of a national union in a

m anufacturing firm . During a general membership
meeting called fo r the purpose of discussing proposals
fo r bargaining negotiations, he was surprised to know
that his Tocal through their union president disaffiliated
from the national union.
(a) Has Z any ground to complain? Explain.

ANS. Yes, Z, as a union member, has the right to

participate by secret ballot, to determine any question
of major policy affecting the entire membership. Dis­
affiliation is a question of major policy.

(b) What is the remedy available to Z?

ANS. He and others constituting at least 30% of

the general membership may file with the Regional
O ffice where the union is dom iciled a com plaint
against the union president for violation of Article 241
of the Labor Code. The proceedings may result in the
expulsion of the union president from the organization.

* hr hr

May a labor union disaffiliate from its mother federation

prior to the 60-day freedom period immediately preced­
ing the expiration o f the CBA? Why?

A iR
 RIGHT TO SELF-ORGANIZATION

ANS. Yes. This is part of the workers’ right to self­

organization and to form and join labor organizations
of* their own choosing for the purpose of collective
bargaining. Even before the onset of the freedom
period, disaffiliation may be carried out when there is
a shift of allegiance on the part of the m ajority of the
members of the union. (Alliance of Nationalist and
Genuine Labor Organization vs. Samahan ng mga
Manggagawang Nagkakaisa sa Manila Bay Spinning
Mills et al., G. R. No. 118562, July 5, 1996)

* * *

Describe briefly the nature o f the constitution and by­

laws o f labor unions.

ANS. Trade unions have the right to adopt consti­

tutions, rules or by-laws within the scope of their lawful
purposes, and bind their members thereby. To be
valid, the provisions in the constitution and by-laws
must be reasonable, uniform and not contrary to public
policy or the law of the land.
The constitution, rules and by-laws of a union
constitute a jio n tra c t between it and its members and
between theTmembers themselves, and the court will
enforce such contract as long as it is not immoral,
contrary to law or public policy, or beyond reason.
(Johnson and Johnson Labor Union, et al. vs. Direc­
tor of Labor Relations, G. R. No. 76427, February
21, 1989)
The constitution and by-laws, to be binding, must
f:ave been ratified by the majority of the members at
the time of its adoption.
To be acceptable as one of the documents in
support of the union’s application for registration, it
must contain a definite procedure for settling internal
disputes, provide for an education research fund and
for a three (3) year term (now five years) for the
officers. (Section 5, Rule II, Book V, Implementing
Rules and Regulations)

417
 RIGHT TO SELF-ORGANIZATION

The union’s constitution and by-laws provides that no

individual who previously belonged to another union
may be admitted as awssbsr thereof, Is this provision
valid? Why?

ANS. The provision is not valid. While a union is

in general free to select its own members, it cannot
impose arbitrary and discriminatory conditions for ad­
mission to membership. In the present problem, it is
very clear that the provision discriminates against an
individual fo r having exercised his right to self­
organization.

* hr he

Discuss the binding effect of the union’s constitution

and by-laws on the individual union member.

ANS. When a man joins a labor union (or almost

any other dem ocratically controlled group), necessarily
a portion of his individual freedom is surrendered for
the benefit of all members. He accepts the w ill of the
m ajority of the members in order that he may derive
the advantages to be gained from the concerted action
of all. Just as the enactments of the legislature bind
all of us, to the constitution and by-laws of the union
(unless contrary to good morals or public policy, or
otherwise illegal), which are duly enacted through
democratic processes, bind all of the members. If a
member of a union dislikes the provisions of the
by-laws, he may seek to have ihem amanueu or sriay
withdraw from the union; otherwise, he must abide by
them. It is not the function of courts to decide the
wisdom or propriety of legitimate by-laws of a trade
union.
On joining a labor union, the constitution and
by-laws become a part of the member’s contract of
membership under which he agrees to become bound
by the constitution and governing rules of ihe union so
far as it is not inconsistent with controlling principles of
law. The constitution and by-laws of an unincorpo­

418
 RIGHT TO SELF-ORGANIZATION

rated trade union express the terms of a contract,

which define the privileges and rights secured to, and
duties- assumed by, those who have become members.
The agreement of a member on joining a union to
abide by its Jaws and comply with the will of the
lawfully constituted majority does not require a mem­
ber to. submit to the determination of the union any
question involving his personal rights. (Ang Malayang
Mangagawa ng Ang Tibay Enterprises et al. vs. Ang
Tibay, 102 Phi!. 669, December 23, 1957).
* ☆ *

May a:~union he compelled to admit a person as a

member? Explain.

ANS. No person has an absolute right to member­

ship in a trade union; generally, a union has the right
to select its members. It has however been held that
where union membership is a pre-requisite to employ­
ment, as where the union has a closed shop agreement
with the employer, the union may be compelled to
admit a person in case of its unreasonable refusal to
do so. In such cases, union membership becomes
impressed with public interest. (51 CJS Sec. 68, pp.
691-692; Salunga vs. CIR, et al., G. R. No. L-22456,
September 27, 1967)
* * *

May a union sue the employer fo r the individual claims

©f its members or fo r unfair labor practice committed
against the latter ? Explain.

ANS. A labor union has the requisite personality to

sue on behalf of its members for their individual
money claims. It would be an unwarranted impairment
of the right to self-organization through the formation
of labor associations if thereafter such collective enti­
ties would be barred from instituting actions in their

419
 RIGHT TO SELF-ORGANIZATION

representative capacity. (La Carlota Sugar Central vs.

CIR, G. R. No. L-20203, May 19, 1975)
It is the function precisely of a labor union to carry
the representation of its members particularly against
the employer's unfair labor practices and to file an
action for their benefit without joining them, to avoid
the cumbersome procedure of joining each and every
member as a separate party. (Davao Free Workers
Front vs. CIR, G. R. No. L-29356, October 31, 1974)
* * *

After obtaining a judgm ent fo r the reinstatement with

backwages o f its members who were victim s of the
company’s unfair labor practice acts, the union through
its legislative council dismissed the union counsel who
successfully prosecuted the case, and through a new
counsel filed a m otion to dismiss the case alleging that
they “ after carefiil and serious consideration of their
petition, taken in the light o f recent developments af­
fecting their relationship with the respondent-company
have decided that they have lost interest in the further
prosecution o f their claim.” Rule on the legal effect of
the motion to dismiss.

ANS. While it may be true that the labor union

itself has lost interest in the case, we do not believe
that such should give ground for the dismissal of this
case. The labor union as a body in reality has not so
great a material interest in the controversy as would
prejudice it in the event of dismissal. It is the j
twenty-one (21) members for whose benefit the ULP
case was prosecuted, who stand to take tremendous I
losses. Nor is the argument that union and employer
are now in the process of formulating a collective
bargaining agreement of any consequence. That
would not be affected by the decision we now render
as an aftermath of the ULP case. Unless of course
such a dismissal is q u id pro q u o before the parties
could sit around the bargaining table. Which surely
enough is not to the “best interest” of the laborers. (La

420
 RIGHT TO SELF-ORGANIZATION

Campana Food Products, Inc. vs. CIR, G. R. No.

L-27907, May 22, 1969)
The recognition of the right of working men to join,
or assist in the formulation of an association for the
purpose of demanding reasonable concessions from
their employer, and of their legitimate aspiration to
work and live decently, did not come by an Aladdin’s
lamp. No greater perfidy can be conceived than that
after a union has emerged victor in a bitterly-fought
struggle, its officers, by the simple expedient of a
stroke of the pen, become p a rtic e p s c rim in is in the
betrayal of the union’s aggrieved members. (Kaisahan
ng mga Manggagawa sa La Campana vs. De los
Angeles, G. R. No. L-30798, November 26, 1970)
* * *

The union filed a charge against the company fo r unfair

labor practices committed against three (3) o f its mem­
bers. - During the pendency o f the case, the union
staged a strike. Later on, the union and the company
reached an agreement fo r the amicable settlement o f all
differences, disputes and/or controversies between
them, subject to the condition among others that the
company w ill pay the sum equivalent to three (3)months
separation pay to each striking employee. A m otion to
withdraw the ULP case, signed by the union president
and the three employees against whom th e a lle g e d
unfair labor practices had been committed as well as
their counsel, was also filed. The vice-president o f the
union and twenty-seven (27) members objected to the
dismissal of the case and even filed a new case fo r
unfair labor practice. Is the compromise agreement
binding upon the union vice-president and the twenty-
seven (27) union members? Explain.

ANS. It is an accepted rule under our laws that the

will of the m ajority should prevail over the minority.
(Betting Workers Union vs. Jai-Alai, G. R. No.
L-9330, June 29, 1957, Jesalve, et al. vs. Bautisia,
G. R. Nos. L-11928-30, March 24, 1959). Otherwise,

421
 RIGHT TO SELF-ORGANIZATION

no employer would ever enter into any compromise

agreement with the union for the m inority members will
always dishonor the terms of the agreement, and
demand for better terms. (Dionela, et al. vs. CIR et
al., G. R. No. L-18334, August 31, 1963)

May the union and its officers waive the right of union
members to reinstatement provided fo r under an NLRC
decision? Why?

ANS. No. The waiver of reinstatement, like

waivers of money claims, must be regarded as a
personal right which must be exercised personally by
the workers themselves. For a waiver thereof to be
legally effective, the individual consent or ratification
of the workers or employees involved must be shown.
(Jag & Haggar Jeans and Sportswear Corporation vs.
NLRC et al., G. R. No. 105710, February 23, 1995)
* * *

When may an employee’s money claims against th©

employer be settled through the union?

ANS. Before money claims can be the object of

settlement through a union, the individual consent of
the employee concerned should first be procured.
This is because a waiver of money claims is consid­
ered a personal right which must be protected by the
courts on consideration of public policy. To really give
teeth to the constitutional mandate of giving laborers
maximum protection and security, they must be pro­
tected not only against their employer but also against
the leaders of their own union. But a union has the
requisite personality to file a representative suit in
behalf and for the benefit of its members. (Liana’s
Supermarket vs. NLRC et al., G. R. No. 111014,
May 31, 1996)

a
 RIGHT TO SELF-ORGANIZATION

Give a discussion on the right of a union to sue in a

representative capacity.

ANS. One of the rights granted by Art. 242 of the

Labor Code to a legitimate labor organization is to sue
and be sued in its registered name. In Liberty Manu­
facturing Workers Union v. Court o f First Instance of
Bulacan (G. R. No. L-35252, November 1972, 48
SCRA 273), citing National Brewery and Allied Indus­
tries Labor Union o f the Philippines vs. San Miguel
Brewery, Inc. (G. R. No. L-19017, December 1963,
9 SCRA 847), and Itogon-Suyoc Mines, Inc. v.
Sangilo-ltogon Workers' Union (G. R. No. L-24189,
August 1968, 24 SCRA 873), the Court held that the
aforementioned provision authorizes a union to file a
“representative suit” for the benefit of its members in
the interest of avoiding an otherwise cumbersome
procedure of joining all union members in the com­
plaint, even if they number by the hundreds.
In another case, Davao Free Workers Front v.
Court o f Industrial Relations (G. R. No. L-29356,
October 31, 1974, 60 SCRA 408), the Court stated that
the detail that the number and names of striking
members of petitioner union were not specified in the
decision nor in the complaint is of no consequence.
Reiterating the rule in the Liberty case, the Court held
that it was the function precisely of a labor union to
carry the representation of its members and to file an
action for the benefit and behalf without joining them
and avoid the cumbersome procedure of joining each
and every member as a separate party. Still, in La
Cariota Sugar Central v. Court o f Industrial Relations
(G. R. No. L-20203, May 19, 1975, 64 SCRA 79), the
Court emphasized that it would be an unwarranted
impairment of the right to' self-organization through
formation of labor associations if thereafter such col­
lective entities would be barred from instituting action
in their representative capacity.
W hile a party acting in a representative capacity,
such as a union, may be permitted to intervene in a
case, ordinarily, a person whose interests are already

423
 RIGHT TO SELF-ORGANIZATION

represented will not be permitted to do the same,

except when there is a suggestion of fraud or collusion
or that the representative will not act in good faith for
the protection of all interests represented by him.
There must be clear and convincing evidence of fraud
or collusion or lack of good faith. To reiterate, for a
member of a class to be permitted to intervene in a
representative action, fraud or collusion or lack of
good faith on the part of the representative must be
proven. It must be based on facts borne on record.
Mere assertions do not suffice. (Acedera et al vs.
International Container Terminal Services, Inc. et al.,
G. R. No. 146073, January 13, 2003)

* * *

Two hundred fifty-seven (257) out of two hundred sixty-

two (262) union members agreed through their union to
a compromise settlement whereby they would be paid
separation benefits in exchange fo r the dismissal of the
criminal and unfair labor practice cases filed by the
company against them.
(a) Is the compromise agreement entered into by the
union w ith the company binding on the union members
who did not consent thereto? Why?

ANS. No. Absent a special authority to settle the

individual members’ claim s for reinstatem ent and
backwages, a union has no authority to compromise
the individual claims of members who did not consent
to such settlement.

(b) Are m inority union members who did not consent to

a compromise settlement bound by the m ajority deci­
sion approving said settlement? Why?

ANS. No. W aiver of money claims of workers are

regarded as a personal right. (Golden Donuts, Inc. vs.
NLRC et al., G. R. Nos. 113666-68, January 19,
2000 )

A1A
 RIGHT TO SELF-ORGANIZATION

On what grounds may a union registration be can­

celed?

ANS. Article 239 of the Labor Code gives the

following grounds:

(a) Misrepresentation, false statement or fraud in

connection with the adoption or ratification of the
constitution and by-laws or amendments thereto, the
minutes of ratification, the list of members who took
part in the ratification of the constitution and by-laws
or amendments thereto;
(b) Failure to submit the documents mentioned in
the preceding paragraph within thirty (30) days from
the adoption or ratification of the constitution and
by-laws or amendments thereto;
(c) Misrepresentation, false statements, or frauds
in connection with the election of officers, minutes of
the election of officers, the list of voters, or failure to
submit these documents together with the list of the
newly elected/appointed officers and their postal ad­
dresses within thirty (30) days from election;
(d) Failure to submit the annual financial report to
the Bureau within thirty (30) days after the closing of
every fiscal yr»ir and misrepresentation, false entries
or fraud in the preparation of the financial report itself;
(e) Acting as a labor contractor or engaging in the
“cabo” system, or otherwise engaging in any activity
prohibited by law;
(f) Entering into collective bargaining agreements
which provide terms and conditions of employment
below minimum standards established by law;
(g) Asking for or accepting attorney’s fees or
negotiation fees from employers;
(h) Checking off special assessments or other fees
without duly signed individual written authorization of
the members;
(i) Failure to submit a list of individual members to
the Bureau once a year or whenever required by the
Bureau; and
(j) Failure to comply with requirements under
Articles 237 and 238.

425
 RIGHT TO SELF-ORGANIZATION

Violation of any of the rights and conditions of

membership in a labor organization provided for in
Article 241 of the Labor Code is also a sufficient cause
for the cancellation of the certificate of registration.
•ft •/* 4a

A labor union at the waterfront supplies to shipping

companies stevedores to load and unload cargoes. Is
th is Sega!? Explain.

ANS. No. A union is not allowed to engage in the

“cabo” system. It is formed primarily t-s safeguard the
rights of its members. Acting as a supplier of labor,
whether in the capacity of an agent of the employer or
as an ostensible independent contractor, negates this
purpose.

* * *

Who may order the cancellation o f a union’s certificate

o f registration?

ANS. Subject to the requirements of notice and

due process, the registration of any legitimate inde­
pendent labor union, chartered local and workers’
association may be canceled by the Regional Director,
or in the case of federations, national or industry
unions and trade union centers, by the Bureau Direc­
tor, upon the filing of an independent complaint or
petition for cancellation. (Sec. 1, Rule XIV, Book V,
Implementing Rules, as amended by D. O. No.
40-03)

* 4r *

What is the effect of cancellation of a union’s certificate

registration?

ANS. The cancellation of a certificate of registra­

tion is the equivalent of snuffing out the life of a labor

A'ttt
 RIGHT TO SELF-ORGANIZATION

organization. For without such registration, it loses, as

a rule, its rights under the Labor Code. A labor union
is indisputably entitled to be heard before a judgment
could be rendered canceling its certificate of registra­
tion. (Alliance of Democratic Frae Labor Organization
vs. Laguesma et al., G. R. No. 108625, March 11,
1996)
it it *

On what grounds may a union member be expelled from

the organization?

ANS. A union member may be expelled from the

organization on the following grounds:

(a) For causes specified in the union’s constitution

and by-laws provided the same are not arbitrary,
unreasonable or contrary to law or public policy and
the member is accorded a fa ir hearing.
(b) Participation in any irregularity in the approval
o f a resolution authorizing payment of compensation
to union officers. (Article 241 (k), Labor Code)
* * *

The union constitution and by-laws provides that a

member may be expelled from the union upon a vote of
two-thirds (2/3) o f all the members. Rule on the validity
o f th is provision.

ANS. The provision is not valid. Expulsion of a

union member cannot be made to depend upon'the
whims and caprices of his co-members. It must be
founded on some just and serious grounds. His
membership cannot be trifled with. For oftentimes, by
virtue of a union security clause, his continued em­
ploym ent depends upon his membership in good
standing in the union.

427
 RIGHT TO SELF-ORGANIZATION

The union constitution and by-laws provides that a

member may be expelled, after notice and hearing for
non-payment of union dues or disloyalty to the union.
Are these grounds reasonable. Explain.

ANS. The grounds are reasonable. A union

member has the obligation to give financial support to
his organization. This is in exchange for the protection
and services that the union gives to the member.
Loyalty is expected of every union member. The
union is formed as an instrument of collective
strength. A member is not allowed to provide the very
causes for its disintegration.

it ★ ★

May a union member voluntarily terminate his member­

ship or resign from the union at any time? Explain.

ANS. Yes. It is within his prerogative to determine

when to get out from the union; this is part of his right
to self-organization. There may however be adverse
consequences of his resignation; by virtue of a union
security clause, it may even result in the loss of his
employment. It is all up to the member to decide.
* * *

Five regular employees of Occidental Foundry Corpora­

tion were dismissed allegedly pursuant to the union
security clause of the CBA. They had previously been
expelled from the union fo r attempting to oust the union
leadership, but they were not given opportunity to
explain their side, as required by the union’s constitu­
tion and by-laws, before their expulsion. The company
also did not conduct an investigation before dismissing
the employees; it took fo r granted that the union had
conducted an inquiry and considered the union secu­
rity clause as self-operating so that, upon receipt of a
notice that some members of the union had failed to

428
 RIGHT TO SELF-ORGANIZATION

maintain their membership in good standing, it sum­

marily dismissed them.
(a) is the dismissal of the five (5) regular employees
lawful? Why?

ANS. No. The union should have given them an

opportunity to explain their side before expelling them.
And the company should have conducted its own
investigation before dismissing them. The twin re­
quirements of notice and hearing are essential ele­
ments of due process and must be met in employment
termination cases.

(b) is the act of the employees in trying to oust the

union leadership, due to the latter’s alleged inattention
to the former’s demand for the implementation o f the
P25-wage increase, a ground to expel them from the
union? Why?

ANS. No. This may be disloyalty to the union

leadership, but it cannot be considered as disloyalty to
the union.

(c) Distinguish this case from Carlrio vs. NLRC, 185

SCRA 177.

ANS. In C a rifio , the erring union official was

given the chance to answer the complaints against him
before an investigating committee created for that
purpose. No such opportunity was given either by the
union or the company, to the employees involved in
the instant case. (Ferrer, et al. vs. NLRC, et al,, G.
R. No. 100898, July 5, 1993)
*• * *

The union constitution and by-laws provides that oniy

employees with two (2) years service in the company
are eligible fo r membership therein. Is the provision
valid? Why?

A2Q
 RIGHT TO SELF-ORGANIZATION

ANS. The provision is an unreasonable restriction

on the worker’s exercise of his right to se lf­
organization. It would leave those who have less than
two (2) years of service without representation in
bargaining with the employer.

* * *

As o f what time is an Individual considered an em­

ployee fo r purposes o f membership in a labor union?

ANS. Article 277 (c) of the Labor Code, as

amended by Rep. Act 6715, provides:

“Any employee, whether employed for a definite

period or not, shall beginning on his first day of
service, be considered an employee for purposes of
membership in any labor union.’

* # #

Give a brief discussion on union loyalty.

ANS. While an employee is given the right to join

a labor organization, such right should only be as­
serted in a manner that will not spell the destruction of
the same organization. Loyalty is necessary to obtain
to the full extent the union's cohesion and integrity.
And as an act of loyalty a union may certainly require
its members not to affiliate with any other labor union
and to consider its infringement as a reasonable cause
for separation. (Ang Malayang Manggagawa sa Ang
Tibay Enterprises, et al. vs. Ang Tibay, et al., 102
Phil. 669)
Inherent in every labor uriion, or any organization
for that matter, is the right of self-preservation. When
members of a labor union, therefore, sow the seeds of
dissension and strife within the union, when they seek
the disintegration and destruction of the very union to
which they belong, they thereby forfeit their right to
remain as members of the union which they seek to

430
 RIGHT TO SELF-ORGANIZATION

destroy. (Villar, et al. vs. Inciong, et al., G. R. Nos

L-50283-84, April 20, 1983)

* * *

May labor unions or employers’ organization accept

donations, assistance or grants given by foreign indi­
viduals, organizations or entities in relation to or in
support of trade union activities?

ANS. Labor organizations, employers or employ­

ers’ organizations cannot receive directly or indirectly
any donations, grants or other forms of assistance
given by a foreign individual, organization or entity in
relation to or in support of trade union activities
without prior permission from the Department of Labor
and Employment. (Article 270, Labor Code)

Hr * *

Is a labor organization responsible for the preservation

pf industrial peace?

ANS. The preservation of industrial peace is not

the sole responsibility of the employer. The labor
union in the company is equally responsible. This is
following the principle of “shared responsibility and
mutual respect” announced in Article 277 (g) of the
Labor Code and Section 3, Article XIII of the 1987
Constitution.

* * *

In establishments where no labor organization exists,

what step may be taken to promote industrial peace?

ANS. In establishments where no legitimate labor

organization exists, labor management committees
may be formed vcSuntarily by workers and employers
for the purpose of promoting industrial peace. (Article
277 (h), Labor Code)

431
 RIGHT TO SELF-ORGANIZATION

What is the scope of the visitoriai power o f the Secre­

tary o f Labor and Employment over labiir unions?

ANS. Art. 274 of the Labor Code as amended by

Rep. Act 6715 provides:

Visitoriai power - The Secretary of Labor and

Employment or his duly authorized representative is
hereby empowered to inquire into the financial activi­
ties of legitimate labor organizations upon the filing of
a complaint under oath and duly supported by the
written consent of at least twenty percent (20%) of the
total membership of the labor organization concerned
and to examine their books of accounts and other
records to determine compliance or non-compliance
with the law and to prosecute any violations of the law
and the union constitution and by-laws: Provided, that
such inquiry or examination shall not be conducted
during the sixty (60) day freedom period nor within
thirty (30) days immediately preceding the date of
election of union officers.
* * *

Under Article 274 of the Labor Code, the Secretary of

Labor and Employment or his duly authorized represen­
tative is empowered to inquire info the financial activi­
ties o f legitimate labor organizations. May such visito­
riai power be exercised by the Bureau o f Labor Rela­
tions (BLR)? Explain.

ANS. The BLR may exercise the visitoriai power

provided for in Article 274 if the matters of examina­
tion of union accounts is endorsed to it by the DOLE
Secretary.
And independently of any delegation, the BLR has
power of its own to conduct the examination of union
accounts under Section 16, Chapter 4, Title VII, Book
IV, of the Administrative Code of 1987 which among
others empowers the said Bureau to set policies,
standards and procedures on the examination of finan­

432
 RIGHT TO SELF-ORGANIZATION

cial records of accounts of labor organizations. Articie

226 of the Labor Code furthermore authorizes the BLR
to decide intra-union disputes. The examination of the
financial records of the union is an intra-union dispute.
(La Tondefia Workers Union vs. The Honorable Sec­
retary of Labor and Employment, et al., G. R. No.
96821, December 9, 1994)

* * *

State the procedure in the registration o? unions of

government employees.

ANS. Executive Order No. 180 provides:

“Section 7. Government employees’ organizations

shall register with the Civil Service Commission and
the Department of Labor and Employment. The appli­
cation shall be filed with the Bureau of Labor Relations
of the Department which shall process the same in
accordance with the provisions of the Labor Code of
the Philippines, as amended. Applications may also
be filed with the Regional Offices of the Department of
Labor and Employment which shall immediately trans­
mit the said applications to the Bureau of Labor
Relations within three (3) day? from receipt thereof.
“Section 8. Upon approval of the application, a
registration certificate shall be issued to the organiza­
tion recognizing it as a legitimate employees’ organi­
zation with the right to represent its members and
undertake activities to further and defend its interest.
The corresponding certificates of registration shall be
jointly approved by the Chairman of the Civil Service
Commission and the Secretary of Labor and Employ­
ment. . .

433
 CHAPTER XII

CERTlFlCATiOM ELECTIONS
What is certification election? Distinguish it from con­
sent election.

ANS. Certification election refers to the process of

determining through secret ballot the sole and exclu­
sive representative of the employees in an appropriate
bargaining unit for purposes of collective bargaining or
negotiation.
A certification election is ordered by the Depart­
ment of Labor and Employment, while a consent
election is voluntarily agreed upon by the parties, with
or without the intervention by the Department. (Sec. 1
(h), Rule I, Book V, Implementing Rules, as amended
by D. O. 40-03)

Describe briefly the nature of certification election.

ANS. Certification election is the fairest and most

effective way of determining which labor organization
can truly represent the working force. It is a funda­
mental postulate that the will of the majority, if given
expression in an honest election with freedom on the
part of the voter to make their choice, is controlling.
No better device can assure the institution of industrial
democracy with the two parties to business enterprise,
management and labor, establishing a regime of self-
rule. (FOfTAF vs. Director of the Bureau of Labor
Relations, et ai., G. R. No. L-41937, July 6, 1976)
A certification proceeding is not a litigation in the
sense in which this term is commonly understood; it is
a mere investigation of a non-adversary fact-finding
character in which the Bureau of Labor Relations of the
Department of Labor plays the part of a disinterested
investigator seeking merely to ascertain the desires of

434
 CERTIFICATION ELECTIONS

the employees as to the matter of their representation.

(Airline Pilots Association of the Philippines vs. CIR,
et al., G. R. No. L-33705, April 15, 1977)
* * *

Who may file a petition fo r certification election?

ANS. A legitimate labor organization (Article 257,

Labor Code), or an employer when requested to bar­
gain collectively. (Art. 258, Labor Code)
* * *

Where should the petition fo r certification election be

filed?

ANS. A petition for certification election shall be

filed with the Regional Office which issued the petition­
ing union's certificate o f registration/certificate of cre­
ation of chartered local.
The petition shall be heard and resolved by the
Med-Arbiter.
Where two or more petitions involving the same
bargaining unit are filed in one Regional Office, the
same shall be autom atically consolidated with the
Med-Arbiter who first acquired jurisdiction. Where the
petitions are filed in different Regional Offices, the
Regional O ffice in which the petition was first filed
shall exclude all others; in which case, the latter shall
indorse the petition to the form er for consolidation.
(Sec. 2, Rule VIII, Book V, Implementing Rules, as
amended by DOLE D. O. No. 40-03)
* ★t *

When may a certification election be autom atically

called?

ANS. Article 257 of the Labor Code, as amended

by Rep. Act No. 6715, provides that in any establish­

435
 CERTIFICATION ELECTIONS

ment where there is no certified bargaining agent, a

certification election shall automatically be conducted
by the Med-Arbiter upon the filing of a petition by a
legitim ate labor organization.
In an organized establishment, when a verified
petition questioning the majority status of the incum­
bent bargaining agent is filed within the sixty-day
period before the expiration of a collective bargaining
agreement, the Med-Arbiter shall automatically order
an election by secret ballot when the verified petition
is supported by the written consent of at least twenty-
five percent (25%) of all the employees in the bargain­
ing unit. (Art. 256, Labor Code, as amended by R, A.
6715)

* * iSr

When may a petition fo r certification election be filed?

ANS. A petition for certification election may be

filed anytime, except:

(a) when a fact of voluntary recognition has been

entered or a valid certification, consent or
run-off election has been conducted within the
bargaining unit within one (1) year prior to the
filing of the petition for certification election.
Where an appeal has been filed from the order
of the Med-Arbiter certifying the results of the
election, the running of the one-year period
shall be suspended until the decision on the
appeal has become final and executory;
(b) when the duly certified union has commenced
and sustained negotiations in good faith with
the employer in accordance with Article 250 of
the Labor Code within the one-year period
referred to in the immediately preceding para­
graph;
(c) when a bargaining deadlock to which an incum­
bent or certified bargaining agent is a party had
been submitted to conciliation or arbitration or

436
 CERTIFICATION ELECTIONS

had become the subject of a valid notice of

strike or lockout;
(d) when a collective bargaining agreement be­
tween the employer and a duly recognized or
certified bargaining agent has been registered
in accordance with Article 231 of the Labor
Code. Where such collective bargaining agree­
ment is registered, the petition may be filed
only within sixty (60) days prior to its expiry.
(Sec. 3, Rule VIII, Book V, Implementing
Rules, as amended by DOLE Department Order
No. 40-03)

* * *

NAFLU filed on November 7, 1995, in behalf of its

affiliate COPPER, a petition fo r certification election at
PASAR. This was during the freedom period. On
November 29, 1996, the Med-Arbiter issued an order
granting the petition. But on December?, 1995, another
union PEA-ALU moved to dismiss the petition fo r failure
of NAFLU to acquire fo r and in behalf of its local charter
affiliate COPPER a legal personality as a legitimate
labor organization. However, on the same day COPPER
was issued by the DOLE a certificate of registration.
Is the motion to dismiss m eritorious? Explain.

ANS. It was ruled that the acquisition of legal

personality by COPPER retroacted to the date of the
filing the petition for certification election. By fiction of
law, COPPER was already a duly registered labor
union when the petition was filed and could then act as
principal of NAFLU. Besides, PEA-ALU must be
considered estopped from questioning the legal per­
sonality of COPPER as it had entered into an agree­
ment with NAFLU regarding the holding of a certifica­
tion election. (Associated Labor Unions (ALU) and
PASAR Employees Association vs. Quisumbing et al.,
G. R. No. 128192, April 14, 1999)

■* ★ it

437
 CERTIFICATION ELECTIONS

May a new labor union be organized and granted regis­

tration during the lifetime o f a collective bargaining
agreement between the company and another union?

ANS. Yes. Section 3, Rule V, Book V of the

Omnibus Rules Implementing the Labor Code, pro­
hibits not the registration of a new union but the
holding of a certification election “within one year from
the date of issuance of a final certification election
result.’ (Katipunan ng mga Manggagawa Sa Daungan
vs. Hon. Pura Ferrer-Calleja et al., G. R. No.
104692, September 5, 1997)
* * *

What is an “ organized establishment” ?

ANS. It is an enterprise where there exists a

recognized or certified exclusive bargaining agent.
(Section 1(11), Rule I, Book V, Implementing Rules, as
amended by DOLE Department Order No. 40-03)
* * *

Under what conditions may the Med-Arbiter automati­

cally order a certification election by secret ballot in an
organized establishment?

ANS. (1) That a petition questioning the majority

status of the incumbent bargaining agent is filed before
the DOLE within the sixty-day freedom period; (2) that
such petition is verified; and (3) that the petition is
supported by the written consent of at least twenty five
(25%) per cent of all employees in the bargaining unit.
The mere fact that the contending unions are
bound by a Code of Ethics requiring affiliation/disaffili­
ation disputes among them to be referred to a fraternal
relations committee for final determination or settle­
ment cannot prevent the automatic holding of the
certification election or deprive the Med-Arbiter of
jurisdiction. Jurisdiction is vested by law, not by
agreement between or among the parties. Moreover,

i!7 ®
 CERTIFICATION ELECTIONS

labor disputes involve public interest, and hence a

private agreement on their settlement cannot prevaii
over what is provided for by law. (Trade Unions of the
Philippines and Allied Services (TUPAS) vs. Hon. B.
Laguesma, G. R. No. 102350, June 30, 1994)

* * tfr

May the employer file a petition fo r certification election

in an “ unorganized establishment” ? Explain.

ANS. Ordinarily, it is the union in an unorganized

establishm ent that files a petition for certification
election. But where the union requests the employer to
voluntarily recognize it as the bargaining agent, the
latter may itself file the petition inasmuch as such
request is equivalent to a request to bargain collec­
tively. Under Article 258 of the Labor Code, the
employer may petition for certification election “when
requested to bargain collectively." (Ilaw at Buklod ng
Manggagawa vs. Hon. P. Ferrer-Calleja, et al., G. R.
No. 84685, February 23, 1990)

* * *

X union, w inner in a certification election, was certified

in August 1981. Bargaining negotiations w ith the com­
pany started thereafter but the parties could not arrive
at an engagement. To break the deadlock, they agreed
in September 1982 to subm it the matter to voluntary
arbitration. In October 1983, o r after one (1) year from
the certification of X union, Y union filed a petition fo r
certification election. W ill the petition be entertained?
Why?

ANS. No. The petition will not be entertained. A

bargaining deadlock between X, the certified union,
and the employer is pending arbitration. A certification
election w ill only aggravate the situation. It w ill
seriously disturb, rather than promote, industrial
peace.

/IIQ
 CERTIFICATION ELECTIONS

What should the petition fo r certification election con­

tain?

ANS. The petition shall be in writing, verified

under oath by the president of petitioning labor organi­
zation. Where the petition is filed by a federation or
national union, it shall be verified under oath by the
president or its duly authorized representation. The
petition shall contain the following:

(a) the name of petitioner, its address, and a ffilia­

tion if appropriate, the date and number of its
certificate of registration. If the petition is filed
by a federation or national union, the date and
number of the certificate of registration or
certificate of creation of chartered local;
(b) the name, address and nature of employer’s
business;
(c) the description of the bargaining unit;
(d) the approximate number of employees in the
bargaining unit;
(e) the names and addresses of other legitimate
labor unions in the bargaining unit;
(f) a statement indicating any of the following
circumstances:
v
1) that the bargaining unit is unorganized or
that there is no registered collective bar­
gaining agreement covering the employees
in the bargaining unit;
2) if there exists a duly registered collective
bargaining agreement, that the petition is
filed within the sixty-day freedom period of
such agreement; or
3) if another union had been previously recog­
nized voluntarily or certified in a valid certi­
fication, consent or run-off election, that the
petition is filed outside the one-year period
from entry of voluntary recognition or con­
duct of certification or run-off election and
no appeal is pending thereon.

Ain
 CERTIFICATION ELECTIONS

(g) in an organized establishment, the signature of

at least twenty-five percent (25%) of all em­
ployees in the appropriate bargaining unit shall
be attached to the petition at the tim e of its
filing; and
(h) other relevant facts. (Sec. 4, Rule VIII, Book
V, Implementing Rules, as amended by DOLE
Department Order No. 40-03)
* * *

May a local o r chapter o f a federation file a petition fo r

certification election and be certified as the sole and
exclusive bargaining agent o f the employees in the
bargaining unit? May a federation file such petition in
behalf o f its chapter or local? Explain.

ANS. A local or chapter of a federation may file a

petition for certification election provided it is a legiti­
mate labor organization. It becomes a legitimate labor
organization only upon submission of the following to
the Bureau of Labor Relations: (1) a charter certifi­
cate within 30 days from its issuance by the labor
federation or national union, and (2) the constitution
and by-laws, a statement on the set of officers, and the
books of accounts all of which are certified under oath
by the secretary or treasurer, as the case may be, of
such local or chapter, and attested to by its president.
Absent com pliance with these mandatory require­
ments, the local or chapter does not become a legiti­
mate labor organization. Consequently, the failure of
the secretary of the local or chapter to certify the
required documents under oath is fatal to its acquisi­
tion of a legitimate status.
The formation of a local or chapter can be a handy
tool for the circumvention of union registration require­
ments. Absent the institution of safeguards, it be­
comes a convenient device for a sm all group of
employees to foist a not-so-desirable federation or
union on unsuspecting co-workers.
The mother federation, being merely an agent of
the local or chapter, may file a petition for certification

441
 CERTIFICATION ELECTIONS

election in behalf of the latter who is considered the

principal. The local or chapter must how ever be a
legitimate labor organization; it 'cannot merely re!y on
the le g itim a te status of the mother fed e ra tion .
(P rogressive D evelopm ent C orporation vs. Secretary
of Labor and Em ploym ent, et ai., G. R. No. 96425,
February 4, 1992)

•$t is

May a petition fo r ce rtification ©Section file d by a na­

tio n a l federation fo r a locai chapter not d uly registered
be granted? ■

ANS. No. A petition for certification election filed

by a national federation in behalf of its local chapter
which is not duly registered should be dismissed. The
local chapter, as the principal, must be a duly regis­
tered legitimate iabor organization; the federation's
bona fide status would not suffice. (Lopez Sugar
Central Corporation vs. Hon. Secretary of Labor and
Employment et a!., G. R. No. 93117, August 1, 1995)

Dacongcogors S ugar and Rice Shilling Co., Inc. had a

co llective bargaining agreement w ith the SMationa! Fed­
eration o f Sugar W orkers w h ich expired on November
14, 1SS7. Upon the expiration o f the CBA, the parties
negotiated fo r its renewal; however, .a deadlock ensued
on the matter o f wage increases and optional retire­
ment. On December S, 1988 another uniors, the National
Congress o f Unions in the Sugar in d u stry o f the P h ilip ­
pines, Filed a p etitio n fo r ce rtifica tion election. St was
however ordered dism issed by the. D irector o f the B u­
reau o f Labor Relations as the same was filed beyond
the freedom period.
(a) 3s the dismissal correct? W hy?

ANS. Yes. Under Section 6, Rule V, Book V of the

rules implementing the Labor Code, any petition filed
 CERTIFICATION ELECTIONS

before or after Use sixty (60) day freedom period shall

be dismissed outright. This Is to ensure stability in the
relationship of the workers and the management by
preventing frequent m odifications of any collective
bargaining agreement earlier entered into by them in
good faith and for the stipulated original period.

fib) Fssidirtg settlement o f the bargaining deadlock,,

what contract shall govern the relationship between the
company and the National Federation of Sugar Work­
ers? Explain.

ANS. The CBA entered into in 1987 w ill continue

to govern the relationship of the parties. Despite the
lapse of the forma! effectivity of the contract, the law
still considers the same as continuing in force and
effect until a new CBA shall have been validly exe­
cuted. (National Congress o f Unions in the Sugar
Industry of the Philippines (N A C U S IP )-TU C P vs. Hon.
Pura Ferrer-Calleja, et a!., G. R. No. 89609, January
27, 1992)
* ■& -fo

State the reason fo r the prohibition o f the holding o f a

certification election outside the freedom period.

ANS. This is to ensure industrial peace between

the employer and its employees during the existence
of the CBA.
Thus, where the collective bargaining agreement
was effective from June 30, 1988 to June 30, 1991, it
was held that a petition for certification filed on Jan­
uary 21, 1991 is premature and should be dismissed.
(Republic Planters Bank General Services Employees
Union vs. Laguesma et al., G. R. No. 119675,
November 21. 1996)
* * -.V

The Nations! Federation o f Sugar Workers (NFSW) filed

a petition fo r certification election in Victorias Milling

443
 CERTIFICATION ELECTIONS

Company, Inc. (VICMICO) which had a total of 3,017

rank-and-file workers. The petition was supported by
1,325 signatures. It was however contended by another
union, Victorias Industrial Workers Association (VIWA),
that more than 600 bona fide rank-and-file members had
disaffiliated from NFSW, thereby reducing the number
o f signatories to the petition to less than 30% (now 25%)
o f the employees in the bargaining unit. Assuming this
to be true, should the petition be dismissed? Explain.

ANS. On the issue that more than 600 bona fide

rank-and-file members of VIWA had disaffiliated with
respondent NFSW, this Court had occasion to state
what should be followed in case o f withdrawal or
retraction or signatures. In National Mines and Allied
W orkers Union vs. Luna, 83 SCRA 607, it was held
that “the best forum for determining whether there
were indeed retractions from some of the laborers is
the certification election itself wherein the workers can
freely express their choice in a secret ballot." And,
pursuant to Article 257 of the Labor Code; “if there is
any reasonable doubt as to whom the employees have
chosen as their representative for the purpose of
collective bargaining, the Bureau shall order a secret
ballot election to be conducted by the Bureau to
ascertain who is the freely chosen representative of
the employees concerned, x x x . ' To hold otherwise
would be violative of the liberal approach constantly
followed by this Court in matters of certification elec­
tions. (VICMICO Industrial W orkers Association
(VWA) vs. The Hon. Carmelo Noriel, et al., No.
L-59167, August 31, 1984)
* * *

Associated Labor Union (ALU), a legitimate labor orga­

nization, filed a petition fo r direct certification praying
that it be certified as the sole and exclusive bargaining
representative o f all the rank-and-file employees of
George and Peter Lines, Inc., there being no labor union
organized thereat. The company opposed the petition
 CERTIFICATION ELECTIONS

on the ground th a t more than 80% o f the licensed and

unlicensed crew o f its vessels claim than they are not
members o f any union and have no desire to jo in any; it
later on filed a petition fo r certification election to deter­
mine once and fo r all whether the employees concerned
wanted ALU to be their sole bargaining representative.
Should ALU be directly certified as the bargaining agent
or should a certification election be called?

ANS. As the right of respondent Union to represent

the employees is seriously put in doubt by the with­
drawal of 80% of the membership, which the Union
claims to be involuntary, the best forum to determine
if there was, indeed, undue pressure exerted upon the
employees to retract their membership is in the certifi­
cation election itself, wherein they can freely express
their choice in a secret ballot. Certification election is
the best and most appropriate means of ascertaining
the w ill of the employees as to their choice of an
exclusive bargaining representative. That there are no
competing unions involved should not alter that princi­
ple, the freedom of choice by the employees being the
primordial consideration besides the fact that the em­
ployees can still choose between ALU and No Union.
Even if the withdrawals of the employees concerned
were submitted after the petition for direct certification
had been filed, the doubt as to the majority representa­
tion of the Union has arisen, and it is best to determine
the true sentiment of the employees through a certifi­
cation election. If respondent Union is confident that it
commands the majority of the workers there is no
reason why it should object to the holding of a certifi­
cation election. (George & Peter Lines, Inc. vs. ALU,
et al., L-51602, January 17, 1985)

* * *

The International Container Terminal Services, Inc.

(ICTSI) had a collective bargaining agreement w ith the
Associated Port Checkers and Workers Union (APCWU)
which would expire on April 14, 1990. On March 14,

445
 CERTIFICATION ELECTIONS

1990, or about a month prior to the expiration of the

CBA, the Sandigasi ng Manggagawa sa Daungan
(SAIV1ADA) filed a petition for certification election; the
consent signatures in support of the petition were how­
ever submitted on March 28, 1900 or eleven days after
the filing of the petition. On April 2,1990, Port Checkers
Union of the Philippines (PWUP) filed a petition for
intervention. On April 6, 1990 another petition for
certification election was filed by the Port Employees
Association and Labor Union fPEALU); the consent
signatures in support thereof were submitted on May
11, 1990, or thirty-five days after the filing of the peti­
tion. Upon motion of APCWU, the petitions of SAMADA
and PEALU were dismissed for failure to comply with
Section S, Rule ¥, Book ¥ of the Implementing Rules
and Regulations providing that the 25% consent signa­
ture requirement shall be satisfied upon the filing of the
petition, otherwise the same shall be dismissed, inter­
vener PWUP appealed the order o f dismissal to the
Secretary of Labor but the appeal was dismissed.
Thereafter, on September 2 8 , 1990, the employer (ICTSI)
and APCWU concluded a new collective bargaining
agreement.' This was ratified by a majority of the work­
ers in the bargaining unit on October 7,1990.
a) Was the dismissal of the petitions filed by SAMADA
and PEALU justified? Why? "

ANS. No. The administrative rule requiring the

simultaneous submission of the 25% consent signa­
tures upon the filing of the petition for certification
election should not be strictly applied to frustrate the
determination or the legitimate representative of the
workers. Significantly, the requirement in the rule is
not found in Article 256, the law it seeks to implement;
it should at best be given only a directory effect.
The mere filing of a petition for certification elec­
tion within the freedom period is sufficient basis for the
issuance of an order for the holding of a certification
election, subject to the submission of the consent
signatures within a reasonable period from such filing.
 CERTIFICATION ELECTIONS

b) Is the requirement o f the 25% consent signatures

a p p lica b le ' to -the- petition fo r intervention file d by
PWUP?

ANS. SMd; The requirement is applicable only to

the original petition.

c) May the new CBA executed by ICTSI and APCWU on

September 28, 1990 and ratified on October 7, 1990 b®
considered as a bar to the certification election? Why?

ANS. No. Under Section 4, Rule V, Book V of the

Implementing Rules and Regulations, the representa­
tion case shall not be adversely affected by a collec­
tive agreement submitted before or during the last 60
days of a subsisting agreement or during the pendency
of the representation case. (Port Workers Union of the
Philippines (P\A/UP) Vs. Hon. Undersecretary of Labor
and Employment, et al., G. R. Nos. 94929-30, March
18, 1992)
'• ' * hr *

May a certification election be called by the Med-Arbiter

although the 25% statutory requirement has not been
complied with? Explain-

ANS. Yes. Even conceding that the statutory

requirement of 25% consent signatures is not strictly
-complied- with, the Med-Arbiter is still empowered to
order that ihe certification'election be held precisely
for the purpose of ascertaining which of the contending
labor organizations shall be the exclusive bargaining
agent; The requirement then is relevant only when it
becomes mandatory to conduct a certification election.
In all other instances, the discretion ought to be
ordinarily exercised in favor of a petition for certifica­
tion election. (California Manufacturing Corporation
vs. Hon. Undersecretary of Labor, et al., G. R. No.
97020, June 8, 1992)
 CERTIFICATION ELECTIONS

The employer presents the written statements of same

workers to the effect that they were tricked into giving
th e ir written consent to the filin g o f the petition fo r
certification election. W ill these statements prevent the
holding o f a certification election? Explain.

ANS. The rule that should be followed in case of

alleged withdrawals and retractions is that the best
forum for determining whether there were indeed re­
tractions from some of the laborers is in the certifica­
tion election itself wherein the workers can freely
express their choice in a secret ballot. The will of the
rank-and-file employees should in every possible in­
stance be determined by secret ballot rather than by
adm inistrative or quasi-judicia| inquiry. Such repre­
sentation and certification election cases are not to be
taken as contentious litigations or suits but as mere
investigations of a non-adversary, fact-finding charac­
te r as to which of the competing unions represents the
genuine choice of the workers to be their sole and
exclusive collective bargaining representative with
their employer.- (Federation Obrera de la Industria y
Otros Trabajadores de Filipinas vs. Noriel, et al., G.
R. No. L-41937, July 6, 1976)
W ithdrawals made before the filing of the petition
are presumed voluntary unless there is convincing
proof to the contrary, whereas withdrawals made after
the filing of the petition are deemed involuntary. The
reason for such distinction is that if the withdrawal or
retraction made before the filing of the petition, the
names o f employees supporting the petition are sup­
posed to be held secret to the opposite party. Logi­
cally, any such withdrawal or retraction shows volun­
tariness in the absence of proof to the contrary.
Moreover, it becomes apparent that such employees
had not given consent to the filing of the petition,
hence the subscription requirement has not been met.
When the withdrawal or retraction is made after the
petition is filed, the employees who are supporting the
petition become known to the opposite party since their
names are attached to the petition at the tim e of filing.
Therefore, it would not be unexpected that the oppo-

448
 CERTIFICATION ELECTIONS

site party would use foul means for the subject employ­
ees to withdraw their support. (La Suerte Cigarette
Factory vs. Director of the Bureau of Labor Relations,
G. R. No. L-55674,July 25, 1983)
* * *

May the Med-Arbiter validly order the holding o f a certi­

fication election upon the filin g o f a petition fo r certifi­
cation election by a registered union despite the com­
pany's appeal pending before the DOLE Secretary
against the issuance o f the union’s registration?

ANS. Yes. Article 251 of the Labor Code man­

dates that a c e rtific 0 p n election shall autom atically
be conducted by tl¥e Med-Arbiter upon the filing or a
petition by a legitimate labor union. Nothing is said
therein that prohibits automatic conduct of the certifi­
cation election if the management appeals on the issue
o f the validity of the union's registration (Sugbuanon
Rural Bank, Inc. vs. Hon. Undersecretary Bienvenido
Laguesma et al., G. R. No. 116194, February 2,
2000)
* * *

What is the Contract Bar Rule?

ANS. The existence of a collective bargaining

agreement duly filed with and submitted to the Depart­
ment of Labor and Employment, in compliance with the
requirements and standards of the said office, between
the employer and a legitimate labor organization, bars
a certification election in the collective bargaining unit
except within sixty (60) days prior to the expiration of
the life of such contract. This is the contract bar rule,
and it is intended to assure industrial peace and
stability. (Foamtex Labor Union-TUPAS vs. Director
of Bureau of Labor Relations, et al., G. R. No.
L-42349, August 17, 1976)
* * *

AAQ
 CERTIFICATION ELECTIONS

On November 15,1989, the Integrated Labor Organiza­

tion (ILO-Phils) was certified as the sole and exclusive
bargaining agent o f the rank-and-file employees o f
Transunion Corporation-Glassware Division. On
November 28, 1989, a collective bargaining agreement
was forged between Transunion and ILO-Phils. The
CBA, w ith a five-year term from December 1, 1989 to
December 1,1994 was ratified by a great m ajority o f the
rank-and-file workers on December 8, 1989. In the
meantime, the union president died and an intra-union
conflict ensued. The CBA was registered w ith the DOLE
only on March 14,1990, more o r less three (3) months
from its execution.
On March 23,1990, the Trade Unions o f the Philippines
- February Six Movement (TUPAS-FSM) filed a petition
fo r certification election fo r the purpose of choosing a
bargaining representative o f the rank-and-file employ­
ees o f Transunion Corporation-Glassware Division
Is the petition filed by TUPAS-FSM barred by the CBA
between ILO-Phils. and Transunion Corporation-
Glassware Division, which contract was registered ber
yond the thirty (30) day period prescribed by Article 231
o f the Labor Code? Why?

ANS. Yes. Non-compliance with the procedural

requirement of Article 231 should not adversely affect
the substantive validity of the CBA. A collective
bargaining agreement is more than a contract. It is
highly impressed with public interest for its is an
essential instrum ent to promote industrial peace.
Hence, it bears the blessings not only of the employer
and employees concerned but even the DOLE. To set
it aside on technical grounds is not conducive to the
public good. (Trade Unions of the Philippines / Febru­
ary Six Movement vs. Laguesma et al., G. R. No.
95013, September 21, 1994)
* * *

May a petition fo r certification election filed after the

lapse o f sixty-day freedom period be allowed? Why?

A*n
 CERTIFICATION ELECTIONS

ANS. No. The contract bar rule still applies. For

despite the lapse of the form a' effectivity of the CBA,
the law still considers the same as continuing in force
and effept until a new CBA, shall have been validly
executed. (Colegio de San Juan de Letran vs. Associ-
^tiQO; pf iBrnpipyees and Faculty of Letran et al., G. R.
No' 14’1471, September 18, 2000)
it * ifir

In case no petition fo r certification eScction is filed

w ithin the freedom period, is the employer obliged to
continue recognizing the majority status o f the incum­
bent bargaining agent?

ANS. Yes. (Art. 256, 2nd par., Labor Code, as

amended by R. A. No. 6715)
* * *

What is the Deadlock Bar Rule? Give an illustration of

its application.

ANS. The Deadl6ck Bar Rule provides that a

petition for certification5 election-can only be enter­
tained if there is no pending bargaining deadlock
suDmitted to 1conciliation or arbitration or which has
become the subject of a valid notice of strike or
«lo6kout; The principal purpose is to ensure stability in
the relationship of the workers and the management:
To illustrate: The National Congress of Unions in
the Sugar Industry of the Philippines (NACUSIP) -
TUCP was the certified exclusive bargaining represen­
tative of the rank-and-file workers of Calinog Refinery
Corporation. On July 14, 198^; the deadlock in collec­
tive bargaining between the said union and the com­
pany was submitted to compulsory arbitration. On July
21, 1982 a petition fo r certification election was filed
by Federation of Unions of Rizal (FUR) alleging among
others that no Selection had been held for the past
twelve (12) months and that while NACUSIP had been
-certified as the sole collective bargaining agent, for

..451
 CERTIFICATION ELECTIONS

over a year it failed to conclude a collective bargaining

agreement with the company. The petition should
however be dismissed because of the Deadlock Bar
Rule. (National Congress of Unions in the Sugar
Industry of the Philippines (NACUSIP)-TUCP vs. Dir.
C. Trajano, et al., G. R. No. 67485, April 10, 1992)

* * *

In February 1981 the National Federation o f Labor

Unions (NAFLU) was declared by the Bureau o f Labor
Relations as the exclusive bargaining representative of
all rank-and-file employees of Viron Garments Manufac­
turing Co., Inc. More than four (4) years thereafter, o r in
April 1985, the Kaisahan ng Manggagawang Pilipino
(KAMPIL) filed a petition fo r certification election among
the employees of VIRON. Should the petition of
KAMPIL be given due course considering that there was
an existing certified bargaining agent (NAFLU) in VI­
RON? Why?

ANS. Yes. The prohibition on the holding of a

certification within one year from the date of issuance
of declaration of a final certification election result has
no application to the case. That one-year period
known as the “certification year’ during which the
certified union is required to negotiate with the em­
ployer, and certification election is prohibited - has
long expired. There was furthermore no deadlock in
collective bargaining between NAFLU and VIRON
which had been submitted to conciliation or arbitration
or had become the subject of a valid notice of strike o r
lockout. (Kaisahan ng Manggagawang Filipino vs.
Hon. C. Trajano et al G. R. No. 75810, September
9, 1991)

it it *

May a certification election be barred in an organized

bargaining unit w ith a collective bargaining agent but
w ith out a collective bargaining agreement although
 CERTIFICATION ELECTIONS

there is no CBA deadlock and the twelve-month period

(certification year) from the issuance o f the declaration
o f the final certification election result has long lapsed?
Explain.

ANS. Yes. This is where the delay in the forging

of a CBA is not attributable to the bargaining agent but
to the employer’s use of all legal means to block the
certification of the union as a bargaining agent and use
the same as leverage for its failure to bargain with the
union; and the latter has taken an action to legally
coerce the employer to comply with its statutory duty
to bargain collectively, i. e., charging the employer
with unfair labor practice and conducting a strike to
protest against the em ployer’s refusal to bargain.
(Capitol Medical Center Alliance of Concerned
Employees-UFSW vs. Hon. Laguesma et al., G. R.
No. 118915, February 4, 1997)
* * *

Give the statutory recognition o f the contract bar rule.

ANS. Article 232 of the Labor Code, as amended

by R. A. 6715, provides:

“Art. 232. Prohibition on certification election. —

The Bureau shall not entertain any petition fo r certifi­
cation election or any other action which may disturb
the administration of duly registered existing collective
bargaining agreements affecting the parties except
under Articles 253, 253-A and 256 of this Code."
★ * *

W ithin sixty (60) days prior to the expiration o f the

collective bargaining agreement between the Associ­
ated Labor Union (ALU) and the Firestone Tire and
Rubber Company o f the Philippines, some 233 out o f
about 400 rank-and-file employees resigned from ALU
and formed another union, FEU. After the issuance of
its registration permit, the new union filed a petition fo r

453
 CERTIFICATION ELECTIONS

direct certification or certification election; but the same

cou|d not be acted upon because o f the question raised
by ALU regarding the validity of the new union’s regis­
tration. Meanwhile, ALU and the company entered irtto
a new collective bargaining agreement. When FEU filed
a new petition fo r direct certification election, the new
collective bargaining agreement was interposed as a
bar thereto. Is the contract bar rule applicable? Explain.

ANS. No. The contract bar rule should not be

made to apply. It seems to be the better; view that a
contract does not operate as a bar; to representation
proceedings where it is shown that because of a
schism in the union the contract can no longer serve to
promote industrial stability. In the case at bar* it is
doubtful if any contract that may have been entered
into between ALU and the company will foster stability
in the bargaining unit in view of the fact that a
substantial number of the employees therein have
resigned from ALU and joined FEU. At any rate, this is
a matter that must be finally determined by means o^a,
certification election. (Firestone Tire and Rubber Co!
Employees Union, etc. vs. Hon. F. Esirella, et al., G.
R. Nos. L-45513-14, January 6, 1978) 'V, wrj

Eight (8) months prior to the expiration o f the collective

bargaining agteementv ihe company and the /union re^
newed the Same for another threfe (3) years. W ithin sixty
(60) days prior to the <Sxpiratiori of the- Origihkl jjeribd o f
the agreement, another union filed a petition fo r certifi­
cation election. Can the renewed CBA be set up as a
bar to the holding of the certification ejection? Why?

ANS. No. A collective bargaining agreement

which is prematurely renewed is not a bar to the
holding of a certification election. Instead of fostering
and promoting industrial democracy, such a contract
would enable a union that may have close lies with the
'management to perpetuate1itself in power. The em-

ik d
 CERTIFICATION ELECTIONS

ployer and a friendly union cannot, by the mere expe­

dient of prematurely renewing their collective bargain­
ing agreement effectively deprive the workers of their
right to freely select their bargaining agent. (General
Textiles Allied Workers Association vs. The Director
of the Bureau of Labor Relations, et al., G R No
L-45719, July 31, 1978
* * *

Under Section 3 / Rule V, Book V of the Rules Imple­

menting the Labor Code, no certification election may
be held w ithin one year from the date o f issuance of a
final certification election result. What does the phrase
“ final certification election result” mean?

ANS. It means that there was an actual conduct of

election, i; e., ballots were cast and there was a
counting of votes. It does not include a case where no
election was conducted because the petition was dis­
missed as it did not include all the employees who
should be properly included in the collective bargain­
ing unit. (R. Transport Corporation vs. Laguesma, et
al., G. R. No. 106830, November 16, 1993)

Associated Labor Union (ALU) had a collective bargain­

ing agreement with Philippine Associated Smelting and
Refining Corporation (PASAR) which expired on April 1,
1987. Several days before the expiration o f the CBA, the
National Federation o f Labor Unions (NAFLU) filed a
petition fo r certification election. ALU sought the dis­
missal of the petition on the-ground that NAFLU failed
to present the necessary signatures in support of the
petition. The med-arbiter dismissed the petition but
enjoined PASAR from entering into a collective bargain­
ing agreement with any union until after the issue of
representation is finally resolved.
NAFLU appealed the order o f dismissal. During the
pendency o f the appeal, ALU and PASAR concluded a

455
 CERTIFICATION ELECTIONS

CBA. On July 28,1987, the said CBA was ratified by the

employees in the bargaining unit. Thereafter, ALU
moved fo r the dismissal o f NAFLU’s appeal on the
ground, among others, that it had already concluded a
CBA w ith PASAR. Is the CBA a bar to the holding o f a
certification election? Explain.

ANS. No. The petition for certification election

was filed within the freedom period and the CBA was
hastily concluded despite the order of the med-arbiter
enjoining ALU and the company from doing so until the
issue of representation is finally resolved. The parties
were in bad faith when they concluded the CBA. Their
act was clearly intended to bar the petition for certifi­
cation election filed by NAFLU. This cannot be coun­
tenanced as it is not conducive to industrial peace.
(Associated Labor Unions vs. Hon. Pura Ferrer-
Calleja, et al., G. R. No. 85085, November 6, 1989)

* * *

United CMC Textile Workers Union filed a com plaint fo r

unfair labor practice against the Central Textile Mills
(CENTEX) and PAFLU, alleging that CENTEX helped and
cooperated in the organization o f the PAFLU local in the
company. During the pendency o f the ULP case, PAFLU
filed a petition fo r certification election among the rank-
and-file employees o f CENTEX. The United CMC Textile
Workers Union moved to dismiss the petition on the
ground o f the pendency o f the ULP case.
(a) Should the m otion be granted?

ANS. Under settled jurisprudence, the pendency of

a form al charge of company domination is a prejudicial
question that, until decided, bars proceeding for a
certification election, the reason being that the votes
of the members of the dominated union would nor be
free. Furthermore, the certification election may lead
to the selection of an employer-dominated or company
union as the employees' bargaining agent, and when
the court finds in the unfair labor practice case that

456
 CERTIFICATION ELECTIONS

said union is company dominated, the union selected

would be decertified and the whole election proceed­
ings would be useless and nugatory. The proceedings
should therefore be suspended.

(b) Who can file and maintain an opposition to the

holding o f a certification election based on a charge of
company domination?

ANS. Only the union who made the charge of

company domination, since it is the entity that stands
to lose and suffer prejudice by the certification elec­
tion, its members might be overwhelmed in the voting
by those controlled and dominated by the company.

(c) What kind of charge o f company domination w ill not

suspend the certification proceedings?

ANS. A charge that is flimsy, or made in bad faith,

or filed purposely to forestall the certification election.
(United CMC Textile Workers Union vs. Bureau of
Labor Relations, et al., G. R. No. L-51337, March 22,
1984, citing Standard Cigarette Workers Union vs.
CIR, 101 Phil. 126; Manila Paper Mills Employees vs.
CIR, 104 Phil. 10; B. F. Goodrich Philippines, Inc.
vs. B. F. Goodrich Confidential and Salaried Employ­
ees Union, 49 SCRA 532)
* * *

The collective bargaining agreement provides that the

company shall grant to the workers such wage in­
creases and other economic benefits as may be pro­
vided by law during the lifetime o f the contract. Can
such a contract serve as a bar to a certification elec­
tion? Why?

ANS. No. To be a bar to the holding of a

certification election, the collective bargaining agree­
ment must provide for substantial benefits to the
employees. One which simply grants benefits already

457
 CERTIFICATION ELECTIONS

enjoyed by the workers under existing laws (a

“sweetheart contract”) will not bar a certification elec­
tion; otherwise, the workers right to seek better terms
and conditions of employment will be emasculated.
•St * *

Does the pendency o f a petition fo r cancellation of the

petitioner union’s registration bar the holding o f a certi­
fication election? Explain.

ANS. As long as there is no final order for the

cancellation of the registration of the petitioner union,
the certification election should be allowed to proceed.
A liberal approach is observed in matters of certifica­
tion election; this is crucial to the institution of collec­
tive bargaining; it gives substance to the principle of
majority rule as one of the basic concepts of a demo­
cratic policy. (National Union of Bank Employees vs.
The Honorable Minister of Labor, et al., G. R. No.
53406, December 14, 1981)

* * *

The Nagkakaisang Lakas ng Manggagawa filed a peti­

tion fo r certification election with the DOLE National
Capital Region in behalf of ihe rank-and-file employees
of Pizza H u t The company filed a motion to dismiss the
petition alleging fraud, falsification and misrepresents
tion in the union’s registration making it void at d
valid. It also filed a petition seeking the cancellai. '
the union’s registration. The med-arbiter nonetiiek ss
ordered the ho'ding o f a certification election; he ruled
that the alleged fraud, falsification and misrepresenta­
tion in the registration o f the union are merely collateral
issued to be ventilated in the cancellation proceedings,
(a) Is the order o f the med-arbiter correct? Why?

ANS. No. The grounds ventilated in the cancella­

tion proceedings in accordance with Article 239 of the
Labor Code constitute a grave challenge to the right of
 CERTIFICATION ELECTIONS

the union to ask for a certification election. The

med-arbiter should have looked into the merits of the
petition for cancellation before issuing an order calling
for a certification election. Registration based on false
and fraudulent statements and documents confer no
legitim acy upon a labor organization irregularly recog­
nized, which, at best, holds on to a mere scrap of
paper. Under such circumstances, the labor organiza­
tion, not being a legitimate labor organization, ac­
quires no rights, particularly the right to ask fo r a
certification election in a bargaining unit.

(b) In what proceedings may the propriety o f the labor

organization's registration be assailed?

ANS. Directly, through cancellation or registration

proceedings in accordance with Articles 238 and 239 of
the Labor Code, or indirectly, by challenging its peti­
tion for the issuance of an order fo r certification
election. These measures may be undertaken sim ulta­
neously.

(c) Why is a strict enforcem ent o f tha Labor Code’s

requirements fo r the legitimacy o f a union required?

ANS. Once a labor organization attains the status

of a legitimate labor organization, it begins to possess
all the rights and privileges granted by law to such
organizations. As such rights and privileges ultimately
affect areas which are constitutionally protected, the
activities in which labor organizations, associations
and unions are engaged directly affect the public
interest and should be zealously protected.
(Progressive Development Corporation - Pizza Hut vs.
Laguesma et al., G. R. No. 115077, April 18, 1997)

* * *

May th® question o f whether the union that fUed the

petition fo r certification election composed o f both su­
pervisory personnel and rank-and-file workars be
 CERTIFICATION ELECTIONS

threshed out in the pre-election conference thru the

exclusion-inclusion proceedings? Why?

ANS. No. The issue involves the very existence

of the union. A union that is composed of supervisory
personnel and rank-and-file workers is no labor organi­
zation at ail and does not have any personality to file
a petition for certification election. This iss-ue must
therefore be resolved prior to the issuance of an order
allowing the certification election. (Dunlop Slazenger
(Phils.) Inc. vs. Hon. Secretary of Labor and
Employment et al., G. R. No. 131248, December 11,
1998)

* * *

Is the submission of a xerox copy of the union’s certifi­

cate of registration sufficient to establish the legitimacy
o f the union fo r purposes o f certification election?
Why?

ANS. Yes. A certification election is not a litiga­

tion; it is not covered by the technical rules of evi­
dence. Presentation of the xerox copy of the certifi­
cate of registration instead of the original certificate is
not a fatal defect and does not in any way affect the
union’s legitimate status. (Furusawa Rubber Philip­
pines, Inc. vs. Hon. Secretary of Labor and Employ­
ment et al., G. R. No. 121241, December 10, 1997)

•sV * iRr

The Tagaytay Highlands Employees Union fTHELS) a

local charter of PTGWO, a legitimate labor organization
filed a petition fo r certification election among the rank-
and-file employees of Tagaytay Highlands International
G olf Club, Inc. (THIGCI). The company opposed the
petition on the ground that the list of union members
submitted by the union was defective and fatally flawed
as it included the names and signatures of supervisors,
resigned, terminated and absent without leave (AWOL)

/sen
 CERTIFICATION ELECTIONS

employees, as we!! as employees of a corporation sepa­

rate and distinct from THIGCI, and that out of the 192
signatures to the petition, only 71 were actual rarak~and~
file employees o f THIGCi.
(a) May the certification election be ordered conducted
despite the company’s objection bassd ora the sup­
posed lack of legaS personality of the union? Explain.

ANS. Yes. After the 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.

(b) is the alleged inclusion in a union of disqualified

employees a ground to cancel a union’s .certificate of
registration?

ANS. No, unless such inclusion is due to misrepre­

sentation, false statement or fraud under the circum­
stances enumerated in Sections (a) and (c) of Article
239 of the Labor Code. (Tagaytay Highlands Interna­
tional G olf Club, Inc. vs. Tagaytay Highlands Employ­
ees Union-PGTWO, G. R. No. 142000, January 22,
2003)
tfr ij ☆

Explain the role of the employer in a certification elec­

tion.

ANS. A certification election is the sole concern of

the workers. The only exception is where the employer
has to file a petition for certification election because
it is requested to bargain collectively. Thereafter the
role of the em ployer in the certification process
ceases. It becomes merely a by-stander. (Trade
Unions of the Philippines and Allied Services (TUPAS)
vs. Trajano, et a!., G. R. No. 61153, January 17,
1983)
'rlu sive concern
of Idbui, the choice of a collective bargaining repre­

481
 CERTIFICATION ELECTIONS

sentative, the employer is definitely an intruder. Its

participation, to say the least, deserves no encourage­
ment. (Consolidated Farms, Inc. vs. Noriel, G. R.
No. L-47752, July 31,1978; Filipino Metals Corp. vs.
Opie, G. R. No. L-43881, September 4,1981; Monark
International, Inc. vs. Noriel, et al., G. R. No.
L-47570, May 11, 1978)
After the issuance of the order for certification
election, it is entirely improper for the employer to be
present during the proceedings, even as an observer,
let alone sit in and participate therein. (Rizal Workers
Union vs. Hon. Pura Ferrer-Calleja, et al., G. R. No.
82759, June 8, 1990)
An employer has no standing to question a certifi­
cation election. (Asian Design and Manufacturing
Corporation vs. Calleja, et al., G. R. No. 77415,
June 29, 1989). Such is the sole concern of the
workers. The only exception is where the employer
has to file the petition for certification election pur­
suant to Article 258 of the Labor Code because it was
requested to bargain collectively. Thereafter, the role
of the employer in the certification election process
ceases. The employer becomes merely a by-stander.
(California Manufacturing Corporation vs. The Hon.
Undersecretary of Labor, et al., G. R. No. 97020,
June 8, 1992)
* * *

It is accepted that “ an employer has no legal standing to

question a certification election since this is the sole
concern of the workers.” Is this rule absolute?

ANS. No. Where the existence of employer-

employee relationship is disputed, the employer may
intervene. (Republic Planters Bank General Services
Employees Union vs. Laguesma et al., G. R. No.
119675, November 21, 1996)
The employer may also intervene to question the
legal personality of the petitioning union. (Progressive
Development Corporation vs. Hon. Secretary of Labor
et al., G. R. No. 96425, February 4, 1992)
 CERTIFICATION ELECTIONS

The employer may even file a petition for certifica­

tion election when requested to bargain collectively.
(Article 258, Labor Code)

iV it it

PLUM Federation of Industrial and Agrarian Workers

filed a petition praying that it be certified as the sols and
exclusive bargaining agent o f the rank-and-file workers
of Manila Jockey Club, Inc. This was opposed by the
PTGWO; it invoked among others the “ No Union Raid­
ing Clause” of the “ Code of Ethics” of the Trade Union
Congress of the Philippines (TUCP). Instead of order­
ing a certification election, the Bureau of Labor Rela­
tions referred the matter to the TUCP fo r decision. Is
such a step Segal? Why?

ANS. No. It is an impairment of the right of the

workers to voice out their choice of the union to
represent them. The TUCP has no authority to super­
sede or im pair the holding of a certification election or
deny the workers their right to choose their union.
(PLUM Federation of Industrial and Agrarian Workers
vs. Noriel, et al., G. R. No. L-4007, December 15,
1982)
* * *

What is an appropriate bargaining unit? .

ANS. An appropriate bargaining unit may be said

to be a group of employees of a given employer,
comprised of all or less than all of the entire body of
employees, which the collective interest of all the
employees, consistent with equity to the employer,
indicate to be best suited to serve the reciprocal rights
and duties of the parties under the collective bargain­
ing provisions of the law. (Rothenberg on Labor
Relations, p. 482)
A unit to be appropriate must effect a grouping of
employees who have substantial, mutual interest in

483
 CERTIFICATION ELECTIONS

wages, hours, working conditions and other subjects of

collective bargaining. (Democratic Labor Association
vs. Cebu Stevedoring Co., Inc., et al., G. R. No.
L-10321, February 28, 1958)

* * *

What factors are considered in determining the appro­

priateness of a bargaining unit?

ANS.
a) W ill of the employees (Globe Doctrine);
b) A ffinity and unity of employees’ interests;
c) Prior collective bargaining history; and
d) Employment status, such as temporary, sea­
sonal and probationary employees.
v * * *

A cigar and cigarette manufacturing company has eight

departments, namely, administrative, raw leaf, cigar,
cigarette, engineering and garage, precinteria, dispen­
sary, and sales. May the rank-and-file employees
whether paid on the monthly, daily or commission basis
in the administrative, sales and dispensary departments
be grouped into a bargaining unit separate and distinct
from the one composed o f the employees in the raw
leaf, cigar, cigarette, packing and engineering depart­
ments? Explain.

ANS. Yes. The employees in the administrative,

sales, and dispensary departments are engaged in
work entirely different from those performed by em­
ployees in the other departments. The latter’s work
involves production and maintenance, and the place
where they work are separate from those of the former.
There can hardly be any doubt that the employees in
the administrative, sales and dispensary departments
have a community of interest which justifies their
formation or existence as a separate appropriate col­
lective bargaining unit. (Alhambra Cigar & Cigarette

AM
 CERTIFICATION ELECTIONS

Manufacturing Co., et al. vs. Alhambra Employees

Association (PAFLU), G. R. No. L-13573, February
20, 1960)
* * *

Golden Farms, Inc., a company engaged in tha produc­

tion and marketing of bananas fo r export, has two (2)
sets o f rank-and-file employees, to w it: (1) m onthly
paid who perform administrative o r clerical functions,
and (2) daily paid who w ork in the cultivation of
bananas in the fields. There is an existing bargaining
unit of the daily paid rank-and-file workers. May the
m onthly paid employees constitute a separate bargain­
ing unit? Why?

ANS. Yes. The monthly paid rank-and-file em­

ployees of the company have very little in common
with the daily paid rank-and-file employees in terms of
duties and obligations, working conditions, salary
rates, and skills. This dissim ilarity of interests war­
rants the formation of a separate and distinct bargain­
ing unit for the form er group of employees; otherwise,
they would be denied their right to self-organization for
purposes of collective bargaining. W ithout the shield
of an organization, this group will also be exposed to
the exploitations of management. (Golden Farms, Inc.
vs. The Hon. Secretary of Labor, et al., G. R. No.
102130, July 26,1994)
* * *

What is the “ employer unit” ? Cite examples.

ANS. The employer unit is an appropriate bargain­

ing unit consisting of all rank-and-file employees of the
employer. Such a unit has been held to be appropriate
in the work force of a transportation company (Buklod
ng Saulog Transit vs. Casalla, 99 Phil. 1 6 ) and in the
personnel complement of a sugar m illing firm .
(PLASLU vs. CIR, 110 Phil. 176). The use of the
term “employer” is to indicate the scope of the unit.

465
 CERTIFICATION ELECTIONS

Distinguish between “ plant” unit and “ craft” unit.

ANS. A “plant” unit is a bargaining unit composed

of employees in a particular plant of the company,
such as the company’s Cebu plant as distinguished
from its llocos plant.
A “craft” unit is a bargaining unit composed of
employees of the company with the same occupation,
such as pilots as distinguished from ground personnel.
In the “plant” unit, the main consideration is geo­
graphical, while in the “craft” unit, it is occupational.
* * *

ft is proposed in a certification election that the profes­

sors and instructors o f L. College be grouped into two
separate units, namely, the college unit composed of
professors and instructors in the college department
and the high school unit comprising the high school
teachers. This proposal is based on the follow ing facts:
that college professors and instructors are governed by
rules and regulations of the Bureau of Private Education
which are different from the rules and regulations for
high school teachers; that the high school department
was organized at a time different from the date of
organization of the college department; that the set-up
in the two departments are different; and that the high
school teachers are paid per period per subject, while
the college teachers are paid on the hourly basis. This
proposal is opposed on the follow ing grounds: that
these two departments are under the control of only one
board o f trustees; that they are housed in one and the
same building; that there is but one cashier and only
one registrar who is himself the administrative officer of
the whole college; that there are some teachers who are
teaching in both college and the high school depart­
ments; that the teachers of the elementary department
would be left w ithout a bargaining representative; and
that there are only 130 teachers involved in the proceed­
ings. How many bargaining units should there be in L.
Coliege?

468
 CERTIFICATION ELECTIONS

ANS. There should only be one, the employer unit.

The facts show community of interest of the teachers
of the college and high school departments. Besides,
the establishment of separate units would leave the
elementary teachers without a bargaining representa­
tive. And considering that there are only 130 teachers,
the division of the bargaining unit would dissipate their
strength for collective bargaining purposes. Finally,
the employer would be contending with two different
unions vying against each other for better benefits to
gain more members. (Laguna College vs. CIR, et al.,
G. R. No. L-28927, September 25, 1968)
* A *

May the non-academic personnel of the University of

the Philippines, such as janitors, messengers and
clerks, be joined with the academic personnel, such as
professors and instructors, in one appropriate organiza­
tional unit? Why?

ANS. No. The two groups do not have community

or mutuality of interests. On the contrary, the di­
chotomy, of interests, the dissimilarity of the nature of
the work and duties as well as in the compensation and
working conditions of the academic and non-academic
personnel dictate the segregation of these two cate­
gories of employees into separate units. (University of
the Philippines vs. Hon. P. Calleja, et al., G. R. No.
96189, July 14, 1992)
* * *

The BELYCA Corporation was engaged in the business

of poultry raising, piggery and planting of agricultural
crops, and also in the operation of supermarts and
cinemas. It employed 205 workers. In a certification
election, the company contended that the bargaining
unit must include a3i the workers in its integrated busi­
ness concerns so as not to sp lit an otherwise single
bargaining unit into fragmented bargaining units. Is
this contention tenable ? Explain.

487
 CERTIFICATION ELECTIONS

ANS. It is beyond question that the employees of

the livestock and agro division of petitioner corporation
perform work entirely different from those performed
by employees in the supermarts and cinema. Among
others, the noted differences are: their working condi­
tions, hours of v/ork, rates of pay, including the cate­
gories of their positions and employment status. As
stated by petitioner corporation in its position paper,
due to the nature of the business in which its livestock-
agro division is engaged very few of its employees in
the division are permanent, the overwhelming majority
of which are seasonal and casual and not regular
employees. Definitely, they have very little in common
with the employees of the supermarts and cinemas.
To lump all the employees of petitioner in its inte­
grated business concerns cannot result in an effica­
cious bargaining unit comprised of constituents enjoy­
ing a community or mutuality of interest. Undeniably,
the rank-and-file employees of the livestock-agro d ivi­
sion fully constitute a bargaining unit that satisfies
both requirements of classification according to em­
ployment status and of the substantial sim ilarity of
work and duties which will ultimately assure its mem­
bers the exercise of their collective bargaining rights.
(BELYCA Corp. vs. Calleja, et al., G. R. No. 77395,
November 29, 1988)

May the employees of San Miguel Corporation belong­

ing to the Magnolia Poultry Products Plants of Cabuyao,
San Fernando and Otis constitute a single bargaining
unit? Why?

ANS. Yes. They all belong to the Magnolia Poultry

Division of San Miguel Corporation. This means that,
although they belong to the different plants, they
perform work of the same nature, receive the same
wages and compensation, and most importantly share
a common stake in concerted activities.
Separate bargaining units in the three plants of the
division will fragmentize the employees and greatly

468
 CERTIFICATION ELECTIONS

diminish their bargaining leverage. Any concerted

activity held against the company for a labor grievance
in one bargaining unit will, in all probability, not create
much impact on the operations of the company. The
two other plants still in operation can well step up their
production and make up for the slack caused by the
bargaining unit engaged in the concerted activity.
Geographical location can be completely disre­
garded if the communal or mutual interests of the
employees are not sacrificed. (San Miguel Corporation
Supervisors and Exempt Union et al. vs. Hon. B.
Laguesma et al., G. R. No. 116399, August 19, 1997)
* * *

May confidential employees, such as division secre­

taries and staff o f the personnel and industrial relations
department, be excluded from the bargaining unit?
Why?

ANS. Yes. By the nature of their functions, they

assist and act in a confidential capacity to, or have
access to confidential matters of, persons who exer­
cise managerial functions in the field of labor relations.
They may become the source of undue advantage for
either the union or the employer. They can act as
spies of either party. (Philips Industrial Development,
Inc. vs. NLRC, et al., G. R. No. 88957, June 25,
1992)
* * *

May foremen and legal secretaries be members o f the

rank-and-file bargaining unit? Why?

ANS. No. Foremen are chief and often especially-

trained workmen who work with and commonly are in
charge of a group of employees in an industrial plant
or in construction work. They are the persons desig­
nated by the employer-management to direct the work
of employees, and to superintend and oversee them.
They are representatives of the employer-management

ARQ
 CERTIFICATION ELECTIONS

with authority over particular groups of workers, pro­

cesses, operations, or sections of a plant or an entire
organization. In the modern industrial plant, they are
at once a link in the chain of command and the bridge
between management and labor. In the performance
of their work, foremen definitely use their independent
judgment and are empowered to make recommenda­
tions for managerial action with respect to those em­
ployees under their control. Foremen fall squarely
under the category of s u p e rv is o ry em p lo ye e s, and
cannot be part of rank-and-file unions.
Upon the other hand, legal secretaries are neither
managers nor supervisors. Their work is basically
routinary and clerical. However, they should be differ­
entiated from rank-and-file employees because they
are tasked with, among others, the typing of legal
documents, memoranda and correspondence, the
keeping of records and files, the giving of and receiv­
ing notices, and such other duties as required by the
legal personnel of the corporation. Legal secretaries
therefore fall under the category of c o n fid e n tia l em ­
p lo ye e s. (Pier 8 Arrastre & Stevedoring Services,
Inc. Vs. Hon. Ma. Nieves Roldan-Confesor, et al., G.
R. No. 110854, February 13, 1995)
* •* *

Section 2 (c), Rule V, Book V, of the Implementing Rules

of the Labor Code, provides in connection with certifica­
tion elections that the bargaining unit of the rank-and-
file employees shall not include security guards.
(a) Is this exclusion valid? Why?

ANS. No. It contravenes the law. The disqualifi­

cation of security guards to join unions was eliminated
by Executive Order No. Ill issued by Pres. C. Aquino
on December 24, 1986. Consequently, they can be
part of the bargaining unit of rank-and-file employees.
This is of course on the assumption that they are
rank-and-file security guards. Supervisory security
personnel can join the union of supervisors and be part
of the bargaining unit of supervisors.

ATn
 CERTIFICATION ELECTIONS

(b) What are the possible consequences in the imple­

mentation o f the law allowing security personnel to jo in
labor unions w ithin the company they serve?

ANS. The law is apt to produce divided loyalties in

the faithful performance of their duties. Economic
reasons would present the employees concerned with
the temptation to subordinate their duties to the alle­
giance they owe the union of which they are members,
aware as they are that it is usually union action that
obtains for them increased pecuniary benefits.
Thus, in the event of a strike declared by their
union, security personnel may neglect or outrightly
abandon their duties, such as protection of property of
their employer and the persons of its officials and
employees, the control of access to the em ployer’s
premises, and the maintenance of order in the event of
emergencies and untoward incidents.
It is hoped that the corresponding amendatory
and/or suppletory laws be passed by Congress to avoid
possible conflict of interest in security personnel.
(Manila Electric Co. vs. The Hon. Secretary of Labor
and Employment, et al., G. R. No. 91902, May 20,
1991)

* * *

Why is the form ation of several bargaining units in one

company recognized?

ANS. This is to sim plify and expedite the collec­

tive bargaining process, and to facilitate the execution
of a collective bargaining agreement. Lumping all the
employees in one bargaining, unit, regardless of their
commonality or mutuality of interest, will make the
collective bargaining process tedious or cumbersome.

* * *

Give a brief discussion on the “ one-union, one-

company” policy.

A71
 CERTIFICATION ELECTIONS

ANS. The ends of unionism are better served if all

the rank-and-file employees with substantially the
same interssts and who invoke their right to self­
organization are part of a single unit so that they can
deal with their employer with just one and yet potent
voice. The employees’ bargaining power with manage­
ment is strengthened thereby.
The proliferation of unions in an employer unit is
discouraged as a matter of policy unless compelling
reasons exist which deny a certain and distinct class of
employees the right to self-organization for purposes
of collective bargaining. (Pagkakaisa Ng Mga Mang-
gagawa sa Triumph International, etc. vs. Pura
Ferrer-Calleja, et al., G. R. No. 85915, January 17,
1990)
1t * *

May monthly-paid regular rank-and-file employees con­

stitute an appropriate bargaining unit separate and dis­
tin ct from an existing unit composed o f daily o r piece-
rate paid regular rank-and-file employees? Is the “ one
company-one union” policy absolute? Explain.

ANS. Monthly-paid regular rank-and-file employ­

ees, not included in an existing unit of daily or piece-
rate paid regular employees, may constitute a separate
unit. This is to assure the exercise by the monthly-
paid employees of their right to self-organization and
to collective bargaining. Furthermore, the bargaining
history in the company shows that the CBA has been
consistently limited to the daily or piece-rate paid
employees.
The one company-one union policy, which is in­
tended to enhance the bargaining strength of the
employees, is not without exceptions. The supervisory
and the rank-and-file personnel cannot be in one union
and thus cannot be in the same unit. The employer
unit, though preferred, must at times give way to the
other units like the craft unit, plant unit, or a subdivi­
sion thereof; this is to assure employees of the fullest
freedom in exercising their rights to self-organization

472
 CERTIFICATION ELECTIONS

and to collective bargaining. (Knitjoy Manufacturing,

Inc. vs. Calleja, et al., G. R. No. 81883, September
23, 1992)
It has also been held that there is a m utuality of
interest among the employees of the sawmill division
and the logging division of a lumber development
company and should constitute only one unit, despite
the fact that these two divisions were eighty kilometers
distant from each other and the history of collective
bargaining in the company showed that they were
previously treated as separate units; it was found that
the functions of these employees meshed with one
another; one group needed the other in the same way
that the company needed them both; besides, out of
201 employees of the company, 175 consented to and
supported the petition for certification election, thereby
confirming their desire fo r one bargaining representa­
tive. (National Association of Free Trade Unions vs.
Mainit Lumber Development Company W orkers Union,
G. R. No. 79526, December 21, 1990)
PHILTRANCO is a large bus company engaged in
the business of carrying passengers and freight, ser­
vicing Luzon, Visayas and Mindanao. Certainly there
is “a commonality of interest among filing clerks,
dispatchers, drivers, typists, and field men. They are
all interested in the progress of their company and in
each worker sharing in the fruits of their endeavors
equitably and generously. Their functions mesh with
one another. One group needs the othsr in the same
way that the company needs them ail. The drivers,
mechanics and conductors are necessary for the com­
pany but technical, adm inistrative and office personnel
are also needed and equally important for the smooth
operation of the business. There may be differences
as to the nature of their individual assignments but the
distinctions are not enough to warrant the form ation of
separate unions. It has not even been shown that a
separate bargaining unit would be beneficial to the
employees concerned. (Philtranco vs. Bureau of
Labor Relations, et al., G. R. No. 85343, June 28,
1989)

473
 GERjflFIQATiC)Wr6tE©Tl®MS

The entire north Luzon «*ales area of Magnolia consists

orii^ o f approximately fifty^fivfe (55) employees. Should
each sales office in the area be considered as a separate
bargaining unit follow ing prior collective bargaining
history? Why?

ANS. No. Prior collective bargaining history is

neither decisive nor conclusive in the determination of
what constitutes an appropriate bargaining unit. In­
deed, the test of grouping is mutuality or commonality
of interests.
What greatly m ilitates against the employer’s posi­
tion is the meager number of sales personnel'in each
of the Magnolia Sales O ffice in northern Luzon.
Surely, it would not be for the best interest of those
employees if they would be further fractionalized:
(San Miguel Corporation vs. L aguesma et .al'.; G. R.
No. 100485, September 21, 1994)
* * *

Indophil Textile Mill Workers Union - PTGWQ, the bar­

gaining agent of the rank-and-file employees o f Indophij
Textile Mills, inc. executed a collective bargaining
agreement effective April 1,1987 to March 31,1990. On
November 3, 1987, Indophil Acrylic Manufacturing Cor­
p o ra tio n w a s registered with the Securities and Ex­
change Commission; it became operational in 1988; and
in July, 1989, its workers unionized and executed a CBA
with the company. In 1990 Indophil Textile Workers
Union - PTGWQ sought;th,e ^v, er age&o , f hof
Indophil Acrylic underrits vCBA with
contended that Indophil; Acrylic was; merely annextjejrir
sion or expansion ofelnfdaphi! lextile* considering that
the; tvtoTcorporationsthadiitheicphysicab plantsiiofftces
and facilities in the same compound in Marilao. Bulacan
and Indophit rrrextile is to manufacturegtextileis; while
Indophil! Acrylic was’ foitganized to engage insthe busi­
e s o f manufacture^ purchase and sale o f yarns Of
the total stock subscription of Indophil Acrylic, seventy
percent (70%) thereof pertained to Indophil Textiles.
 CERTIFICATION ELECTIONS

(a) May the two corporations be treated as a single

bargaining unit?

ANS. No. The two corporation are indubitably

distinct entities with separate juridical personalities.

(b) Considering that the businesses of the two corpora­

tion are related, that some o f the employees of Indophil
Textiles are the same persons manning and providing
fo r auxiliary services to the units of Acrylic, and that the
physical plants, offices and facilities are situated in the
same compound, should the corporate veil o f Acrylic be
pierced?

ANS. No. The legal corporate entity is disre­

garded only if the officers and stockholders are sought
to be held directly liable for a corporate, debt , or
obligation. In the instant case, the union does not seek
to impose a claim against the officers and stockholders
of Acrylic. (Indophil Textile Mill W orkers Union ■■
PTGWO vs. Voluntary Arbitrator Calica, et al., G. R.
No. 96490, February 3, 1992)
* * *

The proliferation o f unions in an employer unit is dis­

couraged as a matter o f policy as a rule, the “ one union
- one company" policy must be upheld. Are there
exceptions to this rule?

ANS. Yes. The rule must yield to the right of

employees to form unions or associations for purposes
not contrary to law, to self-organization and to enter
into collective bargaining negotiations.
Where the workers were excluded from the bar­
gaining unit of the rank-and-file because they were
allegedly “supervisors" but it was later on determined
that they were mere rank-and-file workers, it was held
that they could constitute another rank-and-file bar­
gaining unit and form their own organization; other­
wise, they would be denied th e ir right to se lf­

475
 CERTIFICATION ELECTIONS

organization for purpose of collective bargaining; this

is a “compelling reason* not to apply the “one union-
one company* policy. (Barbizon Philippines, Inc. vs.
Nagkakaisang Supervisors ng Barbizon Philippines,
Inc. - NAFLU et al., G. R. Nos. 113204-05, Septem­
ber 16, 1996).
* * *

Three (3) corporations operating as security agencies

and known collectively as the “ PGA Security Group”
wWe managed by the Utilities Management Corporation.
The agencies had common and interlocking incorpora­
tors and officers; the employees drew their salaries
from the management corporation, had a single mutual
benefit system and followed a single system o f com pul­
sory retirement. There was a cross-linking o f the three
agencies’ command, control and communications sys­
tem. May the employees o f the three (3) security agen­
cies constitute a single bargaining unit? Why?

ANS. Yes. The three (3) security agencies are in

reality a single business entity. The veil of corporate
fiction may be lifted for the purpose of allowing the
employees to forma single union and be part of a
single bargaining unit. (Philippine Scout Veterans
Security and Investigation Agency et al. vs. Torres et
a l.,G . R. No. 92357, July 21, 1993)

* * *

Who are entitled to vote in a certification election?

ANS. All employees in the appropriate bargaining

unit are entitled to vote in a certification election.
it * ★

Are the employees who are prohibited by their religion

to be members of a labor organization be allowed to
vote in a certification election? Why?

476
 CERTIFICATION ELECTIONS

ANS. Yes. Neither law, adm inistrative rule nor

jurisprudence requires that only employees affiliated
with any labor organization may take part in a certifica­
tion election. On the contrary, the plainly discernible
intendment of the law is to grant the right to vote to all
bona fid e employees in the bargaining unit, whether
they are members of a labor organization or not.
(Reyes, et al. vs. Trajano, et al., G. R. No. 64433,
June 2, 1992)
* * *

In a certification election to select the bargaining agent

o f the pilots in an airline company, the follow ing are not
allowed to vote:
a) The president o f one o f the participating unions who
has been dismissed by reason of his union activities
and who is now working as a car salesman on commis­
sion basis.
b) A stewardess of the airline.
c) A pilot who does not belong to any union..
Are the foregoing individuals really disqualified to vote?
Why?

ANS. The union president is not disqualified. He

is still deemed an employee of the airline company.
Under Article 212 (d) of the Labor Code, the term
“employee’ includes 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. He was dismissed by reason
of his union activities; this is an unfair labor practice.
And he has not found an employment which is regular
and substantially equivalent to his work as a pilot.
The stewardess is disqualified. She does not
belong to the bargaining unit.
The pilot who does not belong to any union is not
disqualified. Membership in a union is not a require­
ment. It is only necessary that the employee belongs
to the bargaining unit.
 QERTIFICAinipNELEGTIpNS

In a certification election proceeding, the follow ing ob­

jections were raised:
(a) , That the SSS list, and not the payroll, was utilized to
determine the number of eligible voters w ithin the bar­
gaining unit;
(Ij) That the certification election can no longer be held
in>wiew) of the CBA signed by the company and one of
theipatticjpant'unipns= d urin a the pendency o f the pro­
ceedings; and
(c) That the certification election cannot be held in view
of the pendency o f cancellation proceedings against the
union that filed the petition.
Decide.

ANS (3) It should ideally be the payroll which

should be used for the purpose of the election. How­
ever, the unjustified refusal of a company to submit the
payroll in its custody, despite efforts to compel it to
produce it, makes the SSS list the next best source of
information. After all, the SSS list is a public record
whose regularity is presumed. The policy under the
Labor Code is to encourage the holding of a certifica­
tion election as the .definitive and certain way of
ascertaining the choice of employees as to their bar­
gaining agent. No obstacle must be placed to the
holding of the election. Insistence on the use of the
payroll could defeat this policy and could facilitate
fraud, by employers who can easily suppress the pay­
roll to prevent the election from being held.
...(b) The representation case shall not be adversely
affected by a collective bargaining agreement during
the pendency of the said case.
(c) A certification election can be held despite the
pendency of a petition to cancel the certificate of
registration of the union that filed the representation
case. The cancellation case is not a prejudicial
question. At the time it filed the petition.it still had the
legal personality to perform such act absent an order
directing its cancellation. (Samahan ng Manggagawa
sa Pacific Plastic vs. Laguesma et al., G. R. No.
111245, January 31, 1997)

478
What is the vot^-,nfs;c1f s s a ^ 3to um^ke,;a:.union.win in a
certification election?

ANS. A majority of the valid votes cast is sufficient

for certjfijG3 |jqf \3 fs§sP§Npd ballots are not counted in
S^ejnpining«tl^rn»ajoj;% 5) £ £ insist on the absolute
m ajorily tend to foster long drawn-out and protracted
proceedings (PAFLU vs Bureau of Labor Relations,
et al., G R No L-43760, August 21 r 1976)
However, to have a valid election, at least a
majority of. all eligible voters in the unit must cast their
votes. (Article 256, Labor Code) f oilo ;;;
•* *

exclusive bargaining agent of

the workers and em ployee^of “ X” Mining Co., a certifi­
cation election was held among the three contending
unions, namely, Union ‘A,’ Union ‘B,’ and Union ‘C.’ of
the 356O\eli0 ib le ftv ^ i^ « p n ly i^ O actu a llyca stth e ir votes,
Union “ A ” garnered 220jvotes,r Union “ B” garnered 242
votes, Union “ C" garnered 30 votes, while the rest of the
ballots were considered as “ spoiled.” (1982 Bar) b
a) How do you determine the m ajority vote in a certifica­
tion election?

ANS. The m ajority vote in a certification election

i§ 50% plus 1 of the valid votes cast. Spoiled ballots
are excluded.

b) In the problem, which of the contending unions won

the certification election, if any? Why?

ANS. None. To be declared the winner, a union

should have obtained at least 247 votes. This consti­
tutes m ajority of the valid votes cast. Although 500
votes were cast, 8 thereof were spoiled; there were
therefore 492 valid votes cast. The majority of the
valid votes cast is 247.
noiflw soii'fO mo omen 9 nt n;nvv nc^tn 000 si vie ?n^'D v

419
 CERTIFICATION ELECTIONS

When may there be a “ run o f f ’ election?

ANS. When an election which provides for three

(3) or more choices results in no choice receiving a
m ajority of the valid votes cast, a run o ff election shall
be conducted between the labor unions receiving the
two (2) highest number of votes; provided that the total
number of votes for all contending unions is at least
fifty (50%) percent of the number of votes cast. (Art.
256, Labor Code)
“No Union’ shall not be a choice in the run-off
election.
* * *

Is “ direct certification” still recognized as a method of

selecting the bargaining agent?

ANS. Direct certification is no longer allowed as a

method of selecting the bargaining agent. By virtue of
Executive Order No. 111, which became effective on
March 4, 1987, the direct certification originally al­
lowed under Article 257 of the Labor Code has appar­
ently been discontinued. And where a union has filed
a petition for certification election, the mere fact that
no opposition is made does not warrant a direct
certification. (Central Negros Electric Cooperative,
Inc. vs. Hon. Secretary of Labor and Employment, et
al., G. R. No. 94045, September 13, 1991)
* * *

What are the requirements fo r voluntary recognition?

ANS. In unorganized establishments with only one

legitim ate labor organization, the employer may volun­
tarily recognize the representation status of such a
union. W ithin thirty (30) days from such recognition,
the em ployer and union shall submit a notice of
voluntary recognition with the Regional Office which
issued the recognized labor union’s certificate of regis­
tration or certificate of creation of a chartered local.

AIM
 CERTIFICATION ELECTIONS

The notice of voluntary recognition shall b® accom­

panied by the original copy and two (2) duplicate
copies of the following documents:
(a) a joint statement under oath of voluntary recog­
nition attesting to the fact of voluntary recogni­
tion;
(b) certificate of posting of the joint statement of
voluntary recognition for fifteen (15) consecu­
tive days in at least two (2) conspicuous places
in the establishment or bargaining unit where
the union seeks to operate;
(c) the approximate number of employees in the
bargaining unit, accompanied by the names of
thosr who support the voluntary recognition
comprising at least a m ajority of the members
of the bargaining unit; and
(d) a statement that the labor union is the only
legitimate labor organization operating within
the bargaining unit.
All accompanying documents of the notice for
voluntary recognition shall be certified under oath by
the employer representative and president of the rec­
ognized labor union. (Secs. 1 and 2, Rule VII, Book
V, Implementing Rules, as amended by D. O. 40-03)
* * *

What is the effect of voluntary recognition?

ANS. From the time of recording of voluntary

recognition, the recognized labor union shall enjoy the
rights, privileges and obligations of an existing bar­
gaining agent of all the employees in tho bargaining
unit. ‘ '
Entry of voluntary recognition shall bar the filing of
a petition for certification election by any labor organi­
zation for a period of one (1) year from the c!3te of
entry of voluntary recognition’ Upon expiration of this
one-year period, any legitimate labor organization may
file a petition for certification election in the same
bargaining unit represented by the voluntarily recog­

481
 CERTIFICATION ELECTIONS

nized union, unless a collective bargaining agreement

between the employer and voluntarily recognized labor
union was executed and registered with the Regional
Office in accordance with Rule XVII of these Rules.
(Sec. 4, Rule VII, Book V, Implementing Rules, as
amended by D. O. 40-03)

★ * *

After winning over Y union in a certification election and

after being certified as the exclusive bargaining repre­
sentative o f the workers in the bargaining unit, X union
concludes a collective bargaining agreement w ith the
employer granting substantial benefits to its (X's) mem­
bers only, excluding the members o f the loser Y union.
Are the actuations o f X union legal and proper? Why?

ANS. In concluding a collective bargaining agree­

ment exclusively for the benefit of its members, X
union violated its primary duty, i. e., to act as the
representative of all ihe employees in an appropriate
bargaining unit for purposes of collective bargaining.
(Article 242 (b), Labor Code). The certification im­
poses upon the winning union the obligation to repre­
sent and protect the interest of all the workers in the
appropriate bargaining unit. (Article 256, Labor Code)

* * *

Is a collective bargaining agreement entered into by and

between the employer and the union representing ma­
jo rity o f the employees valid and binding on all the
employees o f the said employer, whether or not they are
union members? Why? (1975 Bar)

ANS. The agreement is valid and binding on all

rank-and-file employees in the appropriate bargaining
unit, whether or not they belong to the union conclud­
ing the agreement. They constitute the unit repre­
sented by the union. They are deemed the principal
and they are bound by the actions of their agerrt.

482
 CERTIFICATION ELECTIONS

Juan, a member o f the union that has been certified as

the sole and exclusive bargaining representative o f the
employees in the bargaining unit, aends a letter to the
management requesting, in view o f inflation, fo r an
increase in his wages. The management refuses to
entertain Juan’s request on the ground that this should
be made by Juan’s union and not by him in his individ­
ual capacity. Is the position of the employer tenable?
Why?

ANS. No. Although there may exist an exclusive

bargaining representative in the unit, an individual
employee or group of employees have the right at any
time to present grievances to their employer. (Article
155, Labor Code). The individual employee should not
be rendered totally helpless and without recourse in
case his union unreasonably refuses to fight for his
rights or is in collusion with the employer. It would
have been different if Juan demanded for wage in­
creases for the other employees. He has no authority
to represent them.

Describe the procedure in the selection o f the sole and

exclusive representative of government employees.

ANS. Executive Order No. 180, approved June 1,

1981, in part provides:

“Section 9. The appropriate organizational unit

shall be the employer unit consisting of rank-and-file
employees unless circumstances otherwise require.
“Section 10. The duly registered employees’ orga­
nization having the support of the m ajority of the
employees in the appropriate organizational unit shall
be designated as the sole and exclusive representative
of the employees.
“Section 11. A duly registered employees’ organi­
zation shall be accorded voluntary recognition upon a
showing that no other employees’ organization is regis­
tered or is seeking registration, based on records of

483
 CERTIFICATION ELECTIONS

the Bureau of Labor Relations, and that the said

organization has the majority support of the rank-and-
file employees in the organizational unit. m
“Section 12. Where there are two or more duly
registered employees’ organizations in the appropriate
organizational unit, the Bureau of Labor Relations
shall, upon petition, order the conduct of a certification
election and shall certify the winner as the exclusive
representative of the rank-and-file employees in said
organizational unit."

* * *'

Does the Bureau of Labor Relations have jurisdiction

over a petition fo r certification election filed by a union
of employees o f the ComiI of Appeals?

ANS. Yes. The Bureau of Labor Relations has the

expertise, machinery and experience in this particular
activity. The Civil Service Commission has no fa cili­
ties, personnel or experience in the conduct of. certifi­
cation elections. And the doctrine of separation of
powers does not require the Supreme Court to super­
vise the details of self-organization activities in the
courts. (Association of Court of Appeals Employees
vs. Hon. Pura Ferrer-Calleja, et al., G. R. No.
94716, November 15, 1991)

* * W

Are the ondters ofth e Med-Arbiter in certification election

proceedings appealable?

ANS. Yes. Any party to an election may appeal

the order or results of the election as determined by
the Med-Arbiter directly to the Secretary of Labor and
Employment on the ground that the rules and regula­
tions for the conduct of the election have been vio­
lated. (Art. 259, Labor Code, as amended by X. A.
6715)

484
 CHAPTER XSI1

COLLECTIVE BARGAINING AND

COLLECTIVE BARGAINING AGREEMENTS
What is collective bargain ng? (1975 Bar)

ANS. Collective bargaining has been defined as

the process of negotiation between an employer or
employers and employees organization or union to
reach an agreement on the terms and conditions of
employment for a specified period. It covers the entire
range of organized relationships between employers
and employees represented by unions; this includes5
the negotiation, administration, interpretation or appli­
cation of the labor contract.
* * *

What is a collective bargaining agreement?

ANS. It is the negotiated contract between a

legitimate labor organization and the employer con­
cerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit, includ­
ing mandatory provisions for grievance and arbitration
machineries. (University of Immaculate Conception,
Inc. vs. Secretary of Labor and Employment et al., G.
R. No. 146291, January 23, 2002) It constitutes the
law between the parties. (Mindanao Steel Corporation
vs. Minsteel Free Workers Organization, G. R. No.
130693, March 4, 2004)
* it r ft

Distinguish between an employment contract and a

collective bargaining agreement.

A.vS. An employment contract establishes the

p oyer-employee relationship, while a collective

485
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

bargaining agreement presupposes the existence of

such relationship.
. An employment contract is between the employer
and an individual employee, while a collective bargain­
ing agreement is between the employer and a union in
representation of a group of workers.
An employment contract ends or terminates when
the period fixed therein expires, while a collective
bargaining agreement continues to be binding and
effective as long as no new CBA is entered into.
■
M •
k it

What are the most important aims or aspects o f collec­

tive bargaining? (1975 Bar).

ANS. The most important aims of collective bar­

gaining are:
a) To establish industrial peace by enabling capital
and labor to resolve their disputes and controversies
on terms mutually acceptable and satisfactory to them­
selves.
b) To enhance industrial efficiency through speedy
resolution of labor disputes concerning the fixing of
wages, working hours and other terms and conditions
of employment, the execution of contracts incorporat­
ing such agreements, and the adjustment or settlement
of any grievance arising thereunder.
c) To establish benefits for tabor higher or greater
than those fixed by lav/.

The various aspects of collective bargaining are:

a) The duty of the parties to bargain anc! negotiate
on proposals concerning wages, working hours and
other terms and conditions of employment;
b) The duty of the parties to adhere to the
statutory standards of good faith, promptness and
expeditious actions;
c) The duty to refrain from unilateral changes
concerning matters subject to bargaining; and

488
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

d) In case there is an existing collective contract,

the duty to adhere faithfully to its terms and not
terminate or modify the same during its period of
effectivity.
* ft ft

Explain the meaning of the duty to bargain collectively.

(1917 Bar).

ANS. The meaning of the duty to bargain is given

in the following provisions of the Labor Code:

Article 252. M eaning o f d u ty to b a rg a in c o lle c ­

tiv e ly . — The duty to bargain collectively means the
performance of a mutual obligation to meet and confer
promptly and expeditiously and in good faith for the
purpose of negotiating an agreement with respect to
wages, hours of work, and all other terms and condi­
tions of employment including proposals for- adjusting
any grievances or questions arising under such agree­
ment and executing a contract incorporating such
agreement if requested by either party, but such duty
does not compel any party to agree to a proposal or to
make any concession.

Article 253. D uty to b a rg a in c o lle c tiv e ly w h en

th e re e x is ts a c o lle c tiv e b a rg a in in g agree m en t.
— The duty to bargain collectively shall also mean that
either party shall not terminate nor modify such agree­
ment during its lifetime. However, either party can
serve a written notice to terminate or modify the
agreement at least sixty (60) days prior to its expira­
tion date. It shall be the duty, of both parties to keep
the status quo and to continue in full force and effect
the terms and conditions of the existing agreement
during the sixty day period and/or until a new agree­
ment is reached by the parties.

ft ft ft

487
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

Among the objectives of the State under Article 211 of

the Labor Code is the promotion of frea collective
bargaining as a mode of settling Eabor or industrial
disputes. What in your opinion is the most important
factor that will assure free collective bargaining? Ex­
plain.

ANS. Free and genuine collective bargaining can

exist only if the parties are of equal strength. If by
reason of weakness, one is dominated by the other,
collective bargaining becomes a farce. This is best
illustrated by collective bargaining between an em­
ployer and a company union. Being company-
dominated, the union cannot be expected to fight for
the rights of its members.
A i3r

Describe briefly the procedure in collective bargaining.

ANS. in the absence of an agreement or other

voluntary arrangement providing for a more expedi­
tious manner of collective bargaining, the following
procedure shall be observed:

a) When a party desires to negotiate an agree­

ment, it shall serve a written notice upon the other wish
a statement of its proposals. The other party shall
make a reply thereto not later than ten (10) calendar
days from receipt of such notice;
b) Should differences arise on the basis of such
notice and reply, either party may request for a confer­
ence which shall begin not later than ten (10) calendar
days from the date of request; ,
c) if the dispute is not settled, the Board (now the
National Conciliation and Mediation Board) shall inter­
vene upon request of either or both parties or at its
own initiative call the parties to conciliation meetings.
The Board shall have the power to issue subpoenas
requiring the attendance of the parties to such meet­
ings. It shall be the duty of the parties to participate

488
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

fully and promptly in the conciliation meetings the

Board may call;
d) During the conciliation proceedings in the
Board, the parties ar6 prohibited from doing any act
which may disrupt or impede the early settlement of
the disputes;
e) The Board shall exert efforts to settle disputes
amicably and encourage the parties to submit their
case to voluntary arbitration. (Article 250, Labor Code,
as amended by R. A. 6715)
* * *

Under what conditions may multi-employer bargaining

take place? Explain.

ANS. A legitimate labor union(s) and employers

may agree in writing to come together for the purpose
of collective bargaining, provided:

(a) only legitimate labor unions who are incumbent

exclusive bargaining agents may participate
and negotiate in multi-employer bargaining;
(b) only employers with counterpart legitimate la­
b o r , unions who are incumbent bargaining
agents may participate and negotiate in m ulti­
employer bargaining; and
(c) only those legitimate labor unions who pertain
to em ployer units who consent to m ulti­
employer bargaining may participate in m ulti­
employer bargaining.

M ulti-employer bargaining may be initiated by the

labor unions or by the employers.
(a) Legitimate labor unions who desire to negotiate
with their employers collectively shall execute
a written agreement among themselves, which
shall contain the following:
1) the names of the labor unions who desire to
avail of m ulti-em ployer bargaining;
2) each labor union in the employer unit;

AftQ
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

3) the fact that each of the labor unions are

the incumbent exclusive bargaining agents
for their respective employer units;
4) the duration of the collective bargaining
agreements, If any, entered into by each
labor union with their respective employers.

Legitimate labor unions who are members

o f the same registered federation, national, or
industry union are exempt from execution of
this written agreement.

(b) The legitimate labor unions who desire to bar­

gain with multi-employers shall send a written
notice to this effect to each employer con­
cerned. The written agreement stated in the
preceding paragraph, or the certificates of reg­
istration of the federation, hational, or industry
union, shall accompany said notice.
Employers who agree to group themselves
or use their existing associations to engage in
multi-employer bargaining shall send a written
notice to each of their counterpart legitimate
labor unions indicating their desire to engage in
multi-employer bargaining. Said notice shall
Indicate the following:

1) the names of the employers who desire to

avail of multi-employer bargaining;
2) their corresponding legitimate labor organi­
zations;
3) the fact that each corresponding legitimate
labor union is any incumbent exclusive
bargaining agent;
4) Vhe duration of the current collective bar­
gaining agreement, if any, entered into by
each employer with the counterpart legiti­
mate labor union.

(c) Each employer or concerned labor union shall

express its willingness or refusal to participate
in m ulti-em ployer bargaining in writing, ad-

490
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

dressed to its corresponding exclusive bargain­

ing agent or employer. Negotiations may com­
mence only with regard to respective employ­
ers and labor unions who consent to participate
in multi-employer bargaining;

(d) During the course of negotiations, consenting

employers and the corresponding legitim ate
labor unions shall discuss and agree on the
following:
1) the manner by which negotiations shall
proceed;
2) the scope and coverage of the negotiations
and the agreement; and
3) where appropriate, the effect of the negoti­
ations on current agreements or conditions
of employment among the parties.

Two (2) signed copies of collective bargaining

agreement reached through multi-employer bargaining
shall be posted for at least five (5) days' in two
conspicuous areas in each workplace of the employer
units concerned. Said collective bargaining agreement
shall affect only those employees in the bargaining
units who have ratified it.

The same collective bargaining agreement shall be

registered with the Department in accordance with the
following Rule. (Sections 5-7, Rule XVI, Book V,
Implementing Rules, as amended by D. O. No.
40-03)
■rff "k ft

Is the duty to bargain collectively fulfilled by the reli­

gious attendance of a party in collective bargaining
conferences? Explain.

ANS. True collective bargaining involves more

than the holding of conferences and the exchange of
pleasantries. While the law does not compel the
parties to reach agreement, they must approach the

491
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

negotiations with an open mind and make reasonable

efforts to reach a common ground of agreement.
Proposals must be matched with counter-proposals.
Although the law cannot open a man’s mind, it can at
least compel him to conduct himself as if he were
trying to persuade and were willing to be persuaded.
But where the employer did not even bother to submit
an answer to the bargaining proposals of the union,
there is a clear evasion of the duty to bargain collec­
tively. (The Bradman Co., Inc. vs. CIR, et al., G. R.
No. L-23134, July 21, 1977)

* * *

Is the employer bound to commence contract negotia­

tions?

ANS. While it is a mutual obligation of the parties

to bargain, the employer, however, is not under any
legal duty to initiate contract negotiation. The me­
chanics of collective bargaining is set in motion only
when the following jurisdictional preconditions are
present, namely (1) possession of the status of
m ajority representation of the employees’ representa­
tive in accordance with any of the means of selection
or designation provided for by the Labor Code; (2)
proof of majority representation; and (3) a demand to
bargain under Article 250, par. (a) of the New Labor
Code. (Kiok Loy vs. NLRC, et al., G. R. No. 54334,
January 22, 1986)
* if *

Give the effect of a violation of the duty to bargain

collectively.

ANS. The violation of the duty to bargain collec­

tively constitutes an unfair labor practice on the part of
the employer. (Art. 248 (g), Labor Code) or the labor
organization selected as representative of the employ­
ees. (Article 249 (c), Labor Code)

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 COLLECTIVE BARGAINING AND
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May the draft CBA submitted to the employer by the

bargaining agent be approved and adopted as the par­
ties' CBA even w ithout the employer’s consent? Ex­
plain.

ANS. As a general rule, no. But where the

employer violated its duty to bargain collectively, as it
did not even bother to submit an answer or reply to the
union's proposals, the draft CBA submitted by the
union may be approved and adopted as the parties'
CBA. (Kiok Loy vs. NLRC et al., G. R. No. L-54334,
January 22, 1986; Divine Word University of Tacloban
vs. Secretary of Labor and Employment et al., G. R.
No. 9 t9 1 5, September 11, 1992)
* * 1t

What do you understand by the off-repeated statement

that “ collective bargaining is a continuous process” ?

ANS. Collective bargaining does not end with the

execution of a collective bargaining agreement.
Thereafter, parties to the agreement are obliged to
meet and confer promptly, expeditiously and in good
faith to thresh out any grievances in accordance with
the grievance procedure therein provided. Indeed, the
grievance procedure is a part of the continuous pro­
cess of collective bargaining: (Republic Savings Bank
vs. CIR, et al., G. R. No. L-20303, September 27,
1967)

What are the usual provisions, stipulations, or clauses

in a collective bargaining agreement?

ANS. They are the following:

a) D e fin itio n o f B a rg a in in g U n it. — This is a
statement of the scope of the appropriate bargaining
unit covered by the agreement and of the jiositk i s
included in and excluded from the unit.

493
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

b) U n ion S e c u rity C lause. — This is intended to

maintain the strength of the contracting union during
the life of the agreement and safeguard it against the
perfidy or fickleness of its own members and incur­
sions by the employer.
c) C h e c k -o ff P ro v is io n . — Pursuant to this
provision the employer undertakes to deduct from the
wages of union members union dues and other assess­
ments and remit the same to the treasurer of the union.
d) M anagem ent P re ro g a tiv e s C lause. — The
rights and prerogatives of the company are enumer­
ated in this provision.
e) E co n o m ic B e n e fits . — Provisions granting
economic benefits to the employees such as increases,
vacation and sick leaves, hospitalization and retire­
ment.
f) P ro v is io n on A d m in is tra tio n o f A g ree m e nt.
— Article 260 of the Labor Code requires the parties to
include in their agreement provisions to ensure mutual
observance of the terms and conditions of the agree­
ment and to establish a machinery for the adjustment
of grievances arising from the interpretation or imple­
mentation of the CBA and arising from the interpreta­
tion or enforcement of company personnel policies..
g) V o lu n ta ry A rb itra tio n CJause. —- The parties
are also required to provide in their agreement for the
submission to voluntary arbitration of grievances not
settled through the grievance procedure and to desig­
nate in advance an arbitrator or panel of arbitrators or
provide the manner for the selection of such arbitrator
or panel of arbitrators. (Art. 260, Labor Code)
h) No S trike -N o L o c k o u t C lause. — The parties
may stipulate that during the life of the agreement, the
union shall not go.on strike and the employer shall not
declare a lockout.
i) C o m p le te n e ss o f A g reem ent. — In this
clause, the parties stipulate that the CBA is a full and
complete settlement of all demands and proposals
made during the negotiations.
j) P ro v is io n s on F a m ily P la n n in g , P a rtic ip a ­
tio n in S p o rts etc. — The parties undertake to

494
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

encourage employee participation in programs for fam ­

ily planning or population control and in sports and
recreational activities to reduce work monotony, and to
have periodic discussions on cooperative schemes to
increase productivity and sharing of profits therefrom.
k) P ro v is io n A g a in s t D rug Use in W o rkp la ce .
— Section 49 of R. A. 9165 requires the parties to
include in their CBA joint continuing programs and
information campaigns to achieve a drug-free work­
place.
0 D u ra tio n o f A greem ent. — This provision
states the duration of the agreement. Linder Article
253-A of the Labor Code, as amended by R. A. 6715,
the term of the CBA, insofar as the representation
aspect is concerned, shall be five (5) years.
* A.*

Describe briefly the different classes of union security

clauses.

ANS. C losed sh o p agree m en t is an'agreem ent

whereby an employer binds himself to hire only mem­
bers of the contracting union who must continue to
remain members of the union in good standing for the
duration of the agreement as a condition for continued
employment.
U n io n s h o p agree m en t is one whereby the em­
ployer is permitted to employ a non-union worker, but
to retain employment such worker must become a
union member after some period and maintain his
membership therein in good standing for the duration
of the agreement.
M a inten ance o f m e m b e rsh ip cla use does not
require non-members to join the union but provides
that those who do join most maintain their membership
for the duration of the union contract, under penalty of
discharge.
P re fe re n tia l s h o p a g re e m e n t recognizes the
right of the employer to select his employees but
requires him to give p/ef lo members of the
contracting union who are qualme-d.

495
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

Is there an express statutory recognition o f the closed

shop agreement?

ANS. Yes. Article 248 (e) of the Labor Code

provides in part: “Nothing in this Code or any other
law shall prevent the parties from requiring member­
ship in a recognized collective bargaining agent as a
condition for employment except those employees who
are already members of another union at the time of
the signing of the collective bargaining agreement.”

* * *

X union has with Y, Inc. a collective bargaining agree­

ment which provides among others: “ The Company
undertakes not to employ anyone who is not a member
o f the Union and to dismiss from employment any
employee who resigns or is expelled from the Union.”
Zi an employee, resigns from X union, and by reason of
such resignation he is dismissed from the company. He
contends that his dismissal violates his right to self-
organization which includes the freedom not to jo in or
resign from a labor union. Decide with reason.

ANS. The contention of Z is untenable. His

dismissal was effected pursuant to the closed shop
provision of the collective bargaining agreement. The
validity of such a provision is legally recognized; it is
intended to make the union strong so that true collec­
tiv e bargaining may be assured. Statutes recognizing
the validity of closed shop agreements have been
justified on the police power. And the recognition of
the validity of such agreements has been held to be
the most prized achievement of unionism. (Juat vs.
CIR, e ta l.,G . R. No. L-20764, November 29, 1965)
★ * ★

Union A wins over Union B in a certification election,

then enters into a collective bargaining agreement with
the employer. The CBA contains among others a closed

496
 COLLECTIVE BARGAINING AND
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shop provision. As the members of Union B, the loser,

did not apply fo r membership in Union A, the latter
demanded that the employer dismiss the said employ­
ees pursuant to the closed shop agreement. Is the
employer obliged to dismiss them? Why?

ANS. No. The closed shop agreement cannot be

enforced against employees who are already members
of another union at the time of the signing of the
collective bargaining agreement. To compel the mem­
bers of a m inority union to disaffiliate from their union
and join the majority or contracting union would render
nugatory the right of the employees to self-
organization and to form, join or assist a labor organi­
zation of their own choosing. (Freeman Shirt Mfg. Co.
vs. CIR, G. R. No. L-16661, January 28, 1961; Sta.
Cecilia Sawmills, Inc. vs. CIR, G. R. No. L-19273,
February 29; 1964; U. S. Lines Co. vs. Associated
Watchmen Security Union, G. R. No. L-15508, June
29, 1963; Guijarno vs. CIR, G. R. No. L-28791,
August 27, 1973)
* * *

The Bagong Buhay Labor Union had with the Artex

Development Co., Inc. a collective bargaining agree­
ment w ith a closed shop stipulation. Three o f its
members affiliated themselves w ith another union, the
Artex Free Workers. The Bagong Buhay Labor Union
therefore declared them guilty o f disloyalty, expelled
them, then demanded that the employer dismiss them
from employment pursuant to the closed shop agree­
ment. The company terminated the employment of the
three. The latter however contended that they were
unaware o f the contents of the CBA and should not
therefore be bound by it. Decide.

ANS. Even, if we assume, in g ra n tia a rg u m e n -

tis , that the employees involved were unaware of the
stipulations set forth in the collective bargaining agree­
ment, since their membership in BBLU prior to their

497
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

expulsion therefrom is undenied, there can be no

question that as long as the agreement with closed
shop provision was in force, they were bound by it.
Neither their ignorance of, nor the!r dissatisfaction
with, its terms and conditions would ju stify breach
thereof or the formation by them of a union of their
own. As has been aptly said, “a collective bargaining
agreement entered into by officers of a union, as agent
of the members, and an employer, gives rise to valid
enforceable contractual relations, against the individ­
ual union members in matters that affect them pecu­
liarly, and against the union in matters that affect the
entire membership or large classes of its members,’’
and a “a union member who is employed under an
agreement between the union and his employer is
bound by the provisions thereof, since it is a jo int and
several contract of the members of the union entered
into by the union as their agent." (Jose Manalang, et
al. vs. Artex Development Co., Inc., G. R. No.
L-20432, October 30, 1976)
* * *

A collective bargaining agreement provides:

“ That the UNION shall have the exclusive right and

privilege to supply the COMPANY w ith such laborers,
employees and workers as are necessary in the logging,
mechanical, etc. x x x and that the COMPANY agrees to
em ployer hire in any o f its departments only such
person o r persons who are members o f the UNION.”

If a union member resigns or is expelled from the union

during the lifetime o f the agreement, is the company
obliged to terminate his employment pursuant to the
foregoing provision? Why?

ANS. No. The stipulation above-quoted does not

establish a closed shop agreement. It simply estab­
lishes the exclusive right of the union to supply labor­
ers and lim its the authority of the company to employ
or hire them. In other words, it requires that the
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

laborers, employees and workers hired or employed by

the company be members of the union at the time of
the commencement of the employer-employee rela­
tion. But membership in the union is not a condition
for the continuation of said relation or for the retention
of a laborer or employee engaged either before said
agreement or while he was a member of the union.
(Confederated Sons of Labor vs. Anakan Lumber Co.,
et al., G. R. No. L-12503, April 29, 1960)
"ft * *

A collective bargaining agreement stipulates as follows:

“ The EMPLOYER agrees to have in its employ and to
employ only members in good standing o f the UNION in
all its branches, units, plants, quarries, warehouses,
docks, etc. The UNION agrees to furnish at all times the
laborers, employees and all the technical helps that the
EMPLOYER may require. EMPLOYER, however, re­
serves its right to accept o r reject where they fail to
meet its requirements.” (Article 1, Section 5)
“ The EMPLOYER agrees not to have in its employ nor to
hire any new employee or laborer unless he is a member
of good standing of the UNION, and a bona fide holder
of a UNION (NWB) card, provided such new employee or
laborer meets the qualifications required by the EM­
PLOYER." (Article VII, Section 1-d)
If a member o f the union is expelled therefrom fo r
disloyalty, is the employer obliged under the foregoing
provision to terminate his employment? Why?

ANS. No. The contract does not clearly prescribe

the period within which the employee must remain as
a member of good standing of the union. And it is not
clear that membership in the union is a condition for
continuation or retention of employment.
Stipulations of this nature are strictly construed;
doubts are resolved against the existence of the right
to dismiss. (Rizal Labor Union, et al. vs. Rizal
Cement Co., Inc., et al., G. R. No. L-19779, July 30,
1966)

499
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

A collective bargaining agreement provides:

“ MAINTENANCE OF MEMBERSHIP. Both parties agree

that all employees o f the COMPANY who are already
members of the UNION at the time o f the signing o f this
AGREEMENT shall continue to remain members o f the
UNION fo r the duration o f this AGREEMENT.”

Three (3) members o f the contracting union who re­

signed to jo in a new union were dismissed by the
company pursuant to the above-quoted provision. Is
their dismissal legal? Why?

ANS. Their dismissal is not legal. The contractual

provision relied upon does not expressly provide that
membership in the union is a condition for continued
employment. In order that an employer may be bound
to d ism iss’employees who do not maintain their mem­
bership in the union, the stipulation to this effect must
be so clear as to leave no room for doubt thereon. An
undertaking of this nature is so harsh that it must be
strictly construed and doubts must be resolved against
the existence of the right to dismiss. (Manila Cordage
Co. vs. CIR, e ta l., G. R. No. L-27079, August 31,
1977)
* * *

Union “ A ” and "B ” company entered into a collective

bargaining agreement containing, among others, a
“ closed shop” provision whereby the company agreed
to hire only members of union “ A” of good standing.
When the CBA was executed, ‘X,’ % ’ and ‘Z’ had been
working w ith ‘B’ company fo r the past 5 years. Because
‘X,’ ‘Y,’ and *Z’ belonged to a religious sect which
prohibits its members from joining any organization,
including labor unions, they refused to jo in “ A.”
In view of the “ closed shop” agreement may the com­
pany be compelled by union “ A " to dismiss ‘X,’ 'Y,' and
‘Z’? Reasons. (1982 Bar).

500
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ANS. The company cannot be compelled to dis­

miss ‘X ,’ ‘Y ,’ and ‘Z .’ The closed shop agreement
cannot be made to apply to them; otherwise, religious
freedom, which enjoys a preferred position in the
hierarchy of valued, will be violated. Religious profes­
sion or belief is superior to contract rights; the latter
must yield to the former. (Victoriano vs. Elizalde
Rope W orkers Union, et al., G. R. No. L-25246,
September 12, 1974; Anucesion, et al. vs. NLU, et
al., G. R. No. L-26097, November 29, 1977)
* * *

Distinguish closed shop from union shop.

ANS. Under c lo s e d sh o p , the employer cannot

hire any worker who is not a member of the contracting
union; under u n io n shop , the employer, may do so
but the workers must within a specified period after his
employment become a member of the contracting
union. In c lo s e d shop , membership in the contract­
ing union is a condition for employment and retention
of employment; in u n io n sh o p , membership in the
contracting union is a condition for continued employ­
ment.

* * *

About eight (8) months after the execution o f a collec­

tive bargaining agreement between the company and
their union, some union members joined another union
and even filed a petition fo r certification election. As
the CBA contained a maintenance o f membership
clause, the bargaining agent sbught the dismissal o f the
said members.
(a) Is there a ground fo r the enforcement o f the union
security clause? Why?

ANS. Yes. The union members committed acts of

disloyalty. Inherent in every labor union is the right of
self preservation. When members of a union seek the

K t\ 4
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

disintegration of destruction of the very organization to

which they belong, they forfeit their rights to remain
members thereof.

(b) Does the expiration o f the CBA preclude the dis­

missal o f the union members guilty of disloyalty?

ANS. No. The expiration of the CBA did not

cleanse them from the acts of disloyalty. They com­
mitted such acts while the CBA was in force and
existing for which they have to face the sanctions
lawfully imposed by the union.

(c) If the act of disloyalty was committed during the

“ freedom period,” could the union security clause be
still enforced?

ANS. No more. The requirement for union mem­

bers to maintain their membership in good standing
ceases to be binding during the 60-day freedom period
im m ediately preceding the expiration of the CBA.
(Tanduay Distillery Labor Union vs. NLRC, et al., G.
R. No. 75037, April 30, 1981)

it it *

Blanco belonged to a union (LEA) which had a closed

shop agreement with LITEX textile company where he
worked. But he and several other union members
formed another union (CIALO) and filed a petition fo r
certification election. This was however dismissed and
LEA was certified as the sole and exclusive bargaining
representative of the rank-and-file employees of LITEX.
As under its constitution and by-laws, a member may be
expelled therefrom fo r jo ining another union, LEA after
conducting an investigation demanded fo r the d is­
missal from employment o f the employees who formed
CIALO. The company complied. Is the dismissal of the
employees involved legal? Why?
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ANS. Yes. The company had to comply with the

closed shop agreement, which is a valid form of union
security. And it cannot be said that there was no
reasonable ground for the employees’ expulsion from
LEA. By organizing a rival union, they violated the
union's constitution and by-laws. (Lirag Textile Mills,
Inc. vs. Blanco, et al., G. R. No. L-27029, November
12, 1981)

★ * *

X union has with Y Co. a collective bargaining agree­

ment containing, among others, a maintenance-of-
membership clause. Due to the refusal o f Z, an em­
ployee o f Y Co., to jo in it, despite repeated invitations, X
union sends a demand to Y Co. fo r the dismissal o f Z.
Y Co. refuses. Is the refusal o f the company justified?
Why?

ANS. The refusal of the company is justified. It is

not bound to dismiss an employee who refuses to join
the union. The maintenance-of-membership clause
applies only to employees who are members of the
contracting union at the tim e of the execution of the
collective bargaining agreement and to those who may
thereafter on their own volition join the union; these
must maintain their membership in good standing in
the union to keep their jobs.

* * *

Is a union shop clause contained in a collective bargain­

ing agreement which has not yet been certified (now
registered) by the Bureau of Labor Relations operative
and enforceable?

ANS. Yes. The certification (now registration) of

the collective bargaining agreement by the Bureau of
Labor Relations is not required to put a stamp of
validity to such contract. Once it is duly entered into
and signed by the parties, a collective bargaining
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

agreement becomes effective as between the parties

regardless of whether or not the same has been
certified (now registered) by the BLR. (Liberty Flour
Mills Employees, et al. vs. Liberty Flour Mills, Inc., et
al., G. R. Nos. 58768-70, December 29, 1989)
* * *'

Carifio, the union president, was at a general member­

ship meeting impeached and ordered recalled by unani­
mous vote of the union membership fo r acts against the
interest o f the union and w illfu l violation o f the union’s
constitution and by-laws. He was also expelled from the
union. The union then sent notice of Carino's expulsion
to the company and demanded enforcement of the
union security clause of the existing collective bargain­
ing agreement. The company dismissed Carino the
follow ing day.
(a) Is the impeachment and recall o f Caririo valid
considering'that under the constitution of the union
such proceedings must be initiated by a formal petition
or resolution signed by at least thirty (30%) percent of
all bona fide union members?

ANS. Yes. Failure to comply literally with the

requirement is not necessary. Carino was impeached
and ordered recalled by unanimous vote of the mem­
bership. The prescribed impeachment and recall pro­
ceeding was more than substantially complied with.

(b) Is the dismissal of Carino by the company effected

with procedural due process?

ANS. No. The company should have given Carino

an opportunity to explain his side of the controversy
with the union. It should have reasonably satisfied
itself by its own inquiry that the union had not been
merely acting arbitrarily and capriciously in impeach­
ing and expelling Oarino.

(c) Is Carifto entitled to reinstatement?

 COLLECTIVE BARGAINING AMD
COLLECTIVE BARGAINING AGREEMENTS

ANS. No. His dismissal was effected pursuant to

the union security clause in the collective bargaining
agreement. He should however be paid the sum of
P5.000.00 by way of penalty to be borne by the
company and the union solidarily. (Carino vs. NLRC,
et al., G. R. No. 91086, May 8, 1990)
* * vV

Some regular employees of Occidental Foundry Corpo­

ration were dismissed from work after their union Sarna-
han notified the company that they failed to retain
membership in the union in good standing; they had
conducted a special election of officers of Sarnahan and
tried to stage a strike based on economic demands. No
hearing was conducted by the union before the workers
were expelled therefrom despite a requirement for such
hearing in the constitution and by-laws. The company
likewise did not, before dismissing the workers, hear
the side of the workers; it took for granted that Sarnahan
had actually conducted an inquiry,
is the dismissal of the workers lawful? Why?

; ANS. No. Their dismissal was effected without

prior notice and hearing, which are essential elements
of due process. (Ferrer et al. vs. NLRC et al., G. R.
No. 100898, July 5, 1993)
* >Y tV

The union security clause in the collective bargaining

agreement provided that any employee covered by the
agreement who fails to maintain his membership in the
union for non-payment of union dues, for resignation
and for violation of the union’s constitution and by­
laws, and any new employee who fails to join or to
maintain his membership in the union, shall upon writ­
ten notice of such failure to join or to maintain member­
ship in the union and upon written recommendation to
the company by the union, be dismissed from employ­
ment by the company. Pursuant to this clause, the

505
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

company dismissed th irty (30) union officers who were

expelled due to acts o f disloyalty from the union by the
federation that had placed the union under trusteeship.
The company did not however conduct a separate and
independent investigation into the causes o f the em­
ployees’ alleged expulsion before dism issing them.
The dismissal became effective on the day the employ­
ees received their termination notices.
(a) Is the dismissal valid? Why?

ANS. N o .' W hile the company may validly dismiss

employees expelled by the union for disloyalty under
the union security clause of the collective bargaining
agreement upon recommendation by the union, the
dismissal should not be done hastily and summarily
thereby eroding the employees' right to due process,
self-organization and security of tenure. Even on the
assumption that the federation had valid grounds to
expel the union officers, due process requires that they
be accorded a separate hearing by the company.

(b) Under the union security clause, the union under­

took to hold the company free from any liability result­
ing from such a dismissal. Does this free the company
from liability in favor of the dismissed employees?

ANS. No. The company may still be held liable if

it was remiss in its duty to accord the employees their
right to be heard on the matter.

(c) May workers who lose their union membership on

grounds other than those stipulated in the union secu­
rity clause be validly dismissed pursuant thereto? Why?

ANS. No. The workers may be validly dismissed

pursuant to the union security clause only if they lost
membership in the union on the grounds specified in
the collective bargaining agreement. Thus, it has been
held that where the CBA lim ited the grounds for
dismissal to only three (3) grounds, to wit: failure to
maintain membership in the union for (1) non-payment

508
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

of union dues, (2) for resignation, and (3) for violation

of the union’s constitution and by-laws, the workers
could not be validly dismissed for their act of establish­
ing a federation different from the one that expelled
them, as this act is not among those grounds specified
in the CBA as grounds fo r dismissal. (Malayang
Samahan Ng Mga Manggagawa sa M. Greenfield et ai
vs. Hon. Cresencio J, Ramos et al., G. R. No.
113907, February 28, 2000)

* * *

Discuss briefly the importance of the union security

clause.

ANS. The union security clause is intended to

strengthen the contracting union and to protect it from
the fickleness or perfidy of its own members. W ithout
such safeguard, group solidarity becomes uncertain;
the union becomes gradually weakened and increas­
ingly vulnerable to company machinations.- In this
clause lies the strength of the union during the en­
forcement of the collective bargaining agreement. It
provides substantial power in collective bargaining.
(Caltex Refinery Employees Association vs. Hon. J.
Brillantes et al., G. R. No. 123782, September 16,
1997)

* '£r tfr

A collective bargaining agreement provides:

“ The EMPLOYER undertakes to deduct m onthly from

the wages o f the employees in,the bargaining unit who
do not belong to the UNION but who accept and enjoy
the benefits provided fo r in this Agreement an amount
equivalent to the union dues paid by members o f the
UNION and remit the same to the UNION.”

Is such a stipulation valid? Why?

507
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ANS. Yes. It provides for the collection of agency

fee from the members who accept and enjoy the
benefits attained through the efforts of the bargaining
agent. The non-union members should not be unjustly
enriched at the expense of the bargaining agent.
The legality of the imposition of the agency fee is
recognized in Article 248 (e) of the Labor Code. This
provision states in part: ‘ Employees belonging to an
appropriate collective bargaining unit who are not
members of the recognized collective bargaining agent
may be assessed a reasonable fee equivalent to the
dues and other fees paid by members of the recog­
nized collective bargaining agent, if such non-union
members accept the benefits under the collective
agreement x x x."
* * *

A union succeeds in negotiating with the employer a

collective bargaining agreement w hich provides fa r
substantial .benefits .to the employees in the bargaining
unit. Among these employees are members of a reli­
gious organization which prohibits their members from
giving contributions to unions or organizations. Since
they have accepted the .benefits of the CBA, the union
demands that the em ployer deduct from thesr wages
agency fees under Article 248 (e) of the Labor Code. Js
such demand justified ? Explain.

ANS. Although these employees cannot be com­

pelled to become members of the bargaining agent,
they are obliged to pay agency fees to the latter since
they accepted the CBA; otherwise, they would be
unjustly enriched at the expense of the union. They
were not under compulsion to accept the benefits; they
should not be allowed to utilize religious freedom to
obtain free benefits.
’*• * * ft

After winning over Union Y in a certification ejection,

Union X negotiates and concludes a collective bargain­

508
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ing agreement with the employer. Since the members of

Union Y accepted the salary increases provided for ip
the CBA, Union X requested the employer to deduct
monthly from the wages of said employees the amount
of P1.00 as agency fee. The company refused 1o effect
the deduction on the follow ing grounds:

a) the employees concerned did not authorize in writing

such deduction.
b) the collective bargaining agreement does not ex­
pressly provide for the collection of agency fees.
c) the employees concerned toelong to another union.
Which of the foregoing is/are tenable? Give reasons.

ANS. None of the foregoing grounds is tenable. It

is not necessary that the employee authorizes in
writing the deduction of agency; fees. (Article 248 (e)
proviso, Labor Code). His acceptance of the benefits
under th© CBA is sufficient justification for the deduc­
tion of the amount.
The law does not impose as a condition-for the
collection of the agency fee that the same be provided
for in the CBA. The basis of the union’s right to the
agency fee is quasi-contraclual, not contractual.
The fact that the employees concerned belong to
another union cannot exempt them from the payment
of agency fee. In the same manner that they cannot
be compelled to leave their union to join the contract­
ing or majority union, they should not he allowed to
utilize their union membership as a shield against the
imposition of a reasonable fee for their enjoyment of
benefits obtained through the efforts of the majority
union; otherwise, they would be placed in a more
favored situation than members of the contracting or
majority union.
* * *

The collective bargaining agreement negotiated by

Union Y provides for a P2.00 daily wage increase for the
employees in the production and maintenance depart­
ment which constituted the bargaining unit. To avoid

5A8
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

any charges o f discrim ination, the company also

granted the same increase to employees in the adm inis­
trative and sales department. Union Y now demands
that agency fee be deducted from the wages o f the
employees in the administrative and sales department.
Is such demand valid? Why?

ANS. The demand is not valid. In the first place,

the employees in the administrative and sales depart­
ment do not belong to the bargaining unit covered by
the agreement. In the second place, the wage in­
creases given to the said employees were not obtained
through the efforts of Union Y.

* * *

What do you understand by the “ substitutionary doc­

trine” ?

ANS. The principle, formulated as a compromise

solution when there occurs a shift in employees' union
allegiance after the execution of a bargaining contract
with their employer, merely states that even during the
effectivity of a collective bargaining agreement exe­
cuted between the employer and the employees thru
their agent, the employees can change said agent but
the contract continues to bind them up to its expiration
date. They may bargain however for the shortening of
said expiration date.
In formulating the “substitutionary" doctrine the
only consideration involved was the employees’ inter­
est jn the existing bargaining agreement. The agent’s
interest never entered the picture. In fact, the ju s tifi­
cation for said doctrine was that the majority of the
employees, as an entity under the statute, is the true
party in interest to the contract, holding rights through
the agency of the union representative; thus, any
exclusive interest claimed by the agent is defeasible at
the w ill of the principal.
Stated otherwise, the “substitutionary’' doctrine
only provides that the employees cannot revoke the

Kin
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

validly executed collective bargaining contract with

their employer by the simple expedient of changing
their bargaining agent. And it is in the light of this that
the phrase “said new agent would have to respect said
contract” must be understood. It only means that the
employees, thru their new bargaining agent, cannot
renege on their collective bargaining contract, except
of course to negotiate with management for the short­
ening thereof. (Benguet Consolidated, Inc. vs. BCI
Employees and Workers Union - PAFLU, G. R. No
L-24711, April 30, 1968)

* * *

Under the “ substitutionary doctrine,” is the new agent

or substitute automatically bound by the personal un­
dertakings, like a no-strike stipulation, o f the deposed
or substituted union? Explain.

ANS. No. When the old union assume.d in the

contract certain personal undertakings, like the under­
taking not to strike, it did so as agent of the employees
and not of the other unions in the company. To hold
the new agent automatically bound would be to violate
the legal maxim of res in te r a lio s acta. O f course,
the new agent could always voluntarily assume all the
personal undertakings made by the displaced agent.
(Benguet Consolidated, Inc. vs. BCI Employees and
Workers Union - PAFLU, G. R. No. L-24711, April 30,
1968)

* * *

A few months after the execution o f a collective bargain­

ing agreement between A Co. and B Union, all the
members of the latter resigned from the union. Since B
Union, the bargaining agent, had no more members, A
Co. refused to further implement the bargaining con­
tract, contending that the same has been novated. De­
cide.

511
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ANS. The refusal of the company to implement the

contract is not justified. Although all the members of
B Union have resigned therefrom, they remain the
parties io ihe contract; they are the principals; the
union is simply their agent. Mere change of agent
does not abrogate the CBA.
Vf tV *

Articie 231 of the Labor Code requires the parties to a

collective bargaining agreement to submit for registra­
tion copies thereof to the Bureau of Labor Relations or
the regional offices.
Within what period should this duty be complied with?

ANS. Copies of the collective bargaining agree­

ment must be submitted within thirty (30) days from
execution thereof.
* * * .

What is the effect of the registration of a collective

bargaining agreement in accordance with Article 231 of
the Labor Code?

ANS. The contract will bar a certification election

except w ith in the last sixty days (freedom period)
before the expiration of the representation period of
five (5) years.
* -Ct -Ct

The collective bargaining agreement was not formally

ratified by the majority of all the workers in the bargain­
ing unit. However, the workers received and enjoyed
the beneHts under the CBA. Can the employees later on
have the contract invalidated for lack of formal ratifica­
tion?
•w

ANS. No. The employees have already enjoyed

benefits from it. They cannot receive benefits under
provisions favorable to them and later insist that the

512
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

CBA is void simply because other provisions turn out

not to the liking of certain employees. It is iniquitous
to receive benefits from a CBA and later on disclaim
its validity. (Planters Products, Inc. vs. NLRC, et al.,
G. R. Nos. 78524 & 78739, January 20, 1989)
★ * *

On January 1,1983, Company A signed a 3-year collec­

tive bargaining agreement (CBA) with Union X, the duly
recognized collective bargaining agent o f the employ­
ees. The CBA was never form ally ratified by the employ­
ees, although they all accepted and enjoyed the wage
increase and other benefits provided fo r in the said
CBA. Neither was a copy o f the CBA submitted to the
Secretary o f Labor and Employment.
Eighteen (18) months after the CBA was signed, Union Y
filed a petition fo r the holding o f a certification election
among the employees covered by the CBA and subm it­
ted in support thereof the signatures o f 30% o f the
employees.
(a) Is the CBA between Company A and Union X valid?
Why?

ANS. Yes, the CBA is valid. Union “X,” being the

duly recognized collective bargaining agent, was
legally authorized to execute the CBA. W hile there
was no express ratification, the fact that the employ­
ees accepted the benefits under the CBA without any
reservation is an implied ratification of the terms of the
agreement. The non-submission of a copy of the CBA
to the Secretary of Labor and Employment did not
affect its validity; it is valid and binding in all respects
as between the parties.

(b) W ill the petition filed by Union Y prosper? Explain.

(1984 Bar)

ANS. No, the petition will not prosper because of

the “contract bar" rule. Except for the formal submis­
sion of a copy of the CBA to the MOLE, the CBA is

C49
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

valid in all respects and was duly ratified when the

employees accepted the benefits in the CBA. The
non-submission of a copy of the CBA to the MOLE is a
mere formal requirement which should not prevent the
application of the “contract bar" rule.
Hr * *

The company voluntarily recognized ALU as the bar­

gaining agent and concluded a CBA with the said union
despite the existence of other unions in the unit. The
contract was not posted in at least two (2) conspicuous
places in the establishment before ratification. More
than a m ajority of the employees in the unit repudiated
the alleged negotiation and ratification o f the CBA. Is
the contract valid. Why?

ANS. No. There was a failure to properly deter­

mine whether ALU enjoyed majority representation.
There was no posting of copies of the contract as
required by law. Ratification was not established. It
cannot promote industrial stability. (Associated Labor
Unions vs. Hon. Ferrer-Calleja, et al., G. R. No.
77282, May 5, 1989)
* lit *

What is the “ freedom period” ?

ANS. It is the sixty-day (60) day period immedi­

ately preceding the expiration of the representation
period of five (5) years in the collective bargaining
agreement. A certification election can be held within
the period.
* he 1t

Union A and B Co. concluded a collective bargaining

agreement with a duration of three (3) years and provid­
ing fo r an increase o f P3.00 per day in the wages of the
employees. Upon the expiration o f the three (3) year
period and since the contract was not renewed, B Co.

514
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

discontinued giving the P3.00 daily increase to its em­

ployees. Is this legal? Why?

ANS. No. Article 253 of the Labor Code requires

the parties to keep the s ta tu s q uo and to continue in
full force and effect the terms and conditions of the
existing contract until a new agreement is reached.
Besides, benefits that an employer has given to his
employees cannot be unilaterally withdrawn.
* * *

May the benefits provided fo r in a CBA be extended to

employees who are employed in the bargaining unit
after the expiration of the stipulated term o f the con­
tract? Explain.

ANS. Yes. This is to avoid discrimination. Even

after the expiration of the stipulated term of the
contract, its provisions continue to have legal effect as
long as there is no new agreement. (New. Pacific
Timber & Supply Company, Inc. vs. NLRC et al., G.
R. No. 124224, March 17, 2000)
* * *

Is renegotiation of the CBA during its lifetime required?

ANS. Article 253-A of the Labor Code provides:

Art. 253-A. Term s o f a c o lle c tiv e b a rg a in in g

agreem ent. — Any collective bargaining agreement
that the parties may enter into shall, insofar as the
representation aspect is concerned be fo r a term of
five (5) years. No petition questioning the majority
status of the incumbent bargaining agent shall be
entertained and no certification election shall be con­
ducted by the Department of Labor and Employment
outside of the sixty-day period immediately before the
date of expiry of such five year term of the collective
bargaining agreement. All other provisions of the
collective bargaining agreement shall be re-negotiated
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

not later than three (3) years after its execution. Any
agreement on such other provisions of the collective
bargaining agreement entered into within six (6)
months from the date of expiry of the term of such
other provisions as fixed in the collective bargaining
agreement, shall retroact to the day immediately fol­
lowing such date. If any such agreement is entered
into beyond six months, the parties shall agree on the
duration of retroactivity thereof. In case of a deadlock
in the renegotiation of the collective bargaining agree­
ment, the parties may exercise their rights under this
Code.
* * *

Article 253-A o f the Labor Code requires the parties to a

collective bargaining agreement to renegotiate the pro­
visions of the CBA (except the representation aspect)
not later than three (3) years after its execution.
May the renegotiated contract be fo r a period exceeding
the remainder of the original five-year term in the CBA?
Why?

ANS. Yes. Article 253-A does not fix the period of

the renegotiated contract. A longer period will promote
industrial peace and will afford the new union and the
employer time to know each other. The renegotiated
contract must however be ratified by the majority of
the workers within the bargaining unit. It will not also
bar a petition for certification election during the last
sixty (60) days of the original five-year period. (San
Miguel Corporation Employees Union-PTGWO et al.
vs. Hon. Ma. Nieves D. Confesor et al.,G. R. No.
111262, September 19, 1996)

* * *

Article 253-A also provides that any “ agreement” on

such provisions entered into w ithin six (6) months from
the date of expiry of the term thereof as fixed in the CBA
shall retroact to the day immediately follow ing such

C<4 C
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

date. Does the term “ agreement” mean a signed agree­

ment? Explain.

ANS. No. Agreement, according to Black's Law

Dictionary, is a coming together of the minds; the
coming together in accord of two minds on a given
proposition. This is sim ilar to Article 1305 of ,the Civil
Code’s definition of “contract” as a meeting of the
minds between two persons. Hence, even without
written evidence of the collective bargaining agree­
ment made by the parties within the above-mentioned
period of six (6) months, the renegotiated provisions
shall have retroactive operation as long as there has
been a meeting of the minds of the parties. (Mindanao
Terminal and Brokerage Service, Inc. vs. Hon. Ma.
Nieves Roldan-Confesor et al., G. R. No. 111809,
May 5, 1997)
* * *

Give the effects of the employer’s unjustified refusal to

renegotiate the collective bargaining agreement as re­
quired by Article 253-A o f the Labor Code.

ANS. .Where the company refused without ju s tifi­

able reason to renegotiate the CBA (except the repre­
sentation aspect) not later than three (3) years from its
execution, thereby committing an unfair labor practice
consisting of violation of the duty to bargain collec­
tively, the draft CBA proposed by the union for the
remaining two (2) years of the original period of CBA,
may be imposed on the erring employer. The em­
ployer, having violated its duty to bargain collectively,
lost its statutory right to negotiate or renegotiate the
terms and conditions of the dfaft CBA proposed by the
union. (General Milling Corporation vs. Court of
Appeals et al., G. R. No. 146728, February 11, 2004)
•Ar * ft

Does the retroactivity clause of Article 253-A o f the

Labor Code apply to arbitral awards? Explain.

517
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ANS. No. Article 253-A refers to collective bar­

gaining agreements entered into by the parties as a
result of their mutual agreement. It does not cover
agreements which are the subject of awards by the
Secretary of Labor and Employment in the exercise of
his power of compulsory arbitration under Article
263(g) or by voluntary arbitrators. The agreement may
thus be ordered by the arbitrator to retroact to the date
of expiry of the term of the provisions notwithstanding
the fact that the agreement was entered into beyond
the six (6) month period fixed in Article 253-A. (St.
Luke’s Medical Center, Inc. vs. Hon. R. Torres et al.,
G. R. No. 99395, June 29, 1993; Manila Central Line
Corporation vs. Manila Central Line Free Workers
Union et a l., G. R. No. 109383, June 15, 1998;
Manila Electric Co. vs. Hon. Secretary of Labor et
al., G. R. No. 127598, August 1, 2000)
* * *

May parties agree on the suspension of their collective

bargaining agreement fo r a certain period? Explain.

ANS. Article 253-A of the Labor Code has a

two-fold purpose. One is to promote industrial stability
and predictability. The other is to assign specific
timetables wherein negotiations become a matter of
right and requirement. Nothing therein prohibits the
parties from waiving or suspending the mandatory
timetables and agreeing on the remedies to enforce
the same.
Thus, an agreement between PAL and PALEA for
the suspension of the PAL-PALEA CBA for ten (10)
years has been ruled to be not violative of Article
253-A. The agreement was made not only to promote
industrial peace but to prevent closure of PAL due to
severe financial distress. Each PAL employee, in turn,
was granted 60,000 shares of stock pursuant to the
agreement. The right to free collective bargaining
includes the right to suspend it. (Rivera et al vs. Hon.
Edgardo Espiritu et al., G. R. No. 135547, January
23, 2002)

518
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

Are wage increases paid by the employer pursuant to

laws and wage orders deemed compliance with the
wage increases provided fo r under a collective bargain­
ing agreement? Explain.

ANS. No. in the absence of a provision of law or

of the collective bargaining agreement to the effect
that benefits provided by the form er encompass those
provided by the latter, benefits derived from either the
law or a contract should be treated as separate from
each other. A collective bargaining agreement is a
contractual obligation. It is distinct from an obligation
imposed by law. Employee benefits derived from law
are exclusive of benefits arrived at through negotiation
and agreement unless otherwise provided by the
agreement itself or by law. (Meycauayan College vs.
Drilon, et al., G. R. No. 81144, May 7, 1990)
There is nothing sinister in a stipulation in the CBA
to the effect that increases provided therein shall be
creditable to wage increases that are or may be
mandated within the applicable period by law. Such
stipulation merely creates an equivalence .between
legal and contractual imperatives, rendering both obli­
gation susceptible of performance by compliance with
either, subject only to the condition that where the
increases given under the agreement fall short of
those fixed by law, the difference must be made up by
the employer. (Philippine Telegraph and Telephone
Corporation vs. NLRC et al., G. R. No. 99858, June
19, 1995)

* * *

The Marcopper Mining Corporation and the NAMAWU-

MIF, the labor federation in which the bargaining agent
of its rank-and-file workers was affiliated, entered into a
collective bargaining agreement which provided among
others fo r yearly wage increases based on the “ basic
wage” , exclusive of cost of living allowances. During
the effectivity of the CBA, Executive Order No. 178 was
promulgated mandating the integration of the cost of

519
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

living allowance under the wage orders into the basic

wage of workers. Thereafter, the union demanded that
wage increases provided in the CBA be computed on
the basis of the workers’ basic wage including the cost
of living allowances thereunto integrated. Marcopper,
on the other hand, contended that the collective bar­
gaining agreement which constitutes the law between
the parties must be respected. Resolve.

ANS. The company is not correct. The CBA is not

an ordinary contract on which is applied the principles
of law governing ordinary contracts. It is impressed
with public interest and must yield to the common
good.
The avowed policy of the State, enshrined in the
Constitution, to accord utmost protection and justice to
labor must be given effect.
The purpose of E. O. 178 is to improve the lot of
the workers covered by the said statute. The Court is
bound to ensure its fruition. (Marcopper Mining Corpo­
ration vs. NLRC et al., G. R. No. 103525, March 29,
1996)

* * *

May the parties be required by the Secretary of Labor

and Employment to execute a collective bargaining
agreement embodying terms and conditions that the
latter may determine?

ANS. Yes. This is pursuant to the power of

compulsory arbitration vested in the Secretary of Labor
and Employment by Article 263(g) of the Labor Code to
settle a labor dispute in an industry indispensable to
the national interest.

* * *

State the procedure in tft* registration of a collective

bargaining agreement.

520
 COLLECTIVE BARGAINING AND
COLLECTIVE BARGAINING AGREEMENTS

ANS. Section 1. Where to file. — W ithin thirty

(30) days from execution of a collective bargaining
agreement, the parties thereto shall submit two (2)
duly signed copies of the agreement to the Regional
Office which issued the certificate of registration/cer­
tificate of creation of chartered local of the labor
union-party to the agreement. Where the certificate of
creation of the concerned chartered local was issued
by the Bureau, the agreement shall be filed with the
Regional Office which has jurisdiction over the place
where it principally operates.
Multi-employer collective bargaining agreements
shall be filed with the Bureau.

Section 2. Requirements for registration. — The

application for CBA registration shall be accompanied
by the original and two (2) duplicate copies of the
following documents which must be certified under
oath by the representative(s) of the employer(s) and
labor union(s) concerned:

(a) the collective bargaining agreement;

(b) a statement that the collective bargaining
agreement was posted in at least two (2) con­
spicuous places in the establishment or estab­
lishments concerned for at least five (5) days
before its ratification; and
(c) a statement that the collective bargaining
agreement was ratified by the majority of the
employees in the bargaining unit of the em­
ployer or employers concerned.

No other document shall be required in the regis­

tration of collective bargaining agreements.

Section 3. Payment of registration fee. — The

certificate of registration of collective bargaining
agreement shall be issued by the Regional Office upon
payment of the prescribed registration fee. (Sections
1-3, Rule XVII, Implementing Rules, as amended by D.
O. No. 40-03)

521
 CHAPTER XIV

STRIKES AND LOCKOUTS

What is a “ strike” ?

ANS. A “strike" means any temporary stoppage of

work by the concerted action of employees as a result
of an industrial or labor dispute. (Article 212 (o), Labor
Code)

* * *

What is a “ lockout” ?

ANS. “Lockout” means the temporary refusal of an

employer to furnish work as a result of an industrial or
labor dispute. (Article 212 (p), Labor Code)

* * *

A “ strike” or “ lockout” is the result of a “ labor or

industrial dispute.” What is the scope o f this term?

ANS. A labor or industrial dispute includes any

controversy or matter concerning terms or conditions
of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing or
arranging the terms and conditions of employment,
regardless of whether or not the disputants stand in the
proxim ate relation of employers and employees.
(Article 212 (I), Labor Code)

* * *

On the first anniversary of the death of the president of

their union, the workers stopped working fo r one (1)
hour and prayed fo r the eternal repose of his soul. Is
such temporary stoppage o f work a strike? Reasons.

522
 STRIKES AND LOCKOUTS

ANS. No. The stoppage of work is not by reason

of a labor or industrial dispute. It is not the result of
any controversy or matter regarding terms or condi­
tions of employment, or regarding the association or
representation of persons in negotiating, fixing, main­
taining, changing or arranging the terms and conditions
of employment.
★ * *

Due to lack of raw materials, a textile firm stops opera­

tions fo r fifteen (15) days. Is this a lockout? Why?

ANS. No. The temporary refusal to give or furnish

work is due to a cause which cannot be categorized as
a labor or industrial dispute.
* i*r *

The Fruit Canning Co. has been requiring its workers to

render overtime work of five hours everyday fo r the last
six months. The union requested the management
repeatedly to cut off overtime work and instead allow
some of the workers to work on their rest days and
holidays or to stagger the rest days. But management
insisted the overtime work was necessary to avoid
irreparable losses through spoilage of the fruits which
must be immediately canned before the workers leave
the premises. Finally, all employees refused to work
overtime and left the plant after working eight hours
during the day. They reported fo r the regular work
schedule the following morning.
Did the concerted refusal to render overtime work
amount to a strike? Explain fu lly your answer. (1985
Bar)

ANS. Yes. A strike is a tem.'C 'ary stoppage of

work by the concerted action of the employees by
reason of a labor or industrial dispute (Art. 212 (o),
Labor Code). And a labor dispute includes any contro­
versy or matter concerning terms and conditions of

523
 STRIKES AND LOCKOUTS

employment (Art. 212 (I), Labor Code). In the

problem, the concerted refusal of the employees to
render overtime work which the employer, incidentally,
can compel them to render considering the purpose
therefor, was by reason of a controversy regarding
working hours; there was a temporary but concerted
refusal to work on the part of the employees by reason
of a labor dispute.

★ * *

Upon the effectivity o f Republic Act No. 6727 (Wage

Rationalization Act) on June 5,1989, the Haw at Buklod
Ng Manggagawa, allegedly representing about 4,500
employees of San Miguel Corporation, presented to the
company a demand fo r correction o f significant distor­
tion in the workers’ wages brought about by the imple­
mentation of the said law. The company offered an
across-the-board wage increase o f P7.00 per day per
employee; this was not however acceptable to the
union. Thereafter, the workers, especially at the bot­
tling plants in Polo, refused to render overtime work;
they worked only fo r eight (8) hours a day instead o f ten
(10) hours in accordance with a practice which had been
followed fo r five (5) years.
(a) Is the refusal of the workers to adhere to the ten (10)
hours a day work schedule considered a strike? If so, is
it lawful? Explain.

ANS. Yes. It is a limited or partial strike. It is not

lawful because under Republic Act No. 6727 any issue
involving wage distortion shall not be a ground for a
strike or lockout. Besides, it is violative of the no­
strike clause in the collective bargaining agreement.

(b) What is a “ slowdown"?

ANS. It is a strike on the installment plan. It is a

willful reduction in the rate of work by concerted action
of workers for the purpose of restricting the output of
the employer in relation to a labor dispute; it is an

KOA
 STRIKES AND LOCKOUTS

activity by which workers, without a complete stoppage

o f work, retard production or their performance of
duties and function to compel management to grant
their demands. It is inherently illicit and unjustifiable
because while the employees continue to work and
remain at their positions and accept the wages paid to
them, they at the same time select what part on their
allotted tasks they care to perform of their own volition
or refuse openly or secretly; in other words, they work
on their own terms.

(c) What are the concerted activities commonly resorted

to by employees?

ANS. They are the following: s trik e - the tempo­

rary stoppage of work as a result of an industrial or
labor dispute; p ic k e tin g - the marching to and fro at
the employer’s premises, usually accompanied by the
display of placards and other signs making known the
facts involved in a labor dispute; and b o y c o tts - the
concerted refusal to patronize an employer’s goods or
services and to persuade others to a like refusal. (Haw
at Buklod ng Manggagawa [IBM] vs. NLRC, et al., G.
R. No. 91980, June 27, 1991)
★ * *

What is a "boycott” ?

ANS. A “boycott’ may be said to include any

activity on the part of a labor organization whereby it
is sought through concerted action, other than by
reason of lawful competition, to obtain withdrawal of
public patronage from one in business. (Burke vs.
Adams Dairy, Inc., 352 U. S. 969)
* a #

Is a “ boycott” lawful?

ANS. Employees may lawfully exert economic

pressure on their employer by means of a boycott,

525
 STRIKES AND LOCKOUTS

provided they act peaceably and honestly. They have

a right to persuade the public by any lawful means to
refuse to patronize the employer. Union members are
entitled to advise the public of the existence of their
controversy with the employer and may request their
friends and the public generally to assist them by riot
patronizing the employer. In so doing, there is no
element of *ireat or coercion or unlawful interference
with another’s business. (51A, C. J. S. Sec. 286, pp.
64-65)

ih it *

Is there any express statutory recognition of the work­

ers' right to strike and the employers’ right to lockout?

ANS. Yes. Article 263 (b) of the Labor Code

provides:

Workers shall have the right to engage in con­

certed activities for purposes of collective bargaining
or for their mutual benefit and protection. The right of
legitimate labor organizations to strike and picket and
of employers to lockout, consistent with the national
interest, shall continue to be recognized and re­
spected. However, no labor union may strike and no
employer may declare a lockout on grounds involving
inter-union and intra-union disputes.

* ★ *

Is the right to strike or to lockout absolute? Explain.

ANS. No. The exercise of these rights are subject

to reasonable restrictions pursuant to the police power
of the State.
It has even been held that the right to strike,
because of its more serious impact upon the public
interest, is more vulnerable to regulation than the right
to organize and select representatives for purposes of
collective bargaining. (National Federation of Sugar

M/*
 STRIKES AND LOCKOUTS

Workers (NFSW) vs. Ovejera, et a i., G. R. No.

L-59743, May 31, 1982)

* * *

Who may declare a strike or lockout?

ANS. Any certified or duly recognized bargaining

representative may declare a strike in cases of bar­
gaining deadlocks and unfair labcr practices. The
employer may declare a lockout in the same cases. In
the absence of a certified or duly recognized bargain­
ing representative, any legitimate labor organization in
the establishment may declare a strike but only on
grounds of unfair labor practices. (Sec. 6, Rule XXII,
Book V, Implementing Rules, as amended by D. O.
40-03)
* * *

What is the National Conciliation and Mediation Board?

ANS. It is the body created under Executive Order

No. 126, effective January 30, 1987, which absorbed
the conciliation, mediation and voluntary arbitration
functions of the Bureau of Labor Relations.

* * *

On what grounds may a strike or lockout be declared?

ANS. A strike or lockout may be declared in cases

of bargaining deadlocks and unfair labor practices.
Violations of collective bargaining agreements, except
flagrant and/or malicious refusal to comply with its
economic provisions, shall not be considered unfair
labor practice and shall not be strikeable. No strike or
lockout may be declared on grounds involving inter­
union and intra-union disputes o r without first having
filed a notice of strike or lockout or without the
necessary strike or lockout vote having been obtained

K07
 STRIKES AND LOCKOUTS

and reported to the Board. Neither will a strike be

declared after assumption of jurisdiction by the Secre­
tary or after certification or submission of the dispute
to compulsory or voluntary arbitration or during the
pendency of cases involving the same grounds for the
strike or lockout. (Sec. 5, Rule XXII, Book V,
Implementing Rules, as amended by D. O. 40A-03)

★ ★ *

When does a “ deadlock" in collective bargaining arise?

ANS. A deadlock arises when there is an impasse

which presupposes reasonable effort at good faith
bargaining which, despite noble intentions, does not
conclude in agreement between the parties.
Where for instance, the employer never made any
serious efforts to respond to the proposals for collec­
tive bargaining by the union, it cannot be maintained
that a deadlock in collective bargaining arose; there
was no “counteraction" of forces producing entire
stoppage. (Divine Word University of Tacloban vs.
Secretary of Labor and Employment, et al,, G. R. No.
91915, September 11, 1992)

* * *

What are the requisites of a lawful strike or lockout?

ANS. To be lawful, a strike or lockout must satisfy

the following:

(a) it must be based on serious and substantial

grounds involving a bargaining deadlock and/or unfair
labor practice and these have not been brought to
voluntary or compulsory arbitration.
(b) A notice of strike or lockout, as the case may
be, must be filed with the NCMB at least thirty (30)
days (in cases of bargaining deadlocks) or fifteen (15)
days (in cases of unfair labor practice) before the
intended date thereof.

«WR
 STRIKES AND LOCKOUTS

(c) The notice of strike must be filed by the

certified or duly recognized bargaining representative
but in cases of unfair labor practice and in the absence
of a duly certified or recognized bargaining representa­
tive, the notice may be filed by any legitimate labor
organization in behalf of its members.
(d) The decision to strike must be approved by a
m ajority of the total union membership in the bargain­
ing unit concerned obtained by secret ballot in meet­
ings or referenda; and the decision to declare a lockout
must be approved by a m ajority of the board of
directors of the employer corporation or association or
of the partners in a partnership obtained by secret
ballot in a meeting called for the purpose. A report of
the strike or lockout vote must be filed with the NCMB
at least seven (7) days before the intended strike or
lockout.
(e) The cooling-off period of thirty (30) or fifteen
(15) days has lapsed and the dispute remains unsettled
despite efforts at mediation and conciliation. How­
ever, in case of dismissal of union officers duly elected
in accordance with the union constitution and by-laws,
which may constitute union busting where the exis­
tence of the union is threatened, the 15-day cooling-off
period shall not apply and the union may take action
immediately.
(f) The union declaring the strike or the employer
declaring the lockout must have complied with its duty
to bargain collective!y.
(g) The strike must be staged and conducted by
peaceful means.
♦ * *

The union indicated in the' notice o f strike the ground

fo r the strike as unfair labor practice in the form of
discrimination. Is the notice sufficient? Why?

ANS. Yes. There was sufficient indication of the

nature and cause of the labor dispute subject of the
notice of strike. The union merely filled out the
standard form furnished by the DOLE, and it was not

529
 STRIKES AND LOCKOUTS

expected to write in detail the history of the dispute.

Rules may be relaxed in order to give full meaning to
the constitutional mandate of affording full protection
to labor. There was in this instance substantial compli­
ance with the law. (PNOC Dockyard and Engineering
Corporation vs. NLRC et al., G. R. No. 118223, June
26, 1998)
* * *

Give the contents of the notice of strike or lockout.

ANS. The notice shall state, among others, the

names and addresses of the employer and the union
involved, the nature of the industry to which the
employer belongs, the number of union members and
of the workers in the bargaining unit, and such other
relevant data as may facilitate the settlement of the
dispute, such as a brief statement or enumeration of all
pending labor disputes involving the same parties.
In cases of bargaining deadlocks, the notice shall,
as far as practicable, further state the unresolved
issues in the bargaining negotiations and be accompa­
nied by the written proposals of the union, the counter­
proposals of the employer and proof of a request for
conference to settle the differences. In cases of unfair
labor practices, the notice shall, as far as practicable,
state the acts complained of and the efforts taken to
resolve the dispute amicably.
In case any notice does not conform with the
requirements of this and the foregoing sections, the
regional branch of the Board shall inform the con­
cerned party of such fact. (Sec. 8, Rule XXII, Book V,
Implementing Rules, as amended by D. O. 40-03)
* * *

Give the legal basis fo r the conversion o f a notice of

strike to preventive mediation.

ANS. The order of the NCMB converting a notice

of strike to preventive mediation because the issues

con
 STRIKES AND LOCKOUTS

raised therein are non-strikeable is in pursuance of the

NCMB’s duty under the Rules Implementing the Labor
Code to exert “all efforts at mediation and conciliation
to enable the parties to settle the dispute amicably”
and in line with the state policy of favoring voluntary
modes of settling labor disputes. And a strike mounted
by the union after the NCMB had dropped the notice of
strike from its docket of notice of strikes and during the
pendency of preventive mediation proceedings would
be illegal. (San Miguel Corporation vs. NLRC et al.,
G. R. No. 119293, June 10, 2003)
* * *

Who has the burden o f establishing the unfair labor

practices stated as ground in the notice of strike?

ANS. The union has the burden to establish by

substantial evidence the grounds alleged in the notice
of strike. It must also show that it substantiated the
allegations during the conciliation proceedings. It is
not enough that the union believed that the employer
committed acts of unfair labor practice when the
circumstances clearly negate even a M lILiJacje show­
ing to warrant such a belief. (Tiu et al vs. N LR C etal.,
G. R. No. 123276, August 18, 1997)

ifc * *

Article 263 of the Labor Code provides fo r a “ cooling-

off” period of thirty (30) days (in cases o f bargaining
deadlocks) or fifteen (15) days (in unfair labor practices
cases) after the filin g o f a notice of strike o r lockout, and
a “ waiting period” of seven (7) days after the filin g of
the strike or lockout vote report, before a strike or
lockout can be actually effected. Are these “ cooling-
o ff” and “ w aiting” periods mandatory? Reason out your
answer.

ANS. Both the “cooling-off" and the “waiting”

periods are mandatory.

Ml
 STRIKES AND LOCKOUTS

In requiring a strike notice and a cooling-off peri­

ods, the avowed intent of the law is to provide an
opportunity for mediation and conciliation. The waiting
period on the other hand is intended to provide oppor­
tunity for the members of the union or the management
to take the appropriate remedy in case the strike or
lockout vote report is false or inaccurate, and the
intended strike or lockout turns out to be merely the
idea of a m inority group.
If the purpose of the strike or lockout notice and
the strike and lockout vote report is to be achieved, the
periods prescribed fo r th e ir attainm ent should be
deemed mandatory. (National Federation of Sugar
W orkers (NFSW) vs. Ovejera, et al., G. R. No.
L-59743, May 31, 1982)
* * *

Is a strike staged on the sixth day strike vote report

lawful? Why?

ANS. No. It violates the seven-day strike ban,

which is mandatory in nature. Substantial compliance
is not sufficient. Strict adherence to the mandate of
the law is required. This is to attain legitimate policy
objectives embodied in the law. (CCBPI Postmix
W orkers Union vs. NLRC et al., G. R. No. 114521,
November 27, 1998)
* * *

What is “ improved offer” and “ reduced offer” balloting?

ANS. Article 265 of the Labor Code, as amended

by R. A. 6715, provides:

“Art. 265. Im p ro ve d o ffe r b a llo tin g . — In an

effort to settle a strike, the Department of Labor and
Employment shall conduct a referendum by secret
balloting on the improved offer of the employer on or
before the 30th day of the strike. When at least a
majority of the union members vote to accept the

532
 STRIKES AND LOCKOUTS

improved offer, the striking workers shall immediately

return to work and the employer shall thereupon read-
m itlh e m upon the signing of the agreement.
In case of a lockout, the Department of Labor and
Employment shall also conduct a referendum by secret
balloting on the reduced offer of the union on or before
the 30th day of the lockout. When at least a majority
of the Board of Directors or trustees or the partners
holding the controlling interest in the case of a partner­
ship vote to accept the reduced offer, the workers shall
immediately return to work and the employer shall
thereupon readmit them upoji the signing of the agree­
ment.
* ★ *

A union in a gasoline company staged a strike in protest

against the latter’s act of abolishing its security guards
department, and o f contracting out the work to an
outside agency, which resulted in the transfer and sub­
sequent dismissal of eighteen (18) guards who were
covered by the existing collective bargaining agree­
ment. The strike lasted fo r one (1) month. On fo u r or
five occasions, violence erupted; in the presence o f the
police officers, molotov bombs were exploded and the
streets obstructed with wooden planks containing pro­
truding nails; on dates unspecified physical injuries
appeared to have been inflicted on management per­
sonnel. The strike is sought to be declared illegal on
the grounds that there was no justification fo r it and it
was attended by violence. Decide w ith reasons.

ANS. The strike is legal.

It was prompted by the company’s unfair labor
practice. By abolishing the security guard department,
the company violated the existing collective bargaining
agreement which expressly covered it. The security of
tenure of the security guards, at least during the period
of the contract, was undermined. Moreover, the acts
of violence that attended the strike were not pervasive.
Responsibility for these acts is individual, not collec­

533
 STRIKES AND LOCKOUTS

tive. (Shell Oil Workers Union vs. Shell Company of

the Philippines, Ltd., G. R. No. L-28607, May 31,
1971)
* * *

The strike declared by a union o f seamen against an

association o f shipowners lasted fo r more than two (2)
months. During the said period, the strikers formed
human cordons alongside the w harf and means of
egress and ingress to the shipowners’ vessels and
launches; on several occasions, thru force and coer­
cion, the strikers took possession o f the vessels and
launches and even used some to ferry themselves; thru
force and intim idation the strikers prevented the non­
striking crew members from boarding the vessels and
performing their jobs; they even untied a vessel’s an­
chor causing it to drift info the gulf and thus prevented
her unloading; they also grabbed gangplanks carried by
stevedores and pushed them against the bodies of the
latter, causing injuries; and they shouted slanderous
and scurrilous words against the owners o f the vessels
and hurled threatening remarks at non-strikers.
Assuming that the purpose of the strike is valid, would
you consider the strike lawful?

ANS. The strike is illegal by reason of the employ­

ment of force, coercion, intimidation, violence and the
use of slanderous and obscene language or epithets
(United Seamen’s Union of the Philippines vs. Davao
Shipowners Association, et al., G. R. Nos. L-18778-
79, August 31, 1967).
•ft "(r *

The union sent demands to the company fo r the dis­

missal o f the general foreman on the ground among
others that he maltreated one o f the union members.
The com pany refused to dism iss the foreman but
caused the reopening o f the case filed against the
foreman in the fiscal's office which has been previously

534
 STRIKES AND LOCKOUTS

dropped. Despite this act o f accommodation on the part

of the company and before the outcome of the investi­
gation was announced, the union went on strike, leav­
ing the operations of the form er in complete paralysis
fo r fifteen (15) days. Would you consider the strike
legal? Why?

ANS. The strike is unjustified and unreasonable.

The demand for the dismissal of the foreman had been
accorded the attention that it merited. In fact, the
company even took a measure beyond what may be
expected of it, when it sought the reopening of the
case in the fiscal’s office to secure, for both parties,
the benefit of an impartial investigation. (National
Labor Union, et al. vs. CIR, 70 Phil. 300)
* * *

A newly organized labor union sends a letter to the

company stating that it represents the m ajority o f the
rank-and-file employees and demanding that it be rec­
ognized as the sole and exclusive bargaining represen­
tative o f the said employees. The company sends a
reply to the effect that it cannot accord such recognition
as it is not convinced that the union counted w ith th^
support of the majority o f the employees. The union
goes on strike on the issue. Is the strike legal? Give
reasons.

ANS. The strike is hot legal. The ground for the

same in unreasonable. If the union wants to compel
the employer to recognize it, it should file a petition for
certification election. Recognition cannot be legally
obtained by means of a strike.

it it -it

X Union loses in a certification election. Claiming that

they were cheated by the winning union, the members
of X Union stage a strike. Is the strike legal?Why?

535
 STRIKES AND LOCKOUTS

ANS. The strike is not legal. Under Article 263 (b)

o f the Labor Code, no labor union may strike on
grounds involving inter-union and intra-union disputes.
The ground of the strike in this case involves a dispute
between X Union and the winner; it is an inter-union
dispute.
* * *

What is a union recognition strike?

ANS. A union recognition strike is calculated to

compel the employer to recognize one’s union, and not
the other contending group, as the employees’ bargain­
ing representative despite the striking union's doubtful
m ajority status to merit voluntary recognition and lack
of form al certification as the exclusive representative
in the bargaining unit. (Association of Independent
Unions of the Philippines et al vs. NLRC et al., G. R.
No. 120505, March 25, 1999)

* ★ *

In the course o f a collective bargaining negotiations

between the company and the bargaining agent, the
latter requested th a t the form er produce its latest bank
statements to show the actual financial conditio^ of the
company. This request was prompted by the com­
pany’s insistence that it cannot afford wage increases
demanded by the union. The company refused to make
the disclosure, contending that the matter is confiden­
tial. The union thereupon broke o ff negotiations, filed a
notice o f strike alleging unfair labor practices, and
eventually staged a strike after complying w ith all pro­
cedural requisites. Is the strike legal?

ANS. No. The refusal of the company to produce

its bank statements is justified; these are confidential
documents. What the company may be required to
furnish the union are up-to-date financial information
on the economic situation of the undertaking which are

536
 STRIKES AND LOCKOUTS

normally submitted to relevant government agencies,

such as annual financial statements and balance
sheets. (Art. 242 (c), Labor Code)
* * *

Explain briefly the effects o f sporadic violence upon the

legality o f a strike.

ANS. Not every form of violence suffices to affix

the seal of illegality on a strike as to cause the loss of
employment of the guilty party. Where acts of vio­
lence while the strike lasts are sporadic and not
pervasive by design and policy, responsibility therefor
is individual and not collective. (Feati Faculty Club vs.
Feati University, et al., G. R. No. L-31503, August
15, 1974). It must be conceded that some disorder is
unfortunately quite usual in any extensive or long
drawn out strike. A strike is essentially a battle waged
with economic weapons. Engaged in it are human
beings whose feelings are stirred to the depths. Rising
passions call forth hot words. Hot words lead to blows
on the picket line. The transformation from economic
to physical combat by those engaged in the contest is
difficult to prevent even when cool heads direct the
fight. (The Insular Life Assurance Co., Ltd. Employ­
ees Association, et al. vs. The Insular Life Assurance
Co., Ltd., et al., G. R. Mo. L-25291, January 30,
1971)
A strike otherwise valid, if violent in character, may
be placed beyond the paie. Care is to be taken,
however, especially where an unfair labor practice is
involved, to avoid stamping it with illegality just be­
cause it is tainted by such acts. To avoid rendering
illusory the recognition of th$ right to strike, responsi­
bility in such a case should be individual and not
collective. A different conclusion would be called for,
of course, if the existence of force while the strike lasts
is pervasive and widespread, consistently and deliber­
ately resorted to as a matter of policy. It could be
reasonably concluded then that even if justified as to
ends, it becomes illegal because of the means em­

537
 STRIKES AND LOCKOUTS

ployed. (Almira, et al. vs. B. F. Goodrich Philip­

pines, Inc., et al., G. R. No. L-34974, July 25, 1974)
Where the acts of violence during the strike cannot
be attributed to the striking employees alone for the
company itself hired men to pacify the strikers, and
violence was committed on both sides, the same
cannot be a ground for declaring the strike illegal.
(Malayang Samahan ng Mga Manggagawa sa M.
Greenfield et al vs. Hon. Cresencio Ramos et al., G.
R. No. 113907 , February 28, 2000)
* * *

Cite an example of a strike which is illegal because it

was attended by pervasive and widespread violence.

ANS. A strike declared by a union of employees of

a transportation company wherein the following oc­
curred: hijacking of 29 buses which resulted in injuries
to some employees and panic to commuters; barricad­
ing of the bus terminal with the use of five buses which
had been hijacked; puncturing of tires; cutting of
electrical wirings, water hoses and fan belts; theft of
expensive equipment such as fuel injections worth
P30.000.00 each; throwing of molotov bombs into the
compound of the company. These illegal acts were
neither isolated nor accidental but deliberately em­
ployed to intimidate and harass the employer and the
public. (First City Interlink Transportation Co., Inc.
vs. Confesor et al., G. R. No. 106316, May 5, 1997)
The strike was ruled to be illegal where the union,
prior to staging the strike, failed to submit the result of
the strike vote to the NCMB, and it was established by
substantial evidence that on various occasions during
the strike acts of violence,threats coercion and intim i­
dation were committed by the striking employees,
including blockade of the means of ingress and egress,
stoning of companv vehicles and buildings, and switch­
ing o ff of the circuit breaker to render company ma­
chines inoperable. (Samahan ng Manggagawa sa
Moldex Products, Inc. et al vs. NLRC et al., G. R.
No. 119467, February 1, 2000)

538
 STRIKES AND LOCKOUTS

The strikers formed human barricades to block the road,

prevented the passage o f the company’s truck, pad­
locked the company’s gate, prevented co-workers from
entering the company premises and violated the tempo­
rary restraining order issued by the NLRC.
(a) May the strike be declared illegal? Why?

ANS. Yes. To be valid, a strike must be pursued

within legal bounds. The right to strike as a means for
the attainment of social justice is never meant to
oppress or destroy the employer. The law provides
lim its fo r its exercise. Among such lim its are the
prohibited activities under Article 264 of the Labor
Code, particularly paragraph (e) which states that no
person engaged in picketing shall commi* any act of
violence, coercion or intimidation; obstruct the free
ingress to or egress from the employer’s premises for
lawful purposes; or obstruct public thoroughfares.

(b) May union officers lose their employment as a

consequence of the illegality o f the strike? Explain.

ANS. Yes. This is provided for in Article 264 (a)

of the Labor Code, the pertinent portion of which
states: “x x Any union officer who knowingly partici­
pates in an illegal strike and any xx union officer who
knowingly participates in the commission of illegal acts
during a strike may be declared to have lost his
employment status. X x ”
Union officers are duty bound to guide their mem­
bers to respect the law. If instead of doing so, the
officers urge the members to violate the law and defy
the duly constituted authorities, their dismissal from
the service is a just penalty or sanction for their
unlawful acts. The officers'responsibility is greater
than that of the members. (Association of Independent
Unions in the Philippines et al. vs. NLRC et al., G. R.
No. 120505, March 25, 1999)

* * *

539
 STRIKES AND LOCKOUTS

May good faith on the part of the strikers determine the

legality o f the strike? Explain.

ANS. It has been ruled in several cases that a

strike may be considered legal when the union be­
lieved that the company committed unfair labor prac­
tices and the circumstances warranted such belief in
good faith, although subsequently such allegation of
unfair labor practices are found out as not true.
(People’s Industrial and Commercial Employees and
Workers Organization, et al. vs. People’s Industrial
and Commercial Corporation, et al., G. R. No.
L-37687, March 15, 1982)
A strike- called to offset what ihe employees were
warranted in believing in good faith to be unfair labor
practices on the part of the employer is legal. (Ferrer,
et al. vs. CIR, eta!., G. R. No. L-24267-63, May 31,
1966)
The act of the company in dismissing a former
president of the union, done.without the required fair
hearing, and therefore, not tenable even under strict
legal grounds, induced the union and its members to
believe that said company was guilty of unfair labor
practice although viewed now in retrospect said act
would fall short of unfair labor practice. Since the
strike of the union was in response to what it was
warranted in believing in good faith to be unfair labor
practice on the part of the management, the strike did
not result in the termination of the striking members’
status as employees and therefore they are still enti­
tled to reinstatement, without backwages. (Norton
Harrison Co. and Jackbilt Blocks Co. Labor Union
(NLU) vs. Norton and Harrison, et al., G. R. No.
L-18461, February 10, 1967)
It is not required that there be in fact an unfair
labor practice committed by the employer. It suffices
if such a belief in good faith is entertained by labor as
the inducing factor for staging a strike. (Shell OH
Workers Union vs. Shell Company of the Philippines,
Ltd., G. R. No. L-28607, May 31, 1971)
When the strikers believed in good faith that the
company committed unfair labor practice when it dis­

540
 STRIKES AND LOCKOUTS

missed the union officers upon request by the federa­

tion, the strike based on this ground cannot be de­
clared illegal even if the allegations of unfair labor
practice are subsequently found out to be untrue; the
presumption of legality of the strike prevails.
(Malayang Samahan ng mga Manggagawa sa M.
Greenfield et al vs. Hon. C. Ramos et al., G. R. No.
113907, February 28, 2000)

* 'it ☆

Is a strike which is declared in good faith but without

prior filin g o f a notice o f strike and strike vote report
lawful? Why ?

ANS. No. With the enactment of Republic Act No.

6715 which took effect on March 21, 1989, such
requirements as the filing of a notice of strike, strike
vote and strike vote report are mandatory in nature.
W hile it may be true that in Philippine Metal
Foundries, Inc. vs. CIR (90 SCRA 135) it was held
that a strike in gocd faith cannot be declared illegal for
lack of notice, it is important to note that said case was
decided in 1979. (National Federation of Labor [NFL]
et al. vs. NLRC et al., G. R. No. 113466, December
15, 1997) Samahan Manggagawa sa Sulpicio Lines,
Inc. et al vs. Sulpicio Lines, Inc., G. R. No. 140992,
March 25, 2004)

it -ft it

To avoid unnecessary Joss of productive working time

due to personal and non-work-related conversations,
personal telephone calls and non-work-connected visits
by personnel to other departments, an insurance com­
pany effected a change in the seating arrangement of its
employees in its underwriting department. Four of
those affected protested the transfer of their tables and
seats, claim ing that the change was w ithout prior notice
and was done merely to harass them as union members.
They hurled unprintable insults against the manager
 STRIKES AND LOCKOUTS

who insisted on the change and they refused to stay at

their designated places. They were later suspended
then dismissed due to misconduct, insubordination and
gross disrespect. Their union staged a strike based on
unfair labor practice. Is the strike lawful? Why?

ANS. No. The company did not commit any unfair

labor practice. In effecting a change in the seating
arrangement in the underwriting department, the com­
pany merely exercised a reasonable management pre­
rogative. Rearrangement of furniture cannot justify a
strike. (Reliance Surety and Insurance Co., Inc. vs.
NLRC, et al., G. R. Nos. 86917-18, January 25,
1991)
* ★ *

The union went on strike because there was unresolved

dispute between the parties on the proper manner of
application and computation of the 13th month pay. Is
the strike lawful? Why?

ANS. No. The issue is not constitutive of unfair

labor practice. Under the Rules and Regulations
Im plem enting Presidential Decree No. 851, non­
payment of the 13th month pay is to be treated as
money claims cases. The strike is precipitate and
ill-considered. (Isalama Machine Works Corporation
vs. NLRC et al., G. R. No. 100167, March 2, 1995)

it it it

Is the pari-delicto rule applicable in strikes and lock­

outs? Explain.

ANS. Yes. When the parties are in p a ri d e lic to

— the employees having staged an illegal strike and
the employer having declared an illegal lockout —
such situation warrants the restoration of the s ta tu s
q u o ante and bringing back the parties to their respec­
tive positions before the illegal strike and illegal lock­
 STRIKES AND LOCKOUTS

out through the reinstatement, without backwages, of

the dismissed employees. (Philippine Inter-Fashion,
Inc. vs. NLRC, et al., G. R. No. 59847, October 18,
1982)

<f Vt ifr

Give the effects o f an illegal strike upon the employment

status o f officers of the union declaring such strike.

ANS. Union officers who knowingly participate in

an illegal strike may be declared to have lost their
employment status. (Article 264, Labor Code, as
amended by B. P. Big. 227). They are the leaders of
the strike. (De Ocampo, et al. vs. NLRC, et al., G. R.
No. 81077, June 6, 1990)
ft it *

Give the effects of an illegal strike upon the employment

status o f workers or union members who are not union
officers.

ANS. A worker or union member (not a union

officer) who participates in an illegal strike does not
lose his employment status unless he commits illegal
acts in the course of the strike. He is a mere follower.
The participation of the worker in illegal acts must
be established by substantial evidence. (Association
of Independent Unions et al vs. NLRC et al., G. R.
No. 120505, March 25, 1999)
•ft & *

Is failure to heed the order o f a superior from jo in in g the

picket line considered an illegal act under Article 264 of
the Labor Code which w ill ju stify dismissal?

ANS. No. Any union officer who knowingly partici­

pates in an illegal strike and any worker or union
officer who knowingly participates in the commission of

KA9
 STRIKES AND LOCKOUTS

illegal acts during a strike may be declared to have lost

his employment status under Article 264(a) of the
Labor Code. Bui the fact that some union members
failed to heed the order of their superior from joining
the picket line is mere insubordination and cannot be
considered as an illegal or unlawful act committed
during the strike to justify their dismissal from employ­
ment. (International Container Terminal Services, Inc.
vs. NLRC et al., G. R. Nos. 98295-99, April 10,
1996)
* * *

Give the effects o f the commission o f illegal acts, such

as physical injuries, destruction o f property, obstruc­
tion, coercion and intimidation, during a strike upon the
employment status of a worker, union officer or member
com m itting the same.

ANS. Any worker, union officer or union member

who knowingly participates in the commission of illegal
acts during a strike may be declared to have lost his
employment status. (Article 264, Labor Code, as
amended by B. P. Big. 227)

* * *

A strike is declared in violation o f the No Strike Clause

o f a collective bargaining agreement. As the strike is
clearly illegal, the company seeks to terminate the em­
ployment o f al! the employees who voted fo r the decla­
ration of the same. Will the action o f the company
prosper? Why?

ANS. The action will not prosper. Only the union

officers who knowingly participated in the declaration
of the strike may lose their employment. The mere
followers, even if they voted for the declaration of the
strike, will not be made to suffer the harsh penalty of
dismissal.
 STRIKES AND LOCKOUTS

Forty-four (44) employees were dismissed by a poultry

and hog feeds manufacturing company fo r staging a
“ one-morning sitdown strike.” The employees denied
that they went on strike; they alleged that they merely
engaged in a mass representation fo r the employer to
recognize their newly formed union and negotiate their
demands.
(a) Assuming that the sitdown strike is illegal, is the
dismissal o f the workers warranted?

ANS. No. The dismissal is not in consonance with

the constitutional guarantee on protection to labor. It
is likewise not in accordance with the settled doctrine
that the mere finding of illegality of a strike does not
automatically warrant a wholesale dismissal of the
strikers from their employment and that a premature or
improvident strike should not be visited with a conse­
quence so severe as dismissal where a penalty less
punitive would suffice.

(b) Considering that the employer displayed obstinacy

by refusing to reinstate the strikers despite a return to
work order from the Department o f Labor, how should
the lat'cer’s backwages be computed?

ANS. They should be entitled to full backwages

without deduction or qualification from the date of the
retum-to-work order until their reinstatement. This is
by way of departing from the usual equivalent of three
(3) years backwages severally awarded by the Court,
in line with the principle enunciated in Davao Free
W orkers Union vs. CIR, 60 SCRA 408, that an
employer guilty of oppressive and unfair labor prac­
tices, discriminatory acts and union-busting activities
must bear the fun consequences of its acts particularly
in the light of its obstinacy in persisting in its refusal to
reinstate the unlawfully dismissed employees and the
returning strikers notwithstanding the return-to-work
order issued in this case. (TUPAS Local Chapter No.
979, etc. vs. NLRC, et al., G. R. Nos. 60532-33,
November 5, 1985)

545
 STRIKES AND LOCKOUTS

As a result of a deadlock in collective bargaining and

after the expiration of the cooling-off period of thirty
(30) days from the filing of its strike notice, a union goes
on strike. In the course thereof, some properties o f the
company are destroyed by strikers. After the strike, the
company filed an action to recover from the union and
its officers the value of the properties destroyed in the
course of the strike. Are the union and its officers liable
therefor? Explain.

ANS. In the absence of clear proof of actual

participation, or authorization or ratification of the acts
causing the destruction of company property, the union
and its officers cannot be held liable for the value of
the properties destroyed. This is the personal respon­
sibility of the strikers who committed the illegal acts.
The rule of vicarious liability no longer applies.
(Benguet Consolidated, Inc. vs. BCI Employees &
Workers Union-PAFLU, et al., G. R. No. L-24711,
April 30, 1968)

* * »V

While a grievance is pending settlement in accordance

with the grievance machinery of the collective bargain­
ing agreement, the union in a food processing company
stages a walkout on this same issue. As a result
thereof, raw materials of the company valued at thou­
sands of pesos become rotten. As the walkout is clearly
in violation of the collective bargaining agreement, the
company files an action for damages against the union
and the signatories of the collective bargaining agree­
ment. Cite a legal provision upon which the company’s
action may be based.

ANS. The company’s action may be based upon

Article 1704 of the Civil Code which provides:

“in collective bargaining, the labor union or mem­

bers of the board or committee signing the contract
shall be liable for non-fulfillment thereof.”
 STRIKES AND LOCKOUTS

Is an employee who goes on strike deemed to have

abandoned his employment? Why?

ANS. No. By going on strike, an employee

exercises an important aspect of his right to self­
organization. The temporary stoppage of work is
intended to seek improvement of his working condi­
tions or to protect his rights as an employee. Cer­
tainly, an individual who goes on strike precisely to
obtain better working conditions or to protect the rights
arising from his employment cannot be deemed to
have abandoned such employment.

* * *

Cite other instances where the strike has been held to

be illegal.

ANS. A strike staged despite the no strike no

lockout clause in the CBA and the absence of unfair
labor practice on the part of the employer is illegal and
may result to loss of employment of union officers who
knowingly participate in the strike and of any worker or
union officer who knowingly participates in the com­
mission of illegal acts during the strike. (Panay
Electric Co., Inc. vs. N L R C e ta l.,G . R. No. 102672,
October 4, 1995)
A strike declared two (2) days after the filing of the
strike vote report with the NCMB is violative of Articles
263 and 264 of the Labor Code. (Lapanday Workers
Union et al. vs. NLRC, G. R. Nos. 95494-97,
September 7, 1995)
Early one morning, the employees of a stevedoring
company stopped working and gathered in a mass
action to express their grievances regarding wages,
13th month pay and hazard pay. They were all
members of the union with whom the company had an
existing collective bargaining agreement. On the
same morning, the workers filed individual notices of
strike with the Department of Labor and Employment.
It was nevertheless held that the strike is illegal. (Gold

M l
 STRIKES AND LOCKOUTS

City Integrated Port Services, Inc. vs. NLRC et al., G.

R. No. 103560, July 6, 1995)

* Vf '.V

The union officers and members, numbering 167, in a

concerted manner, did not report for work on May 20,
1994; instead, they gathered in front of the company’s
office and conducted a strike vote. Although their
union had filed a notice of strike based on unfair labor
practice, it failed to submit any strike vote report to the
DOLE.
(a) Is the workers’ absence on May 20, 1994 considered
a strike? Why?

ANS. Yes. The workers’ cessation of work was a

concerted action resulting from a labor dispute.

(b) Is the strike lawful? Why?

ANS. No. There was no strike vore report submit­

ted by the union within the period prescribed by law,
and the 7-day strike ban was not observed. The
supposed unfair labor practice upon which the stop­
page of work was based was not furthermore proved by
the union.

(c) Considering that the stoppage was only fo r one (1)

day and the business activities of the company were not
interrupted, much less paralyzed, should the officers of
the union be penalized with dismissal? Why?

ANS. Yes. Participation of union officers in an

illegal strike forfeits their employment status.
(Samahan Manggagawa sa Sulpicio Lines, Inc. et al
vs. Sulpicio Lines, Inc., G. R. No. 140992, March 25,
2004)

* it *
 STRIKES AND LOCKOUTS

Give a brief discussion on picketing.

ANS. Peaceful picketing comes within the protec­

tion of the free speech guarantee of the Constitution.
It involves people marching to and fro with placards to
acquaint the public with the facts of a labor dispute.
(Mortera vs. CIR, 79 Phil. 345; Chan Brothers, Inc.
vs. FO ITAF, G. R. No. L-34761 .January 17, 1974;
Associated Labor Union, et al. vs. Gomez, et al., G.
R. No. L-27743, March 28, 1980). Picketing peace­
fully carried out is not illegal even in the absence of
employer-employee relationship. (De Leon, et al. vs.
National Labor Union, et al., 100 Phil. 789). It may be
carried on not only in the premises of the employer but
in other places where the employer’s products have
been brought or are distributed as a means to circum­
vent, defeat or minimize the adverse effects of the
picketing conducted at the employer's plants and of­
fices. (Associated Labor Union vs. Borromeo.et al.,
G. R. No, L-26461, November 27, 1968)
* * -it

The Associated Labor Union (ALU) staged a strike, on

grounds of unfair labor practices, against the Superior
Gas and'Equipment Co., of Cebu, Inc. (SUGECO) with
offices in Cebu CUy and a factory plant in Mandaue.
ALU picketed not only SUGECO’s factory plant in Man­
daue but also the Cebu Home and Industrial Supply, a
store in Cebu City where products of SUGECO were
being sold and which is operated by the husband of the
manager of SUGECO. Is the picketing at the Cebu Home
and Industrial Supply, in the absence of force, violence
and other illegal acts, lawful? Explain.

ANS. The picketing at the Cebu Home and Indus­

trial Supply is lawful. There is unity of interest
between the latter and S U G E C O , and it is clear that
the distribution of S U G E C O products by Cebu Home is
a means to circumvent, defeat or minimize the adverse
effects of the picketing conducted in the S U G E C O

543
 STRIKES AND LOCKOUTS

plant and office in Mandaue and Cebu City respec­

tively.
Where the manufacturer disposes of its products
through retailers in unity with it, unless the union may
follow the product in the place where it is sold and
peacefully ask the public to refrain from purchasing it,
the union would be deprived of a fair and proper
means of bringing its plea to the attention of the
public. (Associated Labor Union vs. Borromeo, et al.,
G. R. No. L-26461, November 27, 1968; Goldfinger
vs. Feintuch, 11 N. E. 2d 910, 913)
* * *

is the exercise of the right to picket subject to regula­

tion?

ANS. W hile, peaceful picketing is entitled to

protection as an exercise of free speech, courts are not
without power to confine or localize the sphere of
communication or the demonstration to the parties to
the labor dispute, including those with related interest,
and to insulate establishments or persons with no
industrial connection or having interest totally foreign
to the context of the dispute. Thus, the right may be
regulated at the instance of third parties or “innocent
bystanders" if it appears that the inevitable result of its
existence is to create an impression that a labor
dispute with which they have no connection or interest
exists between them and the picketing union, or consti­
tutes and invasion of their rights. (Philippine Associa­
tion of Free Labor Unions vs. Cloribel.et al., G. R.
No. L-25878, March 28, 1969)
* * *

The Philippine Association o f Free Labor Unions

(PAFLU) declared a strike against the Metropolitan Bank
and Trust Company (METROBANK), and picketed in
front of and along the common passageway of the
six-storey W ellington Building, the ground flo o r of

550
 STRIKES AND LOCKOUTS

which was occupied by METROBANK. The owner of the

Wellington Building however complained that the pick-
eters were annoyingly clogging the common passage­
way of the building, the only ingress and ©gress being
used by the occupants of the second to the sixth floors
thereof as well as by their respective employees, clients
and customers; and that besides giving the disconcert­
ing impression that a strike had teen declared against it
or any of the occupants of the second to the sixth floors
of the building, the picketing of the passageway in
question placed it in an embarrassing position as the
occupants, mostly affected business firms, demanded
protection of their peaceful enjoyment of, and free ac­
cess to and from the premises respectively leased by
them. May the picketing by PAFLU at the common
passageway of the Wellington BuiSding be restrained?
Explain.

ANS. Yes. The right to picket as a means of

communicating the facts of a labor dispute is a phase
of the freedom of speech guaranteed by the Constitu­
tion. (De Leon, et al. vs. National Labor Union <NLU),
et al., 100 Phil. 789; Philippine Association of Free
Labor Unions (PAFLU), et al. vs. Barot, et al., supra;
Cruz vs. Cinema Stage and Radio Entertainment Free
Workers (FFW), 101 Phil. 1259. See aiso Thornhill
vs. Alabama, 310 U. S. 88, 60 S. Ct. 736, 84 L. Ed.
1093. If peacefully carried out, it cannot be curtailed
even in the absence of employer-employee re la tio n ^
ship.
The right is, however, not an absolute one. While
peaceful picketing is entitled to protection as an exer­
cise of free speech, courts are not without power to
confine or localize the sphere of communication or the
demonstration to the parties to the labor dispute,
including those with related interest, and to insulate
establishments or persons with no industrial connec­
tion or having interest totally foreign to the context of
the dispute. (Carpenters and Joiners Union of Amer­
ica, Local No. 213 vs. Ritters Cafe, 315 U, S. 722,
62 S. Ct. 807, 86 L. Ed. 1143). Thus the right may

S51
 STRIKES AND LOCKOUTS

be regulated at the instance of third parties or

“innocent bystanders” if it appears that the inevitable
result of its exercise is to create an impression that a
labor dispute with which they have no connection or
interest exists between them and the picketing union or
constitute ah invasion of their rights. (Jensen vs.
Cooks and Waiters Union, 39 Wash. 531, 81 P. 1069,
4 L. R. A. N. S. 302)

* * *

The AIA Feed Mills, Inc. and the Republic Flours Mills,
Inc., two (2) different corporations engaged in different
businesses, had their factories in the same compound.
Employees of Republic Flour Mills, Inc. belonging to
the Republic Flour Mills Workers Association declared a
strike against their employer and AIA Feed Mills, Inc. Is
the AIA Feed Mills, Inc. entitled to an injunction to stop
the picketing in its premises? Why?

ANS. Yes. There exists no labor dispute between

AIA Feed Mills, Inc. and the Republic Flour Mills
Workers Association. The strikers are employees of
Republic Flour Mills, Inc. and not of AIA Feed Mills,
Inc. The two companies have separate and distinct
personalities and business. (Republic Flour Mills
Workers Association, et al. vs. Reyes, et al., G. R.
No. L-21378, November 28, 1966)

* * *

Give the acts specifically prohibited by law in connec­

tion with picketing.

ANS. Article 264 of the Labor Code provides:

“(b) No person shall obstruct, impede, or interfere
with by force, violence, coercion, threats or intim ida­
tion any peaceful picketing by employees during any
labor controversy or in the exercise of the right of
self-organization or collective bargaining or shall aid or
abet such obstruction or inteiference.

552
 STRIKES AND LOCKOUTS

“(e) No person engaged in picketing shall commit

acts of violence, coercion, or intimidation or obstruct
the free ingress to or egress from the employer’s
premises for lawful purposes, or obstruct public thor­
oughfares."
* * *

Philnabank Employees Association (PEMA), a labor or­

ganization composed of the rank-and-filo employees of
the Philippine National Bank, staged a strike against
their employer. One of the placards displayed during
the strike contained the follow ing words: “ PCI3 BAD
ACCOUNTS TRANSFERRED TO PNB-NIDC?” It was
contended by PCIB (Philippine Commercial and Indus­
trial Bank) that the placard was libelous as it gave the
impression that PCIB was a party to a fraud, in that it
was able to recoup on bad debts or other uncollected
accounts by fraudulent, questionable and immoral
transfer thereof to the PNB or NIDC. Decide.

ANS. The placard is not libelous. Labor disputes

give rise to strong emotional response. It is a fact of
industrial life that in the continuing confrontation be­
tween labor and management it is far from likely that
the language employed would be both courteous and
polite. The judiciary, in deciding suits for libel, must
ascertain whether or not the alleged offending words
may be embraced by the guarantees of free speech
and free press. (Philippine Commercial and Industrial
Bank vs. Philnabank Employees Association, G. R.
No. 1.-29630, July 2, 1981)

* * ■*

The employees of Permanent Concrete Products, Inc.

declared a strike against their employer. But they also
picketed, stopped and prohibited the trucks and em ­
ployees of Liwayway Publications, Inc., a company
which had a bodega in the compound o f Permanent
Concrete Products, Inc., from entering the premises.

553
 STRIKES AND LOCKOUTS

May the strikers be enjoined from further committing

the acts aforementioned against Liwayway Publica­
tions, Inc.? Why?

ANS. Yes. There exists no labor dispute between

Liwayway Publications, Inc. and the employees of
Permanent Concrete Products, Inc. The form er’s
business is exclusively the publication of magazines;
this has no relation to or connection whatsoever with
the cause of the strike of the union against their
company, much less with the terms, conditions or
demands of the strikers. It just happened that both
companies were situated in the same compound. In
such a factual situation, Liwayway Publications is a
third party or an “innocent by-stander." (Liwayway
Publications, Inc. vs. Permanent Concrete Workers
Union, et al., G. R. No. L-25003, October 23, 1981)

* * ★

May a strike or a lockout be enjoined? Why?

ANS. As a rule, a strike or a lockout cannot be

enjoined. The Labor Code provides that:
‘ Article 254. In ju n c tio n p ro h ib ite d . — No
temporary or permanent injunction or restraining order
in any case involving or growing out of labor disputes
shall be issued by any court or other entity, except as
otherwise provided in Articles 218 and 264 (now Art.
263) of this Code."

This is to give effect to the policy of free collective

bargaining. The parties must be free to use the
economic weapons (strike and lockout) that the law
has given them.

* * ft

Under Article 254 of the Labor Code, the issuance o f an

injunction o r restraining order is prohibited in cases
 STRIKES AND LOCKOUTS

“ involving or growing out of labor disputes.” Cite

instances where a labor dispute has been held to exist.

ANS. A controversy between two rival unions as to

which of them should be the recognized bargaining
agent for the employees constitutes a labor dispute
(Malayang Manggagawa sa Esso vs. Esso Standard
Eastern, Inc., et al., G. R. No. L-24224, July 30,
1965; Prudon, et al. vs. CFI of Manila, et al., G. R.
No. L-36937, August 23, 1978). A strike declared by
a union of watchmen, hired by watchmen agencies to
guard the steamers of some shipping companies has
also been held to constitute a labor dispute between
the union and the shipping companies; although the
watchmen were contracted for by the watchmen agen­
cies, the fact remains that their services were availed
of and their compensation paid by the shipping compa­
nies; furthermore, a labor dispute can exist “regardless
of whether the disputants stand in the proximate
relation of employer and em ployee.” (Associated
Watchmen and Security Union vs. U. S. Lines, et al.,
101 Phil. 896; Associated Labor Union vs. Borromeo,
et al., G. R. No. L-26461, November 27, 1968)

★ ★ *

Cite instances where a labor dispute has been held not

to exist.

ANS. No labor dispute has however been held to

exist between a labor organization that declared a
strike against a bank and the owner of the building
where the bank was located. (Philippine Association of
Free Labor Unions vs. Cloribel, et al., G. R. No.
L-25878, March 28, 1969). Neither does such dispute
exist between a striking union and a second sublessee
of a part of the premises occupied by the employer
against whom the strike was declared; such sublessee
is a mere “innocent bystander." (Liwayway Publica­
tions,Inc. vs. Permanent Concrete Workers Union, et
al., G. R. No. L-25003, October 23, 1981)

555
 STRIKES AND LOCKOUTS

Ss the prohibition against the issuance of injunction or

restraining order in cases involving or growing out of
iabor disputes absolute? In case your answer is in the
negative, givs th«> exceptions.

ANS. The prohibition is not absolute. The excep­

tions are provided for in the following articles of the
Labor Cods:

(a) Article 263 (g), on labor disputes causing or

likely to cause strikes or lockouts in an industry indis­
pensable to the nations! interest; and
(b) Article 218 (e), on the power of the National
Labor Relations Commission to restrain the commis­
sion of prohibited or unlawful acts in a labor dispute.

* * *

Professor Juan defa Cruz, an author of the textbook

Commsniatiss on fha Labor Cods of ths Philippines,
citing an American case, wrcfc: “It is said that the
prohibition against She issuance of a w rit of injunction
in Jabor cases creates substantive and not purely proce­
dural Saw.” is there any statutory basis for the state-
me!it/cosrr?mc<ii under Philippine law? (2000 Bar}

ANS. Yes. It is Article 254 of the Labor Code,

which provides that no temporary or permanent injunc­
tion or restraining order in any case involving or
proving out of labor disputes shall be issued by any
court or other entity excapi as otherwise provided in
Article 218 and 263 of this Code.
The prohibition against the Issuance of injunctions
in labor disputes is part and parcel of the workers right
to self-organization and to collective bargaining. Such
rights cannot be freely and effectively exercised if the
State, through a court or other entity, can stop the
exercise thereof through an injunction or restraining
order.
it has been held that the prohibition creates sub­
stantive and not purely procedural law (Calte* Filipro

must
 STRIKES AND LOCKOUTS

Managers and Supervisors Association vs. CiR 44

3CRA 350 (1972)

* it ‘

State the provision of Article 283, paragraph (g) of the

Labor Code.

ANS. Article 263 (g) of the Labor Code provides:

“(g) When, in hfs opinion, there exists a labor

dispute causing or likeiy to cause a strike or lockout in
an industry indispensable to the national interest, the
Secretary of Labor and Employment may assume
jurisdiction over the dispute and detfide it or certify the
same to the Commission for compulsory arbitration.
Such assumption or certification shall have the effect
of automatically enjoining the intended or impending
strike or lockout as specified in the assumption or
certifipation order. If one has already taken place at
the time of assumption or certification, all striking or
iocked out employees shall immediately return to work
and the employer shall immediately resume operations
and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The
Secretary of Labor and Employment or the Commis­
sion may seek the assistance of law enforcement
agencies to ensure compliance with this provision as
well as with such orders as he may issue to enforce the
same.
“In line with the national concern' for and the
highest respect accorded to the right of patients to life
and health, strikes and lockouts in hospitals, clinics
and sim ilar medicai institutions shall, to every extent
possible, be avoided, and all serious efforts, not only
by labor and management but Government as well, be
exhausted to substantially minimize, if not prevent,
their adverse effects on such life and health, through
the exercise, however legitimate, by labor of its right to
strike and by management to lockout. In labor dis­
putes adversely affecting the continued operation of
such hospitals, clinics or medical institutions, it shall

557
 STRIKES AND LOCKOUTS

be the duty of the striking union or locking-out em­

ployer to provide and maintain an effective skeletal
workforce of medical and other health personnel whose
movement and services shall be unhampered and
unrestricted, as are necessary to insure the proper and
adequate protection of the life and health of its pa­
tients, most especially emergency cases, for the dura­
tion of the strike or lockout. In such cases, therefore,
the Secretary of Labor and Employment may immedi­
ately assume, within twenty four (24) hours from
knowledge of the occurrence of such a strike or lock­
out, jurisdiction over the same or certify it to the
Commission for compulsory arbitration. For this pur­
pose the contending parties are strictly enjoined to
comply with such orders, prohibitions and/or injunc­
tions as are issued by the Secretary of Labor and
Employment or the Commission, under pain of immedi­
ate disciplinary action, including dismissal or loss of
employment status or payment by the locking-out
employer of backwages, damages and other affirm a­
tive relief, even criminal prosecution against either or
both of them.
“The foregoing notwithstanding, the President of
the Philippines shall not be precluded from determin­
ing the industries that, in his opinion, are indispensable
to the national interest; and from intervening at any
time and assuming jurisdiction over any labor dispute
in such industries in order to settle or term inate the
same." (As amended by R. A. 6715)
* * *

Article 263, paragraph (g) o f the Labor Code, as

amended, gives to the Secretary o f Labor and Employ­
ment the power to assume jurisdiction over and decide
a labor dispute or certify the same to the National Labor
Relations Commission fo r com pulsory arbitration.
Does this not constitute an undue delegation o f legisla­
tive power? Explain.

ANS. No. The power of the Secretary of Labor

and Employment is not unlimited. He can exercise his

558
 STRIKES AND LOCKOUTS

power to assume jurisdiction or certification only in

tabor disputes "causing or likely to cause strikes or
lockouts adversely affecting the national interest.” The
law contains a sufficient standard.
What cannot be delegated is the authority under
the Constitution to make laws and to alter and repeal
them. The test is the completeness of the statute in all
its terms and provisions when it leaves the hands of
the legislature. To determine whether or not there is
an undue delegation of legislative power, the inquiry
must be directed to the scope and definiteness of the
measure enacted. The legislature does not abdicate
its functions when it describes what job must be done,
who is to do it, and what is the scope of his authority.
(Free Telephone Workers Union vs. The Honorable
Minister of Labor and Employment, et al., G. R. No.
L-58184, October 30, 1981)
* * *

Assuming that Article 263, paragraph (g) as amended, of

the Labor Code is not on its face unconstitutional fo r
being violative of the doctrine of non-delegation of
legislative power, can there nevertheless be an uncon­
stitutional application of the said law? Explain.

ANS. Yes. This occurs where the application is

violative of the worker’s right to self-organization,
collective bargaining, security of tenure, just and hu­
mane conditions of work; or is repugnant to the protec­
tion to labor mandate of the Constitution. For a law
fair on its face and impartial in appearance may be
applied and administered by public authority with an
evil eye and an unequal hand. (Free Telephone
Workers Union vs. The Honorable Minister of Labor
and Employment, et al., G. R. No. L-58184, October
30, 1981)
* * it

In a certification election in X Oil Co., Union Y and

Union Z were the participants. The atmosphere was

559
 STRIKES AND LOCKOUTS

anything but friendly in view of charges hurled by Union

Y that Union Z was utilizing goons in its campaign fo r
votes. Union Z on the other hand hurled counter­
charges that Union Y was resorting to vote-buying and
even aired threats to go on strike by reason thereof.
Informed by the X Oil Co. of these developments, the
Secretary o f Labor and Employment assumed ju risd ic­
tion over the proceeding and certified Union Z as the
bargaining agent.
(a) Is the assumption of jurisdiction by the'Secretary of
Labor and Employment over the proceedings legal?
Why?

ANS. Yes, pursuant to his powers under Article

263 (g) of the Labor Code. There exists a labor
dispute (a representation issue) that may cause a
strike in a company engaged in the generation or
distribution of energy, thus indispensable to the na­
tional interest.

(b) Is the certification o f Union Z as the bargaining

agent valid? Why?

ANS. No. The Secretary must order the holding of

a certification election. He cannot simply certify Union
Z as the bargaining agent; this would violate the
workers’ right to freely select their agent and constitute
an unconstitutional exercise of his power under Article
263 (g).
* A *

is the Secretary o f Labor and Employment empowered

under Article 263 (g) to certify a union as the employees’
bargaining agent w ithout following the procedure out­
lined by the Labor Code fo r certification election pro­
ceedings?

ANS. No. Even in the exercise of his power of

compulsory arbitration under Article 263 (g) of the
Labor Code, the Secretary of Labor and Employment

560
 STRIKES AND LOCKOUTS

must follow the law. For when an overzealous official

by passes the law on the pretext of attaining a laud­
able objective, the intendment or purpose of the law
will lose its meaning as the law itself is disregarded. A
labor union should not be certified as a bargaining
agent unless it has been determined with legal cer­
tainty that it enjoys m ajority representation. (Colgate
Palmolive Philippines, Inc. vs. Ople, et al., G. R.
No. 73681, June 30, 1988)

* * *

Cite examples of industries which are considered as

indispensable to the national interest.

ANS. Public utilities, companies engaged in the

generation or distribution of energy, banks, schools,
hospitals and export oriented industries.
* * *

The M inister of Labor and Employment certified to the

National Labor Relations 'Commission fo r com pulsory
arbitration a strike iri the Central Textile Mills, a com­
pany w hich employs more than 3,000 workers and
which is engaged in the production o f textile fabrics fo r
export as well as fo r domestic consumption w ith a high
value added on the raw materials used in the produc­
tion. Is the certification valid? Why?

ANS. Yes. Firstly, Central Textile Mills can be

classified as an “export-oriented" industry. It manufac­
tures items which acquire a value much higher than the
cost of the raw materials ,and which are exported.
Secondly, there is danger to national interest as pro­
longed labor disputes may bring about the collapse of
one textile firm after another and which w ill ultimately
result in the collapse of the eniire textile industry. The
Government has to view industries from a broader
perspective when it is constrained to move in and
exercise the constitutionally-granted power of compul­

561
 STRIKES AND LOCKOUTS

sory arbitration in labor disputes. (United CMC Textile

Workers Union, et al. vs. Hon. Bias Ople, et al.,G.
R. No. L-62037, January 27, 1983)
* * *

A rubber company employed rubber tree tappers at its

plantation and required each to tap 250 trees daily. The
workers sought a reduction of their daily quota as they
found it beyond normal human endurance to tap at least
2S0 trees a day, but the company refused. The tappers
struck, and the dispute was certified by the Minister of
Labor and Employment to the NLRC fo r com pulsory
arbitration. As the workers refused to return to work
despite several orders to do so by the NLRC, the com­
pany was authorized to replace them permanently pend­
ing the compulsory arbitration proceedings. Is such
authority legal?

ANS. No. A return-to-work order is by its very

nature a provisional measure; non-compliaace there­
with will not necessarily authorize the permanent re­
placement of the recalcitrant workers. Any order for
the replacement of striking employees is not a final
determination of their right to go back to work or for
the new recruits to continue thereon as permanent
employees. Besides, the case must be decided in the
light of its own surrounding circumstances, legal and
equitable, and the benign constitutional policies in
favor or the workers. (National Federation of Labor,
etc. vs. NLRC, et al., G. R. No. 65150, November
11, 1985)
* * ★

About 1,400 employees o f Findlay Miller Timber Com­

pany staged a mass walk-out to protest, among others,
the non-payment o f their salaries and wages fo r one and
a half months. The strike was staged w ithout prior
notice and in violation of the no-strike clause o f the
collective bargaining agreement. It is not however

562
 STRIKES AND LOCKOUTS

disputed that the company did not pay the salaries of

the workers fo r one and a half months. In the exercise
o f his power of compulsory arbitration, the M inister of
Labor declared the strike illegal and authorized the
dismissal o f the instigators o f the strike. Is the Minister
correct? Why?

ANS. Even on the assumption that the illegality of

the strike is predicated on its being a violation of the
ban or prohibition of strikers in export-oriented indus­
tries, lack of notice-to-strike, and as a violation of the
no-strike clause of the CBA, still, the automatic finding
of the illegality of the strike finds no authoritative
support in the light of the attendant circumstances. As
this Court held in Cebu Portland Cement Co. vs.
Cement Workers Union, (25 SCRA 504) a strike staged
by the workers, inspired by good faith, does not
autom atically make the same illegal. In Ferrer vs.
Court of Industrial Relations (17 SCRA 350) the belief
of the strikers that the management was committing
unfair labor practice was properly considered in declar­
ing another wise premature strike, not unlawful, and in
affirm ing the order of the Labor Court for the reinstate­
ment without backwages of said e m p lo ye r.
In the instant case, it is not disputed that, indeed,
the Company did not pay the salaries of the workers
for one and a half months,more or less. Such act of
the company broke the patience of the workers and
those who depended on them for support and daily
subsistence. On the other hand, the act of the workers
in demanding a valid grievance fo r the payment of
their salaries is inspired by their honest belief that the
Company was committing acts inim ical to their inter­
ests relative to wages which, basically, is a violation of
the CBA existing between the parties.
At the very least, respondent M inister of Labor and
Employment should have viewed the strike as prema­
ture following the cases of Cebu Portland Cement Co.,
Ferrer and Shell Oil W orkers Union. The ruling laid
down in the three aforecited cases was reiterated in
Almira vs. B. F. Goodrich Phils., Inc., (58 SCRA 120)
a 1974 case, that the strike should have been viewed

563
 STRIKES AND LOCKOUTS

with a little less disapproval and even if declared

illegal, need not have been attended with such a
drastic consequence as termination of employment
relationship. This is so because, according to the
Court, of the security of tenure provision under the
Constitution. (Bacus, et al. vs. Ople, ei al., G. R.
No. L-56856, October 23, 1984)

* * *

The Secretary of Labor and Employment assumed ju ris ­

diction over a strike in a match factory. He justified his
assumption of jurisdiction by citing the adverse effects
of the prolonged work disruption not only upon ths
parties to the dispute but also upon those directly and
indirectly dependent on the unhampered operations of
the company fo r their means of livelihood as well as
upon the entire community.
Is the assumption warranted? Explain.

ANS. This would be stretching too far the power of

the power of the DOLE Secretary as every case of a
strike or lockout where there are inconvenience in the
community, or work disruptions in an industry though
not indispensable to the national interest would then
come within his power. It would be practically allowing
the Secretary of Labor to intervene in any labor dispute
at his pleasure. This is precisely why the lav/ sets and
defines the standard.
Although the intention may be to find a balance
between the demands of labor and the resources of
management, intervention from the state and the dero­
gation of the right to strike are not always the solutions
to the just demands of labor. More often than not, the
intervention is more to the advant&ge of management,
which would not incur overhead expenses that would
otherwise be wasted during a work stoppage. (Phimco
Industries, Inc. vs. Honorable Acting Secretary of
Labor et al., G. R. No. 120751, March 17, 1999)
& * *

564
 STRIKES AND LOCKOUTS

The union staged a strike, despite the “ No-Strike No-

Lockout” clause in the CBA, on the ground of refusal of
the company to implement the service allowance p ro v k
sion o f the CBA, discrimination, unreasonable suspen­
sion o f union officials and unreasonable refusal to
entertain grievance. Is the strike illegal? Why?

ANS. No. A no-strike clause in a CBA is applica­

ble only to economic strikes. Corollarily, if the strike is
founded on an unfair labor practice of the employer, a
strike declared by the union cannot be considered a
violation of the no-strike clause.
An economic strike is defined as one which is to
force wage or other concession from the employer
which he is not required by law to grant. (Master Iron
Labor Union, et al. vs. NLRC, et al., G. R. No.
92000, February 17, 1993, citing Philippines Metal
Foundries, Inc. vs. CIR, 90 SCRA 135 and Consoli­
dated Labor Association of the Philippines vs. Mars-
man & Co., Inc., 11 SCRA 589); see also Malsyang
Samahan ng mga Manggagawa sa M. Greenfield et al
vs. Hon. C. Ramos et al., G. R. No. 113907,
February 28, 2000)
* * *

Due to a deadlock in collective bargaining, the Associ­

ated Labor Union (ALU) staged a strike against Interna­
tional Pharmaceuticals, Inc. Subsequently, two cases
were filed by International Pharmaceuticals, Inc.
against ALU fo r injunction and damages and to declare
the strike illegal. ALU also filed a complaint against the
company fo r unfair labor practice and damages. The
Secretary of Labor then assumed jurisdiction over the
labor dispute and ordered the consolidation of the three
cases w ith the case before him.
(a) Is the assumption of jurisdiction by the Secretary of
Labor over the labor dispute justified? Why?

ANS. Yes. The company is engaged in the

manufacture of drugs and pharmaceuticals and it em­
 STRIKES AND LOCKOUTS

ploys around 600 workers. This is an industry indis­

pensable to the national interest.

(b) Is the consolidation of the three cases with the case

before the Secretary o f Labor, despite the fact that they
were pending before the NLRC or the labor arbiter,
proper? Why?

ANS. Yes. The authority of the Secretary of Labor

to assume jurisdiction over a labor dispute causing or
likely to cause a strike or lockout in an industry
indispensable to national interest include and extend to
all questions and controversies arising therefrom, in­
cluding cases over which the labor arbiter has exclu­
sive jurisdiction. This is to enable the Secretary of
Labor to effectively and efficiently dispose of the
primary dispute; to hold the contrary may even lead to
the absurd and undesirable result wherein the Secre­
tary and tfce labor arbiter concerned may have diamet­
rically opposed rulings. Finally, split jurisdiction,
which is obnoxious to the orderly administration of
justice, must be avoided; and the parties, especially
workers, should be given assistance in obtaining just,
speedy and inexpensive determination of their respec­
tive claims and defenses. (International Pharmaceuti­
cals, Inc. vs. Hon. Secretary of Labor, et al., G. R.
Nos. 92981-83, January 9, 1992)

★ * ik

May the Secretary of Labor and Employment assume

jurisdiction over a strike in a company engaged in the
manufacture and sale o f various kinds of chemical
substances, including aluminum sulfate which is essen­
tial in purifying water and sulfuric acid used in thermal
power plants?

ANS. Yes. The company was supplying the sulfate

requirements of MWSS as well as the sulfuric acid of
NAPOCOR; consequently, the continuation of the
strike would seriously affect the water supply of Metro
 STRIKES AND LOCKOUTS

Manila and the power supply of the Luzon Grid. (LMG

Chemicals Corporation vs. The Secretary of Labor and
Employment et al., G. R. No. 127422, April 17, 2001)
* * ★

May the Secretary of Labor and Employment, in the

exercise of his jurisdiction under Article 263 (g) o f the
Labor Code, take cognizance of an issue w hich is
merely incidental to the labor dispute over which he has
assumed jurisdiction? Explain.

ANS. Yes, provided the said issue is involved in

the labor dispute itself or otherwise submitted to him
for resolution. (St. Scholastica’s College vs. Torres
et al., G. R. No. 100158, June 29, 1992)
* * *

Nine (9) months before the expiration of the collective

bargaining agreement with a no-strike provision, the
union filed a notice of strike based on bargaining dead­
lock and unfair labor practice due to the airline’s refusal
to accept the union’s proposal fo r payscale adjustment.
The National Conciliation and Mediation Board however
declared the notice o f strike as appropriate fo r
“ preventive mediation.” But eight (8) days after subm is­
sion of the strike vote results, the union declared a
strike. The Secretary of labor then assumed jurisdiction
over the labor dispute, ordered the strikers to lift th e ir
pickets and return to work, directed management to
accept all returning employees and not to take retalia­
tory action against them, and resolved the issue subject
of the strike by making monetary awards to the strikers.
He also declared the strike valid and legal.
(a) In ruling on the legality of the strike and in prohibit­
ing the employer from taking disciplinary action against
the strikers, did the Secretary o f Labor act w ithin his
jurisdiction? Why?

567
 STRIKES AND LOCKOUTS

ANS. No. The legality or illegality of the strike

was not submitted to him for resolution. The jurisdic­
tion to decide the legality of strikes or lockouts is
vested in Labor Arbiters pursuant to Article 217 of the
Labor Code.
He also exceeded his jurisdiction when he re­
strained the airline from taking disciplinary action
against guilty employees. Under Article 263 (g), all
that the Secretary may enjoin is the holding of the
strike but not the company’s right to take action
against erring employees. Such prohibition constitutes
an unlawful deprivation of property and denial of due
process.

(b) Was the strike legal? Explain.

ANS. No. It was premature as there was an

existing CBA which still had nine (9) months to run.
The no-strike provision of the CBA was also violated.
And the NCMB had declared the notice of strike as
appropriate for preventive mediation; the effect of that
declaration was to drop the case from the docket of
notices of strikes, as if there was no notice of strike.
During the pendency of preventive mediation proceed­
ings, no strike could be legally declared. (Philippine
Airlines, Inc. vs. Secretary of Labor and Employment,
et al., G. R. No. 88210, January 23, 1991)
* * ★

Qiscuss the extent o f jurisdiction o f the NLRC in certi­

fied cases.

ANS. When the Secretary of Labor and Employ­

ment certifies the labor /dispute to the NLRC for
compulsory arbitration pursuant to Article 263 (g) of
the Labor Code, the latter is concomitantly empowered
to resolve all questions and controversies arising
therefrom including oases otherwise belonging origi­
nally and exclusively to the Labor Arbiter.
Where the certification by the DOLE Secretary to
the NLRC of the issues sought to be settled involved

568
 STRIKES AND LOCKOUTS

the strike, the latter would have jurisdiction to decide

on the legality of the strike.
Although Article 217 of the Labor Code vests in the
Labor Arbiter original and exclusive jurisdiction over
the cases therein mentioned, including those involving
the legality of strikes and lockouts, the opening phrase
of the law states “(a) Except as otherwise provided
under this Code x x x." (PASVIL/Pascual Liner, Inc.
Workers Union-NAFLU et al. vs. NLRC et al., G. R.
No. 124823, July 28, 1999)
;
* * *
!
Considering that the 1987 Constitution, unlike the 1973
Constitution, does not expressly recognize compulsory
arbitration o f labor disputes, should Article 283 (g) of
the Labor Code which empowers the Secretary of Labor
to assume jurisdiction over and decide a labor dispute
in an industry indispensable to the national interest, be
now deemed abrogated? Explain.

ANS. No. No law has as yet been passed by

Congress expressly repealing Article 263 of the Labor
Code; on the contrary, Congress has recognized the
continued validity and operation of the said article by
amending the same. At any rate, Article 263 and 264
of the Labor Code have been enacted pursuant to the
police power of the State, and such power need not be
expressly conferred by the Constitution. (Union of
Filipro Employees, et al. vs. NestlS Philippines, Inc.,
et al., G. R. Nos. 88710-13, December 19, 1990)
* * *

f Characterize the assumption and certification orders

issued by the Secretary of Labor and Employment un­
der Article 263 (g) of the Labor Code.

ANS. The assumption and certification orders are

executory in character and are to be strictly complied
with by the parties even during live pendency of any

589
 STRIKES A in'D LOCKOUTS

petition questioning their validity. This extraordinary

authority is aimed at arriving at a peaceful and speedy
solution to labor disputes, without jeopardizing national
interests.
An assumption or certification order automatically
results in a return-to-work of all strikers, whether or not
a corresponding order has been issued by the Secre­
tary of Labor. A strike that is undertaken despite the
issuance of an assumption or certification order be­
comes a prohibited activity and thus illegal, pursuant
to the second paragraph of Article 264 of the Labor
Code as amended. (Union of Filipro Employees, et al.
vs. Nestle Philippines, Inc., et al., G. R. Nos.
88710-13, December 19, 1990)
The moment a worker defies a return-to-work or­
der, he is deemed to have abandoned his job. It is
already in itself knowingly participating in an illegal
act. Otherwise, the worker will simply refuse to return
to his work and cause a standstill in the company
operations while retaining the positions they refuse to
discharge or allow the management to fill. (St.
Scholastica’s College vs. Torres et al., G. R. No.
100158, June 29, 1992)
* * *

Discuss the extent of judicial review of an arbitral award

of the Secretary of Labor and Employment pursuant to
Article 263 (g) of the Labor Code.

ANS. The extent of judicial review over the

Secretary of Labor’s arbitral award is not limited to a
determination of grave abuse in the manner of the
secretary’s exercise of his statutory powers. The Court
is entitled to, and must — in the exercise of its judicial
power — review the substance of the Secretary’s
award when grave abuse of discretion is alleged to
exist in the award, i. e., in the appreciation of and the
conclusions the Secretary drew from the evidence
presented.
The natural and ever present limitation on the
Secretary’s acts is, of course, the Constitution. Indeed

570
 STRIKES AND LOCKOUTS

the constitutional provisions on State policies on labor

and social justice can serve as standards in assessing
the validity of a Secretary of Labor’s actions. How­
ever, these provisions do not provide clear, precise
and objective standards of conduct that lend them­
selves to easy application. Likewise the Constitution
is not a lopsided document that only recognized the
interest of the working man; it too protects the interests
of the property owner and employer as well.
The more appropriate and available standard —
and one that does not require a constitutional interpre­
tation — is the standard of reasonableness. In lay­
man’s terms, reasonableness implies the absence of
arbitrariness; in legal parlance, this translates into the
exercise of proper discretion and to the observance of
due process. Thus, the question we have to answer in
deciding this case is whether the Secretary’s actions
have been reasonable in light of the parties positions
and the evidence they presented. (Manila Electric
Company vs. The Honorable Secretary of Labor
Leonardo Quisumbing, et al., G. R. No. 127598,
January 27, 1999)
* ★ ★

Is the “ middle ground” approach o f settling a wage

dispute desirable?

ANS. No. The “middle ground” approach is not

necessarily the best method of resolving a wage
dispute. Merely finding the midway point between the
demands of the company and the union, and “splitting
the difference” is a sim plistic solution that fails to
recognize that the parties may already be at the limits
of the wage levels they can afford. It may lead to the
danger that neither of the parties will engage in princi­
pled bargaining; the company may keep its position
artificially low while the union presents an artificially
high position, on the fear that a “Solomonic” solution
cannot be avoided. Thus, rather than encourage
agreement, a “middle ground approach” instead pro­
motes a “play safe" attitude that leads to more dead­

571
 STRIKES AND LOCKOUTS

locks than to successfully negotiated CBAs. (Manila

Electric Company vs. The Honorable Secretary of
Labor Leonardo Quisumbing, et al., G. R. No.
127598, January 27, 1999)

•k it it

State the legal provision empowering the National La­

bor Relations Commission (NLRC) to issue injunctions
or restraining orders in labor disputes.

ANS. Article 218, paragraph (e), as amended, of

the Labor Code gives to the NLRC the power:

“(e) To enjoin or restrain any actual or threatened

commission of any or all prohibited or unlawful acts or
to require the performance of a particular act in any
labor dispute which, if not restrained or performed
forthwith, may cause grave or irreparable damage to
any party or render ineffective any decision in favor of
such party: Provided, That no temporary or permanent
injunction in any case involving or growing out of a
labor dispute as defined in this Code shall be issued
except after hearing the testimony of witnesses, with
opportunity for cross-examination, in support of the
allegations of a complaint made under oath, and
testimony in opposition thereto, if offered, and only
after a finding of fact by the Commission, to the effect:

“(1) That prohibited or unlawful acts have been

threatened and will be committed unless restrained, or
have been committed and will be continued unless
restrained, but no injunction or temporary restraining
order shall be issued on account of any threat, prohib­
ited or unlawful act, except against the person or
persons, association or organization making the threat
or committing the prohibited or unlawful' act or actually
authorizing or ratifying the same after actual knowl­
edge thereof;
’ (2) That substantial and irreparable injury to
com plainant’s property will follow;

572
 STRIKES AND LOCKOUTS

“(3) That, as to each item of relief to be granted,

greater injury will be inflicted upon complainant by the
denial of relief than will be inflicted upon defendants
by the granting of relief;
“(•}) That complainant has no adequate remedy at
law; and
“(5) That the public officers charged with the duty
to protect complainant’s property are unable or unwill­
ing to furnish adequate protection."

“Such hearing shall be held after due and personal

notice thereof has been served, in such manner as the
Commission shall direct, to all known persons against
whom relief is sought, and also to the Chief Executive
and other public officials of the province or city within
which the unlawful acts have been threatened or
committed charged with the duty to protect com­
plain ants property: P ro vid e d , how ever, That if a
complainant shall also allege that, unless a temporary
restraining order shall be issued without notice, a
substantial and irreparable injury to com plainant’s
property will be unavoidable, such temporary restrain­
ing order may be issued upon testimony under oath,
sufficient, if sustained, to justify the Commission in
issuing a temporary injunction upon hearing after
notice. Such a temporary restraining order shall be
effective for no longer than twenty (20) days and shall
become void at the expiration of said twenty (20) days.
No such temporary restraining order or temporary
injunction shall be issued except on condition that
complainant shall first file an undertaking with ade­
quate security in an amount to be fixed by the Com­
mission sufficient to recompense those enjoined for
any loss, expense or damage caused by the im provi­
dent or erroneous issuance of such order or injunction,
including all reasonable costs, together with a reason­
able attorney’s fee, and expense of defense against
the order or against the granting of any injunctive relief
sought in the same proceeding and subsequently de­
nied by the Commission.
“The undertaking herein mentioned shall be under­
stood to constitute an agreement entered into by the
 STRIKES AND LOCKOUTS

complainant in the same suit or proceeding against

said complainant and surety, upon a hearing to assess
damages, of which hearing complainant and surety
shall have reasonable notice, the said complainant and
surety submitting themselves to the jurisdiction of the
Commission for that purpose. But nothing herein
contained shall deprive any party having a claim or
cause of action under or upon such undertaking from
electing to pursue his ordinary remedy by suit at law or
in equity: P ro v id e d , fu rth e r, That the reception of
evidence for the application of a writ of injunction may
be delegated by the Commission to any of its Labor
Arbiters who shall conduct such hearings in such
places as he may determine to be accessible to the
parties and their witnesses and shall submit thereafter
his recommendation to the Com m ission.” (As
amended by R. A. 6715)
* * ★

May an ex-parte temporary restraining order be issued

by the NLRC in a labor dispute? Explain.

ANS. Yes. The issuance of such an order should

however be characterized by care and caution for the
law requires that it be clearly justified by considera­
tions of extreme necessity, i. e., when the commission
of unlawful acts is causing substantial and irreparable
injury to company properties and the company is, for
the moment, bereft of an adequate remedy at law.
Imprudently issued temporary restraining orders
can break the back of employees engaged in a lawful
strike. (Bisig ng Manggagawa sa Concrete Aggre­
gates, Inc. vs. NLRC et al., G. R. No. 105090,
September 16, 1993)

* * *

Cite a factual basis fo r the issuance o f an injunction by

the NLRC.
 STRIKES AND LOCKOUTS

ANS. Where at the time the injunction was being

sought, there existed a threat on the part of the union
to revive an unlawful strike, as shown by the flyers it
circulated, a factual basis for the issuance of the
injunction by the NLRC exists. Furthermore, the
declaration of a strike without the required notice is a
prohibited activity which may be prevented through an
injunction. (San Miguel Corporation vs. NLRC et al.,
G. R. No. 119293, June 10, 2003)
* *- *

A strike occurs in a bank. Since acts o f violence have

been actually committed by the strikers, the manage­
ment applies to the NLRC fo r injunction to stop the
commission o f further illegal acts. The striking union
moves to dismiss the application fo r injunction ctn the
ground that since the dispute was not certified by the
Department o f Labor and Employment to the NLRC fo r
compulsory arbitration pursuant to Article 2153 of the
Labor Code, the said body is w ithout power to issue any
injunction or restraining order. Should the m otion to
dismiss be granted? Why?

ANS. The motion to dismiss should not be granted.

Although the labor dispute was not certified to it for
compulsory arbitration, the NLRC can issue the injunc­
tion or restraining order pursuant to Article 218 (e), of
the Labor Code. It is however necessary to establish
that the commission of the illegal acts will cause grave
or irreparable damage to the party seeking the injunc­
tive relief or render ineffectual any decision in favor of
such party.

* * *

You are the counsel fo r a supermarket whose employ­

ees are on strike. Your client would like to know
whether it is legally possible to enjoin or restrain the
commission by the strikers of threats, coercion o r intim ­
idation considering that by the nature of the business

575
 STRIKES AND LOCKOUTS

the dispute cannot be certified to the NLRC for compul­

sory arbitration. What is your opinion? Explain.

ANS. It is legally possible to secure an injunction

or restraining order from the NLRC under Article 218,
paragraph (e), of the Labor Code. It is riot necessary
for injunctive relief to issue under this provision that
the strike is in an industry indispensable to the national
interest. It may be issued in any labor dispute in any
kind of industry or business. The party seeking relief
must however show that there is actual or threatened
commission of prohibited or unlawful acts which, if not
restrained forthwith, may cause grave or irreparable
damage to it or render ineffectual any decision in favor
of such party.

* * *

A company engaged in the refining and distribution of

oil products filed with the National Labor Relations
Commission a petition fo r injunction to stop its employ­
ees who have gone on strike from blocking the means
of egress from and ingress to the plant. The NLRC
ordered the strikers to return to work and the company
to accept them. Is the order o f the NLRC legal? Why?

ANS. No. In the absence of a certification from

the Secretary of Labor and Employment pursuant to
Article 263 (g), the NLRC has no power to order
strikers to return to work. It may however, pursuant to
Article 218 (e), restrain strikers from blocking the
means of egress from and ingress to the plant.

•ft h it

Due to a deadlock on the issue of wage increases and

leave benefits, the management o f a transportation
company files a notice of lockout. As the counsel of the
union, what steps w ill you take to prevent the lockout
from being effected? Explain.

57G
 STRIKES AND LOCKOUTS

ANS. I will file with the Secretary of Labor and

Employment a request that he assumes jurisdiction
over the labor dispute or certify the same to the NLRC
for compulsory arbitration on the ground that the
intended lockout is in an industry indispensable to the
national interest.
The assumption of jurisdiction or certification has
the effect of automatically enjoining the impending
lockout. (Article 263 paragraph (g), as amended,
Labor Code)
* * *

If notwithstanding the certification, the company pro­

ceeds with the lockout, what are the rights o f an em­
ployee who is deprived of his work as a consequence
thereof?

ANS. Under Article 264, paragraph (a), of the

Labor Code, any worker whose employment has been
terminated as a consequence of an unlawful lockout is
entitled to reinstatement with full backwages.
# * *

May the Secretary of Labor and Employment, in the

exercise of his powers under Article 263 (g) o f the Labor
Code, provide for retroactivity of his arbitral award?
Why?

ANS. Yes. There is no specific provision of law

prohibiting retroactivity of the effectivity of arbitral
awards issued by the Secretary of Labor pursuant to
Article 263 (g) of the Labor Code. He is therefore
deemed vested with plenary and discretionary powers
to determine the effectivity thereof. (St. Luke’s
Medical Center, Inc. vs. Torres, et ai., G. R. No.
99395, June 30, 1993; Philippine Airlines, Inc. vs.
Confesor and PALEA, G. R. No. 111480, March 10,
1994)

577
 STRIKES AND LOCKOUTS

Givo a discussion os? th© purposes of a ns£uro~tD-worfc

order and the effects of a defiance by the strikers of
such an order.

ANS. It must be stressed that while one purpose of

the return-to-work order is to protect the workers who
might otherwise be locked out by the employer for
threatening or waging the strike, the more important
reason is. to prevent impairment of the national interest
in case the operations of the company are disrupted by
a refusal of the strikers to return >'o work as directed.
In the instant case, stoppage of work in the firm will be
hurtful not only to both the employer and the employ­
ees. More particularly, it is the national economy that
will suffer because of the resultant reduction in our
export warnings and our dollar reserves, not to mention
possible cancellation of the contracts of the company
with foreign importers. It was particularly for the
purpose of avoiding such a development that the labor
dispute was certified to the NLRC, with the return-to-
work following as a matter of course under the law.
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 worker’s will.
Returning to work in this situation is not a m atter of
option or voluntariness but of obligation. The worker
must return to his job together with his co-workers so
the operations of the company can be resumed and it
can continue serving the public and promoting its
interest. That is the real reason such return can be
compelled. So imperative is the order in fact that it is
not even considered violative of the right against
involuntary servitude, as this Court held in Kaisahan
ng Mga Manggagawa sa Kahoy vs. Gotsmco Sawmills.
The worker can of course give up his work, thus
severing his ties with tiie company, if he does not want
to obey the order; but the order must be obeyed if he
wants to retain his work even if his inclination is to
strike. (Sarmiento, et al. vs. Hon. Tuico, et al., G.
R. Nos. 75271-73, Ju?,e 27, 1988)

578
 STRIKES AND LOCKOUTS

A return-to-work order is a statutory part and parcel

of the DOLE Secretary’s assumption or certification
order under Article 263(g) of the Labor Code. Follow­
ing an assumption or certification order, returning to
work, on the part of a worker is not a matter of option
or voluntariness but of obligation. Case law likewise
provides that by staging a strike after the assumption
of jurisdiction or certification for arbitration, workers
forfeit their right to be readmitted to work, having
abandoned their employment, and so can be validly
replaced. The DOLE Secretary has no authority to
require the employer to accept back to work, pending
arbitration proceedings, the workers who defied the
return-to-work order. (Marcopper Mining Corporation
vs. Hon. Acting Secretary of Labor et al., G. R. No.
119381, March 11, 1996)
ft *

Employees of a bank who went on strike refused to

heed the return-to-work order issued by the DOLE Sec­
retary pursuant to Article 263(g) of the Labor Code. May
all the strikers, be they union officers or mere union
members, be declared to have lost their employment
status?

ANS. Yes. A strike undertaken despite the is­

suance of an assumption or certification order by the
Secretary of Labor and Employment becomes a pro­
hibited activity and thus illegal pursuant to the second
paragraph of Article 264 of the Labor Code. The union
officers and members, as a result, are deemed to have
lost their employment status. (Allied Banking Corpora­
tion vs. NLRC et al., G. R. No. 116128, July 12,
1996)

★ * *

Before reinstating strikers pursuant to a return-to-work

order issued by the DOLE Secretary the bus company
required the workers to subm it the follow ing: NBI

579
 STRIKES AND LOCKOUTS

Police and ESarangay clearances, driver’s and conduc­

to r’s license, pictures and certificate of medical exami­
nation. Are these requirements reasonable and not
violative of the return-to-work order? Why?

ANS. They are reasonable. The clearance re­

quirement is to enable management to determine
whether the returning employees have pending
charges of illegal acts especially those committed
during the strike. So also is the license requirement as
this is needed for the performance of their tasks. The
pictures are necessary for the employer’s personal
records. With respect to the requirement of a medical
examination, the same can be justified as manage­
ment prerogative since it is the employer’s right to
ensure that the employees are physically fit to resume
the performance of their duties. (First City Interlink
Transportation Co., Inc. vs. Confesor et al., G. R.
No. 105316, May 5, 1997)

* * *

A strike that i:> undertaken despite the issuance by the

DOLE Secretary of an assumption and/or certification
order is a prohibited activity and union officers and
members who knowingly participate in such illegal act
loss their employment. Is there any exception to this
rule? Explain.

ANS. Yes. Where the employer itself terminated

en masse the employment of 183 union officers and
members who participated in the strike, despite the
DOLE Secretary’s order enjoining the parties to cease
and desist from committing any and all acts that might
exacerbate the situation, it was held that suspension of
the erring employees would be sufficient punishment;
the employer did not act ir, good faith. This circum ­
stance sets this case apart from the instances where
strikers have been ordered dismissed because of their
defiance of the return-to-work order. It is furthermore
the Supreme Court’s judicial prerogative to resolve

580
 STRIKES AND LOCKOUTS

disputes in a way to render each interested party the

most judicious solution, and in the ultimate scheme, a
resolution of a dispute tending to preserve the greater
order of society. For the peculiar nature of the judicial
treatment of labor disputes urges the arbiter of the
issues involved to maintain a careful eye, if not a
caring hand, to the interests of the parties, such ihat
industrial peace and labor-management stability is
preserved. (Philippine Airlines, inc. vs. Hon. Acting
Secretary of Labor et al., G. R. No. 119360, October
10,1997)
* * *

What is a “strike-breaker”?

ANS. “Strike-breaker” means any person who

obstructs, impedes or interferes with by force, vio­
lence, coercion, threats or intimidation any peaceful
picketing by employees during any labor controversy
affecting wages, hours or conditions of work or in the
exercise of the right of self-organization or collective
bargaining. (Article 212, paragraph (r), Labor Code)
it * V?

Is the employment of a strike-breakar allowed?

ANS. No employer shall use or employ any strike­

breaker, nor shall any person be employed as a
strike-breaker. (Article 264, paragraph (c), Labor
Code).
Any employer using or utilizing a strike-breaker or
any person who is employed as such shall be punished
by a fine of not exceeding one thousand (P1.000)
pesos and/or imprisonment for not less than three (3)
months, nor more than three (3) years, or both such
fine and imprisonment, at the discretion of the court.
(Article 272, paragraph (a), Labor Code)

•it it it

581
 STRIKES AND LOCKOUTS

What is a “ strike-area” ?

ANS. “Strike area” means the establishment,

warehouses, depots, plants or offices, including the
sites or premises used as run-away shops, of the
employer struck against, as well as the immediate
vicinity actually used by picketing strikers in moving to
and fro before all points of entrance to and from said
establishm ent. (Article 212 (s), Labor Code as
amended)
* * *

What is a “ runaway shop” ?

ANS. A “runaway shop" is defined as an industrial

plant moved by its owners from one location to another
to escape union labor regulations or state laws, but the
term is also used to describe a plant removed to a new
location in order to discriminate against employees at
the old plant because of their union activities.- It is one
wherein the employer moves its business to another
location or it temporarily closes its business for anti-
union purpose. It is a relocation motivated by anti­
union animus rather than for business reasons.
There is no “runaway shop" where the temporary
closure of the company (Complex) was for losses and
not because of an impending strike and that the
transfer of its equipment to another company (Ionics)
was upon the request of customers who were the real
owners of the equipment, Complex being a mere
consignee thereof; furthermore Ionics was not a newly
established plant but had existed about eight (8) years
prior to the establishment of Complex. (Complex
Electronics Employees Association et al vs. NLRC et
al., G. R. No. 121315, July 19, 1999)

* * *

What is a “ w ildcat” strike?

582
 STRIKES AND LOCKOUTS

ANS. it is a strike not authorized by the union

representing the strikers.

Ks *' *

State the prohibition against the tsss of poise® m armed

escorts during a strike.

ANS. Article 264, paragraph (d), of the Labor Code

states:

“(d) No public official or employee, including

officers and personnel of the New Armed Forces of the
Philippines or the integrated National Police, or armed
person, shall bring in, introduce or escort in any
manner any individual who seeks to replace strikers in
entering and/or leaving the premises of a strike area or
to work in place of the strikers. The police force shall
keep out of the picket lines unless actual violence, or
other criminal acts occur therein: Provided, That
nothing herein shall be interpreted to prevent any
public officer from taking any measure necessary to
maintain peace and order and/or protect life and
property, and/or enforce the law and legal orders."

1S1 * ‘A*

The strike declared by She Matsgas labor Union has

reached its 60th day, but there is no end in sight. The
company is adamant, and the strikers are now hungry
and sick. Taking pity, Sisters Michele and Candice, two
French missionaries, distribute food and drinks to the
strikers. Has anyone committed any illegal! acts? Why?

ANS. Sisters Michele and Candice, in distributing

food and drinks to the strikers, violated Article 269 of
the Labor Code which strictly prohibits aliens from
engaging directly or indirectly in al! forms of trade
union activities. The term “trade union activities"
includes ali forms of concerted union actions and
analogous activities.

583
 STRIKES AND LOCKOUTS

By reason of a deadlock in collective bargaining, the

union, after the lapse o f the cooling-off period, declares
a strike. The strike is peaceful but fruitless; the man­
agement is adamant. So after 60 days, the strikers
abandon the strike and offer to return to work.
(a) Is the company bound to readmit them? Why?

ANS. Yes. By going on strike, the employees are

not deemed to have abandoned their work; they are
merely utilizing a weapon given to them by law to seek
better terms and conditions of employment and to
protect their rights. An employer who refuses to
readmit the strikers, excepting those who have for­
feited their employment status because of illegal acts
cgmmitted in the course of the strike would be discrim ­
inating against thenrrfor havjng exercised their right to
engage in a concerted action; it commits an unfair
labor practice. (Cromwell Commercial Employees and
Laborers Union vs. CIR, et al., G. R. No. L-19778,
September 30, 1964) .

(b) If by reason of the prolonged strike, the company

was compelled to hire replacements, would this consti­
tute sufficient reason fo r it not to readmit the strikers?
Why?

ANS. No. Under Article 264 of the Labor Code,

mere participation of a worker in a lawful strike shall
not constitute sufficient ground for termination of his
employment, even if a replacement had been hired by
the employer during such lawful strike. A contrary rule
would enable the employer to dismiss an employee by
the simple expedient of hiring a replacement.

* * *

If an employer knowingly readmits to work a striker who

committed illegal acts during a strike, can it later on
seek the dismissal of the employee by reason o f such
acts? Why?

584
 STRIKES AND LOCKOUTS

ANS. The employer can no longer seek the dis­

missal of the employee on the ground that he com m it­
ted illegal acts during the strike. By readmitting him to
work, the employer is deemed to have condoned the
illegal acts.
* * *

Are strikers entitled to payment o f wages during the

period of the strike? Explain.

ANS. In an economic strike, the strikers are not

entitled to backpay, since the employer should get the
equivalent day’s work for what he pays his employees.
(Consolidated Labor Association of the Philippines vs.
Marsman & Co., Inc., G. R. No. L-17038, July 1,
1964). Likewise, employees who strike as a voluntary
act of protest against what they consider unfair labor
practice of the company are not entitled to backpay;
the stoppage of their work is not the direct conse­
quence of the company’s unfair labor practice; their
economic loss should not be shifted to the employer.
However, when strikers abandon the strike and apply
for reinstatement despite the unfair labor practices and
the employer either refuses to reinstate them or im­
poses upon their reinstatement new conditions that
constitute unfair labor practices, the strikers who
refuse to accept the conditions and are consequently
refused reinstatement are entitled to be made whole
for any losses of pay they may have suffered by
reason of the em ployer’s discrim inatory acts.
(Cromwell Commercial Employees and Laborers Union
vs. CIR, et al., G. R. No. L-19778, September 30,
1964)

# * #

Are employees who are unable to work by reason Ci -

lockout validly declared by the employer entitled
wages corresponding to the period o f the Jocko...?
Why?

585
 STRIKES AND LOCKOUTS

ANS. No. The refusal of the employer to furnish

work is lawful. And since the employees did not render
any service, they should not get paid; this is in
accordance with the “no work-no pay' rule.

* * *

May employees o f the Government go on strike and may

the latter declare a lockout? Why?

ANS. No. The terms and conditions of employ­

ment of government employees including employees
of government-owned and controlled corporations, are
governed by C ivil Service Law, rules and regulations.
(Art. 276, Labor Code). The standardization of their
salaries and the improvement of the other terms and
conditions of their employment are dependent upon the
legislature. (Section 5, Article IX-B, Constitution).
And Congress has yet to enact a law granting them the
right to strike. However, under Section 13 of Execu­
tive Order No. 180, terms and conditions or improve­
ments thereof not fixed by law may be the subject of
negotiations between duly recognized employees’ or­
ganizations and appropriate government authorities.

* * ft

Give a brief discussion on the right o f government

employees to strike under the 1987 Constitution.

ANS. The 1987 Constitution in the Article on

Social Justice and Human Rights, provides that the
State “shall guarantee the rights of all workers to
self-organization, collective bargaining and negotia­
tions, and peaceful concerted activities, including the
right to strike in accordance with law’ (Art. XIII, Sec.
3).
By itself, this provision would seem to recognize
the right df all workers and employees, including those
in the public sector, to strike. But the Constitution
itself fails to expressly confirm this impression, for in

586
 STRIKES AND LOCKOUTS

the Sub-Article on the Civil Service Commission, it

provides, after defining the scope of the civil service
as ‘ all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-
owned or controlled corporations with original char­
ters," that “(t)he right to self-organization shall not be
denied to government employees" (Art. IX(B), Sec.
2(1), and (5)). Parenthetically, th® Bill of Rights also
provides that *(t)he right of the people, including those
employed in the public and private sectors, to form
unions, associations, or societies for purposes not
contrary to law shall not be abridged” (Art. Ill, Sec. 8).
Thus, while there is no question that the Constitution
recognizes the right of government employees to orga­
nize, it is silent as to whether such recognition also
includes the right to strike.
Resort to the intent of the framers of the organic
law becomes helpful in understanding the meaning of
these provisions. A reading of the proceedings of the
Constitutional Commission that drafted the 1987 Con­
stitution would show that in recognizing the right of
government employees to organize, the commission­
ers intended to lim it the right to the formation of unions
or associations only, without including the right to
strike. (SSS Employees Association (SSSEA), et al.
vs. CA, et al., G. R. No. 85279, July 28, 1989)
♦ ■* *

Assuming that employees of government-owned or con­

trolled corporations with original charters cannot go on
strike, may they nevertheless form unions and petition
fo r certification election?

ANS. Yes. Although they are covered by civil

service laws, they are guaranteed the right to self­
organization. And under Executive Order No. »80,
where there are two or more duly registered employ­
ees' organizations in the appropriate organizational
unit, the Bureau of Labor Relations shall, upon petition
order the conduct of certification election and certify

587
 STRIKES AND LOCKOUTS

the winner as the oxclusive representative of the

rank-and-file employees in said organizational unit.
(TUPAS vs. National Housina Corporation, et al., G.
R. No. 49677, May 4, 1989)

■fir iSr *

On Septerrtbsr 17, i990, a Monday, some 800 public

school teachers did not conduct their classes; instead,
they converged at the Liwasang Bonifacio and then
proceeded to the DECS National Office fo r a whole day
assembly. They wero among others protesting non­
payment of their benefits. Is the mass action lawful?
W hy?

ANS. No. Employees in the public service do not

have the right to strike. There was a concerted and
unauthorized stoppage of, or absence from, work
which was the teachers’ duty to perform, undertaken
for essentially economic reasons. (Manila Public
School Teachers Association, et al. vs. Laguio, et al.,
G. R. No. 95445, August 6, 1991); s6e also Jacinto
et al vs. Court of Appeals et al., G. R. No. 124540,
November 14, 1997)

588
 CHAPTER XV

UNFAIR LABOR PRACTICES

Give the concept q? unfair Sabor practice (ULP) under
the Labor Code.

ANS. The Labor Code provides:

Art. 247. C o n ce p t o f .u n fa ir Sabor p ra c tic e and

p ro ce d u re th e re o f, — Unfair iabor practices violate
the constitutional right of workers and employees to
self-organization, are inimical to the legitimate inter­
ests of both labor and management, including their
right to bargain collectively and otherwise deal with
each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and hinder the promo­
tion of healthy and stable labor management relations.

Consequently, unfair labor practices are not only

violations of the civil rights of both labor and manage­
ment but are also criminal offenses against the State
which shall be subject to prosecution and punishment
as herein provided.

* * *

Before the enactment o f Baias Pambansa Big. 70,

amending the Labor Code, on May 1, 1980, an unfair
labor practice was considered merely as an administra­
tive offense. But the said amendatory law made an
unfair labor practice a criminal offense, thus reverting to
the old concept under the Magna Carta o? Labor (R. A.
Wo. 875). Give the reasons fo r this change.

ANS. The concept of unfair labor practices as

mere administrative offenses emboldened employers,
many of them aliens, to commit said acts. There was
no effective deterrent to the commission of unfair labor

589
 UNFAIR LABOR PRACTICES

practices. Unions couid not also fuiiy utilize their right

to strike as this right was at that time restricted.

* ft w

May the administrative proceedings and the criminal

prosecution fo r unfair labor practices be instituted and
held simultaneously? Why?

ANS. No. A final judgment of the labor arbiter,

finding that an unfair labor practice was committed,
must first be obtained before a criminal prosecution for
the same can be commenced. This is to prevent the
criminal action from being utilized as a means of
harassment. The final judgment rendered by the labor
arbiter is not however binding in the criminal case nor
can the same be considered as evidence of guilt. (Art.
247, Labor Code). This is because mere substantial
evidence, not proof beyond reasonable doubt, is suffi­
cient to support the decision of the labor arbiter.

* * *

Who may commit an unfair labor practice?

ANS. The employer or a labor organization may

commit an unfair labor practice. (Arts. 248 and 249,
Labor Code)

* * *

In case the employer com mitting the unfair labor prac­

tices is a corporation, association o r partnership, who
may be held crim inally liable therefor?

ANS. Only the officers and agents of corporations,

associations or partnerships who have actually partici­
pated in, authorized or ratified the unfair labor prac­
tices shall be held crim inally liable. (Article 248, last
paragraph, Labor Code)

590
 UNFAIR LABOR PRACTICES

Who may be held crim inally liable fo r the unfair labor

practices committed by a labor union?

ANS. Only the officers, members of governing

boards, representatives or agents or members of labor
associations or organizations who have actually partic­
ipated in, authorized or ratified the unfair labor prac­
tices shall be held crim inally liable. (Art. 249, last
paragraph, Labor Code)
* * *

What are the unfair labor practices that may be commit­

ted by an employer ?

ANS. Article 248 of the Labor Code enumerates

the unfair labor practices that may be committed by an
employer, to wit:

(a) To interfere with, restrain or coerce employees

in the exercise of their right to self-organiz.ation;
(b) To require as a condition for employment that
a person or an employee shall not join a labor organi­
zation or shall withdraw from one to which he belongs;
(c) To contract out services or functions being
performed by union members when such will interfere
with, restrain or coerce employees in the exercise of
their right to self-organization;
(d) To initiate, dominate, assist or otherwise
interfere with the formation or administration of any
labor organization, including the giving of financial or
other support to it or its organizers or officers;
(e) To discriminate in regard to hire or tenure of
employment or any term or condition of employment in
order to encourage or discourage membership in any
labor organization. Nothing in this Code or in any
other law shall prevent the parties from requiring
membership in a recognized collective bargaining
agent as a condition for employment, except those
employees who are already members of anotheF union
at the tim e of the signing of the collective bargaining

591
 UNFAIR LABOR PRACTICES

agreement. Employees belonging to an appropriate

collective bargaining unit who are not members of the
recognized collective bargaining agent may be as­
sessed a reasonable fee equivalent to the dues and
other fees paid by members of the recognized collec­
tive bargaining agent, if such non-union members
accept the benefits under the collective agreement;
Provided, That the individual authorization required
under Article 241, paragraph (o) of this Code shall not
apply to non-members of the recognized collective
bargaining agent;
(f) To dismiss, discharge, or otherwise prejudice or
discriminate against an employee for having given or
being about to give testimony under this Code;
(g) To violate the duty to bargain collectively as
prescribed by this Code;
.(h) To pay negotiation or attorney’s fees to the
union or its officers or agents as part of the settlement
of any issue in collective bargaining or any other
dispute; or
(i) To violate a collective bargaining agreement.

’, * * *

Give the unfair labor practices that may be committed

by a labor organization.

ANS. Under Article 249 of the Labor Code, it is

unfair labor practice for a labor organization, its o ffi­
cers, agents or representatives to commit the follow­
ing:

(a); To restrain or coerce employees in the exer­

cise of their right to self-organization; Provided, That
the labor organization shall have the right to prescribe
its own rules with respect to the acquisition or retention
of membership;
(b) To cause or attempt to cause an employer to
discriminate against an employee, including discrim i­
nation against an employee with respect to whom
membership in such organization has been denied or
terminated on any ground other than the usual terms

592
 UNFAIR LABOR PRACTICES

and conditions under which membership or continua­

tion of membership is made available to other mem­
bers;
(c) To violate the duty, or refuse to bargain
collectively with the employer, provided that it is the
representative of the employees;
(d) To cause or attempt to cause an employer to
pay or deliver or agree to pay or deliver any money or
other things of value in the nature of an exaction, for
services which are not performed or not to be per­
formed, including the demand for a fee for union
negotiations;
(e) To ask for or accept negotiations or attorney’s
fees from employers as part of the settlement of any
issue in collective bargaining or any other dispute; or
(f) To violate a collective bargaining agreement.
* * *

Give an example o f an unfair labor practice committed

by a government agency.

ANS. Sixteen (16) instructors of the Pamantasan

ng Lungsod ng Maynila (PLM), who had temporary
employment contracts that were renewed on a yearly
basis, were among the founders of the Pamantasan ng
Lungsod ng Maynila Faculty Organization (PLMFO).
The establishment of their union was allegedly m oti­
vated by longstanding issues of th e : faculty with the
PLM management. The sixteen (16) instructors were
separated from the service by means of the non­
renewal of their contracts, soon after their union had
secured its public sector registration. At the tim e of
their separation^ half of the complainants had been
with PLM for a long time, ranging from four (4) to six
and one-half (6%) years.
The non-renewal of an employment contract with a
term, it is true, is ordinarily a valid mode of removal at
the end of each period. This rule, however, must yield
to the superior constitutional right of employees, per­
manent or temporary, to self-organization. W hile a
temporary employment may be ended with or without

593
 UNFAIR LABOR PRACTICES

cause, it certainly may not, however, be terminated for

an illegal cause. (Pamantasan ng Lungsod ng Maynila
vs. Civil Service Commission, et al., G. R. No.
1Q7590, February 21, 1995)

* * *

Cite specific instances or cases where the employer was

held to have committed an unfair labor practice.

ANS. (a) Dismissal of employees who refused to

resign from their union and to affiliate with another one
which was formed at the instance of the employer.
(Progressive Development Corporation, et al. vs.
CIR, et al., G. R. No. L-36546, November 24, 1977)
(b) Lay-off by a bank of 65 employees who were
active union members allegedly by reason of retrench­
ment; it appeared however that at no tim e did the bank
incur losses; on the contrary, it even declared divi­
dends. (People’s Bank and Trust Co. vs. People’s
Bank and Trust Co. Employees Union, et al., G. R.
No. L-39603, January 13, 1976)
(c) Refusal of the employer to reinstate strikers
who abandoned their strike and who voluntarily and
unconditionally offered to return to work. (Cromwell
Commercial Employees and Laborers Union vs. CIR,
et al., G. R. No. L-19778, September 30, 1964)
(d) Dismissal, due to alleged losses, of union
officers and members who were m ilitant and dynamic
after the organization of their union and after they had
sent a letter of demand for the improvement of working
conditions in the company, such dismissal being ef­
fected about two (2) years after the alleged losses
were sustained. (Oceanic A ir Products, Inc. vs. CIR,
G. R. No. L-18364, January 31, 1963)
(e) Dismissal of laborers due to their membership
in a union. (Magdalena Estate, Inc. vs. Kapisanan ng
mga Manggagawa sa Magdalena Estate, Inc., G. R.
No. L-18333, May 21, 1963; U. S. Lines Co. vs.
Associated Watchmen Security Union, G. R. No.
L-15508, June 29, 1963)

594
 UNFAIR LABOR PRACTICES

(f) Refusal to comply with the terms of a collective

bargaining agreement. (National Development Co.
vs. NDC Employees and Workers Union, G. R. No.
L-32387, August 19, 1975)
(g) Refusal of an employer to implement a negoti­
ated wage increase, provided for in the collective
bargaining agreement and intended to be distinct and
separate from any benefit or privileges that may be
forthcoming to the workers. (Philippine Apparel W ork­
ers Union vs. NLRC, et al., G. R. No. L-56320, July
31, 1981)
(h) W ithdrawal of holiday pay benefits provided for
in a supplementary agreement. (Oceanic Pharmacal
Employees Union vs. Hon. A. Inciong, et al., G. R.
No. L-50568, November 7, 1979)
(i) Dismissal of a union president for his union
activities, although he may have incurred numerous
absences w ithout permission. (Philippine Metal
Foundries, Inc. vs. CIR, et al., G. R. Nos.
L-34948-49, May 15, 1979)
(j) Dismissal of an active union member due to
alleged overpricing of needles he was ordered to buy
and tampering with receipts, which however was im­
plausible and not clearly proven. (Kapisanan ng
Manggagawa sa Camara Shoes, et al. vs. Camara
Shoes, et al., G. R. No. L-50985, January 30, 1902)
(k) Dismissal of some employees for soliciting
membership in a union to be organized in the com­
pany. (Judric Canning Corporation vs. Hon. A.
Inciong, et al., G. R. No. L-51494, August 19, 1982)
(I) Riefusal of employer to reinstate an employee
who had been unjustly dismissed pursuant to the union
security clause unless the latter admitted his guilt.
(Litex Employees Association, et al. vs. CIR, et al.,
G. R. No. L-39154, September 9, 1982)
(m) Replacement by the purchaser of an establish­
ment of union members who were negotiating a collec­
tive bargaining agreement with the old owner at the
tim e of the sale. (NLU vs. CIR, et al., G. R. No.
L-31276, September 9, 1982)
(n) Uneven application of the company's market­
ing plan, causing undue hardship to the union presi­

595
 UNFAIR LABOR PRACTICES

dent and vice-president. (AHS/Philippines Employees

Union, et al. vs. NLRC, et al., G. R. No. 73721,
March 30, 1987)
(o) Employer’s capital reduction efforts clearly
intended to camouflage the fact it had been making
profits, to justify mass layoffs of union members, and
to obviate a just sharing to labor of the vast profits
obtained by its joint efforts with capital through the
years. (Madrigal & Co., Inc. vs. Zamora, et al., G. R.
No. L-48237, June 30, 1987)
(p) Refusal of a school to renew the contracts of
teachers who have been with the school for periods
ranging from six (6) to twenty (20) years, for fear that
they will instigate a strike. (Rizal Memorial Colleges
Faculty Union, et al. vs. NLRC* et al., G. R. Nos.
59012-13, October 12, 1989)
(q) “Union busting,” or interference with the form a­
tion of a union. (Zamboanga Wood Products, Inc. vs.
NLRC, et al., G. R. No. 82088, October 13, 1989)

.★ ★ *

Cruz, the duly elected president of the union, was

dismissed by the company fo r allegedly “ threatening
the lives o f four employees” and fo r “ having reported
under the influence of liquor.” It was however estab­
lished that Cruz was very active in union affairs; that he
had been previously dismissed a day after his union
sent collective bargaining proposals to the company;
that the alleged threats were made while he was con­
vincing employees to jo in the nationwide stake
launched by the federation with which his union was
affiliated; and that Cruz had no reason to threaten the
four employees and as a matter of fact, he was on
friendly terms w ith ih e latter. Is the dismissal of Cruz an
unfair labor practice? Why?

ANS. Yes. Cruz was unjustly dismissed for his

union activities.
Where the attendant circumstances, the history of
the employer’s past conduct and like considerations,

596
 UNFAIR LABOR PRACTICES

coupled with an intimate connection between the em­

ployer’s action and the union affiliations or activities of
the particular employee or employees taken as a whole
raise a suspicion as to the m otivation far the em­
ployer’s action, the failure of the employer to ascribe a
valid reason therefor may justify an inference that his
unexplained conduct in respect of the particular em­
ployee or employees was inspired by the latter's union
membership or activities. (Royal Undergarment Cor-,
poration of the Philippines vs. CIR, et al., G. R. No.
L-39040, June 6, 1990, citing Rotherberg on Labor
Relations, pp. 401-402)
* * *

Is surveillance by an employer of the meeting and

activities of a union considered an unfair labor prac­
tice? Explain.

ANS. Generally, the surveillance by an employer

of the meetings and activities of a union, whether
frankly open or carefully concealed, may constitute an
unfair labor practice. Surveillance becomes illegal
because it indicates the em ployer’s opposition to
unionization, and the furtive nature of his activity tends
to demonstrate spectacularly the state of his anxiety
and from this the law reasons that when an employer
either engages in surveillance or takes steps leading
his employees to think that it is going on, they are
under threat of economic coercion and retaliation.
(51A CJS Sec. 382 p. 278)
* * *

The employer prohibits its employees from engaging in

union membership solicitation and distribution o f union
literature in the company premises during working
hours. Is this an unfair labor practice? Why?

ANS. No, as long as these restrictions are applied

or enforced without discrimination. The employer has

597
 UNFAIR LABOR PRACTICES

the prerogative of promulgating rules to maintain disci­

pline and enhance production within its premises dur­
ing working hours.

* * *

The Shell Co. o f the Philippines, Ltd. dissolved its

security guard section, transferred eighteen (18) secu­
rity guards affected to other departments and eventually
dismissed them, then contracted the services o f an
independent professional security agency. Such sec­
tion was among the departments form ing part of the
bargaining unit and covered by the existing collective
bargaining agreement. In the absence o f an express
reservation in the collective bargaining agreement of
Shell’s right to abolish the security guard section, did
the said employer commit an unfair labor practice by
dissolving the said section? Why?

ANS. Yes. The dissolution of the security guard

section is a violation of the collective bargaining
agreement, the terms of which cannot be unilaterally
disregarded by either of the parties thereto. Shell
should have specifically reserved in the CBA its right
to dissolve this section; a statement of management
prerogatives couched in general terms is not sufficient.
(Shell Oil Workers Union vs. Shell Company of the
Philippines, Ltd., G. R. No. L-28607, May 31, 1971)

1t it Hr

N. Luna, president o f a. union in the Republic Bank and

the union’s representative to the Board o f Trustees o f
the R B Provident Fund, made remarks, during a meet­
ing o f the said Board o f Trustees where a proposed
tie-up of the Fund with the money market operations o f
the Bank was being discussed, to the effect among
others that the Bank’s management were experts in
distressing the R B, that a proposed member o f the
Board o f Trustees was a poor credit risk, and that the R
B had the intention of appointing unscrupulous people.

598
 UNFAIR LABOR PRACTICES

For these remarks N. Luna was dismissed. In his

dismissal an unfair labor practice? Why?

ANS. Yes. Luna’s remarks at the meeting are

privileged, a valid exercise of his freedom o f expres­
sion and his right to self-organization. They were
made in defense of the interest of the employees that
he represented and whose contributions formed part of
the Provident Fund. (Union of Supervisors (R B)
NATU vs. The Secretary of Labor, et al., G. R. No.
L-39889, November 12, 1981)

* * it

Eight (8) employees o f the Republic Savings Bank wrote

and published a letter-charge to the bank president
demanding his resignation on the ground o f immorality,
nepotism, favoritism and discrim ination in the appoint­
ment and prom otion o f bank employees. Contending
that the letter was libelous, the bank dismissed the eight
(8) employees. In the unfair labor practice case, the
bank put up the defense that w riting the letter-charge
was not a union action but merely the individual act o f
the employees involved. Assuming that the bank’s
contention is true, was an unfair labor practice never­
theless committed? Explain.

ANS. Yes. In writing the letter-charge, the eight

(8) employees engaged in a concerted activity for their
mutual aid and protection. This is part of their right of
self-organization, interference with which constitutes
an unfair labor practice. (Republic Savings Bank vs.
CIR, et al., G. R. No. L-20303, September 27, 1967)

* * *

What is a yellow dog contract?

ANS. It is a promise exacted from workers as a

condition of employment that they are not to belong to,
or attempt to foster, a union during their period of

599
 UNFAIR LABOR PRACTICES

employment. The typical yellow dog contract contains

a representation by the employee that he is not a
member of a labor union and a promise by him not to
join a labor union or upon joining a union to quit his
employment. (Teller, Labor Disputes and Collective
Bargaining, pp. 118-119)

. * * *

X applied fo r employment w ith Y Co. He was asked by

the personnel manager if he belonged to a union and he
said yes. The personnel manager told X that the (X)
cannot be employed in Y Co. unless he first resigned
from his union. As X refused to do so, he was not
employed.
(a) Did Y Co. commit an unfair labor practice?

ANS. Yes. It committed an act which falls under

Article 248 (b) which makes it an unfair labor practice
for an employer to require as a condition for employ­
ment that a person or an employee shall not join a
labor organization or shall withdraw from one to which
he belongs.

(b) Y Co. set up the defense that it cannot be guilty of

an unfair labor practice against one who is not yet its
employee. Is this defense tenable?

ANS. No. The unfair labor practice covered by

Art. 248 (b) may be committed against a prospective
employee. The provision uses the phrase “person or
an employee.”

* * *

Is questioning or interrogation o f the employee by an

employer w ith respect to union matters an unfair labor
practice? Explain.

ANS: Mere words of interrogation by an employer,

not threatening or intimidating in themselves, made by

600
 UNFAIR LABOR PRACTICES

an employer without anti-union background and not

associated as a part of a pattern or course of conduct
hostile to unionism or as part of espionage on employ­
ees, do not amount to interference with, restraint, or
coercion of employees in connection with their union
activities. In other words, the mere questioning of
employees, standing alone, is not an unfair labor
practice, and before inquiries by an employer as to
union mater can be held to be unfair labor practices
they must be shown to have some relation to coercion
or restraint of the employees in their right of self-
organization (51A CJS, Sec. 383, pp. 279-380).
* * *

Does an employer commit an unfair labor practice by

predicting unfavorable consequences of unionization?

ANS. As a general rule, an employer may predict

unfavorable consequences of unionization without
committing an unfair labor practice if he can do co in a
manner which contains no threat. So he may suggest
that the benefits of a liberal labor policy would be lost
if a union is organized. It has been held, however, that
when statements as to consequences which might
follow employees’ adherence to a union are made by
one who is part of company management, and who has
power to transform the prophecies into realities, such
statements, whether couched in languages of probabil­
ity or certainty, tend to impede and coerce employees
in their right of self-organjzation, and therefore consti­
tute unfair labor practices. (51A CJS Sec. 385, p.
292)
* * *

May an employer commit unfair labor practice prior to

the registration of the union being formed by the em­
ployees?

ANS. Yes. The employer may be guilty of interfer­

ing with the employees’ right to self-organization even

601
 UNFAIR LABOR PRACTICES

before the union has been registered as where employ­

ees are dismissed because of their refusal to divulge
the names of the organizers and members of the
union. (Samahan ng Mga Manggagawa sa Bandolino
vs. NLRC et al., G. R. No. 125195, July 17, 1997)

* * *

Having received reliabie information that his employees

are form ing a union because they want to demand fo r
wage increases and vacation and sick leave benefits,
the employer, fo r the purpose of preventing the form a­
tion o f the union, granted substantial wage increases
and vacation and sick leave benefits. Is this act o f ths
employer an unfair labor practice?

ANS. Yes. The employer’s conduct amounts to

interference in the exercise by the employees of their
right to self-organization. More specifically, it inter­
feres with their freedom of choice for or against
unionization. Interference may be in the form of
allurements.
* * it

The union sent a letter to the company requesting

permission fo r certain officers and members o f the
union to attend the hearing o f their petition fo r certifica­
tion election. The company refused to acknowledge
receipt of the said letter and preventively suspended the
union officers and members who attended the hearing.
(a) Did the company commit an unfair labor practice?

ANS. Yes. It is an interference with the employ­

ees’ right to self-organization.

(b) May the employer be held liable fo r moral and

exemplary damages?

ANS. Yes. Moral damages may be awarded under

Article 2220 of the Civil Code providing for damages

602
 UNFAIR LABOR PRACTICES

for breaches of contract where the defendant acted

fraudulently or in bad faith. Exemplary damages may
be granted pursuant to Articles 2229 and 2231 and/or
2232 of the Civil Code. (CLLC E. G. Gochangco
Workers Union, et al. vs. NLRC, et al., G. R. Nos.
67158-62, May 30, 1988)

* * *

May retrenchment undertaken by the employer consti­

tute an unfair labor practice?

ANS. W hile the right of an employer to dismiss an

employee is conceded in a valid retrenchment, the
right differs from and should not be confused with the
manner in which such right is exercised. Where all the
retrenched employees were members of a particular
union, there being no satisfactory explanation why said
employees were singled out, the conclusion is in­
evitable that the employer had discriminated against
membership in the said union, an act which amounts to
interference in the employees’ exercise of their right to
self-organization. (Bataan Shipyard and Engineering
Co., Inc. vs. NLRC, et al., G. R. No. 78604, May 9,
1988)
H * 4r

Aronson was incorporated with an authorized capita!

stock o f P500,000.00 and with a corporate life o f 50
years. It was organized fo r the purpose o f engaging in
buying, im porting and selling goods and merchandise,
including photo materials and stationery supplies. It
was controlled by the Aronson family.
After two strikes declared by its employees Aronson
entered into a CBA w ith their union. However, while the
CBA was still in effect, the company notified its employ­
ees that it would be dissolved due to poor business.
The articles of incorporation were later amended so that
the life of the corporation was made to expire nine (9)
years earlier. Less than a month after the amendment,

603
 UNFAIR LABOR PRACTICES

Medel, another corporation, was formed w ith a capital

stock of P100,000.00, to engage in buying and selling
wares and merchandise including paper and other of­
fice material. About five (5) months later, s till another
corporation, Photo Materials, w ith an authorized capital
stock of P400,000.00 was incorporated to engage in
buying and selling o f photographic equipment. Medel
and Photo Materials were controlled by the Aronson
Family, started business at the same time, and used the
office equipment and premises o f Aronson. They also
absorbed the employees o f Aronson who were not
members o f the union.
Did Aronson commit any unfair labor practice? Why?

ANS. Yes. The alleged dissolution of the corpora­

tion was effected in order to dismiss workers because
of their union activities. That Aronson did not actually
want to go out of business is shown by the fact that
Medel and Photo Materials were organized to engage
in the same business as Aronson, that their total
capitalization amounted to exactly the same autho­
rized capital stock of Aronson, and that they used the
office equipment and premises of Aronson. (Aronson
& Co., Inc., et al. vs. Associated Labor Union, et al.,
G. R. No. L-23010, July 9, 1971)
* * *

A union o f employees o f Simex filed a petition fo r direct

certification before the Med-Arbiter. Fifteen (15) days
thereafter, thirty-six (36) workers in the “ lumpia” depart­
ment o f the company were not given work. Sixteen (16)
more workers from other departments were later on
sim ilarly refused employment. The company then filed
a “ Notice o f Permanent Shutdown/Total Closure o f
Units of Operation in the Establishment” w ith the DOLE
allegedly due to business reverses. The notice ren­
dered the certification case m oot and academic. The
company however continued to operate after the target
date of closure and never applied fo r dissolution. Its

604
 UNFAIR LABOR PRACTICES

audited financial statement also depicted retained eam-

ihgs.
Did Simex commit any unfair labor practice? Why?

ANS. Yes. The supposed closure of the business

of Simex was a subterfuge to discourage formation of
a union. To all appearances, the company filed a
Notice of Closure to pre-empt the employees from
forming a union within the company. Simex and its
officers who were major stockholders were guilty of
union busting. (Union of Filipino W orkers vs. NLRC,
et al., G. R. No. 90519, March 23, 1992)
* * *

While a strike was in progress, the president and man­

ager o f the company sent to each striker a letter stating
among others that if the latter returned to work, he can
have his meals w ithin the office, make a choice whether
to go home at the end o f the day o r to sleep nights at
the office where comfortable cots have been prepared,
enjoy free coffee and occasional movies, be paid over­
time, and can be sure arrangements w ill be made fo r his
family. Is the w riting o f the letter an unfair labor
practice? Why?

ANS. Yes. The letter tends to undermine the

concerted activity of the employees, an activity to
which they are entitled free from the employer’s mo­
lestation. It is equivalent to an attempt to break the
strike, for an employer to offer reinstatement to strik­
ing employees individually, when they are represented
by a union, since the employees thus offered reinstate­
ment are unable to determine what the consequences
of returning to work would be. (The Insular Life
Assurance Co. Ltd. Employees Association, et al. vs.
The Insular Life Assurance Co. Ltd., et al., G. R. No.
L-25291, January 30, 1971)

* * *

605
 UNFAIR LABOR PRACTICES

A corporation capitalized at P3 m illion ceased its opera­

tion after receiving notice o f the form ation o f a labor
union by its employees and the filin g by them o f a
petition fo r certification election. It alleged serious
financial losses; it had sustained losses in the amount
o f P1.603.99 about seven m onths earlier.
(a) Is the closure an unfair labor practice? Explain.

ANS. Yes. The closure is motivated not by a

desire to avoid further losses but to discourage the
workers from organizing themselves into a union for
more effective negotiations with the management.
And even without such m otivation, closure cannot be
justified because the claimed losses are obviously not
serious.

(b) Is the president and general manager personally

liable fo r the illegal acts o f the corporation?

ANS. Yes. In this case, the president and general

manager is also the owner of the corporation.
(Carmelcraft Corporation, etc. vs. NLRC, et at., G.
R. Nos. 90634-35, June 6, 1990)

* * *

To forestall impending financial losses, the company

adopted several cost-cutting measures including the
lay-off of around 177 employees, some o f whom were
officers and members o f the union that had declared a
strike, The affected employees were given separation
pay equivalent to one month pay f o r every year of
service, fo r which they signed documents o f waiver.
The company later on rehired some o f the dismissed
employees when projects became available; the * was
done in pursuance o f the company’s policy o f giving
preference to its form er workers in the hiring o f project
employees.
(a) Is the dismissal of the union officers and members
an unfair labor practice? Why?
 UNFAIR LABOR PRACTICES

ANS. No. The dismissal was a valid exercise of

management prerogatives; the company losses, for a
number of years, were established by financial state­
ments presented by both parties; indeed, the company
had to resort to cost-cutting measures in order to stare
o ff further losses.

(b) Is the waiver executed by the workers valid and

binding? Why?

ANS. Yes. The employees waived their claims

because of the awareness of the precarious financial
condition of the company as shown by a steady decline
in its income. The waiver furtherm ore embodied
reasonable settlements of their claims; as a m atter of
fact, they received separation pay equivalent to one
month pay for every year of service, which was more
than what they were entitled to receive under the law,
which- provides for separation pay equivalent to one
month pay or one-half (1/2) month pay for every year
of service, whichever is higher. ( AF & P United Rank
and File Association et al. vs. NLRC et al., G. R. No.
108259, November 29, 1996)

* * *

Article 248, paragraph (e), of the Labor Code, makes it

an unfair labor practice fo r an employer “ to discriminate
in regard to hire o r tenure of employment of any term or
condition o f employment in order to encourage or dis­
courage membership in any labor organization.” Is
such discrim ination limited to an employee or a group
o f employees? Explain.

ANS. No. Discriminatory acts under Article 248,

paragraph (e), of the Labor Code do not have to be
against a specific employee or against a group of
employees, for said acts are not limited to hiring or
tenure but extend to terms and conditions of employ­
ment. Discrimination can be in favor or against a
union itself (Philippine Charity Sweepstakes Office, et

607
 UNFAIR LABOR PRACTICES

al. vs. The Association of Sweepstakes Staff Person­

nel, et al., G. R. No. L-27546, July 16, 1982).

* * *

During the pendency o f proceedings to determine

whether it should be Union A or Union B that w ill act as
the sole bargaining representative of the employees, the
employer extended privileges and concessions to Union
B while denying the same privileges and concessions to
Union A. Did the employer commit an unfair labor
practice? Why?

ANS. Yes. It discriminated against Union A and in

favor of Union B, with regard to terms or conditions of
employment, with the obvious purpose of encouraging
membership in Union B and discouraging membership
in Union A. This falls under Article 248, paragraph (e),
of the Labor Code, and form erly under Section 4 (o) of
Republic Act No. 875. (Philippine Charity Sweep­
stakes Office, et al. vs. The Association of Sweep­
stakes Staff Personnel, et al., G. R. No. L-27546,
July 16, 1982).

He He He

Associated Labor Unions (ALU) was certified as the

bargaining agent o f the rank-and-file workers o f Balmar
Farms, Inc., a corporation engaged in the planting of
bananas. Balmar subsequently received a copy of a
letter addressed to the Regional Director by the presi­
dent of the union of its workers stating among others
that they wanted to negotiate directly with the company
and not thru ALU. ALU sent a letter to the company
containing their proposals fo r collective bargaining.
Balmar however refused to negotiate w ith ALU, con­
tending that the latter has been disauthorized by the
workers. Has Balmar, by such refusal, committed an
unfair labor practice? Explain.

608
 UNFAIR LABOR PRACTICES

ANS. Yes. It has violated its duty to bargain

collectively. ALU has been certified as the bargaining
representative of the rank-and-file workers of Balmar,
and it is not for the latter to question which group is the
bargaining represerftative of its workers. Thepe was no
order superseding the order certifying ALU as the sole
and exclusive bargaining representative of Balmar's
workers. (Balmar Farms, Inc. vs. NLRC, et al., G. R.
No. 73504, October 15, 1991)
* * *

Upon the resumption o f operations o f the factory follow ­

ing a brief closure thereof by reason o f the alleged sale
and change o f ownership of the business, the members
o f M. Union were refused readmission While those who
had resigned therefrom and joined R. Union were
allowed to work. Considering that R. Union is not
company-dominated, did the company commit an unfair
labor practice? Why?

ANS. Yes. An employer can discriminate in favor

of a union even if the latter is not company dominated.
(Moncada Bijon Factory, et al. vs. CIR, et al., G. R.
No. L-18065, March 30, 1962)

* * *

For filin g money claims against the school, the school

nursb was dismissed after nineteen (19)years o f service.
What provisions of the Labor Code were violated by the
school by reason of such dismissal?

ANS. The school violated Articles 118 and 248 (f)

of the Labor Code, which provide as follows:

“A rt. 118. R e ta lia to ry m easures. — It shall be

unlawful for an employer to refuse to pay or reduce the
wages and benefits, discharge or in any manner dis­
criminate against any employee who has filed any

609
 UNFAIR LABOR PRACTICES

complaint or instituted any proceeding under this Title

or has testified or is about to testify in such proceed­
ings."

"A rt. 248. U n fa ir la b o r p ra c tic e o f e m p lo y e rs .

— It shall be unlawful for an employer to commit any
of the following unfair labor practices:

xxxxxx

(f) to dismiss, discharge, or otherwise prejudice or

discriminate against an employee for having given or
being about to give testimony under this Code." (Sibal
vs. Notre Dame of Greater Manila and NLRC, G. R.
No. 75093, February 23, 1990)

* * *

A company considers as one factor fo r prom otion the

fact that an employee is an llocano. Assuming that this
is discriminatory, is the employer guilty o f unfair labor
practice? Why?

ANS. No. Not all acts of discrimination of the

employer constitute unfair labor practices. Only such
act as would interfere with the employees’ right to
self-organization, encourage or discourage member­
ship in a labor organization, or discriminate against an
employee for having given or being about to give
testimony under the Code are considered unfair labor
practices under Article 248. The said provision, being
penal in character, should be strictly construed.

* ft ft

Norma Mabeza, a hotel chambermaid, was dismissed by

Hotel Supreme fo r her refusal to swear before the Prose­
cutor’s Office to the veracity and contents o f the jo in t
affidavit to the effect that the affiants had no complaint
against the management as they were paid their employ­
ment benefits and were treated well.

610
 UNFAIR LABOR PRACTICES

Is the dismissal o f Norma an unfair labor practice?

ANS. Yes. The act of compelling employees to

sign an instrument indicating that the employer ob­
served labor standards provisions of law when he
might have not, together with the act terminating or
coercing those who refuse to cooperate with the em­
ployer’s scheme constitutes unfair labor practice. The
first act pre-empts the right of the workers to seek
better terms and conditions of employment through
concerted action. The act is analogous to the situation
envisaged in paragraph (f) of Article 248 of the Labor
Code which makes it an unfair labor practice to dis­
miss, discharge or otherwise prejudice or discriminate
against an employee for having given or being about to
give testimony under the Code. In not giving positive
testimony in favor of her employer, Norma had re­
served not only her right to dispute the claim and
proffer evidence in support thereof but also to work for
better terms and conditions of employment. (Mabeza
vs. NLRC et al., G. R. No. 118506, April, 18, 1997)
* * *

The Association o f Employees and Faculty o f Letran

(AEFL), the bargaining agent o f the employees o f Cole-
gio de San Juan de Letran, presented its proposals fo r
collective bargaining. For more than a month after the
submission o f the proposals, the school did not give
any counter-proposals; it could only offer the explana­
tion that the Board o f Trustees had not yet convened to
discuss the matter. The union president was also
dismissed fo r alleged insubordination consisting o f her
refusal to follow a new teaching schedule set by the
school.
(a) Did Letran commit any unfair labor practice? Why?

ANS. Yes. The school violated its duty to bargain

collectively when it failed without valid reasons to give
counter-proposals within ten (10) days from receipt of
the union’s proposals. This is required by Article 250
of the Labor Code.

R11
 UNFAIR LABOR PRACTICES

It also interfered with the worker’s right to self­

organization by dismissing the union president.

(b) As an additions! reason fo r its failure to reply to the

union’s proposals, Letran pointed to the pendency o f a
petition fo r certification election filed by A rival union.
Is the ground tenable? Why?

ANS. No. The mere filing of a petition for

certification election does not Ipso facto justify the
suspension of negotiation by the employer. The peti­
tion must first comply with the requirements for a valid
petition, foremost of which is it must be filed during the
sixty-day freedom period. Here, the petition was filed
two (2) years after the lapse of the freedom period*
(Colegio de San Juan de Letran vs. Association of
Employees and Faculty of Letran et aL* G». R. No.
141471, September 18, 2000)

Fortune Tobacco Corporation (FTC) entered into a con­

tract fo r security services with Fortune Integrated Ser­
vices, Inc. (FISI) whereby the latter undertook to pro­
vide security guards fo r the protection and security of
the former. The two corporations had identical stock­
holders and the same business address. FISI also had
no other clients except FTC and other companies be­
longing to the Lucio Tan group o f companies. More­
over, the early payslips of the security guards show that
their salaries were initially paid by FTC.
To enforce their rightful benefits under labor standard
laws, some security guards of FISI formed a union
which was later certified as the bargaining agent of all
the security guards. The stockholders of FISI then sold
all their participation in the corporations to a new set of
stockholders which renamed the corporation Magnum
Integrated Services, Inc. FTC, w ithout any reason, later
on preterminated its contract o f security services with
Magnum and contracted two other agencies to provide
security services fo r its premises. This resulted in the

612
 UNFAIR LABOR PRACTICES

displacement o f the security guards. Magnum had no

other clients; it failed to give new assignments to the
guards.
(a) May the security guards of FISI/Magnum be consid­
ered employees of FTC? Why?

ANS. Yes. FISI was a mere adjunct of FTC. The

separate juridical personality of a corporation may be
disregarded when such corporation is a mere alter ego
or business conduit of another person. FTC cannot be
allowed to use its separate corporate personality to
shield itself from liability for illegal acts committed
against its employees.

(b) Did FTC/FISI/Magnum commit any unfair labor prac­

tice? Why?

ANS. Yes. It appears that they engaged in a

scheme to terminate the services of FISI’s security
guards posted at the premises of FTC and bust their
newly-organized union which was then beginning to
become active in demanding the company's com pli­
ance with labor standard laws. (De Leon et al vs.
NLRC et al., G. R. No. 112661, May 30, 2001)
* * «

Cite specific cases/instances where the acts o f the

employer were held not to constitute an unfair labor
practice.

ANS. (a) Dismissal of union members upon

demand of the union pursuant to a closed shop agree­
ment, the form er having been expelled from the latter
on valid grounds, such as formation of the rival union,
and after being accorded due process. (Lirag Textile
Mills, Inc. vs. Blanco, et al., G. R. No. L-27029,
November 12, 1981; Victorias M illing Co., Inc. vs.
Victorias-Manapla Workers Organization (PAFLU), G.
R. No. L-18467, September 30, 1963)
(b) Dismissal of a union member because of
threats made by him upon" his employer's life; and

613
 UNFAIR LABOR PRACTICES

there being evidence that other union members more

active than him were retained. (National Union of
Restaurant Workers (PTUC) vs. CIR, G. R. No.
L-20044, April 30, 1964)
(c) Dismissal of an employee due to loss of
confidence (Nevans vs. CIR, G. R. No. L-21510,
June 29, 1968)
(d) Grant of bigger bonus to non-union members
who are exceptionally good or efficient. (Philippine
Blooming Mills Employees Organization (PAFLU) vs.
Philippine Blooming Mills Co., Inc., NLRC Case No.
RB-IV-295-75, June 4, 1976)
(e) Refusal of the company to re-admit workers
who staged an illegal strike. (GOP-CCP Workers
Union, et al., vs. CIR, et al., G. R. No. L-32015,
September 10, 1979)
(f) Refusal of the company to readmit the presi­
dent and vice-president of the union that declared an
illegal strike is not discriminatory and does not consti­
tute an unfair labor practice. A union officer has larger
and heavier responsibilities than a union member.
Union officers are duty bound to respect the law and to
exhaust and guide their members to do the same; their
position mandates them to lead by example. (Great
Pacific Life Employees Union et al vs. Great Pacific
Life Assurance Corporation et al., G. R. No. 1267*17,
February 11, 1999)
(g) Where the company presented duly audited
financial documents showing that it had been incurring
huge financial losses for about four (4) years, the
dismissal of employees due to retrenchment cannot be
considered an unfair labor practice even if they had
formed a union to protect their rights. The dismissal is
a reasonable exercise of management prerogative.
(NDC-Guthrie Plantations, Inc. et al. vs. NLRC et al.,
G. R. No. 110740, August 9, 2001)

* ★ Hr

The company granted profit sharing benefits to man­

agers, supervisors and rank-and-file employees not cov­

614
 UNFAIR LABOR PRACTICES

ered by the CBA. This is assailed as discriminatory by

the union; it claims that employees covered by the CBA
should also be given the benefit. Decide.

ANS. The grant of profit sharing benefits to

employees not covered by the CBA is an exercise in
good faith of management prerogatives. There is no
discrimination as the situation of the union employees
is different from the non-union employees. The em­
ployees concerned are not sim ilarly situated. The
union employees are not discriminated against as they
are entitled to benefits under the CBA. (Wise & Co.,
Inc. vs. Wise & Co., Inc. Employees Union, et al.', G.
R. No. 87672, October 13, 1989)

ft it it

Due to the negligence of the mother federation in at­

tending to a ULP case filed by its local against the
employer, 32 out of 36 members o f the local union
signed a resolution of disaffiliation from the mother
federation. For this act, the m other federation de­
manded the dismissal of the union officers from the
company pursuant to the maintenance of membership
clause in the collective bargaining agreement. Immedi­
ately on the day following receipt o f the demand, the
company effected the dismissal.
(a) Assuming that the disaffiliation was in accordance
with the constitution and by-laws o f the mother federa­
tion, did the latter and the company commit an unfair
labor practice? Why?

ANS. Yes. The officers of the union were dis­

missed by reason of the exercise of their freedom to
disaffiliate. This is part of their right to self­
organization. Besides, their dismissal was effected
hastily, without previous hearing.

(b) What should be the extent o f the liability o f the

employer? Why?

615
 UNFAIR LABOR PRACTICES

ANS. The company’s liability should be limited to

the immediate reinstatement of the workers, consider­
ing that the dispute revolved around the mother feder­
ation and its local. The mother federation, at whose
instance the workers were dismissed, should be held
liable for payment of backwages. (Liberty Cotton Mills
Workers Union, et al. vs. Liberty Cotton Mills, Inc. et
al., G. R. No. L-33987, September 4, 1975)
★ * *

For organizing another union, members of the Binango-

nan Labor Union were expelled therefrom fo r disloyalty.
On the same day that they were expelled, the union
demanded their dismissal from the company pursuant
to the union security clause in the collective bargaining
agreement which provided, among others, that “ the
EMPLOYER agrees to have in its employ and to employ
only members in good standing o f the UNION x x x.”
The company dismissed the workers the follow ing day.
Did thoir dismissal constitute an unfair labor practice?
Why?

ANS. Yes. Their dismissal was by reason of the

exercise of their right to self-organization. It should be
noted that the union security clause simply imposed
membership in the Binangonan Labor Union as a
condition fo r employment; it did not clearly specify how
long after his employment must the worker remain a
member thereof. Under the circumstances, a union
member could be expelled from the union without
necessarily forfeiting his employment. (Rizal Labor
Union, et al. vs. Rizal Cement Co., Inc., et al., G. R.
No. L-19779, July 30, 1966)

* * *

Employees were expelled from their union fo r alleged

“ disloyalty” consisting o f their act in seeking help from
another union to fig h t fo r their reinstatement. The

616
 UNFAIR LABOR PRACTICES

expulsion was ordered after investigation supposi 1iy

conducted by a Panel of Investigators com posed of
members of the Board of Directors of the union. The
filing of the charge of disloyalty was however instigated
by the Chairman of the Board of Directors and A cting
Union President. Most of the employees expelled did
not appear during the investigation. By reason of such
expulsion, the company upon demand by the union
dismissed the employees pursuant to the onion security
clause in the CBA.
(a) Ss the dism issal o f the employees an u nfa ir labor
practice?

ANS. Yes. The mere act of ihe em ployees in

seeking help from another union cannot constitute
disloyalty. At most, If was ari act of self-preservation
of workers who, driven to desperation, found shelter in
another union who took the cudgels fo r them.
Furthermore, the investigation proceedings leading
to their expulsion were violative; o f the elem entary
rules of justice and fair play. The Board o f Directors of
the union would have acted as prosecutor, in ve stiga tor
and judge at the same time.

(h) Ss the em ployer also g u ilty o f u n fa ir labor practice?

ANS. Yes. The scandalous haste with which the

company dismissed the em ployees Sends credence to
the claim that there was connivance between the
company-and the union. (Ranee et al. vs. NLRC, et
a!., G. R. No. 68147, June 30, 1988)
ft ft ft

Dissatisfied with the «

union, S. resigned th e r^r vs ■ ° > , to
w ithdraw his resignation \,i ?§* \ j j
par / that the same would me .
employment pursuant to the ckv I 'j
the CBA. As lie had been critics
being run, the officers did i* (M in / ,

817
 UNFAIR LABOR PRACTICES

resignation and insisted that he be dismissed from his

work. With great reluctance, the company dismissed S.
(a) Did the Union commit an unfair labor practice in
refusing to allow S. to withdraw or revoke his resigna­
tion? Why?

ANS. Yes. The union acted arbitrarily in refusing

to allow S. to withdraw his resignation. He was
discriminated against by reason of his critical attitude
towards the officers of the union.

(b) Cannot the closed shop stipulation in the CBA

ju stify the actuations o f the officers of the union? Why?

ANS. No. Although generally a state may not

compel a union to admit or readmit thereto any given
individual, because membership therein may be ac­
corded or withheld as a matter of privilege, the rule is
qualified in respect of labor unions holding a monopoly
in the supply of labor, either in a given locality or as
regards a particular employer. In such cases, admis­
sion requirements and administration of discipline by
unions become affected with the public interest.

(c) Is the employer likewise guilty of an unfair labor

practice? Why?

ANS. No. There is no showing that the employer

connived with the union to discriminate against S. As
a matter of fact, it showed great reluctance in dismiss­
ing S., being convinced that the latter did not know the
legal effects of his resignation from the union.
(Salunga vs. CIR, et al., G. R. No. L-22456,
September 27, 1967)

* * *

Before a labor organization may be declared to have

violated the duty to bargain collectively, what must be
established?

61#
 UNFAIR LABOR PRACTICES

ANS. It must be established that the labor organi­

zation is the bargaining representative of the employ­
ees. (Art. 249, par. (c), Labor Code). A union that
has not been selected as the representative of the
employees has no obligation to collectively bargain
with the employer. After all, its acts cannot bind the
employees.

★ * ★

What is featherbedding?

ANS. This refers to the practice of the union or its

agents in causing or attempting to cause an employer
to pay or deliver or agree to pay or deliver money or
other things of value, in the nature of an exaction, for
services which are not performed or not to be per­
formed, as when a union demands that the employer
maintain personnel in excess of the latter’s require­
ments.
ik it it

A union in a containerized shipping company declares a

strike to compel the employer to assign two (2) check­
ers to one (1) container. If it can be established that
only one (1) checker is needed fo r a container, has the
union committed an unfair labor practice? Why?

ANS. Yes, the union is guilty of featherbedding.

The strike is an attempt to compel the company to
employ excess personnel and to pay for services which
are not needed.

★ * ★

To break a deadlock on the issue of salary increases,

the union agreed to accept the employer’s countar-
proposal provided an additional amount equivalent to
five (5%) percent of the wage increase be paid by the

619
 UNFAIR LABOR PRACTICES

employer to the union as negotiation fee. Has the union

committed an unfair labor practice? Why?

ANS. Yes. It is an unfair labor practice for a union

to ask for or accept negotiation fees from the employer
as part of the settlement of any issue in collective
bargaining or any other dispute. (Art. 249 (e), Labor
Code). This is to avoid the possibility of the union’s
decision being influenced by monetary doleouts from
the employer to the union officers.
it 4r it -—— ___

Is violation o f a collective bargaining agreement still

considered an unfair labor practice?

ANS. Under Article 261 of the Labor Code, as

amended by R. A. 6715, violations of a collective
bargaining agreement, except those which are gross in
character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the
collective bargaining agreement. Gross violations of a
collective bargaining agreement shall mean flagrant
and/or malicious refusal to comply with the economic
provisions of such agreement.
★ * it

If an employee is dismissed because of an unfair labor

practice, what is the administrative relief to which he is
entitled?

ANS. He is entitled to reinstatement to his former

position without loss of seniority and other rights, and
to payment of backwages.
it it it

What is reinstatement?

ANS. In its generally accepted sense, reinstate­

ment is a restoration to a state from which one has

eon
 UNFAIR LABOR PRACTICES

been removed or separated. It is the return to the

position from which he was removed. (San Miguel
Brewery, Inc. vs. Santos and CIR, 112 Phil. 986) and
assuming again the functions of the office already held
(Abeto vs. Rodas, 82 Phil. 67)
Reinstatement pre-supposes that the previous po­
sition from which one had been removed still exists, or
that there is an unfilled position more or less of a
sim ilar nature as one previously occupied by the
employee (Philippine Engineering Corporation vs.
CIR, G. R. No. L-27880, September 30, 1971)

★ Vr

Should an order o f reinstatement with full backwages

fo r an indefinite and prolonged period of time be coun­
tenanced? Why?

ANS. No. Such an order is viewed with disfavor.

(Lepanto Consolidated Mining Co. vs. Encarnacion,
et al., G. R. Nos. 67002-03, April 30, 1985). It is not
only unjust to the employer but fosters indolence on
the part of the worker; the latter is not supposed to be
relying on a court judgment for his support; he should
do everything a reasonable man would do to find
employment and try to minimize the loss that may be
caused to the employer by looking for other work.
(Sta. Cecilia Sawmills, Inc. vs. CIR, 10 SCRA 43)
* * *

When is an unfair labor practice deemed to be purely an

administrative offense and not a criminal act?

ANS. The unfair labor practice is deemed to be

purely an administrative offense and not a criminal act
when the acts complained of hinges on a question of
interpretation or implementation of ambiguous provi­
sions of an existing collective bargaining agreement.
(Article 288, Labor Code, as amended by B. P. Big.
70). By reason of the ambiguity in the contract, the

821
 UNFAIR LABOR PRACTICES

party committing the unfair labor practice may claim to

have acted in good faith.

* * *

Is the illegal dismissal of an employee always an unfair

labor practice? Explain.

ANS. No. Such illegal dismissal constitutes an

unfair labor practice only when it results from any of
the acts specified in Articles 248 and 249 of the Labor
Code. An employee may be dismissed for causes
which are illegal or unjustified under the law, but which
are not considered unfair labor practices.

* * *

What are “ seniority rights” ?

ANS. “Seniority rights” are rights of employees to

certain preferential treatment based on their fength of
service. An employee has no inherent “seniority
rights," this is based on a contract or a statute or
administrative regulation relative thereto. (51 C. J.
S., Sec. 14, p. 586)

* * *

May officers of a corporation be held jo in tly and sever­

ally w ith the latter to an employee fo r damages arising
from the latter’s illegal dismissal?

ANS. Yes, if they acted oppressively, w illfully, and

in bad faith. Their liability is based on Articles 19, 20,
21, and 1701 of the Civil Code. (General Bank and
Trust Co., et al. vs. Court of Appeals, et al., G. R.
No. L-42724, April 9, 1985)

* * *

622
 UNFAIR LABOR PRACTICES

May the general manager o f a corporation be made

jo in tly and severally responsible w ith the latter fo r the
backwages o f dismissed employees?

ANS. In the absence of malice or bad faith, a

general manager cannot be made personally liable for
his act in terminating the services of employees. This
is within the scope of his authority and is a corporate
act. (Sunio, et al. vs. NLRC, et al., G. R. No.
L-57767, January 31, 1984)
* * *

Give the bases of computation of backwages and sepa­

ration pay.

ANS. In the computation of backwages and sepa­

ration pay, account must be taken not only of the basic
salary of the employee but also of her transportation
and emergency allowances, vacation or service incen­
tive leaves and sick leaves and thirteenth month pay.
(Santos vs. NLRC, et al., G. R. No. 76721,
September 21, 1987; Soriano vs. NLRC, et al., G. R.
No. L-75510, October 27, 1987; St. Louis College of
Tuguegarao vs. NLRC, et al., G. R. No. 74214,
August 31, 1989; Paramount Vinyl Products Corpora­
tion vs. NLRC, et al., G. R. No. 81200, October 17,
1990)
* * *

May separation pay, in lieu o f reinstatement, be awarded

to an employee who was dismissed by reason o f an
unfair labor practice? Why?

ANS. No. Otherwise, the employer would still get

what he wants and the unfair labor practice is con­
doned. (Gubac vs. NLRC, et al., G. R. No. 81946,
July 13, 1990)

623
 UNFAIR LABOR PRACTICES

Does separation pay, in lieu o f reinstatement, take the

place of the backwages due the employee by reason of
his illegal dismissal? Explain.

AMS. No. Separation pay is given as a substitute

for immediate and continued re-employment with the
company. The award of backwages, on the other hand,
is to relieve the employee of the loss of earnings that
he suffered during the period between his dismissal
and his reinstatement. Payment of backwages is a
form of relief that restores the income that was lost by
reason of unlawful dismissal; separation pay, in con­
trast, is oriented towards the immediate future, the
transitional period the dismissed employee must un­
dergo before locating a replacement job. (Santos vs.
NLRC, et al., G . , R. No. L-76721, September 21,
1987)

•How is separation pay, in lieu of. reinstatement, to be

computed?

ANS. The separation pay, in lieu of reinstatement,

is to be computed at the rate of one (1) month .for
every year of service, from the start of his employment
up to the time of termination thereof, including ths
three (3) year period in respect of which backwagss
are awarded although the dismissed employee did not
actually serve during the latter period. Furthermore,
the salary rate prevailing at the end of the three-year
period of putative service should be used in such
com putation. (G roiier International, Inc. vs.
Amansec, G. R. No. 8?523, August 31, 1989;
Sesland Services,- Inc., et al. vs. NLRC, et al., G. R.
No. 90500, October 5, 1990; Tonllo vs. Leogardo, et
a!., G. R. Mo. 77205, May 27, 1991)
* * *

May unfair labor practice cases bo the subject o f com­

promises?

624
 UNFAIR LABOR PRACTICES

ANS. No. Unfair labor practice cases are not, in

view of the public interest involved, subject to compro­
mise. (CLLC E. G. Gochangco W orkers Union, et al.
vs. NLRC, et al., G. R. Nos. 67158-62, May 30,
1988, citing AFP Mutual Benefit Association, Inc. vs.
AFP-MBAI-EU, et al., G. R. Nos. L-39140 & 39145,
May 17, 1980)

•k * *

What is the penalty fo r an unfair labor practice?

ANS. Fine of not less than P1,000.00 or imprison­

ment of not less than three (3) months nor more than
three (3) years, or both such fine and imprisonment at
the discretion of the court. (Art. 288, Labor Code)

625
 CHAPTER XVI

TERMINATION OF EMPLOYMENT
AND RETIREMENT

What is meant by the “ security of tenure” of an em­

ployee?

ANS. Security of tenure of an employee is his right

against unjust and arbitrary dismissal. He cannot be
deprived of his work, which is property in the constitu­
tional sense, without a just or authorized cause and
without the benefit of a hearing. It also includes his
right against unwarranted transfers, demotion and
diminution of his benefits.
* * *

Is there an express constitutional or statutory guarantee

o f the security of tenure of an employee?

ANS. Yes. Article XIII, Section 3, of the Philippine

Constitution, expressly guarantees the employee’s se­
curity of tenure. This is reiterated in Article 3 of the
Labor Code.

* * *

May an employee who enjoys security of tenure, like a

regular employee, be validly dismissed? Explain.

ANS. Yes. Security of tenure does not guarantee

perpetual employment. If there is a just or authorized
cause the employer may terminate the services of an
employee; the form er cannot be legally compelled to
have in its employ a person whose continued employ­
ment is patently inimical to its interest. The law, while
affording protection to the employee, does not autho­
rize the oppression or destruction of the employer.

626
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

How would you reconcile union security clause with

security o f tenure? (1982 Bar).

ANS. A union security clause is a contractual

lim itation upon the security of tenure of an employee.
Pursuant to a union security clause, such as closed
shop, union shop or m aintenance of membership
clause, voluntarily entered into by the workers’ bar­
gaining representative, and the employer, an individ­
ual’s employment may be validly terminated. Laws
recognizing the validity of union security clauses are
enacted pursuant to the police power of the State; they
are intended to make unions strong, thereby becoming
effective instruments for the protection of the worker’s
rights. The security of tenure of an employee must
yield to the operation of a valid union security clause.

* * *

Who are considered regular employees?

ANS. The following are considered, under Article

280 of the, Labor Code, to be regular employees:

(a) Those who have been engaged to perform

activities which are usually necessary or desirable in
the usual business or trade of the employer, their
employment not being fixed for a specific project or
undertaking the completion or termination of which has
been determined at the time of engagement, or sea­
sonal in nature and the employment is for the duration
of the season.

(b) Casual employees who have rendered at least

one (1) year of service, whether such service is
continuous c;- broken; they are considered regular
employees with respect to the activities in which they
are employed; their employment shall continue while
such activity exists.
Article 280 classifies regular employment into two
(2) kinds: (a) regular employees by nature of work,

627
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

and (b) regular employees by years of service. The

first category covers employees whose services are
usually necessary or desirable in the usual business or
trade of the employer. The second category covers
employees who have been performing the job for at
least one (1) year, even if the performance is not
continuous or merely intermittent; but such regular
employment is only with respect to such activity and
while such activity exists. (E. Ganzon, Inc. vs. NLRC
et al., G. R. No. 123769, December 22, 1999)

* ★

What is casual employment?

ANS. An employment is casual when the employee

is engaged to perform tasks or activities which are not
usually necessary or desirable in the usual business or
trade of the employer. (Article 280, Labor Code)

* * *

May a casual employee enjoy security of tenure?

ANS,. A casual employee who has rendered at

least one year of service, whether such service is
continuous or broken, enjoys limited security of tenure;
his employment shall continue while the activity in
which he is employed, exists. (Article 280, Labor Code)

* * *

May a casual employee acquire regular status?

ANS. Yes. When he completes one year of

service, he becomes a regular employee with respect
to the activity in which he is employed. It is not
necessary that the employee be first issued a regular
appointment or be form ally declared as such before he
can acquire regular status. (Kimberly Independent

628
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Labor Union, etc. vs. Drilon, et al., G. R. Nos.

77629 and 78791, May 9, 1990)

* *

What are the consequences of the violation o f a

worker’s security o f tenure?

ANS. Article 279 of the Labor Code provides that

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 backwages,
inclusive of allowances, and other benefits or their
monetary equivalent computed from the time his com­
pensation was withheld from him up to the time of his
actual reinstatement.
He may also recover moral and exemplary dam­
ages and attorney’s fees.

★ ★ *

Are there provisions in the Labor Code recognizing the

worker’s right to notice and hearing before he is dis­
missed?

ANS. Yes. Article 277 (b) of the Labor Code

provides that the employer shall furnish the employee
whose employment is sought to be terminated a written
notice containing a statement of the causes for term i­
nation 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.
Article 283 of the Labor Code provides, in connec­
tion with dismissals for authorized causes, that the
employer must serve a written notice upon the worker
and the Department of Labor and Employment at least
one (1) month before the intended date of termination.

629
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Perez is hired by a textile firm as a weaving machine

operator. The employment contract with the company
stipulates among others that the latter shall make an
annual assessment of his performance and his contin­
ued employment shall depend upon the said evaluation.
(a) Is the employment of Perez regular? Why?

ANS. Yes. He is engaged to perform an activity

(weaving) which is usually necessary or desirable in
the usual business or trade (textile manufacturing) of
his employer.

(b) Is the aforesaid stipulation in his employment

contract valid? Why?

ANS. The stipulation is not valid. It undermines

the security of tenure enjoyed by Perez, who is a
regular employee. His continued employment is made
to depend upon the whims of the employer.
* * *

Barcenas, who spoke the Chinese language, was hired

by the Hsad Monk of the Buddhist Temple as secretary
and interpreter. Her position required her to receive and
assist Chinese visitors, act as tourist guide fo r foreign
Chinese visitors, attend to the callers of the Head Monk
as well as to the food fo r temple visitors, run errands fo r
the Head Monk such as paying the Meralco, PLDT,
MWSS bills and act as liaison in some government
offices. She also bore the child o f the Head Monk.
Is Barcenas a regular employee of the Buddhist Temple
o r a domestic helper?

ANS. Barcenas is a regular employee. Her

functions were essential and important to the operation
and religious function of the temple; they could not be
categorized as mere domestic work. (Barcenas vs.
NLRC, et al., G. R. No. 87210, July 16, 1990)

* * *

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 TERMINATION OF EMPLOYMENT
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A company engaged in the construction business hired

carpenters, masons or laborers and issued to them
notices of employment stating among others that they
have been hired fo r a specific project and that their
employment shall be deemed automatically terminated
either at the completion o f the project or upon the
completion o f the work requiring their services. How­
ever, when a project to which they were individually
assigned was completed, they would be assigned to the
next project o r a stage thereof. Considering that they
have been working fo r the company fo r a number of
years, are they regular employees of the latter? Why?

ANS. Yes, they are considered regular employees.

They perform activities usually necessary or desirable
in the usual business of the company. Also, they have
rendered at least one (1) year of service. They are
considered “non-project employees” of the construction
company. (Fegurin, et al. vs. NLRC, et al., G. R.
No. L-54083, February 28, 1983)

* * *

A corporation operating a jai-alai fronton fo r sport and

amusement hired a mason and plumber who, together
w ith some workers, were assigned to do renovation on
its building. The work lasted fo r about eleven (11)
months. Are the mason and plumber regular employees
o f the company? Why?

ANS. No, they are not regular employees. They

were engaged for a specific project or undertaking.
Their work did not even take one year. They are
casual employees and as such do not enjoy security of
tenure. (Philippine Jai-Alai and Amusement Corpora­
tion vs. Clave, et al., G. R. No. L-54136, December
21, 1983)

631
 TERMINATION OF EMPLOYMENT
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Elena Honasan applied for employment with the Holiday

Inn and was accepted fo r “ on-the-job training” as a
telephone operator fo r a period of three (3) weeks. For
her services, she received food and transportation al­
lowance. After the completion of her training, she was
employed on a “ probationary basis” fo r a period of six
(6) months. Four (4) days before the expiration of the
aforesaid period, Holiday Inn notified her of her dis­
missal on the ground that her performance had not
come up to the standards of the hotel. Was the dis­
missal of Elena lawful? Why?

ANS. No. At the time of her dismissal she had

become a regular employee and could no longer be
dismissed on the ground relied upon by the hotel. Her
“on-the-job training” for three weeks was in itself a
probationary period. She was certainly under observa­
tion during that time. If her services proved unsatis­
factory then, she could have been dropped as early as
during that period. But she was not.
Even if it be supposed that the probation did not
end with the three-week period of on-the-job training,
there is no reason why that period should not be
included in the stipulated six-month period of proba­
tion. Consequently, at the time of her dismissal, the
probationary period of six-months had expired and she
had become a regular employee. (Holiday Inn Manila,
etc. vs. NLRC, et al., G. R. No. 109114, September
14,1993)

* ★ ★

Stevedores were employed by corporations engaged in

deep-sea fishing to unload the tuna fish catch from
latter’s vessels into refrigerated vans fo r shipment
abroad. Their work was however intermittent, depend­
ing on the arrival of fishing vessels. There were also
times when the stevedores worked on vessels belong­
ing to other fishing companies.
(a) Would you consider the stevedores as regular
employees of the deep-sea fishing corporations?

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 TERMINATION OF EMPLOYMENT
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ANS. Yes. They were engaged to perform activi­

ties usually necessary or desirable in the usual busi­
ness or trade of their employers. The activity of
catching fish is a continuous process; it cannot be
considered as a specific project or a seasonal activity.

(b) Did the fact that the stevedores alternated their

employment on different vessels militate against the
existence of employer-employee relationship? Why?

ANS. No, During temporary layoffs, it is natural

for a worker to seek other employment, for he is not
being paid and must therefore find means of support
elsewhere. Temporary cessation of operations or lack
of work should not mean starvation for workers and
their families. (RJL Martinez Fishing Corporation vs.
NLRC, et al., G. R. No. L-63550, January 31, 1984)
* * *

An electric cooperative extended peijnanent appoint­

ments to meter inspectors, PABX operators, utility men,
disconnectors, linemen, messengers, secretaries,
clerks, typists, plumbers, mechanics, draftsmen, HRD
personnel, collectors and electricians after six (6)
months from the date of their hiring.
(a) May the employer treat these workers as regular
employees only from the date they were extended per­
manent appointments? Why?

ANS. No. Their services are usually necessary or

desirable in the usual trade or business of the electric
cooperative. Furthermore, the employer should not be
allowed to adopt schemes to eternalize their temporary
status.

(b) May the employer classify regular employees into

two (2) groups, the first group to be entitled to security
of tenure and the benefits under the CBA, and the
second group to be entitled only to security of tenure?
Why?

633
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. Such a classification finds no sanction

under the Labor Code for it distinguishes where there
is no difference. (Central Negros Electric Cooperative,
Inc. vs. NLRC, et al., G. R. No. 106246, September
1, 1994)
* ft -ft

De Leon was hired by La Tondefta, Inc., which is en­

gaged in the business of manufacture and distillery of
wines and liquors and given the work o f painting a
company building and equipment and other odd jobs
relating to maintenance, like cleaning and oiling ma­
chines. After working fo r more than one (1) year, he
asked that he be regularized. Instead o f acceding to
this request, the company dismissed De Leon, contend­
ing that he was a casual employee.
(a) Is De Leon considered a casual employee?

ANS. No. His work was not limited to painting a

company building; he also performed maintenance
jobs. Besides, his employment had lasted for more
than one (1) year.

(b) What is the primary standard of determining regular

employment?

ANS. It is the reasonable connection between the

particular activity performed by the employee in rela­
tion to the usual business or trade 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. The entirety of the activities performed by
the employee should be considered.
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 indispens­
ability of the activity to the business.

834
i
i
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Hence, the employment is also considered regular,

but only with respect to such activity and while such
activity exists. (De Leon vs. NLRC, et al., G. R. No.
70705, August 21, 1989)
* * *

T u to r Industries, Inc., a company engaged in the busi­

ness of moving and storage of goods, hired packers,
drivers and utility men/carpenters pursuant to uniform
company-prepared master employment contracts which
provided among others that the workers were employed
on “ as-needed” basis and considered “ daily-hired” and
not entitled to the benefits enjoyed by permanent em­
ployees of the company. Are the packers, drivers, utility
men/carpenters nevertheless considered to be regular
employees of Tucor Industries? Why?

ANS. Yes. Carpentry work, packing and driving

activities are usually necessary and desirable in Tu-
cor’s usual business and done on a regular basis.
They are entitled to security of tenure, the provision of
the written agreement to the contrary notwithstanding.
(Tucor Industries, Inc., et al. vs. NLRC, et al., G. R.
Nos. 96608-09, May 20, 1991)
* * *

M. was a master carpenter. He worked with other

carpenters in the repair o f vessels of a shipping enter-
prise. He was paid on the daily basis and had rendered
service fo r the company fo r five (5) years. He hired men
to help him in the repair of the vessels and paid them
with money given by the employer. If any of the men
hired by him is inefficient, he could fire the former. He
was also left to decide how to best repair the vessels. Is
M. a regular employee of the fishing enterprise or an
independent contractor? Why?

ANS. M. is a regular employee, not an indepen­

dent contractor. An employee who is given a more or

635
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

less free hand in the technical details of one operation

in an enterprise or firm and who is made a supervisor
over skilled workers hired as the need arises does not
become an independent contractor simply because the
employer delegates to that employee many functions
and responsibilities which the employer himself may
discharge. This is especially true in fam ily businesses,
fishing and farming and cottage industries where infor­
mal and unwritten relationships prevail and the clear
cut distinctions governing labor-management relations
may, at times, be blurred. (Jose Manapat vs. The
Honorable W orkmen’s Compensation Commission, et
al., G. R. No. L-30278, December 14, 1982)
* * *

Mehitabel Furniture Co. is engaged in the manufacture

of furniture fo r export. It has regular customers abroad
but also receives special orders if is unable to decline
as a matter of business policy. It therefore has to hire
“ temporary workers” to meet these special orders.
These are made to sign temporary employment con­
tracts. Are the workers nevertheless considered as
regular workers? Why?

ANS. Yes, they are regular workers. They are

engaged in activities which are usually necessary or
desirable in the usual business or trade of the em­
ployer. Significantly, the special orders are not sea­
sonal but more or less regular, requiring the continu­
ous services of the “temporary workers.” The tempo­
rary employment contracts have little probative value.
Furthermore, the “temporary workers” have in fact
worked for more than one year in the so-called “special
projects.” (Mehitabel Furniture Co., Inc., et al. vs.
NLRC, et al., G. R. No. 101268, March 30, 1993)

* * *

Explain the justification fo r the classification o f employ­

ment into regular and casual.

636
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. The concept of regular and casual employ­

ment is designed to put an end to the practice of
employers of hiring “casuals" to perform regular jobs
and thus deprive the latter of the benefits of regular
employment. (Policy Instructions No. 12, Secretary of
Labor). The term “casual” has not always been clearly
understood, and the limitation on the right of the
employer to employ casuals has never been precisely
defined.

* * *

Does the fact that an employment contract is only fo r a

fixed period of six (6) months prevent a worker from
becoming a regular employee?

ANS. No. Where laborers, harvesters or sprayers

were hired and rehired by an agricultural establishment
which produces high grade bananas in a span of from
two (2)' to four (4) years, it was held that they were
regular employees, notwithstanding the fact that the
last contract that they signed provided for an employ­
ment period of six (6) months. Their services were
indispensable to the year-round operations of the
company. (Bustamante et al. vs. NLRC et al., G. R.
No. 111651, March 15, 1996)
* * *

May employment be regular although the activities may

not be continuous? Cite an instance.

ANS. The employment of seeders, operators,

sorters, slicers, janitors, drivers, truck helpers, me­
chanics and office personnel in a food processing
company is regular and not seasonal in nature. While
it may be true that some phases of the company’s
processing operations are dependent on the supply of
fruits for a particular season, the other equally impor­
tant aspects of its business, such as manufacturing
and marketing are not seasonal. The company contin­

837
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ues to operate and do business through-out the year

even if the availability of fruits and vegetables is
seasonal. (Philippine Fruit and Vegetable Industries,
Inc. vs. NLRC et al., G. R. No. 122122, July 20,
1999)

* * *

May a part-time employee and one who is paid by

commission be deemed regular?

ANS. That an employee worked only on a part-

tim e basis does not mean that he is not a regular
employee. One’s regularity of employment is not
determined by the number of hours one works but by
the nature and by the length of time one has been in
that particular job. (Perpetual Help Credit Coopera­
tive, Inc. vs. Faburada et al., G. R. No. 121948,
October 8, 2001)
The employment of drivers and conductors by a
passenger bus company is considered regular; they
render services which are usually necessary or desir­
able in the business of the company; the latter cannot
operate and manage its business of providing trans­
portation services to the public. Such is the rule
notwithstanding that the employees are compensated
purely on commission basis and work for only about
ten (10) to fifteen (15) days in a month; their employ­
ment has nothing to do with the manner of computing
and paying the employees’ wages. (Columbus Philip­
pines Bus Corporation vs. NLRC et a!., G. R. Nos.
114858-59, September?, 2001)

* * *

Pure Foods Corporation hired workers, numbering 906,

to work fo r a fixed period o f five months at its tuna
canning plant in General Santos City. Their work con­
sisted in the receiving, skinning, loining, packing and
casing-up of tuna fish which were then exported by

638
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Pure Foods. After the expiration of the period fixed in

their contract, their services were terminated and they
executed a “ Release and Quitclaim” stating that they
had no claim whatsoever against the company.
The main bulk o f the workforce o f the company con­
sisted o f workers hired fo ra duration o f five months; as
a matter o f fact, the company hired such employees
every month fo r a duration o f five months after which
th e ir services were terminated and they were replaced
by other workers also hired fo r a five-month period. The
employees hired by the company on a five-month basis
numbered about ten thousand.
(a) Are the employees hired on a five-month basis
considered regular employees? Why?

ANS. Yes. They performed work usually neces­

sary or desirable in the company’s usual business.
They must also be deemed to have been hired for an
indefinite period and not for a fixed term; being mere
cannery workers, they could not have voluntarily and
knowingly agreed to a five-month employment con­
tract. Furthermore, the five-month period specified in
the employment contracts was obviously imposed to
circumvent the constitutional guarantee on security of
tenure and should be struck down or disregarded as
contrary to public policy or morals.

(b) Did the execution by the workers o f a “ Release and

Quitclaim” preclude them from questioning the termina­
tion o f their services? Why?

ANS. No. Generally, quitclaims by laborers are

frowned upon as contrary to public policy and are held
to be ineffective to bar recovery for the full measure of
the workers’ rights. The reason for the rule is that the
employer and the employee do not stand on the same
footing. (Pure Foods Corporation vs. NLRC et al., G.
R. No. 122653, December 12, 1997)
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Vivian was employed as an encoder by International

Information Services, Inc., a corporation engaged in the
business o f data encoding and key punching, fo r more
than three (3) years. During this period, she signed
thirteen (13) separate employment contracts, such last­
ing only fo r a period o f three (3) months. Each contract
expressly provided that it was only fo r a specific project
and effective fo r the period therein fixed. May Vivian be
considered a regular employee? Explain.

ANS. Yes. She performed activities usually

necessary or desirable in the usual business or trade of
her employer continuously for a period of more than
three (3) years. In Maraguinot vs. NLRC, G. R. No.
120969, January 22, 1998, it was ruled that a project
employee or a member of a work pool may acquire the
status of a regular employee when the following con­
cur: (1) there is continuous rehiring of project
employees even after the cessation of a project, and
(2) the tasks performed by the alleged project employ­
ees are vital, necessary and indispensable to the
visual business or trade of the employer. (Inbuido vs.
NLRC e t a l., G. R. No. 114734, March 31, 2000)
* * *

The contract of employment o f a “ data control clerk”

provided:

“ Section 2. This Contract shall be effective fo r a period

of 1 year commencing on May 10, 1994, until May 10,
1595 uniess sooner terminated pursuant to the provi­
sions hereof.

From May 10,1994 to November 10,1994, o r fo r a period

of six (6) months, the EMPLOYEE shall be contractual
during which the EMPLOYER can terminate the EM­
PLOYEE'S services by serving written notice to that
effect. Such term ination shall be immediate, o r at
whatever date w ithin the six-month period, as the em­
ployer may determine. Should the employee continue
his employment beyond November 10, 1994, he shall

640
 TERMINATION OF EMPLOYMENT
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become a regular employee upon demonstration of

sufficient skill in the terms of his ability to meet the
standards set by the EMPLOYER. IF the EMPLOYEE
fails to demonstrate the ability to master his task during
the first six months he can be placed on probation for
another six (6) months after which he w ill be evaluated
fo r promotion as a regular employee.”

(a) Are the periods fixed in the contract valid? Explain.

ANS. No. It is just another scheme to defeat the

constitutionally guaranteed right to employees to secu­
rity of tenure.
The language of the contract is truly a double-
bladed scheme to block the acquisition of the em­
ployee of tenurial security. Thereunder, the employer
has two options. It can terminate the services of the
employee by reason of expiration of contract, or it may
use “failure to meet work standards” as the ground for
the employee’s dismissal. In either case, the tenor of
the contract jeopardizes the right of the worker to
security of tenure.

(b) Is the “ data control clerk” considered a regular

employee? Why?

ANS. Yes. His job is directly related to the data

processing and data encoding business of the em­
ployer.
Even assuming that his original employment was
probationary, he was permitted to work beyond the
six-month period; an employee allowed to work beyond
the probationary period is deemed a regular employee.
(Servidad vs. NLRC et al., G. R. No. 128682, March
18, 1999)
* * *

Are project workers regular employees? Explain.

ANS. Project workers are not regular employees,

their services being needed only when there are pro­

641
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

jects to be undertaken. The rationale of this rule is

that if a project has already been completed, it would
be unjust to require ihe employer to maintain them in
the payroll while they are doing absolutely nothing
except waiting until another project is begun, if at all.
Iri effect, these standby 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. (De Ocampo, et al. vs. NLRC, et al.,
G. R. No. 81077, June 6, 1990)
Electricians and other workers hired by an electri­
cal contractor have been held to be project workers
despite the fact that they worked under different pro­
ject employment contracts for many years; it would be
burdensome for the employer to carry them as perma­
nent employees and pay them wages even if there are
no projects for them to work on. (Cartagenas, et al.
vs. Romago Electric Co., Inc., et al., G. R. No.
82973, September 15, 1989)
K. was hired by PNOC as a project technician to
work in the company’s geothermal plant project in
Valencia, Negros Oriental for a period of five (5)
months. A fter the expiration of the first contract, he
was given another contract for five (6) months. There­
after, he was re-hired for six (6) months. Bui prior to
the expiration of this contract, he was dismissed
without any valid cause. It was ruled that K. is entitled
to reinstatement to his former position without loss of
seniority right and privileges and with fu!l backwages
from the date of his dismissal until his actual reinstate
ment. The fact that an employee is not a regular
employee does not mean that he can be dismissed any
time, even illegally, by his employer. Likewise, PNCC
failed to show proof as to when the project was
completed. (Kamaco vs. NLRC et al., G R. r!c.
129449, June 29, 1999)
The employment of M. as a fabricator, helper,
stockman and timekeeper in different offices and pro­
jects of the company for a period of thirteen (13) years
cannot be considered as project employment. The

642
 TERMINATION OF EMPLOYMENT
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company even failed to submit termination reports with

the nearest public employment office. (Audion Electric
Co., inc. vs. NLRC et al., G. R. No. 106648, June
1 7 ,1 9 9 9 ).

What is a “ project"?

ANS. A “project” has reference to a particular job

or undertaking that may or may not be within the
regular or usual business of the employer. In either
case, the project must be distinct, separate and identi­
fiable from the main business of the employer and its
duration must be determined or determ inable.
(Philippine Airlines, Inc. vs. NLRC et al., G. R. No.
125792, November 9, 1998)
* * *

Philnor Consultants and Planners, Inc., a company pro­

viding construction supervision of the Manila North
Expressway Extension, hired Hilario Rada as a driver fo r
a term of twenty four (24) months. After the expiration
o f this period, he was extended another employment fo r
ten (10) months. A third employment contract, fo r
nineteen (19) months, was thereafter executed between
him and Philnor. All these contracts were entered into
during various stages and prior to the completion of the
construction project. Was Rada a regular employee of
Philnor? Why?

ANS. No. He was hired in a specific project or

undertaking as a driver. He was a project employee
whose employment terminated upon the expiration of
his employment contract or upon the completion of the
project. (Rada vs NLRC, et a!., G. R. No. 96078,
January 9, 1992)

643
 TERMINATION OF EMPLOYMENT
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A company engaged in the building and repair of ves­

sels hire welders, helpers and construction workers to
work in the repair or construction of a specified vessel.
The company does not however construct vessels for
sale o r otherwise which w ill demand continuous pro­
duction o f ships; it merely accepts contracts fo r ship­
building o r repair o f vessels. 1$ the employment of the
workers considered regular ? Explain.

ANS. No. They are project employees whose work

is co-ternriinus with the project for which they are hired.
Project employees, as distinguished from regular or
non-project employees, are mentioned in Article 280 of
the Labor Code as those “Where ihe employment has
been fixed for a specific project or undertaking the
completion or termination of which has been deter­
mined at the time of the engagement of the employee.’’
(Sandoval Shipyards, Inc. vs. NLRC, et al., G. R.
No. L-65689, May 31, 1985)

* * *

Are project employees in the construction industry con­

sidered as regular employees?

ANS. ; No. Project employees are employed in

connection with a particular construction project. They
know before hand that their employment would term i­
nate as soon as the project is finished. (Policy
Instructions No. 20, Minister of Labor)

* * *

The Philippine National Oil Company-Energy Develop­

ment Corporation hired Francisco Mata as a driver dur­
ing the construction of the steam wells o f the Bacon-
Manito Geothermal Project in Sorsogon. He signed a
contract with a fixed period. He worked in the project
from 1980 until 1985 when the exploration stage was
completed. The PNOC however never gave written

644
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

notice to the Department of Labor regarding the term i­

nation of the contract of Mata.
(a) Is Mata considered a project employee? Why?

ANS. Yes. His employment was for the duration of

a particular phase of the geothermal project. He
knowingly and voluntarily entered into an employment
contract with a fixed period.

(b) Is the termination of his contract valid?

ANS. No. The company failed to obtain a written

clearance from the Secretary of Labor as required by
Policy Instruction No. 20, entitled “Employer-
Employee Relations in the Construction Industry.”
(Philippine National Oil Co., et al. vs. NLRC, et al.,
G. R. No. 97747, March 31, 1993, citing Ochoco vs.
NLRC, 120 SCRA 774)

* * *

Consumer Pulse, Inc. is engaged in the business of

conducting market researches and public surveys on
consumer products and services fo r its clients. These
researches and. surveys are dependent upon the con­
tracts it can secure from its clients consisting of corpo­
rations, organizations, government and individuals.
The company hired field interviewers on specific project
basis fo r a definite period o f time. Many of the inter­
viewers worked fo r several projects. Generally, the
contractual employment is not continuous but interm it­
tent, sporadic with long intervals o f idle periods in
between projects due to lack o f work o r jo b contracts.
Are the field interviewers considered regular employees
of Consumer Pulse, Inc.? Why?

ANS. No. The interviewers were hired for specific

projects the completion or termination of which were
determined at the start of their employment. They
could not be hired for an indefinite period of time and
carried on the payroll even without projects to work

645
 TERMINATION OF EMPLOYMENT
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with without the company incurring financial losses.

The company, in entering into specific and limited
contracts with the interviewers, was only exercising its
management prerogative to conduct its business in the
most efficient manner thereby avoiding unnecessary
expenses and maximizing profitability without however
defeating or circumventing the rights of its employees.
(Mamansag, et al. vs. NLRC, et al., G. R. No.
97520, February 9, 1993)
* k k

Fernandez, a skilled welder, worked fo r D. M. Consunji,

Inc., a construction firm. He was first hired in Novem­
ber, 1974; his employment was terminated in March,
1986 on the ground that the project he had been as­
signed to was already completed and there was no more
work fo r him to do. From November, 1974 up to March,
1986, the company hired him interm ittently as he was
engaged solely fo r specific projects. There were gaps
of a month or months between the hiring o f the em­
ployee in the numerous projects wherein he was as­
signed. The company regularly made lay-off and term i­
nation reports to the Department of Labor. There was
also no evidence that the worker was under obligation
to be always available on call by the company and that
he could not offer his services to other employers.
Considering his length of service, may Fernandez be
considered a regular employee of D. M. Consunji, Inc.?
Why?

ANS. No. He is a project employee. Under Article

280 of the Labor Code, employment for a project is
excepted from the category of regular employment.
(Fernandez vs. NLRC, et al., G. R. No. 106090,
February 28, 1994)
* * ★

The National Steel Corporation (NSC), a company en­

gaged in the production or making and marketing of

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 TERMINATION OF EMPLOYMENT
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steel products, had a Five Year Expansion Program with

a number of component projects consisting of con­
struction of plants and installation of new machinery
and equipment. NSC hired workers to undertake the
expansion program.
(a) Are the workers hired for the expansion program
considered as project workers? Why?

ANS. Yes. They were hired to perform work in a

specific undertaking the completion of which had been
determined at the time of their engagement.

(b) Give the types of projects for which workers may be

hired.

ANS. The project for the carrying out of which

project employees are hired would ordinarily have
relationship to the usual business of the employer. But
it is still conceivable, though unusual, for a company to
undertake a project which has absolutely no relation­
ship to the usual business of the company.

(c) What is the principal test to determine whether

employees are “ project employees” as distinguished
from “ regular employees” ?

ANS. The test is whether or not the project

employees are assigned to carry out a specific project
or undertaking the duration and scope of which are
specified at the time the employees are engaged for
that project.

(d) The NSC project employees rendered service for

more than six (6) years. Does this qualify them as
regular employees? Why?

ANS. No. The fact that their employment had

gone beyond one (1) year, does not detract from, or
legally dissolve, their status as project employees.
The second paragraph of Article 280 of the Labor
Code, providing that an employee who has served for

647
 TERMINATION OF EMPLOYMENT
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at least one (1) year, shall be considered a regular

employee relates to casual employees, not to project
employees. (ALU-TUCP, etc. vs. NLRC, et al., G. R.
No. 109902, August 2, 1994)

* it *

Magante was employed as a carpenter by a company

engaged in the concrete structural business. His work
involved the making of moulds fo r bridges, buildings
and others. He was never assigned to work outside the
plant o f his employer. Every three (3) months, however,
he was made to fill up and sign an employment contract
relating to a particular phase of work in a specific
project. After working fo r almost two (2) years, Magante
was told that his contract had expired and was not
being renewed.
(a) Is the termination of Magante's employment lawful?
Why?

ANS. No. Magante's employment was regular and

could be terminated only for just or authorized causes.
He was assigned to perform tasks which are usually
necessary or desirable in the usual business or trade of
the company. The employment contracts signed by
Magante cannot be used to defeat the purpose for
which the Labor Code and its implementing rules were
enacted.

(b) Is Magante a project employee under Policy Instruc­

tion No. 20?

ANS. No. The work assignments did not end on a

project to project basis. Despite the signing of employ­
ment contracts allegedly for different projects, he
continued to perform the same kind of work throughout
his period of employment. (Magante vs. NLRC, et al.,
G. R. No. 74969, May 7, 1990)
* * *

648
 TERMINATION OF EMPLOYMENT
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A construction firm extended written appointments to

six (6) employees designating them as project contract
workers, instead o f being assigned solely to job sites,
these employees were also made to work as welder,
inventory clerk, truck helper, machinist, battery man or
warehouseman either at the company’s central shop,
central warehouse, or central office. Are they project
employees? Why?

ANS. No. Their work did not end upon the

completion of a project. They performed their jobs
even after a job had been finished. Since they
performed tasks vital and indispensable to the efficient
administration and completion of the company’s vari­
ous projects, they are considered regular employees.
Besides, the company never submitted any reports of
termination of project employment to the nearest em­
ployment office as required by Policy Instruction No.
20. (Capitol Industrial Construction Groups vs. NLRC,
et al., G. R. No. 105359, April 22, 1993)
* ★ *

Cite recent decisions on project employment.

ANS. A project employee hired for a specific task

also enjoys security of tenure. His dismissal prior to
the completion of the project must comply with the
substantive and procedural requirements of due pro­
cess. A mere claim of project completion is not
sufficient to terminate a project worker’s employment
without adequate proof to demonstrate such claim.
(Archbuild Masters and Construction, Inc. et al. vs.
NLRC et al., G. R. No. 108142, December 26, 1995)
The employment by Cosmos Bottling Corporation
of special teams to install and dismantle its annex
plant machines in various plants all over the country
has been held to be project employment. The projects
are distinct ansi separate, and are identifiable as such,
from its usual business of bottling beverages. Their
duration and scope are made known prior to the

649
 TERMINATION OF EMPLOYMENT
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undertaking and their specified goal and purpose are

fulfilled once the projects are completed. And the
mere fact that a project employee has worked on the
specific project for more than one (1) year does not
necessarily change his status as project employee and
convert it to regular or permanent em ployment.
(Cosmos Bottling Corporation vs. NLRC et al., G. R.
No. 106600, March 29, 1996)
Where S, a rigger, worked for AG & P for approxi­
mately twenty-eight (28) years virtually performing the
same work, and his “project-to-work" employment was
renewed several times with a gap of one (1) day to one
(1) week from the last project to the succeeding one, it
was held that his employment was not project but
rather regular employment; the company even failed to
file the notices of termination of employment of S with
the nearest Public Employment Office as required by
Policy Instruction No. 20 and Department Order No.
19 issued on April 1, 1993; such notice is among the
“indicators” that a worker is a project employee.
(Samson vs. NLRC, et. al., G. R. No. 113166,
February 1, 1996)
The employment by a construction firm of eight (8)
workers (as mason, carpenter and laborer) for several
years has been held to be non-project, it appearing
that their jobs were continuous and on-going such that
when a project to which they were individually as­
signed was completed, they were reassigned to the
other businesses of the employer or to the next project,
if any. The employer even failed to submit any
employment contracts and records showing the dates
of hiring and termination of the workers in relation to
particular projects in which the latter were employed,
and the termination reports required to be submitted to
the DOLE upon completion of a project. (Uy vs. NLRC
et. al., G. R. No. 117983, September 6, 1996)
Where there is doubt, due to conflicting data
submitted by the parties, as to whether the workers
hired by a company engaged in the installation of
aircondition'ng systems as tinsmith, leadman, aircon
mechanic, installer, welder and painter, were project or
regular employees, such doubt should be resolved in

650
 TERMINATION OF EMPLOYMENT
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favor of their status as regular employees. (Raycor

Aircontrol Systems, Inc. vs. NLRC, et al., G. R. No.
114290, September 9, 1996)
Workers hired to handle the installation of aircondi-
tioning and refrigeration equipment in construction
projects were held to be regular employees of a
company engaged in the manufacture and installation
of such equipment since there was no proof that they
were hired on a project-to-project basis; as a matter of
fact they were employed without interruption, their
length of employment ranged from 8 years to \ Vi
years, and they performed services which were neces­
sary and desirable in the business of their employer.
(Magcalas et al. vs. NLRC et al., G. R. No. 100333,
March 13, 1997)
Where workers of a group of companies engaged in
the construction business, had already gone through
the status of project workers and were now continu­
ously rehired due to the demands of the business, and
oftentimes the construction projects overlapped, and
their employment covered a long span of time (the
shortest, at seven years), it was held that they can no
longer be considered as project workers; they should
be deemed regular workers. (Tomas Lao Construction
et al. vs. NLRC et al., G. R. No. 116781, September
5, 1997)
Project employees are entitled to security of tenure
for the duration of the project they were hired for, or
the phases thereof to which they were assigned or in
connection with whicli they rendered services. If
illegally dismissed, they v/ould be entitled to full back­
wages from the time they were dismissed up to the
completion of the project or phases thereof to which
they were assigned. (Southern Cotabato Development
and Construction, Inc. et al. vs. NLRC et al., G. R.
No. 121582, October 16, 1997) \
The failure of the employer to report to the nearest
employment office the termination of employment of-
workers every time it completed a project is proof that
dismissed employees were not project employees but
regular employee. This report is required by Policy
Instruction No. 20 of the Department of Labor and

651
 TERMINATION OF EMPLOYMENT
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Employment. (Brahe industries, Inc.. vs. NLRC et al.,

G. R. No. 118853, October 16, 1997)
Workers hired by Atlantic Gulf and Pacific Com­
pany, a construction company engaged, among others,
in building offshore marine structures for third parties,
for its Poro Point plant were considered project em­
ployees, it appearing that their hiring was based on the
availability of project contracts and on the need for
each worker’s particular skills. (Abad et al vs. NLRC
et a!., G. R. No. 108996, February 20, 1998)
It is not enough that an employee is hired for a
specific project or phrase of the 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 is engaged. Otherwise, the worker must be
considered a regular employee. (Violeta et al. vs.
NLRC et al., G. R. No. 119523, October 10, 1997)
The repeated renewals of the employment con­
tracts of a lubeman, bulk cement operator and carpen­
ter of a construction company whose total length of
services ranged from five (5) to nine (9) years have
been held to be a clear indication that the worker’s
employment was regular and not project-to-project; the
company even failed to give a single notice of termina­
tion as required by Policy Instruction No. 20 and
Department Order No. 19. (Salinas et al vs. NLRC et
al., G. R. No. 114671, November 24, 1999) *
A project employee cannot be dismissed without a
valid cause prior to the completion of the project.
(Kiamco vs. NLRC et al., G. R. No. 129449, June
29, 1999)
* * it

Doroteo Alegre was engaged as athletic director by

Brent School, Inc. fo r a fixed term of five (5) years, i. e.,
from July 18,1971 up to July 17,1976. Since he was not
rehired after the expiration of the period, Alegre
protested that his services were necessary and desir­
able in the usual business of his employer and he could
not be dismissed except fo r a valid cause as he had
become a regular employee. Decide.
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Alegrs’s employment was for a fixed period.

After the expiration of the period, his employment
ended.
Article 280 of the Labor Code does not outlaw
employment contracts with a fixed period freely en­
tered into 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.
It does not necessarily follow that where the duties
of the employee entail activities which are usually
necessary or desirable in the usual business or trade of
the employer, the parties should be forbidden to stipu­
late any period of time for the performance of those
activities. There is nothing essentially contradictory
between a definite period of an employment and the
nature of the employee's duties. (Brent School, Inc.
vs. Zamora, et al., G. R. No. 48494, February 5,
1990)

4f * .V

On December 2, 1978, petitioner Pakistan International

Airlines Corporation (PIA) executed in Manila two sepa­
rate contracts of employment with flig h t attendants
Farrales and Mamasig. The contracts provided fo r a
period of three (3) years, subject to extension by mutual
consent o f the parties (par. §); PIA can terminate the
agreement at any time by giving the employee notice In
advance one month befose the intended date o f tervnina-
tion or in lieu thereof by paying the employee wages
equivalent to one month salary (par. 6); and the agree­
ment shall be construed and governed by the laws of
Pakistan, and only the Court of Karachi, Pakistan shall
have jurisdiction to consider any matter arising out of or
under the agreement (par. 10).
On August 2, 1980, roughly one (1) year and four (4)
months prior to the expiration of the contracts of em­
ployment, the employees were informed that their ser­
vices would be terminated effective September 1,1980.

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 TERMINATION OF EMPLOYMENT
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(a) Is their employment for a fixed period? Is their

dismissal lawful? Why?

ANS. No. There is substantial indication that the

period specified in their employment contracts was
designed to circumvent the security of tenure of regu­
lar employees. Although under paragraph 5 of the
contracts, a period of three (3) years was fixed, this
was effectively neutralized by paragraph 6 thereof
which authorized PIA to shorten the period and in
effect rendered the flight attendants’ employment basi­
cally at the pleasure of PIA.

(b) Is the provision in the contracts that the law of

Pakistan shall be the applicable law of the agreement
and that the venue for the settlement of any dispute
arising out of or in connection therewith shall only be in
the court of Karachi, Pakistan valid and binding? Ex­
plain.

ANS. No. The employer-employee relationship is

much affected with public interest and that the other­
wise applicable Philippine laws and regulations cannot
.be rendered illusory by the parties agreeing upon some
other law to govern their relationship.
Besides, there are multiple and substantial con­
tacts between Philippine law and Philippine courts, on
the one hand, and the relationship between the parties,
upon the other; the contract was executed and per­
formed, at least partially, in the Philippines; the parties
are residents of the Philippines. Philippine courts and
administrative agencies are therefore the proper forum
for the resolution of contractual disputes between the
parties. (Pakistan International Airlines Corporation
vs. Hon. Bias Ople, et al., G. R. No. 61594,
September 28, 1990)
* it *

Zosimo Cielo was engaged by a trucking company as a

truck driver under a contract which provided among

654
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

others fo r a term of six (S) months from execution

thereof unless otherwise earlier terminated at the option
of either party. The agreement was supposed to have
commenced on June 30, 1984 and to end on December
31,1984. On December 22,1984, Cielo was notified by
the company of the termination of his services on the
ground o f expiration of their contract. It also appears
from the records that a!! the drivers of the company
were hired on fixed contract basis. The company
merely filled in the blanks in a mimeographed form with
the corresponding data such as the driver’s name and
address, the amount received by him and the date of the
document.
Were the services of CieSo validly terminated? Why?

ANS. No. Even if ostensibly hired for a fixed

period, he should be considered as a regular employee
entitled to security of tenure. The contract for a fixed
period of six (6) months was a clever scheme of the
company to prevent its employees from becoming
regular employees. (Cielo vs. NLRC, et al , G. R.
No. 78693, January 28, 1991)

* * *

Fifteen (15) years after his dismissal fo r cause, Peronilo

was re-hired by Pantranco as a driver fo r ju s t one (1)
month. Did such re-hiring result in his reacquisition of
his form er permanent status? Why?

ANS. No. The contract specifically provided for a

fixed term of one (1) month. Such stipulation must be
respected. (Pantranco North Express, Inc., etc. vs.
NLRC. e ta l., G. R. No. 106654, December 16, 1994)
* * *

Give the criteria under which fixed period contracts of

employments cannot be said to be a circumvention of
the worker’s security of tenure.

85§
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. The criteria are the following: (1) The fixed

period of employment was knowingly and voluntarily
agreed upon by the parties, v/ithout 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 employee dealt with each other on more
or less equal terms with no moral dominance whatever
being exercised by the form er on the latter. (Philippine
National Oil Company-Energy Development Corpora­
tion vs. NLRC, et al., G. R. No. 97747, March 31,
1993)

* * ★

In May, 1986, the Philippine Village Hotel closed and

totally discontinued its operations due to serious finan­
cial and business reverses; this resulted in the termina­
tion of the services of its employees. The validity of the
closure was upheld in a labor case filed by the union of
its employees. In February, 1989, the hotel decided to
have a one (1) month dry-run to ascertain the feasibility
o f resuming its business operations; fo r this purpose it
hired some of its previous workers fo r a one (1) month
period. But upon the lapse of the one (1) month period,
the hotel terminated their services.
(a) Is the termination lawful? Why]

ANS. Yes. The employmsnt was for a fixed period

of one (1) month. This period was freely and voluntar­
ily agreed upon by the parties.

(b) Is this employment fo r one (1) month a continuation

of the workers’ employment prior to the closure o f the
h o te lin 1986? Why?

ANS. No. The hiring of new employees when it

re-opened after three (3) years is valid and to be
expected. The prior employment which was term i­
nated cannot be joined or tacked to the new employ­
ment for purposes of security of tenure. (Philippine

656
 TERMINATION OF EMPLOYMENT
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Village Hotel vs. NLRC, et al., G. R. No. 105033,

February 28, 1994)
* * *

Agricultural workers were hired by the owners of a rice

and sugar land to perform particular phases o f the
agricultural work necessary in rice production and/or
sugar cane production, after which they were free to
render services to other farm owners who need their
services. Considering that they rendered services fo r
many years, is th e ir employment, though seasonal,
deemed regular under the provisions of Article 280 of
the Code? Why?

ANS. No. They are considered project or seasonal

employees under the first paragraph of Article 280.
Their employment legally ends upon completion of the
project or the season.
A project employee has been defined to be one
whose employment has been fixed for a specific pro­
ject or undertaking, the completion or termination of
which has been determined at the time of the engage­
ment of the employee, or where the work or service to
be performed is seasonal in nature and the employ­
ment is for the duration of the season. (Mercado, et al.
vs. NLRC, et al., G. R. No. 79869, September 5,
1991)
* * *

Lina was hired as a component mechanic by General

Diesel Power Corporation and issued a temporary em­
ployment as such from November 21, 1984 to May 21,
1985. On May 22, 1985 she was extended another
contract o f employment providing a probationary period
of six (6) months. Management decided to end her
probationary employment on November 21, 1985. On
January 20, 1986 she was again rehired as parts clerk
and issued a six-month probationary employment. On
June 5, 1986 she was again dismissed. Lina however

657
 TERMINATION OF EMPLOYMENT
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claims that she has become a regular employee and

cannot be dismissed w ithout a valid cause. Decide.

ANS. Lina has become a regular employee. The

nature of her job as a parts clerk required her to
perform activities which are deemed necessary and
desirable in the usual business of her employer. She
was also rehired after the probationary employments
extended to her; this fact of rehiring negates any claim
that she failed to qualify as a regular employee.
Successive hirings and firings cannot be resorted to by
the employer to avoid obligations imposed by law for
the protection and benefit of probationary employees.
(Octaviano vs. NLRC, et al., G. R. No. 88636,
October 3, 1991)
* * *

What is probationary employment?

ANS. It is employment for a specified period

generally not exceeding six (6) months for the purpose
of determining whether the employee can qualify for
regular employment in accordance with reasonable
standards prescribed by the employer.
* * *

What is the probationary period fo r apprentices and

learners?

ANS. If the job is apprenticeable, the probationary

period is the apprenticeship period, which may be six
(6) months or less than six (6) months depending upon
the nature of the job. Upon graduation, an apprentice
may not be under probationary employment in the
company where he trained. In another company,
however, the probationary period for him would be six
(6) months. The reason is to allow the employee to
test his working habits and other personal traits with
respect to his fitness for regularization in the company.

658
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

If the job is learnable — can be learned within

three months — then the probationary period is three
months or less. (Policy Instructions No. 11, Secretary
of Labor)

* * *

Petilla was hired by an electric company as a clerk-

typist effective December 15, 1986 until January 16,
1987, and then given several extensions until June 30,
1987. Contending that her appointment is merely on a
“ temporary basis," the company terminated her ser­
vices w ithout notice or investigation on June 22, 1987.
is Petilla’s dismissal lawful? Decide.

ANS. No. At the very least, Petilla should be

considered a probationary employee, and she became
regular upon the expiration of six (6) months. She was
furthermore engaged to perform activities which are
usually necessary or desirable in the usual business of
the employer.
Her em ployment cannot be considered
“tem porary”; such kind of employment exists only
where the same has been fixed for a specific undertak­
ing 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 per­
formed is seasonal in nature and the employment is for
the duration of the season. (Beta Electric Corporation
vs. NLRC, et al., G. R. No. 86408, February 15,
1990)
* A *

What is the probationary period fo r professors, instruc­

tors and teachers?

ANS. The probationary employment of professors,

instructors and teachers are subject to standards es­
tablished by the Department of Education and Culture.
The period shall riot be more than three (3) consecu­

659
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

tive years for those in the elementary and secondary

levels, six (6) consecutive regular semesters in the
tertiary and graduate levels, and nine (9) consecutive
trimesters where collegiate courses are offered on a
trimester basis. (D O L E -D E C S -C H E D -TE S D A Order
No. 01, s. 1996)

* ★ *

Seven teachers were hired by the school on a proba­

tionary basis. The period of the probationary employ­
ment was not however fixed. Is this period understood
to be one (1) school year ? Why?

ANS. No. The probationary period, when the same

is not specifically fixed in the employment contract,
should be understood as three (3) years. This is in
accordance with the Manual of Regulations for Private
Schools of .the Department of Education. (Espiritu
Santo Parochial School, et al. vs. NLRC, et al., G. R.
No. 82325, September 26, 1989)

* * *

After teaching in a university fo r eight (8) semesters (4)

years, with a teaching load of 8 or 9 hours per week, Dr.
B. was informed that his appointment would not be
renewed. He filed a complaint fo r illegal dismissal
against the university, contending that he had acquired
security of tenure. Decide.

ANS. Dr. B. did not have security of tenure. He

was merely a part-time faculty member. Under para­
graph 75 of the Manual of Regulations for Private
Schools, full time teachers who have rendered three
consecutive years of satisfactory service shall be
considered permanent, And a “full-time teacher" is
one whose total working day is devoted to the school,
has no other regular remunerative employment, and is
paid on a regular monthly basis regardless of the
number of teaching hours. In college, the normal

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 TERMINATION OF EMPLOYMENT
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teaching load of a full-time instructor is eighteen (18)

hours a week. (University of Sto. Tomas, et al. vs.
NLRC, et al., G. R. No. 85516, February 15, 1990)
* * *

Give the legal requisites fo r a private school teacher to

acquire permanent employment and security of tenure.

ANS. These requisites are: (1) the teacher is a

full time teacher; (2) the teacher must have rendered
three (3) consecutive years of service; and (3) such
service must have been satisfactory (Cagayan Capitol
College, et al. vs. NLRC, et al., G. R. Nos.
90010-11, September 14, 1990).

* * *

Justify the right of the employer to fix a probationary

period of employment.

ANS. 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. (Grand Motor Parts Corporation vs.
The Minister of Labor, et al., G. R. No. L-58958, July
16, 1984)

★ it *

(561
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Jose is employed on a probationary period fo r three (3 )

months. Although the employer is not satisfied with his
performance, he is allowed to work after the end of the
three month period.
(a) Has Jose become a regular employee? Why?

ANS. Yes. An employee who is allowed to work

after a probationary period shall be considered a
regular employee. (Art. 281, Labor Code). By
allowing Jose to work after the expiration of the
probationary period, the employer is deemed to have
approved of his qualifications for regular employment.

(b) Assuming that a few days before the expiration of

the probationary period of three (3) months, the parties
agreed to extend the same fo r another three (3)months,
would your answer remain the same? Why?

ANS. My answer would be the same. The em­

ployer should not be allowed to delay the regulariza­
tion of the employee. Three months is a sufficient time
within which the employer can really ascertain whether
the employee is qualified for the job. Extension of the
probationary period will not serve any useful purpose.

(c) Cannot Jose’s employer successfully maintain that

the probationary period provided fo r in Article 281 of the
Labor Code is six (6) months, which would be Jose’s
total employment on a probationary basis?

ANS. Article 281 of the Labor Code provides that

probationary employment “s h a ll n o t exceed six (6)
months from the date the employee started working
unless it is covered by an apprenticeship agreement
stipulating a longer period.” This means that the
period mentioned therein is the maximum period that
an employer may fix as the probationary period. If he
opted to fix a shorter period, he should be bound by
the same; otherwise, he can delay the regularization of
his employees and deprive them of the benefits arising
therefrom.

662
 TERMINATION OF EMPLOYMENT
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The General Telephone Directory Company, an entity

engaged in the business of publication and circulation
of the directory of the Philippines Long Distance Tele­
phone Co., employed sales representatives under a
contract providing fo r a probationary period o f eighteen
(18) months. Is this stipulation violative of Article 281 of
the Labor Code fixing a probationary period of not
exceeding six (6) months. Explain.

ANS. Generally, the probationary period of em­

ployment 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, especially where the em­
ployee must learn a particular kind of work such as
selling or when the job requires certain qualifications,
skills, experience or training.
In the case at bar, it is shown that private respon­
dent Company needs at least eighteen (18) months to
determine the character and selling capabilities of the
petitioners as safes representatives. The Company is
engaged in advertisement and publication in the Yel­
low Pages of the PLDT Telephone Directories. Publi­
cation of solicited ads are only made a year after the
sale has been made and only then will the company be
able to evaluate the efficiency, conduct, and selling
ability of its sales representatives, the evaluation
being based on the published ads. Moreover, an
eighteen-month probationary period is recognized by
the Labor Union in the private respondent company, as
shown in Article V of the Collective Bargaining Agree­
ment. (Buiser et al. vs. Leogardo, G. R. No.
L-63316, July 31, 1984)

* * *

663
 TERMINATION OF EMPLOYMENT
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Joaquin Dequila was hired on probation by Mariwasa

Manufacturing, Inc. as a general utility worker fo r six (6)
months. Upon expiration of the probationary period, he
was informed by his employer that his work had proved
unsatisfactory and had failed to meet the required stan­
dards. To give him p. chance to improve his perfor­
mance and to qualify fo r regular employment, Mariwasa
extended, with his written conformity, his probationary
period fo r another three (3) months. His performance
did not however improve and fo r this reason his em­
ployment was terminated at the end o f the extended
period. Did the extension of the original probationary
period of six (6) months convert Dequila to a regular
employee?

ANS. No. By voluntarily agreeing to an extension

of the original probationary period, Dequila in effect
waived any benefit attaching to the completion of the
said period. There is nothing in the law which by any
fair interpretation prohibits such waiver. (Mariwasa
Manufacturing, Inc. vs. Leogardo, G. R. No. 74246,
January 26, 1989)

* * *

Cite another instance where the extension of the proba­

tionary period did not ripen to regular employment.

ANS. Where a private school teacher who was

engaged on a probationary basis for two (2) years (four
semesters, excluding summer), was thereafter given,
upon hex plea, a teaching load in the next succeeding
year (which was already beyond the two-year proba­
tionary period), such continued em ployment was
deemed an extension ex-gratia of her probationary
employment, affording her another opportunity to pass
the licensure test for teachers, which was a condition
for her becoming a regular employee and which she
failed to accomplish during the first two (2) years of
employment. (Escorpizo et al. vs. University of
Baguio and NLRC, G. R. No. 121962, April 30, 1999)
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

May the services o f a probationary employee be term i­

nated before the end of the probationary period? If so,
state the grounds.

ANS. Yes. The termination should be for a just

cause or when the probationary employee 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. (Article
281, Labor Code)
* * *

Does a probationary employee enjoy the constitutional

protection on security of tenure? Explain.

ANS. Yes. During his tenure of employment or

before his contract expires, the probationary employee
cannot be dismissed except for a just cause or when
he fails to qualify as a regular employee in accordance
with reasonable standards made known to him at the
time of his engagement. (Manila Hotel Corporation vs.
NLRC, et al., G. R. No. 53453, January 22, 1986)
Where no standards are made known to the em­
ployee at that time, he shall be deemed a regular
employee. (Sec. 6, Rule V lll-A , Book VI, Rules
Implementing the Labor Code)
This constitutional protection ends on the expira­
tion of the probationary period. (Alcira vs. NLRC et
al., G. R. No. 149859, June 9, 2004)
* * *

Where is notice of standards deemed sufficient?

ANS. Where the appointment paper of the sales

manager as a probationary employment mentioned
that his performance shall be periodically evaluated in
accordance with performance standards set by the
company, and that his job description was attached to
the appointment, it was ruled that the employee was
sufficiently informed of the standards to be met before

665
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

he could qualify as a regular employee. (Dela Cruz,

Jr. vs. NLRC et al., G. R. No. 145417, December
11, 2003)
4r -k k

At the time of her retirement, Lilia Ariola had been

employed as a school teacher for twenty-two (22) years.
After three (3) years from her retirement, she was re­
hired by the school under a contract which was renew­
able yearly. But after four (4) years of continuous
satisfactory service, her contract was not renewed. Was
the non-renewal of her contract violative of her security
of tenure? Why?

ANS. Yes. When she was rehired, she did not

have to undergo a probationary employment as her
teaching competence had already been tried and
tested during her 22 years of service. She could not
be discharged solely on account of the expiration of
her fourth annual contract. She could only be dis­
missed for cause and with due process. (St. There-
sita’s Academy, etc. vs. NLRC, et ai., G. R. No.
94523, October 27, 1992) ,
* ★ k

Bernadette was hired by a non-profit organization dedi­

cated to refugee service as a probationary cultural ori­
entation teacher fo r six (6) months. However, after only
three (3) months, her probationary employment was
terminated fo r her failure to meet the prescribed stan­
dards.
Assuming that Bernadette’s probationary employment
was validly terminated, is she entitled to the pay corre­
sponding to the unexpired portion of the original proba­
tionary period? Why?

ANS. No. Being in the nature of a “trial period,”

the essence of a probationary period of employment
fundamentally lies in the purpose or objective sought

666
 TERMINATION OF EMPLOYMENT
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to be attained by 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. While the em­
ployer observes the fitness, propriety and efficiency of
a probationer to ascertain whether he is qualified for
permanent employment, the probationer, on the other,
seeks to prove to the employer that he has the qualifi­
cations to meet the reasonable standards for perma­
nent employment.
If the purpose sought by the employer is neither
attained nor attainable within the probationary period,
the law does not preclude the employer from terminat­
ing the probationary employment on justifiable
grounds. To require it to pay the employee the salary
for the unexpired portion of the probationary period
would not only be unjust but oppressive on the part of
the employer. (International Catholic Migration Com­
mission vs. NLRC, et al., G. R. No. 72222, January
30, 1989)
* * ilr

Nine (9) academic teachers were hired by a private

school on a yearly basis. Before the expiration o f their
yearly contracts they had to reapply and would sign
new ones if the school decided to renew the same.
After their second yearly contract, the school refused to
renew their contract on the ground that their teaching
performances were not satisfactory.
(a) Is the refusal of the school justified? Why?

ANS. Yes. Their positions were temporary in

nature and their employment was for a definite period.
After the expiration of the period agreed upon, they
can no longer claim any security of tenure. And even
assuming that they were hired on a probationary basis,
their probationary period (3 years in case of teachers)
had not yet expired at the time they were notified that
their contracts would not be renewed.

667
 TERMINATION OF EMPLOYMENT
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(b) Since the teachers belonged to a labor union, would

you consider the school’s refusal to renew their con­
tracts an unfair labor practice? Why?

ANS. No. The refusal of the school to renew their

yearly contracts for the third year was not by reason of
their union membership but by reason of their poor
teaching performances. (Biboso, et al. vs. Victorias
Milling Co., Inc., et al., G. R. No. L-44360, March 31,
1977)
* ★ *

Every year, from 1968 to 1973, B. was elected by the

Board of Directors of a bank to the position of manager
o f the bank’s department of economics research and
statistics, and that of assistant vice-president. In
September 1973, the bank’s board o f directors, in the
course o f its deliberation on the bank’s projected
merger with another bank (which was actually effected
in June, 1974), resolved to abolish B’s department fo r
being redundant and consequently to terminate the
services of B. B contended that the abolition o f his
position was a reprisal fo r his exposure o f some anoma­
lies in the bank which resulted in the suspension and
reprimand by the Monetary Board o f certain senior
officers of the bank. Is the abolition of B’s position
nevertheless legal? Reasons.

ANS. Under the peculiar or particular facts of the

case, the termination of B’s employment was lawful
and justified. B was not employed for a fixed period.
He held his position of department manager at the
pleasure of the bank’s board of directors. He occupied
a managerial position and his stay therein depended
on his retention of the trust and confidence of the
management and whether there was any need for his
services.
Although some vindictive motivation might have
impelled the abolition of his position, yet it is undeni­
able that the bank’s board of directors possessed the

668
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

power to remove him and to determine whether the

interest of the bank justified the existence of his
department. (Bondoc vs. People’s Bank and Trust
Co., et a l., G. R. No. L-43835, March 31, 1981)
* * *

Sabio, the manager o f the engineering department of an

electric cooperative, denounced the excessive expendi­
tures and absences of the cooperative’s general man­
ager. The general manager, told Sabio to resign but
could not give any reason why he was telling the latter
to do so. He then gave Sabio another option, that is, to
take a vacation leave. Sabio refused. The manager
informed Sabio that he would be dismissed ju s t the
same. The Board of Directors o f the cooperative later
abolished the engineering department o f which Sabio
was the manager. Is such abolition justified? Why?

ANS. No. There was no valid reason for the

abolition of the department or Sabio’s position. For
such abolition to be valid, the same must be due to
installation of labor saving devices, redundancy, re­
trenchment to prevent losses or the closing or cessa­
tion of operation of the establishment. There was no
proper exercise of management prerogatives. (Ilocos
Sur Electric Cooperative, Inc., et al. vs. NLRC, et al.,
G. R. No. 106161, February 1, 1995)
* * *

Artex Development Co. hired F, as Chief Mechanical

Engineer and Plant Superintendent. His employment
was only on a trial basis and was occasioned by the
start of operations of the company due to the arrival of
new machineries from abroad. After five (5) months, F’s
services were terminated. He was able to show however
that his probationary period of three (3) months was
even extended fo r two (2) months. Is the termination of
his services legal? Why?

669
 TERMINATION OF EMPLOYMENT
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ANS. Yes. F’s employment to a very high and

responsible position was temporary in character and
the circumstances of the case show that he was fully
aware of the true nature of his employment. The
company was just starting operations and everything
was then on trial basis including for that matter the
choice by the company of the position of Plant Super­
intendent and Chief Mechanical Engineer. (Fortich vs.
CIR, e ta l.,G . R. No. L-25953, August 27, 1979)
★ * *

Do “ pakyao” workers enjoy security of tenure? If so, to

what extent (1982 Bar).

ANS. “Pakyao” workers who by the nature of their

work are considered regular workers of the employer
enjoy security of tenure. Although they are paid by
results, they are considered employees of the estab­
lishment for whom they render service as long as the
latter exercises control over the means and methods of
performance of their work. (Dy Keh Beng vs. Interna­
tional Labor and Marine Union of the Philippines, et
al., G. R. No. L-32245, May 25, 1979). However, if
the circumstances indicate that they are in reality
independent contractors, then they do not enjoy secu­
rity of tenure.
* * *

Justify the grant of separation pay to lawfully dismissed

employees.

ANS. The Constitution is replete with positive

commands for the promotion of social justice, and
particularly the protection of the rights of workers. The
enhancement of their welfare is one of the primary
concerns of the present charter. In fact, instead of
confining itself to the general commitment to the cause
of labor in Article II on the Declaration of Principles of
State Policies, the new Constitution contains a sepa­
rate article devoted to the promotion of social justice

(570
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

and human rights with a separate sub-topic for labor.

Article XIII expressly recognizes the vital ro!e of labor,
hand in hand with management, in the advancement of
the national economy and the welfare of the people in
general. The categorical mandates in the Constitution
for the improvement of the lot of the workers are more
than sufficient basis to justify the award of separation
pay in proper cases even if the dismissal be for cause.
(PLDTvs. NLRC, et al., G. R. No. 80609, August 23,
1988)
* * *

Marilyn Abiicay, a traffic operator of the Philippine Long

Distance Telephone Company, was found to have de­
manded and received from certain persons money in
consideration of her promise to facilitate approval of
their applications fo r telephone installation. But both
the Labor Arbiter and the NLRC, while sustaining her
dismissal from employment, ordered the PLDT to pay
her severance compensation. Is the award o f separa­
tion pay valid? Explain.

ANS. No. There should be no question that where

it comes to. such valid but not iniquitous causes as
failure to comply with work standards, the grant of
separation pay to the dismissed employee may be both
just and compassionate, particularly if he has worked
for sometime with the company. For example, a
subordinate who has irreconcilable policy or personal
differences with his employer may be validly dismissed
for demonstrated loss of confidence, which is an
allowable ground. A working mother who has to be
frequently absent because she has also to take cars of
her child may also be removed because of her poor
attendance, this being another authorized ground. It is
not the employee’s fault if he does not have the
necessary aptitude for his work but on the other hand
the company cannot be required to maintain him just
the same at the expense of the efficiency of its
operations. He too may be validly replaced. Under
these and sim ilar circumstances, however, the award

671
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

to the employee of separation pay would be sustain­

able under the social justice policy even if the separa­
tion is for cause.
But where the cause of the separation is more
serious than mere inefficiency, the generosity of the
law must be more discerning. There is no doubt it is
compassionate to given separation pay to a salesman
if he is dismissed for his inability to fill his quota but
surely he does not deserve such generosity if his
offense is misappropriation of the receipts of his sales.
This is no longer mere incompetence but clear dishon­
esty. A security guard found sleeping on the job is
doubtless subject to dismissal but may be allowed
separation pay since his conduct, while inept, is not
depraved. But if he was in fact not really sleeping but
sleeping with a prostitute during his tour of duty and in
the company premises, the situation is changed com­
pletely. This is not only inefficiency but immorality and
the grant of separation pay would be entirely unjusti­
fied.
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 reflect­
ing 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.
A contrary rule would, as the petitioner correctly
argues, have the effect of rewarding rather than pun­
ishing the erring employee for his offense. And we do
not agree that the punishment is his dismissal only and
that the separation pay has nothing to do with the
wrong he has committed. Of course it has. Indeed, if
the employee who steals from the company is granted
separation pay even as he is validly dismissed, it is not
unlikely that he will commit a sim ilar offense in his
next employment because he thinks he can expect a
like leniency if he is again found out. This kind of

672
 TERMINATION OF EMPLOYMENT
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misplaced compassion is not going to do labor in

general any good as it will encourage the infiltration of
its ranks by those who do not deserve the protection
and concern of the Constitution. (PLDT vs. NLRC, et
al., G. R. No. 80609, August 23, 1988)
’* * *

Manreza, hired by CDCP as ja nitor and later promoted to

leadsman, was dismissed fo r having stolen flexbeams
belonging to the company. Considering that Manreza
had worked fo r the company fo r over ten (10) years,
should he be awarded separation pay in the spirit of
compassionate justice?

ANS. No. While it is true that in some earlier

cases th,e Supreme Court held that employees dis­
missed for cause are nevertheless entitled to separa­
tion pay on the ground of social and compassionate
justice, that doctrine has been abandoned in the case
of PLDT vs. NLRC, et a l., G. R. No. 80609,
A u g u s t 23, 1988; henceforth, separation pay shall be
allowed as a measure of social justice where the
employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral
character. (Philippine National Construction Corpora­
tion vs. NLRC, et al., G. R. No. 83320, February 9,
1989)
★ * *

RM was o f violent temper, caused trouble during office

hours, and even defied his superiors as they tried to
pacify him. He was dismissed by the company without
prior investigation; the labor arbiter however found RM
guilty o f grave m isconduct and insubordination.
Should he be ordered reinstated w ith backwages?
Why?

ANS. No. An employee found guilty by the labor

arbiter of grave misconduct and insubordination should
not be rewarded with reinstatement and backwages. It

673
 TERMINATION OF EMPLOYMENT
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may encourage him to do even worse and will render a

mockery of the rules of discipline that employees are
required to observe.
The employer must nevertheless be hald to ac­
count for its failure to the employee his right to an
investigation before causing his dismissal. Consider­
ing the circumstances of the case, the employer must
indemnify RM the amount of P1,000.00. The measure
of this award depends on the facts of each case and
the gravity of the offense committed by the employer.
(Wenphil Corporation vs. NLRC, et al., G. R. No.
80587, February 8, 1989)
* * *

Ruben Serrano, a security checker of Isetann Depart­

ment Store, was dismissed due to redundancy, as a
result of the abolition of the security section of the
establishment. His services were however terminated
on the same day that he was given a notice of termina­
tion.
(a) As his dismissal was fo r a valid cause; is Serrano
entitled to any monetary relief? Why?

ANS. Yes. There was a violation of the one (1)

month notice requirement provided for in Article 283 of
the Labor Code. His dismissal, though for an autho­
rized cause, is ineffectual; in legal contemplation, he
was never dismissed. He is entitled to full backwages
from the time his employment was terminated up to the
date of finality of the decision declaring his dismissal
to be for cause. He is also entitled to separation pay
as required by Article 283 of the Labor Code.

(b) Does the same rule apply to a dismissal fo r a ju st

cause under Article 282 of the Labor Code?

ANS. Yes. If it be shown that the employee was

dismissed tor any of the just causes mentioned in
Article 282, he should not be reinstated; he must
however be paid backwages from the iime his employ­

674
 TERMINATION OF EMPLOYMENT
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ment was terminated until it is determined that the

termination of employment is for a just cause.

(c) Should not the employee who is dismissed fo r

cause but w ithout prior notice be merely awarded in­
demnity, in accordance with the Wenphil doctrine?

ANS. No. The number of cases involving dis­

missals without the requisite notice to the employee,
although effected for just or authorized cause, sug­
gests that the imposition of fine for violation of the
notice requirement has not been effective in deterring
violations of such requirement. Besides, the monetary
sanction is too insignificant, too niggardly, and some­
times even too late. Finally, the Wenphil doctrine has
fostered a policy of “dismiss now, pay later" which
moneyed employers find more convenient to comply
with than the notice requirements. (Serrano vs. NLRC
and Isetann Department Store, G. R. No. 117040,
January 27, 2000)
* * *

Give arguments in support of the proposition that viola­

tion of the notice requirement in dismissals is not a
denial o f due process.

ANS. The first is that the Due Process Clause of

the Constitution is a limitation on governmental pow­
ers. It does not apply to the exercise of private power,
such as the termination of employment under the
Labor Code. This is plain from the text of Art. Ill, S 1
if the Constitution, viz.: “No person shall be deprived
of life, liberty, or property without due process of
law....” The reason is simple: Only the State has
authority to take the life, liberty, or property of the
individual. The purpose of the Due Process Clause is
to ensure that the exercise of this power is consistent
with what are considered civilized methods.
The second reason is that notice and hearing are
required under the Due Process Clause before the
power of organized society are brought to bear upon

675
 TERMINATION OF EMPLOYMENT
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the individual. This is obviously not the case of

termination of employment, under Art. 283. Here the
employee is not faced with an aspect of the adversary
system. The purpose for requiring a 30-day written
notice before an employee is laid o ff is not to afford
him an opportunity to be heard on any charge against
him, for there is none. The purpose rather is to give
him time to prepare for the eventual loss of his job and
the DOLE an opportunity to determine whether eco­
nomic causes do exist justifying the termination of his
employment.
Even in cases of dismissal under Art. 282, the
purpose for the requirement of notice and hearing is
not to comply with the Due Process Clause of the
Constitution. The time for notice and hearing is at the
trial stage. Then that is the time we speak of notice
and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice
requirement before he dismisses an employee does
not foreclose the right of the latter to question the
legality of his dismissal. As Art. 277(b) provides, “Any
decision taken by the employer shall be without preju­
dice 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 Com­
mission."
The third reason why the notice requirement under
Art. 283 can not be considered a requirement of the
Due Process Clause is that the employer cannot really
be expected to be entirely an impartial judge of his
own cause. This is also the case in termination of
employment for a just cause under Art. 282. (Serrano
vs. NLRC, et al., G. R. No. 117040, January 27,
2000)
* * *

In an illegal dismissal case, the employer repeatedly

indicated his w illingness to accept back the com ­
plainants but the latter steadfastly refused the offer.
Although the Labor Arbiter found that there was neither
dismissal nor abandonment, he ordered the employer to

676
 TERMINATION OF EMPLOYMENT
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pay severance compensation to the complainants. Is

the order o f the Labor Arbiter warranted? Why?

ANS. No. There is no clear legal basis for the

award of separation pay. There is nothing, however,
that prevents the employer from voluntarily giving
com plainants some amounts on ex gratia basis.
(Zanotte Shoes/Leonardo Lorenzo vs. NLRC, et al., G.
R. No. 100665, February 13, 1995)
* ☆ *

Do offers of reinstatement validate an illegal dismissal?

ANS. Offers to reinstate the worker made after the

filing of a complaint for illegal dismissal could not
validate an otherwise arbitrary dismissal. The em­
ployer's belated gesture of goodwill is highly suspi­
cious.
The employee’s refusal to be reinstated is more of
a symptom of strained relations between the parties
rather that an indicum of abandonment of work. He
must have realized that even if reinstated, he will find
it uncomfortable to continue under the hostile eyes of
the employer. He had every reason to fear that if he
accepted the offer the watchful eyes of the employer
would thereafter be focused on him to deter every
small shortcoming of his as a ground for vindictive
disciplinary action.
Abandonment is a matter of intention and cannot
be presumed from certain equivocal acts. (Hantex
Trading Co. vs. Court of Appeals, et al., G. R. No.
148241, September 27, 2002)
* * *

M was employed by a drug company on June 30,1981

as a salesman-collector. On March 14., 1984 the com­
pany dismissed him fo r loss o f confidence. It was
however ultimately decided in the labor case that he
filed that there was no sufficient legal basis fo r the
employer’s loss o f confidence. He was awarded back-
 TERMINATION OF EMPLOYMENT
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wages fo r three (3) years, and separation pay in lieu of

reinstatement as the strained relationship between the
parties rendered the continued working relationship
between them no longer feasible. What period should
be covered by the separation pay?

ANS. The separation pay is to be computed based

on the period from June 30, 1981 (start of employ­
ment) to March 15, 1987 (three years from date of
illegal dismissal). (Mapalo vs. NLRC, et al.,G. R.
No. 107940, July 17, 1994)
* * *

After the finality of the judgm ent awarding them sever­

ance compensation and 13th month pay, the workers
executed quitclaims under which they agreed to receive
amounts less than what they should get under the
judgment. The quitclaims were executed before labor
arbiters who had no participation in any aspect o f the
case. Are the quitclaims considered as valid compro­
mises? Why?

ANS. No. While the Labor Code encourages ail

efforts toward the amicable settlement of a labor
dispute, and a quitclaim partakes of the nature of a
compromise, the implementing rules require that such
a settlement shall be approved by the labor arbiter
before whom the case is pending after being satisfied
that it was voluntarily entered into by the parties and
after having explained to them the terms and conse­
quences thereof. The labor arbiter before whom the
case is pending would be in a better position than just
any labor arbiter to personally determine the voluntari­
ness of the agreement and certify its validity. (St.
Gothard Pub & Restaurant, et al. vs. NLRC, et al., G.
R. No. 102570, February 1, 1993)
1*- * -H

Explain the formula used in fixing the backwages of an

employee dismissed due to an unfair labor practice or

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 TERMINATION OF EMPLOYMENT
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dismissal w ithout ju st or authorized cause, and give She

reasons fo r the adoption of the sama.

ANS. In M ercu ry Drug Co., Inc., et al. vs.

C o u rt o f In d u s tria l R e la tio n s , et a l., G. R. No.
L-23357, A p ril 30, 1974, the Supreme Court form ally
adopted the formula or principle of fixing the amount
of backwages at a reasonable level without qualifica­
tion and deduction.
Previously, the rule generally applied was for the
payment of backwages corresponding to the entire
period of the employee’s lay-off minus what he may
have earned elsewhere during said period. But such
rule tended to breed idleness on the part of a dis­
charged employee who would “with folded arms remain
inactive in the expectation that a windfall would come
to him" (Itogon-Suyoc Mines, Inc. vs. Sangilo-ltogon
Workers Union, G. R. No. L-24189, August 30,
1968). And on the part of the employer, the principle
afforded it further opportunity to delay payment of the
award as determination of the actual earnings of the
employee during his lay-off requires further proceed­
ings and in some cases induce the latter to agree to an
unconscionable settlement of the award.
The new principle relieves the parties of presenting
proofs arid counter-proofs as to the discharged em­
ployee’s earnings during his lay-off and thus obviate
the twin evils of idleness on the part of the employee
and attrition and undue delay in satisfying the award
on the part of the employer.
Under the formula, the workers are to be paid their
backwages fixed as of the time of their dismissal
without deduction for their earnings elsewhere during
their lay-off and without qualification of their wages as
thus fixed, i. e., unqualified by any increase or other
benefits that may have been received by their co­
workers who were not dismissed. (Durabuilt Recap­
ping Plant & Co., et al. vs. NLRC, et al., G. R. No.
76746, July 27, 1987). Moreover, such award is
understood to be inclusive of leave benefits; in making
the award, the court necessarily takes into considera­
tion holidays, vacation leaves and service incentive

679
 TERMINATION OF EMPLOYMENT
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leaves; all working days are paid for regardless of

whether or not the same fall on holidays or employees
leave days; the regular allowances that the employee
had been receiving should however be included in the
salary base. (The Insular Life Assurance Co., Ltd., et
al. vs. NLRC. et al., G. R. No. 74191, December 21.
1987; Soriano vs. NLRC, et al., G. R. No. 75510,
October 27, 1987; Santos vs. NLRC, et al., G. R. No.
76121, September 21, 1987)
★ * ★

Cite specific instances/cases where this form ula has

been applied.

ANS. (a) Where the employee was separated on

April 10, 1961 and there was delay on his part of two
(2) years and fifteen (15) days in the filing of his ULP
charge, the case being submitted for decision before
the industrial court on March 29, 1965, backwages
equivalent to one (1) year eleven (11) months and
fifteen (15) days was awarded. (Mercury Drug Co.,
Inc. vs. CIR, et al., G. R. No. L-23357, April 30.
1974)
(b) Considering that a total of eleven years had
elapsed from the date of the commencement of the
backwages, that injunctions were issued retraining the
enforcement of the return-to-work order issued by the
industrial court, that complex and novel legal issues
had to be resolved, and that the respondent was an
educational institution, backwages equivalent to three
(3) years was deemed reasonable. (Feati University
Faculty Club vs. Feati University, et al., G. R. No.
L-31563, August 15, 1974)
(c) Where a total of eighteen (18) years had
elapsed from the date of the commencement of the
backwages, and considering the lengthy procedural
and technical manipulations of the parties, the delay in
the resolution of the case in the court below, the
com plexity of the issues raised by the parties, the
fixing and limitation of the backwages to their equiva­
lent of three (3) years was deemed fully justified.

680
 TERMINATION OF EMPLOYMENT
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(Insular Life Assurance Co., Ltd. Employees Associa­

tion vs. Insular Life Assurance Co., Ltd., G. R. No.
L-25291, March 10, 1977)
(d) Where it is clear that the employer deliberately
committed unfair labor practice and the execution of
the judgment for reinstatement was delayed for about
eight (8) years because of an appeal interposed by the
employer, backwages for a period of four (4) years was
awarded. (Philippine Rock Products, Inc., et al. vs.
PAFLU, et al., G. R. No. L-32829, August 30, 1974)
(e) Where there have been serious unfair labor
practices committed by the employer in laying o ff or
shutting out the workers, obstinacy or deceit in trying
to defeat the judgment for reinstatement by unilateral
closure without just cause of the plant or factory or by
other sim ilar evasive or deceitful means, and conse­
quently prolonged non-satisfaction of the judgment for
reinstatement and backwages, the Court will impose
“an element of punitive damages against respondent
employer by way of example and for the public good”
and award the equivalent of five (5) years backwages
without deduction or qualification or even more.
(Davao Free Workers Front, et al. vs. Court of
Industrial Relations, et al., G. R. No. L-29356,
October 31, 1974; Nassco vs. Court of Industrial
Relations, et al., G. R. No. L-31852, June 28, 1974)
(0 In a case where the employer was found by
final judgment of the industrial court in 1967 to have
committed grave unfair labor practices by pretending
to close down its factory to evade its obligation to
complainant union and then leasing its machines and a
portion of its building and premises to another for the
measly monthly amounts of P200.00 and P30C.00
respectively, such that as found by the industrial court,
the intention to deceive by the management become
very apparent; and that furthermore the management
committed acts of interference, harassment and dis­
crimination culminating in the mass lockout of the
complainants who were deprived of their just dues for
a long period of seventeen (17) years, an award of five
(5) years backwages without deduction and qualifica­
tion was held to be fair and reasonable for all con­

fifll
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

cerned. (New Manila Candy Workers Union, et ai. vs.

CIR, etal., G. R. No. L-29728, October 30, 1978)
•k iV it

Article 279 (formerly Art. 280) of the Labor Code entitles

the employee who is unjustly dismissed to reinstate­
ment and to his full backwages computed from the time
his compensation was withheld from him up to the time
of his actual reinstatement. However, the Supreme
Court has consistently held that such backwages shall
not exceed three (3) years without qualification or de­
duction. Is this not in effect amending the aforesaid
legal provision?

ANS. No. It is because of the need to apply said

provision of the law justly and reasonably and pursuant
to the role of the Court of interpreting the law that this
long established policy has been made applicable even
under the Labor Code. (Lepanto Consolidated Mining
Co. vs. Olegario, et al., G. R. No. 77437, June 23,
1988)
l!r * *

Is the employer entitled to deduct from the award of

backwages to ar. illegally dismissed employee any
amount which the latter may have earned elsewhere
during the period of his illegal termination? Explain.

ANS. For illegal dismissals effected after the

effectivity of Republic Act No. 6715 on March 21,
1989, the Mercury Drug Rule is no longer applicable;
the illegally dismissed employee is to be paid his
backwages, allowances and other benefits for the
entire period he was out of work subject to the rule
enunciated before the Mercury Drug Rule, in East
Asiatic Company, Ltd. vs. CIR, 40 S C R A 521, to
the effect that the employer may deduct any amount
which the employee may have earned during the
period of his illegal termination. This is to avoid unjusi
enrichment on the part of the employee.
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Computation of full backwages and presentation of

proof as to income earned elsewhere by the illegally
dismissed employee after his termination and before
actual reinstatement should be ventilated in the execu­
tion proceedings before the Labor Arbiter. (Ferrer, et
al. vs. NLRC, et al., G. R. No. 100898, July 5, 1993)
it it it

Is an employee who is ordered reinstated with back­

wages entitled to benefits and increases given during
his lay-off?

ANS. No. Increases and benefits are to be

earned; the> do not attach automatically to the length
of service of an employee. These are allowed because
of outstanding performance of duties and not solely
because of length of service. (Union of Supervisors
(RB) NATU vs. The Secretary of Labor, et al., G. R.
No. L-39889, March 29, 1984)
★ * ★

Should the earnings received elsewhere by the illegally

dismissed employee during the period of his lay-off be
deducted from the award of fu ll backwages? Explain.

ANS. If the dismissal is effected on or after March

21, 1989, the date of effectivity of Republic Act No.
6715 which amended among others Article 279 of the
Labor Code, the amounts earned elsewhere by the
employee during the period of his lay-off should be
deducted from the award of full backwages.
The employee should not be allowed to enrich
himself at the expense of th'e employer. In addition,
the law abhors double compensation. (Pines City
Educational Center, et al. vs. NLRC, et al., G. R.
No. 96779, November 10, 1993; Ferrer, et al. vs.
NLRC, et al., G. R. No. L-100898. July 5, 1993)
Jurisprudence distinguishes between employees
illegally dismissed prior to the effectivity of Republic

683
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Act No. 6715 on March 21, 1989, and those whose

illegal dismissals were effected after such date. Em­
ployees illegally dismissed prior to March 21, 1989 are
entitled to backwages up to three (3) years without
deduction or qualification, while those illegally dis­
missed thereafter are granted full backwages inclusive
of allowances and other benefits or their monetary
equivalent from the time their actual compensation
was withheld from them up to the time of their actual
reinstatement. (Jardine Davies, Inc. vs. NLRC et al.,
G. R. No. 76272, July 28, 1999; Metro Transit
Organization, Inc. vs. NLRC et al., G. R. No.
119724, May 31, 1899)
* *

State the latest jurisprudential policy on the computa­

tion o f the backwages o f an employee illegally dis­
missed on or after March 21,1989.

ANS. In Bustamante et al. vs. NLRC and

Evergreen Farms. Inc.. G. R. No. 111651. November
28. 1996. the Supreme Court (En Banc) ruled:
“The Court deems it appropriate, however, to re­
consider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educa­
tional Center case, by now holding that conformably
with the evident legislative intent as expressed in Rep.
Act No. 6715, abovequoted, backwages to be awarded
to an illegally dismissed employee, should not, as a
general rule, be diminished or reduced by the earnings
derived by him elsewhere during the period of his
illegal dismissal. The underlying reason for this ruling
is that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to
support himseif and family, while full backwages have
to be paid by the employer as part of the price or
penalty he has to pay for illegally dismissing his
employee. The clear legislative intent of the amend­
ment in Rep. Act No. 6715 is to give more benefits to
workers than was previously given them under the

684
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Mercury Drug rule or the “deduction of earnings else­

where” rule. Thus, a closer adherence to the legisla­
tive policy behind Rep. Act No. 6715 points to “full
backwages” as meaning exactly that, i. e., without
deducting from backwages the earnings derived else­
where by the concerned employee during the period of
his illegal dismissal. In other words, ihe provision
calling for “full backwages” to illegally dismissed em­
ployees is clear, plain and free from ambiguity and,
therefore, must be applied without attempted or
strained interpretation. Index animi sermo est.”

Zenaida was hired in 1374 as a picker by a tobacco

company. A year later, she was promoted to the posi­
tion of production recorder. Work in t h e company was
however seasonal. After fourteen (14) years of occupy­
ing the position of production recorder, she was de­
moted to picker by reason of inefficiency due to alleged
frequent mistakes in her reports. Zenaida refused to
report for work and filed a comp-iaint for illegal dis­
missal.
(a) Was the demotion of Zenaida justified? Why?

ANS. No. The management based its action

merely on communications between officers of the
company. It was done without the worker’s participa­
tion or knowledge at any stage. She was not even
notified in advance of the company’s impending action
and the reason or reasons therefor before it was
actually effected. As a matter of fact, as the demotion
was dene in bad faith, it must be declared as constitut­
ing constructive dismissal.

(b) As Zenaida prayed fo r payment o f backwages as

well as separation pay in lieu of reinstatement, and
considering that work in the company was seasonal,
how should such backwages and separation pay be
computed?

685
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. The backwages should be from the time her

compensation was withheld from her up to the finality
of the Court’s decision.
As to the severance compensation in lieu of rein­
statement, the same should be computed at one (1)
month pay for every twelve (12) months of service.
(Gaco vs. NLRC, et al., G. R. No. 104690, February
23, 1994)
* * ★

What conditions may warrant the award of moral and

exemplary damages to an illegally dismissed employee?

ANS. Where there is lack of due process in

effecting the dismissal, it is reasonable to award moral
damages to the employee. But an award of exemplary
damages can only be justified if the dismissal was
effected in a wanton, fraudulent, oppressive or malev­
olent manner. (NASECO, et al. vs. NLRC, et al., G.
R. No. 69870, November 29, 1988)
Moral damages are recoverable only where the
dismissal of an employee is attended by bad faith, or
an act oppressive to labor, or it is done in a manner
contrary to morals, good customs or public policy
Neither attorney’s fees nor litigation expenses should
be awarded absent a showing of any of the grounds
provided under the Civil Code. Where the award of
moral damages is eliminated, so must the award for
attorney’s fees. (Mendoza vs. NLRC et al., G. R. No.
131405, July 20, 1999)
The person claiming moral damages must prove
the existence of bad faith by clear and convincing
evidence for the law always presumes good faith. It is
not enough that one merely suffered sleepless nights,
mental anguish, serious anxiety as the result of the
actuations of the other party. Invariably, such action
must be shown to have been willfully done in bad faith
or with ill motive, and the same cannot be presumed.
(Audion Electric Co., Inc. vs. NLRC et al., G. R. No.
106648, June 17, 1999)

686
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

What are the ju st causes fo r the dismissal of an em­

ployee?

ANS. Article 282 of the Labor Code enumerates

the just causes for the termination of employment by
the employer. They are:

(a) Serious misconduct or willful disobedience by

the employee of the lawful order of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee pf
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 causes analogous to the foregoing.
•it -k it

What would you consider as “ causes analogous” to

those specifically enumerated in Article 282 of the Labor
Code?

ANS. Grounds or causes which are characterized

by fault or culpability on the part of the employee. One
such analogous cause is inefficiency.
it * iV

Aside from the grounds enumerated in Article 282 of the

Labor Code, are there other lawful causes fo r the dis­
missal of employees? If so, Enumerate them.

ANS. Yes . They are the “authorized causes” to

wit:
(a) Installation of labor-saving devices (Art. 283,
Labor Code);

887
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) Redundancy (Art. 283, Labor Code);

(c) Retrenchment to prevent losses (Art. 283,
Labor Code);
(d) Closure or cessation of the establishment or
undertaking unless the closure or cessation is for the
purpose of circumventing the provisions of the law.
(Article 283, Labor Code);
(e) Disease (Article 284, Labor Code).

An employee may also be lawfully dismissed pur­

suant to the union security clause in a collective
bargaining agreement.

* * *

Distinguish between dismissal of an employee fo r ju st

cause and termination o f employment fo r authorized
cause. Enumerate examples of ju st cause and autho­
rized cause. (2000 Bar)

ANS. In dismissal for just cause, the employee is

dismissed for causes which are attributable to his fault
or culpability. In termination of employment for autho­
rized cause, the employee is dismissed for causes
independent of his fault or culpability.
When the dismissal is for just cause, the employee
is not as a rule entitled to separation pay. An em­
ployee dismissed for authorized cause is entitled to
separation pay.
Before an employee is dismissed for just cause, he
must be given ample opportunity to be heard and to
defend himself. Before the employer dismisses an
employee for authorized cause, the former must give
the latter a written notice at least one (1) month before
the intended date of termination.
Article 282 of the Labor Code enumerates the just
causes for dismissal. These include serious miscon­
duct and willful disobedience by the employee of a
lawful order of the employer with respect to the for­
mer’s work. Article 283 of the Code enumerates the
authorized causes, such as redundancy and retrench­
ment.

688
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Fidel Gotango, an employee of Philippine Air Lines for

seventeen (17) years, was apprehended by a security
guard as he tried to bring out of the company premises
a lead pipe 8" x 10” x Vi" in size which belonged to PAL.
Upon investigation, he admitted that he was appre­
hended with the lead pipe which he intended to take
home fo r his personal use. For the act, Gotango was
preventively suspended then dismissed,
a) Was his dismissal justified? Why?

ANS. No. Dismissal is too severe a penalty. It is

not proportionate to the gravity of the misdeed. Note
should be taken of the following circumstances: (1) it
was his first time to commit the charge in question for
the duration of his seventeen (17) years of service; (2)
the cost of the lead pipe is negligible; (3) the company
did not lose anything as the lead material was re­
trieved on time; (4) the ignominy and mental torture
undergone by Gotango is practically punishment in
itself; and (5) he was preventively suspended.
To dismiss Gotango under the circumstances would
violate the constitutional guarantee of security of
tenure. (Philippine Air Lines, Inc. vs. Philippine Air
Lines Employees Association (PALEA), G. R. No.
L-24625, June 28, 1974)

(b) Does not the foregoing ruling go against the well-

established principle that “ the law, in protecting the
rights of the laborers, authorizes neither oppression,
nor self-destruction of the employer” ?

ANS. No. The reinstatement of Gotango is neither

oppression nor self-destruction on the part of the
employer. It does not appear that said employee is an
incorrigible offender or that what he did inflicted seri­
ous damage to the company so much so that his
continuance in the service would be patently inimical
to the employer’s interest.
* * A

689
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

The president of the union, who had been with the

cigarette company for more than thirty (30) years, was
dismissed for leading an “unexpected” strike which
lasted for two (2) days and which resulted in loss to the
company amounting to P2.761.00 which represents the
value of unpacked and spoiled cigarettes. Is the dis­
missal justified? Why?

ANS. No. The dismissal is violative of the

employee's security of tenure. The penalty of dis­
missal is grossly disproportionate to the offense im­
puted to her. Her length of service should also be
considered. (Sampang vs. Inciong, et al., G. R. No.
50992, June 19, 1985)

* * *

Felix worked as an auto-mechanic for Gelmart Indus­

tries from 1971 up to May, 1987, when after due investi­
gation he was dismissed for theft of 16 ounces of
“used” motor oil belonging to the company. Pending
investigation, he was also preventively suspended. He
had no previous derogatory record. Is the dismissal of
Felix warranted? Why?

ANS. No. Dismissal is too harsh. Felix had no

previous derogatory record in his fifteen (15) years of
service with Gelmart. The value of the property
pilfered is very minimal. Furthermore, the company
failed to reasonably establish that non-dismissal of
Felix would work undue prejudice to the viability of its
operation or is patently inimical to its interest.
The suspension imposed upon the employee is a
sufficient penalty for the misdemeanor committed.
(Gelmart Industries Phils., inc. vs. NLRC, et al., G.
R. No. 65668, August 10, 1989)

A * *

On December 4, 1987, Gale, a roomboy in the Century

Park Sheraton Manila, was dismissed for blurting out

690
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

against his supervisors in their absence but promptly

reported to them, the following remarks: “ Buaka ng ina
nila, lahat sila pasipsipan.”
(a) Is the dismissal of Gale on this ground justified?
Why?

ANS. No. Dismissal is too harsh. Suspension for

seven (7) days is sufficient.

(b) May Gale’s reinstatement to his former position be

excused on the ground of “ strained relations” ? Why?

ANS. No. The doctrine of “strained relations”

cannot be applied with impunity; management should
not be allowed to indiscriminately dismiss employees
and thereafter provided with a convenient and ready
excuse not to reinstate them. “Strained relations” may
be invoked only against employees whose positions
demand, trust and confidence, or whose differences
with their employer are of such nature or degree as to
preclude reinstatement. The relationship between
Gale, a roomboy, and the management as clearly on
an impersonal level. He did not occupy such a
sensitive position as would require complete trust and
confidence, where personal ill will would preclude
reinstatement.

(c) Is Gale entitled to full backwages computed from the

time his compensation was withheld from him up to the
time of his actual reinstatement? Why?

ANS. No. Gale’s dismissal occurred prior to the

effectivity of R. A. 6715, amending among others
Article 279 of the Labor Code, on March 21, 1989. The
amendatory law has no retrbactive operation. He is
consequently entitled to three (3) years backwages
without deduction and qualification. (Maranaw Hotels
and Resorts Corporation vs. Court of Appeals, et al.,
G. R. No. 103215, November 6, 1992)
* * *

691
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Perejas, a meter reader of an electric cooperative, was

found to have manipulated the kilowatt hour meter
readings of his co-employees by underreading their
electric consumptions and to have attached a jumper
wire to the meter in his house. He was issued a
memorandum requiring him to explain within twelve
(12) hours the presence of the tampered meter in his
residence. He wrote a letter admitting the charge and
promising never to commit the infraction again. Six (6)
days later, the employer issued him another memoran­
dum, this time requiring him to explain w ithin six (6)
hours why he manipulated the meter readings of his
co-employees. He submitted the next day a written
explanation admitting the said act. On the same day, he
was issued a notice terminating his services.
(a) Was there sufficient ground to dismiss Perejas?

ANS. Yes. The offenses Perejas committed

constituted theft of electricity and were not only preju­
dicial to the" company but clearly criminal. He was
guilty of a series of offenses, not a single misdeed.

(b) Was Perejas afforded ample opportunity to defend

himself against the charges? Why?

ANS. No. There was no investigation or formal

hearing conducted on either of the charges. The
company relied solely on the employee’s admission.
There is no showing that Perejas was offered legal
assistance nor does it appear that he waived the right
to a formal hearing. While he may have admitted the
charges, he was not given a chance to consult a lawyer
before making his admissions. Instead of summarily
dismissing Perejas, the company should have in­
formed him of his right to counsel and warned him of
the consequences of such admissions.

(c) Is Perejas entitled to reinstatement?

ANS. No. The procedural defect notwithstanding,

the validity of the cause of his dismissal remains

692
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

unimpaired. He is however entitled to indemnity in the

amount of P1,000.00 by reason of the violation of his
right to due process. (Pangasinan III Electric Coopera­
tive, Inc. vs. NLRC, et al., G. R. No. 89876,
November 13, 1992)
* * *

L. Culala, after working fo r a hospital as cook/reliever

fo r seventeen (17) years, was dismissed from work
because she made disrespectful and profane utterances
against her superior. These utterances were her angry
reaction to the insinuations made by the superior that
she was responsible fo r the loss of food and supplies.
Furthermore, she had an unblemished record and this
was her first offense. Is the dismissal of L. Culala
lawful? Why?

ANS. No. Under the circumstances, the penalty of

termination is extreme and excessive and is not com­
mensurate with the acts committed. (Mary Johnston
Hospital, et al. vs. NLRC, et al., G. R. No. L-73839,
August 30, 1988)
* * *

Toribiano, a counter-clerk and long distance operator of

a telegraph company, was dismissed fo r tampering with
the receipt issued to a customer. He allegedly wrote the
amount of P41.15 in the duplicate although the original
copy issued to the customer showed the amount of
P113.25, or a difference of P72.10. At the time of his
dismissal he had been with the company fo r seven (7)
years.
(a) Assuming that Toribiano committed the act which
was his first offense, is this a sufficient ground fo r his
dismissal?

ANS. No. Dismissal is harsh and disproportionate

to the infraction. His length of service and the fact that

693
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

this is his first offense must be considered. Besides,

the defalcation involved the sum of only P72.10.

(b) Is Toribiano entitled to reinstatement?

ANS. Yes, but without backwages. He is not

entirely faultless. His act should not be condoned,
much less tolerated. (Philippine Telegraph and Tele­
phone Corporation vs. NLRC, et al., G. R. No.
80600, March 21, 1990)
+ * *

Dolores, the Head of Technical Information, Corporate

Research and Development, of San Miguel Corporation,
applied fo r leave fo r 48 days so she could attend, at her
own expense, a course in French language in Paris,
France. The company however limited her leave to one
(1) calendar month. She requested reconsideration of
the company’s decision and then left fo r France w ithout
receiving any formal denial of her request. When she
returned to Manila, she was informed that she had been
dismissed fo r alleged continuous absence. At the time
o f her dismissal, she had been with the company fo r
twenty (21) years. She also did not have any previous
derogatory record.
Is the dismissal of Dolores justified? Why?

ANS. No. The penalty of dismissal is too harsh,

considering her length of service and her lack of
previous derogatory recorJ. Her study in France was
also beneficial to the company as the latter was now
spared from paying for translation services. More
equitably, therefore, she should be granted reinstate­
ment but without damages considering the good faith
of the employer in dismissing her. (Dolores vs. NLRC,
et al., G. R. No. 87673, January 24, 1992)
* * Vt

694
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Mercedes, a food checker of “ Barrio Fiesta” fo r twenty-

six (26) years, had an altercation with the operations
manager of the restaurant. She was meted out a ten-day
suspension, but she refused to acknowledge receipt of
the suspension memo. She also failed to report for
work after the lapse of her suspension, despite repeated
notices from her employer. She was consequently
deemed by the company to have abandoned her work.
She filed no complaint fo r illegal dismissal and unfair
labor practice. Decide.

ANS. The complaint for unfair labor practice

cannot prosper. The charge that she was prohibited
from reporting for work because of her union activities
must be proved by substantial evidence. No concrete
evidence or specific circumstance was cited by her to
prove her accusations.
The. requisites of abandonment are also present in
this ca se .' However, considering that Mercedes had
been with “Barrio Fiesta” for twenty-six (26) years and
there being no showing that she committed any previ­
ous violation of company rules and regulations, dis­
missal from work would be too severe a penalty. Her
return to work without backwages is just and equitable.
(Bonotan vs. NLRC, et al., G. R. No. 104321,
October 25, 1994)
* * *

Six (6) employees o f Tanduay Distillery were dismissed

fo r eating peanuts or drinking alcoholic beverages
while working and fo r engaging outside the company
premises in a fight with the supervisors who appre­
hended them. At the time of their dismissal, they had
served the company for periods ranging from 15 to 27
years, w ithout previous derogatory remarks. They were
also acquitted of the charge of slight physical injuries
filed against them as an outcome of the fight they had
with the supervisors. Is their dismissal justified? Why?

fie)5
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. The penalty of dismissal is too harsh.

W hile an employer-firm has a wide latitude of discre­
tion in the promulgation of policies, rules and regula­
tions on the work-related activities of the employees,
its directives, however, must always be fair and rea­
sonable, and corresponding penalties, when pre­
scribed, must be commensurate to the offense in­
volved and to the degree of infraction. In the actual
imposition by the employer of penalties on erring
employees, due consideration must be given to their
length of service and the number of violations they
have committed during their employ. Their having
been out of work for several years, during the pen­
dency of the illegal dismissal case, is likewise more
than enough punishment for their questioned miscon­
duct. (Tanduay Distillery Labor Union, et al. vs.
NLRC, et al., G. R. No. 73352, December 6, 1994)

* * *

Explain the reluctance of the courts to allow the dis­

missal of a worker.

ANS. The law regards the worker with compassion.

Our society is a compassionate one. Where a penalty
less punitive would suffice, whatever missteps may be
committed by the worker should not be visited with the
supreme penalty of dismissal. This is not only because
of the law’s concern for the working man. There is, in
addition, his family to consider. Unemployment brings
untold hardships and sorrows on those dependent only
on the wage-eamer. After all, labor determinations
should not be secu n d u m ra tio n e m (according to
logic) but also secu n d u m ca rita te m (with compas­
sion). (Almira, et al. vs. B. F. Goodrich Philippines,
Inc., et al., G. R. No. L-34974, July 25, 1974)
* * *

When is dismissal deemed a harsh penalty? Cite in­

stances.

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 TERMINATION OF EMPLOYMENT
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ANS. Dismissal of a reviser/trim mer of a textile

company after twelve (12) years of service, was con­
sidered harsh where it appeared that she was merely
negligent in trimming the cloths’ ribs. (Pioneer Textur-
izing Corporation et al. vs. NLRC et al., G. R. No.
118651, October 16, 1997)
The dismissal due to alleged gross negligence of
the warehouse superintendent and the warehouse su­
pervisor of a sugar refinery company, after they had
served the employer for 20 years and 10 years, re­
spectively, has been held to be harsh considering that
this was their first offense and habituality is an indis­
pensable element for dismissals due to gross negli­
gence; besides, the employer was not entirely blame­
less and the sugar bags lost through the employees’
negligence were recovered; suspension without pay
would be sufficient penalty. (National Sugar Refiner­
ies Corporation vs. NLRC et al., G. R. No. 1125339,
June 21,-19199)
* * *

When is dismissal not a harsh penalty? Cite an example.

ANS. Where two (2) cashiers of a department

store failed to report to management the shortages and
overages in their collections as soon as they arose, it
was ruled that their dismissal was valid because of
breach of the fiduciary trust reposed in them by the
company; their fourteen (14) and thirteen (13) years of
service should be taken against them. The offenses
they committed reflect a regrettable lack of loyalty.
Such loyalty should have been strengthened instead of
betrayed. (Jamer et al. vs. NLRC et al., G. R. No.
112630, Septem bers, 1997)
★ * *

Estioca, the president of the supervisors’ union, posted

a scathing and hostile announcement in the company’s
cafeteria, falsely denouncing the company fo r its sup­

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 TERMINATION OF EMPLOYMENT
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posed extravagance and fomenting discontent and re­

sentment among the employees on account o f the com­
pany’s supposed indifference to their claim fo r in ­
creased living allowance. He however later on apolo­
gized fo r his “ intemperate language” and “ impetuous
action” which he admitted exceeded “ the bounds of
tolerable dissent which management has the right to
reprove or correct,” and expressed regret fo r “ the d iffi­
cult situation that I have created fo r the management.”
The company nonetheless dismissed him fo r loss of
trust and confidence. Is Estioca’s dismissal justified?
Why?

ANS. No. The company’s reaction to Estioca’s

actuations was understandable, but too harsh in view
of his subsequent apology. (Zamboanga Wood Prod­
ucts, Inc. vs. NLRC, et al., G. R. No. 82088,
October 13, 1989)

* * *

Opeginio, an employee o f a mining firm fo r twenty-three

(23) years, was apprehended fo r highgrading or stealing
ores with high gold content. Considering that this was
his firs t offense and that he was immediately placed
under preventive suspension, would his dismissal be
warranted? Why?

ANS. There is no doubt that the employee was

guilty of breach of trust. And as has been repeatedly
held an employer cannot legally be compelled to
continue with the employment of a person who admit­
tedly was guilty of breach of trust towards his employer
and whose continuance in the service of the latter is
patently inimical to its interest. The law in protecting
the rights of the laborers authorizes neither oppression
nor self-destruction of the employer.
However, taking into account Opeginio’s twenty
three (23) years of service which undisputedly is
unblemished by any previous derogatory record and
since he has been under preventive suspension during

698
 TERMINATION OF EMPLOYMENT
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the pendency of the case, in the absence of a showing

that his continued employment would result in the
em ployer’s oppression or self-destruction, his dis­
missal would be a drastic punishment. The ends at
social and compassionate justice would therefore be
served if Opeginio is reinstated but without backwages
in view of the employer’s good faith. (Itogon-Suyoc
Mines, Inc. vs. NLRC, et al., G. R. No. L-54280,
September 30, 1982)

★ *

Signo, an employee for twenty (20) years w ithout previ­

ous derogatory record and with two (2) commendations
fo r honesty, was dismissed by Meralco fo r serious
misconduct and loss of confidence. His act consisted
o f misrepresenting that the residence o f a customer,
from whom he had received the amount of P7,000.00 to
facilitate the latter’s application fo r electrical connec­
tion, was w ithin the serviceable point of Meralco. As a
result of the scheme, the electrical connection to the
customer was installed. But due to the fault of the
power sales division of the company, the customer was
not billed fo r more than a year. Is the dismissal of
Signo justified?

ANS. No. His twenty (20) years of service, without

any previous derogatory record, and his two (2) com­
mendations for honesty, should be taken into account.
He must be reinstated but without the award of back­
wages in view of the good faith of the company in
dismissing him. (Manila Electric Co. vs. NLRC, e ta l.,
G. R. No. 78763, July 12, 1989)

* * *

Arnel Santos, an employee of Aris Philippines, Inc., had

an altercation in the company canteen with a canteen
helper. He smashed some food items on display,
slapped the canteen helper and shouted invectives.
May Santos be dismissed fo r such misconduct? Why?

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 TERMINATION OF EMPLOYMENT
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ANS. No. The misconduct was not connected with

his employment, and the incident did not, in any way,
disrupt the operations of the company. The penalty of
dismissal is too severe. (Aris Philippines, Inc. vs.
NLRC, et al., G. R. No. 97817, November 10, 1994)

* * *

Bank employees circulated an open letter wherein they

protested and criticized the suspension o f their branch
manager fo r alleged malversation of money belonging
to the bank's clients. They claimed in the letter that the
suspension tremendously affected them as the success
o f the branch was due to the efforts of the manager, and
that the suspension was inconsiderate, unfair, biased,
even inhuman. Is the circulation of the letter a ground
to dismiss the employees? Why?

ANS. No. Misconduct, however serious, must be

in connection with the employees’ work in order to
constitute a just cause for separation. In this case the
misconduct has no relation to the work of the employ­
ees. (Cosep et al vs. NLRC et al., G. R. No.
124966, June, 1998)

* * ★

Malabanan, a stock clerk, committed mistakes in post­

ing entries in the stock card; he made entries w ithout
counter checking the actual movement status o f the
items at the warehouse; this resulted in unmanageable
inaccuracies in the data posted in the stock cards. He
was however newly assigned to the jo b o f stock clerk,
and th is was his first infraction w ith regard to his
duties. Is his dismissal justified?

ANS. No. The penalty of dismissal is cruel and

unjust; it is not proportionate to the gravity of the
misdeed. Malabanan is not an incorrigible offender,
and it does not appear that what he did inflicted

7nn
 TERMINATION OF EMPLOYMENT
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serious damage to the company so much so that his

continuance in the service would be inimical to the
employer’s interest. (Rubberworld (Phils.), Inc. vs
NLRC, et al., G. R. No. 75704, July 19, 1989)
* * *

Is a clearance from the Department o f Labor and Em­

ployment necessary before an employer may dismiss a
worker?

ANS. Subject to the constitutional right of workers

to security of tenure and their right to be protected
against dismissal except for a just or authorized cause
and without prejudice to the requirement of notice
under Article 284 (now Art. 283) of this Code, the
clearance to terminate employment shall no longer be
necessary.
* * ★

Describe briefly the procedure to be followed, to con­

form to due process, in the dismissal o f an employee.

ANS. Sec. 2, Rule XIII, Book V, of the Rules

Implementing the Labor Code, provides:

I. For termination of employment based on just

cause as defined in Article 282 of the Labor Code:
(a) A written notice served on the employer
specifying the ground or grounds for termination, and
giving to the said employee reasonable opportunity
within which to explain his side;
(b) A hearing or conference during which the
employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to re­
spond to the charge, present his evidence or rebut the
evidence presented against him, and
(c) A written notice of termination served on the
employee indicating that upon due consideration of all

701
 TERMINATION OF EMPLOYMENT
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the circumstances, grounds have been established to

ju stify his termination.
In case of termination, the foregoing notices shall
be served on the employee’s last known address.
II. For termination of employment as based on
authorized causes defines in Article 283 of the Code,
the requirements of due process shall be deemed
complied with upon service of written notice to the
employee and the appropriate Regional Office of the
Department at least thirty days before the effectivity of
the termination, specifying the ground or grounds for
termination.
III. If the termination is brought about by the
completion of the contract or phase thereof, no prior
notice is required. If the termination is brought about
by the failure of an employee to meet the standards of
the employer in the case of probationary employment,
it shall be sufficient that a written notice is served the
employee within a reasonable time from the effective
date of termination. (Sec. 2, Rule XIII, Book V,
Implementing Rules and Regulations)
* * *

Why is notice and hearing necessary in cases of em­

ployee dismissal?

ANS. The twin requirements of 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
employer’s intent to dismiss and the reason for the
proposed dismissal; upon the other hand, the require­
ment of hearing affords the employee an opportunity to
answer his employer’s charges against him and ac­
cordingly to defend himself therefrom before dismissal
is effected. Neither of these two requirements can be
dispensed with without running afoul of the due pro­
cess requirement of the 1987 Constitution. (Century
Textile Mills, Inc., et al. vs. NLRC, et al., G. R. No.
77859, May 25, 1988)

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 TERMINATION OF EMPLOYMENT
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Where the dismissal of an employer is proven to be

for a just and valid cause but he was not accorded his
right to procedural due process, the dismissal shall be
upheld but the employer must be sanctioned for non-
compliance with the requirements of due process. The
sanction, which is in the nature of indemnification or
penalty, depends on the facts of each case and the
gravity of the omission committed by the employer; the
amount ranges from P1.000.00 to P10.000.00.
(Falguera vs. Hon. C. Linsangan et al., G. R. No.
114848, December 14, 1995)
* ★ ★

May the employer be allowed “ to fire the employee and

let him explain later"? Why?

ANS. No. While the procedure laid down by the

law for the dismissal of an employee need not be
observed to the letter, at least it must be done in the
natural sequence of notice, hearing and judgment.
“Fire the employee and let him explain later" is not in
accord with the requirements of due process.
(Batangas Laguna Tayabas Bus Co. vs. NLRC, et al.,
G. R. No. 94429, May 29. 1992)
★ * *

Eugenia was called to the Office of the General Man­

ager, was told that she was being charged with discour­
tesy and insubordination, and was required to explain
her side. As she could not give an explanation, she was
handed a notice of termination effective immediately. Is
her dismissal legal?

ANS. No. She was not given ample opportunity to

be heard and to defend herself. This is evident from
the fact that she was notified of the charges, required
to explain and then dismissed in only a day. Such a
procedure renders the employee’s security of tenure

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 TERMINATION OF EMPLOYMENT
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illusory. (National Service Corporation, et al. vs.

NLRC, et al., G. R. No. 69870, November 29, 1988)
* * *

Thirty-six (36) conductors o f a bus company were dis­

missed fo r loss o f confidence due to their involvement
in mass defraudation o f the company. No investigation
into the irregularity was however conducted by their
employer; the latter relied on the investigations con­
ducted by the J A 6 0 and the city fiscal who filed the
cases in court. Is their dismissal violative o f due
process?

ANS. No. The irregularity covered a period of ten

(10) months and involved thirty-six (36) employees
and volumes of documentary evidence. For the com­
pany to conduct its own investigation would only be a
duplication of the JAGO’s and later, the city fiscal’s
investigation, which the company had reason to rely
upon, said officials being the persons charged with this
special function of investigating the charges with im­
partiality. (Batangas Laguna Tayabas Bus Co. vs.
NLRC, et al., G. R. No. 69875, October 28, 1988)
* it *

Is the requirement o f written notice and hearing applica­

ble to the dismissal o f Filipino seamen recruited to work
on board foreign vessels?

ANS. Yes. Before a seaman is dismissed and

disembarked from the vessel, he must be given written
notice of the charges against him and afforded a
formal investigation where he could defend himself
personally or through a representative. The ship
captain’s fear that the seaman might cause trouble on
board the vessel upon being informed of his dismissal
is not a reason to dispense with the requirement.
(Seahorse Maritime Corporation, etc. vs. NLRC, et

704
 TERMINATION OF EMPLOYMENT
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a l., G. R. No. 84712, May 15, 1989). And the fact

that the seaman was granted an audience with the ship
captain and the ship agent’s general manager is not
the “due process” contemplated by law. (Tingson, et
al. vs. NLRC, et al., G. R. No. 84702, May 18,
1990)
★ * *

Give instances of dismissals in violation o f due pro­

cess.

ANS. The dismissal of a credit investigator-

appraiser of a bank for serious misconduct and breach
of trust after he was granted an opportunity to explain
his side before an investigating committee but without
counsel or representative. (Salaw vs. NLRC, et al., G.
R. No. 90786, September 27, 1991)
The dismissal of a driver of a marketing corpora­
tion for alleged unauthorized absences after he was
given twenty four (24) hours from notice within which
to give the explanation but he was unable to do so
because the manager left the office without giving him
a chance to present his side. (Mabaylan vs. NLRC, et
al., G. R. No. 73992, November 14, 1991)
The dismissal of a driver of a construction supply a
day after he was told not to report for work anymore.
The mere fact that his employer later made an offer to
reemploy him, after he had filed a complaint, did not
cure the vice in his dismissal. (Ranara vs. NLRC, et
al., G. R. No. 100969, August 14, 1992)
Where the medical representative of a pharmaceu­
tical company was issued tv/o notices requiring her to
explain supposed discrepancies and an apparent
forgery in her reports but no hearing was actually
conducted before her dismissal, it was ruled that the
employee’s right to due process was violated. (Pono
vs. NLRC e ta l., G. R. No. 118860, July 17, 1997)
* * ★

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 TERMINATION OF EMPLOYMENT
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Dieto and Cablay, chief steamer and roasting helper,

respectively, in a restaurant, were dismissed by their
employer because of their alleged participation in the
theft o f dried scallops. The company did not conduct
i& own investigation before dismissing the said work­
ers; it merely relied on the findings, based solely on the
affidavit of an accused-turned state witness, made by
the City Fiscal in the preliminary investigation on the
qualified theft charge against Dieto and Cablay.
(a) Was due process accorded Dieto and Cablay before
they were dismissed? Why?

ANS. No. The findings made by the City Fiscal

were based solely on the affidavit of an accused-
turned state witness. No other evidence was pre­
sented positively linking Dieto and Cablay to the
alleged theft. The substantial evidence requirement is
not present.

(b) Distinguish this case from BLTB Co. vs. NLRC, 166
SCRA 721.

ANS. In the BLTB Co. case, there was mass fraud

covering a period of ten (10) months involving thirty-
six (36) employees and volumes of documentary evi­
dence. The City Fiscal’s finding of a prima facie case
of estafa was based on the affidavits of witnesses and
on the voluminous documentary evidence. There was
consequently basis for the company to dismiss the
employees for loss of confidence without necessarily
conducting a formal investigation separate from the
preliminary investigation. (China City Restaurant Cor­
poration vs. NLRC, et al., G. R. No. 97196, January
22,1993)

* * *

Segismundo and Montalvo, driver and loader/helper,

respectively, were dismissed by a freight forwarding
company, due to their well documented involvement in
pilferages. Prior to their dismissal they were called to a

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 TERMINATION OF EMPLOYMENT
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meeting o f all delivery personnel of the company to

discuss pilferage incidents. During the meeting, they
were allowed to inspect the records gathered by the
company. They denied involvement therein. They were
preventively suspended on the day of the meeting and
then dismissed bareiy a month later. Was their dis­
missal effected inviolation o f their right to due process?
Why?

ANS. Yes. The employer did not comply with the

twin requirements of notice and hearing. The meeting
called by the company to inform the delivery personnel
about the result of the investigation on the pilferages
does not qualify as the hearing required by law. Since
the employees denied any involvement in the pilfer­
ages, a separate hearing should have been conducted
to enable them to air their side.
Segismundo and Montalvo are not however entitled
to reinstatement since they were dismissed for a valid
cause. They are merely entitled to damages in the
sum of P1.000.00 each, for failure of the employer to
conduct a hearing prior to th e ir dismissal.
(Segismundo and Montalvo vs. NLRC, et al., G. R.
No. 112203, December 13, 1994)

On th e ir way homts from a staff conference, the Assis­

tant Vice President of a credit corporation confronted
Jovellanos, a marketing assistant, of the contents o f an
affidavit executed by Racimo, a borrower, about
amounts paid by the affiant to a credit investigator
appraiser, in a notice of preventive suspension subse­
quently isisued to Jovellanos.'he was required to explain
his participation in certain reported irregular transac-
tiorfs 'pertaining to real estate mortgage loan's. An
cx-parte investigation, w ith out the participation o f
Jovellanos, was later conducted. During the investiga­
tion, tw o borrowers declared that Jovellanos asked fo r
a percentage fee, but they refused to give any sworn
statement. Racimo also retracted his affidavit im plicat­
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ing Jovellanos. JoveSianos was nortipihsless dismissed,

after etevsn (11) years of service, fo r alleged w illful
broach of trust.
(a) Was Jovellanos accorded procedural due process
prior to his dismissal? Why?

ANS. No. There was casualness and incomplete­

ness of information given to Jovellanos. The charges
were not specific. He was not aware of the investiga­
tion conducted by the company and was never given
an opportunity to disprove the accusation of the bor­
rowers. His opportunity to defend himself was thus
more chimerical than real.

(b) Is the dismissal of JovelJanos, fo r loss of trust and

confidence, justified? Explain.

ANS. No. The constitutional right of workers to

security of tenure cannot be eroded, let alone be
forfeited except upon a clear and convincing showing
of a just and lawful cause. Jovellanos has been with
the company for eleven (11) years and such service
has not been tainted with any kind of dishonesty. This
length of faithful service cannot be disregarded on the
basis of evidence that is hearsay, uncorroborated, and
untrustworthy; otherwise, the tenurial rights of workers
would have but a scrap value. (BPI Credit Corporation
vs. NLRC, et a!., G. R. No. 106027, June 25, 1994)

* * *

Guevarra, the manager of one of the main branches of

Dunkin Donuts, was asked to attend a meeting where he
was asked about alleged irregularities in his branch
regarding overtime allowances which he approved fo r
himself; and he was also informed of other complaints
against him; Immediately thereafter, he was placed un­
der preventive suspension allegedly because his pres­
ence in the shop intimidated the employees. After one
(1) month, Guevarra received a Notice of Termination
inform ing him of his dismissal fo r breach of trust and

708
 TERMINATION OF EMPLOYMENT
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confidence based on written complaints made by em­

ployees in his branch.
(a) Was Guevarra accorded due process before his
dismissal? Why?

ANS. No. He was not given a written notice

stating the particular acts he committed. He was not
given a reasonable period from receipt of such notice
to answer the charges, and ample opportunity to be
heard and to defsnd himself with the assistance of his
representative.

(b) Was there sufficient ground to dismiss Guevarra?

Why?

ANS. None. The employer failed to discharge its

burden of establishing the just cause for the dismissal
of Guevarra. The employees whose complaints were
the bases for his dismissal were not even presented as
witnesses' nor confronted by Guevarra during the al­
leged investigation conducted by the employer. Man­
agerial employees are no less entitled to security of
tenure as are other employees.

(c) Is Guevarra, though illegally dismissed, entitled to

reinstatement? Why?

ANS. No. He held a sensitive position. The case

left both parties with less than full trust and faith in
each other. He should be paid severance compensa­
tion in lieu of reinstatement. (Golden Donuts, Inc., et
al. vs. NLRC, et al., G. R. Nos. 105788-89,
February 21, 1994)
* * %
V

In April, 1980, Jon de Ysasi hired his son, Jon de Ysasi

III, as farm administrator of Hacienda Manucao. In June
and August, 1982, Ysasi ill was hospitalized fo r various
ailments. In November, 1982 he underwent surgery. In
June and December, 1883 and January, 1984 he was

TftO
 TERMINATION OF EMPLOYMENT
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also confined in the hospital. During the entire periods

of his illnesses, his father took care of his medical
expenses and he continued to receivo compensation
until April, when w ithout notice the same was discontin­
ued. The father later contended that the son abandoned
his job.
(a) Was there abandonment? Why?

ANS. None. His long absence from work was due

to various illnesses and his confinements in the hospi­
tal. It is deliberate and unjustified refusal to resume
employment and not mere absence that is required to
constitute abandonment as a ground for termination of
employment.

(b) Was Ysasi III accorded due process?

ANS. No. He was never given any notice about

his impending dismissal and the grounds therefor,
much less a chance to be heard. In cases of abandon­
ment, the notice must be served at the worker's last
known address.

(c) Is Ysasi III entitled to reic.statement? Why?

ANS. No. Reinstatement is not advisable as the

strained relationship between father and son has ren­
dered im possible a harmonious and peaceful
employer-employee relationship. Besides, an em­
ployer who no longer trusts his manager cannot oper­
ate freely in a competitive and profitable manner.

(d) Is Ysasi HI entitled to moral and exemplary dam­

ages? Why?

ANS. No. In the cases where moral and exem­

plary damages were awarded, ths dismissed employ­
ees were genuinely without fault and were undoubtedly
victim s of the erring employer’s capricious exercise of
power. In the present case, however, the parties
fanned the flames that geve rise and aggravated the

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 TERMINATION OF EMPLOYMENT
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controversy, instead of sincerely negotiating a peace­

ful settlement of their claims. Their actuations seethed
with mutual antagonism; neither acted in good faith;
and each one has a cause for damages against the
other. (Jon de Ysasi III vs. NLRC, et al., G. R. No
104599, March 11, 1994)

* * *

Employees, who allegedly falsified the signature o f the

company physician on their applications fo r SSS sick­
ness benefits, were required in writing to explain why
they subm itted falsified documents and why they
should not be dismissed fo r cause. But no hearing was
conducted before the employees were dismissed. The
dismissal was effected after a company personnel su­
pervisor interviewed the employees and the company
physician. Were the employees denied due process?
Explain.

ANS. Yes. It is not enough ffiat the employee be

served with written notices, viz: notice stating the
charges against him and notice of the decision to
dismiss him. The employee must be afforded ample
opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
“Ample opportunity” connotes every kind of assistance
that management must record the employee to enable
him to prepare adequately for his defense, including
legal representation. Consultations or conferences are
not a substitute for the actual observance of notice and
hearing. (Mirano et al. vs. NLRC et al., G. R. No.
121112, March 19, 1997)

* * *

For threatening with bodily harm a female co-employee

on several occasions, B, a headwaiter of Silahis Interna­
tional Hotel, was issued by the management a memo­
randum requiring him to subm it a written explanation
why no disciplinary action should be taken against him

711
 TERMINATION OF EMPLOYMENT
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fo r having violated the company rules in the employees

handbook on “ Disturbing Peace and Order” and “ Threat
or Inflicting Bodily Harm.” A written police report was
attached to the memorandum. After B submitted a letter
explanation, the management sent B another memoran­
dum terminating his services fo r violation o f the rule on
“ Threat, Coercion."
(a) Are the foregoing written notices sufficient to satisfy
the requirements of due process? Explain.

ANS. No. The first notice, requiring B. to give his

explanation, does not state with particularity the acts
and omissions for which B. is being charged. It is
couched in too-general terms, without any narration
whatsoever as to how B. committed the infractions. It
cannot be said that B. was informed with particularity
of the acts and omissions for which he is being
charged. ___

~ Neither may the second notice De considered suffi­

cient. It does not clearly state the reason for B’s
dismissal. It lacks specifications.

(b) May the dismissal of B be nonetheless deemed

valid? Why?

ANS. Yes. His acts constitute serious misconduct.

The company, which is engaged in the hotel business,
must be able to maintain an atmosphere of peace and
tranquillity within its premises. It should however pay
P2.000.00 to B as indemnity for non-observance of due
process. (Bondoc et al. vs. NLRC et al., G. R. No.
103209, July 28, f 997)
★ ★ *

The charge and notice sent to the employee read:

1) On JuJy 31, 1SS7, an investigation was conducted

involving you fo r being under suspicion of theft.
 TERMINATION OF EMPLOYMENT
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2) On the same day, two witnesses gave testimonies.

One admitted to visiting your home and finding numer­
ous KAMISETA clothing. The other said you encour­
aged her to steal a KAMISETA belt from the stocks.

3) On the same day, you were aware of the allegations

made against you arid you were given a chance to
explain yourself. You were also asked by representa­
tives of the Company if you were w illing to have your
home inspected. You agreed and accompanied the said
representatives to your residence.

4) During the said inspection, the representativec

found the follow ing items:

a. KAMISETA fabrics (approx. VA yds.)

b. 2 pcs. Shirts made out of KAMISETA excess
cuttings
c. NAUTICAL SHOP wall paper

5) On July 31, 1997, you were given a disciplinary

action by the company and placed under indefinite
suspension w ithout pay fo r stealing. You signed the
said form thereby accepting the charges as true.

8) You have violated Article 12 under Category 4 of our

Company rules and regulations. You have received a
copy of this handbook on March 17, 1997 (Booklet No.
63) and on the same day you signed your acceptance
and compliance to the rules therein. ARTICLE 12 UNr
DER CATEGORY 4 states: ang pagnanakaw sa kompa-
nya o pagnanakaw sa iba. Kasama nito ang: pagkuha
ng anumang pag-aari mula sa kapwa empleyado ng
walang pahintulot. Ang paglabas/paggamit ng pera ng
kompanya ng walang pahintulot.

The above violation is punishable by termination.

7) You are hereby called to the Head Office on August

28, 1997 to give you an opportunity to explain yourself
further.

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 TERMINATION OF EMPLOYMENT
AND RETIREMENT

8) Non-attendanca would mean you have no cause to

explain yourself further and the Company shall proceed
with the evaluation of your case.

The employee however failed to appear during the

scheduled hearing. Consequently, the company de­
cided to dismiss her. Is the dismissal valid?

ANS. No. The company failed to show that It had

complied with the two-notice requirement: (a) a
written notice containing a statement of the cause for
the termination to afford the employee ample opportu­
nity 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 the reason there­
for. (Shoppes Manila, Inc. vs. NLRC et al., G. R.
No. 147125, January 14, 2004)
* * ★

May the worker sought to be dismissed be placed under

preventive suspension? If so, state the ground for, as
well as the duration of, such preventive suspension.

ANS. The employer may place the worker con­

cerned under preventive suspension if the latter’s
continued employment poses a serious and imminent
threat to the life or property of the employer or his
co-workers. (Sec. 3, Rule XIV, Book V, Implementing
Rules and Regulations)
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 exten­
sion, 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 hear­
ing, to dismiss the worker.

714
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

The preventive suspension, for a period not ex­

ceeding 30 days, of the department manager and
assistant manager pending investigation into the al­
leged alterations they made in the entries of the
company’s post operations logbook, has been held to
be proper. (Pacific Cement Company, Inc. vs. NLRC,
et al., G. R. Nos. 78871-72, May 5, 1989)
* * *

Has the dismissed worker the right to contest his dis­

missal?

ANS. Yes. Any decision taken by the employer is

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 (Sec. 7, Rule XIV, Book
V, Implementing Rules and Regulations).
Cases involving the dismissal of a worker shall be
decided by the Labor Arbiter within twenty (20) working
days from the date of submission of such cases for
decision (Sec. 8, Rule XIV, Book V, Implementing
Rules and Regulations).

★ * *

Pending resolution of the case by the labor arbiter, may

the dismissed employee be ordered reinstated?

ANS. Pending resolution of the case, the Secre­

tary of Labor and Employment may suspend the ef­
fects of the termination in the event of a p rim a fa cie
finding by the appropriate official of the Department
before whom such dispute is pending, that the term ina­
tion may cause a serious labor dispute or is in imple­
mentation of a mass lay-off. (Article 277, Labor Code,
as amended by R. A. 6715)

715
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Who has the burcta?) of proving the existence o f a valid

or authorized cause fo r dismissal?

ANS. Article 277 of the Labor Code imposes upon

the employer the burden of proving that the term ina­
tion was for a valid or authorized cause. He who
alleges the existence of a fact must prove the same.
The existence of a just or authorized cause for dis­
missal cannot be presumed. A contrary rule would
contravene the constitutional policy of affording pro­
tection to the worker.

* * *

Why are a ju st or authorized cause and prior hearing

required fo r the dismissal of a worker?

ANS. The worker’s employment is property in the

constitutional sense. He cannot be deprived thereof
without due process. Substantive due process requires
that a person be deprived of his property only on just
and reasonable grounds. Procedural due process
requires that a person be deprived of his property only
after he has been given an opportunity to be heard.
Due process insures fairness and avoids arbitrariness.

* * Hr

An employer, anxious to get rid o f an employee who is a

“ pilosopo,” seeks your opinion on whether he can
dismiss the latter upon payment of severance compen­
sation. What is your advice? Explain.

ANS. My advice is this: the employer cannot

dismiss an employee simply by reason of the payment
of severance compensation. W illingness on the part of
the employer to pay severance compensation is not
among the just causes enumerated by law; otherwise,
the security of tenure guaranteed under the Constitu­
tion becomes illusory and the individual’s continuance

716
 TERMINATION OF EMPLOYMENT
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in the service will depend upon the pleasure of the

employer.
* * *

Give a discussion on constructive dismissals.

ANS. An employee who quits his work because of

the employer’s unreasonable, humiliating or demean­
ing actuations which render continued work impossible
is deemed to have been illegally dismissed. This may
occur although there is no diminution or reduction of
salary of the employee. It may be a transfer from a
position of dignity to a more servile or menial job. It
has therefore been held that the transfer from assistant
high school principal to classroom teacher (Del Rio vs.
Bonilla, NLRC Case No. CA-318, October 27, 1975),
from waiter to roomboy (M iraflor vs. New Swiss Inn,
NLRC Case No. R04-2-871-74, January 12, 1976) and
from internal auditor to purchaser of logs (Quisaba vs.
Sta. Ines-Melale Veneer and Plywood, Inc., G. R. No.
L-38088, August 30, 1974), amount to constructive
dismissal.
Constructive discharge is a quitting because con­
tinued, employment is rendered impor ible, unreason­
able or unlikely; as an offer involving a demotion in
rank and a diminution in pay. But a transfer from the
position of executive secretary, to production secre­
tary, without reduction in salary or workload, cannot be
the basis for a claim for constructive discharge.
(Philippine Japan Active Carbon Corporation, et al.
vs. NLRC, et al., G. R. No. 83239, March 8, 1989)
Where a managerial employee, after a heated
argument with the owners of the company, left his work
arid filed a complaint fo r'illega l dismissal, it was held
that such complaint cannot be sustained there being no
showing that the employee was prevented from return­
ing to his work and considering that the company had
consistently manifested its willingness to reinstate him
in his former position. (Chong Guan Trading vs.
NLRC, et al., G. R. No. 81471, April 26, 1989)

717
 TERMINATION OF EMPLOYMENT
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Where a security guard of a hacienda was demoted

to the position of a laborer in a sugar plantation, it was
held that there was constructive dismissal, it appearing
that the demotion was made because the security
guard was actively campaigning for the actual distribu­
tion of the hacienda to the workers under the agrarian
reform program. (Ledesma & Co. et al. vs. NLRC, G.
R. No. 110930, July 13, 1995).
Constructive dismissal is an involuntary resigna­
tion resorted to when continued employment is ren­
dered impossible, unreasonable or unlikely; when there
is demotion in rank and/or a diminution in pay; or when
a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee.
But there is no constructive dismissal where an
employee resigns because he is transferred but such
transfer does not involve demotion as there is no
reduction in position, rank or salary as a result thereof.
(Philippine Wireless, Inc. vs. NLRC et al., G. R. No.
112963, July 20, 1999)
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. So that where workers were not
demoted in rank nor their pay diminished considerably,
but were simply told without prior warning or notice
that there was no more work for them, they were
actually, and, not constructively dismissed. (Mark
Roche International et al vs. NLRC et si., G. R. No.
123825, August 31, 1999)
The transfer of a food technologist from the labora­
tory of a dairy and chocolate company to the vegetable
processing section as a mere worker, for allegedly
leaving her post without permission, was ruled to be a
constructive dismissal, considering that under the
company’s rules the penalty for the offense was merely
“warning’’ and she was never given an opportunity to
refute the reason for the transfer. (Blue Dairy Corpo­
ration et al vs. NLRC et al., G. R. No. 129843,
September 14, 1999)

71ft
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Ananias was employed as an accountant by a tim ber

company. He was instructed by the owner-manager of
the company to cut o ff the living allowance of the
employees. He requested that a memorandum to this
effect be issued so that he would not be blamed by the
workers. The manager got angry and shouted at him.
Thereafter, Ananias was no longer given any account­
ing work, deprived of free light and per diem, and
allowed only to do simple clerical work. Payment of his
salary was also delayed. When he returned from his
vacation leave, he was informed by the company that
his application for leave had been disapproved and that
he was not entitled to any salary fo r the period o f his
leave.
(a) Has Ananias b-sen constructively dismissed? Why?

ANS. Yes. He was systematically deprived of his

duties and benefits to make him feel that his presence
in the company was no longer wanted.

(b) Considering that he was illegally dismissed, is he

entitled to reinstatement? Why!

ANS. No. As accountant, Ananias occupied a

position involving trust and confidence. In the light of
the strained relation between the parties, the full
restoration of an employment relationship based on
trust and confidence is no longer possible. He should
be awarded separation pay in lieu of reinstatement.

(c) Is Ananias entitled to backwages? How much?

ANS. In view of his illegal dismissal, Ananias is

entitled to backwages, apart from the separation pay
awarded in lieu of reinstatement. As the employer
obviously acted in bad faith and considering that the
case dragged on for several years to the prejudice of
the employee, an award of five (5) years backwages is
justified.

719
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(d) Article 219 of the Labor Code, as amended by

Republic Act No. 6715, provides that backwages be
awarded to the employee from the time he was deprived
of his compensation up to the time of his actua! rein­
statement. Is this applicable to the instant case? Ex­
plain.

ANS. No. Ananias was dismissed in 1979. Repub­

lic Act 6715, amending Article 279 of the Labor Code,
took effect on March 21, 1989. As ruled in L a n tio n ,
et al. vs. NLRC, G. R. No. 82028, J a n u a ry 29,
1990 and Sealand S e rvice , Inc, vs. NLRC, G. R.
No. 90500, O c to b e r 5, 1990, the amendatory law
has no retroactive application. (Panday vs. NLRC, et
al., G. R. No. 67665, May 20, 1992)
* * *

Bonifacio de Leon, an Assistant Vice-President-

Manager (Makati Office) o f a sugar cooperative, was told
to take a vacation leave. When he returned, he was
informed that his application fo r retirement has been
accepted. De Leon protested, alleging that he never
applied fo r retirement. The President of the company
however intimated to him that the audit of the books
showed the commission of some irregularities and that
it would be better if De Leon ju st retired under the
company’s retrenchment program; this would save him
the embarrassment attendant to a full-dress investiga­
tion. At that time, he had served the company fo r more
than twenty-eight (28) years.
(a) Is the retirement of De Leon equivalent to a dis­
missal?

ANS. Yes. If the intent to retire is not adequately

evidenced or is a statement of intent to retire is
involuntary or coerced, an alleged retirement is treated
as a dismissal.

(b) Is the dismissal of De Leon, effected under the guise

of retirement, legal? Why?

720
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. There is in this case a clear denial of

due process. He was not given an opportunity to
explain his side with respect to the irregularities al­
legedly found by the auditors. It is incumbent upon the
employer to conduct a formal investigation and inform
the employee of the specific charges against him.
Under our system of government, even the most
hardened criminals are given a day in court.

(c) De Leon accepted the sum of P26.492.63 represent­

ing his retirement pay. Is he, by such acceptance,
estopped from questioning the legality o f his dis­
missal? Why?

ANS. No. Since he was forced to retire, he

suddenly found himself jobless and with a fam ily to
support. He had no alternative but to accept what was
offered to him. He needed money to support his
family. Estoppel does not apply. (De Leon vs. NLRC,
et al., G. R. No. L-52056, October 30, 1980)

* *

Diaz, who worked in an advertising company as Vice-

President and concurrently head o f the Account Man­
agement Group, was asked by C., the Chairman of the
Board, to jo in him in organizing a new advertising
agency. The latter was then at odds with E., the major­
ity stockholder of the company. Diaz expressed reluc­
tance to the idea, and instead suggested that the own­
ers should reconcile their differences. P., the company
president expressed his disappointment over the non­
committal stance of Diaz. The faction of C. & P. later
bought out the shareholdings of E. A major reorganiza­
tion o f the agency followed. The position o f Diaz was
abolished and he was made to merely head a division of
the Account Management Group, but he continued to
receive the same salaries, benefits and privileges. He
thereafter served on the company a notice that he
considered himself constructively dismissed and then

721
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

filed 3. complaint fo r illegal dismissal. Is the complaint

of Diaz meritorious? Why?

ANS. Yes. Constructive dismissal does not always

involve diminution of salaries or benefits or demotion
in rank. An act of clear discrimination, insensibility, or
disdain by an employer may become so unbearable on
the part of the employee that it could foreclose any
choice by him except to forego his continued employ­
ment. (Philippine Advertising Counselors, Inc. et al.
vs. NLRC e ta l., G. R. No. 12008, October 18, 1996)
* * *

For his absence fo r one (1) day, Agapito, a machine

shop operator, was told by his employer, in an insulting
and demeaning manner, that he had been suspended
for one (1) month. But he was later on readmitted
through the intercession of a common relative. He was
however assigned to the jo b o f transporting fillin g mate­
rials to the shop premises. When he protested, he was
again berated and then told to leave the place immedi­
ately. He filed a complaint fo r illegal dismissal. Agapito
had served the machine shop fo r sixteen (16) years.
(a) May Agapito be considered to have been construc­
tively dismissed? Explain.

ANS. Yes. He was compelled to leave his job

because of his demotion without just cause.

(b) In case of constructive dismissals, who has the

burden of proving that the transfer or demotion is for
valid and legitimate grounds?

ANS. The employer.

(c) Is due process required before an employee may be

demoted? Why?

ANS. Yes. Demotions, like dismissals, affect the

employment of a worker whose right to continued

722
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

employment, under the same terms and conditions is

also protested by law. Moreover, considering that
demotion is, like dismissal, also a punitive action, the
employer being demoted should be given a chance to
contest the same. (Jarcia Machine Shop and Auto
Supply, Inc. vs. NLRC et al., G. R. No. 118045,
January 2, 1997); see also Leonardo vs. NLRC et al.,
G. R. No. 125303, June 16, 2000)

* * *

J. Florendo-Flores was the Senior Account Manager fo r

Northern Luzon of GLOBE TELECOM, INC. She did not
report fo r work because her immediate supervisor, C.
M. Santos, did not accomplish and subm it her perfor­
mance evaluation report thereby depriving her of salary
increases, bonuses and other incentives which other
employees of the same rank had been receiving; re­
duced her to a house-to-house selling agent of com­
pany products despite her rank as supervisor of com­
pany dealers and agents; never supported her in the
sales programs and withheld all her other benefits, i. e.,
gasoline allowance, per diems, representation al­
lowance and car maintenance. She however continued
to have the rank o f a supervisor.
(a) Was Florendo-Flores constructively dismissed? Ex­
plain.

ANS. Yes. The reduction of her functions which

were originally supervisory in nature to a mere house-
to-house agent or direct sales agent constituted a
demotion in rarik.

(b) Who has the burden of prbving that the demotion of

an employee is fo r ju st and valid grounds?

ANS. The employer. And if it cannot overcome

this burden of proof, the employee's demotion shall be
tantamount to unlawful constructive dismissal.

723
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(c) May not the unauthorized absence of Florendo-

Flores be considered abandonment?

ANS. No. Abandonment is negated by her imme­

diate filing of a complaint for illegal dismissal against
the company. A charge of abandonment is totally
inconsistent with the immediate filing of a complaint
for illegal dismissal; more so, when it includes a prayer
for reinstatement. (Globe Telecom, Inc. et al vs.
Joan Florendo-Flores, G. R. No. 150092, September
27, 2002)

* * •*

Josephine, a property custodian of Benguet Electric

Cooperative (BENECO), was detailed to assume the
duties o f bill distributor without any charge in salary
rate. She had worked fo r BENECO fo r twenty (20) years.
She refused to obey the order, claiming that the assign­
ment was in the form o f a demotion. The company
issued to her a memorandum threatening to charge her
w ith insubordination. But a day before her receipt of
the memorandum, she filed a complaint fo r constructive
dism issal before the Regional Arbitration Branch,
NLRC, CAR. She however thereafter continued to report
fo r work.
(a) Was Josephine constructively dismissed? Why?

ANS. No. There was no demotion. The positions

of property custodian and bill distributor belonged to
the same rank. The latter position, as a matter of fact,
was crucial to the operations of the company; the
lifeblood of an electric cooperative hinges on the
proper collection of revenues from its clients.

(b) May Josephine be validly dismissed? Why?

ANS. Yes. Her refusal to obey the transfer order

constitutes willful disobedience of a lawful order of her
employer. (Benguet Electric Cooperative et al vs.
Fianza, G. R. No. 158606, March 9, 2004)

724
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Jimmy was hired by a recreational corporation on a day

to day basis as dishwasher and laborer fo r a period of
ten (10) m onths and then rehired fo r over two (2)
months as gardener. May he thereafter be dismissed
w ithout ju st and valid cause considering that his em­
ployment contract provided that he may be dismissed at
any time? Why?

ANS. No. He has become a regular employee and

he may be dismissed only for just or authorized
causes. The provisions of the contract are not binding
because they were intended to circumvent the security
of tenure of the employee. (Baguio Country Club
Corporation vs. NLRC, et al., G. R. No. 71664,
February 28, 1992)
* * *

Trinio, a security coordinator who had supervision over

all guards assigned to secure the employer’s premises
by an agency with which the employer had an agree­
ment, one night drank intoxicating liquor w ithin the
company premises and had sexual intercourse with a
female married security guard on top of the desk of the
security head and in the presence of another female
security guard. For this misconduct, Trinio was dis­
missed by the company. He however charged that his
dismissal is not warranted considering that the act was
under the rules and regulations penalized with suspen­
sion fo r thirty (30) days and not dismissal, that this was
his first offense, and that the company was not preju­
diced thereby. Decide.

ANS. The dismissal of Triniq is justified. His acts

constitute serious misconduct. The employer’s form u­
lation and promulgation of rules of conduct and disci­
pline for its employees cannot and should not operate
to altogether negate his prerogatives and responsibility
to determine and declare whether or not facts not
explicitly set out in the rules constitute serious miscon­
duct; otherwise, the rules, literally applied, would result

725
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Yes. The heart of the charge is the crooked

and anarchic attitude of the employee towards his
employer. Damage aggravates the charge but its
absence does not mitigate nor negate the employee’s
liability. The fact that a replacement driver was able
to perform the task could neither alter the gravity of
the charge, this responsibility being personal to the
perpetrator. The length of service rendered by the
employee is also inconsequential for it does not lessen
a bit the rebellious temper of the employee object of
the charge.

(b) Was the employee’s right to due process violated?

Why?

ANS. No. His written explanation was taken into

consideration in arriving at the decision to dismiss him.
He should have insisted on a hearing in the initial
proceedings conducted by the company; anyway, his
written explanation admitted the complained inaction
thereby rendering unnecessary any hearing thereon.
And since the defense interposed was in the nature of
a justifying circumstance, the burden shifted to him to
prove that his inaction was warranted.

(c) Is the penalty of dismissal too harsh in this, case,

considering the employee’s long years o f service?
Why?

ANS. No. The charge of willful disobedience is

clearly established, hence his. dismissal is inevitable.

(d) Is Nuez entitled to severance pay as a measure of

compassionate justice?W hy?

ANS. No. His willful disobedience constitutes

serious misconduct. (Nuez vs. NLRC, et al., G. R.
No. 107574, December 28, 1994)

728
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Manebo, an employee of Tritran Bus Co. fo r about ten

(10) years, was told by the personnel manager to see
right away the new company president to apologize for
his past misdeeds. Manebo had ju st been ordered
reinstated to his jo b by resolution o f the grievance
committee. He however failed to comply with the per­
sonnel manager’s instruction as he was attending, as
representative of the union, a grievance committee
hearing and tha president’s office was fifty (50) kilorne-
ters away.
The follow ing day, Manebo was issued a memorandum
requiring him to explain why he should not be dealt with
administratively fo r refusing to see the company presi­
dent fo r conference and appropriate guidance. Three
(3) days later, he filed his explanation. About nineteen
(19) days thereafter, the company rendered a decision
dismissing him fo r disobedience and misconduct. At
the time of his dismissal, Manebo occupied the position
o f comptroller.
(a) Was the dismissal o f Manebo justified? Why?

ANS. No. The directive for Manebo to see the

company president was neither reasonable nor one
connected, with his duties. His disobedience, further­
more, cannot be characterized as willful.

(b) Was Manebo accorded due process before his

dismissal? Explain.

ANS. No. While it may be true that he was

allowed to explain, no hearing was thereafter actually
conducted.
The decision to dismiss must come only after the
employee is given reasonable period to answer the
charge and an ample opportunity to be heard and
defend himself with the assistance of his representa­
tive, if he so desires. (Manebo vs. NLRC, et al., G.
R. No. 107721, January 10, 1894)
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Reta was hired as a Second Officer of a vessel. On

December 11, 1990, he was caught watching television
at the smoking room instead o f being at his post. On
December 12, he failed to take proper positions of the
vessel, rendering his observations unreliable. On De­
cember 18, he forgot to take sun observations and to
keep track of the vessel’s proper position and made a
wrong entry in the logbook. On December 26, he
refused to work overtime. On December 27, by reason
of his faulty maneuvering, the vessel barely missed
colliding with another vessel. On January 1,1991, while
he was in charge of loading fuel into the holds o f the
vessel, he left his workplace and went to the dining
room. On January 8, while the vessel was going
through strong current, he let loose the mooring line c f
the vessel causing it to move away from the loading
birth; it had to be moored by a tug boat; all the crew,
except Reta, responded to the call fo r help in m ooring
the vessel. On February 27, the master o f the vessel
discharged Reta. Was his dismissal justified? Explain.

ANS. Yes. The infractions committed by Reta all

boil down to insubordination, incompetence, and ineffi­
ciency. However, as he was not accorded due process
before his dismissal and since he was forced to leave
the vessel in a foreign port, the employer should be
required to pay a penalty of P10,000.00. (Reta vs.
NLRC, et al., G. R. No. 112100, May 27, 1994)

★ * *

Teotimo worked as administrative officer of a bus com­

pany. In violation of a company memorandum restrict­
ing cash advances of confidential employees to P i00.00
each payroll period, he repeatedly drew cash advances
in excess of the amount allowed thereunder. For this,
he was dismissed. Is his dismissal justified? Explain.

ANS. There can be no doubt that the emplsyees

here has repeatedly abused the “vale" privilege and

730
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

therefore in this respect can be considered w illful. He

cannot claim that he is ignorant of the memorandum
and the circulars limiting the cash advances of employ­
ees to not more than P100.00 each payroll period. But
the rules, instructions or commands limiting the cash
advances of confidential employees do not pertain to
the duties which the employee has been engaged to
discharge. Said rules, instructions or commands are
primarily intended for the benefit of the company itself
and have nothing to do with the duties of its employees
and therefore cannot be a valid ground fo r their
discharge on the score of disobedience. (Batangas
Laguna Tayabas Bus Co. vs. Court of Appeals and
Teotimo de Mesa, G. R. No. L-38482, June 18, 1976)

* * *

Ofilada was employed as a ticket-seller in a theater.

Contrary to the theater's rules and regulations, he al­
lowed his friends and relatives to enter the theater free
o f charge, slept during working hours, and left open his
ticket-booth so that he could converse w ith his visitors
and friends who were in a nearby room. The rule
requiring the closing of the ticket-booth was a precau­
tion against hold-ups and other untoward incidents.
For these violations, Ofilada was dismissed. Is his
dismissal justified? Why?

ANS. The infractions of company rules and regula­

tions by Ofilada are serious enough to warrant his
dismissal. He disobeyed the lawful instructions of his
employer on matters pertaining to his work as a ticket
seller. (Castillo, et al. vs. CIR, et al., G. R. No.
L-26124, May 2S, 1971)

★ * *

Mrs. E.B.B. was employed as Chief Dietitian o f a non­

profit hospital institution devoted to the preservation of
life, the prevention of death, care and treatment o f the
sick, the invalid and the infirm, and the prom otion of

731
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

health. As such, she was entrusted with the task,

among others, o f purchasing food supplies o f the hos­
pital. For purposes of economy, the Board of Trustees,
through the Medical Director and Adm inistrator, in­
structed Mrs. E.B.B. to purchase food items from a
specified supplier who was w illing to give a discount.
Mrs. E.B.B. however insisted on making purchases
from the old supplier. For this reason, she was d is­
missed. is her dismissal justified?

ANS. The dismissal of Mrs. E.B.B. is justified.

Her acts constitute serious defiance of the lawful
orders of her superiors with respect to raatters involv­
ing her duties. They are also sufficient basis for her
superiors to lose their trust and confidence in her. (St.
Luke’s Hospital, Inc. vs. The M inister of Labor, et al.,
G. R. Nos. 54068 and 54142, August 30, 1982)

* * *

Dosch, an employee of Northwest Airlines fo r eleven

(11) years, including nine (9) years as Manager of the
Manila Station o f the airline, refused to accept a promo­
tion to the position of Director o f International Sales in
Northwest’s General Office in Minneapolis, U.S.A. He
cited “ personal reasons and reasons involving fam ily”
as grounds fo r such refusal. Does such refusal consti­
tute insubordination warranting dismissal of Dosch?

ANS. There is no law that compels an employee to

accept a promotion, as a promotion is in the nature of
a gift or a reward, which a person has a right to refuse.
When petitioner (Dosch) refused to accept his promo­
tion to Director of International Sales, he was exercis­
ing a right and he cannot be punished for it as qui jure
suo utitor neminem laedit. He who uses his own legal
right injures no one.
The fact that petitioner (Dosch) is a managerial
employee does not by itself exclude him from the
protection of the constitutional guarantee of security of
tenure. Even a manager in a private concern has the

73.2
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

right to be secure in his position, to decline a promo­

tion where, although the promotion carries an increase
in his salary and rank, results in his transfer to a new
place of assignment or station and away from his
family. Such an order constitutes removal without just
cause and is illegal. Nor can the removal be justified
on the ground of loss of confidence as now claimed by
private respondent Northwest, insisting as it does that
by petitioner’s alleged contumacious refusal to obey
the transfer order, said petitioner was guilty of insubor­
dination (Dosch vs. NLRC, et al., G. R. No. L-51182,
July 5, 1983).
* * *

Paimos and Sevilla, employed on board a vessel as able

seamen had an altercation with the Chief Officer as they
returned from shore leave. The Chief Officer thereafter
reported the incident to the Captain and demanded that
Paimos and Sevilla be dismissed from the service of the
vessel. As he did not want to displease and lose tho
Chief Officer, the Captain, who was something less than
firm and decisive, signed o ff Paimos and Sevilla. Were
Paimos and Sevilla validly “ signed o f f ’ (dismissed)?
Why?

ANS. No. The dismissal of the seamen was not

due to their actual behavior, nor to an actual threat to
the internal peace and order of the vessel posed by
such behavior, but rather on the need felt by the
Captain to satisfy the demand of a subordinate officer.
The demand was not itself lawful or reasonable. The
dismissal was not for a just or authorized cause.
(Klaveness Maritime Agency, et al. vs. NLRC, et al.,
G. R. Nos. 102310-12, May 10, 1994)

♦ * *

Is the master o f a vessel a managerial employee? May

he be summarily dismissed? Explain.

733
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. A master or captain of a vessel is a confi­

dential and managerial employee. He is, among
others, the commander and technical director of the
vessel; such role, like that of the chief executive
officer of a present-day corporate enterprise, has to do
with the operation and preservation of the vessel
during its voyage and the protection of the passengers
as well as its crew and cargo.
It is well settled in this jurisdiction that confidential
and managerial employees cannot be arbitrarily dis­
missed 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.
It has therefore been held that the dismissal of the
master of a vessel, without prior investigation, and for
the reason merely that he decided to delay the sailing
of the vessel to await the delivery of needed supplies,
is unlawful; he should be paid the salaries for the
unexpired portion of his contract, plus leatfe benefits
and attorney’s fees. (Inter-Orient Maritime Enter­
prises, Inc., et al. vs. NLRC, et al., G. R. No.
115286, August 11, 1994)

★ * *

Dr. Carmencita Cruz, the dean of the graduate school of

Roosevelt Colleges, was ordered by the school’s Board
o f Trustees to forego her six (6) teaching loads and
devote more time to effective and efficient administra­
tion of the Agro-Forestry Program of the school. She
was to receive additional remuneration equivalent to the
pay fo r her teaching load. Dr. Cruz however insisted in
retaining her teaching load. The Board o f Trustees
therefore terminated her services fo r her alleged defiant
disregard of its order.
(a) Is the dismissal of Dr. Cruz justified?

ANS. Yes. She was holding a managerial position;

her refusal to abide by the lawful orders of the school

734
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

would lead to erosion of the trust and confidence

reposed on her. The grant of teaching loads was only
a privilege since as dean her first and primary function
was to administer the particular college under her case
and authority. And the decision of the school to take
away her teaching load so that she can handle the
Agro-Forestry Program with the same pay is reason­
able and lawful.

(b) May Dr. Cruz be nevertheless awarded severance

compensation?

ANS. Yes. Considering that she had spent the

best years of her professional life in the service of the
school (from 1958 up to 1984) and her work was
beyond reproach, the ends of compassionate justice
would be served if she is given some equitable relief
consisting of one (1) month latest salary for every year
of service. (Cruz vs. Hon. G. Medina, et al., G. R.
No. 73053, September 15, 1989)
★ * *

Agnote was first employed in 1977 by Family Planning

organization o f the Philippines. In 1981 he held the
position o f section head. On April 5,1981, he used the
vehicle o f the organization fo r personal purposes w ith ­
out authorization. No disciplinary action was however
taken against him, but a memorandum reminding him as
well as the security guards o f the procedure fo r the
release o f the company vehicles was issued. On April
25,1981, the same company vehicle was again brought
out o f the company premises w ithout authorization; this
time it met an accident; Agnote and two security guards,
who were all under the influence of liquor, were passen­
gers. Is there sufficient ground to dismiss Agnote?
Why?

ANS. Yes. A rule prohibiting employees from

using company vehicles for private purpose without
authority from management is reasonable. He had

735
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

been previously reminded on the procedure for the

release of company vehicles. It is one of the funda­
mental duties of the employee to yield obedience to all
reasonable rules, orders and instruction of the em­
ployer, and willful or intentional disobedience thereof,
as a general rule, justifies the peremptory dismissal of
the employee. There was also a substantial harm
suffered by the company due to his misconduct.
(Family Planning Organization of the Philippines, Inc.
vs. NLRC, et al., G. R. No. 75907, March 23, 1992)
* * *

Safiro and Gerardo, a press-helper and stitcher, respec­

tively, of a printing company, drank beer outside the
company compound after their tour o f duty and then
went to the company canteen to eat their lunch. For
these acts, they were dismissed by the company fo r
alleged violation of a rule prohibiting “ drinking in the
company premises or coming to work under the influ­
ence of alcohol." They had no previous violations.
Is the dismissal of Safiro and Gerardo justified? Ex­
plain.

ANS. No. They did not drink beer in the company

premises; neither did they report for work under the
influence of liquor because it was not their tour of duty
then. Moreover, the company did not suffer any
material injury by reason of such intoxication. Finally,
dismissal is too harsh and not commensurate with the
gravity of the infraction. (Catalan, et al. vs. Genilo,
et al., G. R. No. 62391, June 8, 1992)
* 1 i *

Cite recent decisions on disobedience.

ANS. Where a classroom teacher without any

justifiable reason refused to comply with the (1) order
of the school requiring her to explain why after punch­

736
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ing her daily time card she im m ediately left the

premises without the knowledge and consent of the
authorities, and the (2) order for her to submit herself
to a medical examination to be conducted by school
physicians to determine the basis of her application for
sick leave, it was ruled that such disobedience consti­
tutes a valid ground to dismiss her considering that the
orders were lawful and reasonable. (Aquinas School
vs. Hon. B. Magnaye et al., G. R. No. 120062,
September 5, 1997)
The refusal of construction workers to comply with
a memorandum requiring them to sign employment
contracts providing that they are project employees
where employments were for definite periods has been
ruled not to constitute a ground for their dismissal;
their refusal though willful was not plain and perverse
insubordination; it was dictated by necessity and ju sti­
fiable reasons; they had no option but to disobey the
directive which they deemed unreasonable and unlaw­
ful because it would result in their being downsized to
mere project workers. (Tomas Lao Construction et al.
vs. NLRC et al., G. R. No. 116781, September 5,
1997)
The dismissal of a branch accountant due to dis­
obedience has been sustained where she refused to be
reassigned to another branch about 30 kilometers
away from her residence in order that she could
maintain a harmonious relationship with her parents-in-
law, the reassignment being necessary to uplift the
operational efficiency of the bank. (Homeowners’
Savings and Loan Association, Inc. vs. NLRC et al.,
G. R. No. 97067, September 26, 1996)
Repeated defiance committed by a marketing spe­
cialist of the company’s order to prospect for clients
through the telephone directory (cold calls) constitute
a valid ground for dismissal due to disobedience.
(Lagatic vs. NLRC et al., G. R. No. 121004, January
28, 1998)
Disobedience, to be a just cause for dismissal,
envisages the concurrence of at least two (2) requi­
sites: (a) the employee’s assailed conduct must have
been willful or intentional, the, willfulness being charac­

737
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

terized by a wrongful and perverse attitude; and (b)

ttje order violated must have been reasonable, lawful,
made known to the employee, and must pertain to the
duties which he has been engaged to discharge. To
illustrate: The doorman of a hotel was ordered trans­
ferred to the linen room due to negative reports on his
performance. Upon receipt of the order, the doorman
took an extended leave of absence, and when he
reported back for work he did not discharge his duties
as linen room attendant despite repeated reminders
from the personnel office as well as his union; while he
came to the hotel everyday, he just went to the union
office instead of working at the linen room. When
asked to explain his action, he merely questioned the
transfer order. It was ruled that the doorman’s dis­
missal based on disobedience is justified (Westin
Philippine Plaza Hotel vs. NLRC et al., G. R. No.
121621, May 3, 1999).
Where a driver, who was instructed to deliver 600
bags of cement to a hardware store, instead delivered
the merchandise to another store that never paid for
the same, thereby causing loss to his em-pJoyer in the
amount of P60.000.00, and also inflicted physical
injury upon another driver hired to replace him be­
cause of his tendency to disobey his employer, it was
ruled that the driver’s dismissal for disobedience and
serious misconduct was justified. (Rosario vs. Victory
Ricemill, G. R. No. 147572, February 19, 2003)

* * *

Nestor SVIicosa, a laborer of International Rice Research

Institute, was convicted by final judgm ent o? the crime
of homicide. The m itigating circumstances of incom­
plete self-defense and voluntary surrender were consid­
ered in his favor. The crime was committed outside the
IRRI Complex. He was however dismissed by IRRI
because of a company rule to the effect that an em­
ployee convicted of a crime involving moral turpitude
may be dismissed from the service.
(a) Is the dismissal of Micosa lawfuS? Why?

738
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. The ground for his dismissal is not

among those enumerated in Article 282 of the Labor
Code. Neither can the same be deemed analogous to
the grounds enumerated in the said article. Analogous
causes must have an element sim ilar to those found in
the specific just causes enumerated in Article 282.
The crime committed by Micosa is not work-related.
There is even no indication that Micosa had a tendency
to kill without provocation or that he posed a clear and
Rresent danger to the company and its personnel.

(b) Does the crime of homicide involve moral turpitude?

Explain.

ANS. Homicide may or may not involve moral

turpitude depending on the degree of the crime. Moral
turpitude is not involved in every criminal act and is
not shown by every known and intentional violation of
statute, but whether any particular conviction involves
moral turpitude may be a question of fact and fre­
quently depends on all the surrounding circumstances.
Moral turpitude is somewhat a vague and indefinite
term, the meaning of which must be left to the process
of judicial inclusion or exclusion as the cases are
reached. (International Rice Research Institute vs.
NLRC, et al., G. R. No. 97239, May 12, 1993)
* * *

What is gross negligence as a ground fo r dismissal?

ANS. Gross negligence is negligence character­

ized by want of even slight care, acting or omitting to
act in a situation where there is a duty to act, not
inadvertently but w illfully and intentionally with a con­
scious indifference to consequences insofar as other
persons may be affected. It has thus been ruled that a
driver may not be validly dismissed for gross negli­
gence where it was shown that in a vehicular accident,
he tried to turn left to avoid a collision, even giving up
his right of way. (Tres Reyes vs. Maxim’s Tea House
e ta l., G. R. No. 140853, February 27, 2003)

739
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Cite an instance of gross and habitual neglect warrant­

ing the dismissal of the employee.

ANS. On at least five (5) separate occasions, Ms.

Llonillo, a Citibank employee of twenty-two (22) years,
picked up newly approved unsigned credit cards and
delivered them to an employee of another company
that she hardly knew. This kind of delivery was not
authorized, under a bank policy which required the
employee picking up the credit cards to deliver the
same to the cardholders concerned or their duly autho­
rized representatives. The cards taken by Ms. Llonillo
were eventually used by fictitious persons, and the
bank thereby suffered losses of about P200,000.00. It
was ruled that she can be dismissed by reason of gross
and habitual neglect. By delivering the credit cards to
persons that she hardly knew, without even asking for
receipts, she failed to exercise the slightest care or
diligence. Her negligence is also habitual since she
made deliveries on at least five (5) separate occa­
sions. (Citibank N. A. vs. Dr. L. C. Gatchalian et
al., G. R. No. 111222, January 18, 1995)

* * *

Maria, a bank teller, received P200,000.00 fo r deposit.

W ithout bothering to put the cash in her drawer, she left
her cage twice to see the chief teller regarding some
payroll checks. The P290,000.00 pile was left exposed
on her counter; it was pay day and depositors were
m illing around. When she returned to her cage she
discovered that P50,000.00 was missing from the pile;
this was never found. Considering that under the
bank’s Teller’s Manual of Operations cash should never
be left exposed, may Maria be validly dismissed?

ANS. Yes, for gross negligence. And although the

infraction is not habitual, the substantial amount lost
should be taken into account. (Fuentes vs. NLRC, et
al., G. R. No. 75955, October 28, 1988)

740
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Anita, ths front desk cashier of a hotel, was requested to

encash two dollar checks by a ranking officer o f a sister
company of the hotel corporation and a close relative of
the Executive Vice-President. She balked at encashing
ths checks in view of the corporate policy against this
practice. She was however prevailed upon to effect the
encashment. Previously, she had been reprimanded for
refusing to encash a sim ilar check. The two dollar
checks bounced and Anita was dismissed from employ­
ment fo r gross negligence. Is her dismissal lawful?

ANS. No. Anita acted in good faith in encashing

the checks. She was not precipitate and she did not
act in utter disregard of the consequences. She was
prevailed upon by her superiors to encash the checks.
Gross negligence is want of any or slight care. (Anita
Llosa-Tan vs. Silahis International Hotel, et al., G. R.
No. 77457, February 5, 1990)

* * *

Lourdes, who worked as a remittance clerk in a bank,

brought to her house or kept in her drawer over two
hundred (200) foreign checks fo r about six (6) months,
instead of transm itting them to the bank’s correspon­
dent abroad. She also concealed her failure to make the
transmittal. However upon investigation by the bank
authorities, she admitted having committed the said
infractions. She was dismissed fo r gross negligence.
(a) Should she be reinstated? Decide.

ANS. Although the guilt of Lourdes was substan­

tially established and she was given ample opportunity
to prove her innocence, dismissal is too drastic. The
fact that she admitted the infractions the first time she
was investigated by the bank authorities should be
considered in her favor. She should be reinstated and
given a second opportunity to make good in her job.

(b) Is Lourdes entitled to backwsges? Why?

741
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. Denial of backwages would sufficiently

penalize her for her infractions. Besides, the bank
officials acted in good faith in dismissing her; she had
unquestionably committed an offense inimical to the
interest of the bank. The good faith of the employer,
when clear under the circumstances, may preclude or
diminish recovery of backwages. (Ma. Lourdes T.
Cruz, et al. vs. Hon. Minister of Labor and Employ­
ment, et al., G. R. No. 56591, January 17, 1983)
* * *

To drum up sales and create goodwill, the manager of

the Los Baftos branch of a drug company devised some
schemes, one of which was the accommodation of
reasonable requests by customers, such as reflecting in
the original receipt purchases made by the customers in
other branches which were covered only by cash regis­
ter tapes, and to reflect the actual purchases made in
the Los Baftos branch only in the duplicate and trip li­
cate copies of such receipts which were retained by the
company. The customers requested this scheme fo r
reimbursement purposes. This practice was carried on
even after the manager had left the Los Baftos branch.
Is an employee who continued with this practice liable
to be dismissed fo r falsification? Why?

ANS. No. The company did not suffer any

prejudice by reason of the scheme. Neither is there
proof that the employee intended to cause prejudice to
the company. The collation of all customer’s pur­
chases from the other branches is a statement of the
truth v/ithout any additional advantage to the em­
ployee. (Mercury Drug Corporation vs. NLRC, et al.,
G. R. No. 96525, June 26, 1992)
* * tfc

Saturnino worked as a motor banca operator in the log

pond of a logging firm. He was given, in addition to his

7 AO
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

regular duties, the confidential assignment of helping

an anti-smuggling team of company security personnel
and Philippine Constabulary soldiers patrolling the area
to curb the smuggling of illegally cut logs from the
company’s forest concessions. One day, Saturnino was
himself caught by security personnel while he was
towing a pilfered log from the log pond to a sawmill. Is
there sufficient cause fo r the dismissal of Saturnino?
Explain.

ANS. There is no question that the theft of logs by

an employee who operates the motor, bancas used in
towing those logs and who is given the extra assign­
ment of helping security personnel patrol the waters in
and around the log pond against log thieves is a valid
reason for dismissal by his employer. Saturnino was
caught in the very act he was supposed to curb or
guard against. (International Hardwood and Veneer
Co. of the Philippines vs. Hon. Vicente Leogardo, et
al., G. R. No. 57429, October 28, 1982)

* * *

Ernesto was a warehouseman of an oil exploration

company. He signed fo r and accepted the delivery of
one tanker of diesel oil intended fo r use in one of the
project sites of the company, but with the connivance of
the truck driver the fuel was diverted and sold to an­
other party. The truck driver, when apprehended, exe­
cuted an extrajudicial confession implicating Ernesto.
The fiscal however held that such confession is inad­
missible insofar as Ernesto was concerned and dis­
missed the criminai charge against
him.
(a) Is there sufficient ground for the dismissal of
Ernesto?

ANS. Yes. Ernesto committed fraud or breach of

trust which is serious in nature and which justifies his
dismissal.
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) Is the dismissal of tire criminal charge against him a

bar to the termination of his employment? Why?

ANS. The conviction of an employee in a criminal

case is not indispensable to warrant his dismissal by
his employer. If there is sufficient evidence to show
that the employee is guilty of breach of trust, or that
his employer has ample reason to distrust him, the
employer cannot be denied the authority to dismiss
such an employee. (Philippine Geothermal, Inc. vs.
NLRC, et al., G. R. Nos. 55249-50, October 19,
1982)
* * *

In sworn statements before the police, three persons

identified Reyes, a warehouseman, as the one who
received part of the proceeds of the sale of medicinal oil
(White Flower) pilfered from the warehouse where he
(Reyes) worked. The affiants later repudiated their
affidavits, alleging that they were forced by the police to
sign the same. This ultimately resulted in the dismissal
of the complaint fo r qualified theft filed against Reyes in
the fiscal’s office. The employer nonetheless dismissed
Reyes. In view of the dismissal o f the complaint for
qualified theft against Reyes, is the termination of his
employment legal? Why?

ANS. A review of the records convinces an unbi­

ased mind that Reyes was involved in the loss or theft
of the medicinal oil. This fact need not be proven
beyond reasonable doubt. It is sufficient that the
employer should have a basis for believing that Reyes
breached the trust and confidence reposed in him. 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 conclu­
sive upon a labor tribunal. (Sea-Land Service, Inc.
vs. NLRC, et al., G. R. No. L-68212, May 24, 1985)

744
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Emilia was dismissed by Sampaguita Garments Corpo­

ration fo r theft of a piece of clothing belonging to the
latter. She filed a complaint fo r illegal dismissal. The
NLRC, reversing the labor arbiter, ordered her reinstate­
ment with backwages. Meantime, in the criminal case
filed by the company against her fo r the same offense in
the Municipal Trial Court, Emilia was after trial found
guilty and sentenced to an indeterminate penalty of 1
month and 1 day o f arresto mayor as minimum to 4
months of arresto mayor as maximum. The decisions in
the labor case and the criminal case became final and
executory. Subsequently, Emilia moved fo r the execu­
tion of the decision in the labor case; Sampaguita
opposed the motion, invoking Emilia’s conviction in the
criminal case.
(a) Is the opposition of Sampaguita meritorious? Why?

ANS. Yes. The conviction of Emilia in the criminal

case is a supervening cause that rendered unjust and
inequitable the decision mandating her reinstatement
with backwages.

(b) Is Emilia nonetheless entitled to separation pay?

Why?

ANS. No. She was found guilty of a crime

involving moral turpitude. Separation pay is 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
The only amount that Emilia may be entitled to is
the sum of P1.000.00 to be paid to her by Sampaguita
for effecting her dismissal without complying with the
procedural requirements laid down in Section 2 and 5
of Rule XIV, Book V, of the Rules Implementing the
Labor Code. (Sampaguita Garments Corporation vs.
NLRC, et al., G. R. No. 102406, June 17. 1994)
* * *

745
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

May an employer dismiss an employee fo r theft or

misappropriation despite the fact that the latter has
been acquitted of the crime of thefi or misappropriation
in a criminal prosecution involving the same act? Ex­
plain.

ANS. An employee’s acquittal in a criminal case

does not automatically preclude a determination that
he has been guilty of acts inimical to the employer’s
interest resulting in loss of trust and confidence.
Corollarily, the ground for the dismissal of an em­
ployee does not require proof beyond reasonable
doubt, the quantum of proof required is merely sub­
stantial evidence. (Vergara vs. NLRC et al., G. R.
No. 117196, December 5, 1997)
It has also been held that the dismissal of the
criminal charges against the employee for estafa does
not prevent the employer from-dismissing the former
for ioss of trust and confidence. But this rule does not
apply where there is an entire want of evidence to
justify the dismissal of the employees as where the
criminal and civil cases against the employee are
dismissed respectively for failure to prosecute the
criminal case and for failure of the company to prove
its crime case. This should be distinguished from the
rulings in those cases where the acquittal of the
employee is because the evidence presented is not
sufficient to satisfy the requirement of proof beyond
reasonable doubt but otherwise adequate to support a
finding that there was substantial evidence that the
employee was guilty. (Quiambao vs. NLRC et al., G.
R. No. 91935, March 4, 1996)

it * *

“ A” was appointed sales supervisor (a managerial posi­

tion) of a match company fo r a period of one (1) month
but w ith the condition that should his performance be
found satisfactory during the said period, he would be
extended a probationary appointment. After five (5)
months from the date he started working and w ithin the

74S
 TERMINATION OF EMPLOYMENT
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probationary period of his employment he was dis­

missed fo r alleged loss o f trust and confidence. Less
than a month before his date of dismissal, he had
received a letter from the company president congratu­
lating him fo r excellent jo b performance. The company
however argued that A’s appointment was anchored on
the trust and confidence reposed in him and that when
this ceased to exist he could be terminated, more so,
within the probationary period of his employment. De­
cide with reasons.

ANS. “Loss of confidence,” to be successfully

invoked as a ground for dismissal, requires some basis
therefor. Such ground has never been intended to
afford an occasion for abuse by the employer of its
prerogative, as it can easily bs subject to abuse
because of its subjective nature, to dismiss employees
in contravention of the protection to labor clause of the
Constitution. It is this constitutional guaranty that
accords even to employees engaged on a probationary
basis the protection that their services “may be termi­
nated 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.”
“A ” is entitled to reinstatement with backwages for
three (3) years without qualification and deduction.
(Acda vs. Minister of Labor, et al., G. R. No. 51607,
December 15, 1982)

★ * *

Give a brief discussion on “ loss of confidence” as a

ground to dismiss an employee.

ANS. Loss of confidence is a valid ground for

dismissing an employee, and proof beyond reasonable
doubt of the employee’ misconduct is not required to
dismiss him on this charge. (National Organization of
Laborers and Employees vs. Roldan, 95 Phil. 727;
Phil. Refining Co. vs. Garcia, 13 SCRA 107;

747
 TERMINATION OF EMPLOYMENT
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Gatmaitan vs. MRR, 21 SCRA 191). It is sufficient if

there is ‘some basis’ for such loss of confidence;
(Galsim vs. PNB, 29 SCRA 293) or if the employer
has reasonable grounds to believe, if not to entertain
the moral conviction, that the employee concerned is
responsible for the misconduct and that the nature of
his participation therein rendered him absolutely un­
worthy of the trust and confidence demanded by his
position. (Nevans vs. CIR, 23 SCRA 1321)
Loss of confidence, to be a valid cause for dis­
missal, (a) should not be simulated, (b) should not be
used as a subterfuge for causes which fare improper,
illegal or unjustified, (c) should not be arbitrarily
asserted in the face of overwhelming evidence to the
contrary, and (d) must be genuine, not a mere
afterthought to justify earlier action taken in bad faith.
(Vitarich Corporation et al. vs. NLRC, et al., G. R.
No. 121905, May 20, 1999, citing Midas Touch Food
Corporation vs. NLRC, G. R. No. 111639, July 29,
1996)
* * *

Ms. Molina, the firm ’s financial officer, was designated

com ptroller and over-all supervisor, when the president
and the vice-president o f the company went to the US
fo r a brief sojourn. As comptroller she was tasked to
hold in trust fo r the company corporate funds to pay
obligations as authorized by the president and the
board of directors and as the same fell due. She was
given 79 prepared and pre-signed checks, 16 in blank
and 63 with specific amounts on them, with correspond­
ing vouchers containing the amount of debts due and
the names of the creditors. She was also specifically
instructed to pay only the creditors mentioned in the
cash vouchers and to place on each o f the 16 blank
checks the amount stated in the corresponding check
voucher. The said checks were made payable to Ms.
Molina; upon withdrawal o f the money from the bank,
she was to pay the same to the creditors. The total

7Att
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

amount payable to the creditors as appearing in the

check vouchers corresponding to the 16 blank checks
was P224.131.50.
Ms. Molina however disobeyed the instructions given
her not to pay more than what was specified in the
check vouchers. She increased the amounts she wrote
on the blank checks so that instead of paying only
P224.131.50, as budgeted, she withdrew from the bank
account of the company an aggregate sum of
P1,515,823.00 and left a balance of only P5,720.00. Like­
wise, she paid some creditors who were not specified in
the cash vouchers. There was however no proof that
Ms. Molina misappropriated or embezzled any of the
amounts, she withdrew from the bank.
(a) Is there nevertheless sufficisnt ground to dismiss
Ms. Molina? Why?

ANS. Yes, on the ground of loss of trust and

confidence. Her disobedience and precipitate action
caused great damage to the company's cash flow.
Cash flow is as important as profitability. Disruption of
the cash flow could result in the immediate collapse of
the company. She violated her duty of controlling cash
flow and specific instruction on how the very limited
cash of the company was to be spent.

(b) Is the dismissal of I/is. Molina, after an audit was

conducted during which she was asked questions
about her withdrawals, in accordance with procedural
due process? Why?

ANS. No. She was not given notice of the charges

against her. Neither was she given a hearing or
opportunity to present her defense. Questions asked
her during the audit are too scant and too bare to
amount to due process. She is entitled to indemnity of
P1.000.00. (MGG Marine Services, Inc. et al. vs.
NLRC, et al., G. R. No. 114313, July 29, 1996)

ft "it it

749
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Yes. Under the circumstances, there can be

no shred of doubt that the employees’ continuance in
the service would pose a serious threat to the property
of the company. And there is nothing in the rule on
preventive suspension that requires that the report
upon which the preventive suspension is based should
make a specific finding that the employee’s continued
employment poses an imminent threat to the property
of the employer. It is enough that such fact can be
gleaned from the circumstances of the case.

(b) Do V & P hold positions of trust and confidence?

May they be dismissed fo r loss of confidence? Explain.

ANS. V & P are purchasers of materials supplies

needed by the company. They entered into transac­
tions involving a gargantuan amount of money, i. e.,
more or less P600 million annually. There is no
denying that their positions are vested with a high
degree of trust and confidence.
The irregularities committed by them and estab­
lished by substantial evidence constitute reasonable
basis for the company to lose trust and confidence in
them. (Atlas Fertilizer Corporation et al. vs. NLRC et
al., G. R. No. 120030, June 17, 1997)

* * *

Johnny, an employee o f eleven (11) years, was dis­

missed because he no longer enjoyed “ the trust and
confidence reposed upon him by the company as ser­
vice supervisor." The loss o f trust and confidence was
due to his alleged involvement in pilferages. But his
involvement was not established. Is his dismissal ju s ti­
fied? Why?

ANS. Johnny’s dismissal is not justified. The

alleged loss of trust and confidence in grounded on
mere suspicion. The charges against him were not
substantiated. The fact that he has been in the service
of the company for eleven ( 11) years should also be

752
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

considered in his favor. (Johnny Busiillos vs. Amado

Inciong, et a!., G. R. No. 45396, January 27, 1983)

* *.V *

Reyes, the acting manager of the pharmaceuticals divi­

sion of a company, withheld from the winner of a
promotional contest conducted by the company, the
sum of P4,090.00 out of the total prize money of
P24.000.00. This prompted Miss T., the winner, to send
two handwritten complaints to th@ company. About two
(2) weeks later, however, she retracted and absolved M.
Reyes. Despite Miss T ’s retraction, the company dis­
missed M. Reyes for loss of confidence.
(a) Is the dismissal of M. Reyes justified? Explain.

ANS. M. Reyes is a managerial employee, one in

whom the company has given its complete trust and
confidence. The company was justified in expecting
that his actuations should be above suspicion. Be­
cause of his involvement in the raffle anomaly, i. e.,
having withheld from the winner P4.000.00 of the
P24,000.00 prize money, it is not wise to tolerate the
latter to remain in his position because the breach of
trust has already been committed.

(b) M. Reyes however contends that in view of the

retraction of Miss T., the reason for the alleged loss of
confidence has not been established beyond reason­
able doubt. Rule on such a contention.

ANS. Loss of confidence is a valid ground for

dismissing an employee, and proof beyond reasonable
doubt of the employee’s misconduct is not required to
dismiss him on this charge. It is sufficient if there is
“some basis” for such loss of confidence, or if the
employer has reasonable grounds to believe, if not to
entertain, the moral conviction that the employee
concerned is responsible for the misconduct and that
the nature of his participation therein^ rendered him
absolutely unworthy of the trust and confidence de­

753
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

manded by his position. (Reyes vs. Zamora, et al., G.

R. No. 1-46732, May 5, 1979)

*V ifr A

Five employees of an electric cooperative were dis­

missed for loss of confidence. Their employer charged
that they committed pilferage of electric current through
tampered meters and illegal wire connections to their
houses. Considering that the said employees held no
position involving trust and confidence (excepting one
who was a bill collector), is loss of confidence a ground
to dismiss them? Explain.

ANS. No. The offense they committed is not

work-related. The alleged pilferage of electricity was
committed by them as consumers and not as employ­
ees. Essentially, they were being dismissed for non­
payment of the electricity they allegedly consumed.
The pilferage could have been effected even if they
were not employees of the cooperative. (Quezon
Electric Cooperative vs. NLRC, et al., G. R. Nos.
79718-22, April 12, 1989)
* * *

Cite cases on loss of confidence as a ground for dis­

missal.

ANS. (a) Where the evidence shows that Sevilla,

as cable splicer headcrew of a telephone company,
took advantage of his position to withdraw company
properties with the use of double or fictitious requisi­
tion slips, the employer had valid and legitimate rea­
sons to lose its confidence in him and to order his
dismissal. (Philippine Long Distance Telephone Co.
vs. NLRC, et al., G. R. No. L-63191, April 30, 1984)
(b) Where an accountant, performing managerial
functions, in the chromite project of a mining company
incurred shortages in his accounts and then absented
himself for several weeks without prior permission, his

754
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

dismissal for loss of confidence and abandonment is

justified. (New Frontier Mines vs. NLRC, G. R. No.
L-52578, May 29, 1984)
(c) Enriquez (budget clerk) and Carpio (accounting
clerk) of San Miguel Corporation failed to remit to the
cash department of the company considerable sums
entrusted to them for transmittal. Their dismissal for
loss of confidence was held to be valid and justifiable,
notwithstanding the apparent laxity in the accounting
procedures of the company. (San Miguel Corporation
vs. NLRC, et al., G. R. No. L-50321, March 13,
1984)
(d) Soto, a district sales supervisor of San Miguel
Corporation, made it appear that empty wooden cases
(shells) of softdrinks were returned by customers to
whom cash refunds were allegedly given, when in fact
these shells were those which were allegedly con­
demned and destroyed upon his orders. In this way he
was able to raise money for himself by pocketing the
alleged refunds. His dismissal for loss of confidence
is in order. (San Miguel Corporation vs. The Deputy
Minister of Labor and Employment, et al., G. 'R. Nos.
L-61232-33, December 29, 1983)
(e) The dismissal based on loss of confidence of
an executive of an advertising company, prior to the
expiration of his contract, was held valid in view of his
attempts to recruit company personnel to join him in an
advertising agency he will put up. However, as a
measure of compassionate justice, he was awarded
damages equivalent to his pay for the remainder of his
contract. (J. W alter Thompson Co. (Phils.) vs.
NLRC, et al., G. R. No. L-57895, December 29,
1983)
(f) Rebolos, a salesman of San Miguel Corpora­
tion, failed to return to the company for one year and
three (3) months the sum of P7.000.00 which had been
entrusted to him to be used as cash bond. He merged
the amount with his family funds. He contended it was
a loan and returned the same upon demand. His
dismissal for breach of trust and loss of confidence
was justified. (San Miguel Corporation vs. NLRC, et
al., G. R. No. L-58630, November 25, 1983)

755
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(g) Jolingan, Fuentes and Gaiti, salesmen of San

Miguel Corporation, misappropriated funds belonging
to their employer. Although it was established that the
shortages were fully restituted, their dismissal was
fully justified; restitution cannot obliterate the betrayal
of trust and confidence in their positions where honesty
and integrity are the primary considerations. (San
Miguel Corporation vs. The Deputy M inister of Labor
and Employment, et al., G. R. No. 58927, October
27, 1986)
(h) Where a credit and collection supervisor
proved himself an unruly, uncooperative and irrespon­
sible manager by frequently reporting late for work
without valid excuses and by using disrespectful and
abusive language when addressing his superiors and
customers, his dismissal for loss of confidence, which
ground does not require proof beyond reasonable
doubt of the em ployee’s misconduct, is ju stified.
(Tabacalera Ins. Co. vs. NLRC, et al., ,G. R. No.
72555, July 31, 1987)
(i) Repeated shortages incurred by a bill collector,
although resulting in no material damage to the com­
pany as the amounts were returned, constitute suffi­
cient justification for the form er’s dismissal for loss of
confidence; no company can afford to have dishonest
bill collectors. (Piedad vs. Lanao del Norte Electric
Cooperative, Inc., et al., G. R. No. 73735, August 31,
1987)
(j) The failure of a department head in a commodi­
ties trading firm to supervise and monitor the activities
of the employee in her department, resulting in the
commission of serious irregularities by some of the
latter, constitutes a ground for her dismissal based on
loss of trust and confidence. (Soriano vs. NLRC, et
al., G. R. No. 75510, October 27, 1987)
(k) Where a salesman regularly made it appear
that he sold the company's products to numerous
customers when in fact he actually sold to only a few,
his dismissal for breach of trust is warranted although
no economic loss was suffered by the company.
(Filipro, Inc. vs. NLRC, et al., G. R. No. 70546,
October 16, 1986)

756
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(I) Repeated shortages and overages incurred by

bank tellers, taken with other infractions consisting of
allowing encashm ent'of checks over the counter with­
out verification of drawer’s signature and without ap­
proval of authorized officers and non-compliance with
instruction of superiors to report to Central Bank Cash
Units, constitute serious misconduct and w illful breach
of trust warranting the forfeiture of the employees’
right to security of tenure. (Allied Banking Corporation
vs. Castro, et al., G. R. No. 70608, December 22,
1987)
(m) But where no witnesses were presented by the
employer to substantiate its charges that the employee
pocketed sums pertaining to the form er and as a
matter of fact one of these supposed witnesses re­
tracted a previous declaration that he had paid to the
employee the sum alleged by the company, dismissal
of the employee based on loss of confidence has no
sufficient basis. (Citytrust Finance Corporation vs.
NLRC, et al., G. R. No. 75740, January 15, 1988)
(n) The dismissal of the Chief Accountant of a
marketing firm for loss of trust and confidence, after
eleven (11) years of service, was held to be justified
where (1) a surprise audit showed that she had
misappropriated funds of the company amounting to
P6.500.00 and then made it appear that said amount
represented cash advances of other employees, (2)
majority of her disbursements were not approved by
the vice-president as required by company policy, (3)
she lent money from funds not intended for that
purpose, (4) she liquidated the cash advance of
P6.500.00 in an abnormal manner, and (5) a co­
employee testified that the accountant confided to her
the misappropriation of funds. (Inter-Capitol Marketing
Corporation, et al vs. NLRC, et al., G. R. No. 90745,
October 10, 1991)
(o) The unexplained possession by a telephone
installer of equipment belonging to the company and
which were in excess of what he had declared in his
reports is sufficient basis for dismissal for loss of trust
and confidence. (Del Carmen vs. NLRC, et al., G. R.
No. 93413, October 28, 1991)

757
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(p) The dismissal of the chief executive of a

multinational company for alleged loss of confidence is
unjustified in the absence of proof of sufficient basis
therefor at the time of his dismissal; such defect
cannot be cured by evidence showing the existence of
causes arising after the employee has been dismissed;
otherwise, an employee can be dismissed on mere
suspicion or on the employer’s caprices. (Lawrence
vs. NLRC, et al., G. R. No. 87421, February 4, 1992)
(q) Where a miner was apprehended at 9:00
o’clock in the evening with pulverized stones tucked in
his belt, in a highly restricted area which was not his
assigned workplace, his dismissal for loss of trust and
confidence was held to be justified despite his eight (8)
years of service to the company and the lack of proof
that the stones found in his possession were of high
gold content; the undisputed fact that he had been
previously apprehended and suspended twice for theft
of company property was also taken into account,
(Patna-an vs. NLRC, et al., G. R. No. 42878, March
6, 1992)
(r) The summary dismissal of the manager, 60
years of age, after twenty three (23) years of service,
for loss of confidence because he allegedly pocketed
some P111,000.00 as commissions/rebates due the
company’s customers, was ruled to be unjustified as no
customer was presented to show that he did not
receive his commission or rebate; the m anager’s
strained relationship with the company plus his ad­
vanced age however preclude his reinstatement to his
form er position. (Sunday Machine Works, Inc. vs.
NLRC, et al., G. R. No. 95692, March 16, 1992)
(s) Dismissal of a gate inspector of the arrastre
operator for loss of confidence due to his alleged
participation in the falsification of gate passes was
held to be unjustified as there was no direct evidence
linking him to the alleged falsification. (Icasiano vs.
Office of the President, et al., G. R. No. L-49885,
May 15, 1992)
(t) Defalcation committed by a bus conductor
cannot serve as a basis for the dismissal of the bus
driver in the absence of proof of conspiracy between

7HR
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

them. The mere fact that the bus driver tried to

convince the bus inspector not to report the alleged
defalcation of the conductor to the management is not
sufficient evidence of conspiracy considering that he
just wanted to help a co-union member. (Batangas
Laguna Tayabas Bus Co. vs. NLRC, &t al., G. R. No.
94429, May 29, 1992)
(u) The dismissal of a company physician for loss
of confidence because of his alleged refusal to report
for work during a strike is unjusiified as the company
failed to establish that he was ordered to report for
work during said period. (Hi Cement Corporation vs.
NLRC, et al., G. R. No. 90311, June 9, 1992)
(v) The concealment by a bank manager of a
shortage in the sum of P5.000.00 from a picked-up
deposit and his fraudulent alteration of the due dates
of several time deposit certificates in order to enable
his friends or relatives to take advantage of higher
interest rates are sufficient grounds for his dismissal
for loss of trust and confidence. (De la Cruz vs.
NLRC, et al., G. R. No. 96745, July 2, 1992)
(w) Dismissal of a worker by reason of loss of
confidence must rest on actual breach of duty and not
merely on the employer's imagined whim or caprice.
The act upon which the loss of trust is predicated must
be related to the performance of the duties of the
employee. In essence subjective, it requires adequate
basis or proof to support it, and the burden lies on the
employer to convincingly establish that fact. It has
consequently been held that the dismissal of a branch
personnel manager for loss of confidence simply be­
cause he questioned his transfer to another plant and
in this connection sought the advice of the lawyer of
one of the contending unions in the company was
unjustified as the company’s actuations were based on
mere suspicion. (San Antonio vs. NLRC et al., G. R.
No. 100829, November 28, 1995)
(x) But the dismissal due to loss of confidence of
a bill collector for his failure to explain satisfactorily
why he has not remitted his collections amounting to
P75.238.87 has been upheld. (Pampanga II Electric
Cooperative, Inc. vs. NLRC et al., G. R. No.
107541, November 16, 1995)

759
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(y) Where the shift supervisor of a petroleum

pipeline system operator admitted that he tampered
with sensitive equipment at the jo int terminal facility
which exposed the terminal complex and the residents
in adjacent communities to the danger of a major
disaster caused by tank explosions and conflagration,
it was held that his dismissal for loss of trust and
confidence was warranted. (Deles vs. NLRC et al., G.
R. No. 121348, March 9, 2000)
(z) The position of the hotel assistant cook,
charged with the care of food preparation in the hotel’s
coffee shop and with custody of food supplies, is one
of trust and confidence.' The said employee may be
dismissed for loss of trust and confidence. But such
loss of confidence must be based on a w illful breach of
trust and founded on clearly established or proven
facts. And where the charge for pilferage against the
assistant cook is based merely on allegations made by
other employees, but no written statements of the
latter on specific acts of pilferage were ever presented,
the form er’s dismissal for loss of confidence is unwar­
ranted. (Concorde Hotel vs. Court of Appeals et al.,
G. R. No. 144089, August 9, 2001)
(aa) Loss of confidence as a just cause for the
termination of employment is based on the premise
that the employee holds a position of trust and confi­
dence,as when he is entrusted with responsibility in­
volving delicate matters, and the task of janitor does
not fall squarely under the category. (Delos Santos et
al vs. NLRC e ta l., 6 . R. No. 121327, December 20,
2001)
(bb) Where there is no sufficient evidence to show
that the truck driver conspired with the thieves in
stealing four (4) pieces of basketball from his truck, his
dismissal, after thirteen (13) years of service without
any infractions, for loss of trust and confidence is
unwarranted. Loss of trust and confidence must be
founded on clearly established facts. (Sulpicio Lines,
Inc. vs. Guide, G. R. No. 149930, February 22,
2002 )
(cc) Unlike other just causes for dismissal, trust in
an employee once lost, is difficult, if not impossible, to

760
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

regain. And it cannot be over emphasized that, where

the employee occupied the position of foreman and
shift boss and had over-all control of the care, supervi­
sion and operations of the plant, there is no substitute
for honesty and he should be dismissed if he has
breached the confidence reposed in him. (Salvador
vs. Philippine Mining Service Corporation, G. R. No.
148766, January 22, 2003)
(dd) Where the teller and cashier of an electric
cooperative allowed, in violation of the Coop Checks
Policy, for a period of one year, the encashment of
crossed checks out of their cash collections, some of
which were later returned due to insufficiency of funds,
it was held the their dismissal due to loss of confidence
was warranted. It is immaterial that they did not
misappropriate any amount of money. The betrayal of J
trust is the essence of the offense. (Central Pangasi-
nan Electric Cooperative, Inc. vs. Macaraeg & De
Vera, G. R. No. 145800, January 22, 2003)
(ee) The act of a senior sales manager in reim­
bursing his fam ily’s personal travel experience but of
company funds amounts to fraud or deceit leading to
the loss of trust and confidence of his employer,
justifying his dismissal. (Dela Cruz, Jr. vs. NLRC et
al., G. R. No. 145417, December 11, 2003)

* # ife

Give a discussion on the employer’s latitude o f discre­

tion in dismissing employees fo r loss o f confidence.

ANS. As a general rule, employers are allowed a

wider latitude of discretion in terminating the employ­
ment of managerial personnel,or those who, while not
of sim ilar rank, perform functions which by their nature
require the employer’s full trust and confidence. This
must be distinguished from the case of ordinary rank-
and-file employees whose termination on the basis of
these same grounds requires a higher proof of involve­
ment in the events in question; mere uncorroborated
assertions and accusations by the employer will not

761
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

suffice. (Coca-Cola Bottlers Phils., Inc. vs. NLRC, et

al., G. R. No. 82580, April 25, 1989)
The loss of trust and confidence must be based on
the willful breach of the trust reposed in the employee
by his employer. Ordinary breach of trust will not
suffice. A breach of trust is willful if it is done
intentionally, knowingly and purposely, without ju s tifi­
able excuse, as distinguished from an act done care­
lessly, thoughtlessly, heedlessly or inadvertently. Loss
of confidence, as a just cause for term ination of
employment, is premised on the fact that the employee
concerned holds a position of responsibility, trust and
confidence.
It h«is thus been held that the dismissal of a route
managfer (who was also a dealer) of a softdrinks
company, for loss of confidence was justified, it ap­
pearing that he gave himself a credit extension without
proper authority; that he prevailed upon a salesman,
who was his subordinate, to issue to him, contrary to
company policy, an official receipt to cover his post­
dated check; and that he issued a post-dated check
receipt to himself knowing fully well that he was not
authorized to issue such check. (Gonzales vs. NLRC
e ta l., G. R. No. 131653, March 26, 2001)

* * *

Imelda Salazar worked as a systems analyst of Globe-

Mackay Cable and Radio Corporation. She was very
close to Deifin Saldivar, the company’s manager for
technical operations support; as a matter of fact, they
lived in the same apartment. Prompted by reports that
equipment and spare parts worth thousands of dollars
under the custody of Saldivar were missing, the com­
pany caused an investigation with the iatter’s activities.
The internal auditor of the company reported that Sal­
divar and Yambao, a supplier often recommended to the
company by Saldivar, entered into a partnership. EvU
dence also showed that Imelda signed as a witness to
the articles of partnership and that she had Ssnowiedgs
of the whereabouts of a company airconditioner takcm

762
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

by Saldivar but she failed to inform her employer. Sal­

divar later resigned; but Imelda was preventively sus­
pended and then dismissed for loss of confidence.
(a) Is the dismissal of Imelda justified? Why?

ANS. No. She cannot be dismissed on the basis

of suspicion derived from speculative inferences. The
mere fact that she lived with Saldivar in the same
apartment does not establish that she had participated
in her friend’s alleged thievery and anomalous transac­
tions.
Furthermore, her signing as a witness to the part­
nership papers of Saldivar and Yambao did not create
a conflict of interest situation. She was very far
removed from operations involving the procurement of
supplies; she did not occupy a position of trust relative
to the approval and purchase of supplies and company
assets.

(b) May she be paid severance compensation in lieu of

reinstatement on the principle of “strained relations”?
Why?

ANS. No. The position of systems analyst is not

one that may be characterized as a position of trust
and confidence that reinstatement may weil lead to
strained relations between employer and employee,
and create an atmosphere of antipathy and antagonism
thereby adversely affecting the efficiency and produc­
tivity of the latter.
The principle of “strained relations” cannot be
applied indiscriminately; otherwise, reinstatement can
never be possible because some hostility is invariably
engendered between the parties as a result of litiga­
tion. Besides, no strained relations should arise from
a valid and legal act of asserting one’s right; otherwise,
an employee who asserts his right could be easily
separated from the service through payment of separa­
tion pay on the pretext that his relationship with his
em ployer had already become strained. (Globe-
Mackay Cable and Radio Corporation vs. NLRC, et al.,
G. R. No. 81511, March 3, 1992)

763
 TERMINATION OF EMPLOYMENT
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Thirteen (13) regular employees of the PLDT were ar­

rested and detained by m ilitary authorities by virtue of
an Arrest, Search and Seizure Order (ASSO) issued by
the M inister of National Defense. Their arrest and
detention were due to their having been suspected by
th e ir employer o f participation in a so-called “ tele-
hygienic” racket consisting of selling hygienic mouth­
pieces to telephone subscribers, refusal o f which by the
latter resulted in their telephones turning out of order.
The PLDT dismissed the said employees on grounds of
breach of trust, serious m isconduct and less o f confi­
dence, relying merely on the action taken by the m ilitary
authorities and w ithout conducting its own investiga­
tion.
(a) Is the dismissal of the employees justified? Why?

ANS. No. The company did not conduct its own

investigation to determine the truth of the alleged
involvement of the employees in the alleged racket.
The grounds for the dismissal were not substantiated,
PLDT did not even present the findings of the m ilitary
authorities.

(b) What is the relief that should be accorded to the

dismissed employees?

ANS. They are entitled to reinstatement with

backwages. Considering however, that they have been
laid off for over four (4) years during which period they
were not prevented from deriving income from some
other gainful activity, their backwages should be lim ­
ited to two (2) years without deduction. (Philippine
Long Distance Telephone Co. vs. NLRC, et al., G. R.
No. 58004, May 30, 1933)

* * *

What degree of evidence is necessary to support a

charge of dishonesty against an employee?

764
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. The employee’s right to security of tenure

may not be jeopardized except by clear and convincing
evidence of dishonesty. A doubtful accusation of
extortion will not be allowed to overshadow an em­
ployee’s unblemished record of service for eighteen
(18) years, and the promotions he had received in the
course of his employment. (Garcia vs. NLRC, et al.,
G. R. No. 88243, December 22, 1989)
Loss of company funds, even if true, cannot just
be attributed to an employee where it clearly appears
from the records that there were other persons who
had access to the safe where the funds were kept.
While dishonesty of an employee is not to be con­
doned, neither should a condemnation on that ground
be tolerated on the basis of suspicions spawned by
speculative inferences. (San Miguel Corporation vs.
NLRC, et al., G. R. No. 72572, December 9, 1989)

* * *

After eleven (11) year^ of service, the Materials Manager

of PAL was dismissed fo r repeatedly ordering and re­
ceiving goods and supplies w ithout the required pur­
chase orders. The NLRC found that he could be validly
dismissed fo r loss o f confidence. PAL was however
required to pay severance compensation. Is the award
justified?

ANS. No. The employee was dismissed for causes

reflecting on his moral character. Social justice is not
intended to countenance wrongdoing. Those who
invoke social justice may do so only if their motives
are blameless. (Philippine Airlines, Inc. vs. NLRC et
al., G. R, No. 124456, December 5, 1997)
* * *

Discuss briefly whether conflict of interest may serve as

a ju st cause fo r dismissal of an employee.

765
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. One who asserts an interest, or performs

acts adverse or disloyal to one’s employer commits a
breach of an implied condition of the contract of
employment which may warrant discharge, as, for
example, where one secretly engages in a business
which renders him a competitor and rival of his em­
ployer. Aside from the duties expressly imposed upon
or undertaken by the employee in the contract of
employment, the law implies various obligations and
undertakings by an employee in entering into a con­
tract of employment, x x x An employer has the right
to expect loyalty from his employees as long as the
employment relationship continues. Implicit in the
contract of employment is the undertaking that the
employee shall be faithful to the interest of the em­
ployer during the term of the employment. When an
employee deliberately acquires an interest adverse to
his employer, he is disloyal, and his discharge is
justified. And where an employee engages in a
business which necessarily renders him a competitor
and rival of his employer, no matter how much or how
little time and attention he may devote to it, he is
deemed to have an interest which conflicts with his
duty to his employer, and for this cause may be
dismissed, x x x In the absence of a specific provi­
sion, the employee must be deemed to have been
rightfully discharged where it appears that his activities
tended to injure or endanger the business of his
employer, x x x On the other hand, where an occupa­
tion or business is conducted by a servant out of the
hours of service, and is not inconsistent with his duties
to the master or antagonistic to or competitive with the
master’s business, it furnishes no ground for the dis­
charge of the servant. (Jaffray vs. King 34 Md 217;
M iller Agency Co. vs. Greene, 177 NE 534, cited in
53 Am Jur 2nd, Master and Servant, 57)
* * *

Celestino Galan, employed as a sales representative for

about thirtesn (13) years by Elizalde, was dismissed by
the latter fo r alleged breach of trust. He was found to

766
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

have been selling through an entity with a firm name of

“C-G. Enterprise” allegedly owned by him, “TO Y
RHUM,” 9 competitor product of “Tanduay Rhum”
which was being distributed by Elizalde.
is the dismissal of Galan for a just and valid cause?
Explain.

ANS. Celestino Galan’s act of engaging in a

business in competition with his employer was not only
an act of disloyalty but more specifically a willful
breach of the trust reposed in him by the latter. “Trust”
which in its general signification is the “firm belief or
confidence in t!ie honesty, integrity, reliability, justice,
etc. of another person or thing” (Webster’s New World
Dictionary of the American Language, Second College
Edition), is an essential element in the relationship of
employer and employee, and a willful breach thereof
entitles the employer to discharge the guilty employee.
As sales representative, it was the duty of Celestino
Gaian to promote and sell the products of his employer
which duty is incompatible with his undisclosed owner­
ship of a company, found to be the source of the new
product with the label “TDY RHUM” manufactured by
the Mabuhay Distillery, Inc., distributed and sold, in
competition with the “Tanduay Rhum” distributed by
the omployer. It was an act inimical to his employer’s
interest and, therefore, a just cause for dismissal.
(E lizald* International Philippines, Inc., et al. vs.
Court of Appeals, et al., G. R. No. L-40553, February
26, 1981)

* * *

Feliciano worked for Better Buildings, Inc. (BB1) as

Chief Supervisor. During his employment, he estab­
lished a corporation, Reachout General Services, en­
gaged in maintenance/janitorial service, the same line of
business as that of BB1. Although it was his duty to
promote and offer the services of BBI to prospective
clients, he offered the services of his own company; he
even tried to induce BBS’s prominent clients to transfer

787
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

their service contracts to his own corporation. He also

hired as employees of Reachout General Services the
form er employees of BBI. BBI dismissed Feliciano. Is
the dismissal justified? Why?

ANS. Yes. His act of engaging in a business in

direct competition with his employer was not only an
act of disloyalty but a willful breach of trust and
confidence. (Better Buildings, Inc. et al vs. NLRC et
al., G. R. No. 109714, December 15, 1997)

* A *

In 1977, after a total of 24 years o f continuous services,

Ricardo Reyes gave notice o f his intention to retire
pursuant to the retirement scheme under the collective
bargaining agreement. But the company refused to
grant him retirement benefits and instead terminated his
services on the ground that he was an incorporator of
MOSECOR, an entity engaged in the sale of equipment
and Supplies being sold by the company. The company
had known about the stockholding o f Reyes in
MOSECOR in June, 1975; there was furthermore no
proof that Reyes transacted any business prejudicial to
the company. Is the dismissal of Reyes, fo r loss of
confidence and conflict of interest, nevertheless ju s ti­
fied? Explain.

ANS. The company is now estopped from ques­

tioning the involvement of Reyes in MOSECOR, it
failed to apprise the latter of his supposed detrimental
acts immediately upon knowledge thereof. The com­
pany should have exercised caution and care in deal­
ing with its employees to prevent the suspicion that its
dismissal of the latter was only a scheme to evade its
responsibility of granting retirement benefits. It should
not have waited until Reyes applied for retirement
before taking action against him for a cause it had
already knowledge of. (Reyes vs. Philippine Duplica­
tors, Inc., et al., G. R. No. L-54996, November 27,
1981)

768
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

W. F., a station cashier of the Radio Communications of

the Philippines, Inc. (RCPI) in Cotabato City, was dis­
missed, after twenty-four (24) years of service, fo r
breach of trust, due to a shortage of P50,985.37. He
explained to the field auditor of the company that he
had used the missing funds to pay the retirement bene­
fits of five employees. He also paid back about
P46,000.00 of the shortages.
(a) Is the dismissal of W. F. valid? Why?

ANS. No. Cash shortages in a cashier’s work may

happen, and when there is no proof that the same was
done deliberately for a fraudulent or wrongful purpose,
it cannot constitute breach of trust. Besides, W. F. is
not a managerial employee; the term ‘trust and confi­
dence’ is restricted to managerial employees. Finally,
the length of service of W. F., with no previous record,
makes the dismissal unduly harsh and grossly dispro­
portionate to the infraction upon which his dismissal
was based.

(b) The notice of dismissal sent to W. F. merely stated

a conclusion to the effect that W. F. withheld the
money deliberately to hide alleged misappropriation or
misappropriation, and that the position of cashier re­
quires utmost trust and confidence. Is this notice
sufficient? Why?

ANS. No. No facts and circumstances were

mentioned in support of the conclusion that the with­
holding was deliberate. The notice did not also allege
the breach of trust on the part of W. F. and how the
same was committed. (Farrol vs. Court of Appeals et
al., G. R. No. 133259, February 10, 2000)

* * *

Give the elements and requisites of abandonment to b*

a valid ground fo r dismissal.

7 fiQ
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. For abandonment to be a valid ground for

dismissal, two requisites must be present: (1) inten­
tion of the employee to leave his work permanently,
and (2) overt act from which it may be inferred that
the employee had no more intention to resume his
work. Hence, where the inability of a janitor to resume
work was due to an appendectomy operation for which
the company physician advised him to rest for 30 days
before reporting for duty, it was ruled that he could not
be validly dismissed by reason of abandonment; fur­
thermore, the filing of a complaint for illegal dismissal
is inconsistent with the employer’s allegation that he
had abandoned his job. Surely, an employee’s posture
w ill be illogical if he abandons his work and then
im m ediately files an action for his reinstatement.
(Jackson Building Condominium Corporation et al. vs.
NLRC et. al., G. R. No. 111515, July 14, 1995)

The refusal of the department heads of the school

to continue with their part-time teaching jobs cannot be
considered abandonment and a ground for dismissal, it
appearing that such refusal was due to the failure,
despite repeated requests, of the school to increase
their rates which were lower than those paid to their
subordinates, that they continued with their functions
as department heads, and that their part-time teaching
was done when they were supposed to render service
as full time administrative heads. (Balayan Colleges
vs. NLRC et al., G. R. No. 101070, March 14, 1996)

For abandonment to be a just and valid ground for

dismissal, there must be a deliberate and unjustified
refusal on the part of an employee to resume his
employment. The burden of proof is on the employer
to show an unequivocal intent on the part of the
employee to discontinue employment. And there must
be evidence not only of the failure of an employee to
report for work or his absence without valid or ju s tifi­
able reason, but also of his intention to sever the
employer-employee relationship. The second element
is the more determinative factor, being manifested by
overt acts. Thus, it has been held that the absence of

770
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

an employee for seventeen (17) days because his wife

had left him and their six (6) children did not indicate
his intention to sever his employment. (Metro Transit
Organization, Inc. vs. NLRC et al., G. R. No.
119724, May 31, 1999; Mendoza vs. NLRC et al., G.
R. No. 131405, July 20, 1999)

* * *

Penaflor, employed by Caltrans as a jeepney driver fo r

twenty-five (25) years, was dismissed fo r alleged aban­
donment o f work. He was however able to prove that he
did not report fo r work because he was not provided
with a conductor. Is he deemed to have abandoned his
jo b? Why?

ANS. No. His refusal to report for work is for a

justifiable reason which is Caltrans’ failure to provide
him with a conductor. It is also unbelievable that
Penaflor who had worked for the company for 25 years
would simply walk away from his job unmindful of the
consequences of his act, i. e., forfeiture of his accrued
employment benefits. (Penaflor vs. NLRC, et al., G.
R. No. 61247, January 17, 1983)

* ★ *

Twenty-eight (28) workers, who were ordered reinstated

after almost a year o f lay-off, leave their jo bs after only
two (2) days o f work, claiming that they were subjected
to harassment, ridicule and unfair treatment by supervi­
sors of the company. The company claims that they
abandoned their jobs. Decide.

ANS. To constitute abandonment, there must be

clear and deliberate intent to discontinue one’s em­
ployment, without any intention of returning. In the
case at bar, such intention is absent, it is inconceiv­
able that a group of workers aggrieved by lay-off for
almost a year would abandon their work immediately
upon their reinstatement. The only logical explanation

774
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

is that the company subjected them to harassment in

order to compel them to resign or abandon their work
and cause final term ination of their employment.
(Capital Garment Corporation vs. Hon. Bias Ople, et
al., G. R. No. L-53627, September 30, 1982)

it it -ft

“ S,” the product manager of “ J & J, Inc." requested fo r

a leave o f absence of two (2) months to enable him to go
to the United States to attend to the medical treatment
and rehabilitation of his son who was a victim o f cere­
bral palsy. The company however granted him only one
(1) month leave. About fo u r (4) days prior to the
expiration of his leave, “ S” sent a telex to the company
stating that he would be unable to report fo r work upon
the expiration of his leave on May 8,1983 as he still had
to attend to some matters involving his son’s condition,
and requesting that he be allowed to return on or before
June 13. The company denied his request and required
him to report fo r work on May 16; he answered that due
to budget fare limitation, he would be able to report for
work only on June 2. “ S” was advised by telex that this
was unacceptable; later, he received another telex term i­
nating his services fo r abandonment of work and fo r
refusing or neglecting to obey the order o f manage­
ment.
Is the dismissal of “ S” lawful? Explain.

ANS. No. His repeated requests through telexes

that he be allowed to stay longer in the United States
certainly do not reflect an intention to leave his job in
the Philippines. The employer’s allegation of abandon­
ment is furthermore belied by the fact that after
learning that his services have been terminated, “S,”
filed a complaint for illegal dismissal. Abandonment of
work is inconsistent with the filing of the said com­
plaint. (Santos vs. NLRC, et al., G. R. No. 76991,
October 28, 1988)
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Halili and Magno, working students employed by a

company engaged in the manufacture/assembly o f ice
boxes in Tarlac, were directed to report fo r duty in
Manila within one week from their receipt of the order.
The transfer was timed at the height of union concerted
activities in the firm. The workers refused and the
company sought to dismiss them fo r abandonment.
Decide.

ANS. Halili and Magno cannot be dismissed for

abandonment. They had a valid reason to refuse the
Manila reassignment. They were working students and
their transfer would mean a disruption of their studies.
There was also no genuine business urgency that
necessitated their transfer as workers could be con­
tracted right in Manila to perform the work. Finally the
proposed transfer was discriminatory as the same was
deliberately calculated to demoralize union members.
The managerial prerogatives to transfer personnel
must be exercised without grave abuse of discretion
and putting to mind the basic elements of justice and
fair play. Having the right should not be confused with
the manner in which that right must be exercised.
Thus it cannot be used as a subterfuge by the em­
ployer to rid himself of an undesirable worker. Nor
when the real reason is to penalize an employee for his
union activities and thereby defeat his right to self­
organization. But the transfer can be upheld when
there is no showing that it is unnecessary, inconve­
nient and prejudicial to the displaced employee. (Yuco
Chemical Industries, Inc. vs. MOLE, et al., G. R. No.
75656, May 28, 1990)

ifc * *

Simplicio, working as a lobby boy o f a movie theater

company, was pursuant to standard management prac­
tice transferred from the day shift where he had been fo r
quite a time to the night shift and at the same time was
assigned from one theater to another. He asked that the
change be recalled but his request was denied. As he

773
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

disliked the new assignment, he did not report fo r work.

The management dismissed him after three (3) days. Is
there a valid cause fo r his dismissal? Why?

ANS. Yes. There was nothing unusual or discrim i­

natory in his change of assignment, because rotation
of employees from one shift to another was a standard
practice in the company, adopted precisely to avoid
any discrimination among them; and Simplicio had
already been in the morning shift for quite a time. For
his insubordination and abandonment of work, his
dismissal was justified. (Castillo, et al. vs. CIR, et
al., G. R. No. L-26124, May 29, 1971)
A * *

Due to unauthorized absences, Meracap, employed with

a ceramics manufacturing company fo r eighteen (18)
years, was transferred from the Fire Tender Section to
the Pan Grinding Section. He however did not report fo r
work to the new section, contending that his transfer
was unreasonable and equivalent to a demotion. The
company contends that his failure to report fo r work
despite repeated notices constitute abandonment and a
ground fo r his dismissal. Decide.

ANS. The penalty of dismissal is out of proportion

to the offense committed. Note should be taken of the
fact that Meracap has been in the service of the
company for a continuous period of eighteen (18)
years without any adverse record. His dismissal will
violate his security of tenure; suspension for one (1)
year would be sufficient. (Meracap vs. International
Ceramics Manufacturing Co., Inc., et al., G. R. Nos.
L-48235-36, July 30, 1979)
it * *

The company had a rule to the effect that fo r nine (9)

absences w ithout leave w ithin one (1) calendar year an
employee may be dismissed. “ C” was absent w ithout

774
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

leave fo r ten (10) days and was therefore dismissed. It

was however shown that some of his absences had
already been previously penalized w ith suspension
w ithout pay.
(a) Should such absences be still included in the
computation o f the nine (9) absences required fo r dis­
missal since to do so would place “ C" twice in jeopardy
o f punishment fo r the same offense?

ANS. Yes. The company rule prescribed gradu­

ated or cumulative penalties (culminating in dismissal)
for each day of absence without leave. It is immaterial
that the absences included in the nine absences re­
quired for dismissal had already been penalized with
suspension. The rule does not make any distinction.

(b) But is the dismissal o f UC” warranted?

ANS. Under the circumstances, dismissal would be

a very drastic penalty. “C ' should be reinstated but
without backwages. Denial of backwages is sufficient
punishment. (San Miguel Corp. vs. NLRC, et al., G.
R. No. L-60067, August 19, 1982)
★ * Hr

Henminio, employed in a company engaged in the busi­

ness o f manufacturing liquefied petroleum gas cylin­
ders, as a quality control inspector, was caught sleep­
ing on the jo b by the company president. For this
offense, he was dismissed after nine (9) years o f un­
blemished service and despite his apology fo r having
closed his eyes.
(a) Is the dismissal justified? Why?

ANS. No. The penalty is not commensurate to the

offense involved. Under the attendant circumstances,
dismissal is too harsh, considering that this was the
employee’s first offense, after nine (9) long years of
unblemished service, and that the alleged offense
caused no prejudice to the employer.

775
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) May sleeping on the jo b be a valid ground to

dismiss? Explain.

ANS. Yes, but in instances where the work of the

employee, such as a security guard, necessitates that
he be awake and watchful at all times inasmuch as his
function is to protect the company from pilferage or
loss. (VH Manufacturing, Inc. vs. NLRC et al., G. R.
No. 130957, January 19, 2000)

★ ★ *

It has been repeatedly ruled that the filing by the em­

ployee of a complaint fo r illegal dismissal is inconsis­
tent with the employer’s defense of abandonment. Is
this rule absolute? Explain.

ANS. No. Where the employer proffers substantial

evidence that it had not dismissed the employee but
simply laid him off in view of the temporary shut down
of its operations, neither the labor arbiter nor the NLRC
can simply ignore such evidence on the pretext that
the employee would not have filed the complaint for
illegal dismissal if he had not indeed been dismissed.
This is clearly a non sequitur reasoning that can never
validly take the place of the evidence of both the
employer and the employee. (Arc-men Food Indus­
tries, Inc. vs. NLRC et al., G. R. No. 113721, May
7, 1991)

★ * *

State the judicial yardsticks established by ju rispru­

dence to determine whether or not an employee has
abandoned his work.

ANS. To constitute abandonment, two elements

must concur: (1) failure of the worker to report for
work or absence without valid or justifiable reason, and
(2) a clear intention to sever the employer-employee
relationship as manifested by overt acts.

776
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Mere absence of the employee does not establish

abandonment.
It is the employer who has the burden of proof to
show a deliberate and unjustified refusal of the em­
ployee to resume his employment.
The filing of an employee of a complaint for illegal
dismissal is proof enough of his desire to return to
work, thus negating the employer’s charge of abandon­
ment.
Abandonment is a matter of intention and cannot
be lightly inferred or legally presumed from certain
equivocal acts.
To get a job is difficult; to run from it is foolhardy,
(see Pure Blue Industries, Inc. vs. NLRC et al., G. R.
No. 115879, August 16, 1997; Samarca vs. Arc-Men
Industries, G. R. No. 146118, October 8, 2003; ACD
Investigation Security Agency,Inc. vs. Daquera, G.
R. No. 147473, March 30, 2004)

* Hr *

Is the refusal of an employee to accept the employer’s

offers of reinstatement, made after the filing o f the
complaint fo r illegal dismissal, an indication of aban­
donment? Explain.

ANS. Not necessarily. The employee's refusal to

be reinstated may be more of a symptom of strained
relations between the parties, rather than an indication
of abandonment. The filing of the complaint for illegal
dismissal and the bitter incidents that followed could
have sundered the erstwhile harmonious relationship
between the parties. The employee may find it uncom­
fortable to continue working under the hostile and
watchful eyes of the employer, ready to defect, for
purpose of disciplinary action, every small shortcoming
of the employee. In any case, the employer’s offer to
reinstate an employee cannot have the effect of vali­
dating an otherwise arbitrary dismissal. (Hantex Trad­
ing Co., Inc. et al vs. Court of Appeals et al., G. R.
No. 148241, September 27, 2002)

777
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Magtoto, employed as a clerk in a pharmaceutical firm,

was arrested and detained by military authorities on
rebellion charges. Twenty five (25) days after his arrest,
his employer dismissed him from his work due to pro­
longed absence. After seven (7) months of detention,
the charges against him were dismissed by the fiscal fo r
lack o f evidence and he was released from custody. He
then sought reinstatement.
(a) Is Magtoto entitled to reinstatement?

ANS. Yes. Magtoto could not report for work

because he was in a prison cell. The detention cannot
be divorced from prolonged absence. One caused the
other. Since the causes for the detention, which in
turn gave the employer aground to dismiss Magtoto,
proved to be non-existent, his dismissal is illegal and
reinstatement is warranted. Such reinstatement how­
ever should be to a substantially equivalent position
because due to his prolonged detention, the company
was compelled to hire a replacement.

(b) Assuming that Magtoto was guilty of habitual tardi­

ness, gross neglect of duties, serious disrespect, or
sabotage of company products, could the company
insist on his dismissal on these grounds?

ANS. No. These charges should have been

pressed with vigor shortly after the incidents hap­
pened. Instead of pursuing established disciplinary
procedures, the employer merely waited until the m ili­
tary arrested Magtoto for charges related to rebellion
and, when he could not free himself from detention,
terminated his employment due to prolonged absence.

(c) Is Magtoto entitled to backwages?

ANS. Petitioner is not entitled to any wages during

the period of detention. However, after he was re­
leased from detention and the company refused, with­
out legal basis, to reinstate him, his entitlement com­
menced. He is entitled to fifty (50%) percent back-

778
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

wages from the time of his release up to the date he is

reinstated but not to exceed three (3) years. (Magtoto
vs. NLRC, et al.,G. R. No. 63370, November 18,
1985)
* * *

On at least five (5) separate occasions, Ms. Llonillo, a

Citibank employee of twenty4wo (22) years, picked up
newly approved and unsigned credit cards and deliv­
ered them to an employee o f another company that she
hardly knew. This kind of delivery was not authorized.
Bank policy required the employee picking up the credit
cards to deliver the same to the cardholders concerned
or their duly authorized representatives. The cards
taken by Ms. Llonillo were eventually used by fictitious
persons, and the bank thereby suffered losses o f about
P200,000.00.
(a) Is there a valid ground to dismiss Ms. Llonillo?
Explain.

ANS. She can be dismissed by reason of gross

and habitual neglect. By delivering the credit cards to
persons that she hardly knew, without even asking for
receipts, she failed to exercise the slightest care or
diligence. Her negligence is also habitual since she
made deliveries on at least five (5) separate occa­
sions.

(b) Should her twenty-two (22) years of service mitigate

her liability? Why?

ANS. No. The longer an employee stays in the

service of the company, the greater is his responsibil­
ity for knowledge and compliance with the norms of
conduct, and the code of discipline. Furthermore, by
reason of her negligence the bank suffered substantial
losses. (Citibank, N. A. vs. Dr. J. C. Gatchalian,
et al., G. R. No. 111222, January 18, 1995)

* ★ ★

770
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Alvarez an employee of Philippine Geothermal, Inc. for

about ten (10) years, met a work-connected accident
resulting in the fracture of his right arm. He was
hospitalized. When he was completely recovered, he
failed to report for work despite the certifications of five
(5) doctors that he could resume his normal work and
several written warnings from the company. He in­
curred forty-seven (47) absences. He was dismissed
pursuant to a company rule that an employee who
incurs w ithout valid reason six (6) or more absences is
subject to dismissal. Is the dismissal of Alvarez war­
ranted? Why ?

ANS. Yes. He was guilty of seriously neglecting

his duties. He should however be awarded separation
pay of one-half (Yt) month pay for every year of
service. (Philippine Geothermal, Inc. vs. NLRC, et
al., G. R. No. 106370, September 8, 1994)
* * *

Sedaya was employed by Philippine Packing Corpora­

tion in 1960 as a research field worker at its pineapple
plantation operation in Bukidnon. in 1970 he was
transferred to the general crops plantation operations in
Misamis Oriental; four years later he was promoted to
the position of Supervisor. In 1982, in view o f the
phase-out of the company’s research activity, Sedaya
was advised of his re-assignment to Bukidnon. Instead
o f reporting to his new assignment, Sedaya filed suc­
cessive applications fo r leaves, the iast of which was
disapproved by the company because his leaves had
exceeded the maximum ceiling. Sedaya justified his
non-acceptance of the Bukidnon assignment on his
land problems and the anticipated dislocation of his
family.
(a) Is the refusal of Sedaya to accept the transfer
tenable?

ANS. No. The transfer was required by the

exigencies of the service. It was not a demotion.
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) Is Sedaya entitled to separation pay?

ANS. No. if for any reason an employee finds

himself in the intolerable situation where he is unable
to sacrifice his personal interests in favor of the
demands of the service, then he has no other option
but to separate himself from his'employment. And the
company is not duty-bound to grant him separation pay
for the reason that his removal is of his own choosing.
The company is however required, considering
Sedaya’s long period of service and the fact he has
never been cited for any disciplinary infraction, to
issue another written memorandum requiring him to
report for work in Bukidnon within ten (10) days from
his receipt thereof; otherwise, he will be dismissed for
cause. (Sedaya vs. NLRC, et al., G. R. No. 75931,
August 28, 1989)
# # A

After his retirement, Chu was rehired fo r one (1) year by

the company under a “ Special Contract of Employment”
as head o f the Warehousing, Sugar, Shipping and Ma­
rine Department. About five (5) month thereafter, he
was transferred to the Sugar Sales Department. The
transfer did not involve change in rank and salary. Chu
however contended that the transfer amounted to con­
structive dismissal, and that the company, by employ­
ing him specifically as head of a particular department
waived its prerogative to reassign him during the term
o f the contract to another department. Decide.

ANS. The contention of Chu is not tenable. One

of the prerogatives of management, and a very impor­
tant one at that, is the right to transfer employees in
their work station. Before such right can be deemed to
have been waived or contracted away, the stipulation
to that effect must be clearly stated so as to leave no
room to doubt the intention of the parties. The mere
specification in the employment contract of the posi­
tion to be held by the employee is not such stipulation.

781
 TERMINATION OF EMPLOYMENT
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And the 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. (Chu vs. NLRC, et al., G. R. No. 106107,
June 2, 1994)

★ * ★

After the reorganization of the company, Alinas, an

accounting supervisor was informed by the new man­
agement that he would be transferred to a provincial
branch as marketing and sales supervisor. He refused
the transfer because his background was that of an
accountant, his new assignment would cause inconve­
nience to his two sisters whom he was supporting and
he would be unable to continue his studies in Manila.
The company dismissed Alinas. There was evidence
show ing that prio r to his dism issal, Alinas was
promised other positions, but these were never given to
him, and that he was told that the new management was
uncomfortable with him and fo r this reason he was
offered separation pay. Was the dismissal of Alinas
justified? Why?

ANS. No. The employer committed grave abuse

of discretion in exercising its management prerogative
to transfer. (Pocketbell Philippines, Inc. vs. NLRC, et
al., G. R. No. 106843, January 20, 1995)

* * *

Caballo, a ju n io r engineer in the construction depart­

ment o f a m ining company, took an approved leave of
absence often (10) days. But after the expiration o f his
leave, he was striken ill and was advised by his physi­
cian to rest fo r several months. He requested his sister
to inform the company of his predicament. He did not
however oppose the application of the company for
clearance to dismiss him. Six (6) months and twenty

782
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

four (24) days after his initial leave, Caballo reported fo r

work; the company refused to readmit him, despite the
presentation o f a medical certificate attesting that he
was sick with hepatitis. He therefore filed a complaint
fo r illegal dismissal.
(a) is Caballo deemed to have abandoned his job?

ANS. No. His prolonged absence cannot be

construed as abandonment of work since said absence
was due to justifiable reason. For abandonment to
exist, there must be a deliberate unjustified refusal of
the employee to resume his employment. Besides, the
filing of a complaint for illegal dismissal negates his
intention to leave his job.

(b) Is Caballo entitled to moral damages, aside from

reinstatement and backwages? Why?

ANS. Yes. It appears that although the company

had given him a grace period within which to report for
work, the form er had decided to dismiss him even
before the lapse of the said period. The employer
violated the rules of fair play. (Atlas Consolidated
Mining and Development Corporation vs. NLRC et al.,
G. R. No. 75751 , October 17, 1990)

* * ft

Ms. Cabatbat was the branch accountant o f a savings

and loan association in San Carlos City, Pangasinan.
She was among employees who were transferred to new
assignments; in her case, she was re-assigned to the
lirdaneta Branch, also in Pangasinan, about 30 kilome­
ters away from her residence,. She moved to reconsider
her re-assignment; she allegedly needed to maintain
harmonious relationship with her parents-in-law with
whom she then lived; the transfer would also entail
additional expenses and physical exhaustion. The re­
quest was denied by the bank; the transfer was neces­
sary to uplift the operational efficiency of the bank. She
then wrote the bank bluntly refusing her re-assignment

783
 TERMINATION OF EMPLOYMENT
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on the pretext that the same was a promotion which she

had the option to accept or reject. She was also
reminded o f the bank’s policy to reimburse actual cost
of transportation incurred by employees as a result of
reassignment.
Pncause of her continued refusal to report to her new
assignment, Ms. Cabatbat was ultimately dismissed.
She had rendered about ten (10) years of service at the
time of her dismissal.
(a) Is the dismissal of Ms. Cabatbat justified? Why?

ANS. Yes. She refused to obey an order of the

bank issued in the valid exercise of management
prerogatives. The transfer was needed to uplift the
operational efficiency of the bank; there was no grave
abuse of discretion or bad faith on the part of the bank.
It is the employer’s prerogatives, based on its
assessment and perception of its employees’ qualifica­
tions, 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. The rationale for this rule is
that 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.

(b) Was the re-assignment of Ms. Cabatbat, as she

contended, a promotion? Why?

ANS. No. There was no advancement from one

position to another or an upward vertical movement of
the employee’s rank or position. And any increase in
salary should only be considered incidental but never
determinative of whether or not a promotion is be­
stowed upon an employee. Her transfer was only a
lateral movement. (Homeowners’ Savings and Loan
Association, Inc. vs. NLRC et al., G. R. No. 97067,
September 16, 1996)

784
 TERMINATION OF EMPLOYMENT
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When is transfer an unfair labor practics?

ANS. Where the transfer of the president and a

director of the union was made at a time when a
certification election was about to be held in the
company, it was ruled that the dismissal of the workers
due to insubordination constituted an unfair labor
practice. (Gonpu Services Corporation vs. NLRC et
al., G. R. No. January 27, 1997)
* * *

Leaving the company premises one afternoon, “ Y,” an

employee fo r nine (9) years, was apprehended by a
policeman and was found carrying a bagful o f drugs
worth P267.00. Upon investigation, “ Y” admitted that he
had brought the drugs fo r purposes o f re-sale, from his
co-workers who had received the same free o f charge
from the company to keep them in the “ pink of health.”
He also promised not to commit the same act again.
Contending that the trafficking off drugs was a subver­
sion of its efforts to give medical benefits to its employ­
ees, the company dismissed “ Y.” Is the dismissal
warranted? Why?

ANS. Taking into account the circumstances of the

case, particularly “Y ’s” initial attitude of confessing
that his error was dictated by necessity and his
promise not to repeat the same mistake, his dismissal
is a drastic punishment. He should be reinstated but
without backwages because the company acted in
good faith in dismissing him. ( San Miguel Corporation,
et al vs. Secretary of Labor, et al., G. R. No.
L-39195, May 16, 1975)
* * *

By reason of the late preparation of a debit memo,

Carmencita, a bank teller, called Cesar, another bank
teller, “ tarantado” while the latter was having lunch with
their supervisor and two other employees. Thirty m in­

735
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

utes later, Cesar approached Carmencita and told her he

resented her having revealed his mistake and her use of
the word “ tarantado” in front of their supervisor. Car­
mencita made no apology although she said that the
word is her ordinary expression. Their supervisor ad­
monished them to stop which they did momentarily;
Cesar however sat opposite petitioner w ith dagger
looks. This caused Carmencita to remark: “ Aiam ko
matapang ka mangyari security ka dati.” Cesar consid­
ered this an insult and slapped Carmencita; the latter
retaliated by throwing a stapler but did not hit him.
Before Cesar could slap her again, cooler heads inter­
vened.
By reason o f this accident, both were asked to resign.
Cesar, who was on probationary status, did so; but
Carmencita who was already a regular employee did
not. She was therefore dismissed by the bank fo r
violation of company rules and regulations on office
relationship, penalizing with dismissal any disrespect,
discourtesy, or use of foul languags towards any officer
or staff member.
Considering that Carmencita had served the bank fo r
three (3 ) years with apparently a good record, is her
dismissal proper? Decide with reasons.

ANS. Dismissal is too severe a penalty. Her

utterance of the word “tarantado” was meant only as a
joke as it was her usual expression. Her act of
throwing the stapler was merely in retaliation for the
physical violence upon her person and self-respect.
And while the quarrel may constitute discourtesy to a
superior as it took place in the presence of a bank
supervisor and despite her admonition for them to
stop, the same does not merit outright dismissal as it
did not involve the efficiency or honesty of Car­
mencita. A thirty-day suspension without pay is suffi­
cient. (Visperas vs. Inciong, G. R. No. L-51299,
December 29, 1982)

it He it

786
 TERMINATION OF EMPLOYMENT
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Romeo, a foreman, was verbally instructed by his super­

visor to gather men who would want to render overtime
work. As he was able to convince eight (8), he prepared
the overtime authorization slip. Later, Romeo’s name
was ordered deleted from the list as there were supervi­
sory personnel who would want the overtime work.
Informed o f the change, Romeo tore the overtime autho­
rization slip in the presence of his co-workers and this
group leader, uttering, “ Sinusubukan yata niya ako.”
By reason o f this incident, Romeo v;as dismissed fc r
violating the company rules and regulations on provok­
ing, instigating or fig h tin g w ith in the company
premises, insubordination, and use of abusive and d;rty
language against supervisory personnel. Decide.

ANS. The rule on provoking, instigating or fighting

within the company premises was not violated. The
act of the petitioner (Romeo) in tearing the Overtime
Authorization Slip and in uttering “Sinusubukan yata
niya ako” cannot by any stretch of the imagination be
construed as “provoking, instigating or fighting.” It
must be borne in mind that ihe petitioner has prepared
the slip himself and after he was told to delete some
names, he saw no further use for it.
Neither did the petitioner commit insubordination.
He did not refuse to comply with or obey orders or
instructions of his supervisors. On the contrary, when
the petitioner was ordered to delete his name from the
overtime slip, he did so in a categorical manner — he
tore the slip. The petitioner was told not to work
overtime; he did not. How then can it be said that he
was guilty of insubordination?
The petitioner uttered the words “sinusubukan yata
niya ako." It is claimed that he thereby used abusive
and dirty language. Even by genteel Victorian stan­
dards the words cannot be categorized as abusive
much less dirty. Perhaps they were slightly disrespect­
ful but not sufficiently so to bring them within the ambit
of the rule. (Romeo Oliva vs. NLRC & Phil. Carpet
Manufacturing Corporation, G. R. No. 57865, April
28, 1983)

787
 TERMINATION OF EMPLOYMENT
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“ A” challenges “ B,” his supervisor, to a fist fight within

the company premises. Is this sufficient cause fo r the
dismissal o f “ A” ? Why?

ANS. Yes. It constitutes serious misconduct, and

dismissal is a reasonable measure of self-protection of
the employer. (Luzon Stevedoring Corporation vs.
CIR, et al., G. R. No. L-17411, December 31, 1965;
Dominguez vs. Pepsi-Cola Bottling Co., Inc., G. R.
No. L-23473, November 27, 1971)
* * *

While he was off-duty, Angeles, a security guard, cre­

ated trouble inside a restaurant and got involved in a
fracas with policemen. There was also evidence that
sometimes he had gone on duty under the influence of
liquor, wore untidy and improper uniform, and enter­
tained outsiders at night while on duty. Are the forego­
ing sufficient to warrant his dismissal? Explain.

ANS. A security guard, by the very nature of his

job, must possess attributes of discipline, proper be­
havior, courtesy, respect for authority and emotional
stability. There are altogether too many security
guards who are trigger happy or who get mistaken
notions of power simply because they are armed.
Unfortunate incidents have been caused by indiscrim i­
nate resort to firearms resulting from heated argu­
ments over such trivial items as reserved parking
spaces, inspection of brief cases and bundles, wearing
ID cards, and other matters easily resolved by more
disciplined and reliable persons. The employer cannot
wait until a more serious or fatal incident involving its
employees occurs before taking appJjgjSfttete^ton,.,. ^
W hile the restaurant incident alone is ordinarily nof3®**"
sufficient ground for termination, the very nature of his
work as a security guard together with the allegations
of untidiness, laxity in the performance of his duties,
going on duty under the influence of liquor and enter­
taining outsiders at night while on duty are more than

788
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

sufficient to justify the termination of private respon­

dent’s employment. A series of irregularities when put
together may constitute serious misconduct, which
under Article 283 (now Art. 282) of the Labor Code, is
a just cause for termination. (National Service Corpo­
ration, e tp l vs. Leogardo, et al., G. R. No. L-64296,
July 20, 1984)

* * *

During working hours, Gupa, a pin bey o? Club Filipino,

went berserk and broke the m irror and drinking glasses
o f the employees’ canteen c f the establishment while
under the influence of liquor. He also punched the
house officer when the latter tried to pacify him. Is the
dismissal of Gupa justified? Why?

ANS. Yes. His acts constitute serious misconduct

(Club Filipino, Inc. vs. Voluntary A rbitrator Sebastian,
et al., G. R. No. 85490, July 23, 1992).

# * *

Flores worked w ith MERALCO fo r twenty-one (21) years.

He was a teller; prior thereto, he worked as a lineman
responsible fo r the inspection and installation o f elec­
tric services and fo r the disconnection o f delinquent
accounts o r those found w ith tampered electric meters.
He was dismissed, after investigation, fo r installing and
using a tampered and unregistered electric meter w ith a
two-line jum per in his residence. His dismissal was
effected despite his unqualified adm ission o f the
charges against him, his plea fo r the im position o f a
lesser penalty, and payment of the unrecorded electric
consumption.
(a) Was the dismissal o f Flores justified? Why?

ANS. Yes. His acts constitute gross misconduct

and breach of trust.

7R9
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) In view of his length of service with MERALCO,

should the latter be required to pay severance compen­
sation? Why?

ANS. No. The length of service of Flores, if this is

to be considered at a!!, should be taken against him.
The infraction that he committed, vis-a-vis his long
years of service with the company, reflects a regret­
table lack of loyalty. Loyalty that he should have
strengthened rather than betrayed. (Flores vs. NLRC,
et al., G. R. No. 96969, March 2, 1993)
* * *

Maalat was hired in 1962 by Cosmopolitan Funera!

Homes, Inc. as a “ supervisor” to handle the solicitation
o f mortuary arrangement, sales and collection. He was
paid on commission basis. He was prohibited from
engaging in other funeral business or in part-time em­
balming business outside of the company. Absences
were subject to disciplinary action. He was not allowed
to issue his own receipts and to directly deduct his
commission. The company rules also required that
negotiation and making of contracts with customers
must be done inside the office and signing o f contracts
be made immediately before the deceased is placed in
the casket. Maalat was also reported fo r SSS coverage.
He was dismissed in 1987 fo r dishonesty.
(a) Is Maalat considered an employee o f the funeral
homes or is he an independent contractor?

ANS. Maalat is an employee, not an independent

contractor. He was not free to accomplish his work on
his own terms and engage in other means of livelihood.
He had always to be on the job or at least most of the
time.

(b) As the ground fo r his dismissal is dishonesty, is

Maalat entitled to severance pay as a measure of social
and compassionate justice in view of his long years of
service?

790
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. The policy of social justice is not

intended to countenance wrongdoing. The erring em­
ployee should not be rewarded for his offense.
(Cosmopolitan Funeral Homes, Inc. vs. Maalat, et al.,
G. R. No. 86693, July 2, 1990)
* ft if

Bacalso, employed as an admeasurer o f a port service

company, quarreled and had a fis tfig h t w ith a co­
employee (Mabalacad) inside the office o f his superior
despite the latter’s order fo r Bacalso to stop provoking
Mabalacad. The incident started when Bacalso con­
fronted Mabalacad about the re-checking done on his
measurement o f pallets of bananas.
(a) May Bacalso be dismissed fo r w illfu l disobedience
of his employer’s lawful orders?

ANS. No. While there was lawful disobedience of

the immediate superior's order not to breach the peace
and order of the division, which undoubtedly was a
lawful order connected with Bacalso’s work, the fist­
fight did not pose any serious or substantial danger or
prejudice to the well-being of his co-employees or the
business of the employer or of the general public doing
business with the employer. The fistfight occurred
away from the view of the employer's customers or the
general public. Suspension without pay for three (3)
months would be an adequate penalty. (Gold City
Integrated Port Services, Inc. vs. NLRC, et a l., G. R.
No. 86000, September 21, 1990)

(b) Cite an instance where disorderly conduct was

considered a ground fo r dismissal.

ANS. The pugnacious behavior exhibited by a

crewmember in the course of an argument with his
immediate superior, in the presence of passengers and
other crewmen on board an inter-island vessel, was
held to be a ground for dismissal considering that the
employee’s behavior could have easily provoked a

791
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

brawl and mindless panic on board the vessel and

endangered the safety of the passengers, crewmem-
bers and of the vessel itself. (Lausa vs. NLRC, et al.,
G. R. No. 79731, July 9, 1990)
* * *

Miss E., a probationary employee of a medical center,

was dismissed m ainly due to her act in borrowing
P50.00 from one of the patients therein, which is al­
legedly violative of the employer’s policy against solici­
tation o f any consideration from patients. The loan was
however repaid. Is the dismissal legal? Why?

ANS. No. Borrowing money is not dishonest,

immoral or illegal, much less criminal. At any rate, the
loan was .repaid. It may be added that she must have
been compelled to borrow because of necessity, which
circumstance should evoke sympathy, not condemna­
tion. (Medical Doctors, Inc. vs. NLRC, et al., G. R.
No. L-56633, April 24, 1985)

it it it

The Personnel Manager and Chief Security Officer o f the

company failed to liquidate her cash advances on time
despite repeated reminders by the auditor and
comptroller, and when she finally did so she submitted
an explanation showing that some of the expenses were
fo r purely personal purposes and an altered receipt
indicating a larger amount than what was actually
spent.
(a) Is her dismissal justified? Why?

ANS. Yes. There is sufficient reason for the

company to lose its confidence in the personnel man­
ager whose position carries with it the highest degree
of responsibility in upholding the interest of the em­
ployer and in setting the standards of honesty and
discipline among her subordinates.

792
 TERMINATION OF EMPLOYMENT
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(b) Considering that she had served the company fo r

fifteen (15) years, is she entitled to separation pay or
financial assistance? Why?

ANS. No. Where the reason for the valid dis­

missal is an offense involving moral turpitude and
dishonesty, the grant of separation pay or financial
assistance is not justified. If any employee who steals
from the company is granted separation pay, it is not
unlikely that he will commit a sim ilar offense in his
next employment because he thinks he can expect a
like leniency if he is again found out; this kind of
misplaced compassion is not going to do labor in
general any good; it will encourage the infiltration of its
ranks by those who do not deserve the protection and
concern of the Constitution. (Baguio Country Club
Corporation vs. NLRC, et al., G. R. No. 102397,
September 4, 1992)
* * *

Give recent decisions on dismissals by reason o f seri­

ous misconduct.

ANS. The dismissal, after 27 years of service of

the electrician of a vessel has been upheld where it
was established that he left the vessel without permis­
sion purportedly to settle a m arital problem, that
before leaving he disconnected the ship’s steering line
so that the vessel could not leave port without him, and
that his actuation delayed the departure of the vessel.
The fact that this was his first offense could not
mitigate his liability, as his misconduct showed lack of
loyalty to his employers and lack of regard for the
latter’s rules. (Villeno vs. NLRC et al., G. R. No.
108153, December 26, 1995)
The outright dismissal of an administrative clerk,
after twelve (12) years of service, for intercalating an
item in the approved purchase order has been held to
be too severe, considering that the item (one executive
swivel chair) was intended for the use of the head of
her department, that she did not gain m aterially there­

793
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

from, and that the cost of the chair, even if purchased,

would not make the total amount to be expended
exceed the amount of budget. Payment of severance
pay, without backwages, was deemed sufficient.
(Bernardo vs. NLRC et. al., G. R. No. 105819,
March 15, 1996)
But the act of a male worker in embracing a
co-employee after working time at the ladies’ dormitory
inside the compound and forcibly placing himself on
top of her has been held to be a valid reason for
dismissal where the Code of Employee Discipline
provides that immoral conduct within the company
premises regardless of whether or not the same is
com mitted during working time is punishable; the
misconduct though involving a personal m atter is
work-related considering that the peace of the com­
pany is affected. (Navarro vs. Hon. I. D. Damasco
et. a l.,-G ..R . No. 101875, July 14, 1995.)
The dismissal of a union president, after seventeen
(17) years of service, has been upheld, where it was
established that she engaged a co-employee in a brawl
during office hours in the company premises in full
view of other employees and visitors, and that she had
previously incurred unauthorized absences, committed
misconduct and violated company rules and regula­
tions. (Flores vs. NLRC et. al., G. R. No. 109362,
May 15, 1996)
The pressure and influence exerted by a college
professor on his colleague to change a student’s failing
grade to a passing one as well as the form er’s misrep­
resentation that the student is his nephew constitute
serious misconduct, which is a valid ground for dis­
missing an employee. (Padilla vs. NLRC et al., G. R.
No. 114764, June 13, 1997)
Where the affidavits of witnesses presented by the
em ployer contained mere general allegations and
failed to cite particular acts or circumstances when the
workers were allegedly disrespectful, arrogant, or when
they used grossly abusive language, their dismissal for
misconduct or improper behavior cannot be upheld.
(Molato et al vs. NLRC et al., G. R. No. 113085,
January 2, 1997)

794
 TERMINATION OF EMPLOYMENT
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A cameraman of a television company failed to

report for the taping of a TV program allegedly due to
the sickness of his daughter. However, the employer
later on discovered that the cameraman had absented
himself in order to work in a rival station. It was ruled
that the cameraman could be validly dismissed for
disloyalty, serious misconduct, and w illful breach of
trust. (ABS-CBNtEmployees Union et al vs. NLRC et
al., G. R No. 111211, July 24, 1997)
Possession and use of shabu by an employee -
constitute serious misconduct warranting his dismissal,
even on the assumption that the misconduct was.,r
instigated by the company. Instigation is only'-a
defense against criminal liability. It cannot be used'as
a shield against dismissal from employment especially
when the position involves the safety of human lives.
(Roquero vs. Philippine Airlines, Inc., G. R. No.
152320, April 22, 2003)
W ell-entrenched is the rule that “substantial proof*
and not clear and convincing evidence or proof beyond
reasonable doubt, is sufficient as basis for the imposi­
tion of any disciplinary action upon the employee.
Even where there is no direct evidence that the em­
ployees actually committed the offense, substantial
evidence based on documentary evidence is sufficient
to warrant their dismissal from employment, as where
the employer’s documentary evidence reflects an un­
broken chain which naturally leads to the fair and
reasonable conclusion that the employee was guilty of
extortion. (Philippine Airlines, Inc. vs. Tongson, G.
R. No. 153157, October 14, 2003)
* * *

JS, a married teacher, had a n ,a ffair with his co-teacher.

Mrs. M., who was also married. The couple’s relation­
ship was known among the faculty members and school
officials. Due to this relationship, JS was dismissed by
the school. Is the dismissal justified? Why?

ANS. Yes. When a teacher engages in extra­

marital relationship, especially when the parties are

795
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

both married, such behavior amounts to immorality,

justifying his termination from employment. A teacher
serves as an example to his pupils, especially during
their form ative years and stands in loco parentis to
them. (Santos vs. NLRC et al, G. R. No. 115795,
March 6, 1998)

* ★ *

Juico, a checker, was dismissed by San Miguel Corpo­

ration fo r breach of trust due to his possible involve­
ment in a burglary incident resulting in loss of funds in
the company safe. The dismissal was effected despite
Juico’s acquittal in a criminal case fo r theft based on
absence o f proof of his actual involvement or participa­
tion in the event. There is however proof that he had a
set of keys and knew the right combination.
Is Juico’s dismissal lawful? Why?

ANS. No. The termination of employment of

ordinary rank-and-file employees due to breach of trust
requires proof of actual involvement in the acts consti­
tuting the offense. (San Miguel Corporation, et al vs.
NLRC, et al., G. R. No. 100168, July 8, 1992)

* ★ *

Is inefficiency a ju s t cause fo r dismissal? Explain.

ANS. Yes. The practice of a company in laying off

workers because they failed to make the work quota
has been recognized in this jurisdiction. (Phil. Am eri­
can Embroideries vs. Embroidery and Garment W ork­
ers, 26 SCRA 634, 639). The worker’s failure to meet
the sales quota assigned to each of them constitute a
just cause of their dismissal regardless of the perma­
nent or probationary status of their employment. Fail­
ure to observe prescribed standards of work, or to
fu lfill reasonable work assignments due to inefficiency
may constitute just cause for dismissal. Such ineffi­
ciency is understood to mean failure to attain work

796
 TERMINATION OF EMPLOYMENT
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goals or work quotas, either by failing to complete the

same within the allotted reasonable period, or by
producing unsatisfactory results. This management
prerogative of requiring standards may be availed of
so long as it is exercised in good faith for the advance­
ment of the employer’s interest. (Buiservs. Leogardo,
G. R. No. L-63316, July 31, 1984)

* * *

Canto and Pepito were implicated by their co-employee

Macatubal in the loss of x-ray film s from the storeroom
of their employer. On the basis of Macatubal’s state­
ment, the employer placed Canto and Pepito under
preventive suspension. Is this action justified?

ANS. No. An employee may be placed under

preventive .suspension only if his continued employ­
ment poses a serious and imminent threat to the life or
property of the employer or of his co-employees. In
the instant case, the only evidence linking Canto and
Pepito to the anomalies is the self-serving, uncorrobo­
rated and questionable statement given by their co­
employee. (Manila Doctors Hospital vs. NLRC, et al.,
G. R. No. 64897, February 28, 1985)

An employer who desires to automate his operations

seek your opinion on the steps to effect the dismissal, if
this is possible, of its employees whose jobs w ill be
affected or rendered unnecessary by automation. What
would be your advice?

ANS. Under Article 283 of the Labor Code, the

employer may terminate the employment of any em­
ployee due to the installation of labor-saving devices.
The employer must give written notice of termination
upon the workers affected and the Department of
Labor and Employment at least one (1) month before
the intended date thereof. He must furthermore pay
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

the workers separation pay equivalent to at least their

one (1) month pay or one-half (1/2) month pay for every
year of service, whichever is higher, a fraction of at
least six (6) months being considered as one whole
year.

* * *

Cite an example o f dismissal due to installation of

labor-saving devices.

ANS. Where the reduction of personnel of San

Miguel Corporation was due to the installation of
high-tech, state-of-the-art beer processing machines, it
was ruled that the employees’ dismissal was due to a
valid cause, i. e., the installation of labor-saving
devices.
It was also ruled that the quitclaim executed by an
SMC employee was valid and binding, it appearing that
he held a master’s degree in library science, an
instructor in political science as well as a law student,
and that he received an amount representing 175% of
his entitlement under the Labor Code. (Agustilo vs.
Court of Appeals et al., G. R. No. 142875, Septem­
be r? , 2001)

* * *

After operating a profitable restaurant business fo r

twenty years, Mr. X gives written notice to his employ­
ees and to the Department of Labor and Employment
that he w ill close the company two (2) months from their
receipt thereof. He gave as his reason the fact that he is
already old and he wants to travel around the world.
(a) Considering that his business is financially sound,
has Mr. X the right to close it? Why?

ANS. Yes. X is the owner of the business and as

such he has the right to decide when to stop operating
it. There is furthermore no indication in the problem
that X is acting in bad faith.

798
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) Does Mr. X have any obligation in favor o f his

employees in connection with the intended cessation of
operations? Explain.

ANS. Under Article 283 or the Labor Code, X has

to pay the employees separation pay equivalent to one
(1) month pay or at least one-half (Vi) month pay for
every year of service, whichever is higher, a fraction of
at least six (6) months being considered as one (1)
whole year.
* * *

After Banco Filipino was placed under receivership and

ordered liquidated by the Monetary Board, Mr. F. Di-
zon, the Executive Vice-President and Chief Operating
Officer o f the bank, was dismissed by the Board. Dizon
therefore filed w ith the labor arbiter a complaint against
the bank fo r the recovery o f unpaid salary, the cash
equivalent o f accumulated vacation and sick leaves,
termination pay, moral damages and attorney’s fees.
The Supreme Court meanwhile issued a resolution en­
jo ining the Central Bank from executing further acts of
liquidation in view of the insistence of some stockhold­
ers that the bank is solvent and in sound financial
condition.
(a) Does the labor arbiter have jurisdiction over the
claims of Dizon considering that under the Central Bank
Act liquidation proceedings involving a bank fall w ithin
the jurisdiction o f the ordinary courts?

ANS. Yes. There is nothing in the Central Bank

Act which suggests that the jurisdiction of the liquida­
tion court to adjudicate claims against the insolvent
bank is exclusive. On the other hand, Article 217 of
the Labor Code explicitly provides that labor arbiters
have original and exclusive jurisdiction over money
claims of an employee against an employer. Such
jurisdiction would not be lost simply because a form er
employer had been placed under liquidation. The
legislature deemed it wise to confer jurisdiction over

799
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

labor disputes to a body exclusive of others; such

authority should not be taken away absent a clear
provision of law to that effect.

(b) May the claims of Dizon, adjudicated by the labor

arbiter and the NLRC, be paid ahead of other credits and
outside of the liquidation proceedings?

ANS. No. Dizon’s claims cannot be paid ahead of

other credits and outside of the liquidation proceedings
because the “free property” or the property left after
the creditors mentioned in Articles 2241 and 2242 of
the Civil Code are paid has not yet been determined.
To execute the judgment would unduly deplete the
assets of respondent bank to the obvious prejudice of
other creditors. Dizon’s claims should thus be submit­
ted to the liquidators for processing.

(c) Is the award of separation pay to Dizon warranted?

ANS. Yes. Under Article 283 of the Labor Code,

separation pay is awarded in case of closure of the
establishment. This is based on social justice and
equity. (Banco Filipino Savings and Mortgage Bank
vs. NLRC, et al., G. R. No. 82135, August 20, 1990,
citing International Hardware, Inc. vs. NLRC, et al.,
G. R. No. 80770, August 10, 1989. A u th o r’s
O b s e rv a tio n : A pronouncement was made in this
case to the effect that separation pay is to be awarded
although the closure is due to serious business losses
or reverses. It should however be noted that the
question of whether Banco Filipino had incurred losses
and should be closed or liquidated remains unsettled.
Furthermore, the award of separation pay in In te rn a ­
tio n a l H ardw are was by reason of retrenchment and
not due to the closure of the establishment.)
it ★ *

Is an employee who is entitled to reinstatement to be

paid backwages even beyond the date of closure of the
establishment?

ann
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No, as long as such closure is due to

legitimate business reasons and not merely an attempt
to defeat the order of reinstatement.
An employer is privileged to go out of business by
closing the same. To deprive him of such privilege
would be oppressive and inhuman. In such cases, the
dismissed employee can no longer be reinstated but
shall be entitled to backwages up to the date of closure
(but not exceeding three years). (Pizza Inn, etc. vs.
NLRC, et al., G. R. No. 74531, June 28, 1988)
* * *

Almoradie was employed by MEREX as messenger.

When MEREX closed its operations, Almoradie was
absorbed by PHILAC, a sister company o f MEREX.
Then he was transferred to GUATSON, a sister company
of MEREX and PHILAC. These three (3) corporation
were owned' by one family, and the majority o f their
officers are the same. They were located in one build­
ing and used the same messengerial service. Almoradie
was not paid separation pay when he was absorbed by
PHILAC upon closure of MEREX, and he did not resign
from PHILAC when he was transferred to GUATSON.
May the three (3) companies be held liable fo r the
separation pay and backwages of Almoradie in case of
the latter’s illegal dismissal? Why?

ANS. Yes. The doctrine of piercing the veil of

corporate fiction is applicable. (Guatson International
Travel and Tours, Inc., et al vs. NLRC, et al., G. R.
No. 100322, March 9, 1994)

* * *r

Industrial Timber Corporation (ITC) is a corporation

engaged in the business of manufacturing and process­
ing veneer and plywood products. It used to operate a
veneer and processing plant known as the Butuan Logs
Plant and a veneer and plywood processing plant
known as the Stanply Plant. Sometime in 1989, ITC

801
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

decided to permanently stop and close its veneer pro­

duction at its Butuan plant due to impending heavy
financial losses resulting from high production costs,
erratic supply o f raw materials and depressed prices
and market conditions fo r its wood products. Accord­
ingly ITC served a written notice to all its employees in
the said plant and to the Butuan District Office of the
Department of Labor and Employment stating that thirty
(30) days thereafter, it would cease operations at said
plant. The union objected to this impending closure by
the company. ITC also form ally notified the union of the
availability fo r release of separation pay and other CBA
benefits. Only sixty-three (63) employees availed of the
foregoing benefits. The union contends that the clo­
sure is illegal. Decide.

ANS. The closure is legal. Article 283 of the Labor

Code clearly provides that the employer may terminate
the employment of his employees to prevent losses.
Closure or cessation of operations for economic rea­
sons is, therefore, recognized as a valid exercise of
management prerogative. The determination to cease
operations is a prerogative of management which the
State does not usually interfere with, as no business or
undertaking must be required to continue operating at
a loss simply because it has to maintain its workers in
employment. Such an act would be tantamount to a
taking of property without due process of law.
However, the burden of proving that such closure
is bona fide falls upon the employer. In this case,
petitioner corporation presented the analysis of an
independent certified public accountant, showing in
detail the imminent losses it would suffer should it
continue its operations. It is understandable that no
audited financial statement or other sim ilar documents
were presented as the company is claiming impending
future losses, not past or actual ones. Moreover, the
fact that petitioner company has ceased operations
and has not resumed to do so only reinforces its claim
to a valid closure, not to mention the other established
fact that its Stanply Plant has also the capacity and

802
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

capability to produce veneer, the product it solely

manufactured.
At any rate, it was held in a recent case that an
employer may close or cease his business operations
even if he were not suffering from business or financial
reverses.
The foregoing notwithstanding, ITC complied with
the requirements mandated by law to effectuate a valid
termination of employment on account of closure.
(Industrial Timber Corporation vs. NLRC et al., G. R.
Nos. 107302 & 107306, 108559-60, June 10, 1991)
* * *

If an employer reduces personnel in order to prevent

losses, is it obliged to pay severance compensation to
the employees affected by the retrenchment?

ANS. Yes. In case of retrenchment to prevent

losses, the employees dismissed are entitled to sepa­
ration pay equivalent to one (1) month pay or at least
one-half (%) month pay for every year of service,
whichever is higher, a fraction of at least six (6)
months being considered as one (1) whole year. (Art.
283, Labor Code)
* * Hr

Discuss the requisites of a valid retrenchment.

ANS. The general standards to determine the

validity of retrenchment are the following: 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 imminent, and
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 retrench­

803
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ment, which is after al! a drastic recourse with serious

consequences for the livelihood of the employees
retired or otherwise laid-off. Because of the conse­
quential 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. 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 exer­
cised 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 re­
duced tim e, im proving m anufacturing efficiencies,
trimming of marketing and advertising costs, etc. -
have been tried and found wanting. Lastly, but cer­
tainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and con­
vincing evidence. The reason for requiring this quan­
tum 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.
(Lopez Sugar Corporation vs. FFW, et al., G. R. Nos.
75705-06, August 30, 1990)
The “compulsory retirement,” due to alleged big
losses suffered by the bus company, of a 57 year old
operations manager who had served for 32 years, has
been held ta be illegal since the legal procedure for the
retrenchment of personnel was not followed, to wit: (1)
one month prior notice to the employee was not given;
(2) no fair and reasonable criteria were used in
carrying out the retrenchment program such as (a)
less preferred status, r. e., temporary employees-, (b)
efficiency rating, and (c) seniority; and (3) no proof of
the alleged financial losses suffered by the company

804
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

was produced. (Villena vs. NLRC and BLTB Co., G

R. No. 90664, February 7, 1991)

* * *

What documentary proofs must be submitted to estab­

lish losses in retrenchment cases?

ANS. The condition of business losses is normally

shown by audited financial documents like yearly bal­
ance sheets and profit and loss statements as well as
income tax returns. But financial statements must be
prepared and signed by independent auditors, other­
wise, they can be assailed as self-serving documents.
And it is not enough that only the financial statements
for the year during which retrenchment was undertaken
are presented in evidence. For it may happen that
while the company has indeed been losing, its losses
may be on a downward trend, indicating that business
is picking up and retrenchment, being a drastic move,
should no longer be resorted to. Thus, failure of the
employer to show its income and loss for the immedi­
ately preceding year or to prove that it expected no
abatement of such losses in the coming years, may
bespeak the weakness of its cause, it is necessary
that the employer also show that its losses increased
through a period of time and that the condition of the
company is not likely to improve in the near future.
I (Asian Alcohol Corporation vs. NLRC, et al., G. R.
No. 131108, March 25, 1995)
\
] * * *

CDCP closed its cement division due to substantial

losses in operational and maintenance expenses result­
ing from frequent shutdown caused by lack o f raw
materials and bunker fuel, the strike declared by the
union, and other causes beyond its control. About 175
employees were dismissed. Are they entitled to seve
ance compensation? Why?

805
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Yes. Inasmuch as their dismissal is due to

retrenchment prompted by serious business reverses.
There is no closure of the enterprise or the company
itself as CDCP has not totally ceased operations.
(Construction & Development Corporation of the
Philippines vs. Leogardo, et al., G. R. Nos. L-64207-
08, November 25, 1983)

<r * *

The National Service Corporation (NASECO) retrenched

fifty-one (51) security guards due to losses amounting
to P1,457,700.42 representing the salaries and benefits
paid to them fo r an eight month period during which
they could not be placed with other clients because they
refused reassignment. The guards had previously been
assigned to PNB and had participated in an illegal strike
but were ordered readmitted. Is the dismissal of the
security guards valid? Why?

ANS. Yes. The retrenchment was justified by

losses which were substantial. NASECO tried to
cutback on losses by reassigning the guards to other
clients but they refused reassignment. The particular
facts of the case also precludes the application of the
“first in, last out rule” as NASECO could not compel
PNB to readmit them. (Garcia, et al vs. NLRC, et al.,
G. R. No. 110518, August 1, 1994)

★ * *

Thirty-one employees of the pharmaceutical division of

the company were dismissed due to a change in market­
ing strategy by the suspension of trade and foreign
credit facilities. They were paid one month’s salary as
severance compensation, in lieu of notice.
(a) Is their dismissal legal? Why?

ANS. No. Although their dismissal was due to

retrenchment to prevent losses, which is an authorized
cause under Article 283 of the Labor Code, the said

806
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

article also requires that a written notice of termination

be given to the affected employee and the Department
of Labor at least, one month prior to the intended date
of termination. Payment of severance pay is not
enough.

(b) Is the aforesaid illegal dismissal a ground fo r a

strike?

ANS. In the absence of a showing that the illegal

dismissal was dictated by anti-union motives, the same
does not constitute an unfair labor practice as would be
a valid ground for a strike. The remedy is an action for
reinstatement with backwages and damages.
The lack of proper notice, which made the dis­
missal illegal, could however constitute a violation of
the provision of the CBA requiring the company to
consult the union in cases of layoffs. (AHS/Philippines
Employees Union, et al vs. NLRC, et al., G. R. No.
73721, March 30, 1987)
* * *

When is the written notice to the DOLE, required by

Article 283 of the Labor Code, not necessary?

ANS. If an employee consented to his retrench­

ment or voluntarily applied for retrenchment with the
employer due to the installation of labor-saving de­
vices, redundancy, closure or cessation of operation or
to prevent financial losses to the business of the
employer, the required previous notice to the DOLE is
not necessary as the employee thereby acknowledged
the existence of a valid cause for termination of his
employment. (International Hardware, Inc. vs. NLRC,
et al., G. R. No. 80770, August 10, 1989)
* ■* *

May the giving of “ notice pay" to the employee equiva­

lent to his one month salary in lieu of the notice re­

807
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

quired in the contract of employment before dismissal

valid and lawful? Why?

ANS. No. The notice required is not a mere

technicality but a requirement of due process to which
every employee is entitled to insure that the em­
ployer’s prerogative to dismiss is not exercised in an
arbitrary manner. (JGB and Associates, Inc. vs.
NLRC et al., G. R. No. 109390, March 7, 1996)

* * *

Instead of giving written notice of termination at least

thirty (30) days in advance, as required by Article 283 of
the Labor Code, the employer ju st paid the worker less
salary fo r the said period and did not require him to
report fo r work anymore. Is the substitution of notice
with payment of salary valid? Why?

ANS. No. Nothing in the law gives the employer

the option to substitute the required prior written notice
with payment of thirty (30) days salary. It is not for the
employer to make substitutions for a right that a worker
is legally entitled to.
Indeed, a job is more than the salary that it carries.
Payment of thirty (30) days salary cannot compensate
for the psychological effect or the stigma of immedi­
ately finding one’s self laid off from work. It cannot be
a fully effective substitute for the thirty (30) days
written notice required by law especially when no
notice was given to the Department of Labor and
Employment.
Besides, the purpose of such previous notice is to
give the employee some time to prepare for the
eventual loss of his job as well as the DOLE the
opportunity to ascertain the verity of the alleged autho­
rized cause of termination. Such purpose would not be
served by the simple expedient of paying thirty(30)
days salary in lieu of notice of an employee’s impend­
ing dismissal, as by then the loss of employment would
have been a fait accompli. (Serrano vs. NLRC et al.,

808
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

G. R. No. 117040, May 4, 2000; Resolution on

Motion for Reconsideration)
* A *

After four (4) years of employment “ C” was notified by

his employer that he would be laid-off due to the eco­
nomic situation of the company; he was however as­
sured of being re-hired when operations returned to
normal. Three (3) years later, the company announced
in the newspaper that it was hiring additional personnel
because its production and sales had increased. “ C”
applied fo r employment but he was turned down. He
then filed a complaint for illegal dismissal. Decide.

ANS. “C” should be reinstated with backwages.

The company failed to establish that it suffered eco­
nomic or. business reverses justifying its claim that it
needed to retrench. The ground for "C’s” dismissal
was unproven and non-existent. The employer bears
the burden to prove its allegation of economic or
business reverses with clear and satisfactory evidence
it being in the nature of an affirm ative defense^
(Precision Electronics Corporation vs. NLRC, et al.,
G. R. No. 86657, October 23, 1989)
# # Hr

The San Miguel Corporation closed its Special Events

and Central Shipping Office which had been organized
to promote the products o f the company by providing
services such as bars, coolers and bartenders on spe­
cial occasions like parties, conventions and sim ilar
gatherings. The closure was due to continuous losses
in its operations and lack of demand fo r the services of
the section. The closure resulted in the dismissal of the
seasonal workers in the section who failed to file on
time their application fo r conversion into regular paid
employees.
(a) Is the termination of the employment of the afore­
said workers, who were union members, legal?

809
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Yes. The determination of the usefulness of

a section is a company prerogative. Such determina­
tion cannot in this case be questioned since it was
impelled by economic reasons, and continuous work
cannot even be guaranteed. (Special Events and
Central Shipping Office Workers Union vs. San Miguel
Corporation, et al., G. R. Nos. L-51002-06, May 30,
1983)

(b) If the closure were done at this time, would the

workers affected be entitled to severance pay?

ANS. Yes. The termination can be considered as

retrenchment to prevent losses. Under Article 283 of
the Labor Code, the workers would be entitled to
severance compensation of at least one month pay, or
one-half month pay for every year of service,
whichever is higher, a fraction of at least six months
being considered as one whole year.

* it *

Cite recent decisions on retrenchment.

ANS. The four standards of retrenchment are:

Firstly, the losses expected should be substantial and
not merely de minimis in extent. Secondly, the sub­
stantial loss apprehended must be reasonably im m i­
nent. Thirdly, the retrenchment must be reasonably
necessary and likely to effectively prevent the ex­
pected losses. Fourthly, the alleged losses if already
sustained or expected imminent losses sought to be
forestalled must be proved by sufficient and convinc­
ing evidence. (Central Azucarera dela Carlota vs.
NLRC et al., G. R. No. 100092, December 29, 1995)
Retrenchment does not require proof of actual
financial loss. The phrase “to prevent losses” used in
Article 283 means that retrenchment may be under­
taken sometime before the anticipated losses are
actually sustained or realized. (Revidad et al. vs.
NLRC, G. R. No. 111105, June 27, 1995)

810
 TERMINATION OF EMPLOYMENT
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The closure of one of the haciendas of the com­

pany due to huge losses, resulting in the dismissal of
the workers therein, is a valid exercise of management
prerogatives. The dismissal is by reason of retrench­
ment. (Catatista et al. vs. NLRC, G. R. No. 102422,
August 3, 1995)
Where the employer failed to give written notice to
the employees and the DOLE at least one (1) month
before the intended date of retrenchment, it was held
that the employees are entitled to an indemnity of
P2.000.00 each for such failure of the employer. This
amount is separate and distinct from the severance
compensation that they are entitled to by reason of
their dismissal due to retrenchment to prevent losses.
(Sebuguero et al vs. NLRC e ta l., G. R. No. 115394,
September 27, 1995)
In a later case, the penalty was increased to
P5.000.00 per employee. (Balbalec et al. vs. NLRC
et al., G. R. No. 107756, December 19, 1995; but see
Serrano vs. NLRC et al., p. 651)
* * *

Alleging that it sustained huge losses by reason of a

strike, the company proposed to non-striking employ­
ees financial assistance in exchange for their resigna­
tion, with assurance of priority in hiring when positions
of equal status and compensation become available.
The non-strikers accepted the company’s offer and
signed individual deeds of quitclaim and release upon
receipt of their separation pay. When the strike ended
and the company resumed operations, all the strikers
returned to their jobs. The non-strikers offered to
re-assume their former positions but the company re­
fused to admit them.
(a) Were the non-strikers illegally dismissed? W hy?

ANS. Yes. The refusal of the company to admit

the non-strikers is not justified. First, the company
failed to show that its losses were serious, actual and
real; that retrenchment was necessary to prevent fur­

811
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ther losses; and that the written notices prior to dis­

missal, required by Article 283 of the Labor Code, were
not given to the workers affected and the DOLE, at
least one (1) month prior to the retrenchment.

(b) Did the workers’ availment o f the financial assis­

tance given by the company estop them from question-
tag the legality o f their separation?

ANS. No. They were misled into believing that the

company would cease to operate for an indefinite
period of time. They were left no choice but to accept
the benefits. Acceptance thereof does not amount to
estoppel. (Guerrero vs. NLRC et al., G. R. No.
119842, August 30, 1996)

& it ft

Crispa, Inc. dismissed a number o f its workers by

reason o f retrenchment due to alleged serious business
losses. To establish such losses, the company pre­
sented as evidence a Statement of Profit and Losses
w ithout the accompanying signature o f a certified pub­
lic accountant o r audited by an independent auditor.
Is the dismissal lawful? Why?

ANS. No. The Statement of Profit and Losses

submitted by Crispa, Inc. has no probative value. It is
not the kind of sufficient and convincing evidence
necessary to discharge the burden of proof requited of
the company to prove its losses. (Uichico et ai vs.
NLRC, et al., G. R. No. 121434, June 2, 1997)

* * *

Puyod Farms, the operator o f a banana plantation,

dismissed some o f its workers in order to comply with
the demand o f STANFILCO, with whom it had a market­
ing contract, to reduce personnel. The dismissal was
supposed to be a retrenchment measure; the company
sxpected to incur losses if the dismissal were not ef­
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

fected as STANFILCO w ill use its own personnel in

converting one of the Puyod farms from Cavendish
bananas to Ecuadorian variety, is the dismissal lavrful?
Why?

ANS. No. The expected losses were not proven.

More importantly, the company failed to show that it
had instituted cost reduction measures before under­
taking retrenchment, which under the law, is a remedy
of last resort. (Banana Growers Collective at Puyod
Farms et al vs. NLRC et al., G. R. No. 113958, July
31,1997)
ft *

A plywood manufacturing corporation dismissed 250 of

its employees allegedly due to business losses. The
audited financial statements fo r 1991 and 1992 subm it­
ted by the company showed decrease in net income and
increase iri liabilities. The company alleged that the
decrease in income was due to low market demand, lack
o f raw materials, frequent breakdown of old equipment
and high cost of operations. For a brief period, it
implemented a scheme in which the employees worked
on a rotation basis.
(a) Is the dismissal of workers, allegedly on the ground
of retrenchment, justified? Why?

ANS. No. Not every loss incurred or expected to

be incurred by a company will justify retrenchment.
The company failed to prove that its alleged losses
were substantial, continuing and without any immedi­
ate prospect of abating. It did not also try other
measures, such as cost reduction, lesser investment
on raw materials, adjustment of the work routine to
avoid the scheduled power failure, reduction of the
bonuses and salaries of both management and rank-
and-file, improvement of manufacturing efficiency, and
trimming of marketing and advertising costs. The fact
that the company did not resort to these measures
seriously belie its claim that retrenchment was done in
good faith to avoid losses.
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) The company served notice of the intended re­

trenchment to the workers by posting the same in
bulletin boards and sending memoranda to foremen,
section heads supervisors and department heads in­
structing them to retrench some of the workers based
on certain guidelines. Is the notice sufficient? Why?

ANS. No. The written notice must be served on

the employees themselves. The purpose of this re­
quirement is to give employees sometime to prepare
for the eventual loss of their jobs. (Emco Plywood
Corporation et al vs. Abelgas et al., G. R. No.
148532, April 14, 2004)

* * *

After working as sales manager o f the company fo r over

four (4) years, Mr. Ong was dismissed because of
redundancy resulting from retrenchment to prevent fu r­
ther losses. He filed a complaint before the Labor
Arbiter fo r illegal dismissal alleging among others that
his position could not possibly be redundant because
nobody (save himself) in the company was then per­
form ing the same duties. During the pendency o f the
case before the Labor Arbiter, the company permanently
closed due to substantial financial losses.
(a) Could the dismissal o f Mr. Ong be justified on the
ground of redundancy?

ANS. Yes. Due to financial losses, the company

had to retrench, and the retrenchment in turn resulted
in the redundancy of his position.

(b) Explain briefly the term “ redundancy.”

ANS. Redundancy exists where the services of an

employee are in excess of what is reasonably de­
manded by the actual requirements of the enterprise.
A position is redundant where it is superfluous, and
superfluity of a position or positions may be the

814
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

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
employer has no legal obligation to keep in its payroll
more employees than are necessary for the operation
of its business.

(c) Is there a need fo r investigation and hearing before

an employee may be dismissed due to retrenchment or
redundancy?

ANS. No. The ground for dismissal does not relate

to a blameworthy act or omission on the part of the
employee. There are no allegations which the em­
ployee should refute and defend himself from. The
investigation and hearing would be inutile. The em­
ployee can however controvert the grounds for the
termination of his employment before the Department
of Labor and Employment. It is precisely for this
reason that an employer seeking to terminate the
services of an employee because of closure of estab­
lishment and reduction of personnel is legally required
to give written notice not only to the employee but also
to the Department of Labor and Employment at least
one (1) month before the effectivity date of term ina­
tion. (W iltshire File Co., Inc. vs. NLRC, et al., G. R.
No. 82249, February 7, 1991)
* * *

After eleven (11) years of service as Pollution Control

and Safety Manager, Escareal was dismissed by Philip­
pine Refining Company fo r redundancy. His position,
which was required by the National Pollution Control
Decree (P. D. No. 984) and by the Labor Code, was
absorbed and integrated with the duties of the Industrial
Engineering Manager of the company. He was 57 years
o f age at the time of his dismissal.
(a) Is the dismissal of Escareal due to redundancy
valid? Why?

815
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. His position is neither superfluous nor

duplicative. It is required by law. The need for the
position is likewise shown by the fact that PRC allowed
it to exist for more than ten (10) years.

(b) Escareal’s contract o f employmsnt provided that his

retirement date would be the day when he reached his
60th birthday. Does this provision make his employ­
ment one with a fixed or specific period? Why?

ANS. No. The said provision merely informed

Escareal of the company policy regarding retirement of
its employees. The decisive determination in fixed
period or term employment is the day certain agreed
upon by the parties for the commencement and term i­
nation of their employment relationship.

(c) Is Escareal entitled to reinstatement and back­

wages? Explain.

ANS. Considering that Escareal has reached the

mandatory retirement age, his reinstatement is no
longer feasible. He should thus be awarded his
backwages from the time he was dismissed up to the
date he reached the mandatory retirement age, inclu­
sive of allowances and the monetary equivalent of the
other benefits due him for that period, plus retirement
benefits under the PRC’s compulsory retirem ent
scheme which he would have been entitled to had he
not been illegally dismissed. (Escareal vs. NLRC, et
al., G. R. No. 99359, September 2, 1992)
ii -it it

When is a position considered redundant?

ANS. A position is redundant where it is superflu­

ous, 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 previ­
ously manufactured or undertaken by the enterprise.

316
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Redundancy does not necessarily or even ordinar­

ily refer to duplication of work. That no other person
was holding the same position that the employee held
prior to his dismissal does not show that his position
had not become redundant. (W iltshire File Co., Inc.
vs. NLRC, et al., G. R. No. 82249, February 7, 1991)
The dismissal of three (3) mechanics by a furniture
company, after it had contracted the services of an
outside agency for the maintenance and repair of its
industrial machinery, has been held to be justified by
redundancy due to superfluity. (De Ocampo, et al vs.
NLRC, et al., G. R. No. 101534, September 4, 1992)
It is not enough for a company to merely declare
that it has become over manned. It must produce
adequate proof that such is the actual situation in order
to justify the dismissal of the affected employees for
redundancy. And in the selection of the employees to
be dismissed, a fair and reasonable criteria must be
used, such as but not limited to: (a) less preferred
status (e. g. temporary employee), (b) efficiency, and
(c) seniority. (Golden Thread Knitting Industries, Inc.,
et al vs. NLRC et al., G. R. No. 119157, March 11,
1999)
The position of school electrician cannot be consid­
ered redundant where it was shown that after the
abolition of the position a student-trainee took over the
work. (University of the Immaculate Conception et al
vs. UIC Teaching and Non-Teaching Personnel et al.,
G. R. No. 144702, July 31, 2001)
A wide-scale restructuring of the company due to
the harsh economic and political climate prevailing in
the country and in order to reduce absenteeism is
lawful. An employer is not precluded from adopting a
new policy conducive to a more economical and effec­
tive management, and the law 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. (DOLE Philippines, Inc. et al
vs. NLRC et al., G. R. No. 120009, September 13,
2001)
& A *

817
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

For purposes o f economy, a marketing firm reorganizes

its sales and collection department by imposing upon
its salesmen the additional function of collecting from
their own customers. As the reorganization rendered
unnecessary the jo b o f the collectors of the firm, your
advice is sought on whether the services o f the said
workers can be terminated. Give your opinion.

ANS. Their services can be terminated on the

ground of redundancy, which is an authorized cause
under Article 283 of the Labor Code. The employer
must however give the collectors affected and the
Department of Labor and Employment a written notice
of term ination at least one (1) month before the
intended date thereof, and pay them separation pay
equivalent to at least their one (1) month pay or to at
least one (1) month pay for every year of service,
whichever is higher, a fraction of at least six (6)
months being considered as one (1) whole year.

to it it

PEPSI informed its employees that due to poor perfor­

mance of its Metro Manila Sales Operations it would
restructure and streamline certain physical and sales
distribution systems to improve its warehousing effi­
ciency. Consequently, employees with affected posi­
tions, including a complimentary distribution specialist
(CDS) and a route manager; were dismissed. The em­
ployees accepted their separation pay and executed the
corresponding releases and quitclaims. However, the
company later on created new positions called account
development managers (ADM). Alleging that the cre­
ation o f the new positions belied PEPSI’s claim of
redundancy, one CDS and a route manager filed a
com plaint fo r illegal dismissal.
(a) Was PEPSI precluded from creating new positions
like the ADM after dismissing the workers due to redun­
dancy?

818
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. PEPSI wanted to restructure its organi­

zation in order to include more complex positions that
would either absorb or render completely unnecessary
the positions it had previously declared as redundant.
The wisdom or soundness of this business decision is
not subject to discretionary review in the absence of a
showing of bad faith, malice, or arbitrariness.

(b) May the question of whether the duties of the CDS

and ADM positions are sim ilar be inquired into by the
Supreme Court?

ANS. No. The Supreme Court is not a trier of

facts. Factual findings of the NLRC, particularly when
they coincide with those of the Labor Arbiter, are
accorded respect, even finality, and will not be dis­
turbed for as long as such findings are supported by
substantial evidence. (Santos et al vs. Court of
Appeals et al., G. R. No. 141947, July 5, 2001)
* * *

Due to the implementation of its “ pre-selling operations

scheme,” the company informed “ A” , a stock clerk and
warehouse checker, that all positions o f route sales and
warehouse personnel have been declared redundant
and that the sales office would be closed. The sales
force were informed that they could avail o f the com­
pany’s early retirement package, while those who would
not avail o f the package would be redeployed or ab­
sorbed at the company’s brewery or other sales offices.
“ A " opted to remain and requested to be assigned to
any job, considering that he had three children in col­
lege.
The company ignored the request of “ A” and included
him in the list of employees who availed of the early
retirement package. However, some employees who did
not even request to be retained were redeployed to the
company’s brewery or absorbed by other offices. It also
turned out that the sales office was not closed down.
Finally, the company was not able to show any criterion

819
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

in dism issing “ A ” and how the cessation of operations

o f the sales office contributed to the improvement o f the
effectiveness o f the organization and reduced cosis.
is the dismissal of “ A ” allegedly based on redundancy
valid? Why?

ANS. No. Given the nature of job of “A ” as a

warehouse checker, it is inconceivable that the com­
pany could not accommodate his services considering
that the sales office was not actually shut down. The
company, clearly, resorted to sweeping generalizations
and failed to observe the fundamentals of good faith in
dismissing “A". (Asufrin vs. San Miguel Corporation et
al., G. R. No. 156658, March 10, 2004)

* * *

Distinguish retrenchment from redundancy.

ANS. When an employer decides to reduce the

number of its personnel in order to prevent further
losses, he is exercising his right to retrench employees
to prevent losses in his business operations. On the
other hand, where for purposes of economy, a com­
pany decides to reorganize its departments by impos­
ing on employees of one department the duties per­
formed by employees of the other department, thus
rendering unnecessary the job of the latter, the ser­
vices of the employees whose functions are now being
performed by the former, may be validly terminated on
the ground of redundancy.
The phase-out of the vinyl section of a company
engaged in the manufacture of artificial flowers, due to
shortage of orders and s tiff competition, is a retrench­
ment measure and the employees affected thereby are
entitled to severance compensation at one-half month
pay (not one month pay) for every yaar of service.
(Caffco International Limited vs. Office of the Minister
of Labor, et al., G. R. No. 76466, August 7, 1992)
•
ft it -k

820
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

A security agency was ordered by th® Philippine Con­

stabulary to cease operations. By virtue of this order,
the security agency closed its business and terminated
the services o f its employees.
(a) Are the employees entitled to separation pay?

ANS. Yes. The closure is for causes other than

serious business losses or reverses.

(b) May the president of the agency (a corporation) be

held jo in tly and severally liable with the latter fo r the
separation pay and other money claims of the employ­
ees? Why?

ANS. Yes. Under Article 212 (c) of the Labor

Code, the term “employer” includes any person acting
in the interest of an employer. There can be no
question that the president of a corporation acts in the
interest of the latter. (Gudez, et al vs. NLRC, et al.,
G. R. No. 83023, March 23, 1990)

* * *

Due to the expiration o f its lease contract and the

refusal o f the lessor to renew the same, the company
relocated its printing business from Makati to Sto.
Tomas, Batangas. Its employees, despite notice, did
not however report fo r work in the new location consid­
ering the distance from their residences. They later on
filed a com plaint fo r illegal dismissal against the com­
pany.
(a) Were the employees illegally dismissed? Explain

ANS. No. The company had legitimate reason to

relocate its plant because of the expiration of the lease
contract on the premises it occupied.

(b) Are the employees entitled to severance compensa­

tion? Why?

821
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. The relocation of the employer’s plant to

Batangas amounts to cessation of its business opera­
tions in Makati. Closure or cessation of operation of
an establishment or undertaking not due to serious
business losses or reverses under Article 283 of the
Labor Code includes both the complete cessation of all
business operations and the cessation of only part of a
company business. In Philippine Tobacco Flue-Curing
and Redrying Corporation vs. NLRC (300 SCRA 37
(1998)), a company transferred its tobacco processing
plant in Balintawak, Quezon City to Candon, llocos
Sur. The company did not actually close its entire
business but merely relocated its tobacco processing
and redrying operations to another place. The Court
considered the transfer as closure not due to serious
business losses for which the workers are entitled to
separation pay. (Cheniver Deco Print Technics Corpo­
ration vs. NLRC et al., G. R. No. 122876, February
17 , 2000 )

* * *

Company “ A " was engaged in manufacture of goods

using the by-product of coconut trees and employed
some fifty workers who lived in the coconut plantation
in Quezon province. The land upon which “ A ” con­
ducted its operations was subjected to land reform
under R. A. 6657 fo r distribution to the tenants and
residents of the land. Consequently, “ A” had to close
its operations and dismiss its workers. The union
representing the employees demanded that “ A ” pay the
dismissed workers separation pay under Art. 283 of the
Labor Code that requires, among others, the payment of
separation pay to employees in cases of “ closing or
cessation of operations of the establishment or under­
taking.” Is the union’s claim correct or not? Why? (2001
Bar)

ANS. No. Employees' entitlement to separation

pay as a consequence of closure or cessation of
operations of the employer presupposes that such

822
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

closure or cessation of business is by reason of the

unilateral and voluntary act of the latter. This may be
gleaned from the wording of Article 283 of the Labor
Code that “The employer may also term inate the
employment of any employee due to ...”, denoting that
the statute is directory in nature.
In the instant case, the company was left no choice
but to cease operations as the land on which it con­
ducted its business was subjected to land reform. The
closure occurred though no fault of the company.
(National Federation of Labor et al vs. NLRC et al., G.
R. No. 127718, March 2, 2000)
* * *

In the 1990’s, Joni’s Food Services, inc. (JFSI) had

eight (8) outlets fo r its coffee shop and restaurant
business. In 1997, faced with dropping sales, however,
it shut down three o f these shops to avert serious
business losses. The follow ing year, 1998, saw JFSI
incur a total net loss of P2,541,537.70 as of December
31, 1998. As a result, JFSI shut down more outlets,
leaving it w ith ju st three operating outlets at the end of
1998. Bleak business conditions continued to plague
the company and by the end o f the first quarter of 1999,
the remaining branches were also closed. One month
before the target closure date of its remaining outlets,
JFSI sent notices o f closure to the Department of Labor
and Employment (DOLE) and to the complainants who
were then employed in the remaining branches or out­
lets.
It was shown, with the use of basic accounting tools,
like the working capital ratio, debt-equity ratio and net
profit ration, that JFSI did not have sufficient current
assets to pay its current liabilities and that fo r every
peso of sales it made no profit was made but a loss was
instead incurred.
Is the company obliged to pay severance benefits to its
employees by reason of its closure? Why?

823
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. 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 clo­
sures 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 separa­
tion pay. In other words, Article 283 of the Labor Code
does not obligate an employer to pay separation bene­
fits when the closure is due to serious losses. To
require an employer to be generous when is no longer
in a position to do so, in our view, would be unduly
oppressive, unjust, and unfair to the employer. Ours is
a system of laws and the law protecting the rights of
the working man, authorizes neither the oppression nor
the self-destruction of the employer. (Josefina A.
Camia, et al vs. Joni’s Food Services,Inc., et al., G.
R. No. 153021, March 10, 2004)
* ft ft

May the members of the Board of Directors of a Cooper­

ative be held jo in tly and severally liable with the cooper­
ative fo r the awards of the Labor Arbiter fo r backwages,
moral damages and attorney’s fees in favor of the gen­
eral manager dismissed by resolution of the board?
Why?

ANS. Yes. Under Section 31 of the Corporation

Code, which is applicable in a suppletory manner to
cooperatives, members of the board of directors who
are guilty of gross negligence or bad faith in directing
the affairs of the corporation shall be jointly and
severally liable for all damages resulting therefrom
suffered by the corporation, its stockholders and other
persons. The dismissal of an officer or employee in

824
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

bad faith, without lawful cause and without procedural

due process, is an act that is contra legem. Further,
the cooperative has the right to be reimbursed by the
board members of any amount it may be compelled to
pay to the dismissed employee. (Benguet Electric
Cooperative, Inc. vs. NLRC, et al., G. R. No. 89070,
May 18, 1992)

★ ★ ★

May the major stockholders of a corporation which has

ceased operations be held personally liable fo r back­
wages and reinstatement?

ANS. Yes. Where the corporation has ceased to

operate, a judgment for reinstatement and backwages
may be enforced against its chairman of the board and
president who owned 1,993 of the 2,000 shares of the
corporation. Under the Labor Code, the term
“employer" includes any person acting in the interest of
an employer, directly or indirectly. The rule applies
even where the dispositive portion of the decision does
not specifically make the officer liable in his personal
capacity. A corporation can only act through its
officers or agents. (Valderama vs. NLRC et a l., G. R.
No. 98239, April 25, 1996, citing A. C. Ransom Labor
Union-CCLU vs. NLRC, 142 SCRA 269)

★ * *

Millena, the project accountant of a m ining company,

was dismissed by the corporate treasurer allegedly by
reason of the stoppage of operations of the project due
to the rainy season and the insurgency problem. He
filed a complaint fo r illegal dismissal and fo r unpaid
monetary benefits against the corporation, its president
and its executive vice-president. The Labor Arbiter
found the dismissal of Millena illegal and ordered the
corporation, including the president and the vice-
president, to pay the form er severance compensation,
unpaid salaries, 13m month pay and service incentive

825
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

leave. The president assailed the decision o f the Labor

Arbiter contending that he cannot be held personally
liable fo r the claims o f Millena.
(a) Is the assertion o f the president tenable? Why?

ANS. Yes. He did not have a direct hand in the

dismissal of Millena; he cannot be deemed to have
committed a patently unlawful act while acting for the
corporation. Bad faith cannot also be attributed to him
considering that the dismissal of Millena was in further
mitigation of losses.

(b) Compare the instant case with those exceptional

cases where corporate officers were held personally
accountable fo r the payment of wages and money
claims of employees of the corporation.

ANS. In A. C. Ransom Labor Union-CCLU vs.

NLRC (142 SCRA 269). the corporate entity was a
fam ily corporation and execution against it could not
be implemented because of the disposition posthaste
of its leviable assets evidently in order to evade its just
and due obligations. The doctrine of “piercing the veil
of corporate fiction" was thus clearly appropriate.
Chua vs. NLRC (182 SCRA 353) likewise involved
another fam ily corporation; the conflict was between
two brothers occupying the highest ranking positions in
the company. There were incontrovertible facts which
pointed to extreme personal animosity that resulted,
evidently in bad faith, in the easing out from the
company of one of the brothers by the other.

(c) What is the basic rule to be applied in determining

whether a corporate officer may be held personally
liable fo r the claims o f workers o f the corporation?

ANS. The basic rule is still that which can be

deduced from the Court’s ruling in Sunio vs. NLRC
(127 SCRA 390). The corporate officer must have
acted maliciously or in bad faith. (Santos vs. NLRC et
al., G. R. No. 101699, March 13, 1996)

826
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

The members o f the Board o f Directors of Crispa, Inc.

signed a board resolution retrenching workers on the
feigned ground o f serious business losses that had no
basis apart from an unsigned and unaudited Profit and
Loss Statement which had no evidentiary value whatso­
ever. Are the members o f the Board o f Directors solidar-
ily liable w ith the corporation fo r the claims o f the
illegally dismissed workers? Why?

ANS. Yes. In labor cases, corporate directors and

officers are solidarily liable with the corporation for the
termination of employment of corporate employees
done in malice or in bad faith. In the instant case,the
bad faith of the officers is shown by their use of an
unaudited and unsigned Profit and Loss Statement to
show alleged serious business losses. (Uichico et al
vs. NLRC et al., G. R. No. 121434, June 2, 1997)

* * *

Sergio Naguiat was the president o f Clark Field Taxi,

Inc., a close corporation which operated a fleet of taxi­
cabs in Clark Field. He was also a stockholder and
director of the corporation. Due to the phase-out o f the
US military, bases in the Philippines, Clark A ir Base was
closed. Clark Field Taxi, Inc. also ceased operations,
(a) May Sergio Naguiat, who actively managed Clark
Field Taxi, Inc. be held solidarily liable with the latter
fo r the payment of the severance compensation of the
taxi drivers employed by the corporation? Why?

ANS. Yes. In the first place, the term “employer”

includes any person acting in the interest of an em­
ployer, directly or indirectly. The corporation, only in
the technical sense, is the employer, in the second
place, the taxi company was a close fam ily corpora­
tion; under Section 100, paragraph 5, of the Corpora­
tion Code, stockholders actively engaged in the man­
agement of the business and affairs of a close corpora­
tion may be held liable for corporate torts (breach of
legal duty) unless the corporation has obtained sea­

827
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

sonably adequate liability insurance. Finally, it is well

established that a director or officer may be held
solidariiy liable with a corporation by specific provision
of law; here, Section 100, par. 5, of the Corporation
Code specifically imposes such liability.

(h) May the labor arbiter’s decision against the corpora­

tion fo r payment o f severance compensation o f the taxi
drivers be enforced by w ri! o f execution against Sergio
Naguiat although he was not impleaded as a party to the
complaint?

ANS. Yes. He is covered by the term “employer.”

If the rule were otherwise, a corporate employer can
have devious ways of evading its liabilities in favor of
its employees. (Naguiat vs. NLRC et al., G. R. Klo.
116123, March 13, 1997)
* * *

May an employer dismiss a worker who is found suffer­

ing from a disease? Discuss briefly.

ANS. A worker found suffering from a disease may

be dismissed only when:

(a) His continued employment is prohibited by law

or prejudicial to his health or to the health of his
co-employees;
(b) A competent public health authority certifies
that the disease is of such nature or at such a stage
that it cannot be cured within a period of six (6)months
even with proper medical treatment; and
(c) He is paid severance compensation 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 (6) months being consid­
ered as one (1) whole year. (Art. 284, Labor Code,
Sec. 8, Rule 1, Book VI, Implementing Rules and
Regulations)

828
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

in case the disease of the worker can be cured w ithin

six months, what is the employer required to do?

ANS. The employer shall not terminate the em­

ployee but shall ask the latter to take a leave. Upon
the restoration of the employee's norma! health, the
employer shall immediately reinstate him to his form er
position. (Sec. 8, Rule I, Book VI, Implementing Rules
and Regulations)
* * it

Give an example of a disease which may serve as an

authorized cause fo r termination o f employment.

ANS. Where an inspector of a bus company

suffered several strokes due to high blood pressure, it
is very clear that his continued employment would be
prejudicial to his health. (Baby Bus, Inc. vs. M inister
o f Labor, et al., G. R. No. 54223, February 26, 1988)
* * *

Under the O m nibus Rules Implementing the Labor

Code, an employee may not be dismissed on the ground
o f disease unless there is a certification by a competent
public authority that the disease o f such nature or at
such stage that it cannot be cured w ithin a period o f six
(6) months even w ith proper medical treatment. Who
has the burden o f presenting the medical certificate?

ANS. The employer has the burden to ju stify the

dismissal with the presentation of the medical certifi­
cate. It has consequently been,held that a driver, sick
with tuberculosis, could not be validly dismissed for his
failure to submit a medical certificate issued by a
government physician. (Tan vs. NLRC et al., G. R.
No. 116807, April 14, 1997; Sevillana vs. I. T. Intl’l
Corp. et al., G. R. No. 99047, April 16, 2001)
The requirement for a medical certificate under
Article 284 of the Labor Code cannot be dispensed

829
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

with; otherwise, it would sanction the unilateral and

arbitrary determination by the employer of the gravity
or extent of the employee’s illness and thus defeat the
public policy on the protection of labor. And since the
burden of proving the validity of the dismissal of the
employee rests on the employer, the latter should
likewise bear the burden of showing that the requisites
for a valid dismissal due to a disease have been
complied with. In the absence of the required certifica­
tion by the competent public health authority, the
dismissal of the employee due to disease is illegal.
(Sy et al vs. Court of Appeals et al., G. R. No.
142293, February 27, 2003)
Even on the assumption that the stewardess was
suffering from asthma, her immediate dismissal by
reason thereof cannot be upheld as the company did
not present, as required by the Rules Implementing the
Labor Code, a certification by a competent public
health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of
six (6) months even with proper medical treatment. A
certification by company doctors to the effect that the
stewardess was afflicted with asthma is not sufficient.
(Cathay Pacific Airways, Ltd. vs. NLRC et al., G. R.
Nos. 141702-03, August 2, 2001)
There must be a prior certification from a compe­
tent public authority that the disease afflicting the
employee sought to be dismissed is of such nature or
at such stages that it cannot be cured within six(6)
months even with proper medical treatment before an
employer can dismiss an employee for health reasons.
The burden of proving the existence of such a certifi­
cate is upon the employer, not the employee. (ATCI
Overseas Corporation vs. Court of Appeals et al., G.
R. No. 143949, August 9, 2001)
* * *

Explain why the severance compensation prescribed by

Article 283 o f the Labor Code fo r termination due to
installation o f labor-saving devices or redundancy (at
laast one (1) month pay or at least one (1) month pay fo r

830
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

every year of service) is higher than that provided in the

same article fo r termination due to retrenchment to
prevent losses (at least one (1) month pay or at least
one-half (Vi) month pay fo r every year of service.

ANS. Dismissals due to installation of labor saving

devices or redundancy will result in clear financial
advantage to the employer; he is able to save or
economize as a result thereof. The same cannot be
said when the employer is effecting dismissals in an
attempt to survive. He should not be penalized for
trying to save his business and thus be able to con­
tinue providing employment to some of his employees.

★ * *

Some waiters of. Rino’s Super Club and Restaurant,

dismissed fo r their union activities, were ordered rein­
stated. But the establishment had closed and ceased
operations at the time the workers should be reinstated.
What are their rights?

ANS. Since reinstatement is no longer possible,

the dismissed employees are entitled to 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, a fraction of at least six (6) months being
considered as one whole year. (Sec. 4(b), Rule I,
Book VI, Implementing Rules and Regulations; Tajon-
era, et al vs. Lamaroza, et al., G. R. Nos. L-48907
& 49035, December 19, 1981)
* 4r *

If the employee cannot be reinstated to his form er

position because the same no longer exists fo r reasons
not attributable to the fault of the employer, what are the
rights of the employee?

ANS. The employee is entitled to separation pay

equivalent to one (1) month salary or to one (1) month

831
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

salary for every year of service, whichever is higher, a

fraction of at least six (6) months being considered as
one whole year. (Sec. 4(b), Rule I, Book VI, Imple­
menting Rules and Regulations)

4r * *

Is an employee who voluntarily resigns entitled to sepa­

ration pay? Why?

ANS. Unless otherwise stipulated in an employ­

ment contract or collective bargaining agreement, or
sanctioned by established employer practice or policy,
an employee who voluntarily resigns is not entitled to
separation pay. Resignation is an act purely depen­
dent upon the w ill of the employee, and usually
prompted by a desire on his part for advancement. It
is indeed unfair to require an employer to give finan­
cial assistance to one who may be leaving to work for
another employer.
* * *

FA was employed by the Philippine Star as a senior

investigative reporter, then chief investigative writer
and finally assistant to the publisher. He requested fo r
a thirty-day leave of absence to undergo further medical
consultations abroad. Four days later, he wrote a
sarcastic “ Memorandum fo r File” addressed to Mrs. B,
the paper’s Chairman of the Board with copies fu r­
nished to members o f the board of directors, complain­
ing that his salary was a pittance, he was bypassed in
promotions, was hindered from active participation in
corporate affairs, and was professionally maligned and
accused of being a non-performing employee. He also
stated that he would not be able to see the Chairman fo r
a while. About a month later, FA was informed by letter
that the Board had accepted his resignation, effective
upon expiration of his one month leave. The following
day, FA wrote the Chairman that he had not resigned.

832
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

This was followed by a letter o f his counsel reiterating

that he never resigned.
FA however never reported back fo r work; instead, ha
found employment as chief o f staff o f a senator and fo r
which he was paid a higher salary; he had also cleared
his desk of personal belongings before he was informed
o f the acceptance o f his supposed resignation; and he
never underwent any medical check up. Prior to his
w riting the “ Memorandum fo r File” , FA had a conversa­
tion with Mrs. B. and had indicated his intention to
leave the paper.
(a) May the “ Memorandum fo r File” o f FA be considered
as a letter o f resignation? Explain.

ANS. Yes. Although the “Memorandum for File”

did not contain the words “resign" and/or “resignation”,
the peculiar circumstances attendant to its writing as
well as antecedent, contemporaneous and subsequent
actions were inconsistent with the desire for continued
employment of FA.
The sarcastic and incendiary remarks in the memo­
randum negated any desire to improve work relations
with the executives of the paper; the memorandum
constituted an act of “burning his bridge” with the
officers of the company.
FA did not also report back for work, cleared his
desk of personal belongings, had expressly manifested
his intention to resign, and actually assumed ? job in
another office.

(b) May resignation, voluntarily given, be unilaterally

withdrawn? Explain.

ANS. No. Voluntary resignation, once accepted by

the employer, severs the employer-employee relation.
A resigned employee who desires to take his job back
has to re-apply therefor. Whether he should be taken
back depends upon the employer. The latter has the
basic right to choose whom to employ. (Philippines
Today, Inc. et al vs. NLRC et al., G. R. No. 112965,
January 30, 1997)

jm
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Give the effects of a voluntary resignation of an em­

ployee.

ANS. Once an employee resigns and executes a

quitclaim in favor of the employer, he is thereby
estopped from filing any further money claims against
the employer arising from his employment. Such
money claims may bs given due course only when the
voluntariness of the execution of the quitclaim or
release is put in issue, or when it is established that
there is an unwritten agreement between the employer
and employee entitling the latter to other remuneration
or benefits upon his or her resignation. (Philippine
National Construction Corporation vs. NLRC et al., G.
R. No. 117246, October 2, 1997)
vt * a*

Give the basis of the computation of tha termination pay

due an employee.

ANS. The computation of the termination pay shall

be based on his latest salary rate, unless the same was
reduced by the employer to defeat the intention of the
Code, in which case the basis of computation shall be
the rate before its reduction. (Sec. 10, Rule i, Book
VI, Implementing Rules and Regulations)
■fs \'t

A paper and logging company gave its managers and

supervisors housing and transportation allowances.
Thess were' however temporary. In the case of tha
housing allowance, li would be discontinued when a
vacancy occurred in the company provided housing
accommodations and the employees transferred to the
company premises, in the case of the transportation
allowance, it was given only to employees who had
personal cars and the expenses were subject to liquida­
tion.

im
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Should these allowances be included, in the computa­

tion o f the employees’ separation pay? Explain.

ANS. No. They cannot be considered part of the

employees' wages. They are not “facilities’' as the
continuous enjoyment thereof was based on contingen­
cies the occurrence of which wrote finis to such enjoy­
ment.

“Customary" is founded on long-established and

constant practice connoting regularity. The receipt of
an allowance on a monthly basis does, not ipso facto
characterize it as regular and forming part of salary
because the nature of the grant must be considered.
(Millares et al vs. NLRC et al., G. R. No. 127827,
March 29, 1999)

* * ftr

State the form ula fo r the computation of the severance

compensation o f workers engaged to work fo r less than
twelve (12) months a year.

ANS. Articles !283 and 284 of the Labor Code both

state in connection with separation pay that a fraction
of at least six (6) months shall be considered as one
whole year. Applying this to workers engaged to work
for six (6) to eight (8) months a year, the amount of
separation pay that they should receive is one-half (%)
their respective average monthly pay during the last
season they worked multiplied by the number of years
they actually rendered, provided that they worked for
at least six (6) months during a given year. (Philippine
Tobacco Flue-Curing & Redrying Corporation vs.
NLRC et al., G. R. No. 127395, December 10, 1998)

* -ft it

Where the employer is absolved of the charge of unfair

labor practice in connection with the dismissal of some
employees pursuant to the closed shop provision o f the

R35
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

collective bargaining agreement, may the latter never­

theless be awarded severance compensation? Explain.

ANS. Yes. On equitable consideration, and taking

into account the past services of the dismissed em­
ployees, the employer may be required to pay their
severance compensation. The award of separation
pay is not inconsistent with the absolution of the
company of the charge of unfair labor practice because
the employees were not, in a real sense, dismissed for
just cause; the termination of their employment was
simply by reason of the operation of the union security
clause in the collective bargaining agreement. (United
States Lines, Inc. vs. Inciong, et al., G. R. No.
L-49990, September 30, 1982)

it * *

Does the sale o f the business o f a going concern

terminate employer-employee relations?

ANS. The sale of a business of a going concern

does not ip so fa c to terminate the employer-employee
relations insofar as the successor-employer is con­
cerned. Change of ownership or management of an
establishment or company is not one of the just causes
provided by law for term ination of em ployment.
(Sunio, et al vs. NLRC, et al., G. R. No. L-57767,
January 31, 1984)

it it it

Central Danao sold its sugar m ill properties and other

assets to Danao Development Corporation which actu­
ally took over the management and operation o f the
purchased m ill properties.
(a) Is Danao Development Corporation obliged to con­
tinue employing the workers of Central Danao? Why?

ANS. No. Indeed, an innocent transferee of a

business establishment has no liability to the employ­
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ees of the transferor to continue employing them. Nor

is the transferee liable for past unfair labor practices of
the previous owner, except when liability therefor is
assumed by the new owner under the contract of sale,
or when liability arises because of the new owner’s
participation in thwarting or defeating the rights of the
employees. (Central Azucarera de Danao vs. Court of
Appeals, et al., G. R. No. L-41615, June 29, 1985)

(b) Is Central Danao liable fo r the payment of severance

compensation to the employees adversely affected by
the sale?

ANS. Yes. The sale of the mill properties and

other assets of Central Danao resulted in the cessation
of its operations. Under Article 283 of the Labor Code,
employees who are dismissed from employment due to
cessation of operations not by reason of business
losses or reverses are entitled to severance pay.
* * *

In the absence of wage rates especially prescribed fo r

piece-rate workers, like a packer/wrapper whose salary
depended upon the number o f reams of bond paper she
packed per day, how should the separation pay and
salary differential of such workers be computed?

ANS. The ordinary minimum wage rates pre­

scribed by the Regional Tripartite Wages and Produc­
tivity Boards should apply. This is following the rule
laid down in wage orders to the effect that workers paid
by result shall receive not less than the applicable
minimum wage rates prescribed therein for the normal
working hours which shall not exceed eight (8) hours a
day. (Pulp and Paper, Inc. vs. NLRC et al., G. R.
No. 116593, September 24, 1997)
* * *

The North Davao Mining Corporation closed its opera­

tions because of losses amounting to billions of pesos.

837
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

it paid its employees who were separated by reason of

such closure severance compensation equivalent to
12.5 days’ pay for every year of service. It was however
shown that during the life of the corporation it had been
giving separation pay equivalent to thirty (30) days pay
for every year of service.
(a) Are the employees who were dismissed by reason of
the closure of the company and paid only the equivalent
of 12.5 days’ pay separation benefit per year of service
entitled to additional severance compensation? Why?

ANS. No. By reason of accumulated losses, the

company could no longer afford payment of severance
compensation at thirty (30) days' pay per year of
service. There was no discrimination committed by the
company. To require the company to continue being
generous when it is no longer in a position to do so is
oppressive and unfair.

(b) Is an employer obliged, under Article 283 of the

Labor Code, to pay severance benefits where the clo­
sure is due to losses? Explain.

ANS. No. Severance compensation is due only

where the closure is not by reason of serious business
losses or financial reverses. The employer that closes
by reason of serious business losses or reverses
cannot afford to pay severance compensation. (North
Davao Mining Corporation et al vs. NLRC et al., G. R.
No. 112540, March 13, 1996)

* * *

In the event of business closure or cessation o f opera­

tion or undertaking of the employer, is the affected
employee entitled to separation pay? State the rule as
well as exceptions, if any.

ANS. The rule is that in all cases of business

closure or cessation of operation or undertaking of the
employer the affected employee is entitled to separa-

838
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

lion pay. This is consistent with the state policy of

treating labor as a primary social economic force,
affording full protection to its rights as well as its
welfare.
But where the closure i3 due to serious business
losses or financial reverses, the right o f affected
employees to separation pay is lost for obvious rea­
sons. Such losses must however be duly proved.
Thus, mere allegation that the closure is due to poor
business, increase in rental cost, and failure of Mer-
alco to reconnect the electrical services in the estab­
lishment does not satisfy the requirement. (Reahs
Corporation et al vs. NLRC et a!., G. R. No. 117473,
April 15, 1997)
;V * -it

Distinguish separation pay from retirement benefits.

May an employe© be entitled to both benefits?

ANS. Separation pay is designed to provide the

employee the wherewithal during the period that he is
looking for another employment. Retirement benefits,
on the other hand, 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.
Where an employee is dismissed by reason of
retrenchment at a time when he is already entitled to
retirement benefits as provided for in the CBA, he is to
be paid both separation and retirement pay in the
absence of a provision in the contract that the two
benefits are mutuallv exclusive. (Aquino et al vs.
NLRC et a!., G. R. No. 87653, February 11, 1992)

vt it ’it

Ms. Rosa Allado started working for G repa life as a clerk

in Laoag, llocos Norte in June, 1969. In 1974 she was
transferred to Baguio City where she occupied the
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

position of regional cashier of the company, in 1984, to

cut down expenses, the company abolished her posi­
tion and offered to transfer her to Metro Manila with
relocation expenses. Allado however declined the
transfer, as with the salary she was receiving she could
not afford to live in a highly urbanized area as Metro
Manila and, more importantly, she had dependents who
were studying in Baguio City whom she could not leave
behind. The company assured her that the transfer
would not involve any demotion in rank or pay; it
however warned her that if she failed to report to her
new assignment on or before May 16,1984 she would be
dismissed from the service.
On May 15,1984 Ms. Rosa Allado tendered her resigna­
tion. She was paid gratuity pay and other employee
benefits. She signed a quitclaim and release in favor of
the company.
About eight (8) months thereafter, she filed a complaint
fo r illegal dismissal.
(a) Was Rosa Allado constructively dismissed?

ANS. No. It is the employer’s prerogative to

abolish a position which it deems no longer necessary,
and the courts, absent any findings of malice on the
part of the management, cannot erase that initiative
simply to protect the person holding the office.

(b) Is Ms. Allado nevertheless entitled to any severance

benefits?

ANS. Yes. In the interest of justice, she should be

entitled to receive as separation pay one (1) month pay
for every year of service. We adopt by analogy Article
283 of the Labor Code which requires payment of
severance pay in case of termination of employment
due to installation of labcr saving devices or redun­
dancy. We also take into consideration the fact that
her proposed transfer to Makati would indeed entail
much sacrifice on her part and the finding of the NLRC
that the position she was to assume would be lower
than a regional cashier. (Great Pacific Life Assurance

840
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Corporation vs. NLRC, et al., G. R. No. 88011, July

30, 1990)

* * *

Maglutac, a division manager, was dismissed by the

company because his family filed w ith the Securities
and Exchange Commission a derivative suit accusing
the president of the company and his wife fo r diverting
corporation assets to their personal accounts. He was
not also given any opportunity to present his side.
(a) As his dismissal in vindictive, is Maglutac entitled to
moral and exemplary damages?

ANS. Yes. Where the dismissal is vindictive and

effected in an oppressive and malevolent manner,
award of moral and exemplary damages is reasonable.

(b) May the president of the company be held jo in tly

and severally liable fo r the award o f damages and
separation benefits of Maglutac? Why?

ANS. Yes. The company manifested that it had

become insolvent and suspended operations. The
company president was the most ranking officer of the
corporation at the time of the dismissal of complainant,
and also had a direct hand in the latter’s dismissal.
(Maglutac vs. NLRC, et al., G. R. No. 78345,
September 21, 1990)
it it it

The employment contract between the overseas worker

and the foreign shipping company represented by its
local agent provides that where the worker is terminated
because of a reduction of work force, the employer w ill
be responsible fo r worker’s return transportation to his
point of hire. There is no mention o f an award of
separation pay sim ilar to that provided fo r in Article 283
of the Labor Code. Would the worker, in the event o f his

841
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

dismissal due to redundancy, be nevertheless entitled

to separation pay? Explain.

ANS. Yes. Article 283 of the Labor Code governs

em ployer-em ployee relationship and the same is
deemed written in the employment contract The
overseas worker must furthermore be assured the best
terms and conditions of employment. And when an
employer applies for a license or authority to recruit
workers thru an ageincy it undertakes to guarantee
compliance with the existihg labor and social legisla­
tion of the Philippines. (Tierra International Construc­
tion Corporation vs. NLRC, et al., G. R. No. 88912,
July 3, 1992)

•ft * *

If an overseas contract worker hired fo r a fixed period is

illegally dismissed prior to the expiration of her con­
tract, is she entitled to separation pay or to her salary
corresponding to the unexpired portion of her contract?
Why?

ANS. The overseas contract worker is entitled to

the salary corresponding to the unexpired portion of
her contract, and not merely to separation pay equiva­
lent to one (1) month’s salary for every year of service.
This is a consequence of the breach of contract of
employment for a definite period. (Teknika Skills and
Trade Services, Inc. vs. NLRC, et al., G. R. No.
100399, August 4, 1992; but see Section 10, Migrant
Workers and Overseas Filipinos Act of 1995, R. A.
8042)

■ * * *

In case o f merger of employer corporations, may the

employees o f the constituent corporations pursue their
moriey claims against the surviving or consolidated
corporation?

842
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Yes. Section 80 (5) of the Corporation Code

provides:

“5. The surviving or consolidated corporation shall

be responsible and liable for all the liabilities and
obligations of each of the constituent corporations in
the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obliga­
tions; and any claim, action or proceeding pending by
or against any of such constituent corporations may be
prosecuted by or against the surviving or consolidated
corporation, as the case may be. Neither the rights of
creditors nor any lien upon the property of any of such
constituent corporations shaii be impaired by such
merger or consolidation.” (National "Union of Bank
Employees vs. Lazaro, et al., G. R. No. L-56431,
January 19, 1988)
* * *

May the employee terminate w ithout ju s t cause the

employer-employee relationship? Why?

ANS. Article 285 (a) of the Labor Code provides

that an employee may terminate without just cause the
employer-employee relationship by serving written no­
tice on the employer at least one (1) month in ad­
vance. An employee cannot be compelled against his
will to continue working for an employer, as such may
amount to involuntary servitude. The employer upon
whom no such notice is served may however hold the
employee liable for damages.

* * *

On what grounds may an employee lawfully put an end

to the employer-employee relationship w ithout serving
any notice on the employer?

ANS. Article 285 (b) of the Labor Code provides

that an employee may put an end to the employer-

843
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

employee relationship without serving any notice on

the employer for any of the following just cause:

1. Serious insult by the employer or his represen­

tative on the honor and person of the employee;
2. Inhuman and unbearable treatment accorded
the employee by the employer or his representative;
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
4. Other causes analogous to any of the foregoing.

* * *

Due to continuous rains which caused landslides in its

m ining sites, X Mining Corporation is forced to suspend
its m ining operation fo r three (3) months. Are its miners
deemed dismissed by reason of the suspension of its
mining operations? Why?

ANS. No. Under Article 286 of the Labor Code,

the bona fid e suspension of the operation of a busi­
ness or undertaking for a period not exceeding six (6)
months shall hot terminate employment. In such case,
the employer shall reinstate the employee to his for­
mer position without loss of seniority rights if he
indicates his desire to resume work not later than one
(1) month from resumption of operations.

* * *

Due to lack o f raw materials, a textile firm is forced to

suspend its operations fo r eight (8) months.
(а) Has such suspension the effect of terminating the
services o f the firm ’s employees?

ANS. Yes. The suspension of operations, al­

though obviously made in good faith, exceeds the six
(б) months period fixed in Article 286 of the Labor

AM
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Code. It is equivalent to a closure or cessation of

operations for causes not due to serious business
losses or financial reverses.

(b) What is the liability of the employer in connection

with such suspension of operations?

ANS. Since as above-stated the suspension is

equivalent to a cessation of operations not due to
serious business losses or financial reverses, the
employer must pay his employees separation pay of at
least one (1) month or one-half (VS) month pay for
every year of service, whichever is higher, a fraction of
at least six (6) months being considered as one (1)
whole year.
# A

Eastern Textile Mills, Inc. (EASTEX) suffered business

reverses and its stockholders resolved to form a new
corporation called Lucky Textile Mills, Inc. (LUCKY).
EASTEX then ceased operations and LUCKY agreed to
operate the business of the former, utilizing the assets
of EASTEX foreclosed by DBP. Nolasco, an EASTEX
employee fo r seventeen (17) years, was not hired by
LUCKY. He had been sim ply told by EASTEX to stop
working because of a “ temporary shutdown” of the
company.
(a) Was Nolasco illegally dismissed?

ANS. Yes. EASTEX did not give him prior written

notice of his dismissal by reason of the closure of the
establishment and he was not paid severance compen­
sation.

(b) May LUCKY be held jo in tly and severally with

EASTEX fo r the severance benefits of Nolasco? Why?

ANS. Yes. LUCKY continued the business of

EASTEX and assumed the responsibilities and obliga­
tions of the latter. The corporate veil cannot be used

345
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

to perpetuate fraud. (Lucky Textile Mills, Inc. vs.

NLRC, et al., G. R. No. 97977, January 18, 1994)
Hr Hr

By reason o f fo u r (4) separate strikes which caused

economic dislocation, the company gave notice to its
employees o f the suspension o f its operations, advised
them to look fo r some temporary means o f income, and
assured them that they would be properly notified when
normal operations are resumed. About twenty (20)
months thereafter, the company sent letters to its em­
ployees inform ing them o f the resumption o f its opera­
tions and requiring them to report fo r work w ithin seven
(7) days; otherwise, they would be dismissed. Two (2)
employees, who had gone to Yemen to work, could not
comply with the notice. Are they deemed to have
abandoned their work? Explain.

ANS. No. Their employment was deemed term i­

nated when the suspension of the business operations
of the company exceeded six (6) months. They are
entitled to separation pay. (Toogue, et al vs. NLRC,
et al., G. R. No. 112334, November 18, 1994)
* Ht Ht

Z, an employee, is called to annual active duty training

in the Armed Forces o f the Philippines and w ill therefore
be absent from his work fo r four (4) months. His
employer seeks your legal opinion on the follow ing
questions; (a) whether the services o f Z could be
terminated fo r such absences; and (b) in case the
answer to the first is in the negative, whether Z is
entitled to payment of salary during his absence inas­
much as there is no contractual stipulation or estab­
lished practice on this matter. What w ill be your legal
advice?

ANS. On the first query, I will advice the employer

that under Article 286 of the Labor Code, the fu lfill­

848
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ment by the employee of a m ilitary or a civic duty does

not terminate the employment. If within one (1) month
from his relief from military duty, Z, indicates his
desire to resume work, the employer must reinstate
him to his former position without loss of seniority
rights.
On the second query, I will tell the employer that
his liability for payment of salary to Z, corresponding
to the period of the latter’s absence, is to be deter­
mined under paragraph (0 of P. D. No. 183 which
provides that:

Any employee of any private commercial, industrial

or agricultural firm, with an annual gross volume o f
business of not less than two hundred and fifty thou­
sand pesos and with a personnel force of at least
twenty employees, who is called to undergo refresher
training, or a mobilization or assembly test, or annual
active duty training in the Armed Forces of the Philip­
pines, shall not lose his position or suffer any loss of
pay due to his absence in the fulfillm ent of his m ilitary
obligation: Provided, That said firm shall be entitled to
claim the salaries paid to such employee during the
training period as a deductible item in its income tax
return.
* * *

What is the duration of a temporary lay-off or retrench-

ment? '

ANS. There is no specific provision of law which

treats of a temporary retrenchment or lay-off and
provides for the requisites in effecting it or a period or
duration therefor. These employees cannot forever be
temporarily laid-off. To rehedy this situation or fill the
hiatus, Articles 286 may be applied but only by analogy
to set a specific period that employees may remain
temporarily laid-off or in floating status. Six months is
the period set by law that ihe operation of a business
or undertaking may be suspended thereby suspending
the employment of the employees concerned. The
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

temporary la y-off wherein the employees likewise

cease to work should also not last longer than six
months. After six months, the employees should either
be recalled to work or permanently retrenched follow­
ing the requirements of the law, and that failing to
comply with this would be tantamount to dismissing the
employees and the employer would thus be liable for
such dismissal. (Fe S. Sebuguero, et al vs. National
Labor Relations Commission, et al., G. R. No.
115394, September 27, 1995.)
* - * *

When is abolition o f position considered not a proper

exercise o f management prerogative?

ANS. Where the abolition of the position of a

department manager was not established to be due to
the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closure or cessa­
tion of operation of the employer, said abolition cannot
be said to be a proper exercise o f management prerog­
ative. (Ilocos Sur Electric Cooperative, Inc. vs.
NLRC, G. R. No. 106161, February 1, 1995)

* * *

Batin, a field sales manager o f a softdrinks company

committed dishonesty by purchasing 2,000 cases of
company products but making it appear that the prod­
ucts were bought by a customer; later, when the price of
the products increased, he sold as his own the 2,000
cases at the adjusted price. In making the sale, he
utilized company time and resources. But Batin had
been w ith the company fo r ten (10) years and had no
previous infractions. Is his dismissal justified? Why?

ANS. No. The penalty of dismissal is too harsh

under the circumstances. The long period of preven­
tive suspension which had lasted for more than a year
during which he remained unemployed is sufficient

848
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

penalty for the dishonest act and conflict of interest.

(Pepsi-Cola Distributors of the Philippines, Inc. vs.
NLRC e ta l., G. R. No. 106831, May 6, 1997)

* * *

May a worker be dismissed on mere conjectures and

suspicions?

ANS. No. The evidence to establish the ground

for dismissal must be substantial, not arbitrary and
founded on clearly established facts sufficient to war­
rant the worker’s separation from work. It has thus
been ruled that the dismissal of a tra ffic operator of
PLDT after ten years and nine months of service,
merely because of her frequent handling of overseas
calls coming from a telephone line which had been
disconnected, is unwarranted considering that other
operators shared the same experience but were spared
administrative sanctions and that there were lapses in
certain operational aspects of the company which
made the irregularity possible. (Philippine Long Dis­
tance Tel. Co. vs. NLRC et al., G. R. No. 111933,
July 23, 1997)
It has also been ruled that mere accusations and
declarations by certain persons that the field sales
manager of a softdrinks company demanded bribes or
engaged in fistfight cannot support a finding that he
indeed committed such acts. Unsubstantiated accusa­
tion without more is not synonymous with guilt. (Pepsi­
Cola Distributors of the Philippines, Inc. vs. NLRC et
al., G. R. No. 106831, May 6, 1997)
Unsubstantiated suspicions, actuations and conclu­
sions of employers do not prpvide legal justifications
for dismissing employees. In case of doubt, such
cases should be resolved in favor of labor, pursuant to
the social justice policy of our labor laws and the
Constitution. The act of extorting money from sales
agents in exchange for releasing their commissions is
a serious accusation, but allegations, even if supported
by proforma and generalized affidavits, are not suffi­

849
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

cient proof to justify the dismissal of an employee.

(Mendoza vs. NLRC et al., G. R. No. 131405, July
20,1999)

* # #

Solis, an underground miner, was dismissed in 1991 by

Philex Mining Corporation due to illness. He had
worked fo r Philex since 1972. The company acted
pursuant to a certification issued by the Baguio General
Hospital and Medical Center that Solis was suffering
from tuberculosis and was unfit to continue working in
an underground mine. He was given separation pay.
After his dismissal, Solis submitted himself fo r medical
examination in another hospital; he was issued a medi­
cal certificate declaring him physically fit. He went to
Philex demanding reinstatement but to no avail. A
month after he was dismissed, Solis filed a complaint
fo r illegal dism issal against Philex.
(a) Is his complaint meritorious? Why?

ANS. Yes. The certification issued by the Baguio

General Hospital and Medical Center did not state that
Solis’ ailment could not be cured within six(6) months.
The statement that he was unfit to work underground
does not mean that his ailment cannot be cured within
six (6) months. In fact, a subsequent medical exami­
nation in another hospital showed that Solis was physi­
cally fit.

(b) Is his acceptance o f separation pay a bar to his

complaint fo r illegal dismissial? Why?

ANS. No. His acceptance was due to dire financial

necessity; he had to pay for his hospitalization and
medical expenses. And the fact that he filed the
complaint for illegal dismissal with prayer for reinstate­
ment a month from his separation indicates that he
never waived his right to reinstatement.

850
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(c) Should the reinstatement of Solis be subject to any

condition?

ANS. Yes. His reinstatement must be subject not

only to his physical fitness but also to his fitness to
work underground, requirements which have to be
certified by competent public health authority. (Solis
vs. NLRC et al., G. R. No. 116175, October 28,
1996)

* * *

Cite a recent decision oh commission o f a sim ilar of­

fense as a ground fo r dismissal.

ANS. Where the employee was sought to be

dismissed due to absences without leave, his previous
offenses consisting of gambling, habitual tardiness,
and carrying three sacks, of rice in violation of com­
pany rules, for which he had been suspended or
repeatedly warned, cannot be used to justify- his dis­
missal as they are not sim ilar to the ground fo r
dismissal. (Stellar Industrial Services, Inc. vs. NLRC
e ta l., G. R. No. 117418, January 24, 1996.)

Is the right to reinstatement absolute?

ANS. No. Although an employee may have been

illegally dismissed there may be certain circumstances
that m ilitate against the propriety o f his reinstatement.
Thus reinstatement of a high school teacher was held
inappropriate where her continued presence in the
school may well be met with antipathy and antagonism
by some sectors in the school community. (Divine
Word High School, et al vs. NLRC, et al., G. R. No.
L-72207, August 6, 1986). Reinstatement was also
held improper where the employee held a highly re­
sponsible position and could work effectively only if
she enjoyed the full trust and confidence of top man­

851
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

agement (Asiaworld Publishing House, Inc. vs. Hon.

Bias Ople, et al., G. R. No. 56398, July 23, 1987); or
where the relationship has become so strained and
ruptured as to preclude a harmonious working relation­
ship (Citytrust Finance Corporation vs. NLRC, et al.,
G. R. No. 75740, January 15, 1988). In such cases,
the employee would in lieu of reinstatement be entitled
to severance pay at one (1) month pay for every year
of service, plus backwages.

* * *

May reinstatement be excused on strained relations

even if this matter were not raised before the Labor
Arbiter? Explain.

ANS. Yes. As a general rule, strained relations is

an issue factual in nature that should be raised and
proved before the Labor Arbiter. But where the case
presented peculiar circumstances as the strained rela­
tions arose after the filing of the complaint and deep­
ened during the eight-year pendency of the case, the
Supreme Court, upon a motion for reconsideration filed
by the employer, ordered the payment of separation
pay to the employee in lieu of reinstatement. (Vinoya
vs. NLRC et al., G. R. 126586, August 25, 2000)

* * *

At the time o f his dismissal in 1974, Luna was the

manager o f the San Juan Branch o f the Republic Bank.
When he was ordered reinstated to his form er position
in 1981, the ownership and management o f the bank
had, due to near financial collapse, changed hands and
the new management had already installed a new man­
ager o f the San Juan Branch who enjoyed their fu ll trust
and confidence. This was necessary to insure survival.
May the bank be compelled to reinstate Luna to the San
Juan Branch? Explain.

852
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No, the bank is entitled to continue availing

itself of the services of the new manager they had
installed in the branch and who had proven to have the
skill essential for the bank to weather economic d iffi­
culties. The reinstatement remedy must always be
adapted to “economic-business" conditions. Luna may
be reinstated to a substantially equivalent position.
(Union of Supervisors (RB) NATU vs. The Secretary
of Labor, et al., G. R. No. L-39889, March 29, 1984)

* * *

Although the NLRC found the employees to have been

illegally dismissed, it ordered their employer to pay
severance pay in lieu of reinstatement considering that
the possibility o f reinstatement has become remote
because a period o f six (6) years has lapsed since their
dismissal. Is the decision o f the NLRC legal? Why?

ANS. No. The decision of the NLRC is. based on

speculation. It should have first verified if there were
no available positions to which the workers could be
reinstated. A right so highly ranked as security of
tenure should not lightly be denied on so nebulous a
basis as mere speculation. (City Service Corporation
Workers Union vs. City Service Corporation, G. R.
No. L-59407, March 29, 1985)

★ * *

Cite an instance where reinstatement is excused.

ANS. An employee illegally dismissed is entitled to

reinstatement with backwages. But reinstatement may
be excused due to the ensuing strained relations
between the employer and the employee. In such a
case, it should be proved that the employee concerned
occupies a position where he enjoys the trust and
confidence of his employer; and that it is likely that if
reinstated, an atmosphere of antipathy and antagonism
may be generated as to adversely affect the efficiency

853
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

and productivity of the employee concerned.

(Philippine Telegraph and Telephone Corporation, et al
vs. NLRC et al., G. R. No. 109281, December 7,
1995)
* * ft

When is “ strained relations” a ground to excuse rein­

statement?

ANS. “Strained relations* may be invoked only

against employees whose positions demand trust and
confidence, or whose differences with their employer
are of such nature or degree as to preclude reinstate­
ment. Thus, the reinstatement of an ordinary em­
ployee whose relationship with management was
clearly on an impersonal level could not be excused on
'strained relations*, absent a shovying that he occupied
such a sensitive position as would require complete
trust and confidence, or evidence of personal ill will.
(Dimabayao vs. NLRC et al.. G. R. No.- 122178,
February 25, 1999)
* * *

May the labor arbiter’s decision fo r the reinstatement of

a worker which has become final and executory be
stayed and separation pay, in lieu of reinstatement, be
awarded? Explain.

ANS. Yes. Where reinstatement has become an

im possibility because of a supervening event, viz.. the
abolition in good faith of the position the worker once
occupied and absence of a substantially equivalent
position in the new plantilla. (Zarate vs. Olegario et
al., G. R. No. 90655, October 7, 1996)

* * *

In Maranaw Hotel Resort Corporation vs. NLRC, 238

SCRA 190, it was held that the reinstatement o f the

854
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

worker pending appeal is immediately executory but not

self-executory; however a w rit of execution is required
before reinstatement, whether actual o r payroll, may be
effected. However, in Pioneer Texturizing Corporation
vs. NLRC et al.*-G. R. Mo. 1186S1, October 16, 1997,
the Supreme Court en banc reexamined and abandoned
this ruling and held that reinstatement is effective w ith­
out need of a w rit of execution. Give the reasons fo r the
Pioneer ruling.

ANS. Article 223 of the Labor Code employs the

phrase “shall immediately be executory"; this denotes
an imperative obligation and is inconsistent with the
idea of discretion. The law, moreover, is unambiguous
and clear; it must be applied according to its plain and
obvious meaning. As a matter of fact, even the
posting of a bond by the employer shall not stay the
execution for reinstatement.
The Maranaw case adverted to the rule provided
under Article 224 of the Labor Code. A closer exami­
nation of that provision shows that the necessity for a
writ of execution applies only to final and executory
decisions which are not within the coverage of Article
223.''
To require the application for the issuance of a writ
of execution as a prerequisite fo r 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.
For an application for a writ of execution and its
issuance could be delayed for numerous reasons.
Finally, all doubts in the interpretation and im ple­
mentation of labor laws should be resolved in favor of
labor.
- * * *

State the reason fo r the grant of backwages.

ANS. Backwages, or lucrum cessans in civil law,

are granted on grounds of equity to workers for earn­

855
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ings lost due to their illegal dismissal from work. They

are a reparation for the illegal dismissal of an em­
ployee based on earnings which the employee would
have obtained, either by virtue of a lawful decree or
order, as in the case of a wage increase under a wage
order, or by rightful expectation, as in the case of one’s
salary or wage. The outstanding feature of backwages
is thus the degree of assuredness to an employee that
he would have had them as earnings had he not been
illegally terminated from his employment. (Paguio vs.
Philippine Long Distance Telephone Co., Inc. et al.,
G. R. No. 154072, December 3, 2002)

* * *

Paguio, who was illegally transferred, claimed fo r the

payment o f the salary increases that he would have
supposedly received had he not been transferred. He
alleged that prior to his illegal transfer, he. had been
consistently rated fo r his outstanding performance and
his salary correspondingly increased, and that it is
probable that he would sim ilarly have been given high
ratings and salary increases but fo r his transfer to
another position in the company. Is the claim o f Paguio
m eritorious? Explain.

ANS. No. His claim is based merely on specula­

tion. The mere fact that he had been previously
granted salary increases by reas.on of his excellent
performance does not necessarily guarantee that he
would have performed in the same manner and, there­
fore, qualify for the said increase later. What is more,
his claim is tantamount to saying that he had a vested
right to remain as head of his department and given
salary increases simply because he had performed
well in such position, and thus should not be moved to
any other position where management would require
his services. (Paguio vs. Philippine Long Distance
Telephone Co., Inc. et al., G. R. No. 154072,
December 3, 2002)

856
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

If the order o f ratastatemant o f the Labor Arbiter is

reversed on appoal, is the employs}' nonetheless
obliged to pay the wages o f tE^s dismissed employe®
during th® period o f appeal?

ANS. Yes. the order of reinstatement is im m edi­

ately executory. The unjustified refusal of the em­
ployer to reinstate the employee despite the issuance
of a writ of execution entitles the latter to the payment
of his wages during the period of appeal until reversal
by the higher court. On the other hand, if the em­
ployee has been reinstated during the appeal period
and such reinstatement order is reversed with finality
the employee is not required to reimburse whatever
salary be received. (Roquero vs. Philippine Airlines,
Inc., G. R. No. 152329, April 22, 2003)

* Vr iSr

What is tha prescriptive period fo r an action .for rein­

statement?

ANS. An action for reinstatement by reason of

illegal dismissal is one based on an injury to the
complainant’s rights which should be brought within
four (4) years from the time of his dismissal; this is
pursuant to Article 1146 of the Civil Code. Conse­
quently, a complaint for illegal dismissal filed two (2)
years and five (5) months after the worker was dis­
missed is well within the prescriptive period. It should
also be stressed that in labor cases laches may be
applied only upon the most convincing evidence of
deliberate inaction in view of the social justice provi­
sions of the Constitution. (Reno Foods, Inc. vs.
NLRC, et al., G. R. No. 116462, October 18, 1995)

tie ‘i t iV

May the Supreme Court delete the award fo r back­

wages?

857
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. Yes. In several instances, the Supreme

Court affirmed the deletion of backwages to serve a$
appropriate punishment for the employee’s infraction
or misconduct. But a few minutes' tardiness on two or
three occasions do not warrant the total withholding of
the employee's backwages. (Ram vs. NLRC et al., G.
R. No. 115759, June 21, 1996)
Where it appears that the employee did not aban­
don his job, and neither was he constructively dis­
missed, his reinstatement but without backwages is
proper. If the employee’s failure to work was occa­
sioned neither by his abandonment nor by a termina­
tion, the burden of economic loss is not rightfully
shifted to the employer; each party must bear his own
loss. (Leonardo vs. NLRC et al., G. R. No. 125303,
June 16, 2000)

* * *

Jose worked as a security guard of Abaquin Security

and Detective Agency, Inc. fo r almost twenty-five (25)
years. Due to failing health, he voluntarily resigned
from the agency; he was then sixty-ona (61) years old.
As he was not paid any retirement benefits, he filed a
complaint against the agency fo r separation pay, or in
lieu thereof, gratuity benefits equal to one-half month
salary fo r every year of service and other benefits pro­
vided fo r by law.
(a) Is Jose entitled to retirement benefits under Article
287 o f the Labor Code and its implementing rules?
Why?

ANS. No. Article 237 does not itself purport to

impose any obligation upon employers to set up a
retirement scheme for their employees over and above
that which is 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 employ­
ees as part of a broader social security system that
provides not only for retirement benefits but also death

858
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

and funeral benefits, permanent disability benefits,

sickness benefits and maternity benefits.
In the absence of an individual or collective bar­
gaining agreement between the parties or established
employer’s policy regarding retirement benefits, the
employer is not liable to pay the same.

(b) May Jose nevertheless be awarded separation pay?

ANS. Yes. As he voluntarily resigned due to ill

health. Jose may be paid termination pay for reasons
analogous to those contemplated under Article 284
(disease) of the Labor Code. He was in the employ of
the company for almost a quarter of a century; he
deserves the full measure of the law's benevolence.
(Abaquin Security & Detective Agency, Inc. vs. Hon.
D. Atienza, et al., G. R. No. 72971, October 15,
1990, citing Llora Motors, Inc., etc. vs. Hon. F.
Drilon, et al., G. R. No. 82895, November 7, 1989);
but see R. A. No. 7641, enacted in 1993)
hr * *

For purposes o f computing the retirement benefits due

a worker, are his years o f service prior to the effectivity
o f the Labor Code taken into account? Why?

ANS. Yes. The Labor Code is a remedial legisla­

tion enacted pursuant to the police power of State. It
can be made to apply to contracts of employment
already existing at the time of its enactment. The
constitutional guarantee of non-impairment is limited
by the exercise of the police power. (Allied Investiga­
tion Bureau, Inc. vs. Hon. Bias Ople, et al., G. R.
No. L-49678, June 29, 1979) -
* * *

Distinguish dismissal from retirement.

ANS. Retirement is the result of a bilateral act of

the parties, a voluntary agreement between the em­

859
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ployer and the employees whereby the latter after

reaching a certain age agrees and/or consents to
severe his employment with the former. On the other
hand, dismissal refers to the unilateral act of the
employer in terminating the services of an employee
with or without cause. Retirement benefits are subject
to stipulation of the parties; but in dismissals the
separation pay is fixed by law. (Soberano, et al vs.
Hon. Secretary of Labor, et al., G. R. Nos. L-43753-
55 and L-50991, August 29, 1980)
ft # • *

After the change o f tha ownership of the Super Ma­

hogany Plywood Corporation, the employees were paid
their separation pay and other benefits and they in turn
executed a release and waiver which they acknowl­
edged before a DOLE hearing officer. Was the dismissal
of the employees lawful? Why?

ANS. Yes. Where the transfer of ownership is in

good faith, the transferee is under no legal duty to
absorb the transferor’s employees as there is no lav/
compelling such absorption. The employees also
freely and voluntarily accepted their separation pay.
(Manlimos et al vs. NLRC et al., G. R. No. 113337,
March 2, 1995)

* * *

Give the conditions fo r retirement under Article 287 of

the Labor Code, as amended by Republic Act 7641.

ANS. Article 287 of the Labor Code, as amended,

provides:

Art. 287. Retirement. — An employee may be

retired upon reaching the retirement age established in
the collective bargaining agreement or other applica­
ble employment contract.

860
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

In case of retirement, the employee shall be enti­

tled to receive such retirement benefits as he may
have earned under the existing laws and any collective
bargaining agreement and other agreements: Pro­
vided, however, That an employee’s retirement bene­
fits under any collective bargaining and other agree­
ments shall not bo less than those provided herein.
In the absenc* 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 as 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 (Vi) 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 (%) 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.
Retail, service and agricultural establishments or
operations employing not more than ten (10) employ­
ees or workers are exempted from the coverage of this
provision.
Violation of this provision is hereby declared un­
lawful and subject to the penal provisions provided
under Article 288 of th|s Code.

ft ft -fir

The company’s “ Health, Welfare and Retirement Plan”

provides that regular employees who are separated
from the service fo r any reason other than m isconduct
or voluntary resignation shall be entitled to either the
retirement benefits provided therein or to severance pay
provided by law, whichever is the greater amount. In
case an employee retires and gets the retirement bene­
fits under the plan, computed on the basis of one (1)

0454
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

month compensation fo r each year o f service, is he still

entitled to separation pay provided fo r by law?

ANS. No more. Pursuant to the plan, the em­

ployee is entitled to “either” the amount prescribed
herein “or’ the severance pay provided by law,
“whichever is the greater am ount.' At any rate, the
retirement, benefit is bigger than the severance pay
provided by law. (Cipriano vs. San Miguel Corpora­
tion, G. R. No. L-24774, August 21, 1968)
it * *

The retirement plan o f the company contains an

“ integration provision” to the effect that the retirement,
death and disability benefits provided therein shall be
deemed integrated with and in lieu o f termination pay
and retirement benefits under the Labor Code, collec­
tive bargaining agreements, o r future legislation. Upon
the closure o f the company, a portion o f the funds o f the
retirement plan was applied to cover the separation pay
o f the employees. Is such application o f the funds
legal?

ANS. Yes. Such application of funds to cover the

severance compensation of the employees is fully
warranted under the “ integration provision* of the
retirement plan. It should also be noted that the plan
was exclusively funded by the company, and the
“integration provision* was even incorporated in the
CBA between the company and the union of the
employees. (Ford Philippines Salaried Employees
Association, et al vs. NLRC, et al., G. R. No. 75347,
December 11, 1987)
it * *

The collective bargaining agreement between the uni­

versity and its faculty members provided that in case of
unusual circumstances, such as decrease in enrollment,
or any closure of any college or department o f the

862
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

form er which may warrant the reduction o f the number

of personnel, faculty members whosa services are ter­
minated shall be granted retirement benefits. Are fac­
ulty members affected by the phase-out and who are
given separation pay pursuant to law also entitled to the
retirement benefits provided fo r in the CBA? Why ?

ANS. Yes. There is no provision in the CBA to the

effect that termination benefits received under the law
shall preclude the employee from receiving other
benefits under the agreement. Separation pay arising
from a forced termination of employment and benefits
given as a contractual right due to many years of
faithful service are not necessarily antagonistic to
each other. (University of the East vs. Hon. M inister
of Labor, et al., G. R. No. 74007, July 31, 1987)
* * *

The retirement plan of the company provided that “ any

official and employee who is 65 years old, and upon
discretion o f management, shall be qualified or subject
to compulsory retirement from the company w ith bene­
fits as provided in this plan.”
(a) Does the phrase “ upon discretion o f management'’
give absolute o r unlimited discretion to the manage­
ment to grant o r deny retirement benefits?

ANS. No. Management discretion may not be

exercised arbitrarily or capriciously. Upon acceptance
of employment, a contractual relationship was estab­
lished giving the employee an enforceable vested
interest in the retirement fund. Verily, the retirement
scheme became an integral part of his 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 firm.

(b) If the retirement benefits are unlawfully withheld

from the employee, may the president and m ajority

A M
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

stockholder of the corporation be heirf solidarity liable

with the latter fo r the payment of the claim?

ANS. Yes. Under Section 31 of the Corporation

Code, directors or trustees who w illfully and knowingly
vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation shall
be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders
or members, or other persons. (Razon, et al vs.
NLRC, et al., G. R. No. 80502, May 7, 1990)
* * *

After working continuously fo r the company fo r forty-

one (41) years, and having reached the age of 65 yeara,
Loreto Cecilio notified the latter on September 3,1990 of
her intention to retire from work. He claimed fo r retire­
ment or termination pay. The company however con­
tended that it was not obliged to give any retirement
benefits, relying on Llora Motors, inc. vs. Drilon, G. R.
No. 82895, November 7, 1989. On September 26, 1990,
he filed a complaint with the Labor Arbiter fo r payment
of retirement or termination benefits. On February 11,
1391, the Labor Arbiter rendered a decision awarding
his retirement benefits computed at one-half month pay
fo r every year o f service. The company appealed to the
NLRC. During the pendency o f the appeal, or on Jan­
uary 7, 1993, Republic Act No. 7641, amending Article
287 o f the Labor Code, took effect. And on March 22,
1933, the NLRC rendered its decision awarding retire­
ment benefits on the basis of Republic Act No. 7641.
(a) Is the NLRC correct in applying Republic A c t’ No.
7641, which took effect after Loreto had applied fo r
retirement benefits and had reached the age o f 65
years? Why?

ANS. Yes. At the time R. A. 7641 took effect, the

issue of whether or not Loreto had effectively retired
was still pending determination by the NLRC.

RfiA
^ ------------------

TERMINATION OF EMPLOYMENT
AND RETIREMENT

(b) Is Republic Act 7641 applicable to labor contracts

already existing at the time o f its effectivity? May the
benefits provided therein be reckoned not only from the
date of the law’s enactment but retroactively to the time
said employment contracts started? Explain.

ANS. Republic Act No. 7641 in undoubtedly a

social legislation. The law has been enacted as a
labor protection measure and as a curative statute that
- absent a retirement plan devised by, an agreement
with, or a voluntary grant from, an employer - can
respond, in part at least, to the financial well-being of
workers during their twilight years soon following their
life of labor. There should be little doubt about the fact
that the law can apply to labor contracts existing at the
tim e the statute has taken effect, and that its benefits
can be reckoned not only from the date of the law’s
enactment but retroactively to the tim e said employ­
ment contracts have started. (Oro Enterprises, Inc.
vs. NLRC and Loreto Cecilio, G. R. No. 110861,
November 14, 1994)

* * *

Under the collective bargaining agreement the company

agreed to grant retirement benefits to regular employ­
ees who may be separated from the company upon his
compulsory retirement at the age o f sixty (60) years or
upon com pleting twenty-five (25) years o f service,
whichever comes first.
Suniga was retired by the company at the age o f fifty-
two (52) years, after twenty five (25) years service. He
however contended that his retirement amounted to
illegal dismissal considering^ that he had not reached
sixty (60) years.
(a) Is the contention of Suniga justified? Why?

ANS. No. Article 287 of the Labor Code as worded

permits employers and employees to fix the applicable
retirement age at below 60 years. Moreover, providing
for early retirement does not constitute diminution of

865
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

benefits. Early retirement enables an employee to

reap the fruits of his labor at an earlier age, when he
can enjoy them better and longer or put them to
profitable uses by way of income-generating invest­
ments, thereby affording a more significant measure of
financial security and independence for the retiree.

(b) Does the claim o f Suniga fall under the original and
exclusive jurisdiction of the voluntary arbitrator as pro­
vided fo r in Article 261 of the Labor Code? Explain.

ANS. No. It is a termination dispute which falls

under the jurisdiction of the labor arbiter. The interpre­
tation of the CBA is only corollary to the complaint of
illegal dismissal. Besides, it cannot be said that the
dispute is between the union and the company. It was
only Suniga who on his own questioned his compulsory
retirem ent. (Pantranco North Express, Inc. vs.
NLRC, et al., G. R. No. 95940, July 24, 1996)
* * * '

The American Home Assurance Co. offered a Special

Early Retirement Program (SERP) to all its regular em­
ployees. The program called fo r the voluntary separa­
tion/retirement o f the employee in exchange fo r cash
payments consisting o f two months basic salary fo r
every year o f service anti a lump sum payment of
P50,000.00. The company however reserved fo r itself
the sole discretion to approve o r deny applications
under the program.
De Leon, a branch manager o f the company, applied fo r
early retirement under the SERP twice, but his applica­
tions were denied on the ground that the operational
requirements of the company needed his continuous
employment. He was however ultimately dismissed on
the ground o f redundancy; he was paid two months
basic pay fo r every year of service; he was not however
paid the lump sum bonus o f P50,000.00 under the SERP.
He contended that he was entitled to the bonus because
the ground of his dismissal was precisely a ground fo r

866
 TERMINATION OF EMPLOYMENT
ANL) RETIREMENT

management to accept his application fo r retirement

under the SERP.
(a) Is De Leon entitled to the lump sum bonus o f
PSO,000.00? Why?

ANS. Yes. Employees have a vested and (le-

mandable right over existing benefits voluntarily
granted to them by their employer. Such right cannot
be curtailed or diminished by the employer by retaining
an unreasonable option to do so.

(b) Is De Leon estopped from claiming the bonus

considering that he signed a document of waiver and
quitclaim ? Why?

ANS. No. The law does not consider as valid any

agreement to receive less compensation than what a
worker is entitled to recover nor prevent him from
demanding benefits to which he is entitled. Quitclaims
executed by employees are commonly frowned upon
as contrary to public policy considering the economic
disadvantage of the employee and the inevitable pres­
sure upon him by financial necessity. (American Home
Assurance Co. et al vs. NLRC, et al., G. R. No.
120043, July 24, 1996)
.* ★ *

Porping Regalado worked as a security guard o f Philip­

pine Scout Veterans Security and Investigation Agency,
Inc. from September 1963 until his retirement at age 60
years on March 20, 1989. As he was not paid any
retirement benefits, he filed a com plaint to collect the
same. Both the Labor A rb ite r and the NLRC awarded
him retirement pay despite the absence o f a company
policy which provided fo r such benefit o r a collective
bargaining agreement granting the same. The Labor
Arbiter reasoned out that it is unjust that some financial
assistance is provided fo r people who are dismissed
from their jo bs and who can presumably still find other
work and continue to earn a livelihood, but not fo r those

867
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

who are retired and facing the difficulties attendant to

old age and permanent idleness. The NLRC held that
under Article 287 o f the Labor Code and its implement­
ing rules an employee is entitled to retirement benefits
even in the absence o f a company retirement plan or
collective bargaining agreement.
(a) Is the award justified.

ANS. No. There Is clear lack of contractual and

statutory basis of the award!

(b) May Regalado claim retirement benefits under Re­

public Act No. 7641, amending Article 287?

ANS. No. Regalado retired three(3) years prior to

the approval of R. A. 7641 on December 9, 1992.
This law is to be effective prospectively, absent a clear
intention on the part of the legislature to give it
retroactivity. '

(c) Give the effect o f a prior ruling o f the NLRC in a

sim ilar case granting retirement benefits.

ANS. The prior ruling (Tolentino vs. Standard

Wood Products Co., Inc., NLRC Case No. NCR-5-
3847-82) is of no moment. Although it may be true
that the contemporaneous construction of a statute by
executive officers tasked to enforce and implement
said statute should be given great weight by the courts,
nevertheless, if such construction is erroneous or is
clearly shown to be in conflict with the governing
statute or the Constitution or other laws, the same
must be declared null and void. It is the role of the
Judiciary to refine and when necessary, correct consti­
tutional (and/or statutory) interpretation, in the context
of the interactions of the three branches of the govern­
ment. (Philippine Scout Veterans Security and Investi­
gation Agency, Inc. vs. NLRC et al., G. R. No.
99859, September 20, 1996)

868
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

Santos worked fo r thirty-one (31) years fo r a bank,

occupying various positions the last of which was that
o f department manager. Upon his retirement, he re­
ceived a gratuity pay o f P434.468.S2, in consideration of
which he signed a “ Release, Waiver and Quitclaim.”
But he later on filed a complaint fo r underpayment o f
gratuity pay, non-payment o f accumulated sick and
vacation leaves, mid-year and year end bonus, and
financial assistance, alleging that he should have been
paid a total o f P908,022.65, instead o f P434,468.52, and
that follow ing established bank .practice his gratuity pay
should have been computed on the basis o f the salary
rate o f the next higher rank.
(a) Considering that Santos had occupied responsible
positions in the bank and was undoubtedly highly edu­
cated, would the “ Release, Waiver and Quitclaim” that
he signed bar his claim? Why?

ANS. No. The fact that the amount given in

exchange for the waiver is very much less than the
amount claimed renders the waiver null and void. By
reason of public policy, quitclaims are ineffective to
bar recovery for the full measure of the worker’s rights.

(b) Is the claim o f Santos that his gratuity benefits be

computed on the basis Gf the salary rate o f the next
higher rank meritorious? Explain.

ANS. Yes. The bank had consistently and deliber­

ately adopted this practice. The same has ripened into
a company policy which can no longer be peremptorily
withdrawn. (Republic Planters Bank vs. NLRC et al.,
G. R. No. 117460, January 6, 1997)
* * *

In 1990, Lydia Navarro, a faculty member o f the MLQU,

applied fo r retirement, as she had reached the age of
sixty (60) years, had a heart condition, and had com­
pleted thirteen (13) years of service. The school disap­
proved her application on the ground that the form er’s

869
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

retirement plan fixed retirement at age sixty-five (65)

years w ith at least ten (10) years o f service, or at age
sixty (60) years with at least twenty (20) years o f service.
Rule on the school’s contention.

ANS. The school’s position is not tenable. At the

time of the filing of Navarro’s application for retirement
in 1990, Policy Instruction No. 25, governing the
retirement of teachers and other employees in private
educational institutions, was still in force; it provided
that the teacher or employee mav retire or be retired
from the service and shall be paid the equivalent of at
least one month salary or one-half month salary for
every year of service, whatever is higher, a fraction of
at least six (6) months being considered as one whole
year. Policy Instruction No. 25 is more favorable to
the worker and should prevail over the school’s retire­
ment plan. This is more in accord with the established
policy of interpreting and enforcing labor laws, in case
of ambiguity, in favor of the employee. (Manuel L.
Quezon University et al vs. NLRC et al., G. R. No.
102612, June 19, 1997)

★ W *

The University of Mindanao (UM) had a retirement plan

which became effective in 1968 and which only covered
permanent full-tim e employees who opted to contribute
to the retirement fund. The plan provided that an
employee could be retired upon reaching the age of
sixty (60) years.
Capili, a college instructor to UM since 1982, did not
contribute to the retirement fund; but when he reached
the age of sixty (60) years in August 1993, he was
informed by UM that he would be retired. Capili irs-
formed UM that he was not opting to retire and that he
would continue to serve until he reached the com pul­
sory retirement age of sixty-five (65) years. UM insisted
that it could retire him.
(a) Is the position o f UM tenable? Why?
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

ANS. No. Capili was not a member of the UM

retirement plan. Furthermore, Article 287 of the Labor
Code as amended by R. A. No. 7641* took effect on
January 7, 1993, the option is on the part of the
employee to retire upon reaching the age of sixty (60)
years.

(b) Give the tv j (2) types o f retirement under Article 287

o f the Labor Code.

ANS. Compulsory and optional. The first takes

place at age 65, while the second is primarily deter­
mined by the collective bargaining agreement or other
employment contract or employer’s retirement plan. In
the absence of any provision on optional retirement in
a collective bargaining agreement, other employment
contract, or employer’s retirement plan, an employee
may optionally retire upon reaching the age of 60 years
or more, but not beyond 65 years, provided he has
served at least five years in the establishment con­
cerned. That prerogative is exclusively lodged in the
employee.

(c) Policy Instruction No. 25 promulgated by the

Secretary o f Labor on June 1,1977 and which provided
fo r a separate rule on retirement o f employees o f private
schools “ in consideration o f the unique characteristics
and peculiar problems and work situations o f such
institutions” recognized the employer's right to retire an
employee at age sixty (60) years. Is this rule still
applicable? Why?

ANS. No more. This power of the employer no

longer exists under Art. 287 as amended by R. A.
7641, which unequivocally provides that the option to
retire upon reaching the age of sixty (60) years or more
but not beyond sixty-five (65) years is the exclusive
prerogative of the employee if there is no provision on
retirement in a collective bargaining agreement or any
other agreement or if the employer has no retirement
plan.

871
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(d) Would the acceptance o f fu ll retirement benefits by

Capili during the pendency o f the illegal dismissal case
he filed against UM ju stify the dismissal o f such case?

ANS. Yes. By his acceptance of retirement

benefits, he is deemed to have opted to retire under
the third paragraph of Article 287 of the Labor Code,
as amended by R. A. No. 7641. (Capili vs. NLRC et
al., G. R. No. 120802, June 17, 1997)

Hr * *

Under what conditions may Republic Act No. 7641,

which took effect in 1993 and which amends Article 287
o f the Labor Code be given retroactive application?

ANS. Republic Act No. 7641 may be given

retroactive effect where (1) the claimant for retirement
benefits was still the employee of the employer at the
tim e the statute took effect, and (2) the claimant was
in compliance with the requirements fo r eligibility
under the statute for such retirem ent benefits.
(Cabcaban vs. NLRC et al., G. R. No. 120256,
August 18, 1997)
Where private respondent retired and ceased to be
an employee of petitioner company in February, 1992,
eleven (11) months before the effectivity o f R. A. No.
7641 in January, 1993, it was ruled that the beneficial
provisions of the said law could not be given retroac­
tive effect in his favor, although he brought his com­
plaint in October 23, 1993, nine (9) months after the
law’s effectivity.
The circumstances which must concur before the
law could be given retroactive effect are: (1) the
claimant for retirement benefits was still the employee
of the employer at the time the law took effect; (2) the
claimant has complied with the requirements for eligi­
bility under the statute for such retirement benefits. (J.
V. Angeles Construction Corporation vs. NLRC et al.,
G. R. No. 126888, April 14, 1999)

872
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

What is the retirement age of underground miners?

ANS. Article 287 of the Labor Code, as amended

by R. A. No. 8558, approved on February 26, 1998,
provides in part:

“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) yeaFS as underground mine
worker, may retire and shall be entitled to all the
retirement benefits provided for in this Article."
* * *

Is there a substitute retirement plan provided fo r by

law? ■■ ■ ■

ANS. Yes. Under Section 21 of P. D. No-. 1752,

as amended, (Home Development Mutual Fund or
Pag-ibig Law) a private employer has the option to
treat the coverage by the Fund as a retirement plan for
the employee concerned within the purview of the
Labor Code, subject to any existing collective bargain­
ing agreement.
* * *

In June, 1995, Hilaria was hired as an elementary school

teacher at the Sta. Catalina College. In 1970, she
applied fo r and was granted a one (1) year leave of
absence w ithout pay on account o f the illness o f her
mother. But after the expiration in 1971 o f her leave o f
absence, she did not report back fo r work. As a matter
o f fact, she was employed as a teacher at San Pedro,
Biftan, Laguna during the school year 1981-1982. In
1982, she applied anew, and was hired, at the Sta.
Catalina College. In 1997, she was awarded by the said
school a Plaque o f Appreciation fo r th irty years of
service and P12,000.00 as gratuity pay. Aiso, in 1997,
she reached the compulsory retirement age o f 65 years.

873
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

(a) Should Hilaria be credited fo r her services in 1955-

1970 in the determination o f her retirement benefits?
Why?

ANS. No. She must be deemed to have aban­

doned her teaching position and effe ctively relin­
quished the retirement benefits for the said period
when she failed to report back fo r work when her one
(1) year of absence expired in 1971.

(b) Should the gratuity pay o f P12,000.00 paid to Hilaria

in 1997 be deemed part o f her retirement benefits?
Explain.

ANS. No. Gratuity pay is separate and distinct

from retirement benefits. It is paid out of generosity.
(Sta. Catalina College et al vs. NLRC, et al., G. R.
No. 144483, November 19, 2003

* * * ' '

Cite recent decisions on retirement.

ANS. Where the collective bargaining agreement

provided that no retirement benefits are payable in
instances of resignations or dismissals fo r in cause, it
was ruled that an employee who was dismissed due to
an organizational streamlining program prompted by
substantial financial losses and paid separation benefit
at the rate of two (2) months basic salary per year of
service was not entitled to any retirement benefits.
(Lopez vs. National Steel Corporation, G. R. No.
149674, February 16, 2004)
Taxi drivers do not receive fixed wages, but retain
only those sums in excess of the “boundary" or fee
they pay to the owners or operators of th e ir vehicles.
Thus, the basis for computing their benefits should be
the average daily income. But being paid on the
“boundary" system, they are not entitled to the 13th
month and the service, incentive pay, hence their
retirement pay should be computed on the sole basis

874
 TERMINATION OF EMPLOYMENT
AND RETIREMENT

of their salary. (R & E Transport, Inc. et al vs. Latag

etc., G. R. No. 155214, February 13, 2004)
The PAL-ALPAP Retirement Plan provides that any
member who has completed twenty (20) years as a
pilot for PAL or has flown 20,000 hours for PAL shall
be eligible for normal retirement and shall be entitled
to either a lump sum payment of P100,000.00 such
termination pay benefit to which he may be entitled to
render existing laws, whichever is the greater amount.
A pilot who retires below the retirement age o f 60
years is also entitled to an equity of the retirement
fund under the PAL Pilots Retirement Benefit Plan
consisting of contributions exclusively from PAL; in
sum, the pilot gets an amount equivalent to 240% of
his gross m onthly income for every year of service. It
was ruled that the retirement scheme is not violative of
Article 287 of the Labor Code; as a matter of fact, the
retirement benefits that a pilot would get under Article
287 of the Labor Code are less than those he would get
under the applicable retirem ent plans of PAL.
(Philippine Airlines, Inc. vs. Airline Pilots Association
bf the Philippines, G. R. No. 143686, January 15,
2002 )

875
 CHAPTER XVII

REMEDIES
What cases fall under the original and exclusive ju ris ­
diction o f Labor Arbiters?

ANS. Under Article 217 of the Labor Code, as

amended by R. A. 6715, Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide
within thirty (30) working days after submission of the
case by the parties for decision without extension the
following cases involving all workers, whether agricul-.
tural or non-agricultural:

(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, and 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 claim s arising from employer-employee rela­
tions, including those of persons in domestic or house­
hold service, involving an amount exceeding five
thousand pesos (P5.000.00) whether or not accompa­
nied with a claim for reinstatement.
A A #

May lack o f jurisdiction o f the labor arbiter be raised fo r

the firs t time on appeal?

R7R
 REMEDIES

ANS. Jurisdiction of a tribunal, agency, or office,

is conferred by law, and its lack of jurisdiction may be
questioned at any time even on appeal, even where
the party raising the question failed to interpose the
matter until the case had been brought on appeal.
Thus, it has been held that the lack of jurisdiction of
the Labor Arbiter over a complaint for illegal dismissal
filed by an elected corporate officer (which then was is
under the jurisdiction of the SEC) may be raised by the
corporation for the first time on appeal before the
National Labor Relations Commission. (De Rossi vs.
NLRC et al., G. R. No. 108710, September 14, 1999)

Does service of a notice o f hearing upon a respondent

confer jurisdiction o f the labor arbiter over the person of
the former? Explain.

ANS. No. Notices of hearing are not summonses.

The provisions and prevailing jurisprudence in Civil
Procedure may be applied by analogy to NLRC pro­
ceedings. It is basic that the Labor Arbiter cannot
acquire jurisdiction over the person of the respondent
without the latter being served with summons. In the
absence of service of summons or a valid waiver
thereof, the hearings and judgment rendered by the
Labor Arbiter are null and void. (Larkins vs. NLRC, et
al., G. R. No. 92432, February 23, 1995)

* * *

Are technical rules of procedure and evidence prevail­

ing in courts o f law applicable to proceedings before
labor arbiters and the NLRC?

ANS. No. Article 221 of the Labor Code provides

that the rules of evidence prevailing in courts of law or
equity shall not be controlling in proceedings before
the labor arbiters and the NLRC, and that it is the spirit
and intention of the Code that they shall use every and

877
 REMEDIES

all reasonable means to ascertain the facts in each

case speedily and objectively, without regard to techni­
calities of law or procedure, all in the interest of due
process.

Do Labor Arbiters have jurisdiction to hear and decide

claims fo r damages arising from unfair labor practices?

ANS. Yes. Article 247 of the Labor Code, as

amended by R. A. 6715, provides:

“Subject to the exercise by the President or by the

Secretary of Labor and Employment of the powers
vested in them by Articles 263 and 264 of this Code,
the civil aspects of all cases involving unfair labor
practices, which may include claims for actual, moral,
exemplary and other forms of damages, attorney’s
fees and other affirm ative relief, shall be under the
jurisdiction of the Labor Arbiters. The Labor Arbiters
shall give utmost priority to the hearing and resolution
of all cases involving unfair labor practices. They shall
resolve such cases within thirty (30) calendar days
from the time they are submitted for decision."

* * *

Does the Regional Director of the Department o f Labor

have jurisdiction to hear and decide money claims of
workers?

ANS. Yes. He is empowered, through summary

proceedings 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 househelper, arising from
employer-employee relations provided that the com­
plaint does not include a claim for reinstatement and
the aggregate money claims of each employee or
househelper does not exceed P5,000.00. (Art. 129, as
amended, Labor Code)

878
 REMEDIES

What are the requisites fo r the exercise o f the power o f

the Regional Director to adjudicate employees’ money
claims?

ANS. Under Article 129 of the Labor Code, as

amended by R. A. 6715, the following requisites must
concur: (1) the claim is presented by an employee or
person employed in domestic or household service or
househelper; (2) the claim arises from employer-
employee relations; (3) the claimant does not seek
reinstatement; and (4) the aggregate money claim of
each employee or househelper does not exceed
P5.000.00i (Servando’s Incorporated vs. the Secre­
tary of Labor and Employment, et al., G. R. No.
85840, April 26, 1990)
★ * *

Is the decision o f the Regional Director appealable?

ANS. Yes, to the National Labor Relations Com­

mission, on the same grounds provided in Article 223
of the Labor Code, within five (5) calendar days from
receipt of a copy of said decision. (Art. 129, Labor
Code)

* * *

Thelma Cuerda filed a claim before the Regional Office

o f the Department o f Labor against her form er employer
fo r underpayment o f wages, emergency cost o f living
allowance, nonpayment o f 13th month pay, regular holi­
day pay, rest day pay and service incentive leave pay.
Her claim exceeded PS,000.00. She did not seek rein­
statement.
(a) Does the Regional Director have jurisdiction over
her claim?

ANS. No. Her claim exceeded P5.000.00, and the

employer-employee relationship had been severed.
The labor arbiter has jurisdiction.

879
 REMEDIES

(b) Give the requisites of the Regional Director’s ju ris­

diction over money claims.

ANS. The requisites are: (1) the claim is

presented by an employee or person employed in
domestic or household service, or househelper under
the code; (2) the claimant, no longer being employed,
does not seek reinstatement; and (3) the aggregate
money claim of the employee does not exceed
P5,000.00.
Even if the claim exceeds P5.000.00, the Regional
Director may still exercise the enforcement and visito­
rial powers vested in him by Article 128 of the Labor
Code. (Star Security and Defective Investigation
Agency vs. Secretary of Labor, et al., G. R. No.
82607, July 12, 1990, citing the cases of Brokenshire
Memorial Hospital, G. R. No. 74621, February 7,
1990, and Briad Agro Development Corporation, G: R.
No. 82805, November 9, 1989)

,* *. . * v

How are disputes arising from wage distortions settled?

ANS. Where there is a collective bargaining

agreement, the dispute shall be resolved through the
grievance procedure and, if it remains unresolved,
through voluntary arbitration.
Where there is no collective agreement, the dis­
pute shall be settled through the National Conciliation
and Mediation Board and, i f it remains unresolved after
ten (10) calendar days of conciliation, shall be referred
to the appropriate branch of the NLRC. (Article 124,
Labor Code)

Tumala, claiming that he was arbitrarily and illegally

dismissedi filed: on September 19, 1980 a complaint
against the Pepsi-Cola Bottling Co., Inc. w ith the Court
of First instance o f Davao (now Regional Trial Court)

880
 REMEDIES

claiming fo r back salaries, separation benefits, his prize

consisting o f a house and lo t which he won as top
salesman, plus moral and exemplary damages, attor­
ney’s fees and expenses o f litigation. He did not ask fo r
reinstatement. The company moved to dismiss the case
on the ground o f lack o f jurisdiction. Decide.

ANS, The case should be dismissed; the claim of

Tumala is cognizable by the Labor Arbiter. At the time
o f the filing o f his complaint, P. D. 1691 (effective
May 1, 1980) amending Article 217 of the Labor Code,
had already restored to the Labor Arbiters the exclu­
sive jurisdiction over claims, money or otherwise,
arising from em ployer-em ployee relations, except
those expressly excluded therefrom. None of his
claims fall under the exclusions. Even the claim for
his prize consisting of a house and lot is covered,
considering that the same unquestionably arose from
employer-employee relations. Besides, to hold that
Tumala's claim for the prize should be passed upon by
the regular courts, ihdepiendently and separately from
his claim for back salaries, retirem ent benefits and
damages would be to sanction split jurisdiction and
m ultiplicity of suits which are prejudicial to the orderly
administration of justice. (Pepsi-Cola Bottling Co., et
al vs. Hon. Judge A. Martinez, et al., G. R. No.
L-58877, March 15, 1982)

During her employment, RL secured a loan totaling

P35,000.00 from her employer. She failed to pay a part
o f the loan amounting to P12,170.37.
She file d a com plaint fo r illegal suspension, dismissal
and nonpayment o f commissions w ith the Arbitration
Branch o f the NLRC. The Company in turn filed w ith the
Arbitration Branch a complaint against RL fo r damages
fo r violation o f Article 285 of the Labor Code and attor-
ney’s fees.
The company also filed with the Regional Trial Court a
civil action to collect from RL the unpaid balance o f her

881
 REMEDIES

loan RL moved to dismiss the complaint on the ground

of lack of jurisdiction. The RTC granted the motion. Is
the dismissal of the com plaint justified? Reasons.

ANS. No. Not every dispute between an employer

and employee involves matters that only labor arbiters
and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers, The jurisdiction
of the labor arbiters and the NLRC under Article 217 of
the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be
resolved by reference to the Labor Code, other labor
statutes, or their collective bargaining agreement.
The civil action brought by the company against RL
is a simple collection suit by the former, as creditor
against the latter, as debtor, th e fact that they were
employer and employee at the time of the transaction
does not negate the civil jurisdiction of the trial court.
The case does not involve adjudication of a labor
dispute but recovery of a sum of money based on our
civil laws on obligation and contract. (Georg Grotjahm
GMBH & Co. vs. Hon. Lucia Violago Isnani, et al., G.
R. No. 109172, August 10, 1994)
it U'- it

Cite some decisions on jurisdiction.

ANS. The Regional Trial Court does not have

jurisdiction to enjoin the execution of a final and
executory judgment of the Labor Arbiter or the NLRC.
The petition for injunction filed by a mortgagee/third
party claimant is in reality an action to quash the writ
of execution in a case growing out of a labor dispute,
aptly within the jurisdiction of the Labor Arbiter.
(Philippine Export and Foreign Loan Guarantee Corpo­
ration vs. Court of Appeals et al., G. R. No. 118701,
December 12, 1995)
The labor arbiter has jurisdiction over the com­
plaint for illegal dismissal filed by the general manager
of an electric cooperative. The latter is furthermore
estopped from raising the issue of lack of jurisdiction

882
 REMEDIES

considering that it participated in the proceedings and

only raised this question when the NLRC reversed the
decision of the Labor Arbiter upholding the dismissal of
the manager. (Zamboanga City Electric Cooperative,
Inc. vs. Buat et al., G. R. No. 100514, March 29,
1995.)
It is the Securities and Exchange Commission and
not the NLRC which has original and exclusive jurisdic­
tion over cases involving the removal from employ­
ment of corporate officers. (Espino vs. NLRC et al.,
G. R. Nos. 109642-43, January 5, 1995; Lozon vs.
NLRC et al., G. R. NO. 107660, January 2, 1995)
The Labor Arbiter has no jurisdiction over a com­
plaint for illegal dismissal filed against the Jose N.
Rodriguez Memorial Hospital, a government hospital
by a hospital employee. The said complaint falls under
the jurisdiction of the C ivil Service Commission.
(Department of Health vs. NLRC et al., G. R. No.
113212, December 29, 1995)
The Labor Arbiter, not the SEC, has jurisdiction
over a claim for unpaid wages and separation pay filed
by an administrative officer against the corporation
notwithstanding the fact that the officer was later
elected by the Board of Directors as an Adm inistrative
Manager; there was no showing of any change in the
duties he performed as Administrative O fficer and as
Administrative Manager. (Mainland Construction Co.r
Inc. etc. vs. Movilla et al., G. R. No. 118088,
November 23, 1995)
The labor arbiter has jurisdiction over a term ination
and ULP case filed by workers who were dismissed due
to alleged redundancy, notwithstanding the fact that
the CBA provides that “wages, hours of work, condi­
tions of employment and/or employer-employee rela­
tions shall be settled by arbitration." Article 217 of the
Labor Code speaks in plain and unambiguous terms
that termination disputes, together with unfair labor
practices, are matters falling under the original and
exclusive jurisdiction of the Labor Arbiter. The CBA
must state in unequivocal language that the company
and the union conform to the submission of termination
disputes and unfair labor practices to voluntary arbitra­

883
 REMEDIES

tion. (San Miguel Corporation et al vs. NLRC et al.,

G. R. No. 108001, March 15, 1996)
■* * *

Does the Labor Arbiter have jurisdiction over the claim

o f a security agency against its principal fo r the upward
adjustment of the contract rate mandated by a wage
order?

ANS. No. The relief sought has to do with the

enforcement of the contract between the agency and
the principal which was deemed amended by the> wage
order. The controversy is a civil dispute; no issue is
involved which may be resolved by reference to the
Labor Code,other labor statutes or any collective bar­
gaining agreement. The Regional T ria l Court has
jurisdiction. (Urbanes etc. vs. Secretary of Labor and
Employment et al., G. R. No. 122791, February 19,
2003)

* * *

The company filed w ith the Regional Trial Court a

com plaint fo r damages against a form er employee for
alleged violation o f a provision o f their employment
contract to the effect that the employee should not fo ra
period o f tw o (2) years from the termination o f his
service accept employment in a firm, entity o r undertak­
ing engaged in a business sim ilar to o r in com petition
w ith that o f the company. The complaint sought the
payment o f liquidated damages stipulated in the em­
ployment contract. Does the RTC have jurisdiction over
the case? Why?

ANS. Yes. The company does not ask any relief

under the Labor Code. It seeks to recover damages
agreed Upon in the contract. Such cause of action is
within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. It should
also be noted that the stipulation refers to the post­

884
 REMEDIES

employment relations of the parties. (Dai-Chi Elec­

tronics Mfg. Corp. vs. Hon. M. Villarama, Jr., et al
G. R. No. 112940, November 21, 1994)
* * *

In May, 1979 the former Plant General Manager (Medina)

and Plant Comptroller (Ong) o f the Muntinlupa Plant of
the Pepsi-Cola Bottling Co. o f the Philippines, Inc. filed
a complaint w ith the Court of First Instance of Rizal
against the company and its president and chief execu­
tive officer, alleging that they were slandered and then
dismissed in a humiliating and anti-social manner, and
claiming fo r unrealized income, moral and exemplary
damages, litigation expenses, attorney’s fees and costs.
They did not seek reinstatement.
Upon a second motion to dismiss filed in January, 1981,
the lower court dismissed the case on the ground that
the com plaint alleges unfair labor practice over which
(the claim fo r damages included) the labor arbiter has
original and exclusive jurisdiction. Is the dismissal of
the case correct?

ANS. The pivotal question is whether or not the

Labor Code has any relevance to the reliefs sought by
the plaintiffs.
It is obvious from the complaint that the plaintiffs
have not alleged any unfair labor practice. Theirs is a
simple action for damages for tortious acts allegedly
committed by the defendants. Such being the case,
the governing statute is the Civil Code and not the
Labor Code. It results that the orders under review are
based on a wrong premise. (Medina and Ong vs. Hon.
F. Castro-Bartolome, et al.; G. R. No. L-59825,
September 11, 1982)
* * *

Cruz, employed by Singapore Air fo r a fixed period of

five (5) years, underwent training as flig h t engineer at
the airline's expense. But before the expiration o f the

88S
 REMEDIES

period o f the contract he left his employment. The

company therefore filed with the Court of First Instance
(now Regional Trial Court) a com plaint to collect liq u i­
dated damages, overpayment of wages, cost o f uni­
forms, value of vacation leave he enjoyed but was no
longer entitled to, exemplary damages and attorney’s
fees. The action was based on the contract of employ­
ment signed by Cruz and under which he bound himself
to pay liquidated damages should he leave his employ­
ment o r be dismissed therefrom before the expiration of
five (5) years. Also impleaded as a defendant was
Villanueva, who had acted as the surety o f Cruz/ Does
the COurt 6f First Instance (now Regional Trial Court)
have jurisdiction over the case? Explain.

ANS. Yes. Upon the facts and issues involved,

jurisdiction over the present controversy must be held
to belong to the civil courts. W hile seemingly peti­
tio n e r’s (SAL) claim fo r damages arises from
employer-employee relations, and the latest amend­
ment to Article 217 of the Labor Code under P. D. No.
1691 and BP Big. 130 provides that all other claims
arising from employer-employee relationship are cog­
nizable by Labor Arbiters, in essence, petitioner’s
claim for damages is grounded on the “wanton failure
and refusal” without just cause of private respondent
Cruz to report for duty despite repeated notices served
upon him of the disapproval of his application for leave
of absience without pay. This coupled with the further
averment that Cruz “maliciously and with bad faith”
violated the terms and conditions of the conversion
training course agreement to the damage of petitioner
removes the present controversy from the coverage of
the Labor Code and brings it within the purview of Civil
Law. (Singapore Airlines Limited vs. Hon. Ernani
Cruz Pano, et al., G. R. No. L-47739, June 22, 1983)
* * *

The regional trial court issued an injunction prohibiting

the picketing by employees of the company who were

net:
 REMEDIES

either dismissed o r resigned; it ruled that no labor

dispute existed between the parties since at the time of
the strike, the employees had not even filed a complaint
fo r unfair labor practice, that the mere filin g o f a notice
of strike o r a complaint fo r ULP does not necessarily
mean that there exists a labor dispute," and that there
was even ho collective bargaining agreement between
the parties. Is the ruling o f the regional trial court
correct?W hy?

ANS. No. A labor dispute can exist although acts

of unfair labor practice have not as yet been estab­
lished. And the concerted action taken by the strikers,
no matter how illegal, are acts arising from a labor
dispute. The labor arbiters, not the regular courts,
have original and exclusive jurisdiction to hear and
decide questions involving the legality of strikes and
lockouts. (Samahang Manggagawa ng Liberty Com­
mercial Center, etc. vs. Hon. O. Pimentel, G. R.
No. 78621, December 2, 1987)

* * ■*

A union o f bank employees filed a complaint w ith the

Regional Trial Court against two banks and their o ffi­
cers, alleging that the defendants violated their obliga­
tion to negotiate with plaintiff fo r a collective bargaining
agreement and claiming fo r damages by reason o f the
latter’s Willful, deceitful. o r tortious acts. The court
however dismissed the case fo r lack o f jurisdiction. Is
the dismissal correct? Why?

ANS. Yes. The act complained of partakes of an

unfair labor practice which falls under the original and
exclusive jurisdiction of the labor arbiters. The dam­
ages claimed by plaintiff form part of the civil compo­
nent of the injury arising from the ULP; under Article
247 of the Labor Code, the civil aspects of all cases
involving unfair labor practices, which may include
claims fo r damages and other affirm ative relief, fall
under the jurisdiction of the labor arbiters.

007
 REMEDIES

Even the fact that one of the defendant banks was

not a party to the collective bargaining agreement, as
it had simply a merger agreement with the other bank,
would not bestow jurisdiction upon the court since the
cause of action against the said bank in intertwined
with the alleged unfair labor practice; besides, split
jurisdiction, which has long been recognized to be an
offense against the orderly administration of justice,
should not be sanctioned. (National Union of Bank
Employees, etc. vs. Hon. A. Lazaro, et al., G. R.
No. 56431, January 19, 1988)

Primero filed a complaint for illegal dismissal, back­

wages and reinstatement with the labor arbiter, but later
on withdrew his claims for backwages and reinstate­
ment and commenced before the regular courts a dam-
suit on the theory that the manner of his dismissal
was tortious. Considering that the labor arbiter
awarded Primero compensation, can the latter’s damage
suit before the regular courts still prosper? W hy?

ANS. No more. Thus, an employee who has been

illegally dismissed (i. e. , discharged without just cause
or being accorded due process), in such a manner as
to cause him to suffer moral damages (as determined
by the Civil Code), has a cause of action for reinstate­
ment and recovery of backwages and damages. When
he institutes proceedings before the Labor Arbiter, he
should make a claim for all said reliefs. He cannot, to
be sure, be permitted to prosecute his claims piece­
meal. He cannot institute proceedings separately and
contemporaneously in a court of justice upon the same
cause of action or a part thereof. He cannot and
should not be allowed to sue in two forums: one,
before the Labor Arbiter for reinstatement and recov­
ery of backwages, or for separation pay, upon the
theory that his dismissal was,illegal; and two, before a
court of justice for recovery of moral and other dam­
ages, upon the theory that the manner of his dismissal
 REMEDIES

was unduly injurious, or tortious. This is what in

procedural law is known as splitting causes of action,
engendering m ultiplicity of actions. It is against such
mischiefs that the Labor Code amendments just dis­
cussed are evidently directed, and it is such duplicity
which the Rules of Court regard as ground for abate­
ment or dismissal o f actions, constituting either litis
pendentia (auter action pendant) or res judicata, as the
case may be. But this was precisely what Primero’s
counsel did. He split Primero's cause of action; and he
made one of the split parts the subject of a cause of
action before a court of justice. Consequently, the
judgment of the Labor Arbiter granting Primero separa­
tion pay operated as a bar to his subsequent action for
the recovery of damages before the Court of First
Instance under the doctrine of res judicata. The rule is
that the prior “judgment or order is, with respect to the
matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive
between the parties and their successors in interest by
title subsequent to the commencement of the action or
special proceeding, litigating for the same thing and
under the same title and in the same capacity.”
(Primero vs . Intermediate Appellate Court, et al., G.
R. No. 72644, December 14, 1987)
* * *

A company filed an action for replevin before the Re­

gional Trial Court to recover possession of its fishing
vessel from the crew members who were on strike. The
jurisdiction of the R TC is questioned on the ground that
a labor dispute is intertwined with the replevin case.
Decide.

ANS. The labor dispute involved is not intertwined

with the issue in the Replevin Case. The respective
issues raised in each forum can be resolved indepen­
dently of the other. In fact, on 18 November 1986, the
NLRC in the case before it had issued an injunctive
writ enjoining petitioners from blocking the free ingress

889
 REMEDIES

and egress to the vessel and ordering petitioners to

disembark and vacate. That aspect of the controversy
is properly settled under the Labor Code. So also with
petitioner’s right to picket. But the determination of
the question of who has the better right to take
possession of the vessel and, whether petitioners can
deprive the charterer, as the legal possessor of the
vessel, of that right to possess is addressed to the
competence of Civil Courts. (Basaya, et al vs. Hon.
F. Militante, et al., G. R. No. 75837, December 11,
1987)

Ht Ht *

Evelyn Tolosa, the w idow of a ship captain, filed with

the Labor Arbiter a complaint against the shipowner and
the vessel’s first and second mates fo r actual, moral
and exemplary damages by reason o f th e ir failure or
neglect to provide immediate medical assistance to her
deceased husband, as required by Article 161 o f the
Labor Code. The actual damages claimed consisted of
loss o f earning capacity based on the deceased’s life
expectancy.
Does the Labor A rbiter have ju risd ictio n over the
w idow ’s claims?

ANS. No. The claims are based on tort or

quasi-delict that has no reasonable causal connection
with any of the claims provided fo r in Article 217 of the
Labor Code, other labor statutes, or collective bargain­
ing agreements. The employer-employee relation is
merely incidental. (Tolosa vs. NLRC et al., G. R. No.
149578, April 10, 2003)

* Ht *

Eviota entered into an employment contract w ith Stan­

dard Chartered Bank whereby he was hired as the
bank’s Compensation and Benefits Manager. But barely
a month after his employment, Eviota rejoined his for­
mer employer. Standard Chartered Bank thereafter filed

890
 REMEDIES

w ith the Regional Trial Court o f Makati a complaint

against Eviota fo r actual, moral and exemplary damages
as well as attorney’s fees allegedly arising from his
breach o f the employment contract. The bank alleged
that Eviota’s actions violated Articles 19, 20 and 21 of
the Civil Code, that he failed to give at least one (1)
month written notice prior to the date o f termination of
his employment as provided fo r by Article 285 (a) o f the
Labor Code, and that he made false statements deroga­
tory to the bank’s reputation.
Eviota moved to dismiss the complaint, alleging that the
complaint was w ithin the jurisdiction o f the Labor Ar­
biter. Decide.

ANS. Motion denied. The claims of the bank were

the natural consequences flowing from a breach of an
obligation; intrinsically civil in nature. There is no
causal relationship between the bank's cause of action
against Eviota and their employer-employee relation­
ship. (Eviota vs. Court of Appeals et al., G. R. No.
152121, July 29, 2003)

* * *

To enforce the decision of the Regional Office o f the

Department o f Labor requiring the Inductocast Cebu to
pay its employees a total of P232.908.00, the DOLE
regional sheriff levied upon the buildings and improve­
ments standing on a Sot in Mandaue City. The levied
properties were subsequently sold at public auction to
the employees. Thereafter, the owners of the Sot upon
which the levied properties stood commenced an action
before the Regional Trial Court of Cebu City to ann^E the
public auction sale on the ground that they are the
owners and actual occupants o f the said properties.
The RTC dismissed the civil case on the ground o f lack
o f jurisdiction as the same was connected w ith a labor
case.
(a) Is the dismissal o f the action by the RTC justified?
Why?

891
 REMEDIES

ANS. No. No employer-employee relationship

exists between the plaintiffs in the labor case and the
other parties, and no issue is involved which may be
resolved by reference to the Labor Code, other labor
statutes, or any collective bargaining agreement.
What is to be litigated in the civil case is the issue of
ownership over the levied properties.
When a third-party, or stranger to the action,
asserts a claim over the property levied upon, the
claimant may vindicate his claim by an independent
action in the proper civil court which may stop the
execution of the judgment on property not belonging to
the judgm ent debtor.

(b) Distinguish this case from Pucan vs. Bengzon, 155

SCRA 692.

ANS. In Pucan. what was being questioned was

the propriety or legality of the alias writ of execution as
well as the acts performed by the DOLE officials in
implementing the same. The action was in the nature
of a motion to quash the writ. In the instant case, the
validity of the writ is not even collaterally attacked;
what is prayed for is a ruling that the DOLE judgment
could not be validly executed on the properties in
question; they did not belong to the employer.
(Manliguez, et al vs. Court of Appeals, et al., G. R.
No. 92598, May 20, 1994, citing Santos vs. Bayhon,
199 SCRA 525)
* * *

Claiming that she was illegally dismissed, a faculty

member o f a university filed an action before the Court
o f First Instance (now Regional Trial Court) fo r moral
and exemplary damages and attorney’s fees totaling
P99,000.00. The university interposed the defense that
no permanent employment was extended to her and the
labor arbiter, not the ordinary courts, has jurisdiction
over her claim. Decide.

892
 REMEDIES

ANS. In this case, it is necessary to determine

whether the faculty member became a permanent
employee. The determination of that question could
be more competently handled by the court after a
fullblown trial and not by the labor arbiter by means of
the position-paper procedure followed by him. (De La
Salle University, et al vs. Lao, et al., G. R. No.
L-56566, April 15, 1985)
* * *

San Miguel Corporation (SanMig) filed a verified com­

plaint fo r injunction and damages before the Regional
Trial Court of Pasig to enjoin the San Miguel Corpora­
tion Employees Union-PTGWO from among others rep­
resenting and/or acting fo r and in behalf of the employ­
ees o f the company’s independent contractors
(Lipercon Services, Inc. and D’ Rite Service Enter­
prises) fo r the purpose of collective bargaining, staging
a strike to compel the company to hire the employees of
Lipercon and D’ Rite, and preventing and/or disrupting
fo r the same purpose the peaceful and normal opera­
tions o f the company. San Miguel Corporation had
contracts fo r merchandising services with Lipercon and
D’ Rite and it was expressly stipulated therein that the
workers employed by the contractors would be paid by
the latter and that none o f them would be deemed
employees or agents o f San Miguel. Nonetheless, the
union sought the regularization o f the employment of
some o f them with SanMig.
The union filed a m otion to dismiss the complaint on
the ground of lack o f jurisdiction as the case arises from
a labor dispute.
(a) Is the m otion to dismiss meritorious?

ANS. Yes. The case involves a labor dispute. U

involves terms, tenure and conditions of employment
of the workers contracted by Lipercon and D’ Rite and
their representation and association for the purpose of
negotiating the conditions of their employment. It
should be noted that a “labor dispute” as defined in

RQ3
 REMEDIES

Article 212 (I) of the Labor Code may exist ‘ regardless

of whether the disputants stand in the proximate
relation of employers and employees."

(b) Would the claim fo r damages o f San Miguel Corpo­

ration keep the case w ithin the jurisdictional boundaries
o f the regular courts?

ANS. No. The claim for damages is interwoven

with a labor dispute existing between the parties and
would have to be ventilated before the administrative
machinery established for the expeditious settlement
of those disputes. This is to avoid “split jurisdiction"
which is obnoxious to the orderly administration of
justice. (San Miguel Corporation Employees Union-
PTGWO, et al vs. Bersamira, et al., G. R. No.
87700, June 13, 1990)

* * *

By reason o f the alleged illegal termination o f its presi­

dent, unfair labor practice, nonpayment o f living al­
lowances and employment of oppressive alien manage­
ment personnel w ithout proper permit, the union de­
clared a strike. The company filed with the Regional
Trial Court a complaint against the union officers and
members fo r damages fo r obstruction o f private prop­
erty w ith prayer fo r preliminary injunction and/or re­
straining order. The union moved to dismiss the com-
piaint. Decide.

ANS. The complaint should be dismissed. Under

Article 217 of the Labor Code, it is the labor arbiter,
not a regular court, that has jurisdiction over a suit for
damages arising from picketing that accompany a
strike. In the interest of greater promptness in the
disposition of labor matters, a court is spared the often
onerous task of determining what essentially is a
factual matter, namely, the damages that may be
incurred by either labor or management as a result of
disputes or controversies arising from em ployer-

894
 REMEDIES

employee relations. (National Federation of Labor, et

al vs. Eisma, et al., G. R. No. L-61236, January 31,
1984)
* * •&

Does the labor arbiter have jurisdiction over a claim

filed by an employee against his form er employer fo r
damages arising from his suspension and from the
employer’s acts o f harassment and slanderous accusa­
tions? Explain.

ANS. Yes. The Labor Arbiter has jurisdiction over

a claim for damages arising from employer-employee
relationship. An employee need not seek reinstate­
ment in order to file a complaint with the labor arbiter.
(Encarnacion vs. Dynasty Amusement Center Corpo­
ration, et al., G. R. No. 51289, September 2, 1992)
★ ♦ *

When there is a wrongful dismissal not amounting to an

unfair labor practice, may an employee be awarded
moral and exemplary damages in addition to o r apart
from backwages and reinstatement? Explain.

ANS.. Where the termination of the services of an

employee is attended by fraud or bad faith on the part
of the employer, as when the latter knowingly made
false allegations of a supposed valid cause when none
existed; moral and exemplary damages may be
awarded in favor of the former. (Lirag Textile Mills,
Inc. vs. Court of Appeals, et a!., G. R. No. L-30786,
April 14, 1975). The anti-social,and oppressive abuse
of its right to investigate and dismiss its employees
constitute a violation of Article 1701 of the New Civil
Code which prohibits acts of oppression by either
capital or labor against the other, and Article 21 on
human relations. The grant of moral damages to the
employees by reason of such conduct on the part of
the company is sanctioned by Article 2219, No. 10 of
the Civil Code, which allows recovery of such damages

HOC
 REMEDIES

in actions referred to in Article 21 (Philippines Refining

Co., Inc. vs. Garcia, G. R. No. L-21871, September
27, 1966)
As a rule, moral damages are recoverable only
where the dismissal of the employee was attended by
bad faith or fraud or constituted an act oppressive to
labor, or was done in a manner contrary to morals,
good customs or public policy. Bad faith involves a
state of mind dominated by ill will or motive. It implies
a conscious and intentional design to do a wrongful act
fo r a dishonest purpose of some moral obliguity.
Petitioner Danilo Litonjua showed ill will in treating
respondent Vigan in a very unfair and cruel manner
which made her suffer anxieties by reason of such job
difficulties. The report to work notices sent by petition­
ers to respondent Vigan was just part of the ploy to
make it appear that the latter abandoned her work but
in reality, Vigan was barred from entering her work
premises. We fully subscribe to respondent's position
that petitioners’ action was fo r the purpose of removing
her from her employment. Respondent Vigan is also
entitled to exemplary damages as her dismissal was
effected in an oppressive and malevolent manner.
We also find that there is a basis for the award of
attorney’s fees. It is settled that in action for recovery
of wages or where an employee was forced to litigate
and incur expenses to protect his rights and interest,
he is entitled to an award of attorney’s fees. (Litonjua
Group of Companies et al vs. Vigan, G. R. No.
143723, June 28, 2001)
Award of moral damages cannot be justified solely
upon the premise that the employer fired his employee
without just cause or due process. Additional facts
must be pleaded and proved to warrant the grant of
moral damages under the Civil Code, i. e., that the act
of dismissal was attended by bad faith or fraud, or was
oppressive to labor, or done in a manner contrary to
morals, good customs, or public policy; and, that social
humiliation, wounded feelings, grave anxiety, etc. re­
sulted therefrom.
As regards exemplary damages, they may only be
awarded if the dismissal was shown to have been

ftQfi
 REMEDIES

effected in a wanton, oppressive or malevolent man­

ner, or where the party involved is entitled to moral or
compensatory damages.
Attorney’s fees may be awarded where the workers
were compelled to litigate with their employer and
incur expenses to enforce and protect their interests.
(National Bookstore, Inc., et al. vs. Court of Appeals
et al., G. R. No. 146741, February 27, 2002)
Where the transfer of an employee was unjustified
as the same was the result of his disagreement with ,his
superiors with regard to company policies, moral and
exemplary damages should be awarded to him based
on Article 21 of the Civil Code. (Paguio vs. PLDT et
al., G. R. No. 154072, December 3, 2002)
* * *

In his complaint filed before the labor arbiter fo r illegal

dismissal, Armando also sought payment fo r overtime
pay, holiday pay, 13th month pay, sick leave pay, dam­
ages and attorney’s fees. He impleaded the president
and general manager as a respondent.
(a) May Armando be awarded 13th month pay and
holiday pay even if he did not prove that he was not
paid these benefits? Why?

ANS. Yes. The claimant’s allegation of non­

payment of these benefits is a negative allegation
which need not be supported by evidence unless it is
an essential part of the cause of action. The claim for
monetary benefits is but an incident of the protest
against the dismissal. The burden of proving that
payment of said benefits has been made rests upon
the party who will suffer if no evidence at all is
presented by either party, that is, the employer.

(b) May the president and general manager be held

responsible fo r the payment of backwages and other
monetary benefits awarded by the NLRC?

ANS. No, in the absence of proof that he acted

maliciously or in bad faith. This is following the

897
 REMEDIES

principle laid down in Garcia vs. NLRC, et al., 153

SCRA 639. (Seaborne Carriers Corporation, et al vs.
NLRC, et al., G. RL No. 88795, October 4, 1994)

vV * *

In 1987 the labor arbiter rendered a decision requiring

the employer to reinstate two workers, with backwages,
ECOLA, 13th month pay, holiday pay, vacation and sick
leave pay, in the amount of P24,300.00 each, moral and
exemplary damages of PI 0,000.00 each and attorney’s
fees equivalent to 10% of the total award. In 1992 the
NLRC affirmed the award and after the resolution be­
came final and executory, a w rit of execution was issued
by the labor arbiter requiring tho employer to pay the
workers the total sum o f P387,122.65. The employer
objected to the execution on the ground that the labor
arbiter had no authority to increase the monetary award
in the original decision. Decide.

ANS. The labor arbiter can increase the monetary

award. It is true that after a judgment has become
final and executory, it can no longer be modified or
otherwise disturbed. But this principle admits of
exceptions, as where facts and circumstances tran­
spire which render its execution impossible or unjust
and it therefore becomes necessary, in the interest of
justice, to direct its modification in order to harmonize
the disposition, with the prevailing circumstances.
The backwages and other benefits awarded in the
original decision, amounting to P24.300.00 each, cor­
responded merely to the period between their illegal
dismissal up to the rendition of the decision in 1987.
The recomputation was made in 1992, or five (5) years
thert-after. During this period, the workers were never
reinstated nor paid the monetary awards decreed in the
decision. The recomputation was necessary to arrive
at a just and proper determination of the monetary
awards due the workers. (Industrial Timber Corpora­
tion vs. NLRC, et al., G. R. No. 11985, June 30,
1994)

898
 REMEDIES

May the labor arbiter adjudicate on claims not alleged in

the complaint?
\

ANS. Yes, provided the claims are made in the

complainant's position paper. But claims for wage
differentials not made either in the complaint or in the
position paper cannot be passed upon. (Development
Bank of the Philippines vs. NLRC, et al., G. R. Nos.
100376-77, June 17, 1994)

* * *

Give the effects of the failure of some of the com­

plainants to sign the verification attached to the com­
plaint.

ANS. The mere fact that only twenty-one (21) out

of the sixty-five (65) complainants signed the verifica­
tion attached to the complaint is not a ground to
dismiss, for lack of legal personality, the complaint as
to the non-signatories. The signatories were deemed
to be representing their co-compiainants, this is in
accordance with Section 7 of the NLRC New Rules of
Procedure. And signing of the verification is a matter
of procedure which did not in any way diminish nor
weaken the claim of the other complainants. (Food
Terminal, Inc. vs. NLRC et al., G. R. No. 143352,
April 27, 2001)
* * *

Is the labor arbiter required to hold formal hearings?

ANS. !t is well settled that the holding of a hearing

is discretionary as a matter of right. It is entirely within
the bounds of the Labor Arbiter’s authority to decide a
case based on the mere position papers and support­
ing documents without a form al trial or hearing.
(Consolidated Rural Bank (Cagayan Valley, Inc. vs.
NLRC, G. R. No. 123810, January 20, 1999)

899
 REMEDIES

May the Labor Arbiter decide the case on the basis of a

Supplemental Position Paper and Memorandum subm it­
ted after the parties have filed their position papers and
agreed to consider the case submitted fo r decision after
the submission of their respective memoranda? Why?

ANS. No. This is in violation of specific provisions

of the NLRC Rules precisely intended to assist the
parties in obtaining just, expeditious and inexpensive
settlement of labor disputes.
One such provision is Section 3, Rules V of the
New Rules of Procedure of the NLRC which requires
the submission of verified position papers within fif­
teen days from date of the last conference, with proof
of service thereof on the other parties. The position
papers shall cover only those claims and causes of
action raised in the complaint excluding those that may
have been amicably settled, and shall be accompanied
by all supporting documents including the affidavits of
their respective witnesses which shall take the place of
the latter’s testimony. After the submission thereof,
the parties shall not be allowed to allege facts, or
present evidence to prove facts, not referred to and
any cause or causes of action not included in the
com plaint or position papers, affidavits and other
documents. (Mafiebo vs. NLRC, et al., G. R. No.
107721, January 10, 1994)
* * *

Is the Rules o f Court applicable to proceedings before

the Labor Arbiter and NLRC?

ANS. In the absence of any applicable provision in

the NLRC Rules of Procedure, and in order to effectu­
ate the objectives of the Labor Code, the pertinent
provisions of the Rules of Court and prevailing ju ­
risprudence may, in the interest of expeditious labor
justice and whenever practicable and convenient, be
applied by analogy or in a suppletory character and
effect.

900
 REMEDIES

Thus, since the NLRC Rules of Procedure does not

specifically define the term “filing", it was ruled that as
provided by the Rules of Court, the date of mailing of
the Appeal was considered the date of filing.
(Associated Anglo-American Tobacco Corporation vs.
NLRC et al., G. R. No. 125602, April 29, 1999)
Under the Revised Rules of Procedure of the
NLRC, service by registered mail is complete after five
(5) days from the date of first notice of the postmaster
in the event that the addressee fails to claim his
registered mail from the post office. And it has been
ruled that where the letter was returned “unclaimed”,
and the addressee alleges that it did not receive any
notice from the postmaster, it is incumbent upon the
addressee to rebut by competent and proper evidence
the legal presumption that official duty has been
performed regularly and judicial or quasi-judicial pro­
ceedings regularly conducted. This presumption in­
cludes regularity of service of summons and other
notices. (Columbus Philippines Bus Corporation vs.
NLRC et al., G. R. Nos. 11458-59, September 7,
2001 )

* ft *

The CBA provided that “ wages, hours off work, condi­

tions of employment and/or employer-employee rela­
tions shall be settled by arbitration.”
(a) Would a complaint fo r illegal dismissal, filed by
employees who were dismissed allegedly by reason of
redundancy, be covered by the abovementioned provi­
sion and must, as a consequence, be settled through
arbitration? Why?

ANS. No. The CBA does not state in unequivocal

language that the company and the union conform to
the submission of termination disputes and unfair labor
practices to voluntary arbitration.
Article 217 of the Labor Code, conferring jurisdic­
tion upon the Labor Arbiter on termination disputes and
unfair labor practices must be upheld and given effect.

901
 REMEDIES

(b) Does not the termination dispute call fo r the inter­

pretation or enforcement of company personnel poli­
cies, particularly the company personnel policy on lay­
offs arising from redundancy, and thus become griev-
able and arbitrable by virtue of Article 217 (c) of the
Labor Code? Explain.

ANS. No. Company personnel policies are guiding

principles stated in broad, long-range terms that ex­
press the philosophy or beliefs of an organization’s top
authority regarding personnel matters. The questioned
discharges due to alleged redundancy can hardly be
considered personnel policies. (San Miguel Corpora­
tion et al vs. NLRC et al., G. R. No. 108001, March
15, 1996)
* * *

After the Manilabank was prohibited by the Central Bank

from further doing business in the Philippines and its
assets placed under receivership, the bank employees
who were dismissed and paid whatever separation and/
or retirement benefits were due them, filed a complaint
against the bank and its statutory receiver before the
labor arbiter to recover alleged additional benefits due
them up to the date of their separation, to w it: (a) wage
increases, (b) Christmas bonuses, (c) mid-year
bonuses, (d) profit sharing, (e) car and travel plans, (f)
gasoline allowances, (g) differentials on accrued
leaves, retirement and other bonuses, (h) longevity pay
and loyalty pay, (i) medical, dental and optical benefits,
and O') uniform allowances. The claim was based on
Manilabank’s alleged practice, policy and tradition of
awarding said benefits. The labor arbiter granted the
claims. Is the decision o f the labor arbiter correct?
Why?

ANS. The award of wage increases and bonuses,

being in the nature of gratuities and dependent upon
the bank’s liberality and capacity to give, is not ju sti­
fied as the bank was operating on net loss.

902
 REMEDIES

The award of profit sharing of the bank’s net profits

should be deleted as there were clearly no profits
during the period.
The award of differentials on accrued leaves, re­
tirem ent benefits and on Christmas and m id-year
bonuses is also deleted; this is a necessary and logical
consequence of the denial of the wage increases and
Christmas and mid-year bonuses.
The award of medical, dental and optical benefits
is well taken.
The award for travel and car plans and gasoline
allowance is proper only for those who did not avail of
said benefit.
The award for longevity pay, loyalty bonuses and
uniform allowance is proper given the apparent Ipyalty
and allegiance shown by the employees despite the
bank’s rough sailing. (The Manila Banking Corporation
vs. NLRC et al., G. R. No. 107487, September 29,
1997)

* ifr it ' ; \ ,

In a case involving claims o f workers fo r non-payment

by the company off the increases required by a wage
order, the company interposed the defense that the
workers had in the CBA condoned such non-payment.
The labor arbiter however declared the provision on
condonation in the CBA as null and void and granted
the claim fo r underpayment o f wages. Is the decision of
the labor arbiter correct? Explain.

ANS. Yes. The provision of the CBA on condona­

tion is contrary to the mandate in the wage order.
Besides, it is only the Tripartite Wage Productivity
Board that can approve an exemption of an establish­
ment from coverage of a wage order. (Manila Fash­
ions, Inc. vs. NLRC et al., G. R. No. 117878,
November 13, 1996)
•k "Ct ■it

903
 REMEDIES

Samuel Tamayo agreed to construct fo r the Cabe

spouses their residential house, providing labor and
materials, fo r a specified sum in accordance with the
plans and specifications prepared by an architect. He
was not however able to finish the work because the
Cabe spouses dispensed with his services when he
allegedly made certain deviations from the plans, he
filed w ith the Regional Office of the Ministry of Labor a
claim fo r unpaid labor and materials.
(a) Does the Ministry of Labor and Employment have
jurisdiction over Samuel’s claim?

ANS. No. Samuel is an independent contractor;

no employer-employee relationship exists between him
and the Cabe spouses. (Cabe vs. Tumang, et al., G.
R. No. 57682, March 18, 1985)

(b) If some of the workers of Tamayo were not paid their

wages, are the Cabe spouses liable therefor, notwith­
standing the absence of employer-employee relation­
ship between Tamayo and the latter?

ANS. Yes. Pursuant to Article 106 of the Labor

Code, the Cabe spouses are jointly and severally liable
with Tamayo for unpaid wages to the extent of the work
performed under the contract.
* * *

V. was not re-elected by the Board of Directors of a

rural bank as bank manager. Under the bank’s by-laws,
the position of bank manager was elective. Claiming
that his dismissal was illegal and effected in bad faith,
V. filed a complaint fo r illegal dismissal against the
bank and its officers before the labor arbiter. Does the
labor arbiter have jurisdiction over the case? Explain.

ANS. No. The claim of V. is not a simple labor

problem but a matter that comes within the area of
corporate affairs and management; it is in fact a
corporate controversy in contemplation of the Corpora­
 REMEDIES

tion Code. (Dy, et al vs. NLRC, et al., G. R. No

68544, October 27, 1986)

* ★ ★

The Board of Directors of Philippine A ir Lines (PAL)

issued resolutions to the effect that Leslie Espino, PAL
Executive Vice President and Chief Operating Officer,
was considered resigned from the service fo r loss of
confidence and fo r acts inimical to the interests of the
company. Espino became EVP-COO by virtue of an
election by the Board of Directors pursuant to the
by-laws o f PAL. Claiming that he was illegally dis­
missed, Espino filed a complaint fo r illegal dismissal
with the Arbitration Branch of the NLRC.
(a) Does the Labor Arbiter have jurisdiction over the
case? Why?

ANS. No. This is an intra-corporate matter that

falls under the original and exclusive jurisdiction of the
Securities and Exchange Commission pursuant to Sec­
tion 5 of P. D. No. 902-A.
Espino’s position is indisputably an elective corpo­
rate office. A corporate officer’s dismissal is always a
corporate act and/or an intra-corporate controversy
and that nature is not altered by the reason or wisdom
which the Board of Directors may have in taking such
action.
Furthermore, the reason behind his non-election to
the position of EVP-COO arose from, or is closely
connected with, his involvement in alleged irregulari­
ties, as ruled by the PAL Board of Directors after
investigation. Evidently, this intra-corporate ruling
places the case under the specialized competence and
expertise of the SEC.

(b) Does the fact that Espino sought payment of back­

wages, other benefits, as well as moral and exemplary
damages and attorney’s fees in his complaint fo r illegal
dismissal operate to prevent the SEC from exercising its
jurisdiction under P. D. 902-A? Why?

905
 REMEDIES

ANS. No. The claims are actually part of the

perquisites of his elective office. The question of
remuneration of corporate officers is not a simple labor
problem but a matter that comes within the area of
corporate affairs and management. On the issue of
consequential damages, the SEC also has jurisdiction
since this is closely connected with the intra-corporate
dispute. (Espino vs. NLRC, et al., G. R. Nos.
109642-43, January 5, 1995; see also Lozon vs.
NLRC, et al., G. R. No. 107660, January 2, 1995;
jurisdiction is now with ordinary courts )

* * *

Guilas was appointed by the Board of Directors of

Galeriade Magallanes Condominium Association, Inc.
as Adm inistrator of its condominium project. The Ad­
m inistrator was specifically provided fo r in the by-laws
o f the association as among its executive officers.
When his appointment was not renewed by the Board of
Directors, Guilas filed a complaint fo r illegal dismissal
before the labor arbiter. The association moved to
dismiss the complaint on the ground of lack o f ju risd ic­
tion. Resolve.

ANS. The motion to dismiss is meritorious. Guilas

is a corporate officer and not merely an employee o f
the association. The by-laws of the association specif­
ically includes the Administrator in its roster of corpo­
rate officers. He was appointed directly by the Board
of Directors. A corporate officer’s dismissal is always
a corporate act and/or an intra-corporate controversy.
The complaint falls within the jurisdiction of the SEC.
(Ongkingco et al vs. NLRC et al., G. R. No. 119877,
March 31, 1997)
iV * #

Dr. T., a member of the Board of Trustees of a hospital

was appointed by the said Board as the hospital’s
Medical Director and Hospital Administrator. The ap­
 REMEDIES

pointment was made pursuant to the by-laws o f the

corporation which empowered the Board o f Trustees to
appoint a Medical Director, Comptroller/Administrator,
Chiefs o f Services and such other officers as it may
deem necessary and prescribe their powers and duties.
Dr. T. was later on dismissed by the Board o f Trustees.
She filed a complaint fo r illegal dismissal and non­
payment o f wages, allowances and 13th month pay
before the labor arbiter.
Does the labor arbiter have jurisdiction over the com­
plaint o f Dr. T.?W hy?

ANS. No. The matter is an intra-corporate contro­

versy and falls under the jurisdiction of the Securities
and Exchange Commission; (now with ordinary courts).
Dr. T. was an officer of the corporation; she was not
merely an employee; she occupied an office created
under the by-laws of the corporation and pursuant to
an election by the Board of Trustees. Under Section
5(c) of P. D. No. 902-A, the SEC exercises exclusive
jurisdiction over controversies in the election or ap­
pointment of directors, trustees, officers or managers
of corporations, partnerships or associations. (Tabang
vs. NLRC et al., G. R. No. 121143, January 21,
1997)

* * *

Ms. Priscilla Go was removed as Assistant to the

President and Administration and Personnel Manager of
Union Motors Corporation. She obtained such position
by appointment from the company’s Board of Directors.
The position is a corporate office under the by-laws of
the corporation.
(a) Does the Labor Arbiter have jurisdiction over the
complaint fo r illegal dismissal filed by Ms. Go against
the company? Why?

ANS. No. The complaint of Ms. Go partakes, of

the nature of an intracoporate dispute which among
 REMEDIES

others covers a controversy between the corporation

and its members.

(b) Since it did not interpose the issue of jurisdiction

before the Labor Arbiter, may the company raise the
same fo r the first time before the NLRC?

ANS. Yes. Jurisdiction over the subject matter is

conferred by law. Estoppel does not apply to confer
jurisdiction to a tribunal that has none over a cause of
action. Where it appears that the court or tribunal has
no jurisdiction, the defense may be interposed at any
time, even on appeal, or even after final judgment.
(Union Motors Corporation et al vs. NLRC et al., G. R.
No. 125931, September 16, 1999)

* * *

The National Housing Corporation, established to assist

and carry out the coordinated housing program of the
government, is a one hundred percent government-
owned corporation organized in accordance with Exec­
utive Order No. 399, the Uniform Charter of Government
Corporations dated January 5,1951. Its shares of stock
are owned by the GSIS, SSS, DBP, NIDC and the PHHC.
There has never been any private stockholders.
Are its employees covered by the provisions of the
Labor Code? In case an NHC employee is dismissed
w ithout cause and files a complaint fo r illegal dismissal
before the labor arbiter, should the latter entertain the
complaint? Explain.

ANS. The employees of the NHC are subject to

civil service law, rules and regulations; they are not
covered by the Labor Code. They are part of the Civil
Service which under Section 1, Article Xll-B of the
1973 Constitution “embraces every branch, agency,
subdivision and instrumentality of the Government,
including government-owned or controlled corporations
x x x." The inclusion of “government-owned or con­
trolled corporations,’ created by special charter or not

908
 REMEDIES

and performing government or proprietary functions,

within the embrace of the civil service is intended to
plug a loophole which allowed these entities to avoid
the full consequences of the all encompassing cover­
age of the civil service system.
A complaint for illegal dismissal against the NHC
therefore comes under the jurisdiction of the Civil
Service Commission and not the labor arbiter.
(National Housing Corporation vs. Juco, et al., G. R.
No. L-64313, January 17, 1985; but see Juco vs.
NLRC et al., G. R. No. 98107, August 18, 1997,
Chapter I of this Reviewer)

•k it ft

On March 20, 1987 fifty-five retrenched employees filed

a complaint fo r unpaid separation pay against Food
Terminal, Inc. (FTI) with the Department of Labor and
Employment. The complaint was later amended to
include charges of underpayment o f wages and non­
payment of emergency cost of living allowances. FTI
moved to dismiss the complaint on the ground o f lack
of jurisdiction, arguing that being a government-owned
and controlled corporation, its employees are governed
by the C ivil Service Law and not by the Labor Code, and
that claims arising from employment fall w ithin the
jurisdiction of the Civil Service Commission. The labor
arbiter granted the motion to dismiss. Is the dismissal
justified?

ANS. No. The FTI, which served as the marketing

arm of the National Grains Authority (now NFA) is a
government-owned and controlled corporation without
original charter. Under the 1987 Constitution which
took effect on February 2, 1987, only government-
owned or controlled corporations with original charters
are embraced in the civil service. (Lumunta, et al vs.
NLRC, et al., G. R. No. 82819, February 8, 1989)

* it it

909
 REMEDIES

Joel Montoya, a table supervisor at Casino Filipino, was

dismissed by PAGCOR fo r loss of confidence. Claiming
that he was dismissed w ithout due process, Montoya
filed a complaint fo r damages and attorney’s fees before
the Regional Trial Court against PAGCOR; the latter
however, moved to dismiss the complaint to r lack of
jurisdiction; it alleged that the case was cognizable by
the Labor Arbiter and the NLRC. The RTC however
denied the motion.
(a) Is the denial o f PAGCOR’s m otion to dismiss
proper? Explain.

ANS. No. The case, involving the question of

whether or not Montoya was illegally dismissed, falls
under the jurisdiction of the Merit System Protection
Board and the Civil Service Commission conformably
to the Administrative Code of 1987. The mere fact that
Montoya was claiming for damages does not confer
jurisdiction upon the regular courts; the damages were
supposedly sustained because of the arbitrary dis­
missal.

(b) Why is the case not cognizable by the Labor Arbiter

or the NLRC?

ANS. PAGCOR, it should be noted, was created by

P. D. 1869 in 1983; it is a government-owned or
controlled corporation with an original charter; it is
therefore part of the civil service. (Philippine Amuse­
ment and Gaming Corporation vs. Court of Appeals, et
al., G. R. No. 93396, September 30, 1991)

* * *

Does the Labor Arbiter have jurisdiction over a com

plaint fo r illegal dismissal filed by an employee against
the Philippine Nations! Red Cross? Why?

ANS. No. The Philippine National Red Cross

(PNRC) is a government owned and controlled corpo­
ration with an original charter under Republic Act Mo.
 REMEDIES

95, as amended. Its employees are under the jurisdic­

tion of the Civil Service Commission. (Camporedondo
vs. NLRC et al., G. R. No. 129049, August 6, 1999)
* H

Does the Labor Arbiter have jurisdiction over a claim o?

an employee of Southeast Asian Fisheries Development
Center-Aquaculture Department (SEAFDEC-AQD) an in­
ternational organization, fo r separation pay and other
post-employment benefits? Explain.

ANS. No. Being an intergovernmental organiza­

tion, the SEAFDEC, including its departments (AQD),
enjoys functional independence and freedom from
control of the state in whose territory its office is
located. It enjoys immunity from the legal writs and
processes issued by the tribunals of the host govern­
ment. This is to prevent the latter from interfering in
the organization’s operations and influencing its poli­
cies and decisions. (Southeast Asian Fisheries Devel­
opment Center, et al vs. NLRC, et al., G. R. No.
86773, February 14, 1992)
•ft * *

May a labor arbiter take cognizance of a complaint fo r

illegal dismissal against the Joint United States Military
Assistance Group to the Republic o f the Philippines
(JUSMAG-Philippines) despite the iatter’s objection
based on non-suability of the U. S. Government?
Explain.

ANS. No. In hiring the claimant, JUSMAG per­

formed a governmental function in behalf of the U. S.
Government; this act cannot be considered a waiver of
immunity from suit. There is sovereign equality of
states; an equal has no power over an equal.
(JUSMAG-Philippines vs. NLRC, et al., G. R. No.
108813, December 15, 1994)

911
 REMEDIES

May the Labor Arbiter take cognizance over a complaint

fo r illegal dismissal filed against the United Nations
Revolving Fund fo r Natural Resources Exploration
(UNRFNRE)? Why?

ANS. No. Respondent is a specialized agency of

the United Nations. It enjoys immunity under the
Charter of the United Nations and the Convention on
the Privileges and Immunities of the Specialized Agen­
cies of the United Nations.
The Philippines adopts the generally accepted prin­
ciples of international law. It adheres to the doctrine
of immunity granted to the United Nations and its
specialized agencies.
The UNRFNRE is not even engaged in a commer­
cial venture in the Philippines. Its mission is not to
exploit our natural resources and gain pecuniarily
thereby but to help improve the quality of life of the
people.
The recourse of the claimants would be through the
modes of settlement of disputes provided for by the
agency itself. (Lasco, et al vs. United Nations
Revolving Fund for Natural Resources Exploration, et
al., G. R. Nos. 109C05-109107, February 23, 1995)
★ * ★

Does the Labor Arbiter have jurisdiction over a claim fo r

illegal dismissal filed by a pastor against the Seventh-
Day Adventist Mission Corporation, in view o f the prin­
ciple o f separation o f church and state? Explain.

ANS. Yes. The case does not concern an ecclesi-

astical or purely religious affair as to bar the State
from taking cognizance of the same. W hat is involved
here is the relationship of the church as an employer
and the minister as an employee. It is purely secular
and has no relation whatsoever with the practice of
faith, worship or doctrines of the church. The minister
was not excommunicated or expelled from member­
ship of the church but was terminated from employ­

912
 REMEDIES

ment. (Austria vs. NLRC et al., G. R. No. 124382,

August 16, 1999)

it it it

Alisasis, a salesman, was dismissed by his employer fo r

loss of confidence; he was not however accorded due
process by the latter prior to his dismissal. Thereafter,
he claimed monetary benefits from the Mutual Aid Plan
established by the union to which he belonged. The
union however denied his claim because under the
rules governing the mutual aid program a “ member
dismissed fo r cause” was not entitled to any benefit or
return of contributions. Alisasis filed a claim against
the union before the Med-Arbiter of the Bureau o f Labor
Relations.
(a) Does the Med-Arbiter have jurisdiction over the
claim of Alisasis? Why ?

ANS. Yes. It is an intra-union conflict over which

the Med-Arbiter has exclusive and original jurisdiction.
An intra-union conflict is a conflict within or inside a
labor union. The Med-Arbiter also has jurisdiction over
an inter-union controversy, which is one occurring or
carried on between or among unions. It may be
mentioned, additionally, that the decision of the Med-
Arbiter is appealable to the Secretary of Labor.

(b) May Alisasis be considered to have been dismissed

fo r cause? Why?

ANS. Yes. There existed valid and lawful grounds

for the company to dismiss him. The flaw in his
dismissal was merely in the manner by which the same
was effected, a circumstance quite distinct from the
existence of valid and lawful causes for dismissal.
(Pepsi-Cola Sales and Advertising Union vs. Hon.
Secretary of Labor, et al., G. R. No. 97092, July 27,
1992)

* * *

913
 REMEDIES

!n a general membership meeting o f the union, a resolu­

tion was adopted assessing each member the sum of
P1.098.00 to be deducted from the lump sum of
P10.980.00 which each employee was to receive under
the CBA. Magsipoc, Ibasco, Villarante and Ramirez
protested the deduction and refused to sign the autho­
rization slip fo r the deduction. The union thereafter
passed a resolution expelling them.
They filed a com plaint before the Arbitration Branch of
the NLRC fo r illegal and exorbitant deduction and illegal
expulsion.
Does the NLRC have jurisdiction over the case?

ANS. No. Clearly this is an intra-union dispute, a

dispute between a labor union and its members. Under
Article 226 of the Labor Code, an intra-union dispute
falls under the original and exclusive jurisdiction of the
Bureau of Labor Relations and the Labor Relations
Division of the regional offices, (flaw at Buklod ng
Manggagawa vs. NLRC, et al., G. R. Nos. 81852-53,
March 5, 1993)

* * *

Does the labor arbiter have jurisdiction over a claim of

plantation laborers against the sugar central fo r sugar
workers’ benefits under R. A. 809 (Sugar Act o f 1952)?
Why?

ANS. No. The labor arbiter’s jurisdiction under

Article 217 of the Labor Code involves or covers
disputes arising out or in connection with employer-
employee relationship. Workers of the sugar planta­
tion are employees of the plantation owner and not the
sugar central. (Hawaiian-Philippine Co. vs. Gul-
matico, et al., G. R. No. 106231, November 16,
1994)

* * *

914
 REMEDIES

May an employee who has been legally dism issed nev­

ertheless recover moral and exemplary damages from
the employer by reason o f such dismissal? Explain.

ANS. Although his dismissal is based on just or

authorized causes, he may still recover moral and
exemplary damages from the employer if the latter
effected the dismissal in an anti-social or oppressive
manner. The right of the employer to dismiss an
employee for just or authorized causes should not be
confused with the manner in which the right is exer­
cised and the effects flowing therefrom. The oppres­
sive and anti-social acts of the employer constitute a
violation of Article 1701 of the C ivil Code which
prohibits acts of oppression by either capital or labor
against the other, and Article 21, which makes a
person liable for damages if he w illfully causes loss or
injury to another in a manner that is contrary to morals,
good customs or public policy, the sanction for which,
by way of moral damages, is provided in Article 2219,
No. 10 (Quisaba vs. Sta. Ines Melale Veneer &
Plywood, Inc., G. R. No. L-38088, August 30, 1974).

* * *

In view o f the termination of employment o f Romeo

Rodriguez as claims investigator, his em ployer the
Philippine American Life Insurance Company published
a notice (with his picture) in the Bulletin Today, in the
follow ing tenor:

“ This is to inform the public that MR. ROMEO RO­

DRIGUEZ whose picture appears hereto has ceased to
be connected with the Philippine American Life Insur­
ance Company as Claims Investigator as o f the close of
the office hours of May 23,1979.
Any transaction entered into by him after said date w ill
n o t be honored by Philam life.” “ THE PHILIPPINE
AMERICAN LIFE INSURANCE COMPANY.”

Is the publication libelous? Why?

915
 REMEDIES

ANS. No. It is the ordinary notice usually pub­

lished in the newspapers informing the public that a
certain employee is no longer connected with an
employer. This is necessary to protect its business
from loss or injury. There is not even any mention of
the reason of the employee's separation. It is not
malicious. (De los Reyes vs. Hon. E. Espiritu, et al.,
G. R. No. 58395, April 12, 1982)

* * *

The collective bargaining agreement provides that the

covered employees are entitled to fifteen “ days” vaca­
tion leave w ith pay. The company contends that the
“ days” are calendar days; on the other hand, the union
argues that “ days” means working days. To settle the
dispute, the company files a petition with the Labor
Arbiter fo r the determination o f the correct meaning of
the term “ days” used in the CBA. If you were the Labor
Arbiter, what decision w ill you render? Why?

ANS. The petition should be dismissed. I do not

have jurisdiction over the case as it involves the
interpretation of a collective bargaining agreement.
Matters involving the interpretation of the CBA not
resolved or settled through the grievance machinery
must be referred to voluntary arbitration. (Article 261,
Labor Code)

* * *

What matters fall under the original and exclusive ju ris ­

diction o f voluntary arbitrators provided fo r in a CBA?

ANS. (a) Unresolved grievances arising from the

interpretation or implementation of the CBA and those
arising from the interpretation or enforcement of com­
pany personnel policies. (Art. 261, Labor Code); and
(b) all other labor disputes including unfair labor
practices and bargaining deadlocks submitted to them
by agreement of the parties. (Art. 262, Labor Code)

916
 REMEDIES

Employees were dismissed pursuant to the union secu­

rity clause of the collective bargaining agreement. They
filed a complaint fo r illegal dismissal against the com­
pany and their union before the labor arbiter. The union
filed a m otion to dismiss the com plaint alleging that the
Labor Arbiter was w ithout jurisdiction over the same
considering that cases arising from the interpretation or
implementation o f the collective bargaining agreement
should be resolved through the grievance machinery
and voluntary arbitration procedure in the CBA. Decide.

ANS. The motion to dismiss should be denied.

The case involves a termination dispute over which the
labor arbiter has original and exclusive jurisdiction
under Article 217 of the Labor Code. It is not further­
more a dispute between the company and the union; it
is a dispute between the dismissed employees on the
one hand and the company and the union on the other.
This has to be settled before an impartial body. The
grievance machinery with members designated by the
union and the company cannot be expected to be
impartial against the dismissed employees.
Only disputes involving the union and the company
shall be referred to the grievance machinery or volun­
tary arbitrators. An actual termination case falls within
the jurisdiction of the labor arbiter. (Sanyo Philippines
Workers Union, et al vs. Canizares, et al., G. R. No.
101619, July 8, 1992)

★ * *

Because of a collective bargaining deadlock on the

issue of wage increases, the union lodges a petition
w ith the labor arbiter fo r the latter to break the deadlock
and fix the wage increase that should be given to the
workers. The employer moves to dismiss the petition
on the ground that the labor arbiter has no jurisdiction
to resolve deadlocks in collective bargaining. Is the
m otion to dismiss meritorious? Why?

Q17
 REMEDIES

ANS. Yes. The jurisdiction of labor arbiters over

unresolved issues in collective bargaining, provided
for in the original version of Article 217 of the Labor
Code, has been deleted. This is in accord with the
State’s policy on free collective bargaining. The
parties are nevertheless free to utilize, upon compli­
ance with legal requirements, the economic weapons,
i. e., strikes or lockouts, given to them by law. Resort
to compulsory arbitration is not encouraged.

* * *

W ithin what period should (a) a complaint fo r unfair

labor practice and (b) money claims be filed with the
labor arbiter?

ANS. The complaint for unfair labor practice

should be filed within one (1) year from accrual
thereof, otherwise, it shall be forever barred. (Art.
290, Labor Code)
Money claims arising from employer-employee re­
lations must be filed within three (3) years from the
time the cause of action accrues; otherwise, they shall
be forever barred. (Art. 291, Labor Code)

* * •k

When does the prescriptive period start to run?

ANS. The prescriptive period for an action for

reinstatement or for money claims starts to run only
when the employer makes a categorical rejection of
the claim ; mere inaction of the em ployer on the
demands made by the employee cannot be considered
categorical. (Serrano vs. Court of Appeals et al., G.
R. No. 139420, August 15, 2001)
* * *

How may the three (3) year prescriptive period fo r

money claims be interrupted?

04 0
 REMEDIES

ANS. Applying Article 1155 of the Civil Code, the

prescriptive period is interrupted by the filing of the
claim with the appropriate ju dicial or quasi-judicial
body or by a written demand addressed to the em­
ployer (debtor). (MLQ University Association, et al vs.
MLQ Educational Institution, Inc., et al., G. R. No.
82312, April 19, 1989)

* * *

Callanta was dismissed from employment effective June

1, 1979. On July 5, 1982, he filed with the MOLE
Regional Office a complaint fo r illegal dismissal, rein­
statement and backwages. The company contended
that the complaint, having been filed three (3) years, one
(1) month and five (5) days after his alleged dismissal, is
now barred by prescription. Decide.

ANS. The action has not prescribed. Clearly,

when one is arbitrarily and unjustly deprived of his job
or means of livelihood, the action instituted to contest
the legality of one’s dismissal from employment consti­
tutes, in essence, an action predicated “upon an injury
to the rights of the plaintiff,” as contemplated under
Article 1146 of the New Civil Code, which must be
brought within four (4) years. It is not a mere “money
claim ” which under Article 292 (now Art. 291) of the
Labor Code prescribes in three (3) years.
It is true that the “backwages" sought by the
illegally dismissed employee may be considered as a
“money claim ” but this is not the principal cause of
action; it is merely one of the reliefs sought as a
consequence of the unlawful act committed by the
employer; the award of backwages is not in redress of
a private right, but rather is in the nature of a com­
mand upon the employer to make public reparation for
his violation of the Labor Code. (Callanta vs. Carna­
tion Philippines, Inc., et al., G. R. No. 70615,
October 28, 1986)
* * *

Q1Q
 REMEDIES

“ A ” started working in “ X” Company’s factory in Jan­

uary 1975, with a monthly salary of P50.00, or below the
minimum m onthly wage prescribed by law then in force.
On December 31, 1981, however, the company started
paying him in accordance with the minimum wage law.
In February 1982, he filed a claim with the Labor Arbiter
fo r salary differentials corresponding to the past seven
years, i. e., from 1975 to 1981. Is he entitled to recover
salary differentials that accrued during the past seven
years? Reason. (1982 Bar)

ANS. No. Under Article 291 of the Labor Code

money claims arising from employer-employee rela­
tions must be filed with the Labor Arbiter within three
(3) years from the time the cause of action accrued. In
the instant case, only the salary differential which fell
due within three (3) years from February 1982, the
date of filing of the claim, can be recovered; the rest
are barred by prescription.

* * *

Give the effects, if any, of the pendency of a money

claim before the labor arbiter on criminal and civil
actions arising from or based on the same cause of
action.

ANS. The Labor Code provides:

Art. 292. In s titu tio n o f m oney cla im s. —

Money claims specified in the immediately preceding
Article shall be filed before the appropriate entity
independently of the criminal action that may be
instituted in the proper courts.
Pending the final determination of the merits of
money claims filed with the appropriate entity, no civil
action arising from the same cause of action shall be
filed with any court. This provision shall not apply to
employee’s compensation cases which shall be pro­
cessed and determined strictly in accordance with the
pertinent provisions of this Code.

920
 REMEDIES

State your agreement o r disagreement with the follow­

ing statement and explain your answer briefly: A crimi­
nal case filed against an employee does not have the
effect o f suspending or interrupting the running of the
prescriptive period fo r the filin g o f an action fo r illegal
dismissal. (2002 Bar)

ANS. I agree. The pendency of a criminal case

against the employee has nothing to do with an action
for illegal dismissal he has filed against the employer.
As a matter of fact, an acquittal in the criminal case
does not bar an employer from dismissing the em­
ployee. The employees guilt or innocence in a criminal
case is not determinative of the existence of a just or
authorized case for his dismissal. An action for illegal
dismissal is an administrative case which is separate
and distinct from a crim inal action. (Pepsi Cola
Bottling Co. of the Philippines vs. Guanzon et al., G.
R. No. 81162, April 19, 1989) And under Article 292
o f the Labor Code, money claim s arising from
employer-employee relationship shall be filed indepen­
dently of criminal actions that may be instituted in the
proper courts.
* it *

Of the twenty-eight (28) individual complainants in a

case fo r unfair labor practice and illegal dismissal, six
(6) had their workplaces in the National Capital Region,
thirteen (13) in Cagayan de Oro, and nine (9) in
Cabuyao, Laguna. Their union, which was also a com­
plainant, had its offices in Makati, Metro Manila. The
company had its principal office in the National Capita!
Region.
After the subm ission o f position papers and the testi­
mony of three of the individual complainants, the com­
pany filed a motion to dismiss the case on the ground of
improper venue considering that under Section 1 (a),
Rule V, of the NLRC Rules ail cases which Labor Ar­
biters have authority to hear and decide may be filed in
the Regional Arbitration Branch having jurisdiction over

cm
 REMEDIES

the workplace o f the complainant/petitioner. The com­

pany had also raised this issue in its position paper.
Decide.

ANS. The motion to dismiss should be denied.

The company had waived the defense of improper
venue by failing to pursue the same with diligence.
Although it invoked the said ground in its position
paper, it thereafter participated, with neither qualifica­
tion nor condition, in the hearing on the merits of the
case. The belated awakening from deep slumber and
deafening silence deserves no sympathy but, rather ,
condem nation as it is a crude legal maneuver,
grounded on pure technicality and unfavorable to
labor, designed to delay the proceedings before the
Labor Arbiter.
The Revised Rules of the NLRC does not allow a
motion to dismiss on the ground of improper venue to
interrupt or delay the proceedings. Under Section 14,
Rule VII of said Rules, only c isioiion to dismiss on the
ground of lack of jurisdiction, bar by prior judgment or
prescription, may be filed.
Section 1 (a), Rule V of the NLRC, which provides
that the complaint rnay be filed in the Regional Arbitra­
tion Branch having jurisdiction over the workplace of
the complainant, is intended for the exclusive benefit
of the worker. The reason for this is not only conve­
nience; it is economic as well. But the worker may
waive the benefit.
The rule on venue under the Rules of Court has
suppletory application. Under the Rules of Court,
actions may be commenced and tried where the defen­
dant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiffs resides, at
the election of the plaintiff. (Nestle Philippines, Inc.,
et al vs. NLRC, et al., G. R. No. 98363, June 15,
1992)
* *lr *

Describe briefly the procedure followed by labor ar­

biters in the hearing of cases brought before them.

922
 REMEDIES

ANS. Under the new rules of procedure of the

NLRC, the Labor Arbiter shall first summon the parties
for the purpose of amicable settlement, sim plification
of issues, and determination of other preliminary is­
sues. If no amicable settlement is arrived at, he shall
require the parties to submit verified position papers
and then determine whether there is a need for a
formal trial or hearing. The proceedings are non-
litigious in nature. The decision of the Labor Arbiter
must be clear and concise and contain a brief state­
ment of facts, the issues and laws involved, the
reasons therefor, and the relief granted. .
The Labor Arbiter has the authority to determine
whether or not there is a necessity for conducting
formal hearings in cases brought before him for adjudi­
cation. The holding of a form al hearing or trial is
discretionary with the Labor Arbiter and is something
that the parties cannot demand as a matter of right. It
is within h is ’authority to decide the case before him,
based on the position papers and supporting docu­
ments of the parties, without a trial or formal hearing.
(Columbus Philippines Bus Corporation vs. NLRC et
al., G. R. Nos. 114858-59, Septem ber?, 2001)

* * *

Are the technical rules o f evidence followed in proceed­

ings before labor arbiters?

ANS. The Labor Code provides:

Art. 221. T e c h n ic a l ru le s n o t b in d in g and

p r io r re s o rt to a m ica b le s e ttle m e n t. — 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

923
 REMEDIES

due process. In any proceeding before the Commis­

sion or any Labor Arbiter, the parties may be repre­
sented by legal counsel but it shall be the duty of the
Chairman, any Commissioner or any Labor Arbiter to
exercise complete control of the proceeding at all
stages.
Any provision of law to the contrary notwithstand­
ing, the Labor Arbiter shall exert all efforts towards the
amicable settlem ent of a labor dispute within his
jurisdiction on or before the first hearing. The same
rule shall apply to the Commission in the exercise of
its original jurisdiction. (As amended by R. A. 6715)
Failure of the workers to submit their position
paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint
of the workers. In admitting the position paper, albeit
late, the Labor Arbiter acted within her discretion. In
fact, she is enjoined by law to use every reasonable
means to ascertain the facts in each case speedily and
objectively, all in the interest of due process.
It is unsporting for a party to impute partiality on
the part of the Labor Arbiter just because the decision
is adverse to him. Error in judgment is not equivalent
to undue bias or to grave abuse of discretion amount­
ing to an excess of jurisdiction which renders the
decision null and void. (University of the Immaculate
Concepcion et al vs. UIC Teaching and Non-Teaching
Personnel et al., G. R. No. 144702, July 31, 2001)

* * *

Is a trial-type hearing essential to due process in pro­

ceedings before the labor arbiter? Discuss.

ANS. A trial-type hearing is not at all times and in

all instances essential to due process in proceedings
before the labor arbiter. Due process is satisfied
where the records show that the parties were given
ample opportunity to present as they did present,
affidavits and position papers where they set out their
factual and legal arguments.

cm
 REMEDIES

Furthermore, the holding of a trial is discretionary

on the labor arbiter and cannot be demanded as a
matter of right by the parties. A party’s claim that a
formal hearing should have been had so that it could
present controverting evidence is not in consonance
with the need for speedy disposition of labor cases.
(National Federation of Labor [NFL] et al vs. NLRC et
al., G. R. No. 113466, November 15, 1997)
* * *

May non-lawyers appear before labor arbiters?

ANS. Non-lawyers may appear before labor ar­

biters only if they represent themselves or their organi­
zations or members thereof. (Art. 222, Labor Code)

* * *

Are decisions of labor arbiters appealable? If so, state

the period w ithin which the appeal should be taken, the
body to whom the appeal should be brought, and the
grounds therefor.

ANS. Yes, the decisions of the labor arbiters are

appealable within ten (10) calendar (not working) days
from receipt of the decision, to the National Labor
Relations Commission, which has supervision over
them, on the following grounds.
(a) If there is p rim a fa c ie evidence of abuse of
discretion on the part of the labor arbiter;
(b) If the decision, order or award was secured
through fraud or coercion, including graft and corrup­
tion;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are
raised which would cause grave or irreparable damage
or injury to the appellant. (Article 223, Labor Code)

He ft He

925
 REMEDIES

How is the appeal perfected?

ANS. The appeal is perfected by the filing by the

appellant with the labor arbiter his memorandum of
appeal, copy furnished the appellee, and the payment
of the appeal fee.
The appeal must be taken within ten (10) c a le n d a r
days from receipt of a copy of the decision. (Vir-Jen
Shipping and Marine Services, Inc. vs. NLRC, et a!.,
G. R. Nos. L-58011-12, July 20, 1932). The payment
of the appeal fee is an essential requirement in the
perfection of the appeal. (Acda vs. M inister of Labor,
et al., G. R. No. L-51607, December 15,1982). If the
tenth day falls on a Sunday or a legal holiday, the
appeal may be filed on the next business day. (SM
Agri and General Machineries vs. NLRC, et al., G. R.
No. 74806, January 9, 1989)

* * iV

How is an appeal by an employer from a monetary

award by the labor arbiter perfected?

ANS. In case of a judgment involving 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
Commission in the amount equivalent to the monetary
award in the judgment appealed from. (Art. 223,
Labor Code, as amended by R. A. 6715)

* * *

Cite instances where appeals filed beyond the period of

ten (10) calendar days were allowed and given due
course.

ANS. (a) The appellant’s reliance on the erro­

neous fact on the notice of the decision, which stated
that “the aggrieved party may appeal . . . . within ten
(10) working days as per NLRC Resolution No. 1,

926
 REMEDIES

series of 1977,” has been held to be a reasonable

ground for excusing non-compliance with the ten (10)
calendar day period for appeal. (Chong Guan Trading
vs. NLRC, et al., G. R. No. 81471, April 26, 1989;
Firestone Tire and Rubber Company vs. Lariosa, G.
R. No. 70479, February 27, 1987)
(b) Where the appeal could not be filed on the
tenth calendar day because this was a Saturday and
the offices of the NLRC were ciosed, and neither could
it have been sent by registered mail because the post
office was also closed, it was held that the filing
thereof on the following Monday which was the 12th
calendar day, was seasonably made. (Pacafia vs.
NLRC, et al., G. R. No. 83512, April 18, 1989; see
also Aquino vs. NLRC et al., G. R. No. 98108,
September 3, 1993)
Where there was a one (1) day delay in the filing of
the employee’s appeal from a decision of the labor
arbiter, occasioned by a typhoon which caused the
closure of the post office, it was ruled that the NLRC
did not gravely abuse its discretion in allowing the
appeal. (Surigao del Norte Electric Cooperative vs.
NLRC et al., G. R. No. 125212, June 28, 1999)
* * *-

Is the order o f reinstatement of a labor arbiter stayed by

an appeal?

ANS. No. The reinstatement aspect of the labor

arbiter’s decision is immediately executory. The em­
ployee shall either be admitted back to work or at the
option of employer merely reinstated in the payroll.
The posting of a bond shall not stay the execution for
reinstatement. (Art. 223, Labor Code, as amended by
R. A. 6715)

★ * /r

Give the legal effects of the follow ing: (a) appeal to the
NLRC made beyond ten (10) calendar days, but w ithin

927
 REMEDIES

ten (10) working days, from receipt of the decision of

the labor arbiter; and (b) failure of the appellant to
furnish a copy of his memorandum appeal to the ad­
verse party.

ANS. (a) The appeal should be dismissed. Appeal

from the decision of the labor arbiter to the NLRC must
be made within ten (10) calendar (not working) days
from receipt of a copy of the decision. (RJL Martinez
Fishing Corporation vs. NLRC, et al., G. R. Nos.
L-63550-51, January 31,1984)
(b) This is not a jurisdictional defect; it is a mere
formal lapse and an excusable neglect; it is technical
ground and does not justify dismissal of the appeal.
(Pagdonsalan vs. NLRC, et al., G. R. No. L-63701,
January 31, 1984; Carnation Phil. Employees Labor
Union-FFW vs. NLRC, et al., G. R. No. L-64397,
OctobeF 11., 1983)

* * *

Article 223 of the Labor Code requires, fo r the perfection

of an appeal by an employer from a decision involving a
monetary award of the Labor Arbiter to the NLRC, that
the appellant post a cash or surety bond in the amount
equivalent to the monetary award in the judgm ent ap­
pealed from.
(a) When is the posting of the bond not necessary?

ANS. The bond is not necessary if the monetary

award consists solely of moral and exemplary dam­
ages.
The bond is not also necessary where the appellant
employer is prepared to accept and comply with the
monetary awards. (Erectors, Inc. vs. NLRC, et al., G.
R. No. 93690, October 10, 1991)

(b) May the appellant be allowed to post the bond after

the lapse of the ten-day period w ithin which to perfect
the appeal?

928
 REMEDIES

ANS. The posting of a cash or surety bond is a

jurisdictional requirement for the perfection of the
appeal; however, where the non-filing of the bond
could be attributed to excusable oversight, such as
where the notice of the appealed decision which set
forth the requirements for an appeal, did not mention
the filing of a bond, the appellant should be given a
reasonable period within which to file the bond. The
requirement should be given a liberal interpretation.
(YBL vs. NLRC, et al., G. R. No. 93381, September
28,1990)
W here the original decision did not state the
amount awarded as backwages and overtime pay, the
appellant may be allowed to post the bond after the
amount has been fixed although this is beyond the
period to appeal. (Rada vs. NLRC, et al., G. R. No.
96078, January 9, 1992)
* * *

May the posting o f a bond in order to perfect an appeal,

as provided fo r in Article 223 of the Labor Code, be
dispensed w ith? Cite instances.

ANS. As a general rule, non-compliance with this

legal requirement is fatal and has the effect of render­
ing the judgment final and executory. However, the
Supreme Court has eased this requirement in order to
bring about the immediate and appropriate resolution
of controversies on the merits without overindulgence
in technicalities, ever mindful of the underlying spirit
and intention of the Labor Code to ascertain the facts
o f each case speedily and objectively without regard to
technical rules of law and procedure, all in the interest
of due process.
Where an association of Negritos performing trash
sorting services in the American naval base in Subic
Bay could not post the required bond allegedly by
reason of insolvency, the Supreme Court dispensed
with this requirement in the greater interests of social
justice. The Constitution and our laws were precisely

OOfi
 REMEDIES

formulated under a sense of obligation to the marginal­

ized and the underprivileged. The Court also took into
account the association’s plea that dismissal of their
appeal for failure to post the bond is tantamount to
violation of the constitutional guaranty that free access
to the courts shall not be denied to any person by
reason of poverty. (Cabalah Poslulan Negrito Labor
Association, et al vs. NLRC, et a!., G. R. No.
106108, February 23, 1995)
Where respondents filed their notice of appeal
within the ten-day period but posted a surety bond
almost a month after the appeal period has lapsed, the
appeal is not deemed perfected and the Labor Arbiter’s
decision becomes final and executor. The explanation
given by respondents that the surety failed to attach
the required Supreme Court certification to the bond is
not an excuse for the delay. The duty to ensure that
the bond satisfies all the formal requirements before it
is filed.within the ten-day appeal period rests solely on
the respondents as appellants. (Gaudia vs. NLRC et
al., G. R. No. 109371, November 13, 1999)
The posting of a cash or surety bond is a require­
ment sine qua non for the perfection of an appeal from
the labor arbiter’s monetary award. The posting of a
bond within the period provided by law is not merely
mandatory but jurisdictional. And it is grave abuse of
discretion on the part of the NLRC to allow the em­
ployer to post a bond beyond the reglementary period
and entertain the appeal simply on his allegation that
he is not the employer and therefore exempt from
posting the bond. (Santos vs. Velarde et al., G. R.
No. 140753, April 30. 2003)

* * it

Give the policy o f the Supreme Court regarding appeals

in labor cases.

ANS. The Supreme Court is very strict regarding

appeals filed outside the reglementary period for filing
the same. To extend the period of the appeal is to

MA
 REMEDIES

delay the case, a circumstance which could give the

employer the chance to wear out the efforts and
meager resources of the worker that the latter is
constrained to give up for less than what is due him.
(Italian Village Restaurant and/or Andrew Ng vs.
NLRC, et al., G. R. No. 95594, March 11, 1992;
Firestone Tire and Rubber Co. of the Philippines vs.
Firestone Tire and Rubber Co. Employees Union, et
al., G. R. No. 75363, August 4, 1992)

Vr * *

Cite some jurisprudence on appeals.

ANS. Article 223 of the Labor Code provides that

in case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon
the posting of a cash or surety bond in the amount
equivalent to the monetary award. The word “only"
makes it perfectly clearly that the lawmakers intended
that the posting of the bond is the exclusive means by
which an em ployer’s appeal may be perfected.
(Oriental Mindoro Electric Cooperative, Inc. vs. NLRC
et al., G. R. No. 111905, July 31, 1995)
An appeal from a decision of the labor arbiter filed
one (1) day late may be entertained by the NLRC. This
is justified under Articles 218(c) and 221 of the Labor
Code and considering that the appellants were mere
salesgirls who were trying to obtain better working
conditions for themselves. (City Fair Corporation vs.
NLRC et al., G. R. No. 95711, April 21, 1995)
The filing of supersedeas bond for the perfection of
an appeal is mandatory and jurisdiction. It is true that
in some cases, the Court relaxed the requirement of
posting supersedeas bond for the perfection of an
appeal. But the decisions in those cases were justified
by the fact that there was substantial compliance with
the rule, so that on balance, technical considerations
had to give way to considerations of equity and justice.
(Quiambao vs. NLRC et al., G. R. No. 91935, March
4, 1996)

931
 REMEDIES

Even where the reglementary period for filing an

appeal has already lapsed, a petition for relief filed by
workers may stil! be entertained and treated as an
appeal in order to prevent deprivation on the part of
the workers of benefits which are rightfully due them.
(New Pacific Timber & Supply Co., Inc. vs. NLRC, et
al., G. R. No. 124224, March 17, 2000)
* * *

Does a division of the NLRC have jurisdiction (a) to

entertain an employer’s petition fo r injunction and dam­
ages, and an appeal from the labor arbiter’s denial of a
claim fo r set-off based on an alleged indebtedness of
the laborer and order the execution of the final ju d g ­
ment,- anji (b) thereafter to receive evidence, adjudge
recovery on such indebtedness and authorize it to off­
set the labor arbiter’s final award in favor o f the em­
ployee? Explain.

ANS. No. This will defeat a final judgment of the

labor arbiter. The NLRC has only appellate, not
original jurisdiction over the money claims covered by
the final judgment. (Pondoc vs. NLRC et al., G. R.
No. 116347, October 3, 1996)
* * *

May tardiness of the appeal from the decision of the

Labor Arbiter to the NLRC be excused? Explain.

ANS. As a general rule, the perfection of an

appeal in the manner and within the period prescribed
by law should not only be considered mandatory but
jurisdictional. However, the procedural lapse may be
disregarded where there is an acceptable reason to
excuse tardiness. Among these are (a) counsel’s
reliance on the footnote of the notice of the decision of
the Labor Arbiter that “the aggrieved party may appeal
within ten(10) working days”; (b) fundamental consid­
erations of substantial justice; (c) prevention of mis­

932
 REMEDIES

carriage of justice or of unjust enrichment, as where

the tardy appeal is from a decision granting separation
pay which was already granted in an earlier final
decision; (d) special circumstances of the case com­
bined with its legal merits, or the, amount is the issue
involved; and (e) where the iabor arbiter’s lack of
jurisdiction is palpably clear on the face of the com-
piaint, and unjust enrichment will be perpetuated if the
appeal is disallowed. (Philippine Airlines, Inc. vs.
NLRC etal., G. R. No. 120508, October 28, 1996)
The requirements for perfecting an appeal within
the reglementary period specified in the law must be
strictly followed as they are considered indispensable
interdictions against needless delays and for orderly
discharge of judicial business, it is only in highly
meritorious cases that the Court opts not to strictly
apply the rules and thus prevent a grave injustice from
being done. (Corporate Inn Hotel et al vs. Lizo, G. R.
No. 148279, May 27, 2004)

Vf >*f -ft

Article 223 of the Labor Code, as amended by R. A.

6715, requires the posting of a cash or surety bond fo r
the perfection of an appea! from a monetary award of
the Labor Arbiter, May the appellant be allowed to post
a property bond in lieu o f a cash o r surety bond?
Explain.

ANS. Yes. This is pursuant to the current policy

not to strictly follow technical rules and to stress the
importance of deciding cases on the basis of their
substantive merit. Where, for instance, the judgment
involved more than P17 million and its precipitate
execution can adversely affect the existence of the
employer medical center, and it appearing that the reai
property bond was worth more f.han P102 million, it
was held that the posting of a real property bo«td was
sufficient compliance with the requirements of Article
223. (UERM-Memorial. Medical Center, et ai vs.
NLRC et al., G. R. No. 110419, March 3, 1997)

933
 REMEDIES

Article 223 o f the Labor Code provides that in case of a

judgm ent involving a monetary award, an appeal by the
employer maybe perfected only upon the posting of a
cash or surety bond in the amount equivalent to the
monetary award in the judgm ent appealed from. Does
the amount of the bond include the award fo r moral and
exemplary damages and attorney’s fees?

ANS. No. Under the NLRC Rules of Procedure the

amount of the bond excludes moral and exemplary
damages as well as attorney’s fees. The rules consti­
tute a contemporaneous construction of Article 223 of
the Labor Code. The exclusion has been recognized in
a number of cases. (Fernandez et al vs. NLRC et al.,
G. R. No. 105892, January 28, 1998)
* * *

May an employee who has not appealed from the deci­

sion o f a labor arbiter declaring his dismissal illegal and
awarding him separation pay sans backwages be
awarded such backwages by the Supreme Court in the
certiorari proceedings interposed by the employer? Ex­
plain.

ANS. While as a general rule, a party who has not

appealed is not entitled to affirm ative relief other than
the ones granted in the decision of the court below, law
and jurisprudence authorize a tribunal to consider
errors, although unassigned, if they involve (1) errors
affecting the lower court’s jurisdiction over the subject
matter, (2) plain errors not specified, and (3) clerical
errors. The failure of the Labor Arbiter and the public
respondent NLRC to award backwages to the em­
ployee, who is legally entitled thereto having been
illegally dismissed, amounts to a “plain error’ which we
may rectify in this petition, although the employee did
not bring any appeal regarding the matter, in the
interest of substantial justice. The Supreme Court is
clothed with ample authority to review matters, even if
they are not assigned as errors on appeal, if it finds

934
 REMEDIES

that their consideration is necessary in arriving at a

just decision of the case. Ruies of procedure are mere
tools designed to facilitate the attainment of justice.
Their strict and rigid application, which would resuit in
technicalities that tend to frustrate rather than promote
substantial justice, must always be avoided. Thus,
substantive rights like the award of backwages result­
ing from illegal dismissal must not be prejudiced by a
rigid and technical application of the rules. (Aurora
Land Projects Corp., etc. vs. NLRC, et al., G. R. No.
114733, January 2, 1997)
* * *

The NLRC gave duo course to an appeal notwithstand­

ing the failure of the appellants to allege the date of
their receipt of the labor arbiter’s decision. Does this
constitute grave abuse of discretion?

ANS. ’ No. The failure to file the appeal within the

prescribed period of ten (10) calendar days is jurisdic­
tional. But the failure to state the date of receipt of the
assailed decision is only a procedural lapse that is
addressed to the sound discretion of the NLRC. The
timeliness of the appeal could be verified from the
records. (Del Mar Domestic Enterprises et al vs.
NLRC et al., G. R. No. 108731, December 10, 1997)
* & it

Is payment of the appsal docket the necessary fo r the

perfection of an appeal from a decision of the Labor
Arbiter to the NLRC? Why?

ANS. No. The law does not provide that payment

of the appeal fee is necessary for the perfection of the
appeal. Failure to pay the appeal fee docket is not
fatal.
As a matter of fact, in labor standards cases, the
payment of docket fees is excused; Article 277 (d) of

935
 REMEDIES

the Labor Code provides that no docket fee shall be

assessed in labor standard disputes. (Aba vs. NLRC
et al., G. R. No. 122627, July 28, 1999)

* * *

In the proceedings before the labor arbiter, only the

unregistered trade name o f the employer-corporation
(Hacienda Lamutan) and its adm inistrator/manager
(Jose Edmundo Pison) were impleaded ss respondents
and subsequently held liable fo r illegal dismissal, back­
wages and separation pay. On appeal, however the
National Labor Relations motu proprio included the
corporate name o f the employer (Pison-Arceo Agricul­
tural and Development Corporation) as jo in tly and sev­
erally liable fo r the workers’ claims. Is the action o f the
NLRC violative o f due process? Explain.

ANS. No. In quasi-judicial proceedings, procedu­

ral rules governing service of summons are not strictly
construed. Substantial compliance thereof is suffi­
cient.
The NLRC is also empowered, under Article 218(c)
of the Labor Code to correct, amend, or waive any
error, defect or irregularity whether in the substance or
in the form of the proceedings before it.
And it is undisputed that summons and all notices
of hearing were duly served upon Jose Edmundo
Pison, the administrator and representative of the
corporation and recognized as such by the workers
therein; his knowledge of the labor case and effort to
resist it can be deemed knowledge and action of the
corporation. (Pison-Arceo Agricultural and Develop­
ment Corporation vs. NLRC et al., G. R. No. 117890,
September 18, 1997)

* * *

Give the composition of the National Labor Relations

Commission (NLRC).

936
 REMEDIES

ANS. The NLRC is composed of a Chairman and

fourteen (14) members. Five (5) members each shall
be chosen from among the nominees of the workers
and employers organizations, respectively. The Chair­
man and the four (4) remaining members shall come
from the public sector, with the latter to be chosen
from among the recommendees of the Secretary of
Labor and Employment.
The Commission may sit en banc or in five (5)
divisions, each composed of three (3) members. The
first and second divisions shall handle cases coming
from the National Capital Region, and the third, fourth
and fifth divisions, cases from other parts of Luzon,
from the Visayas and Mindanao, respectively. (Art.
213, Labor Code, as amended by R. A. 6715)
* * *

Give the powers o f the National Labor Relations Com­

mission.

ANS. Under Article 218, as amended, of the Labor

Code, the NLRC has the power and authority:

(a) To promulgate rules and regulations governing

the hearing and disposition of cases before it and its
regional branches, as well as those pertaining to its
internal functions and such rules and regulations as
ma^r be necessary to carry out the purposes of this
Code;
(b) To administer oaths, summon the parties to a
controversy, issue subpoenas requiring the attendance
and testimony of witnesses or the production of such
books, papers, contracts, records, statements of ac­
counts, agreements, and others as may be m a te ria ijo
a just determination of the matter under investigation,
and to testify in any investigation or hearing conducted
in pursuance of this Code;
(c) To conduct investigation for the determination
of a question, matter or controversy within its jurisdic­
tion, proceed to hear and determine the disputes in ihe

A4*r
 REMEDIES

absence of any parly thereto who has been summoned

or served with notice to appear, conduct its proceed­
ings or any part thereof in public or in private, adjourn
its hearing to any time and place, refer technical
matters or accounts to an expert and to accept his
report as evidence after hearing the parties upon due
notice, direct parties to be joined in or excluded from
the proceedings, correct, amend, or waive any error,
defect, or irregularity whether in substance of in form,
give all such directions as it may deem necessary or
expedient in the determination of the dispute before it,
and dismiss any matter or refrain from further hearing
or from determining the dispute or part thereof, where
it is trivial or where further proceedings by the Com­
mission are not necessary or desirable; and
(d) To hoid any person in contempt directly or
indirectly and impose appropriate penalties therefor.
A person guilty of misbehavior in the presence of
or so near the Chairman or any member of the Com­
mission or any Labor Arbiter as to obstruct or interrupt
the proceedings before the same, including disrespect
toward said officials, offensive personalities toward
others, or refusal to be sworn or to answer as a witness
or to subscribe an affidavit or deposition when lawfully
required to do so, may be summarily adjudged in direct
contempt by said officials and punished by a fine not
exceeding five hundred pesos (P500.00) or imprison­
ment not exceeding five (5) days, or both if it be the
Commission, or member thereof or by a fine not
exceeding one hundred pesos (PI 00.00) or imprison­
ment not exceeding one (1) day, or both if it be a Labor
Arbiter.
The person adjudged in direct contempt by a Labor
Arbiter may appeal to the Commission and the execu­
tion of the judgment shall be suspended pending the
resolution of the appeal upon the filing by such person
of a bond on condition that he will abide by and
perform the judgment of the Commission should the
appeal be decided against him. Judgment of the
Commission on direct contempt is immediately execu­
tory and inappealable. Indirect contempt shall be dealt
with by the Commission or Labor Arbiter in the manner
 REMEDIES

prescribed under Rule 71 of ihe Revised Rules of

Court; and
(e) To enjoin or restrain any actual or threatened
commission of any or all prohibited or unlawful acts or
to require the performance of a particular act in any
labor dispute which, if not restrained or performed
forthwith, may cause grave or irreparable damage to
any party or render ineffective any decision in favor of
such party: P ro vid e d , That no temporary or perma­
nent injunction in any case involving or growing out of
a labor dispute as defined in this Code shall be issued
except after hearing the testimony of witnesses, with
opportunity for cross-examination, in support of the
allegations of a com plaint made under oath, and
testimony in opposition thereto, if offered, and only
after a finding of fact by the Commission, to the effect:

(1) That prohibited or unlawful acts have been

threatened and will be committed unless restrained, or
have been committed and will be continued unless
restrained, but no injunction or temporary restraining
order shall be issued on account of any threat, prohib­
ited or unlawful act, except against the person or
persons, association or organization making the threat
or committing the prohibited or unlawful act or actually
authorizing or ratifying the same after actual knowl­
edge thereof;
(2) That substantial and irreparable injury to
complainant’s property will follow;
(3) That, as to each item of relief to be granted,
greater injury will be inflicted upon complainant by the
denial of relief than will be inflicted upon defendants
by the granting of relief;
(4) That complainant ha? no adequate remedy at
law; and
(5) That the public officers charged with the duty
to protect complainant’s property are unable or unwill­
ing ta furnish adequate protection.

Such hearing shall be held after due and personal

notice thereof has been served, in such manner as the
Commission shall direct, to all known persons against

ftO A
 REMEDIES

whom relief is sought, and also to the Chief Executive

and other public officials of the province or city within
which the unlawful acts have been threatened or
committed charged with the duty to protect com­
plainant's property: P ro vid e d , how ever, That if a
complainant shall also allege that, unless a temporary
restraining order shall be issued without notice, a
substantial and irreparable injury to com plainant’s
property w ill be unavoidable, such temporary restrain­
ing order may be issued upon testimony under oath,
sufficient, if sustained, to justify the Commission in
issuing a temporary injunction upon hearing after
notice. Such a temporary restraining order shall be
effective for no longer than twenty (20) days and shall
become void at the expiration of said twenty (20) days.
No such temporary restraining order or temporary
injunction shall be issued except on condition that
complainant shall first file an undertaking with ade­
quate security in an amount to be fixed by the Com­
mission sufficient to recompense those enjoined for
any loss, expense or damage caused by the im provi­
dent or erroneous issuance of such order or injunction,
including all reasonable costs, together with a reason­
able attorney’s fee, and expense of defense against
the order or against the granting of any injunctive relief
sought in the same proceeding and subsequently de­
nied by the Commission.
The undertaking herein mentioned shall be under­
stood to constitute an agreement entered into by the
complainant in the same suit or proceeding against
said complainant and surety, upon £ hearing to assess
damages, of which hearing complainant and surety
shall have reasonable notice, the said complainant and
surety submitting themselves to the jurisdiction of the
Commission for that purpose. But nothing herein
contained shall deprive any party having a claim or
cause of action under or upon such undertaking from
electing to pursue his ordinary remedy by suit at law or
in equity: P ro v id e d , fu rth e r, That the reception of
evidence for the application of a writ of injunction may
be delegated by the Commission to any of its Labor
Arbiters who shall conduct such hearings in such
 REMEDIES

places as he may determine to be accessible to the

parties and their witnesses and shall submit thereafter
his recommendation to the Commission.
* * -tt

May the NLRC enjoin a strike? Cite an instance.

ANS. Where at the time the injunction was being

sought, there existed a threat on the part of the union
to revive an unlawful strike, as shown by the flyers it
circulated, a factual basis for the issuance of the
injunction by the NLRC exists. Furthermore, the
declaration of a strike without the required notice is a
prohibited activity which may be prevented through an
injunction. (San Miguel Corporation vs. NLRC et al.,
G. R. No. 119293, June 10, 2003)
■ft Vr *

Labor Arbiter Aquino found that PAL illegally dismissed

Singson. PAL appealed Aquino’s decision to the NLRC.
Meanwhile, Arbiter Aquino was appointed the presiding
commissioner of the second division of the NLRC. The
second division composed of Aquino, Calaycay and
Rayala, acted on PAL’s appeal, reversing the decision of
then Labor Arbiter Aquino. Singson filed a m otion for
reconsideration; this was denied by the second divi­
sion, with only two commissioners (Calaycay and Ray­
ala) taking part. Is the NLRC resolution reversing the
labor arbiter’s decision valid? Why?

ANS. No. There was a denial of due process when

Commissioner Aquino participated in reviewing his
own decision as a former labor arbiter. Litigants are
entitled to a review of three (3) commissioners who are
impartial from the start of the review process. Com­
missioner Aquino can hardly be considered impartial
since he was the arbiter who decided the case under
review. (Singson vs. NLRC et al., G. R. No. 122389,
June 19, 1997)

941
 REMEDIES

Is the NLRC or a Labor Arbiter empowered to conduct

an ocular inspection?

ANS. Yes. Article 219 of the Labor Code provides

that:

The Chairman, any Commissioner, Labor Arbiter or

their duly authorized representative, may at any time
during working hours, conduct an ocular inspection on
any establishment, building, ship or vessel, place or
premises, including any work, material, implement,
machinery, appliance or any object therein, and ask
any employee, laborer, or any person as the case may
be for any information or data concerning any matter
or question relative to the object of the investigation.

ft ft ft

May the NLRC order the reinstatement of workers who

did not appeal from a decision of the labor arbiter
ordering the payment to them of separation pay in iieu
o f reinstatement? Why ?

ANS. No. An appellee who has not himself

appealed cannot obtain from the appellate court any
affirm ative relief other than those granted in the deci­
sion of the court below. The appellee can only
advance argument to defeat the appellant’s claim or to
uphold the disputed decision. (SMI Fish Industries,
Inc., et al vs. NLRC, et al., G. R. Nos. 96952-56,
September 2, 1992)
ft ft ft

Is Act 3110, which took effect on March 19,1923, outlin­

ing the procedure fo r the reconstitution o f records
destroyed by fire, applicable to cases pending before
the NLRC?

ANS. No. The said law applies only to reconstitu­

tion of records pending judicial proceedings. The

942
 REMEDIES

NLRC is a quasi-judicial body. Moreover, Article 221

of the Labor Code provides that facts in labor cases be
speedily and objectively ascertained without regard to
technicalities of law or procedure ail in the interest of
due process. (Manila Resource Development Corpora­
tion vs. NLRC, et al., G. R. No. 75242, September
2, 1992)
ft * *

May the NLRC consider •svidence submitted for the first

time on appeal? Why?

ANS. Yes. In keeping with the directive of Article

221 of the Labor Code that every and all reasonable
means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or
procedure, the NLRC may consider evidences such as
documents and affidavits, submitted by the parties for
the first time on appeal. (Bristol Laboratories Employ­
ees Association, et al vs. NLRC, et al., G. R. No.
87974, July 2, 1990; Philippine Telegraph and Tele­
phone Corporation vs. NLRC, et al., G. R. No.
80600, March 21, 1990)
While Article 221 of the Labor Code allows the
NLRC to admit evidence for the first time on appeal, in
order to avoid denial of due process, this does not
sanction the reasonless violation of procedural rules
which were promulgated precisely to achieve order in
the dispensation of justice. Where the document
submitted to the NLRC for the first time on appeal was
available during the proceedings before the Labor
Arbiter and the appellant employer could not offer any
excuse for its non-submission thereat, admission of
such document by the NLRC is unwarranted; the NLRC
did not even give the other party an opportunity to
refute the same. There was over due process given to
the employer, and under due process for the em­
ployee. (Villa vs. NLRC et al., G. R. No. 131552,
February 19, 1999)
No undue sympathy is to be accorded to any claims
of a procedural misstep in labor cases. Such cases
 REMEDIES

must be decided according to justice and equity and

the substantial merits of the controversy. Thus, evi­
dence submitted to the NLRC for the first tim e on
appeal by the employer should be admitted especially
where the complainant had been given opportunity to
rebut the same before the NLRC, the Court of Appeals,
and the Supreme Court. (EDI Staff Builders Interna­
tional, Inc. et al vs. Magsino, G. R. No. 139430,
June 20, 2001)

* * *

Under the! decision rendered by the Labor Arbiter, the

complainants were found to have been illegally dis­
missed and therefore entitled to reinstatement with
backwages and attorney’s fees; It was however pro­
vided that those who were no longer willing to be
reinstated may opt for separation pay. During the
pendency of the appeal before the NLRC, the parties
entered into a compromise agreement whereby the em­
ployer would immediately pay to complainants the full
amount of their gross benefits and the latter would
waive their right to reinstatement. The NLRC approved
the compromise agreement. The employer however
withheld certain sums due to four (4) of the com­
plainants. The NLRC partially rescinded the compro­
mise agreement and ordered the employer to reinstate
the four (4) complainants and to pay backwages.
(a) Is the compromise agreement, which was approved
by the NLRC, valid?

ANS. Yes. Settlements of this kind are not only

recognized to be proper agreements but so encour­
aged as well.

(b) Did the NLRC gravely abuse its discretion when it

partially rescinded the compromise agreement? W hy?

ANS. No. Under Article 2041 of the Civil Code,

should a party fail or refuse to comply with the terms
of a compromise or amicable settlement, the other

944
 REMEDIES

party could either (1) enforce the compromise by a

w rit of execution, or (2) regard it as rescinded and so
insist upon his original demand. The original demand
of the four (4) complainants was fo r them to be
reinstated to their form er positions. Certainly, there
was nothing erroneous, let alone grave abuse of dis­
cretion, on the part of the NLRC when it accordingly
ordered their reinstatement with backwages. (Morales,
et al vs. NLRC, et al., G. R. No. 100133, February
6, 1995)
* * *

Kanlaon Construction Enterprises Co., Inc. is a private

domestic corporation with principal address in Quezon.
Complaints for underpayment of wages were filed
against the company by workers in lligan City. Sum ­
mons were served upon the engineer who supervised
the company construction project in lligan City. The
engineer also appeared before the labor arbiters and
promised to settle the workers’ claims.
(a) Was summons validly served upon the corporation?
W hy?

ANS! Yes. Under the NLRC Rules of Procedure,

summons on the respondent shall be served on the
respondent personally or by registered mail on the
party himself. If the party is represented by counselor
any other authorized representative or agent, sum­
mons shall be served on such person. The engineer as
manager of the project had sufficient responsibility and
discretion to realize the importance of the legal papers
served on him and to relay the same to the president
or other responsible officer o f the corporation.

(b) Is the promise of settlement made by the engineer

before the labor arbiters binding upon the corporation?
W hy?

ANS. No. A promise to pay amounts to an offer to

compromise and requires a special power of attorney

945
 REMEDIES

at the express consent of the corporation. The author­

ity to compromise cannot be lightly presumed and
should be established by evidence.

(c) Considering that the parties were not able to reach a

settlement, were the labor arbiters justified in deciding
the cases on the merits w ithout requiring the submis­
sion o f position papers?

ANS. No. This is violative of due process. Under

Section 3, Rule V of the NLRC Rules of Procedure, if
the parties fail to agree upon an amicable settlement,
the labor arbiter shall direct them to simultaneously file
their respective verified position papers. (Kanlaon
Construction Enterprises Co., Inc. vs. NLRC et al., G.
R. No. 126625, September 18, 1997)
* * Hr

What weight should be given to findings o f the labor

arbiter and the NLRC regarding the existence o f
employer-employee relationship? Explain.

ANS. The question whether an employer-employee

relationship exists is a question of fact. As long as the
findings of the labor agencies on this question are
supported by substantial evidence, the same will not
be disturbed on review by the Supreme Court.
Where tile labor arbiter and the NLRC concluded
that there existed an employer-employee relationship
between a watchman and a construction company
despite the fact that vouchers signed by the watchman
showed that he was paid storage fees and not wages,
the Supreme Court nonetheless found no cogent rea­
son to disturb the findings of the labor agencies
considering that there was also evidence that the
company had cited the watchman for the loss of four
(4) batteries and had paid the watchman storage fees
on equipment stored in its own property. (Algon
Engineering Construction Corporation et al vs. NLRC
et al., G. R. No. 83402, October 6, 1997)

946
 REMEDIES

What is the judicial remedy against decisions o f the

National Labor Relations Commission and the Secretary
of Labor and Employment?

ANS. The remedy is a petition for certiorari under

Rule 65 of the Rules of C ivil Procedure, for grave
abuse of discretion amounting to lack or excess of
jurisdiction. The petition should be filed with the Court
of Appeals in strict observance of the doctrine on the
hierarchy of courts. (St. Martin Funeral Homes vs.
NLRC e ta l., G. R. No. 130866, September 16, 1998;
National Federation of Labor (NFL) vs. Hon. B.
Laguesma et al., G. R. No. 123426, March 10, 1999)

* * *

W ithin what period should the petition fo r certiorari be

filed with the Court of Appeals?

ANS. Under Section 4, Rule 65 (as amended by A.

M. No. 00-2-03-SC) of the Rules of Civil Procedure,
the petition must be filed within sixty (60) days from
notice of the judgment or from notice of the resolution
denying the petitioner's motion for reconsideration.
This amendment is effective September 1, 2000, but
being curative may be given retroactive application.
(Narzoles et al vs. NLRC et al., G. R. No. 141959,
September 29, 2000)
The period within which a petition for certiorari
against a decision of the NLRC may be filed should be
computed from the date counsel of record of the party
receives a copy of the decision or resolution, and not
from the date the party him self receives a copy
thereof. Article 224 of the Labor Code, which requires
that copies of final decisions, orders or awards be
furnished not only the party’s counsel of record but
also the party himself applies to the execution thereof
and not to the filing of an appeal or petition for
certiorari. (Ginete vs. Sunrise Manning Agency et al.,
G. R. No. 142023,June 21, 2001)

947
 REMEDIES

is the failure o? the petitioner to file a motion for recon­

sideration before filing a petition for certiorari before
the Court of Appeals always a fatal omission? Explain.

ANS. No. In the interest of substantial justice, and

especially in cases involving the rights of workers, the
procedural lapse may be disregarded to enable the
Court to examine and resolve the conflicting rights and
responsibilities of the parties and afford protection to
the dismissed employee. (Ranara vs. NLRC, et al., G.
R. No. 100969, August 14, 1992; see also Alfante vs.
NLRC et al., G. R. No. 122655, December 15, 1997)
The precipitate filing of a petition for certiorari
under Rule 65 of the Rules of Court without first
moving for reconsideration of the NLRC decision reso­
lution warrants the outright dismissal of the case.
Such motion is indispensable for it affords the NLRC
an opportunity to rectify errors or mistakes it might
have committed before resort to the courts can be had.
Certiorari will lie only if there is no appeal or any
other plain, speedy and adequate remedy in the ordi­
nary course of law against the acts of public respon­
dents. (Escorpizo et al vs. University of Baguio and
NLRC, G. R. No. 121962, April 30, 1999; Veloso vs.
China Airlines and NLRC, G. R. No. 104302, July 14,
1999)
But a motion for reconsideration is not required
when the questions raised in the petition for certiorari
are those which have been squarely raised in and
passed upon by the NLRC. (Kiambo vs. NLRC et al.,
G. R. No. 129449, June 29, 1999)
The NLRC gravely abused its discretion in enter­
taining a supplemental motion for reconsideration be­
yond the ten (10) calendar day period. Entertaining
such supplemental motion for reconsideration allows
the parties to submit their motions for reconsideration
on a piecemeal basis. This would defeat the rule’s
clear intent to facilitate the speedy disposition of
cases. (Favila et al vs. NLRC et al., G. R. No.
126768,June 16, 1999)
The decision of the Secretary of Labor is subject to
judicial review only through a special civil action for

948
 REMEDIES

csrtiorari. As a rule, this remedy cannot be resorted to

without the aggrieved party having exhausted adminis­
trative remedies through a motion for reconsideration.
The said party must therefore be allowed to move for
reconsideration of the decision so that he can bring the
special civil action for certiorari. (ABS-CBN Supervi­
sors Employees Union Members vs. ABS-CBN Broad­
casting Corporation et al., G. R. No. 106518, March
11,1999)
The general rule is that a motion for reconsidera­
tion is indispensable before resort to the special civil
action for certiorari to afford the court or tribunal the
opportunity to correct its error, if any. Any party
claiming exemption from this rule must show sufficient
justification for dispensing with the requirement of a
prior motion for reconsideration. A bare allegation that
the case falls within the exception is not sufficient.
(Metro Transit Organization, Inc. et al vs. The Court
of Appeals et al., G. R. No. 142133, November 19,
2002 )
The filing of a motion for reconsideration of the
decision or resolution of the NLRC is not a condition
sine oua non before a petition for certiorari against the
NLRC may be given due course where it appears that
the very issues raised in the petition for certiorari had
already been duly passed upon and resolved by the
NLRC. The filing of the motion for reconsideration
would be an exercise in futility. (Abraham vs. NLRC
et al., G. R. No. 143823, March 6, 2001)
* * *

May the lack of jurisdiction of the Labor Arbiter and the

NLRC be raised for the first time in a petition for certio­
rari before the Supreme Court? Why?

ANS. No. It has been consistently held that while

jurisdiction may be assailed at any stage, a party’s
active participation the proceedings before a court
without jurisdiction will estop such party from assailing
such lack of it. It is an undesirable practice of a party
 REMEDIES

participating in the proceedings and submitting his

case for decision and then accepting the judgment only
if favorable, and attacking it for lack of jurisdiction,
when adverse. (Ilocos Sur Electric Cooperative, Inc.,
et al vs. NLRC, et al., G. R. No. 106161, February
1, 1995)
* * *

What weight should be given to the factual findings of

the NLRC?

ANS. It is well settled that factual findings of

quasi-judicial agencies like the NLRC, which have
acquired expertise because their jurisdiction is con­
fined to specific matters, are generally accorded not
only respect but at times even finality if such findings
are supported by substantial evidence. (Manila Man­
darin Employees Union vs. NLRC, et al., G. R. No.
76989, September 28, 1987; Baby Bus Inc. vs. Minis­
ter of Labor, et al., G. R. No. 34223, February 26,
1988)
it it if

What factual findings of the NLRC are binding upon the

Supreme Court?

ANS. Factual findings of the NLRC, to be binding

on the Supreme Court, must have a fairly good degree
of freedom from uncertainty. Hence, the decision
rendered by NLRC to the effect that the delivery truck
driver and truck helper of an ice plant were validly
dismissed for loss of confidence due to theft of one-
fourth block of ice was reversed by the High Court
considering that the ice could have been inadvertently
left inside the truck and the security guard who re­
ported the alleged theft might have had a motive to
make such an adverse report against the duo. The
penalty of dismissal, furthermore, is too harsh to be
meted for less than strong evidence and palpable

ocn
 REMEDIES

reasons. (Marcelo and Sarcia vs. NLRC, et al., G. R.

No. 113458, January 31, 1995)
Findings of fact of the NLRC, when supported by
si/bstantial evidence, are accorded not only respect
but at times finality if such findings are supported by
substantial evidence. Especially so if the findings are
affirmed by the Court of Appeals. Such findings of fact
can only be set aside upon showing of grave abuse of
discretion, fraud, or error of law. (Felix vs. Enertech
Systems Industries, Inc. et al., G. R. No. 142007,
March 28, 2001)
Factual findings of labor administrative officials, if
supported by substantial evidence, are accorded not
only great respect but even finality, unless there is a
showing that the Labor Arbiter and NLRC arbitrarily
disregarded evidence before them or had misappre­
hended evidence of such nature as to compel a con­
trary conclusion if properly appreciated. (University of
the Immaculate Concepcion et al vs. UIC Teaching
and Non-Teaching Personnel et al., G. R. No.
144702, July 31, 2001)

* * *

It is well-settled that factual findings of quasi-judicial

agencies such as the NLRC are generally accorded not
only respect but, at times, even finality. Is this rule
absolute? Explain.

ANS. No. This rule admits of certain well-

recognized exceptions. Thus, when the findings of fact
of the NLRC are not supported by substantial evi­
dence, capricious or arbitrary and directly at variance
with those'of the Labor Arbiter, the Court may make an
independent evaluation of the facts of the case. (Villar
et al vs. NLRC et al., G. R. No. 130935, May 11,
2000; Samson vs. NLRC et al., G. R. No. 121035,
April 12, 2000)
 REMEDIES

May the Supreme Court re-examine the probative value

o r evidentiary weight o f the evidence presented before
the Labor Arbiter o r the NLRC? Explain.

ANS. The findings of the Labor Arbiter, when

affirm ed by the NLRC and the Court of Appeals, are
binding on the Supreme Court unless patently erro­
neous. It is not the function of the Supreme Court to
analyze or weigh all over again the evidence already
considered in the proceedings below. The jurisdiction
of the Court is limited only to reviewing errors of law
that may have been committed by the lower courts or
tribunals. (Metro Transit Organization, Inc. et al vs.
The Court of Appeals et al., G. R. No. 142133,
November 19, 2002; Hantex Trading Co., Inc. et al vs.
Court of Appeals et al., G. R. No. 148241, Septem­
ber 27, 2002)
★ ★ *

Does the NLRC exercise any original jurisdiction?

ANS. Yes. It has original jurisdiction over labor

disputes causing or likely to cause strikes or lockouts
in industries indispensable to the national interest and
which are certified to it for compulsory arbitration by
the Secretary of Labor and Employment pursuant to
Article 263 (g) of the Labor Code. It can also entertain
petitions for injunction under Article 218 (e).

* * *

Agujar, an overseas worker, filed a com plaint against

the shipping agency fo r payment o f salaries fo r the
unexpired portion o f two employment contracts and
separation pay corresponding to his ten (10) years o f
service. As the com plaint was filed about three and a
half (3 Vi) years after the wrongful termination o f Agu-
ja r’s employment, the employer moved to dismiss the
same on the ground o f prescription. Decide.

on
 REMEDIES

ANS. The complaint is not barred by prescription.

Agujar's claim is not a sheer monetary demand; it is
fundamentally a charge of illegal dismissal; it arises
prim arily from injury to one’s rights; under Article 1146
of the C ivil Code, an action based upon ‘ injury to
rights" prescribes in four (4) years. (Pan-Fil Co., Inc.
vs. Agujar, et al., G. R. No. L-81948, November 9,
1988)

* * *

Six (6) Filipino workers entered into an agreement fo r

overseas assignment-employment w ith Hydro. This
corporation which had a jo in t venture w ith Jadro, a
Saudi Arabian company, assigned the employment con­
tracts to the latter w ith the conform ity o f the workers.
Jadro paid only 60% o f the money claims of the workers.
They sought to collect the balance from Hydro. Hydro
interposed the defense that the assignment o f contracts
to Jadro relieved it o f any responsibility fo r the workers’
claim. Decide.

ANS. Hydro is liable. The assignment of the

contracts was obviously a scheme to relieve Hydro of
its responsibility to the workers. This the law cannot
allow. The policy to give full protection to labor, local
or overseas, must be enforced.
Under Policy Instruction No. 22 of the Department
of Labor and Employment, construction workers to be
hired and employed by duly registered and authorized
jo int venture companies are deemed direct employees
of such corporation. This is designed to protect the
well-being of Filipino workers overseas so that a labor
contractor remains to be an employer of an employee
even if there is an assignment of the contract of
employment. (Hydro Resources Contractors Corpora­
tion vs. NLRC, et al., G. R. No. L-80143, December
8, 1988)

* * *

953
 REMEDIES

How should the monetary award of the POEA against a

recruiter be enforced?

ANS. A judgment against a recruiter should ini­

tially be enforced against the cash and surety bonds
filed with the POEA. These bonds answer for all sorts
of liabilities of the recruiter to the worker and to the
POEA. The obligations they guarantee are continuing;
they are subject to replenishment when they are gar­
nished and failure to replenish shall cause the suspen­
sion or cancellation of the recruiter’s license. Further­
more, a cash bond shall be refunded to a recruiter who
surrenders his license only upon posting of a surety
bond of sim ilar amount valid for three (3) years. (Del
Rosario vs. NLRC, et al., G. R. No. 85416, July 24,
1990)
* * *

The Secretary o f Labor issued a department order and

the POEA issued circulars temporarily suspending the
recruitment by private employment agencies of Filipino
domestic helpers going to Hongkong. These measures
were intended to protect the domestic helpers from
unscrupulous practices o f agencies victim izing a pp li­
cants fo r employment in Hongkong. The Philippine
Association o f Service Exporters, Inc. however assailed
the order and circulars as unconstitutional, unreason­
able, oppressive and unenforceable. Decide.

ANS. The order as weil as the circulars are valid

and reasonable and can be justified under Article 36 of
the Labor Code which empowers the Secretary of
l abor to restrict and regulate the recruitment and
placement activities of agencies and to issue orders
and promulgate rules and regulations to carry out the
objective of the law. This is a grant of police power.
The order and the circulars cannot however be en­
forced in the abstnce of proof of compliance wiVh
Section 3 (1), Chapter 2, Book VII of the Administra­
tive Code of 1987 providing that every agency shall

954
 REMEDIES

file with the UP Law Center three (3) certified copies of

every rule adopted by it. The rule only becomes
effective fifteen (15 )days from the date of such filing.
(Philippine Association of Service Exporters, Inc. vs.
Hon. R. D. Torres, et al., G. R. No. 101279, August
6, 1992)

* * *

Who has the power to suspend or cancel the license or

authority to recruit employees fo r overseas employ­
ment?

ANS. This power is concurrently vested with the

POEA and the Secretary of Labor and Employment.
This is clear from the provisions of Article 35 of the
Labor Code and the decisions of the Supreme Court in
Eastern Assurance and Surety Corporation vs. Secre­
tary o f Labor, 181 SCRA 110 and People vs. Diaz, 259
SCRA 441. (Transaction Overseas Corporation vs.
Hon. Secretary of Labor et al., G. R. No. 109583,
September 5, 1997)

* * *

How are labor decisions enforced?

ANS. Article 224 of the Labor Code, as amended,

provides:

“Art. 224. E x e c u tio n o f d e c is io n s , o rd e rs , o r

aw ards. — (a) The Secretary of Labor and Employ­
ment or any Regional Director, the Commission or any
Labor Arbiter or Med-Arbiter, or the voluntary arbitrator
or panel of voluntary arbitrators may, m o tu p ro p rio or
on motion of any interested party, issue a writ of
execution on a judgment within five (5) years from the
date it becomes final and executory, requiring a sheriff
or a duly deputized officer to execute or enforce finsl
decisions, orders or awards of the Secretary of Labor
and Employment or Regional Director, the Commis­

955
 REMEDIES

sion, or the Labor Arbiter or Med-Arbiter, or voluntary

arbitrator or panel of voluntary arbitrators. In any
case, it shall be the duty of the responsible officer to
separately furnish immediately the counsels of record
and the parties with copies of said decisions, orders or
awards. Failure to comply with the duty prescribed
herein shall subject such responsible officer to appro­
priate administrative sanctions.
“(b) The Secretary of Labor and Employment, and
the Chairman of the Commission may designate spe­
cial sheriffs and take any measure under existing laws
to ensure compliance with their decisions, orders or
awards and those of Labor Arbiters and voluntary
arbitrators or panel of voluntary arbitrators, including
the imposition of administrative fines which shall not
be less than five hundred pesos (P500.00) nor more
than ten thousand pesos (P10.000.00).”
* * He

Give the remedies of a third party whose properties

have been levied upon in a labor case.

ANS. The remedies of ,a third party whose proper­

ties have been levied upon by the Sheriff in a labor
case may avail himself of the following alternative
remedies:

a) File a third party claim with the Sheriff of the

Labor Arbiter; and
b) If the third party claim is denied, the thirtf party
may appeal the denial to the NLRC

Even if a third party claim is denied, a third party

may still file a proper action with a competent court to
recover ownership of the property illegally seized in
Sec. 16, Rule 16, Rule 39 of the Revised Rules of
Court. The proper action is entirely separate and
distinct from that in which execution has issued.
The remedies are cumulative and may be resorted
to by a third-party claimant independent of or sepa­
rately from and without need of availing of others.

958
 REMEDIES

The filing of a third party claim with the Labor

Arbiter and the NLRC does not preclude the petitioner
from filing a subsequent action for recovery of property
and damages with the Regional Trial Court. And the
institution of such complaint will not make the peti-,
tioner guilty of forum shopping. (Yupangco Cotton
Mills, Inc. vs. Court of Appeals et a l., G. R. No.
126322, January 16, 2002)
The NLRC should not automatically lift the levy
and restrain execution of final and executory judgment
of the Labor Arbiter just because a third-party claim
has been filed.
When a third-party claim is filed, the sheriff is not
bound to proceed with the levy of the property unless
the judgment creditor or the latter’s agent posts an
indemnity bond against the claim. Where the bond is
filed, the remedy of the third-party claimant is to file an
independent reinvindicatory against the judgm ent
creditor or the purchaser of the property at public
auction. (Tomongon vs. Samson et al., G. R. No.
140889, May 9, 2002)

* * *

Is the order o f execution of a final and executory ju d g ­

ment o f the Labor Arbiter appealable?

ANS. No. Otherwise, there would be no end to a

case. (King Integrated Security Services, Inc. et al.
vs. Gatan, G. R. No. 143813, July 7, 2003)

* * *

Do labor arbiters have jurisdiction over inter-union or

intra-union conflicts, like petitions fo r certification elec­
tion, union elections, union disaffiliation, denial or can­
cellation o f union registration, and violation o f union
constitution and by-laws?

ANS. Labor arbiters have no jurisdiction over

inter-union or intra-union conflicts, except where the

957
 REMEDIES

same also constitute an unfair labor practice. These

matters or controversies fall under the original and
exclusive jurisdiction of the Regional Offices of the
Department of Labor and Employment subject to ap­
peal to the Bureau of Labor Relations (BLR) or to the
Secretary of Labor in certification election cases.

* * *

Is the Bureau o f Labor Relations competent to order

referendum election among the members of a labor
union to ascertain their wishes as to their affiliation with
a labor federation? Explain.

ANS. Yes. Article 226 of the Labor Code, granting

to the Bureau of Labor Relations and the Regional
Offices jurisdiction over “inter-union and intra-union
conflicts” should, in the interest of industrial peace, be
given a broad and expansive meaning. (Litex Employ­
ees Association vs. Eduvala, et al., G. R. No.
L-41106, September 22, 1977)
* * *

Article 211 (a) of the Labor Code provides that it is the

policy of the State to promote free collective bargaining,
including voluntary arbitration, as a mode of settling
labor o r industrial disputes.
(a) What is voluntary arbitration?

ANS. It is the settlement of a controversy or

disputed matter by the decision of an individual or
group, called arbitrator or arbitrators, freely selected or
chosen by the parties and to whom such controversy or
disputed matter is by agreement of the latter submitted
f o r a final'and binding decision.

(b) Distinguish it from compulsory arbitration.

ANS. It is distinguished from compulsory arbitra­

tion in that under the latter the consent of either or

958
 REMEDIES

both of the parties regarding the submission of the'

controversy or disputed m atter to arbitration is en­
forced by statutory provisions. Compulsory arbitration
of labor controversies or disputes may take place
without or against the will of the parties. They are
compelled by law to submit their disputes to arbitra­
tion.
* * *

Give basic principles in resolving issues o f ju risdictio n

o f the voluntary arbitrator over termination disputes.

ANS. Only disputes between the union and the

company shall be referred to the grievance machinery
or voluntary arbitrators. Where the union did not even
object to the dismissal of the employees, voluntary
arbitration of the termination dispute would be point­
less or even prejudicial to the employee’s cause.
(Atlas Farms, Inc. vs. NLRC et at., G. R. No.
142244, November 18, 2002)
Since what was challenged was the legality of the
employee’s dismissal for lack o f cause and lack o f due
process, the case, being prim arily a termination dis­
pute would fioFfall under the jurisdiction of the volun­
tary arbitrator. The issue of whether there was proper
interpretation and implementation of the CBA provi­
sions came into play only because the grievance
procedure in the CBA was not observed, after the
employee sought his union’s assistance. Since the
real issue was whether there was a valid termination,
there was no valid reason to invoke the need to«
interpret nor question an implementation of any CBA
provision. (Vivero vs. Court of Appeals, 344 SCRA
268; see also Maneja vs. NLRC, 290 SCRA 603)
W here the employee and em ployer m utually
agreed to submit the form er’s complaint for illegal
dismissal to voluntary arbitration for resolution, the
voluntary arbitrator would acquire jurisdiction over the
case notwithstanding the fact that the same was not
first submitted to the grievance machinery as provided
for in the collective bargaining agreement. Under
 REMEDIES

Article 262 of the Labor Code, the voluntary arbitrator,

upon agreement of the parties, shall hear and decide
all other labor disputes including unfair labor practices
and bargaining deadlocks. (Apalisok vs. Radio Philip­
pines Network et al., G. R. No. 138094, May 29,
2003)
* ★ *

In a voluntary arbitration case, the parties executed a

subm ission agreement raising the sole issue o f the date
o f regularization o f the workers fo r resolution by the
Voluntary Arbitrator. The Voluntary Arbitrator however
ruled not only on the date when the workers became
regular employees but also awarded the latter monetary
benefits, such as salary increases, due them as regular
employees. Does the Voluntary Arbitrator have the
authority to make the monetary awards considering that
the same were not expressly covered by the subm ission
agreement? Explain.

ANS. Yes. Generally, the arbitrator is expected to

decide only those questions expressly delineated by
the submission agreement. But he can assume that he
has the necessary power to make a final settlement
since arbitration is the final resort for the adjudication
of disputes. (Ludo & Luym Corporation vs. Sordido et
al., G. R. No. 140960, January 20, 2003)

* * *

The employee’s union filed a complaint w ith the Re­

gional Trial Court seeking to restrain the enforcement of
the company’s Drug Abuse Policy, requiring employees
to undergo a drug test. Does the RTC have jurisdiction
over the case? Explain.

ANS. No. The case involves the enforcement of a

company personnel policy. Under Article 261 of the
Labor Code, the dispute falls under the jurisdiction of
the voluntary arbitrator. (Union of Nestld Workers

960
 REMEDIES

Cagayan de Oro Factory et al vs. Nestld Philippines,

Inc. et al., G. R. No. 148303, October 17, 2002)
•/t i* iftr

Cite a labor dispute which under our present laws and

despite the avowed policy of free collective bargaining
can be made the subject of com pulsory arbitration.

ANS. Under Article 263 (g) of the Labor Code, a

labor dispute causing or likely to cause strikes or
lockouts in an industry indispensable to the national
interest may be certified by the Secretary of Labor and
Employment to the NLRC for compulsory arbitration.
But before or during the compulsory arbitration pro­
cess, the parties may opt to submit their dispute to
voluntary arbitration.
* * *

May the Secretary o f Labor and Employment, after the

finality o f the decision of the Regional Director fo r
underpayment, reduce during the execution stage the
amount of the award made by the latter, such reduction
being based on evidence that the company failed, de­
spite due notice, to subm it during the hearing on the
merits of the case? Explain.

ANS. No. The decision of the Regional Director,

having become final, can no longer be modified. The
rule authorizing courts to modify or alter a judgment
even after the same has become final applies only to
cases where the facts and circumstances authorizing
such modification or alteration transpired after the
judgment has become final and executory. There must
be an end to litigation; otherwise; litigation would even
be more intolerable than the wrong or injustice it is
designed to correct. (Aboitiz Shipping Employees
Association vs. Hon. Undersecretary of Labor and
Employment et al., G. R. No. 112955, September 1.
1997)

981
 REMEDIES

Does the Secretary o f Labor and Employmsnt have any

appellate jurisdiction over a decision o f the Bureau of
Labor Relations (BLR) in proceedings fo r the cancella­
tion o f a union’s certificate of registration?

ANS. The appellate jurisdiction of the Secretary of

Labor and Employment is limited only to a review of
cancellation proceedings decided by the Bureau of
Labor Relations in the exercise of its exclusive and
original jurisdiction, i. e., in petition involving federa­
tions, national or industry unions, trade union centers
or workers’ associations operating in more than one
regional jurisdiction.
The Secretary of Labor and Employment has ju ris­
diction over decisions of the BLR rendered by the latter
in the exercise of its appellate jurisdiction of the
Regional Director’s decision in a petition to cancel the
unions’ certificate of registration, said decisions of the
BLR being final and inappealable. (Abbott Laborato­
ries Philippines, Inc. vs. Abbott Laboratories Employ­
ees Union et al., G. R. No. 131374, January 26,
2000)
* * *

TMI Company and the Union reached a deadlock in their

negotiations fo r a new CBA hence the union filed a
notice o f strike with tha NCMB. Considering the nature
o f the company’s business in microelectronics manu­
facturing, Acting Secretary o f Labor Brillantes inter­
vened and assumed jurisdiction over the dispute pur­
suant to Article 263(g) of the Labor Code. Nevertheless
the Union struck. Two days thereafter, the Acting
Secretary ordered the striking workers to return to work
w ithin 24 hours. But the striking Union members failed
to return to work; instead they continued w ith the strike.
Violence erupted in the picket lines when the service
bus ferrying non-striking workers was stoned causing
injuries to the passengers. Thereafter complaints fo r
threats, defamation, illegal detention and physical in ­
juries were filed against the strikers. The Acting Secre­

962
 REMEDIES

tary o f labor issued an order fo r the Company to accept

back all striking employees, pending determination of
the legality o f the strike, except the union officers, shop
stewards, and those w ith pending criminal charges.
The Union excepted to this order by filin g a petition fo r
certiorari before the Supreme Court. However, pending
resolution o f the petition fo r certiorari the Secretary o f
Laboofesued a W rit o f Execution fo r the return to work
order in question.
(a) May the Acting Secretary o f Labor exclude the union
officers, shop stewards and those w ith pending criminal
charges from the directive to the Company to accept
back the striking workers?

ANS. No. In Union of Filipro Employees v. Nestle

Philippines, Inc., we said that an assumption and/or
certification order of the Secretary of Labor automati­
cally results in a return-to-work of all striking workers,
whether or not a corresponding order has been issued
by the Secretary of Labor. Once an assumption/
certification order is issued, strikes are enjoined, or if
one has already taken place, all strikers shall immedi­
ately return to work. Further, in Gold City Integrated
Port Services, Inc. v. NLRC, we explained that Article
264 of the Labor Code makes a distinction as to the
effect of workers and union officers participating in an
illegal strike. In Batangas Laguna Tayabas Bus Com­
pany v. NLRC we said that the mere filing of charges
against an employee for alleged illegal acts during a
strike does not by itself ju stify his dismissal. The
charges must be proved at an investigation duly called
where the employee shall be given an opportunity to
defend himself. This is true even if the alleged ground
constitutes a criminal offense. ,
In the case before us, we cannot see how the
Secretary of Labor arrived at his decision of excluding
union officers, shop stewards and those with pending
criminal charges in his directive to-.the Company. It
may be true that the workers struck after the Secretary
had assumed jurisdiction over the case and that they
have failed to immediately return to work. But the

SS3
 REMEDIES

liability of each union officer and worker, if any, has

yet to be determined. To exclude the union officers,
shop stewards and those with pending criminal charges
without first determining whether they knowingly com­
mitted Illegal acts would be tantamount to dismissal
without due process.

(b) May the Secretary of Labor order the execution of

his order which is being questioned in a certiorari
proceeding in the Supreme Court?

ANS. Yes. In Santiago v. Vasquez, the Supreme

Court has held that the original and special civil action
for certiorari does not have the effect of divesting the
inferior courts of jurisdiction validly acquired over the
case pending before them. It is elementary that the
mere pendency of a special civil action for certiorari,
commenced in relation to a case pending before a
lower court, does not even interrupt the course of the
latter when there is no writ of injunction restraining it.
The inevitable conclusion is that for as long as no writ
of injunction or restraining order is issued in the
special civil action for certiorari, no Impediment exists
and there is nothing to prevent the lower court from
exercising its jurisdiction and proceeding with the case
pending before it. And, even if such injunctive writ or
order is issued, the lower court nevertheless continues
to retain its jurisdiction over the principal action.
The decision of the Secretary is final and executory
ten (10) calendar days after receipt thereof by the
parties. In the case at bar, the Supreme Court did not
issue any Temporary Restraining Order. There is
therefore no legal impediment to the enforcement of
the W rit of Execution previously issued by the Secre­
tary. (Telefunken Semiconductors Employees Union-
FFW vs. Secretary of Labor and Employment et al.,
G. R. Nos. 122743 and 127215, December 12, 1997)
* * *

'G ive three (3) basic rules governing the resolution of

petitions fo r certiorari involving labor cases.

964
 REMEDIES

ANS. (1) The factual findings of the NLRC and the

Department of Labor and Employment, when sup­
ported by substantial evidence, are binding on the
Supreme Court and entitled to great respect, consider­
ing the expertise of these agencies in the field of labor.
(2) Substantial evidence in labor cases is such
amount of relevant evidence which a reasonable mind
will accept as adequate to justify a conclusion.
(3) The sole office of the writ of certiorari is the
correction of errors of jurisdiction including the com­
mission of grave abuse of discretion. It does not
include correction of the NLRC’s evaluation of the
evidence and factual findings based thereon. (Caltex
Refinery Employees Association vs. Hon. J. Bril-
lantes et al., G. R. No. 123782, September 16, 1997)

* * *

Are voluntary arbitration awards or decisions appeal-

able to the Labor Arbiter or the NLRC? How are they
enforced?

ANS. No. Voluntary arbitration awards or deci­

sions shall be final and executory after ten (10) days
from receipt of the copy of the award or decision by the
parties. (Art. 262, Labor Code). Such decisions or
awards may be executed when any interested party
files a motion for execution before the voluntary arbi­
trator or in his absence the Labor Arbiter in the
Regional Office where the interested party resides,
upon which the voluntary arbitrator or Labor Arbiter
shall issue a writ of execution requiring the sheriffs or
the proper officer to execute the same. (Sec. 4, Rule
XI, Book V, Implementing Rules and Regulations; Art.
262-B, Labor Code)
it it tV

Do awards or decisions of voluntary arbitrators consti­

tute res judicata?Expisin.

965
 REMEDIES

ANS. The award of voluntary arbitrators acting

within the scope of their authority determines the rights
of the parties, and their decisions have the same legal
effects as a judgment of the Court. Such decisions on
matters of fact and law are conclusive, and all matters
in the award are thenceforth res judicata, on the theory
that the matter has been adjudged by the tribunal
which the parties have agreed to make as tribunal of
last resort. (Volkschel Labor Union vs. NLRC, G. R.
No. L-39686, June 25, 1980)
it * *

Article 262-B o f the Labor Code provides that awards of

voluntary arbitrators are final and executory. May such
awards be nevertheless subject to judicial review? Ex­
plain.

ANS. Yes. By the nature of his functions, a

voluntary arbitrator acts in a quasi-judicial capacity.
There is no reason why his decisions should be beyond
judicial review where there is want of jurisdiction,
grave abuse of discretion, violation of due process,
denial of substantial justice or erroneous interpretation
of the law. (Mantrade/FMMC Division Employees and
Workers Union, etc. vs. Bacungan, et al., G. R. No.
L-48437, September 30, 1986). The errors of fact or of
law must be so potent and gross and prejudicial as to
amount to a grave abuse of discretion or an exces de
p o u v o ir. (Sime Darby Pilipinas, Inc. vs. Magsalin, et
al., G. R. No. 90426, December 15, 1989) The
awards may be reviewed by the Court of Appeals.
(Rule 43, Secs. 1 and 3, 1997 Rules of Civil Proce­
dure)
* * *

The voluntary arbitrator ruled that overtime and holiday

pay, night premium, and leave benefits be added to the
base pay in the computation o f the 13* month pay o f the
employees. For tw o to three years, the company had
inducted the said benefits in the computation of the 13th

966
 REMEDIES

month pay. The company filed with the Court of Ap­

peals a Petition fo r Certiorari under Rule 65 o f the 1997
Rules o f Civil Procedure fo r the nullification o f the
decision of the voluntary arbitrator.
(a) Is the remedy appropriate? Why?

ANS. No. The proper remedy from an adverse

decision of the voluntary arbitrator is a petition for
review under Rule 43 of the 1997 Rules of Civil
Procedure, which must be filed with the Court of
Appeals within fifteen (15) days from notice of the
decision of the voluntary arbitrator. The special civil
action of certiorari is not and cannot be a substitute for
an appeal.

(b) Is the voluntary arbitrator’s ruling that the overtime

and holiday pay, night premium, and leave benefits be
included in the computation of the 13th month pay
justified? Why?

ANS. Yes. The inclusion by the employer of the

non-basic benefits for at least two (2) years constitutes
voluntary employer practice. (Sevilla Trading Com­
pany vs. A. V. A. Semana et al., G. R. No. 152456,
April 28, 2004)
* * *

Do Labor Arbiters or the NLRC have jurisdiction over

criminal cases involving violations of the penal provi­
sions o f labor taws? Explain.

ANS. Labor Arbiters or the NLRC are not invested

with the judicial power; they merely exercise quasi- ,
judicial functions. In the hearing and disposition of
cases brought before them, they do not adhere strictly
to the technical rules of evidence. This is required in
criminal cases where the guilt of the accused must be
established beyond reasonable doubt.
The regular courts have jurisdiction over criminal
cases involving violations of the labor laws.

987
 REMEDIES

Is P. D. 1508, the Katarungang Pambarangay Law,

applicable to labor cases?

ANS. No. P. D. 1508 is not applicable to labor

cases. The term “other government office” referred to
in Section 6 of the said law does not include the office
of labor arbiter or med-arbiter. Under the Labor Code,
the conciliation and mediation of labor disputes,
grievances or problems fall within the jurisdiction of
the Department of Labor and Employment. Further­
more, ordinary rules of procedure are merely supple-
tory in character vis-a-vis labor cases. (Montoya vs.
Escayo, et al., G. R. Nos. 82211-12, March 21, 1S89)

it 1t 4t

Give the scope of the visitorial power o f the Secretary of

Labor and Employment and regional directors under
Article 128 of the Labor Code.

ANS. The visitorial power provided for under

Article 128 of the Labor Code is confined to checking
compliance with labor standard laws. If the inspection
results in a finding that the employer has violated
certain labor standard laws, then the regional director
must order the necessary rectifications. However, this
does not include adjudication of money claims clearly
within the ambit of the labor arbiter’s authority under
Article 217 of the Labor Code. (Ong, Sr. vs. Parel, et
al., G. R. No. 7671Q, December 21, 1987)
An appeal from an order issued by a representative
of the Secretary of Labor and Employment pursuant to
Article 128 may be brought to the latter. An employer
cannot go directly to court to question the order.
A dm inistrative remedies must first be exhausted.
(Laguna CATV Network, Inc. vs. Maranan et al., G.
R. No. 139482, November 19, 2002)

* * *

968
 REMEDIES

Barona and Semiilano, security guards posted by their

employer, Spartan Security and Detective Agency, Inc.,
at Home Savings Bank and Trust Co., were not paid
their salary differentials resulting from the increases in
minimum wages mandated by Wage Orders No. 5 and 6.
Considering that under the aforesaid wage orders pay­
m ent o f the increases are “ to be borne” by the principal
or client (in this case Home Savings), may the security
guards nevertheless hold Spartan liable therefor? Ex­
plain.

ANS. Yes. Pursuant to Articles 108, 107 and 109

of the Labor Code, Spartan and Home Savings are
jointly and severally liable for the payment of the
salary differentials. Spartan may however claim reim­
bursement of such payment from Home Savings.
(Spartan Security and Detective Agency, Inc. vs.
NLRC, et al., G. R. Nos. 90693 and 93961, Septem­
ber 3, 1992)

* * *

If a party submits to the jurisdiction o f a labor tribunal

and obtains an unfavorable judgment, can he later on
question the jurisdiction of the said tribunal? Explain.

ANS. No. Where a party has voluntarily submitted

to the jurisdiction of a court or tribunal, he cannot later
on, if he gets an unfavorable judgm ent adopt an
inconsistent posture and attack the latter’s jurisdiction.
(Tijam vs. Sibonghanoy, 23 SCRA 35; Hospicio de
San Jose de Barili vs. NLRC, et al., G. R. No.
75997, August 18, 1988). However, where the tribunal
has not yet decided the case, a party can still raise the
issue of lack of jurisdiction. (Vargas vs. Akai Philip­
pines, Inc., G. R. No. UDK-7927, December 14,
1987)

969
 REMEDIES

Article 223 of the Labor Code, as amended by Republic

Act No. 6715, makes an order of the labor arbiter fo r the
reinstatement of a dismissed or separated employee
immediately executory, even pending appeal. This is
assailed as unconstitutional; it allegedly negates the
right of the employer to self-protection and therefore
oppressive and unreasonable. Decide.

ANS. The law is constitutional. It lays down a

compassionate policy which, once more, vivifies and
enhances the provisions of the 1987 Constitution on
labor and the working man.
The right to appeal, furthermore, is not a constitu­
tional, natural or inherent right. It is a statutory
privilege of statutory origin; the law then may validly
provide limitations or qualifications thereto or relief to
the prevailing party in the event appeal is interposed
by the losing party.
The law, finally, is a valid exercise of the police
power of the State. The right of an employer to freely
discharge his employees is subject to regulation by the
State on the theory that the preservation of the lives of
the citizens is a basic duty that is more vital than the
preservation of corporate profits. Pursuant to the
same power, the State may authorize an immediate
implementation of a decision reinstating a dismissed or
separated employee since that saving act is designed
to stop a continuing threat or danger to the survival or
even the life of the dismissed or separated employee
and his family. (Aris (Phil.), Inc. vs. NLRC, et al., G.
R. No. 90501, August 5, 1991)

* * *

Give a brief discussion on the options of employer to

comply, pending appeal, w ith the labor arbiter’s order of
reinstatement which is immediately executory.

ANS. Under Article 223 of the Labor Code, as

amended, an employer has two options in order for him
to comply with an order of reinstatement, which is

970
 REMEDIES

immediately executory..even pending appeal. Firstly,

he can admit the dismissed employee back to work
under the same terms and conditions prevailing prior
to his dismissal or separation or to a substantially
equivalent position if the former position is already
filled up as we have ruled in Union o f S u p e rv is o rs
(RB) NATU vs. Sec. o f Labor, 128 SCRA 442
[1984]; and P e dro so vs. Castro, 141 SCRA 252
[1986]. Secondly, he can reinstate the employee
merely in the payroll. Failing to exercise any of the
above options, the employer can be compelled under
pain of contempt, to pay instead the salary of the
employee. This interpretation is more in consonance
with the constitutional protection to labor (Section 3,
Art. XIII, 1987 Constitution). The right of a person to
his labor is deemed to be property within the meaning
of the constitutional guaranty that no one shall be
deprived of life, liberty, and property without due
process of law. Therefore, he should be protected
against any,arbitrary and unjust deprivation of his job
(Bondoc vs. People’s Bank and Trust Co., Inc., 103
SCRA 599 [1981]). The employee should not be left
without any remedy in case the employer unreasonably
delays reinstatement. Therefore, we hold that the
unjustified refusal of the employer to reinstate an
illegally dismissed employee entitles the employee to
payment of his salaries, effective from the date the
employer failed to reinstate despite an executory writ
of execution served upon him. Such ruling is in accord
with the mandate of the new law awarding full back­
wages until actual reinstatement (Article 279 of the
Labor Code as amended). (Medina, et al vs. Consoli­
dated Broadcasting System, et al., G. R. Nos.
99054-56, May 28, 1993)

* * He

Give the basis of the employer’s option on payroll

reinstatement provided fo r in Article 223 of the Labor
Code.

971
 REMEDIES

ANS. This option is based on practical considera­

tions. The employer may insist that the dismissal of
the employee was for a just and valid cause and the
latter’s presence within its premises is intolerable by
any standard; or such presence would be inimical to its
interest or would demoralize the co-employees. Thus,
while payroll reinstatement would in fact be unaccept­
able because it sanctions the payment of salaries to
one not rendering service, it may still be the lesser evil
compared to the intolerable presence in the workplace
of an unwanted employee. (Maranaw Hotel Resort
Corporation vs. NLRC, et al., G. R. No. 110027,
November 16, 1994)

* <f *

The employment contract between a security guard and

the security agency provides that the latter is entitled to
25% o f the salary of the form er as its share in procuring
jo b placement fo r him.
Is this stipulation valid?Why?

ANS. No. The provision is illegal and inequitous.

The courts should ever be vigilant in protecting the
rights of workers who are placed in a contractually
disadvantaged position and who sign waivers or provi­
sions contrary to law and public policy. (Commando
Security Agency vs. NLRC, et al., G. R. No. 95844,
July 20, 1992, citing Mercury Drug Co., Inc. vs.
Dayno, 117 SCRA 99)

* * *

May an injunction or restraining order be issued by a

labor arbiter or med-arbiter?

ANS. Yes. Under Section 5, Rule XVI, Book V, of

the Omnibus Rules Implementing the Labor Code, the
labor arbiter or med-arbiter may enjoin any or all acts
involving or arising from any case pending before said

972
 REMEDIES

officer which if not restrained forthwith may cause

grave or irreparable damage to any of the parties to
the case or seriously affect social or economic stabil­
ity. (Dinio et al vs. Laguesma et al., G. R. No
108475, June 9, 1997)
* * *

In 1990, Susan Carungcong filed a complaint with the

Arbitration Branch of the NLRC against Sun Life Assur­
ance Company of Canada fo r illegal dismissal. She
started as an agent of Sun Life in 1974. At the time of
her alleged dismissal in 1990 her position was that of
New Business Manager. The contracts she signed with
Sun Life provided that they were terminable by either
party by written notice with or w ithout cause and that
she was an independent contractor and not an em­
ployee of the company. She was free to work as she
pleases, at the place and time she felt convenient to do
so. Does the labor arbiter have jurisdiction over her
complaint? Why?

ANS. No. Carungcong is an independent contrac­

tor. The jurisdiction of the labor arbiter and the NLRC
presupposes the existence of employer-employee rela­
tionship. (Carungcong vs. NLRC et al., G. R. No.
118086, December 15, 1997)

* * *

After the finality of the labor arbiter’s decision ordering

the employer to pay to the illegally dismissed employer
backwages from June 16, 1990 to September 30, 1992,
the employer, during the pre-execution conference,
moved fo r the deduction from the judgment award the
income the employee had allegedly earned elsewhere
during the said period. The motion was denied; hence,
the employer appealed such denial to the NLRC. The
NLRC dismissed the appeal, holding that the decision in
the illegal dismissal case had long become final and

973
 REMEDIES

executory and could no longer be modified. Is the

NLRC correct? Explain.

ANS. Yes. The appeal was a mere strategem to

modify the final judgment in the illegal dismissal case,
and shculd not be allowed as this would make a farce
of a duly promulgated decision that has become final
and executory. (Times Transit Credit Coop Inc. vs.
NLRC et al., G. R. No. 117105, March 2, 1999)
* * *

Are unsigned print-outs presented by the employer

before the Labor Arbiter to show that the employee’s
office attendance was poor and to establish that the
employee was notified of the charges against him ad­
missible in evidence? Why?

ANS. No. The print-outs, which were not signed

either by the employer or by the employee, afford no
assurance of their authenticity. The provision for
flexibility in administrative procedure does not go so
far as to justify orders without a basis in evidence
having rational probative value. The Court, while
adhering to a liberal view in the conduct of proceed­
ings before administrative agencies, have nonetheless
consistently required some proof of authenticity or
reliability as condition for the admission of documents.
(IBM Philippines, Inc et al vs. NLRC et al., G. R.
No. 117221, April 13, 1999)
* ★ Hr

May the buyer of a business be held liable fo r the

obligations of the previous owner to the employees?

ANS. As a general rule, no. But where before

buying the business establishment, the new owner very
well knew that the previous owner had outstanding
obligations to the employees, the form er may be held
jo intly snd severally liable with the latter for the

974
 REMEDIES

payment of the claims. (Rizada et al vs. NLRC et al.,

G. R. No. 96982, September 21, 1999)
* * *

May separation benefits be awarded to workers who are

not constructively dismissed?

ANS. When there is no dismissal to speak of, an

award of separation pay as a form of financial assis­
tance is not in order. It would be an abuse of the
avowed principle of “compassionate justice” in favor of
the working man, were we to permit a grant of financial
assistance to an employee who was not dismissed.
(Arc-Men Food Industries Corporation et al vs. NLRC
et al., G. R. No. 127086, August 22, 2002; Lemery
Savings and Loan Bank vs. NLRC, 205 SCRA 492)
* * *

In 1994, ABS-CBN Broadcasting Corporation entered

into an agreement with Mel and Jay Management and
Development Corporation (MJMDC) whereby the latter,
as agent, agreed to provide Sonza’s services exclu­
sively to the former as talent fo r radio and television.
ABS-CBN agreed to pay Sonza a monthly talent fee. In
1996, Sonza resigned and served notice of rescission of
the agreement. He thereafter filed a complaint with the
NLRC National Capital Region against ABS-CBN to col­
lect his salaries, separation pay, service incentive leave,
13th month pay, signing bonus, travel allowance and
amounts due under the employees stock option plan.
Did the labor arbiter have ju,risdiction over Sonza’s
complaint? Why?

ANS. No. No employer-employee relationship

existed between Sonza and ABS-CBN. He was an
independent contractor.
He was hired because of his unique skills, talent
and celebrity status not possessed by ordinary employ­

975
 REMEDIES

ees. His talent fees, amounting to P317,000.00 a

month, were so huge and out of the ordinary that they
indicate more en independent contractual relationship
rather than an employer-employee relationship. ABS-
CBN could not terminate his services on grounds other
than breach of contract, such as retrenchment to
prevent losses as provided under labor laws.
To perform his work, Sonza only needed his skills
and talent. How he delivered his lines, appeared on
television, and sounded on radio were outside ABS-
CBN’s control. It merely reserved the right to modify
the program format and airtime schedule for more
effective programming. Clearly, ABS-CBN did not
exercise control over the means and methods of
performance of Sonza’s work. (Sonza vs. ABS-CBN
Broadcasting Corporation, G. R. No. 138051, June
10, 2004)

* * *

The Voluntary Arbitrator ruled that where two (2) regular

holidays fall on the same day (like April 9, 1998 which
was Araw ng Kagitingan and at the same time Maunday
Thursday) the daily-paid workers should be entitled to
200% of their regular daily rate although the said day is
unworked. The Court of Appeals upheld the decision of
the Voluntary Arbitrator.
The company elevated the case to the Supreme Court
by a petition fo r certiorari under Rule 65 about twenty-
eight (28) days from its receipt o f the Court of Appeals’
resolution denying its motion fo r reconsideration.
(a) Is the remedy adopted by the company appropriate?

ANS. No. The proper remedy is a petition for

review on certiorari to be filed with the Supreme Court
within fifteen (15) days from receipt of the appellant of
a copy of the Court of Appeals’ resolution denying its
motion for reconsideration.

(b) Is the decision of the Voluntary Arbitrator and

affirmed by the Court of Appeals correct? Explain.

9)6
 REMEDIES

ANS. Yes. Article 94 of the Labor Code, providing

for regular holidays benefit is mandatory. The fact that
two holidays fall on the same date should not operate
to reduce the holiday pay benefits a worker is entitled
to receive. There is nothing in the law which indicates
that the entitlement to ten (10) days of holiday pay
(now eleven) shall be reduced when two (2) holidays
fall on the same day. In any event, all doubts in the
implementation and interpretation of the Labor Code
shall be resolved in favor of labor. (Asian Transmis­
sion Corporation vs. Court of Appeals et al., G. R.
No. 144664, March 15, 2004)

* * *

What are considered inter/intra-union disputes and

other related labor relations disputes? Where may the
complaint in such cases be filed? Who may file the
complaint?

ANS. Rule XI of Book V, Implementing Rules of

the Labor Code, as amended by D. O. 40-03,
provides:

Section 1. Coverage. — Inter/intra-union disputes

shall include:

(a) cancellation of registration of a labor organiza­

tion filed by its members or by another labor
organization:
(b) conduct of election of union and workers’ asso­
ciation officers/nullification of election of union
and workers’ association officers;
(c) audit/accounts examination of union or work­
ers’ association funds;
(d) deregistration of collective bargaining agree­
ments;
(e) validity/invalidity of union affiliation or d isa ffili­
ation;
(f) va lid ity/in va lid ity of acceptance/non-accep­
tance for union membership;

977
 REMEDIES

(g) validity/invalidity of impeachment/expulsion of

union and workers’ association officers and
members;
(h) validity/invalidity of voluntary recognition;
(i) opposition to application for union and CBA
registration;
(j) violations of or disagreements over any provi­
sion in a union or workers’ association constitu­
tion and by-laws;
(k) disagreements over chartering or registration
of labor organizations and collective bargaining
agreements;
(I) violations of the rights and conditions o f union
or workers’ association membership;
(m) violations of the rights of legitimate labor orga­
nizations, except interpretation of collective
bargaining agreements;
(n) -such other disputes or conflicts involving the
rights to self-organization, union members and
collective bargaining —

(1) between and among legitimate labor organi­

zations;
(2) between and among members of a union or
workers’ association.

Section 2. Coverage. — Other related labor

relations disputes include any conflict between a labor
union and the employer or any individual, entity or
group that is not a labor organization or workers’
association. This includes: (1) cancellation of regis­
tration of unions and workers’ associations; and (2) a
petition for interpleader.

Section 3. Effects of the filing/pendency of inter/

intra-union and other related labor relations disputes.
— The rights, relationships and obligations of the
parties/litigants against each other and other parties-
in-interest prior to the institution of the petition shall
continue to remain during the pendency of the petition
and until the date of finality of the decision rendered
therein. Thereafter, the rights, relationships and obli­

978
 REMEDIES

gations of the parties litigants against each other

parties-in-interest shall be governed'by the decision so
ordered.

The filing or pendency of any inter/intra-union

dispute and other related labor relations dispute is not
a prejudicial question to any petition for certification
election and shall not be a ground for the dismissal of
a petition for certification election or suspension of
proceedings for certification election.

Section 4. Who may file. — Any legitimate labor

organization or member(s) thereof specially concerned
may file a complaint or petition involving disputes or
issues enumerated in Section 1 hereof. Any party-in-
interest may file a complaint or petition involving
disputes or issues enumerated in Section 2 hereof.

Where the issue involves the entire membership of

the labor'organization, the complaint or petition shall
be supported by at least thirty percent (30%) of its
members.

Section 5. Where to file. — Complaints or

petitions involving labor unions with independent regis­
trations, chartered locals, workers’ associations, its
officers or members shall be filed with the Regional
O ffice that issued its certificate of registration or
certificate of creation of chartered local. Complaints
involving federations, national unions, industry unions,
its officers or member organizations shall be filed with
the Bureau.

Petitions for cancellation of registration of labor

unions with independent registration, chartered locals
and workers' association and petitions for deregistra­
tion of collective bargaining agreements shall be re­
solved by the Regional Director. He/She may appoint
a Hearing O fficer from the Labor Relations Division.

Other inter/intra-union disputes and related labor

relations disputes shall be heard and resolved by the
Med-Arbiter in the Regional Office.

979
 REMEDIES

Complaints or petitions involving federations, na­

tional or industry unions, trade union centers and their
chartered locals, affiliates or member organizations
shall be filed either with the Regional Office or the
Bureau. The complaint or petition shall be heard and
resolved by the Bureau.

When two or more petitions involving the same

parties and the same causes of action are filed, the
same shall be automatically consolidated.

980
 CHAPTER XVIII

THE SOCIAL SECURITY LAW

(REPUBLIC ACT NO. 1161, AS AMENDED)
What is the policy of the State under the Social Security
Law (Rep. Act No. 1161, as amended)?

ANS. Section 2 of the Social Security Law, as

amended, provides:

D e c la ra tio n o f p o lic y . — It is the policy of the

State to establish, develop, promote and perfect a
sound and viable tax-exempt social security system
suitable to the needs of the people throughout the
Philippines which shall promote social justice and
provide meaningful protection to members and their
beneficiaries against the hazards of disability, sick­
ness, maternity, old age, death, and other contingen­
cies resulting in loss of income or financial burden.
Toward this end, the State shall endeavor to extend
social security protection to workers and their benefi­
ciaries. (Section 2, R. A. No. 1161, as amended by
R. A. No. 8282)
* * *

This law imposes upon employers and employees the

obligation to become members of and make contribu­
tions to the Social Security System. Is such a legal
im position valid and constitutional? Explain.

ANS. The Social Security Law was enacted pur­

suant to the policy of the Republic of the Philippines to
establish, develop and perfect a social security system
suitable to the needs of the people throughout the
Philippines which shall provide to covered employees
and their fam ilies protection against the hazards of
disability, sickness, old age, and death. Such enact-

no*
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

merit is a legitimate exercise of the police power. It

affords protection to labor and is in full accord with the
constitutional mandate on the promotion of .social
justice. (Roman Catholic Archbishop of Manila vs.
Social Security Commission, G. R. No. L-15045,
January 20, 1961)
Membership in the Social Security System is not
the result o f a bilateral and consensual agreement
where the rights and obligations of the parties are
defined by and subject to their will. The law requires
compulsory coverage of employers and employees
under the system. It is actually a legal imposition on
employers and employees, designed to provide secu­
rity to the working man. Membership in the system is,
therefore, in compliance with a lawful exercise of the
police power of the State, to which the principle of
non-impairment of the obligations of contract is not a
proper defense. (Phil. Blooming Mills Co., Inc. et al
vs. Social Security System, G. R. No. L-21223,
August 31, 1966)
The working man while in his productive years is
actually compelled to part with a portion of his earn­
ings which, together with the contributions required of
his employer, are accumulated and held in trust by the
System to answer for the payment of benefits. How­
ever, all revenues of the System which are not needed
to meet current administrative or operational expenses
and benefit obligations are to be invested in ways
authorized by law.

* 19 Ht

What is the latest amendatory law of the SSS Law?

ANS. Republic Act No. 8282, known as the “Social

Security Law of 1997", effective May 24, 1997. It
provides for better benefit packages, expansion of
coverage, flexibility in investments, stiffer penalties
for violations of the law, condonation of penalties of
delinquent employees, and the establishment of a
voluntary provident fund for members.

982
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

Who are subject to compulsory coverage under the

Social Security Law?

ANS. Employees not over sixty (60) years of age

and their employers, domestic helpers earning not less
than one thousand pesos (P1.000.00) a month, as weli
as self-employed individuals are subject to compulsory
coverage under the SSS Law. (Sections 9(a) and 9-A,
R. A. 1161, as amended)

* * *

Cite instances o f a voluntary coverage under the SSS

law.

ANS. Spouses who devote full tim e to managing

their household and fam ily affairs, unless they are also
engaged in other vocation or employment which is
subject to mandatory coverage; or Filipinos recruited
in the Philippines by foreign-based employers for
employment abroad may be covered by the SSS on a
voluntary basis. (Sec. 9(a) and (b), R. A. 1161, as
amended)
* * *

May a provident fund be established under the SSS Law

of 1997?

ANS. Yes. The Social Security Commission is

empowered by the law (a) to establish a provident
fund for the members which will consist of voluntary
contributions of employees and/or employees, self-
employed and voluntary members and their earnings,
for the payment of benefits to such members or their
beneficiaries, subject to such rules and regulations as
it may promulgate and approved by the President of
the Philippines, and (b) to maintain a provident fund
which consists of contributions made by both the SSS
and its officials and employees and their earnings, for
the payment of benefits to such officials and employ­

983
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

ees or their heirs under such terms and conditions as it

may prescribe. (Sec. 4, R. A. 1161,as amended by
R. A. 8282)

* * *

The Collective Bargaining Agreement of the Golden

Corporation, Inc. and the Golden Corporation Workers
Union provides a package of welfare benefits far supe­
rior in comparison with those provided for in the Social
Security Act of 1997. The welfare plan of the company
is funded solely by the employer with no contributions
from the employees. Admittedly, it is the best welfare
plan in the Philippines. The company and the union
jo in tly filed a petition with the Social Security System
fo r exemption from coverage. Will the petition fo r
exemption from coverage prosper? Reason. (2000 Bar)

ANS. No. The existence of a welfare plan funded

soleiy by the employer is not a ground for exemption
from SSS coverage. Under Section 9 of the Social
Security Law, coverage is compulsory upon all employ­
ees not over sixty (60) years of age and their employ­
ers.

The welfare plan may however be integrated with

the SSS in such a way where the employer's contribu­
tion to his private plan is more than that required of
him under the SSS Law he shall pay to the SSS only
the contribution required of him and he shall continue
his contribution to such private plan less his contribu­
tion to the SSS so that the employer’s total contribu­
tion to the benefit plan and to the SSS shall be the
same as his contribution to the private benefit plan
before the compulsory coverage. (Section 9, R. A.
No. 8282)

■if it it

Give the meaning of the term “ employer” used in the

SSS law.

984
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

ANS. Section 8, (c) of R. A. 1181, as amended,

defines “employer” as any person, natural or juridical,
domestic or foreign, who carries on in the Philippines
any trade, business, industry, undertaking, or activity
of any kind and uses the services of another person
who is under his orders as regards the employment,
except the Government and any of its political subdivi­
sions, branches or instrumentalities, including corpora­
tions owned or controlled by the Government: Pro­
vided, that a self-em ployed person shall be both
employee and employer at the same time.

* * *

What is a “ self-employed” individual?

ANS. Under Section 8 (s) of the SSS Law, a

self-employed person is one whose income i s . not
derived from employment as well as those mentioned
in Section 9-a of the law, including:
1) All self-employed professionals;
2) Partners and single proprietors of business;
3) Actors and actresses, directors, scriptwriters
and news correspondents who do not fall within the
definition of the term “employee’ in Sec. 8 (d) of this
Act;
4) Professional athletes, coaches, trainers and
jockeys; and
5) Individual farmers and fishermen.

* * *

Does the term “ employer” include religious organiza­

tions and entities not organized fo r profit? Explain.

ANS. The definition of the term “employer” under

the law is sufficiently comprehensive as to include
religious organizations or entities not organized for
profit. This is made more evident by the fact that the
law itself enumerates the kinds of employment ex­

985
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

cepted; employment in the aforesaid institutions or

entities is not among them. It is also significant to
note that in the original text of the law, services
performed in the employ of institutions organized for
religious or charitable purposes were expressly ex­
cluded from coverage thereof; however, an amenda­
tory act, Republic Act No. 1792, which took effect in
1957, deleted that portion of the original law; this is a
clear indication that the lawmaker intended to include
charitable and religious institutions within the scope of
the law. (Roman Catholic Archbishop of Manila vs.
Social Security Commission, supra)

* * ★

What is the test to determine the existence of employer-

employee relationship fo r purposes of compulsory cov­
erage under the SSS law?

ANS. The test to determine the existence of the

employer-employee relationship for purposes of com­
pulsory coverage under the SSS law is the control test,
(see Chapter I of this Reviewer)
* * *

A sewing machine company engages the services of

agents to sell and promote its product and collect from
customers. The agents are strictly on commission
basis; th e ir com pensation is based solely on the
amount of sales and collections; they receive no com­
pensation if they produce no results, no matter how
much effort they put into their work; they are not re­
quired to observe office hours or to report in person to
the company o r its shops; many o f them are engaged in
some other regular employment, occupation o r busi­
ness activities such as in the government service,
teaching, selling insurance and farming; they are not
required to observe any specific sales techniques; they
are not trained by the company nor are they given

986
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

instructions on how to do their work; they are not

subject to any rule and regulation o f the company; they
are not required to transact a minimum volume of sales
or collections.
Are the sales agents considered the employees o f the
sewing machine company fo r purposes of the SSS
Law? Why?

ANS. No. The manner and means of soliciting

sales and effecting collections are left solely to the
discretion of the sales agents without interference from
the company. The latter are not subject to the control
of the company as to the means and methods of doing
their work. (Singer Sewing Machine Co. vs. Social
Security System, CA-G. R. No. 33722-R, December
16, 1968)

* * *

A security agency engages the services o f the guards

under the follow ing circumstances: (1) when no estab­
lishment is found requiring the services o f a guard, the
latter serves as “ extra guard” , and is utilized by the
agency as a substitute fo r guards sick o r on vacation;
(2) when the agency finds a client requiring the services
of a guard, the contract is entered into by and between
the agency owner and the client; (3) the owner collects
from client the fees fo r the services of the guard, the
owner paying fo r the guard’s services and retaining a
part thereof as “ com mission” ; (4) the owner continues
to receive the commission so long as the watchman is
assigned to guard the premises o f the client; (5) the
agency owner furnishes the firearms and ammunition,
but the watchman buys his uniforms; (6) if the client is
dissatisfied w ith the guard’s services, as when he is
always late, the agency may change the guard if the
client so desires, o r impose disciplinary fine upon him.
Is the security agency considered the “ employer” o f the
guards fo r purposes of the SSS Law? Explain.

987
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

ANS. Tested against the criteria in Section 8 (c)

and (d) of the Act the agency must be considered an
employer of the security guards or watchmen, and the
latter employees of the former. The agency carries on
a business — a watchmen’s service — from which it
derives its income in the form of what it terms
“commission". It uses the services of other persons —
the guards or watchmen — to carry on is business.
W ithout them, it would not be in business, which
consists solely in the letting out of watchmen’s ser­
vices for a fee. The guards or watchmen render their
services to the agency by allowing themselves to be
assigned by the latter, which furnishes them arms and
ammunition, to guard and protect the properties and
interests of clients, thus enabling it to fu lfill its contrac­
tual obligations. Who the clients will be, and under
what terms and condition the services w ill be rendered,
are matters determined not by the guards or watch­
men, but by the security agency. On the other hand,
the client companies have no hand in selecting who
among the guards or watchmen shall be assigned to
them. It is the agency that issues assignment orders
and instructions and exercises control and supervision
over the guards or watchmen, so much so that if for
one reason or another the client is dissatisfied with the
services of a particular guard, the client cannot himself
term inate the services of such guard, but has to notify
the agency, which either substitutes him with another
or metes out to him disciplinary measures. That in the
course of a watchman’s work the client conceivably
issues instructions to him does not in the least detract
from the fact that the agency is the employee of said
watchman, for in legal contemplation such instructions
carry no more weight than mere requests, the privity of
contract being between the client and the agency, not
between the client and the guard or watchman. Corol-
larily, such giving out of instructions inevitably springs
from the client’s right predicated on the contract for
services entered into by it with the agency. (Social
Security System vs. The Court of Appeals and the
Philippine Guards Protection Unit, G. R. Nc. L-
23134, June 30, 1972)

983
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

As acolyte (sacristan) in the Catholic Parish Church of

Baao, Camarines Sur, Bascufla cleaned the premises of
the church, tolled its bells, assisted the priest in the
masses and other church services like baptism and
funeral services. In consideration of these services, he
received 5% of the monthly income o f the church.
(a) Is Bascufta subjcct to compulsory coverage under
the SSS law? Explain.

ANS. Yes. He is considered an employee. He

renders services and receives compensation therefor.
The Archbishop as c o rp o ra tio n sole, to whom a
share of the income or collection is sent, is considered
his employer.

(b) Is the compulsory coverage o f Bascurla under the

SSS law a violation of the principle of separation of
Church and State? Why?

ANS. No. The principle of separation of Church

and State is not an impediment to the exercise of
police power. The SSS law was devised under the
police power; and echoed in the Rerum N ovarum of
many Popes. Although the State must respect rites
and rituals as well as the faith that goes with them, it
cannot, when public interest has become intertwined
therewith, forego its duty to give due protection to
labor. Besides, there can be no dual sovereignty in
our system of government. (Bascufta vs. Roman
Catholic Archbishop of Caceres, CA-G. R. No.
SP-02343-R, November 18, 1974)

* * *

Boat owners enter into agreements with the so-called

patrons or pilots whereby the latter take charge o f the
former’s fishing vessels, equipment and gear and also
hire the crew to man the boats and secure their provi­
sions. But the fishing trips are nc! regular; the fisher­
men go out to sea only when there is no moon or when
it is not very bright. And the men have no regular

989
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

income, if the trip yields a catch, the proceeds thereof

are divided into three (3) parts: one part goes to the
owner o f the boat and equipment; one part is set aside
to cover expenses like crude oil and fo r maintenance of
the boat; and the other one-third is divided among the
men. Are members o f the crew considered, fo r pur­
poses o f coverage under the SSS law, employees of the
boat owners? Decide.

ANS. In the case at bar, the pilots are not under

the orders of the boat owners as regards their employ­
ment. They go out to sea not upon direction of the
boat owners, but upon their own volition as to when,
how long and where to go fishing. Much less do the
boat owners in any way control the crew members with
whom th e form er have no relationship whatsoever.
These crew-members simply join every trip for which
the pilots allow them without any reference to the
owners of the vessels.
In the present case, neither pilots nor the crew
members receive compensation from the boat-owners.
They only share in their own catch produced by their
own efforts. There is no showing that outside of their
one-third share, the boat owners have anything to do
with the distribution of the rest of the catch among the
pilots and the crew-members. They perform no ser­
vice for the boat owners, but mainly for their own
benefit.
In the undertaking in question, the boat owners
obviously are not responsible for the wage, salary, or
fee of the pilot and crew-members. Their sole partici­
pation in the venture is the furnishing or delivery of the
equipment used for fishing, after which they merely
wait for the boat’s return and receive their share in the
catch, if there is any. For his part, a person who joins
the outfit is entitled to a share or participation in the
fruit of the fishing trip. If it gives no return, the men
get nothing. It appears, therefore, that the undertaking
is in the nature of a joint venture, with the boat owner
supplying the boat and its equipments, and the pilot
and crew-members contributing the necessary labor,

990
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

and the parties getting specific shares for their respec­

tive contributions. (Pajarillo et al vs. Social Security
System, G. R. No. L-21930, August 31, 1966)
* * *

Are jeepney drivers on the boundary system subject to

compulsory coverage under the SSS law? Explain.

ANS. Yes. They are considered employees of the

jeepney operators. They did not invest a single
centavo in the business and the latter are the exclusive
owners of the jeeps. The management of the business
is in the hands of the operators. And even if the
drivers take material possession of the jeeps, still the
operators, as holders of the certificate of public conve­
nience, are entitled to exercise, as they do and under
the law they must, supervision over the drivers by
seeing to it that they follow the route prescribed by the
Public Service Commission (now Board of Transporta­
tion) and the rules and regulations promulgated by its
as regards their operation. (National Labor Union vs.
Dinglasan, G. R. No. L-7945, March 22, 1956, SSS
Circular No. 79-T)

* * *

Pablo was a farm-hand in a plantation owned by ABC &

Co., working approximately 6 days a week fo r a good 15
years. Upon Pablo’s death, his w idow filed a claim fo r
burial grant and pension benefits with the Social Secu­
rity System (SSS). The claim was denied on the ground
that Pablo had not been a registered member-employee.
Pablo’s w idow filed a petition before the SSS, asking
that ABC & Co. be directed to pay the premium contri­
butions o f Pablo and that his name be reported fo r SSS
coverage. ABC & Co. countered that Pablo was hired to
plow, harrow and burrow, using his own carabao and
other implements and follow ing his own schedule of
work hours, w ithout any supervision from the company.

991
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

If proven, would this factual setting advanced by ABC &

Co. be a valid defense against the petition?

ANS. No. From the facts given in the question,

Pablo was an employee of ABC & Co. He worked
within the plantation itself, six ( 6 ) days a week for
fifteen (15) years; he could have easily been subjected
to control by the company.
For the employer-employee relationship to arise, it
is not necessary that the employer actually exercises
the power of control over the employee; it is sufficient
that such power could have under the circumstances
been exercised. (Aurora Land Projects Corporation et
al vs. NLRC et al., G. R. No. 114733, January 2,
1997; MAM Realty Development Corp. vs. NLRC et
al., G. R. No. 114787, June 2, 1995) (2003 Bar)
it * ft

Enumerate the kinds of employment which are excepted

from com pulsory coverage under the SSS law.

ANS. Under Section 8 (j) of R. A. 1161, as

amended, the following services or employments are
excepted from coverage:

(1) Employment purely casual and not for the

purpose of occupation or business of the employer;
(2) Service performed on or in connection with an
alien vessel by an employee if he is employed when
such vessel is outside the Philippines;
(3) Service performed in the employ of the Philip­
pine Government or instrumentality or agency thereof;
(4) Service performed in the employ of a foreign
government or international organization, or their
wholly-owned instrumentality: Provided, however,
That this exemption notwithstanding, any foreign gov­
ernment, international organization, or their wholly-
owned instrumentality employing workers in the Philip­
pines or employing Filipinos outside of the Philippines,
may enter into an agreement with the Philippine Gov­

992
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT MO. 1161, AS AMENDED)

ernment for the inclusion of such employees in the

SSS except those already covered by their respective
civil service retirement systems: Provided, further,
That the terms of such agreements shall conform with
the provision of Ns Act on coverage and amount of
payment of contributions and benefits: Provided,
finally, That the provisions of this Act shall be supple­
mentary to any agreement; and
(5) Such other services performed by temporary
employees which may be excluded by regulation of the
Commission. Employees of bona fide independent
contractors shall not be deemed employees of the
employer engaging the services of said contractors.

■ft *

A textile company hires ten (10) carpenter.? to repair the

roof of its factory which was destroyed Jby typhoon
“ Bening” . 'Are the carpenters subject to compulsory
coverage under the SSS law? Why?

ANS. No. The employment is purely casual and

not for the purpose of the occupation or business of th{?
employer. Their engagement is occasioned by the
passage of the typhoon; they are not hired on a regular
basis.
■A * *

Mang Maning, a carpenter, is hired by the paper manu­

facturing firm to work in its maintenance departm ent
Considering that the work of a carpsnter is not directly
related to paper manufacturing, is the errpioym ent of
Mang Maning purely casual? Why?

ANS. No. The employment of Msng Maning is

regular, not casual. Although his work as a carpenter
has no direct relation to paper manufacturing, his
employment is not intermittent or dependent upon the
occurrence of a contingency. He reports for wcr!< even
if there are no repairs to be made.

883
i
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

The owners of FALCON Factory, a company engaged in

the assembling of automotive components, decided to
have their building renovated, Fifty (50) persons, com­
posed of engineers, srshiteefe and other construction
workers, were hired by tha company for this purpose.
The work as estimated to b® compieted in three (3)
years. The employees contended that since the work
would be completed after more that one (1) year, they
should be subject to compulsory coverage under the
Social Security Law. Do you agree with their con­
tention? Explain your answer fully.

ANS. No. The engineers, architects and other

construction workers are not subject to compulsory
coverage under the Social Security Law. Their em­
ployment in the FALCON Factory, which is engaged in
the assembling of automotive components, is purely
casual and not for the purpose of the business of the
company. (Sec. 8 (j), Social Security Law) They were
not even hired as regular maintenance personnel; their
employment was limited to the renovation of the
Falcon factory building. Falcon’s business is not to
renovate buildings. (2002 Bar)
* V* #

When does compulsory coverage of an employer, an

employee, or a self-employed person teke effect?

ANS. Under Section 10 of R. A. 1161, as

amended, compulsory coverage of the employer shall
take effect on the first day of his operation, that of the
employee on the day of his employment, Provided,
That the compulsory coverage of the self-employed
person shall take effect upon his registration with the
SSS.
\V <>• -it

Give the effect of an employee’s separation o f employ­

ment upon his membership in the Social Security Sys­
tem.

994
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

ANS. Under Section 11 of the SSS law, when an

employee under compulsory coverage is separated
from employment,, his employer’s contribution on his
account and his obligation to pay contribution arising
from that employment shall cease at the end of the
month of separation, but he shall be credited with all
contributions paid on his behalf and entitled to benefits
according to the provisions of the Act. He may
however continue to pay the total contributions to
maintain his right to full benefit. This is following the
“once a member, always a member” rule.

* * *

After working fo r five (5) years in a private insurance

company, “ J ” was fired w ithout cause. His dismissal
affected him so much that two months after his dis
missal he suffered a stroke resulting in the paralysis of
left arm and legs. Considering that “ J” was no longer
working' at the time he incurred disability, is he never­
theless entitled to disability benefits under the SSS
Law? Why?

ANS. Yes. This following the rule laid down in

Section 11 of the SSS law, that although the employee
is separated from the service and he has ceased to pay
premiums, he shall be credited with all contributions
paid on his behalf and entitled to benefits available
under the law. As “J ” has already been an SSS
member for five (5) years, he is entitled to disability
benefits. Once “J ” becomes an SSS member, he
remains an SSS member.

* *

Give the effects o f interruption o f the business or pro­

fessional income o f a self-employed individual.

ANS. Under Section 11-A of the SSS Law, if the

self-employed member realizes no income in any

995
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

given month, he shall not be required to pay contribu­

tions for that month. He may, however, be allowed to
continue paying contributions under the same rules
and regulations applicable to a separated covered
employee member: Provided, That no retroactive
payment of contributions shall be allowed other than as
prescribed under Section 22-A of the law.

* * *

Describe briefly the employee’s obligation to contribute

premiums to the Social Security System.

ANS. Beginning as of the last day of the calendar

month when an employee’s compulsory coverage takes
effect and every month thereafter during his employ­
ment, the employer shall deduct and withhold from
such employees' monthly salary, wage, compensation
or earnings during the month in accordance with the
schedule in Section 18 of the SSS Law, and remit the
same to the System.
The schedule of contribution shall also apply to
self-employed and voluntary members.
The maximum monthly salary credit shall be Nine
Thousand pesos (P9.000.00) effective January 1996:
Provided, That it shall be increased by One Thousand
pesos (P1.000.00) every year thereafter until it shall
have reached Twelve Thousand pesos (P12,000.00) by
1999: Provided, further that the minimum and maxi­
mum monthly salary credits may be fixed from time to
time by the Commission through rules and regulations.
“Compensation’’ means all actual remuneration for
employment, including the mandated cost of living
allowa1 as well as the cash value of any remunera­
tion paia in any medium other than cash except that
part of the remuneration in excess of the maximum
salary credit as provided in Section 18 of the law.
(Sec. 8 (f), R. A. 1161, as amended by R. A. 8282)

996
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

!s the employer also obliged to contribute to the Social

Security System?

ANS. Yes. Section 19 of the SSS law provides

that:

Em ployer’s contribution. — (a) Beginning <s of

the last day of the month when an employee’s compul ­
sory coverage takes effect and every month thereafter
during his employment, his employer shai! pay, with
respect to such covered employee, the employer's
contribution in accordance with the schedule indicated
in Section 18 of this Act. Notwithstanding any contract
to the contrary, an employer shall not deduct, directly
or indirectly, from the compensation of his employees
covered by the SSS or otherwise recover from them
the employer’s contribution with respect to such em­
ployees.
(b) The remittance of such contribution by the
employer shall be supported by a quarterly collection
list to be submitted to the SSS at the end of each
calendar quarter indicating the correct ID number of
fiie employer, the correct name and SSS number of the
employees and the total contributions paid for their
account during the quarter. (As amended by R. A.
8282)

How are the contributions of the saif-empSoyed to the

SSS determined?

ANS. The contributions to the SSS of the self-

employed members are determined in accordance with
Section 18 of the SSS law. Provided, That the monthly
earnings declared by the self-employed member at the
time of his registration with the SSS shall be consid­
ered as his monthly compensation and he shall pay
both the employer and employee contributions: Pro­
vided, further, That the contributions of self-employed
persons earning One Thousand pesos (P1,000.00)
monthly or below may be reduced by the Commission.

r if t T
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

The monthly earnings declared by the self-

employed member at the time of his registration shall
remain the basis of his monthly salary credit, unless he
makes another declaration of his monthly earnings, in
which case such latest declaration becomes the new
basis of his monthly salary credits. (Section 19-A, R.
A. 1161, as amended by R. A. 8282)
Net earnings means the net income before income
taxes plus non-cash charges such as depreciation and
depletion appearing in the regular financial statement
of the issuing or assuming institution. (Section 8 (t), R.
A. 1161, as amended by R. A. 8282)

* * ft

For what purposes are the contributions to the Social

Security System utilized?

ANS. The revenues of the SSS are to be used to

meet current administrative and operational expenses
and for the payment of the benefits under the SSS
Law. (Section 26, R. A. 1161, as amended)

* * *

Are the SSS premiums required of employers consid­

ered “ taxes on employment"? Explain.

ANS. No. The taxing power of the state is

exercised for the purpose of raising revenues. How­
ever, under our Social Security Law, the emphasis is
more on the promotion of the general welfare. The act
is not a part of our Internal Revenue Code nor are the
contributions and premiums therein dealt with and
provided for, coiiectible by the Bureau of Internal
Revenue. The funds contributed to the System belong
to the members who will receive benefits, as a matter
of right, whenever the hazards provided by the lav/
occur. (CMS Estate, Inc. vs. Social Security System,
G. R. No. I-26298, September 28, 1984)

998
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

Enumerate the benefits available to employees covered

by the SSS Law.

ANS. The benefits that may be enjoyed by employ­

ees covered by the SSS Law are the following:

(a) Sickness benefits (Sec. 14 );

(b) Permanent disability benefits (Sec. 13-A);
(c) Maternity leave benefit (Sec. 14-A);
(d) Retirement benefits (Sec. 12-B);
(e) Death (Sec. 13} and funeral benefits (Sec.
13-B) and
(f) Loans (Sec. 26).

On his way home form work, Jose Reyes, a machine

operator in a sash factory, entars a movis foouss to
relax. But he is stabbed by an unknown assailant. His
claim for benefits under the SSS law is denied on the
ground that his injury is not work-connected, is the
denial legal? Why?

ANS. No. It is not necessary, for the enjoyment of

benefits under the SSS Law is membership in the
Social Security System and not the causal connection
of the work of the employee to his injury or sickness.
Claims based on work-connected injuries or occu- _
pational diseases are covered by the State Insurance
Fund.

What is the sickness benefit?,

ANS. It is a daily allowance paid to a covered

employee who beco-mes sick and is confined in a
hospital for more than three (3) days or elsewhere with
the Commission’s approval. Such daily allowance
should be equivalent to 90% of the daily salary credit
of such member, but in no case shall it be paid longer
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

than 120 days in one calendar year. Any unused

portion of this period in one year cannot be carried
forward and added to the total number of compensable
days allowable in the following year. The daily sick­
ness benefit shall not be paid for more than 240 days
on account of the same confinement.

* * *

Give th« requisites fo r the enjoyment of the sickness

benafit under the SSS Law.

ANS. Under Section 14 of the Social Security Law,

the following are the requisites for the enjoyment by s
covered individual of the sickness benefits:
(a) Payment of at least three (3) monthly contribu­
tions in the twelve-month period immediately preced­
ing the semester of sickness;
(b) Sickness or injury and confineme.il for more
than three (3) days in a hospital or elsewhere
Commission’s approval;
(c) Notice of the fact of sickness by the ern,jio-yes
to the employer (or to the SSS in case the member is
unemployed) within ?ive (5) calendar days after tha
start of his confinement unless such confinerppn! is
a hospital or the employee became sick or was inmn u
while working or within the premises of the employe: in
which case such notice is not necessary; and
(d) Exhaustion of sick leaves of absence with full
pay to the credit of the employee.

* * *

What is the obligation of the employer with respect to

the payment of the sickness benefit?

ANS. The employer shall pay the allowance

promptly every regular payday or on the fifteenth and
last day of each month, subject to 100 % reimburse­
ment by the SSS upon receipt of satisfactory proof of
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

such payment and legality thereof, provided the em­

ployer has notified the SSS of the confinement within
five (5) calendar days after receipt of the notification
from the employee. |n case the notification is made by
the employer beyond such period, it shall be (reim­
bursed only for each day of confinement starting from
the tenth calendar day immediately preceding the date
of the notification to the SSS. (Sec. 14, R. A. 1161,
as amended)
* * *

When is the employer or the unemployed member not

entitled to reimbursement?

ANS. (a) Where the employer failsd to notify the

SSS of the confinement;
(b) In the case of the unemployed, where he failed
to send the notice direotly to the SSS except when the
confinement is in a hospital; and
(c) Where the claim for reimbursement is made
after <yie (1) year from the date of confinement.
* * *

Classify the permanent disability benefits.

ANS. The permanent total disability benefits and

the permanent partial disability benefits.

* * it

What disabilities are deemed permanent total?

ANS. Under Section 13-A (d) of the SSS Law the

following disabilities are deemed permanent total:

1. Complete loss of sight of both eyes;

2. Loss of two limbs at or above the ankle or
wrists;

inni
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

3. Permanent complete paralysis of two limbs;

4. Brain injury resulting to incurable im becility or
insanity; and
5. Such cases as determined and approved by the
SSS. (As amended by Sec. 9, Pres. Decree No.
1636, S-1979).

* * *

Describe briefly the permanent disability benefits.

ANS. Section 13-A (a) of the SSS law provides:

P erm anent d is a b ility b e n e fits . — (a) Upon the

permanent total disability of a member who has paid at
least thirty-six (36) monthly contributions prior to the
semester of disability, he shall be entitled to the
monthly pension: Provided, That if he has not paid the
required thirty-six (36) monthly contributions, he shall
be entitled to a lump sum benefit equivalent to the
monthly pension times the number of monthly contribu­
tions paid to the SSS or twelve (12) times the monthly
pensiorj, whichever is higher. A member who (1) has
received a lump sum benefit and (2) is re-employed or
has resumed self-employment not earlier than one (1)
year from the date of his disability shall again be
subject to compulsory coverage and shall be consid­
ered a new member. (As amended by R. A. 8282)

★ * *

What is the m onthly pension?

ANS. Section 12 of the SSS Law provides:

M o n th ly p e n sio n . — (a) The monthly pension
shall be the highest of the following amounts:

(1) The sum of the following:

(i) Three Hundred pesos (P300.00); plus

1002
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

(ii) Twenty percent (20%) of the average monthly

salary credit; plus
(iii)T w o percent (2%) of the average m onthly
salary credit for each credited year of service in
excess of ten (10) years; or

(2) Forty percent (40%) of the average monthly

salary credit; or
(3) One Thousand pesos (P1.000.00): Provided,
That the monthly pension shall in no case be paid for
an aggregate amount of less than sixty (60) months.

(b) Notwithstanding the preceding paragraph, the

minimum pension shall be One Thousand Two Hun­
dred pesos (P1,200.00) for members with at least ten
(10) credited years of service and Two Thousand Four
Hundred pesos (P2.400.00) for those with twenty (20)
credited years of service.
<r * *

What are the “ average m onthly salary credit” 'and the

“ average daily salary credit” ?

ANS. Section 8 (m, n) of the SSS Law provides:

(m) A verage m o n th ly s a la ry c re d it. — The

result obtained by dividing the sum of the last sixty
(60) monthly salary credits immediately preceding the
semester of contingency by sixty (60), or the result
obtained by dividing the sum of all the mgnthly salary
credits paid prior to the semester of contingency by the
number of monthly contributions paid in the same
period, whichever is greater: Provided, That the injury
or sickness which caused the disability shall be
deemed as the permanent disability for the purpose of
computing the average monthly salary credit. (As
amended by R. A. 8282)
(n) A verage d a ily s a la ry c re d it. — The result
obtained by dividing the sum of the six (6) highest
monthly salary credits in the twelve-month period
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

immediately preceding the semester of contingency by

one hundred eighty (180). (As amended by R. A.
8282)

* ★ -it

Among the persons entitled to permanent disability

benefits are the “ dependents” of the covered employee.
Who are these “ dependents” ?

ANS. The dependents shall be the following:

(a) The legal spc-use entitled by law to receive

support from the membe.;
(b) The legitimate, |f?giliiTsc?t<id or legally adopted,
and illegitimate chiio who is l arried, not gainfully
employed and has not reached twenty-ov-; ( 21 ) years
of age, or if over twenty-one ( 21 ) years of age. he is
congenitally or while stiff a minor has been perma­
nently incapacitated and incapable of self-support,
physically or mentally; and
(c) The parent who is receiving regular support
from the member. (Sec. 8 (e), R. A. 1161, as
amended by R. A. 8282).

* * *

May the monthly pension be suspended?

ANS. Yes. Section 13-A (b) of the SSS Law

provides:

The monthly pension and dependents’ pension

shall be suspended upon the reemployment or resump­
tion of .eif-employment or the recovery of the disabled
member from his permanent total disability or his
failure to present himself for examination at least once
a year upon notice by the SSS. (As amended by R. A.
8282)

4 n n ,4
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

What are the permanent partial disability benefits?

ANS. (a) If the permanent partial disability occurs

after thirty-six (36) monthly contributions have been
paid prior to the semester of disability, the benefit shall
be the monthly pension for permanent total disability
payaJble not longer than the period specified in the
following schedule:

Complete and Permanent Number of

Loss of use of Months
One thumb 10
One index finger 8
One middle finger 6
One ring finger 5
One little finger 3
One big toe 6
One hand 39
One arm 50
One foot 31
One leg 46
One ear 10
Both ears 20
Hearing of one ear to
Hearing of both ears 50
Sight of one eye 25

(b) If the permanent partial disability occurs before

thirty-six (36) monthly contributions have been paid
prior to the semester of disability, the benefit shall be
the lump sum benefits for permanent total disability
with due regard to the degree of disability as the
Commission may determine. (Section 13-A (e and f),
R. A. 1161, as amended)

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 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

Describe the retirement benefits under the SSS Law.

ANS. Section 12-B of the SSS Law provides:

R e tire m e n t b e n e fits . — (a) A covered employee

who had paid at least one hundred twenty monthly
contributions prior to the semester of retirement, and
who (1) has reached the age of sixty (60) years and is
already separated from employment or has ceased to
be self-employed or (2) has reached the age of
sixty-five (65) years, shall be entitled for as long as he
lives to the monthly pension: Provided, That he shall
have the option to receive his first eighteen (18)
monthly pensions in lump sum discounted at a prefer­
ential rate of interest to be determined by the SSS.
(b) A covered member who is sixty years old at
retirement who does not qualify for pension benefits
under paragraph (a) above, shall be entitled to a lump
sum benefit equal to the total contributions paid by him
and on his behalf: Provided, That he is separated from
employment and is not continuing payment of contribu­
tions to the SSS on his own.
(c) The monthly pension shall be suspended upon
the reemployment or resumption of self-employment of
a retired member who is less than sixty-five (65) years
old. He shall again be subject to Section Eighteen and
his employer to Section Nineteen of this Act. (As
amended by R. A. 8282)

* * *

What are the death benefits under the SSS Law?

ANS. Section 13 of the SSS Law provides:

Death B e n e fits . — Upon the death of a member

who has paid at least thirty-six (36) monthly contribu­
tions prior to the semester of death, his primary
beneficiaries shall be entitled to the monthly pension:
Provided, That if he has no primary beneficiaries, his
secondary beneficiaries shall be entitled to a lump sum
benefit equivalent to thirty-six (36) times the monthly

1006
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

pension. If he has not paid the required thirty-six (36)

monthly contributions, his primary or secondary benefi­
ciaries shall be entitled to a lump sum benefit equiva­
lent to the monthly pension tim es the number of
monthly contributions paid to the SSS or twelve (12)
times the monthly pension, whichever is higher. (As
amended by R. A. 8282)
* * *

Under Section 13 o f the SSS Law, death benefits are

payable to the “ beneficiaries" o f the covered employs©.
Who are these “ beneficiaries” ?

ANS. The following are beneficiaries:

(a) P rim a ry b e n e fic ia rie s . — The dependent

spouse until he or she re-marries, and dependent
legitimate, legitimated or legally adopted, and illegiti­
mate children.
(b) S e co n d a ry b e n e fic ia rie s . — The' dependent
parents; and in the absence of the foregoing, any other
person designated by the covered employee as sec­
ondary beneficiary. (Sec. 8(k), R. A. 1161, as
amended).
* * Or

Rogelio Salcedo, a bachelor, dies after being a member

o f the SSS fo r (10) years. Death benefits are claimed by
Miss L., his girlfriend o f many years standing and whom
he designated as his beneficiary. The claim is con­
tested by Vic Salcedo, the brother o f the deceased. Vic
argues that he is preferred oyer Miss L. Decide with
reasons.

ANS. Miss L. is entitled to the death benefits. Vic

Salcedo, the brother of the deceased, is not among the
primary or the secondary beneficiaries specified by
law. On the other hand, since the deceased had no
blood relatives qualified to be his primary or secondary

1007
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

beneficiaries, he could designate any other person,

like Miss L. as his beneficiary.
* * ★

In his lifetime, Eddie, a widower, designated Maria with

whom he was living without the benefit of marriage as
his beneficiary under the Social Security Act. Upon
Eddie’s death, his unemployed married children by his
deceased spouse questioned the designation of Maria
on the ground that as the only legal heirs of Eddie, they
have the superior right to the death benefits under the
Social Security Act.
Who are entitled to the death benefits? Why? (1984 Bar)

ANS. Maria, being the designated beneficiary, is

entitled to the death benefits. In the absence of the
dependent spouse, dependent children and dependent
parents, any other person designated by the covered
employee shall be the beneficiary (Sec. 8 (k), Social
Security Act). Eddie’s legitimate children, although
unemployed, are not considered “dependents’ under
the law, since they are already married. (SSS vs,
Davac, et al., 17 SCRA 863 [1966]) and Eddie’s
legitimate children cannot rely on their being the legai i
heirs as basis for their claim for death benefits.

* # *

After four (4) years of marriage, the spouses Salmone

broke up in 1966 and agreed to live separately. They
had three (3) children. The Wife, Dominga, left the
conjugal home. Thereafter, Vicente Salmone lived with
another woman and begot five (5) children. In 1987,
Vicente Salmone, then an employee of a private firm sand
an SSS member, died.
Is Dominga Salmone entitled to the death benefit? Why?

ANS. No. She cannot qualify as a beneficiary

because she lived separately from the deceased; she
cannot be considered as a dependent spouse. *

1008
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161. AS AMENDED)

(b) Who is then entitled to th« death benefits?

ANS. A legitimate child of the Salmcnes v*!io wss

below 21 years of age at the tim e of the death of
Vicente. The said child is still a dependent child and a
primary beneficiary, as long as he or she is unmarried
and not gainfully employed. (Salmone vs. Salmone et
al., CA-G. R. SP. No. 19901, January 20, 1990)
* * *

Sabina Gil was married to Antonio Gil, an SSS member,

but they later separated and Antonio contracted another
marriage. Sabina also lived with other men. Antonio
designated one Francisca Lerios as his beneficiary indi­
cating in his SSS form that she was his wife. When
Antonio died, Sabina filed a claim fo r SSS death bene­
fits. Is the claim m eritorious? Why?

ANS. No. Entitlement to benefits as a primary

beneficiary requires not only legitim acy of relationship
but also dependence upon the member employee.
Sabina, while the legitimate spouse of the de­
ceased, was not dependent upon him for support as
she lived and cohabited with other men. (Gil vs.
Social Security Commission et al., CA-G. R. SP.
37150, May 8, 1996)
* * *

What is the amount of, and who are entitled to, the
dependents’ pension?

ANS. The dependents’ pension shall be equivalent

to ten (10%) percent of the monthly pension or Two
Hundred Fifty pesos (P250.00) whichever is higher. It
is payable to each dependent child conceived on or
before the date of the contingency but not exceeding
five, beginning with the youngest and without s u b s ta ­
tion: Provided, That where there are legitimate chil­

1009
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

dren, the form er shall be preferred. (Section 12-A, R.

A. 1161, as amended by R. A. 8282)

* * '#

How long shall the primary beneficiaries be entitled to

the death benefits consisting of a m onthly pension and
dependents’ pension?

ANS. The dependent spouse shall be entitled to

the monthly pension until he or she remarries, and the
dependent children until, they get married, or find
gainful employment, or reach age twenty-one years or
recover from mental or physical incapacity and can
now support themselves.

* -k *

In case a permanent total disability pensioner dies, are

his beneficiaries entitled to any death benefits?

ANS. Section 13-A (c) of the SSS Law provides:

Upon the death of the permanent total disability

pensioner, his primary beneficiaries as of the date of
disability shall be entitled to receive the monthly
pension: Provided, That if he has no primary benefi­
ciaries and he dies within sixty (60) months from the
start of his monthly pension, his secondary beneficia­
ries shall be entitled to a lump sum benefit equivalent
to the total monthly pensions corresponding to the
balance of the five-year guaranteed period excluding
the dependents’ pension. (As amended by R. A.
8282)

* * *

if a retired employee pensioner dies, what death bene­

fits if any w ill his beneficiaries’ and dependents get?

1010
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

ANS. Section 12-B (d) of the SSS law provides:

Upon the death of the retired member, his primary

beneficiaries as of the date of his retirement shall
entitled to receive the monthly pension: Provided,
That if he has no primary beneficiaries and he dies
within sixty (60) months from the start of his monthly
pension, his secondary beneficiaries shall be entitled
to a lump sum benefit equivalent to the total monthly
pensions corresponding to the balance of the five-year
guaranteed period, excluding the dependents’ pension.
(As amended by R. A. 8282)

★ * *

In case no beneficiary qualifies fo r entitlement to the

death benefits under the SSS law, how w ill such bene­
fits be disposed of?

ANS. The death benefits shall be paid to the legal

heirs of the deceased in accordance with the law of
succession. (Sec. 15, R. A. 1161, as amended)

* * *

What is the funeral benefits?

ANS. A funeral grant equivalent to Twelve Thou­

sand pesos (P12,000.00) shall be paid, in cash or in
kind, to help defray the cost of expenses upon the
death of a member, including permanently tota lly
disabled member or retiree. (Sec. 13-B, as amended)

★ * *

Who are entitled to the maternity leave benefit under the

SSS Law as amended by R. A. 7322? What is the
amount of the benefit?

ANS. A female member who has paid at least

three (3) monthly contributions in the twelve-month

1011
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

period immediately preceding the semester of child­

birth 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 caesarean delivery.
(Sec. 14-A, R. A. 1161, as amended by R. A. 8282)
* * *

Enumerate the conditions to which the enjoyment o f the

maternity leave benefit is subject.

ANS. The enjoyment of the maternity leave benefit

is 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) That full payment shall be advanced by the
employer within thirty (30) days from the filing of the
maternity leave application;
(c) That the 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 maternity benefits provided under this
Section shall be paid only for the first four (4) deliver­
ies or miscarriages;
(e) That the SSS shall immediately reimburse the
em ployer of one hundred percent (100%) of the
amount of the 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 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 em­
ployer shall pay to the SSS damages equivalent to the

1012
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

benefits which said employee member would otherwise

have been entitled to. (Sec. 14-A, R. A. 1161, as
amended by R. A. 8282)
it it *

Ms. Sara Mira is an unwed m other with three children

from three different fathers. In 1999, she became a
member of the Social Security System. In August 2000,
she suffered a miscarriage, also out o f wedlock, and
again by a different father. Can Ms. Mira claim mater­
nity benefits under the Social Security Act o f 1997?
Reason. (2000 Bar)

ANS. Yes. Section 14-A of the Social Security Act

as amended by Republic Act No. 8282 (1997), does
not require that the female member be legally married
in order to be entitled to SSS maternity leave benefits.
Furthermore, the said benefit is paid for the first four
(4) deliveries or miscarriages.
* * *

Classify the loans that may be extended by tha Social

Security System to its members.

ANS. Salary loan; educational loan; housing loan;

community hospital loan.

* * *

What beneficiaries are disqualified from receiving any

benefits under the SSS Law?

ANS. A beneficiary who is a national of a foreign

country which does not extend benefits to a Filipino
beneficiary residing in the Philippines, or which is not
recognized by the Philippines, shall not be entitled to
receive any benefit under SSS law; provided, that
notwithstanding the foregoing, where the best interest
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

of the SSS will be served, the Commission may direct

payments without regard to nationality or country of
residence. (Sec. 15, R. A. 1161, as amended)

* * *

Are benefit payments made by the SSS subject to tax or

attachments and sim ilar processes?

ANS. No. Section 16 of the SSS law exempts all

benefit payments made by the SSS from all kinds of
taxes, fees or charges, and from attachments, garnish­
ments, levy or seizure by or under any legal or
equitable process whatsoever, either before or after
receipt by the person or persons entitled thereto,
except to pay any debt of the covered employee to the
SSS.

* * *

The employer is obliged under the SSS law, aside from

remitting the premium contributions, to report immedi­
ately to the SSS, the names, ages, civil status, occupa­
tions, salaries and dependents o f an his employees who
are subject to compulsory coverage. What is the liabil­
ity of the employer should an employee subject to
com pulsory coverage die, become sick o r disabled or
reach the age of sixty w ithout the SSS having previ­
ously received any report or written communication
about him from his employer or from his contribution
paid in his name by the former? Explain.

ANS. The employer is subject to the following

liabilities:

(a) It shall pay to the SSS damages equivalent to

the benefits to which the employee would have been
entitled had his name been reported on time to the
SSS, except that in case of pension benefits, the
employer shall be liable to pay the SSS damages

A flA J
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

equivalent to five years monthly pension; however, if

the contingency occurs within thirty (30) days from
date of employment, the employer shall be relieved of
his liability for damages. (Sec. 24 (a), R. A. 1161, as
amended)
(b) It shall pay the corresponding unremitted
contributions and penalties thereon. (Sec. 24 (b), R.
A. 1161, as amended)
(c) Criminal liability for failure to comply with the
provisions of the SSS law. A fine of not less than five
thousand pesos (P5.000.00) nor more than twenty
thousand pesos (P20.000.00) and imprisonment for not
less than six (6) years and one day nor more than
twelve (12) years. (Sec. 28 (e), R. A. 1161, as
amended)

* * *

What body has jurisdiction over a dispute arising under

the SSS Law with respect to coverage, benefits, contri­
butions o r penalties thereon or any other matter related
thereto?

ANS. The Social Security Commission. Section 5

of the SSS Law provides:

S e ttle m e n t o f D isp u te s. — (a) Any dispute

arising under this Act with respect to coverage, bene­
fits, contributions and penalties thereon or any other
matter related thereto, shall be cognizable by the
Commission, and any case filed with respect thereto
shall be heard by the Commission, or any its members,
or by hearing officers duly authorized by the Commis­
sion and decided within the mandatory period of twenty
(20) days after the submission of the evidence. The
filing, determination and settlement of disputes shall
be governed by the rules and regulations promulgated
by the Commission. (As amended by R. A. 8282)

* ht hr
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

Is the decision o f the Social Security Commission sub­

ject to judicial review?

ANS. Yes. Section 5 (b & c) of the SSS Law

provides:

(b) A p p e a l to c o u rts . — Any Decision of the

Commission, in the absence of any appeal therefrom
as herein provided, shall become final fifteen days
after the date of notification, and ju dicial review
thereof shall be permitted only after any party claiming
to be aggrieved thereby has exhausted his remedies
before the Commission. The Commission shall be
deemed to be a party to any judicial action involving
any such decision, and may be represented by an
attorney employed by the Commission, or when re­
quested by the Commission, by the Solicitor General
or any fiscal.
(c) C o u rt R eview . — The decision of the
Commission upon any disputed m atter may be re­
viewed both upon the law and the facts by the Court of
Appeals. For the purpose of such review, the proce­
dure concerning appeals from the Regional Trial Court
shall be followed as far as practicable and consistent
with the purposes of this Act. Appeal from a decision
of the Commission must be taken within fifteen days
from notification of such decision. If the decision of
the Commission involves only questions of law, the
shall be resolved by the Supreme Court. No appeal
bond shall be required. The case shall be heard in a
summary manner, and shall take precedence over all
cases, except that in the Supreme Court, criminal
cases wherein life imprisonment or death has been
imposed by the trial court shall take precedence. No
appeal shall act as a supersedes or a stay of the order
of the Commission unless the Commission itself, or the
Court of Appeals of the Supreme Court, shall so order.
(Under Sections 1 and 3 of Rule 43 of the Rules of
Civil Procedure, appeal is to be taken to the Court of
Appeals by a verified petition for review.)
* * *
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

Are benefits provided for in the SSS Law transferable?

ANS. Benefits provided for in the SSS law are not

transferable arid no power of attorney or other docu­
ment executed by those entitled thereto, in favor of
any agent, attorney, or any other person for the collec­
tion thereof on their behalf shall be recognized except
when they are physically unable to collect personally
such benefits. (Sec. 15, R. A. 1101, as amended)

* A- *

Are SSS benefits considered prop-arty earned by the

member during his lifetime? Do they form part of his
estate? Explain.

ANS. The benefits receivable under the SSS law

are in the nature of a special privilege or an arrange­
ment secured by the law pursuant to the policy of the
State to provide social security to the workingman.
Such benefits cannot be considered as property earned
by the member during his lifetime. His contributions to
the fund, it may be noted, constitute only an insignifi­
cant portion thereof. Then, the benefits are specifi­
cally declared not transferable and exempt from tax
legal processes and liens. Furthermore, in the settle­
ment of claims, the procedure to be observed is
governed not by the general provisions of law, but by
rules and regulations promulgated by the Sociai Secu­
rity Commission. And it is not the probate or regular
court but the Commission that determines the person
or persons to whom the benefits are payable. (Sociai
Security System vs. Davac et al., G. R. No.
L-21642, July 30, 1966)
* * *

Is the Social Security Act a taw of succession? Why?

ANS. No. The benefits-due to under the SSS Law

do not form part of the state of the covered employee.
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

Besides, persons other than the heirs of the deceased

employee may be entitled to the said benefits.
* * *

What is the “ limited portability scheme” in the social

security insurance systems?

ANS. Republic Act No. 7699, approved on May 1,

1994, provides:

SEC. 3. Provisions of any general or special lav/

or rules and regulations to the contrary notwithstand­
ing, a covered worker who transfers employment from
one sector to another or is employed in both sectors,
shall have his creditable services or contributions in
both Systems credited to his service or contribution
record in each of the Systems and shall be totalized for
purposes of old-age, disability, survivorship and other
benefits in case the covered member does not qualify
for such benefits in either or both Systems without
totalization: Provided, however, That overlapping
periods of membership shall be credited only once for
purposes of totalization. ,

SEC. 4. All contributions paid by such member

personally, and those that were paid by his employers
to both Systems shall be considered in the processing
of benefit which he can claim from either or both
Systems: Provided, however, That the amount of
benefits to be paid by one System shall be in propor­
tion to the number of contributions actually remitted to
that System.
*r * *

In 1960, Juan hired Pablo to drive fo r the form er’s

lumber company. In 1970, Pablo got sick and was
temporarily laid-off. In 1972, Pablo recovered and re­
sumed working fo r the same lumber company, now run
by Juan’s wife since Juan had already passsed away. In

1018
 THE SOCIAL SECURITY LAW
(REPUBLIC ACT NO. 1161, AS AMENDED)

1996, Pablo was retired. When Pablo applied fo r retire­

ment benefits with the SSS that same year, he discov­
ered that the lumber company never enrolled him as an
employee, much less remitted his contributions that
were deducted from his salary. The lumber company
agreed to pay fo r Pablo’s contributions plus penalties
but maintained that most of Pablo’s claims had already
prescribed under Art. 1150 o f the Civil Code. (Art. 1150
provides: “ The time fo r prescription o f all kinds of
actions, when there is no special provision which or­
dains otherwise, shall be counted from the day thay
may ba brought.” ). Is the lumber company’s contention
correct? Why?

ANS. No. Under Section 22 of Republic Act No.

1161, as amended by Republic Act No. 8282, the right
to institute the necessary action against the employer
may be commenced within twenty (20) years from the
time the delinquency is known or the assessment is
made by the SSS, or from the time the benefit accrues,
as the case may be. The prescriptive period does not
commence when the obligation to pay the premiums
accrues. (Lo vs. Court of Appeals et al., G. R. No.
128667, December 17, 1999) (2001 Bar)

1019
 CHAPTER XIX

THE REVISED GOVERNMENT SERVICE

INSURANCE ACT (P. D. 1146)
as amendvd by Republic Act No. 8291
What is Presidential Decree No. 1146?

ANS. Presidential Decree No. 1146, otherwise

known as the “Revised Government Service Insurance
Act of 1977”, is a law expanding and improving the
social security and insurance programs administered
by the Government Service Insurance System (GSIS).
It increases pension benefits, expands disability bene­
fits, and will eventually extend the compulsory cover­
age of the social security and insurance programs to
all government officers regardless of employment sta­
tus. This decree was enacted on May 31, 1977.
* T*f *

What iaw, if any, provided for social security and insur­

ance benefits to government employees prior to the
enactment of Presidential Decree Wo. 114S?

ANS. Commonwealth Act No. 186, as amended,

enacted by the National Assembly of the Common­
wealth of the Philippines on November 14, 1936. It
established the Government Service Insurance System
and provided for retirement, disability and life insur­
ance benefits to government employees.
* -k

What is the latest amendment to Presidential Decree No.

1146?

ANS. It is Republic Act No. 8291, otherwise

known as “The Government Service Insurance System
Act of 1987".
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

What government employees are subject to coverage

under the Government Service insurance System?

ANS. Section 3 of the Pres. Decree No. 114Sas

amended provides:

C o m p u ls o ry Coverage. — Membership in the

GSIS shall be compulsory for all employees receiving
compensation who have not reached the compulsory
retirement age, irrespective of employment status,
except members of the Armed Forces of the Philip­
pines and the Philippine National Police, subject to the
condition that they must settle first their financial
obligation with the GSIS, and contractuals who have
no employer and employee relationship with the agen­
cies they serve.
Except for the members of the judiciary and consti­
tutional commissions who shall have life insurance
only, all members of the GSIS shall have life insur­
ance, retirement, and all other social security protec­
tion such as disability, survivorship, separation, and
unemployment benefits.
* * *

Give the meaning of the term “employee” or “member”

under the Revised GSIS Act.

ANS. The term “employee” or “member” means

any person receiving compensation while in the ser­
vice of an employer as defined herein, whether by
election or appointment, irrespective of status of ap­
pointment, including barangay and sanggunian o ffi­
cials. (Sec. 2 (d), P. D. 1146)
* * *

Who are excluded from the coverage of the GSIS Act?

ANS. (a) Employees who have separate retire­

ment schemes under special laws and are, therefore,
covered by their respective retirement, laws, such as,

1021
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

the members of the Judiciary, Constitutional Commis­

sions, and other sim ilarly situated government o ffi­
cials;
(b) Contractual employees who, as defined in the
Act, have no employer-employee relationship with the
agencies they serve; and
(c) Uniformed members of the Armed Forces of
the Philippines (AFP), the Bureau of Fire Protection,
and the Bureau of Jail Management and Penology
(BJMP) whose coverage by the GSIS has ceased
effective June 24, 1997.
(d) Uniformed members of the Philippine National
Police (PNP) whose coverage by the GSIS has ceased
effective February 1, 1996. (Sec. 2.4, Rule II,
Implementing Rules and Regulations of R. A. No.
8291)

* * *

Give the scope o f the term “ employer” under the Re­

vised GSIS Act.

ANS. “Employer means the National Government,

its political subdivisions, branches, agencies or instru­
mentalities, government owned and controlled corpo­
rations owned and financial institutions with original
charters, the constitutional commissions and the ju d i­
ciary.” (Sec. 2 (c), P. D. 1146)

* Hr *

Classify members o f the GSIS fo r purposes of benefit

entitlement.

ANS. (a) Active members. These members are

still in the service and are paying the integrated
premiums prescribed under R. A. 8291. These
members are covered for the entire package of bene­
fits and privileges being extended by the GSIS.
(b) Policyholders. These members are covered for
life insurance only and are entitled to the specific

1022
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

benefits accruing only from the life insurance cover­

age; they can avail of policy loan privilege only. They
may, however, apply for housing loans, subject to the
terms and conditions applicable for non-members.
(c) Separated Members. These members are
former active members who have been separated from
the service and are still covered by the GSIS under the
principle of “once a member, always a member” ; as
such, unless the terms of their separation provide
otherwise, they shall be entitled to receive future
benefits under P. D. 1146 in the event of compens­
able contingency such as old-age (attainment of age
60 years), disability, survivorship and death. They are
not entitled to any loan privilege. They may, however,
apply for housing loans, subject to the terms and
conditions applicable for non-members.
(d) Retired members. These members are form er
active members who have retired from the service and
are already enjoying the corresponding retirement
benefits applied for. These members are not entitled
to any loan privilege, except stock purchase loan.
(Sec. 2.2, Rules II, Implementing Rules and Regula­
tions of R. A. No. 8291)
* * *

Does the separation of the employee ^ the employer

carry w ith it the termination o f his pfembership with the
GSIS?

ANS. No. Section 4 of P. D. 1146 provides that

a member separated from the service shall continue to
be a member, and shall be entitled to whatever bene­
fits he has qualified to in the event of any contingency
compensable under this Act.

* * *

Give the sources o f funds o f the Government Service

Insurance System.

1023
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

AMS. The funds of the GSiS come from the

monthly contributions required of the covered employ­
ees and their employers. (Sec. 5, P. D. 1146)
The contributions of the employees are deducted
and v/ithheld by the employer each month from the
monthly salary of the form er and are remitted by the
latter, together with its own share, to the System within
the first ten (10) days of each calendar month following
the month to which the contributions apply. (Sec. 6,
P. D. 1146)
* * *

Give the penalty fo r non-remittance or delayed remit­

tance of contributions.

ANS. Unremitted collections shall earn such inter­

est as the GSIS Board of Trustees may prescribe, not
exceeding two (2%) percent per month from due date
to the date of payment by the employer. (Sec. 7, P.
D. 1146)
* * *

in case the GSIS becomes insolvent, who shall pay the

benefits that are due its members?

ANS. The Government o f the Republic of the

Philippines. (Sec. 8, P. D. 1146)

* * *

Enumerate the benefits that may be enjoyed under the

Revised GSIS Act (P. D. 1146).

ANS. They are the following:

(a) Separation benefits (Sec. 11);

(b) Retirement benefits (Sec. 13);
(c) Permanent disability benefits (Secs. 15-17);

1024
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

(d) Temporary disability benefits (Sec. 18);

(e) Survivorship benefits (Sec. 20);
(f) Funeral benefits (Sec. 23);
(g) Life insurance benefits (Sec. 24).
iJr * *

Give the two types of permanent disability.

ANS. They are permanent total disability and

permanent partial disability.
Permanent total disability accrues or arises when
recovery from any loss or impairment of the normal
functions of the physical and/or mental faculty of a
member which reduces or eliminates his/her capacity
to continue with his/her current gainful occupation or
engage in any other gainful occupation is medically
remote. (Sec. 2[q] and [s])
Permanent partial disability accrues or arises upon
the irrevocable loss or impairment o f certain portion/s
of the physical faculties, despite which the.mem ber is
able to pursue a gainful occupation. (Sec. 2[u])
iftr * *

What are the conditions for entitlement to permanent

disability benefits?

ANS. Section 15 of P. D. 1146 provides:

G eneral C o n d itio n s f o r E n title m e n t. — A

member who suffers permanent disability for reasons
not due to his grave misconduct, notorious negligence,
habitual intoxication, or w illful intention to kill himself
or another, shall be entitled to the benefits provided for
under Sections 16 and 17 immediately following, sub­
ject to the corresponding conditions therefor.
* * *

What are the permanent disability benefits?

1025
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

ANS. Sections 16 and 17 of P. D. 1146, as

amended provides:

“SEC. 16. Permanent Io ta ! Disability Benefits. -

(a) If the permanent disability is total, he shall receive
a monthly income benefit for life equal, to the basic
monthly pension effective from the date of disability
Provided, That:
(1) he is in the service at the tim e of disability, or
(2) if separated from the service, he has paid at
least thirty-six (3S) monthly contributions within the
five (5) year period immediately preceding his disabil­
ity, or has paid a total of at least one hundred eighty
(180) monthly contributions, prior to his disability:
Provided, further, That if at the time of disability, he
was in the service and has paid a total of at least one
hundred eighty (180) monthly contributions in addition
to the monthly income benefit, he shall receive a cash
payment equivalent to eighteen (18) times his basic
monthly pension: Provided, finally, That a member
cannot enjoy the monthly income benefit for perma­
nent disability and the old-age retirement ’s imultane­
ously

(b) If a member who suffers permanent total

disability does not satisfy conditions (1) and (2) in
paragraph (a) of this section but has rendered at least
three (3) years service at the time of his disability he
shall be advanced the cash payment equivalent to one
hundred percent (100%) of his average monthly com­
pensation for each year of service he paid contribu­
tions, but not less than Twelve thousand pesos
(P12.000) which should have been his separation
benefit.

(c) Unless the member has reached the minimum

retirement age, disability benefit shall be suspended
when (1) he is reemployed; or (2) he recovers from
his disability as determined by the GSIS whose deci­
sion shall be final and binding; or (3) he fails to
present himself for medical examination when required
by the GSIS.
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

(d) The following shall be be total and permanent:

(1) complete loss of sight of both eyes;

(2) loss of two (2) limbs at or above the ankle or
wrist;
(3) permanent complete paralysis of two (2) limbs;
(4) brain injury resulting in incurable im becility or
insanity; and
(5) such other cases as may be determined by the
GSIS”

“SEC. 17. Permanent Partial Disability Benefits.

- (a) If the disability is partial he shall receive a cash
payment in accordance with a schedule of disabilities
to be prescribed by the GSIS: Provided, That he
satisfies either conditions (1) or (2) of Section 16 (a);
(b) The following disabilities shall be deemed
permanent partial:

(1) complete and permanent loss of the.use of:

(1) any finger

(ii) any toe
(iii) one arm
(iv) one hand
(v) one foot
(vi) one leg
(vii) one or both ears
(viii) hearing of one or both ears
(ix) sight of one eye

(2) such other cases as may be determined by the

GSIS.
* * /*

How much is the “ basic m onthly pension"?

ANS. Section 9 of P. D. 1146, as amender

provides:

1027
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

“Computation of the Basic Monthly - (a) the

basic basic pension is equal to:

1) thirty-seven and one-half percent (37.5%) of the

revalued average monthly compensation; plus
2) two and one-half percent (2.5%) of said reval­
ued average monthly compensation for each year of
service in excess of fifteen (15) years Provided, That
the basic monthly pension shall not exceed -ninety
percent (90%) of the average monthly compensation.

“(b) The basic monthly pension may be adjusted

upon the recommendation of the President and Gen­
eral Manager of the GSIS and approved by the Presi­
dent and General Manager of the GSIS and approved
by the President of the Philippines in accordance with
the rules and regulations prescribed by the GSIS
Provided, however, That the basic monthly pension
shall not be less than One thousand and three hundred
pesos (P1.300.00): Provided, further, That the basic
monthly pension for those who have render'ed at least
twenty ( 20 ) years of service after the effectivity of this
Act shall not be less than Two thousand four hundred
pesos (P2.400.00) a month.

* * *

Give the meaning of “ average m onthly compensation” ,

“ revalued average m onthly com pensation” , “ lump
sum” , “ compensation” .

ANS. “Average monthly compensation” (AMC) is

the quotient after dividing the aggregate compensation
received by the member during his last thirty-six (36)
months of service preceding his separation/retirement/
death by thirty-six (36), or by the number of months he
received such compensation if he has less than thirty-
six (36) months of service: Provided, That the aver­
age monthly compensation shall in no case exceed the
amount and rate as may be respectively set by the
Board under the rules and regulations implementing

1028
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

this Act as determined by the actuary of the GSIS:

Provided, further, That initially the average monthly
compensation shall not exceed Ten thousand pesos
(P10,000.00), and premium shall be nine percent (9%)
and twelve percent (12%) for employee and employer
covering the AMC lim it and below and two percent
(2%) and twelve percent (12%) for employee and
employer covering the compensation above the AMC
limit. (Section 2 (I), P. D. 1148, as amended)

“Revalued average monthly compensation” is an

amount equal to one hundred seventy (170%) percent
of the first One thousand pesos (P1.000.00) of the
average monthly compensation plus one hundred per­
cent (100%) of the average monthly compensation in
excess of One thousand pesos (P1,000.00). (Sec. 2
(m), P. D. 1146)
“Lump sum" is the basic monthly pension multiplied
by sixty (60). (Sec. 2 (n), P. D. 1146)
“Compensation” means the basic pay or salary
received by an employee pursuant to his election/
appointment, excluding per diems, bonuses, overtime
pay, honoraria, allowances and any other emoluments
received in addition to the basic pay which are not
integrated into the basic pay under existing laws.
(Sec. 2 (i), P. D. 1146)
* * *

When is retirement compulsory?

ANS. Unless the service is extended by appropri­

ate authorities, retirement shall be compulsory for an
employee at sixty-five (65) years of age with at least
fifteen (15) years of service; provided, that if he has
less than fifteen (15) years of service, he shall be
allowed to continue in the service to complete the
fifteen (15) years. (Sec. 11(b), P. D. 1146)

1029
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

Give the reasons fo r the compulsory retirement o f gov­

ernment employees.

ANS. The compulsory retirement of government

officials and employees upon their reaching the age of
65 years is founded on public policy which aims by it to
maintain efficiency in the government service and at
the same time give to the retiring public servants the
opportunity to enjoy during the remainder of their lives
the recompense, inadequate perhaps, for their long
service and devotion to the government, in the form of
a comparatively easier life, freed from the rigors of
civil service discipline and the exacting demands that
the nature of their work and their relations with their
superiors as well as the public would impose upon
them. (Hilarion Beronilla vs. GSIS, et al., G. R. No.
L-21723, November 26, 1970)

★ ★ *

A government employee is separated upon reaching the

age of sixty (60) years but has rendered only five (5)
years o f service. Is he entitled to any benefit?

ANS. Yes. He is entitled to Separation Benefits

under Section 11 of P. D. 1146, as amended, which
provides:

“S e p a ra tio n B e n e fits - The separation benefit

shall consist of: (a) a cash payment equivalent to one
hundred percent (100%) of his average monthly com­
pensation for each year of service he paid contribu­
tions, but not less than Twelve thousand pesos
(P12,000) payable upon reaching sixty (60) years of
age or upon separation, whichever comes later: Pro­
vided, That the member resigns or separates from the
service after he has rendered at least three (3) years
of service but less than fifteen (15) years; x x x"

* * *

1030
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

When Gaudencio Cena, the Register o f Deeds o f Mal-

abon, reached the age of SS years, he had rendered a
total government service of 11 years, 9 months and 6
days. . However, before reaching his $5^ birthday, he
requested the Secretary of Justice, through ihe Land
Registration Authority, that he be allowed to extend his
service to complete th© 15-year service requirement to
enable him to retire with fu ll benefits of old-age pension
under Section 11, par. (b) of P. D. 1148. The Civil
Service Commission, to which the matter was referred,
ruled that Cena was only entitled to an extension o f one
(1) year, pursuant to CSC Memorandum Circular No. 27,
Series of 1990.
(a) Is the ruling of the Civil Service Commission cor­
rect? Why?

ANS. No. Section 11 (b) of the Revised Govern­

ment Service Insurance Act of 1977 (P. >D. 1146)
does not lim it the extension of service to only one (1)
year.
Being remedial in character, a statute creating a
pension or establishing a retirement plan should be
liberally construed and administered in ihe favor of the
persons benefited thereby. The liberal approach aims
to achieve the humanitarian purposes of the law in
order that the efficiency, security and well-being of
government employees may be enhanced.
Furthermore, the Civil Service Commission has no
power to supply perceived omissions in P. D. 1146.
Civil Service Memorandum Circular No. 27 s. 1990
constitutes an addition to or an extension of the law,
not merely a mode of carrying it into effect.

(b) Cite instances where the Supreme Court has al­

lowed an employee who has reached the age o f 65 years
to continue in the service to complete the 15-year ser­
vice requirement in order to be entitled to the fu ll
retirement benefits under Section 11 (b) P. D. 1146.

ANS. In a resolution dated January 23, 1990 in

Administrative Matter No. 87-7-1329-MTC, Mrs. Flo-

1031
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

rentina J. Bocade, Clerk of Court, Municipal Trial

Court, Dagani, Leyte, who at the time she reached the
age of sixty five (65) years had only ten (10) years of
government service, was given a period of five (5)
years to complete the 15-year service requirement.
In a resolution dated April 18, 1991 in Administra­
tive M atter No. 91-3-003-SC, Mrs. Crisanta T.
Tiangco, Budget O fficer of the Supreme Court, was
granted an extension of three (3) years, ten (10)
months and thirteen (13) days because at the time she
reached the age of 65 years she had to her credit only
11 years, 1 month and 17 days.

(c) Section 12 (b) of P. D. 1146 provides that “ a

member who has rendered at least three (3) years but
less than 15 years o f service at the time o f separation
shall, x x x upon separation after age sixty, receive a
cash equivalent to 100% of his average m onthly com­
pensation fo r every year of service” . Doss this provi­
sion apply to the case of Mr. Cena? Why?

ANS. No. Mr. Cena opted to continue in the

service to complete the 15-year service requirement
pursuant to Section 11 (b) of P. D. 1146. The
completion of the 15-year service requirement under
Section 11 par. (b) partakes of the nature of a
privilege given to an employee who has reached the
compulsory retirement age of 65 years, but has less
than 15 years of service. If said employee opted to
avail of said privilege, he is entitled to the benefits of
the old-age pension. On the other hand, if the said
employee opted to retire upon reaching the compulsory
retirement of age of 65 years, but has less than 15
years of service, he is entitled to the benefits provided
for under Section 12, of P. D. 1146, i. e. a cash
equivalent to 100% of his average monthly compensa­
tion for every year of service.
The right under Section 11 par. (b) is open to all
employees sim ilarly situated, so it does not offend the
constitutional guarantee of equal protection of the law.
There is nothing qbsurd or inequitable in rewarding an

1032
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

employee for completion of the 15-year service beyond

the retirement age. If he would be better off than the
employee who has served for 14 years but who is
separated from the service at the age of 64, it would
be only just and proper as he would have worked for
the whole period of 15 years as required by law for
entitlement of the old-age pension. Indeed, a longer
service should merit a greater reward. Besides, his
entitlement to the old-age pension is conditioned upon
such completion. Thus, if the service is not completed
due to death or incapacity, he would be entitled to the
benefit under Section 12, par. (b) i. e. a cash
equivalent to 100% of his average monthly compensa­
tion for every year of service. (Cena vs. The Civil
Service Commission et al., G. R. No. 97419, July 3,
1992)
* * *

Rabor was a Utility Worker in the Office of the Mayor,

Davao City. He entered the government service as a
Utility Worker at the age of 55 years. Sometirne in May
1991, an official in the Office of the Mayor of Davao City,
advised Dionisio M. Rabor to apply fo r retirement,
considering that he had already reached the age of
sixty-eight (68) years and seven (7) months, with th ir­
teen (13) years and one (1) month o f government ser­
vice. Rabor, responded by exhibiting a “ Certificate of
Membership” issued by the GSIS wherein there is a
typewritten statement of the follow ing tenor: “ Service
extended to comply 15 years service requirements.”
Thereupon, the Davao City Government wrote to the
Civil Service Commission, requesting advice as to what
action should be taken on the matter. The Civil Service
Commission advised them that under Memorandum
Circular No. 65, the services of Rabor cannot be ex­
tended. The Mayor accordingly informed Rabor o f the
said information and ordered him to stop reporting fo r
work. Rabor contends that he is entitled to an exten­
sion of two years in order to complete the required 15
years of service fo r entitlement to retirement benefits.

1033
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

He invokes the case of Cena to support his claim.

Decide.

ANS. Rabor's employment cannot be extended.

W hile the Cena decision is barely three (3) years old,
the Court considers that it must reexamine the doctrine
of Cena and the theoretical and policy underpinnings
thereof.
Cena laid heavy stress on the interest of retirees or
would be retirees, something that is, in itself, quite
appropriate. At the same time, however, we are bound
to note that there should be countervailing stress on
the interests of the employer agency and of other
government employees as a whole. The results flow­
ing from the striking down of the limitation established
in Civil Service Memorandum Circular No. 27 may
well be “absurd arid inequitable,0 as suggested by
Mme. Justice Grino-Aquino in her dissenting opinion.
An employee who has rendered only three (3) years of
government service at age sixty-five (65) can have his
service extended for twelve (12) years and finally
retire at the age of seventy-seven (77). 'This reduces
the significance of the general principle of compulsory
retirement at age sixty-five (65) very close to the
vanishing point.
The very real difficulties posed by the Cena doc­
trine for rational personnel administration and manage­
ment in the Civil Service, are aggravated when Cena
is considered together with the case of Toledo v. Civil
Service Commission. (202 SCRA 507 [1991]) Toledo
involved the provisions of Rule Ilf, Section 22, of the
Civil Service Rules on Personnel Action and Policies
(CSRPAP) which prohibited the appointment of per­
sons fifty-seven (57) years old or above in government
service without prior approval of the C ivil Service
Commission. Civil Service Memorandum Circular No.
5, Series of 1983 provided that a person fifty-seven
(57) years of age may be appointed to the Civil
Service provided that the exigencies of the govern­
ment service so required and provided that the ap­
pointee possesses special qualifications not possessed
by other officers or employees in the Civil Service and

1034
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

that the vacancy cannot be filled by promotion of

qualified officers or employees of the Civil Service.
Petitioner Toledo was appointed Manager of the Edu­
cation and Information Division of the Commission on
Elections when he was almost fifty-nine (59) years old.
No authority for such appointment had been obtained
either from the President of the Philippines or from the
C ivil Service Commission and the Commission found
that the other conditions laid down in Section 22 of
Rule III, CSRPAP, did not exist. The Court neverthe­
less struck down Section 22, Rule III on the same
exceedingly restrictive view-of permissible administra­
tive legislation that Cena relied on.
When one combines the doctrine of Toledo with the
ruling in Cena, very strange results follow. Under
these combined doctrines, a person sixty-four (64)
years of age may be appointed to the government
service and one (1) year later may demand extension
of his service for the next fourteen (14) years; he
would retire at age seventy-nine (79). The net effect is
thus that the general statutory policy of compulsory
retirement at sixty-five (65) years is heavily eroded
and effectively becomes unenforceable. That general
statutory policy may be seen to embody the notion that
there should be a certain minimum turn-over in the
government service and that opportunities for govern­
ment service should be distributed as broadly as
possible, specially to younger people, considering that
the bulk of our population is below thirty (30) years of
age. That same general policy also reflects the life
expectancy of our people which is still significantly
lower than the life expectancy of, e. g., people in
Northern and Western Europe, North America and
Japan.
Our conclusion is that the doctrine of Cena should
be and is hereby modified to this extent: that Civil
Service Memorandum Circular No. 27, Series of 1990,
more specifically paragraph (1) thereof, is hereby
declared valid and effective. Section 11 (b) of P. D.
No. 1146 must, accordingly, be read together with
Memorandum Circular No. 27. We reiterate, however,
the holding in Cena that the head of the government

1035
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

agency concerned is vested with discretionary author­

ity to allow or disallow extension of the service of an
official or employee who has reached sixty-five (65)
years of age without completing fifteen (15) years of
government service; this discretion is, nevertheless, to
be exercised conformably with the provisions of Civil
Service Memorandum Circular No. 27, Series of 1990.
(Rabor vs. Civil Service Commission, 244 SCRA 614,
May 31. 1995)

★ * *

What laws govern the retirement o f justices, judges and

other members o f the judiciary and members o f the
Armed Forces o f the Philippines?

ANS. The retirement of members of the judiciary

is governed by Rep. Act No. 910, as amended, while
those of members of the Armed Forces of the Philip­
pines by Rep. Act No. 340. P. D. No. 1146 does not
apply where separate retirement schemes are estab­
lished under special laws.

* * *

May government employees elect to retire under Com­

monwealth Act No. 186, as amended?

ANS. Employees who were already in the govern­

ment service on May 31, 1977, when P. D. 1146 took
effect, have at the tim e of their retirement the option
to retire under the said decree or under C. A. No.
186. (Sec. 13, P. D. 1146)

* * *

May a government agency establish a supplementary

retirement plan fo r its employees? Explain.

ANS. As a general rule, no. Republic Act No.

4968, approved June 17, 1967 (the Teves Retirement

1036
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

Law) prohibits the establishment of supplementary

retirem ent or pension plans by any governm ent
agency, office, instrumentality or government owned
or controlled corporations. This is to prevent the
undue and inequitous proliferation of such plans.
(Conte et al vs. Commission on Audit, G. R. No.
116422, November 4, 1996)
However, Republic Act No. 8282, which amends
the SSS law (R. A. 1161) authorizes the SSS to
create a provident fund for its employees. Similarly,
Republic Act No. 8291 (The GSIS Act of 1997)
authorizes the GSIS to design an early retirement plan
(EREP) and/or financial assistance for the purpose of
retirement of its personnel.

* * *

Is the pension o f a public servant a gratuity? Explain.

ANS. To a public servant, a pension is not a

gratuity but rather a form of deferred compensation for
services performed and his right to it commences to
vest upon his entry into the retirement system and
becomes.an enforceable obligation in court upon fu lfill­
ment of all conditions under which it is io be paid.
Similarly, retirement benefits receivables by public
employees are valuable parts of the consideration for
the entrance into and continuation in public office or
employment. They serve a public purpose and a
primary objective in establishing them is to induce
competent persons to enter and remain in public
employment and render faithful and efficient service
while so employed. (Profeta vs. Drilon, G. R. No.
104149, December 22, 1992)

* * *

What are “ unemployment” o r “ involuntary” separation

benefits?

4 IW 7
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

ANS. Section 12 of P. D. 1146 as amended

provides:

“ U n e m p lo y m e n t o r In v o lu n ta ry S e p a ra tio n
B e n e fits - Unemployment benefits in the form of
monthly cash payments equivalent to fifty percent
(50%) of the average monthly compensation shall be
paid to a permanent employee who is involuntarily
separated from the service due to the abolition of his
office or position usually resulting from reorganization
Provided, That he has been paying integrated contribu­
tions for at least one (1) year prior to separation.
Unemployment benefits shall be paid in accordance
with the following schedule:

Contributions Made Benefit Duration

1 year but less than 3 years 2 months

3 or more years but
less than 6 years 3 months
6 or more years but
less than 9 years 4 months
9 or more years but
less than 11 years 5 months
11 or more years but
less than 15 years 6 months

The first payment shall be equivalent to two (2)

monthly benefits. A seven-day (7) waiting period shall
be imposed on succeeding monthly payments.
All accumulated unemployment benefits paid to the
employee during his entire membership with the GSIS
shall be deducted from voluntary separation benefits.
The GSIS shall prescribe the detailed guidelines in
the operationalization of this section in the rules and
regulations implementing this Act."
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

How are retirement Saws Interpreted?

ANS. Retirement Saws are liberally interpreted in

favor of the retiree because their intention is to provide
for his sustenance and hopefully even comfort, when
he no longer has the stamina to continue earning his
livelihood. The liberal approach aims to achieve the
humanitarian purposes of the law in order that the
efficiency, security and well-being of government em­
ployees may be enhanced. (Profeta vs. Drilon, G. R.
No. 104139, December 22, 1992)
tV *

What body has the original and exclusive jurisdiction to

determine whether a member is qualified or not to avaii
of old-age pension benefit under P. D. 1146?

ANS. The GSIS. Its determination is based on its

computation of a member’s years of service with the
government. The computation of a member’s services
includes not only full time but also part time and other
services with compensation as may be included under
the rules and regulation prescribed by the System.
Sick leaves and part-tim e services are included.
(Profeta vs. Drilon, G. R. No. 104139, December 22,
1992)
* * *

What is the basis of computation of the retirement

benefits of a government employee? Give an illustra­
tion.

ANS. Section 9 of Executive Order No. 966

provides:

“Sec. 9. Highest Basic Salary Rate. - The

compensation of salary or pay which may be used in
computing the retirement benefits shall be limited to

A
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

the highest salary rate actually received by an official/

employee as fixed by law and/or indicated in his duly
approved appointment. This shall include salary ad­
justments duly authorized and implemented by the
presidential issuance(s) and budget circular(s), addi­
tional basic compensation or salary indicated an ap­
pointment duly approved as an exception to the prohi­
bition on additional or double compensation, merit
increases, and compensation for substitutionary ser­
vices or in an acting capacity. For this purpose, all
other compensation and/or fringe benefits such as per
diems, allowances, bonuses, overtime pay, honoraria,
hazard pay, flying time fees, consultancy or contrac­
tual fees, or fees in correcting and/or releasing exami­
nation papers shall not be considered in the computa­
tion of the retirement benefits of an official/employee."
To illustrate: S, State Auditor IV of the COA, had
a monthly salary of P7.219.00. He was detailed to the
Manila International Airport Authority and was desig­
nated as the agency’s Assistant General Manager for
Finance and Administration. By virtue of such desig­
nation, he would receive additional compensation of
P5.849.00; his total monthly compensation would then
be P13,068.00. It was held that the latter amount
should be the basis of the computation of his retire­
ment benefits. (Santiago vs. Commission on Audit
and GSIS, G. R. No. 92284, July 12, 1991)
* *

Who are entitled to survivorship benefits?

ANS. Upon the death of a member or pensioner,

his beneficiaries shall be entitled to survivorship bene­
fits. (Sec. 20, P. D. 1146) Such benefit shall consist
of basic survivorship pension which is fifty percent of
the basic monthly pension, dependent’s pension not
exceeding fifty percent of the basic monthly pension,
or a cash payment.

it * *

1040
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

Classify the beneficiaries of a deceased covered em­

ployee.

ANS. They are the primary and the secondary

beneficiaries.
The primary beneficiaries are the legal dependent
spouse until he/she remarries and the dependent chil­
dren
The secondary beneficiaries are the dependent
parents and, subject to the restrictions on dependent
children, the legitimate descendants. (Sec. 2, (g, h),
P. D. 1146, as amended)

* * *

Under what conditions are the primary beneficiaries

entitled to the basic m onthly pension?

ANS. SEC. 21. Death o f a M em ber - (a) Upon

the death of a member the primary beneficiaries shall
be entitled to:

(1) survivorship pension: Provided, That the

deceased:

(1) was in the service at the time of his death; or

(ii) if separated from the service, has at least three
(3) years of service at the tim e of his death and has
paid thirty six (36) monthly contributions within the
five-year period immediately preceding his death or
has paid a total of at least one hundred eighty (180)
monthly contributions prior to his death; or
(2) the survivorship pension plus a cash payment
equivalent to one hundred percent (100%) of his
average monthly compensation for every year of ser­
vice Provided, That the deceased was in the service at
the tim e of his death with at least three (3) years of
service;or

(3) a cash payment equivalent to one hundred

percent (100%) of his average monthly compensation

1041
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

for each year of service he paid contributions, but not

less than Twelve thousand pesos (P12.000.00). Pro­
vided, That the deceased has rendered at least three
(3) years of service prior to his death but does not
qualify for the benefits under item (1) or (2) of this
paragraph. (Sec. 21 [a], P. D. 1146, as amended)

* it it

After the end of the guaranteed periods o f five (5) years

or th irty (30) months, are the beneficiaries still entitled
to any survivorship benefits?

ANS. Yes. Under Section 21(b), P. D. 1146, as

amended, the beneficiaries will be entitled to the
survivorship pension to be paid as follows:

(1) when the dependent spouse is the only survivor

he/she shall receive the basic survivorship pension for
life or until he/she remarries;
(2) when only dependent children are the survivors
they shall be entitled to the basic survivorship pension
for as long as they are qualified plus the dependent
children’s pension equivalent to ten percent (10%) of
the basic monthly pension for every dependent child
not exceeding five (5) counted from the youngest and
without substitution;
(3) when the survivors are the dependent spouse
and the dependent children. The dependent spouse
shall receive the basic survivorship pension for life or
until he/she remarries. And the dependent children
shall receive the dependent children’s pension men­
tioned in the immediately preceding paragraph (2)
hereof. The dependent children, they shall be entitled
to the survivorship pension as long as there are
dependent children and, thereafter, the surviving
spouse shall receive the basic survivorshiQ pension for
life or until he remarries.

* * *

4
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

When are secondary beneficiaries entitled to survivor­

ship benefits?

ANS. Section 21 (c), P. D. 1146, as amended,

provides:

(c) In the absence of primary beneficiaries the

secondary beneficiaries shall be entitled to:
(1) the cash payment equivalent to one hundred
percent (100%) of his average monthly compensation
for each year of service he paid contributions, but not
less than Twelve thousand pesos (P12.000.00), Pro­
vided, That the member is in the service at the time of
his death and has at least three (3) years of service; or
(2) in the absence of secondary beneficiaries the
benefits under this paragraph shall be paid to his legal
heirs.”

it * Tfe

Give the benefits that the beneficiaries are entitled to

receive upon the death of a pensioner.

ANS. Section 22 of P. D. 1146, as amended,

provides:

“ Death o f a P ensioner - Upon the death of an old

age pensioner or a member receiving the monthly
income benefit for permanent disability, the qualified
beneficiaries shall be entitled to the survivorship pen­
sion defined in Section 20 of this Act subject to the
provisions of paragraph (b) of Section 21 hereof.
When the pensioner dies within the period covered by
the lump sum, the survivorship pension shall be paid
only after the expiration of the said period.”
it ht it

Describe the funeral benefit and state to whom it is

payable.
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

ANS. Section 23 of P. D. 1146, as amended,

provides:

“The amount of funeral benefit shall be determined

and specified by the GSIS in the rules and regulations
but shall not be less than Twelve thousand pesos
(P12,000.00) Provided That it shall be increased to at
least Eighteen thousand pesos (P18,000.00) after five
(5) years and shall be paid upon the death of:

(a) an active member as defined under Section

2(e) of this Act; or
(b) a member who has been separated from the
service but who may be entitled to future benefit
pursuant to Section 4 of this Act; or
(c) a pensioner as defined in Section 2(o) of this
Act; or
(d) a retiree who at the time of his retirement was
of pensionable age under this Act but who opted to
retire under Republic Act No. 1616."

* * *

Give the classes of life insurance coverages under the

Revised GSIS Act.

ANS. Life insurance coverages under the Revised

GSIS Act are (a) compulsory and (b) optional. The
plans may be endowment or ordinary life.

* * *

When does compulsory life insurance coverage take

effect?

ANS. Section 24 of P. D. 1146, as amended,

provides:

“C o m p u ls o ry L ife In su ra n ce - All employees

except fo r Members of the Armed Forces of the
Philippines (AFP) and the Philippine National Police

i(\AA
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

(PNP) shall under such terms and conditions as may

be promulgated by the GSIS be compulsorily covered
with life insurance which shall automatically take effect
as follows:
(1) for those employed after the effectivity of this
Act their insurance shall take effect on the date of their
employment;
(2) for those whose insurance will mature after the
effectivity of this Act their insurance shall be deemed
renewed on the day following the maturity or expiry
date of their insurance;
(3) for those without any life insurance as of the
effectivity of this Act their insurance shall take effect
following said effectivity."
* * *

When may a member obtain optional life insurance

coverage?

ANS. Section 26 of P. D. 1146, as amended,

provides:

“O p tio n a l In su ra n ce - Subject to the rules and

regulations prescribed by the GSIS a member may
apply for insurance and/or pre-need coverage embrac­
ing life, health, hospitalizaton, education, memorial
plans and such other plans as may be designed by the
GSIS for himself and/or his dependents. Any employer
may likewise apply for group insurance coverage for its
employees. The payment of the premiums/install­
ments for optional insurance and pre-need products
may be made by the insured or his employer and/or
any person acceptable to the GSIS."
* * *

May a member enjoy the benefits provided fo r in the

Revised GSIS Act simultaneously with sim ilar benefits
provided under other laws fo r the same contingency?

1045
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

ANS. Section 55 of the Revised GSIS provides:

E x c lu s iv e n e s s o f B e n e fits - Whenever other

laws provide sim ilar benefits for the same contingen­
cies covered by this Act, the member who qualifies for
the benefit shall have the option to choose which
benefits wjL js paid to him. However, if the benefits
provided by the law chosen are less than the benefits
provided under this Act, the GSIS shall pay only the
difference.
* A *

What body has jurisdiction over disputes arising under

the revised GSIS Act?

ANS. Section 30 of P. D. 1146 provides:

S e ttle m e n t o f D isp u te s - The GSIS shall have

original and exclusive jurisdiction to settle any dispute
arising under this Act and any other laws administered
by the GSIS.
* * *

What is the prescriptive period fo r claims under P. D.

1146, as amended?

ANS. Under Section 28, clajms for benefits under

the law, except for life and retirement benefits, shall
prescribe after four (4) years from the date of contin­
gency.

★ * *
f
Are decisions of the Government Service Insurance
System appealable? When and how may such decisions
be executed?

ANS. Yes. Under the Rules of Civil Procedure,

awards, judgments or final orders or resolutions of or

1046
 THE REVISED GOVERNMENT SERVICE
INSURANCE ACT

authorized by the Government Service Insurance Sys­

tem, among others, in the exercise of its quasi-judicial
functions, may be appealed to the Court of Appeals
within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of
its last publication, if publication is required by law for
its effectivity, or of the denial of petitioner’s motion for
new trial or reconsideration duly filed in accordance
with the governing law of the GSIS.
Appeal shall be taken by filing a verified petition
for review with the Court of Appeals. (Secs. 1 to 5,
Rule 43, Rules of Court)

1047
 CHAPTER XX

NATIONAL HEALTH INSURANCE PROGRAM

(R. A. No. 7875)
Give the general objectives of the National Health Insur­
ance Act of 1995.

ANS. The National Health Insurance Act of 1995

(R. A. No. 7875) seeks to:

(a) provide all citizens of the Philippines with the

mechanism to gain financial access to health services;
(b) create the National Health Insurance Program
hereinafter referred to as the Program, to serve as the
means to help the people pay for health care services;
(c) prioritize and accelerate the provision of health
services to all Filipinos especially that segment of the
population who cannot afford such services; and
(d) establish the Philippine Health Insurance Cor­
poration, hereinafter referred to as the Corporation,
that will administer the Program at central and local
levels.

* * *

Describe the National Health Insurance Program to be

established under Republic Act No. 7875.

ANS. Section 5 of R. A. No. 7875 provides:

“SEC. 5. Establishment and Purpose. — There is

hereby created the National Health Insurance Program
which shall provide health insurance coverage and
ensure affordable, acceptable, available and accessi­
ble health care services for all citizens of the Philip­
pines, in accordance with the policies and specific
provisions of this Act. This social insurance program
shall serve as the means for the healthy to help pay for
the care of the sick and for those who can afford

I fM f t
 NATIONAL HEALTH INSURANCE PROGRAM

medical care to subsidize those who cannot. It shall

initially consist of Programs I and II of Medicare and
be expanded progressively to constitute one universal
health insurance program for the entire population.
The Program shall include a sustainable system cf
funds constitution, collection, management and dis­
bursement for financing the availment of a basic
minimum package and other supplementary packages
of health insurance benefits by a progressively ex­
panding proportion of the population. The Program
shall be limited to paying for the utilization of heall!-
services by covered beneficiaries or to purchasing
health services in behalf of such beneficiaries. It shsH
be prohibited from providing health care directly, from
buying and dispensing drugs and pharmaceuticfjis,
from employing physicians and other professionals for
the purpose of directly rendering care, and from own­
ing or investing in health care facilities.”
* * a

Who are covered by the National Health Insurance Pro­

gram?

ANS. Section 6 of R. A. No. 7875 provides:

“SEC. 6. Coverage. — All citizens of the

Philippines shall be covered by the National Heaiih
Insurance Program. In accordance with the principles
of universality and compulsory coverage enunciated in
Section 2 (b) and 2 (I) hereof, implementation of the
Program shall, furthermore, be gradual and phased in
over a period of not more than fifteen (15) years:
Provided, That the Program shall not be made compul­
sory in certain provinces and cities until the Corpora­
tion shall be able to ensure that members in such
localities shall have reasonable access to adequate
and acceptable health care services.”
A A* *

Give the effect of R. A. No. 7875 on the Medicare Act

(P. D. 1519).

1049
 NATIONAL HEALTH INSURANCE PROGRAM

ANS. The Medicare Act is repealed by R. A. No.

7875, and the Medicare funds, functions, assets,
equipment, records, operating systems and liabilities
will be transferred to the National Health Insurance
Corporation within five (5) years from the promulgation
of the rules and regulations implementing the law.
(Sections 52, 53 and 57, R. A. No. 7875)
iHr ★ ★

Give the nature and scope of coverage under the Na­

tional Health Insurance Program (NHIP).

ANS. The NHIP shall cover the following members

and their dependents:

a. Employed
Government Sector Employed
Private Sector Employed
b. Indigents
c. Individually-Paying
Self-Employed
Overseas Filipino Workers (OFWs)
Employers/Employees of International Or­
ganizations and Foreign Government based in the
Philippines
Privately sponsored
Others including the following:
Individuals who are separated from em­
ployment and who intend to continue membership
Parents who are not qualified as legal
dependents, indigents or retirees/pensioners
Children who are not qualified as legal
dependents
Unemployed persons who are not quali­
fied as indigents
Citizens of the Philippines residing in
other countries
d. Non-Paying (Sec. 6, Rule I, Revised Imple­
menting Rules and Regulations of NHI Act)

* * *

1050
 NATIONAL HEALTH INSURANCE PROGRAM

Give the categories of personal health services to be

granted to the member or his dependents under the
National Health Insurance Program.

ANS. Under Section 10 of Republic Act No. 7875,

the services shall include:

“SEC. 10. Benefit Package. — Subject to the

limitations specified in this Act and as may be deter­
mined by the Corporation, the following categories of
personal health services granted to the member or his
dependents as medically necessary or appropriate
shall include:

a) Inpatient hospital care:

1) room and board;
2) services of health care professionals;
3) diagnostic, laboratory, and other medical
examination services;
4) use of surgical or medical equipment and
facilities;
5) prescription drugs and biologicals, subject
to the limitations stated in Section 37 of this Act;
6) inpatient education packages;

b) Outpatient care:
1) services of health care professionals;
2) diagnostic, laboratory, and other medical
examination services;
3) personal preventive services; and
4) prescription drugs and biologicals, subject
to the limitations described in Section 37 of this Act;

c) Emergency and transfer services; and

d) Such other health care services that the Corpo­
ration shall determine to be appropriate and cost-
effective: Provided, That the Program, during its
initial phase of implementation, which shall not be
more than five (5) years, shall provide a basic m ini­
mum package of benefits which shall be defined ac­
cording to the following guidelines:

1051
 NATIONAL HEALTH INSURANCE PROGRAM

1) the cost of providing said package is such that

the available national and local Government subsidies
for premium payments of indigents are sufficient to
extend coverage to the widest possible population.
2) the initial set of services shall not be less than
half of those provided under the current Medicare
Program I in terms of overall average cost of claims
paid per beneficiary household per year.
3) the services included are prioritized, first, ac­
cording to its cosi-effectiveness and, second, accord­
ing to its potential of providing maximum relief from
the financial burden on ihe beneficiary: Provided,
That in addition to the basic minimum package, the
Program shall provide supplemental health benefit
coverage to beneficiaries of contributory funds, taking
into consideration the availability of funds for the
purpose from said contributory funds: Provided, fur­
ther, That the Program shall progressively expand the
basic minimum benefit package as the proportion of
the population covered reaches targeted milestones so
that the same benefits are extended to all members of
the Program within five (5) years after the implementa­
tion of this Act. Such expansion will provide for the
gradual incorporation of supplementary health benefits
previously extended only to some beneficiaries into the
basic minimum package extended to all beneficiaries:
and Provided, finally, That in the phased implementa­
tion of this Act, there should be no reduction or
interruption in the benefits currently er.joysd by pre­
sent members of M edicare/
☆ ■it *

Who are considered to be the legal dependents of a

member?

ANS. Sec. 4 (f) of R. A. No. 7875 provides:

“(f) Dependent — The legal dependents of a

member are: 1) the legitimate spouse who is not a
member; 2) the unmarried and unemployed legitimate,
legitimated, illegitim ate, acknowledged children as ap­

1052
 NATIONAL HEALTH INSURANCE PROGRAM

pearing in the birth certificate; legally adopted or

siepchildren beiow twenty-one (21) years of age; 3)
children who are twenty-one (21) years old or above
but suffering from congenital disability, either physical
or mental, or any disability acquired that renders them
totally dependent on the member for support; 4) the
parents who are sixty (60) years old or above whose
monthly income is beiow an amount to be determined
by the Corporation in accordance with the guiding
principles set forth in Article I of this Act."
*. a *

Give the services that are excluded from the coverage of

the Act.

ANS. Section 11 of Republic Act No. 7875

provides:

“SEC. 11. Excluded Personal Health Services. —

The benefits granted under this Act shall not cover
expenses for the services enumerated hereunder ex­
cept when the Corporation, after actuarial- studies,
recommend their inclusion subject to the approval of
the Board:
a) non-prescription drugs and devices;
b) outpatient psychotherapy and counseling for
mental disorders;
c) drug and alcohol abuse or dependency treat­
ment;
d) cosmetic surgery;
e) home and rehabilitation services;
f) optometric services;
g) normal obstetrical delivery; and
h) cost-ineffective procedures which shall be de­
fined by the Corporation.”
* * *

Describe the benefit package under the NHIP.

ANS.

1053
 NATIONAL HEALTH INSURANCE PROGRAM

BENEFIT ITEM Hospital Category

Primary Secondary Tertiary
ROOM AND BOARD 120 220 345
a. Maximum of forty-five (45) days for members; and
b. Maximum of forty-five (45) days for all dependents.
Any unused benefit for any prior year shall not be carried over
to the succeeding year.
One day room and board shall be deducted from the forty-five
(45) day allowance for every outpatient surgical procedure availed
except cataract extraction.
DRUGS AND MEDICINES (per single period of confinement/
availment)
Ordinary Case 1,165 1,595 2,670
Intensive Case 2,430 3,280 7,660
Catastrophic Case 6,575 11,885
X-RAY, LABORATORY, ETC. (per single period of confinement/
availment)
Ordinary Case 305 760 1,625
Intensive Case 590 1,680 3,405
Catastrophic Case 3,405 9,810
PROFESSIONAL FEES
(per single period of P105/day for General Practitioners
confinement/availment) and P150/day for Specialists
Ordinary
General Practitioner 540 540 540
Specialists 810 810 810
Intensive/Catastrophic
General Practitioner 810 810 810
Specialists 1,350 1,350 1,350
OPERATING ROOM FEE (per single period of confinement/
availment)
RUV 5.1 and below 385 670 1,060
RUV 5.1 to 10.0 1,140 1,350
RUV 10.1 and above 2,160 3,490
Surgeon Maximum of P15,930
Anesthesiologist Maximum of P4.785
SURGICAL FAMILY PLANNING
Vasectomy 900 900 900
Tubal Ligation 1,125 1,125 1,125

1054
 NATIONAL HEALTH INSURANCE PROGRAM

Distinguish between catastrophic, intensive and ordi­

nary cases.

ANS. (a) Catastrophic - refers to:

- Illnesses or injuries such as but not limited
to cancer cases with m etastasis and/or requiring
chemotherapy or radiation therapy, meningitis, en­
cephalitis, cirrhosis of the liver (childs C), myocardial
infarction, cerebrovascular attack, rheumatic heart dis­
ease grade III, renal failure, other conditions requiring
dialysis or transplant, other conditions with massive
hemorrhage, shock of any cause;
(b) Intensive - refers to:
- All confinements requiring services in an
intensive care unit such as respiratory and monitoring
support, cardiac/hemodynamic monitoring and mainte­
nance;
- Other sim ilar serious illnesses or injuries
such as but not limited to cancer, pneumonia, moder­
ately or far advanced pulmonary tuberculosis including
its complications, cardiovascular attack, disease of the
heart, chronic obstructive pulmonary disease, liver
disease, typhoid fever, fever grade III, H-fever, kidney
disease, septicemia, diarrhea with severe dehydration,
hepatitis B, dengue hemorrhagic, or severe injuries;
- Surgical procedure or multiple surgical
procedures done in one sitting with a total Relative
Unit Value of 8 but not exceeding 19.99.

(c) Ordinary - refers to illnesses or injuries other

than those included in the above enumeration. (Sec.
43, Rule VII, Revised Implementing Rales of NHI Act)
 CHAPTER XXI

AGRARIAN REFORM
Give the provisions of tha 1987 Constitution on agrarian
reform.

ANS. They are the following:

“The State shall promote comprehensive rural de­

velopment and agrarian reform. (Sec. 21, Art. II)
“The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and
regular farmworkers, who are landless, to own directly
or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits.'
thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention
lim its as the Congress may prescribe, taking into
account ecological, developmental or equity consider­
ations, and subject to the payment of just compensa­
tion. In determining retention limits, the State shall
respect the right of small landowners. The State shall
further provide incentives for voluntary land-sharing.”
(Sec. 4, Art. XIII)
“The State shall recognize the right of farmers,
farmworkers, and landowners as well as cooperatives,
and other independent farm ers’ organizations to partic­
ipate in the planning, organization, and management
of the program, and shall provide support to agriculture
through appropriate technology and research and ade­
quate financial, production, marketing, and other sup­
port services." (Sec. 5, Art. XIII)
“The State shall apply the principles of agrarian
reform or stewardship, whenever applicable in accor­
dance with law, in the disposition or utilization of other
natural resources, including lands of the public domain
under lease or concession suitable to agriculture,
subject to prior rights, homestead rights of small
 AGRARIAN REFORM

settlers, and the rights of indigenous communities to

their ancestral lands.”
“The State shall resettle landless farm ers and
farmworkers in its own agricultural estates which shall
be distributed to them in the manner provided by law."
(Sec. 6, Art. XIII)
“The State shall provide incentives to landowners
to invest the proceeds of the agrarian reform program
to promote industrialization, employment creation, pri­
vatization of public sector enterprises. Financial in­
struments used as payment for their lands shall be
honored as equity in enterprises of their choice." (Sec.
8, Art. XIII)

* * *

Is the social function of property recognized? Discuss

briefly.

ANS. Property ownership is impressed with a

social function. This means that the owner has the
obligation to use his property not only td benefit
himself but society as well. Hence, the Constitution
provides in Section 1 of Article XIII that in the promo­
tion of the social justice, the State shall regulate the
acquisition, ownership, use, and disposition of property
and its increments, and equitably diffuse wealth. (Nilo
vs. Court of Appeals, G. R. No. L-34586, April 2,
1984)

* * *

Agrarian reform has often been understood to be sim ply

the restructuring of the system of land ownership. Is
this concept correct? Explain.

ANS. Agrarian reform is more than restructuring of

or change in the nature of the property ownership.
Forming integral parts of the program are services
extended to the farmers in the form of credit support,
infrastructure, farm extension, legal assistance, elec­

4n*;7
 AGRARIAN REFORM

trification, and the development of rural institutions. It

is designed to uplift the farmers from poverty, igno­
rance and stagnation and to make them dignified,
self-reliant, strong and responsible citizens, a source
of genuine strength in our democratic society and
active participants in nation-building. (Baltazar vs.
Court of Appeals et al., G. R. No. L-40191, May 27,
1981; Hidalgo vs. Hidalgo, G. R. Nos. 23326-27,
May 29, 1970)
& * ☆

What is Republic Act Mo. 3844?

ANS. Republic Act No. 3844 ordained the Agricul­

tural Land Reform Code and instituted land reforms in
the Philippines, including the abolition of tenancy and
the channeling of capital into industry. It was signed
into law by President l^-acapagal on August 8, 1963.
Its original short title, “Agricultural Land Reform
Code3 was changed to “Code of Agrarian Reforms of
the Philippines' by Republic Act No. 6389 which took
effect on September 10, 1971.
* ft *

Discuss briefly “owner-cultiwaforsfaip” and “economic

family-size farm.”

ANS. Owner-cultivatorship is the status of a per­

son who, providing capital and management, person­
ally cultivates his own land with the aid of his immedi­
ate fam ily and household. (Sec. 166 (22), R. A.
3844) It is the goal of the agrarian reform program to
convert the tenant into an owner-cultivator. Through
this “land to the tille r3 scheme, social unrest is m ini­
mized and increased agricultural production assured.
The tenant who is made owner of the land that he tills
is transformed into a dignified member of society.
Instead of being a potential threat to the nation’s
existence, he becomes a source of genuine strength

1058
 AGRARIAN REFORM

thereof. Since he and h;s fam ily have land which they
can call their own, they now have a stako in the
survival of society; they will even lay down their lives
to defend it.
The owner-cultivator is to own and till an economic
family-size farm unit. This is an area of farm land that
permits efficient use of labor and capital resources of
the farm fam ily and will produce an income sufficient
to provide a modest standard of living to meet a farm
fam ily's needs for food, clothing, shelter and education
with possible allowance for payment of yearly install­
ments on the land, and reasonable reserve to absorb
yearly fluctuations in income. (Sec. 166 (20), R. A.
3384) He must till and cultivate the land personally by
himself or with the aid of the members of his immedi­
ate farm household.
* * ★

What is “ agricultural land” ?

ANS. By the term “agricultural land’ is meant land

devoted to any growth, including but not limited to crop
lands, saltbeds, fishponds, idle lands and abandoned
lands as defined in the Code. (Sec. 166 (1), R. A.
3844) But to make the land agricultural it is not enough
that crops are grown or animals are raised thereon; the
land must be by destination devoted to agricultural
production; if the raising of crops or animals are simply
incidental to a principal purpose, the land is not
agricultural. It has thus been held that strips of land
owned by the Philippine National Railways and located
on both sides of its railroad tracks are not agricultural
in character, although in the meantime they may have
been leased for a period of three years to private
parties who grow crops thereon; the lands are not
intended for agricultural production but solely for im­
provement of tha facilities of the PNR. (Philippine
National Railways et al., vs. Hon. Del Valle et al., G.
R. No. L-29381, September 30, 1969). Lands
intended by an industrial concern for the expansion of

1059
 AGRARIAN REFORM

its plant or factory facilities, although planted to some

crops in the meantime, cannot likewise be considered
agricultural.

* * *

<3iv® the meaning ©f ths term “ agrarian reform” under

fh® Comprehensi'vs Agrarian R®f©rm Law, R. A. 6657.

ANS. Agrarian Reform means the redistribution of

lands, regardless of crops or fruits produced, to farm ­
ers and regular farmworkers who are landless, irre­
spective of tenuria! arrangement, to include the totality
of factors and support sea'ices designed to lift the
economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution
of lands, such as production or profit sharing, labor
administration and the distribution of shares of stock,
which w ill allow beneficiaries to receive a just share of
the fruits of the lands they work. (Sec. 3(a), R. A.
0857)
* l2f *

W hm is land considered agricultural?

ANS. Land is considered agricultural if it is de­

voted to agricultural activity as defined in the law, and
not classified as mineral, forest, residential, commer­
cial, or industrial land. Agriculture or agricultural
activity means the cultivation of the soil, planting of
crops, growing of fruit tress, including the harvesting of
such farm products, and other farm activities and
practices performed by a farm er in conjunction with
such farming operations done by a person natural or
juridical. (Sec. 3(b) & (c), R. A. 6657, as amended
by R. A. 7881)

* * *

What is an agrarian dispute?

1080
 AGRARIAN REFORM
I
l
ANS. Agrarian Dispute refers to any controversy
J relating to tenurial arrangements, whether leasehold,
1 tenancy, stewardship or otherwise, over lands devoted
j to agriculture, including disputes concerning the farm-
f workers’ associations or representation of person in
! negotiating, fixing, maintaining, changing, or seeking
to arrange terms or conditions of such tenurial ar~
j rangements.
\ It includes any controversy relating to compensa­
tion of lands acquired under this Act and other terms
j and conditions of transfer of ownership from landown­
ers to farmworkers, tenants and other agrarian reform
beneficiaries, whether the disputants stand in the
proximate relation of farm operator and beneficiary,
i landowner and tenant, or lessor and lessee. (Sec.
; 3(d), R. A. 8657)
vV V?

Distinguish a farmer from a farmworker.

ANS. Farmer refers to a natural person whose

primary livelihood is cultivation of land or the produc­
tion of agricultural crops, either by himself, or primarily
with the assistance of his immediate farm household,
whether the land is owned by him, or another person
under a leasehold or share tenancy agreement or
arrangement with the owner thereof.
Farmworker is a natural person who renders ser­
vice for value as an employee or laborer in an agricul­
tural enterprise or farm regardless of whether his
compensation is paid on a daily, weekly, monthly, or
“pakyaw” basis. The term includes an individual whose
work has ceased as a consequence of, or in connection
with, a pending agrarian dispute and who has not
obtained a substantially equivalent and regular farm
employment. (Sec. 3(f) & (g), R. A. 6657)
ft * -ft

Classify farmworkers.

1061
 AGRARIAN REFORM

ANS. Regular farmworker is a natural person who

is employed on a permanent basis by an agricultural
enterprise or farm.
Seasonal farm worker is natural person who is
employed on a recurrent, periodic or intermittent basis
by an agricultural enterprise or farm, whether as a
permanent or a non-permanent laborer, such as
“dumaan”, “sacada” , and the like.
Other farmworker is a farmworker who does not fall
under paragraphs (g), (h) and (i). (Sec. 3(h), (i) and
(j), R. A. 6657.
* * *

Give the lands covered by the Comprehensive Agrariai

Reform Program.

ANS. The following lands, regardless of tenuria.

arrangement and commodity produced, are covered by
the comprehensive agrarian reform program:

(a) All alienable and disposable lands of the public

domain devoted to or suitable for agriculture. No
reclassification of forest or mineral lands to agriculture
lands shall be undertaken after the approval of this Act
until Congress, taking into account ecological, devel­
opmental and equity considerations, shall have deter­
mined by law, the specific limits of the public domain.
(b) All lands of the public domain in excess of the
specific limits as determined by Congress in the pre­
ceding paragraphs.
(c) All other lands owned by the Government
devoted to or suitable for agricultural; and
(d) All private lands devoted to or suitable for
agriculture regardless of the agricultural products
raised or that can be raised thereon. (Sec. 4, R. A.
6657)
it it it

Give the lands exempted or excluded from the coverage

of the Comprehensive Agrarian Reform Program.

1062
 AGRARIAN REFORM

ANS. Section 10 provides:

a) Lands actually, directly and exclusively used for

parks, w ildlife, forest reserves, reforestation, fish
sanctuaries and breeding grounds, watersheds and
mangroves, shall be exempt from the coverage of this
Act.
b) Lands actually, directly and exclusively used for
prawn farms and fishponds shall be exempt from the
coverage of this Act: Provided, That said prawn farms
and fishponds have not been distributed and C ertifi­
cate of Land Ownership Award (CLOA) issued to
agrarian reform beneficiaries under the Comprehen­
sive Agrarian Reform Program.
In cases where the fishponds or prawn farms have
been subjected to the Comprehensive Agrarian Reform
Law, by voluntary offer to sell, commercial farms
deferment or notices of compulsory acquisition, a
simple and absolute majority of the actual regular
workers or tenants must consent to the exemption
within one (1) year from the effectivity of this Act.
When the workers or the tenants do not agree to this
exemption, the fishponds or prawn farms shall be
distributed collectively to the worker-beneficiaries or
tenants who shall form a cooperative or association to
manage the same.
In cases where the fishponds or prawn farms have
not been subjected to the Agrarian Reform Law, the
consent of the farm workers shall no longer be neces­
sary; however, the provision of Section 32-A hereof on
incentives shall apply.
c) Lands actually, directly and exclusively us&d
and found to be necessary for national defense, school
sites and campuses including experimental farm sta­
tions operated by public or private schools for educa­
tional purposes, seeds, and seedlings research and
pilot production center, church sites and convents
appurtenant thereto, mosque site and Islamic centers
appurtenant thereto, communal burial grounds and
cemeteries, penal colonies and penal farms actually
worked by the inmates, government and private re­
search and quarantine centers and ail lands with
 AGRARIAN REFORM

eighteen percent (18%) slope and over, except those

already developed shall be exempt from the coverage
of the Act. (As amended by R. A. 7881)
* ifr it

The Central Mindanao University (CMU) is an agricul­

tural educational institution owned and run by the gov­
ernment. It was established primarily to answer the
need fo r training people in order to develop the agricul­
tural potential of the Island of Mindanao.
In 1985, the President of the Philippines issued a procla­
mation reserving a site which would be the future cam­
pus o f CMU. A total land area com prising 3,080
hectares was surveyed and registered and titled in the
name o f the school.
The school embarked on self-help projects to carry its
educational objectives. Land resources were leased to
faculty members and employees who paid service fees
to the university. They were however prohibited from
establishing houses or living in the project areas. The
university provided the technical know-how and all
kinds o f assistance. It was also expressly agreed that
no tenant-landlord relationship existed between the par­
ties.
(a) May a portion of the land reservation o f CMU, with
an area of 400 hectares, be segregated and subjected to
coverage under the CARP? Why?

ANS. No. Exempted from the coverage of the

CARP are lands actually, directly and exclusively used
and found to be necessary for school sites and cam­
puses including experimental farm stations operated
by public or private schools for educational purposes,
seeds and seedlings research and pilot production
centers. The present needs of the university should
not be the only consideration. Its future expansion and
growth is likewise a significant factor.

(b) Are the faculty members and employees o f CMU

v/ho continued to occupy the land even after the term i­

1064
 AGRARIAN REFORM

nation of the self-help projects of the university quali­

fied as beneficiaries under the CARP? Why?

ANS. No after the expiration of their privilege to

occupy and cultivate the land of CMU, their continued
stay was unauthorized and their settlement thereon
was without legal authority. A person entering upon
land of another, not claiming in good faith the right to
do so by virtue of any title of his own, or by virtue of
some agreement with the owner or with one whom he
believes holds title to the land, is a squatter. Squatters
cannot enter the land of another; surreptitiously or by
stealth, and under the umbrella of the CARP, claim
rights to said property as landless peasants.

(c) The DAR, through its Agrarian Reform Adjudication

Board (DARAB), ordered the segregation of the land fo r
future beneficiaries, although it found the claimants to
be unqualified as beneficiaries. Is this proper?

ANS. No this is an instance of a quasi-judicial

body going beyond the relief demanded. This consti­
tutes grave abuse of discretion. (Central Mindanao
University vs. DARAB, et al., G. R. No. 100091,
October 22, 1992)

* * *

Are fishponds and prawn farms utilized by persons

engaged in the aquaculture industry covered by the
CARP? Why?

ANS. No. Republic Act No. 7881, approved on

February 20, 1995, amending t,he CARL, has exempted
private lands actually, directly and exclusively used for
prawn farms and fishponds from the coverage of the
law. (Atlas Fertilizer Corporation vs. Hon. Secretary
of the Department of Agrarian Reform, G. R. No.
93100, June 19, 1997)

* * *

1065
 AGRARIAN REFORM

State tbs ie«jaS provision on ths isndownor’s right of

retention.

ANS. Section 0 of the CARL, provides:

Except as otherwise provided in this Act, no person

may own or retain, directly or indirectly, any public or
private agricultural Sand, the sise of which shall vary
according to factors governing a viable family-size
farm such as commodity produced, terrain, infrastruc­
ture, and soii fertility as determined by the Presidential
Agrarian Reform Council (PARC) created hereunder,
but in no case shall retention by the landowner exceed
five (5) hectacss. Three (3) hectares maybe awarded
to each child of the landowner, subject to the following
qualifications: (1) that he is at least fifteen (15) years
of age; and (2) that he is actually tilling the land or
directly managing the farm: Provided, that landowners
whose lands have been covered by Pres. Decree No.
27 shall be allowed to keep the area originally retained
by them thereunder: Provided, further, that original
homestead grantees at the time of the approval^ of this
Act shall retain the same areas as long as they
continue to cultivate the said homestead.

The right to choose the area to be retained, which

shall be compact or contiguous, shall pertain to the
landowner: Provided, however, that in case the area
selected for retention by landowner is tenanted, the
tenant shall have the option to choose whether to
remain therein or be beneficiary in the same or another
agricultural land with sim ilar or comparable features.
In case the tenant chooses to remain in the retained
area, he shall be considered a leaseholder and shall
lose his right to be a beneficiary under this Act. In
case the tenant chooses to be beneficiary in another
agricultural land, he loses his right as a leaseholder to
the land retained by the landowner. The tenant must
exercise this option within a period one (1) year from
the time the landowner manifests his choice o? the
area for retention.

1008
 AGRARIAN REFORM

In all cases, the security of tenure of the farmers or

farmworkers on the land prior to the approval of this
Act shall be respected.

Upon the effectivity of this Act, any sale, disposi­

tion, lease, management contract, or transfer of pos­
session of private lands executed by the original
landowner in violation of the Act shall be null and void:
Provided, however, that those executed prior to this
Act shall be valid only when registered with the Regis­
ter of Deeds within a period of three (3) months after
the effectivity of this Act. Thereafter, all Registers of
Deeds shall inform the Department of Agrarian Reform
(DAR) within thirty (30) days of any transaction involv­
ing agricultural lands in excess of five (5) hectares.

dr A A

Is agrarian reform confined to redistribution of lands?

ANS. No. It includes other arrangements alterna­

tive to the physical redistribution of lands such as
production or profit-sharing, labor administration, and
the distribution of shares of stock, which will allow
beneficiaries to receive a just share of the fruits of the
land they work. (Sec. 3(a), R. A. 6657)

* * *

Upon what right is the agrarian reform program to be

undertaken by the State founded?

ANS. It is founded on th§ right of the farmers and

regular farmworkers, who are landless, to own directly
or collectively, the lands they till or, in the case of
other farmworkers, to receive a just share of the fruits
thereof. (Sec. 4, Article XIII, 1987 Constitution)

*r * *

1067
 AGRARIAN REFORM

Who is deemed a “ landless” foerseSIciary under the

agrarian reform program?

ANS. A “landless’ beneficiary is one who owns

less than three (3) hectares of agricultural land. (Sec.
25, R. A. 6657) Thus, an ow ner-tiller may be
beneficiary of the land he does not own but is actually
cultivating to the extent of the difference between the
area of the land he owns and the award ceiling of three
(3) hectares. (Sec. 7, R. A. 6657)

* *

Under Section 13 of the CARP Law (R. A. 6657), the

land owner whose land is purchased or taken pursuant
to the agrarian reform program may be compensated
therefor, at his option, not only by cash payment but by
other modes, e. g., payment by shares o f stock in
government-owned or controlled corporations, or LBP
bonds. This is assailed as unconstitutional on the
ground that it requires the owners to accept compensa­
tion in medium other than money. Decide.

ANS. The provision is constitutional. We do not

deal here with the tra d itio n a l exercise of the power of
eminent domain. This is not an ordinary expropriation
where only a specific property of relatively limited area
is sought to be taken by the State from its owner for a
specific and perhaps local purpose. What we deal
here with is a re v o lu tio n a ry kind of expropriation. It
affects all private agricultural lands and is intended to
benefit the entire Filipino nation. Such a program w ill
involve hundred of billions of pesos; the financial
institutions of the government do not have that amount
in cash; a less conventional but more practical method
of payment is needed in the light of the magnitude of
the expenditure and the limitations of the expropriator.
(Association of Small Landowners in the Philippines,
Inc. vs. Secretary of Agrarian Reform et al., G. R.
No. 78742, July 14, 1989)

1068
 AGRARIAN REFORM

In undertaking the distribution o f agricultural lands,

what factors must 1)8 teken into consideration by the
State?

ANS. The distribution of agricultural lands must be

a “just" one and subject to priorities and retention
lim its prescribed by Congress, taking into account
ecological, developmental, or equity considerations,
and to payment of just compensation. (Section 4,
Article XIII, 1S87 Constitution)

iJr w

Why is agrarian reform, which requires a more equitable

distribution and ownership o f land, needed?

ANS. This is to provide farmers and farmworkers

with the opportunity to enhance their dignity and
improve the quality of their lives through greater
productivity of agricultural lands.

* * *

Luz Farms, Inc., a corporation engaged in the livestock

and poultry business, alleges that Sections 3(b), 11,13
and 32 of Republic Act No. @657 are unconstitutional
insofar as they include w ithin the coverage of the agrar­
ian reform program lands devoted to the raising of
livestock, poultry and swine. Decide.

ANS. Deliberations of the Constitutional Commis­

sion of 1986 clearly show that it was never the inten­
tion of the framers of the Constitution to include
livestock and poultry industry in the coverage of the
agrarian reform program. Agricultural lands are lim ­
ited to arable and suitable agricultural lands. There is
no reason to include livestock and poultry lands. (Luz
Farms vs. The Honorable Secretary of the Department
of Agrarian Reform, G. R. No. 86889, December 4,
1990)

1089
 AGRARIAN REFORM

What is a watershed? Is it covered by CARP?

ANS. Watershed may be defined as an area

drained by a river and enclosed by a boundary or
divide which separates it from adjacent watersheds.
The most important product of a watershed is
water, which is one of the most important human
necessities. Protection of watersheds is an intergener-
ational responsibility. They are exempt from coverage
of the CARP. (Sta. Rosa Realty Development Corpo­
ration vs. Court of Appeals et al., G. R. No. 112525,
October 12, 2001)
* * tfr

The Martinez Family owns a rice land w ith an area of

fifteen (15) hectares. The Martinez children Jose, aged
18 years, and Juanita, aged 15 years, assist their father
in farming ten (10) hectares o f their land. The rest o f the
land is tilled by Mang Pedro and Mang Juan, who are
agricultural lessees.
(a) Is the riceland of the Martinez Family subject to
acquisition by the government under the Comprehen­
sive Agrarian Reform Program? Why?

ANS. Yes, the area of the land is fifteen (15)

hectares. This is over the retention lim it of five (5)
hectares for the landowner and three (3) hectares for
each child provided for in Section 6 of the law.

(b) If your answer is in the affirmative, is the Martinez

family entitled to retain a portion o f the land? Explain.

ANS. Yes. Under Section 6 of the law, the

landowner is entitled to retain an area not exceeding
(5) hectares. In addition, three (3) hectares may be
awarded to each child of the landowner, subject to the
following qualifications: (1) that he is at least fifteen
(15) years of age; and (2) that he is actually tilling the
land or directly managing the farm.

1070
 AGRARIAN REFORM

(c) Who has the rig h t to choos© the area to bo retained?

ANS. The right to choose the area to be retained,

which shall be compact or contiguous, pertains to the
landowner. (Sec. 8, 2nd par.)

(d) What rights, if any, do Mang Pedro and Mang Juan

have over the area they are tilling as lessees in the event
the said area is retained by the landowner? Explain,

ANS. In case the tenant chooses to remain in the

retained area, he shall be considered a leaseholder
and shall lose his right to be a beneficiary under this
Act. In case the tenant chooses to be a beneficiary in
another agricultural land, he loses his right as a
leaseholder to the land retained by the landowner. The
tenant must exercise this option within a period of one
(1) year from the time the iandowner manifests his
choice of the area for retention. (Sec. 0, 2nd par., R.
A. 6657)
■ft ft "k

What activities are considered "support services”

failing within the scope of agrarian reform?

ANS. Under Article 35 of the CARL, the following

are considered “support services”:
1) Irrigation facilities, especially second crop or
dry season irrigation facilities;
2) Infrastructure development and public works
projects in areas and settlements that come under
agrarian reform, and for this purpose, the preparation
of the physical development plan of such settlements
providing suitable barangay sites, potable water and
power resources, irrigation systems and other facilities
for a sound agricultural development plan;
3) Government subsidies for the use of irrigation
facilities;
4) Price support and guarantee for all agricultural
produce;

1871
 AGRARIAN REFORM

5) Extending to small landowners, farmers and

farm ers’ organizations the necessary credit, like con­
cessional and collateral-free loans for agro­
industrialization based on social collaterals like guar­
antees of farm ers’ organizations;
6) Promoting, developing and extending financial
assistance to small and medium-scale industries in
agrarian reform areas;
7) Assigning sufficient numbers of agricultural
extension workers to farm ers’ organizations;
8) Undertake research, development and dissemi­
nation of information on agrarian reform and low-cost
and ecologically sound farm inputs and technologies to
minimize reliance on expensive and imported agricul­
tural inputs;
9) Development of cooperative management skill
through intensive training;
10) Assistance in the identification of ready market
or agricultural produced and training in other various
aspects of marketing; and
11) Adm inistration, operation, management and
funding of support services programs and projects
including pilot projects and models related to agrarian
reform as developed by the DAR.

* ★ *

Among the lands subject to agrarian reform are private

lands devoted to o r suitable fo r agriculture. How are
such lands acquired by the DAR?

ANS. Private lands may be acquired by the DAR

either through voluntary sale or by compulsory mode.
Under Section 16 of the CARL, the DAR sends
written offers to landowners for the acquisition of their
properties.
If the landowner rejects the offer or fails to make a
reply, the DAR shall conduct summary proceedings to
determine the just compensation for the land, deposits
the same with the accessible bank, takes immediate
possession of the land, requests the proper Register of

1072
 AGRARIAN REFORM

Deeds to issue a Transfer Certificate of Title in the

name of the Republic of the Philippines, and thereafter
proceed with the redistribution of the land to qualified
beneficiaries.
Any party who disagrees with the decision of the
DAR may bring the matter to the court of proper
jurisdiction for final determination of just compensa­
tion.

* * *

What are the modes of payment o f compensation to the

land owner?

ANS. At the option of the land owner, he shall be

paid in one of the following modes:

1) Cash payment under the following term s and

conditions:

(a) For lands above fifty (50) — Twenty-five (25%) cash,

hectares, insofar as the excess the balance to be paid on
hectarage is concerned government financial instru­
ments negotiable at any
time.
(b) For lands above twenty-four — Thirty (30%) cash, the
(24) hectares and up to fifty (50) balance to be paid in govern­
hectares ment financial instruments
negotiable at any time

(c) For lands above twenty-four — Thirty-five (35%) cash,

(24) hectares and below the balance to be paid in
government financial instru­
ments negotiable at any time

2) Shares of stock in government-owned or con­

trolled corporations, LBP preferred shares, physical
assets or other qualified investments in accordance
with guidelines set by the PARC;

1073
 AGRARIAN REFORM

3) Tax credits which can be used against any tax

liability;

4) LBP bonds, which shall have the following

features:

(a) Market rates aligned with 91-day treasury bill

rates. Ten percent (10%) of the face value of the
bonds shall mature every year from the date of is­
suance until the tenth (10th) year: Provided, that
should the landowner choose to forego the cash por­
tion, whether in full or part, he shall be paid corre­
spondingly in LBP bonds;
(b) Transferability and negotiability.

•ft * *

Give the purposes fo r which the Land Bank Bonds paid

to the land owner may be used.

ANS. Under Section 18 of the CARL, the LBP

bonds may be used by the landowner, his successors
in interest or his assigns, up to the amount of their face
value, for any of the following:

(i) Acquisition of land or other real properties of

the government, including assets under ihe asset
Privatization Program and other assets foreclosed by
government financial institutions in the same province
or region where the lands for which the bonds wers
paid are suited;
(ii) Acquisition of shares of stock of government-
owned or controlled corporations or shares of stock
owned by the government in private corporations;
(iii) Substitution for surety or bail bonds for the
provisional release of accused persons or for perfor­
mance bonds;
(iv) Security for loans with any government finan­
cial institution, provided the proceeds of the loans
shall be invested in an economic enterprise, preferably
in a small and medium-scale industry, in the same

1074
 AGRARIAN REFORM

province or regions as the land for which the bonds are

paid;
(v) Payment for various taxes and fees to the
government; Provided, that the use of these bonds for
these purposes will be limited to a certain percentage
of the outstanding balance of the financial instruments;
Provided, further, that the PARC shall determine the
percentage mentioned above;
(vi) Payment for tuition fees of the immediate
fam ily of the original bondholder in government univer­
sities, college, trade schools, and other institutions;
(vii) Payment for fees of the immediate fam ily of
the original bondholder in government hospital?; and
(viii) Such other uses as the PARC may from time
to time allow.

* * *

Give the order o f priority in the distribution o f lands to

beneficiaries.

ANS. Under Section 22 of the CARL, the lands

covered by the CARP shall be distributed as much as
possible to landless residents of the same barangay, or
in the absence of thereof, landless residents of the
same m unicipality in the following order of priority;

(a) agricultural lessees and share tenants;

(b) regular farmworkers;
(c) seasonal farmworkers;
(d) other farmworkers;
(e) actual tillers or occupants of public lands;
(f) collectives or cooperatives of the above benefi­
ciaries; and
(g) others directly working on the land.

A basic qualification of a beneficiary is his w illing­

ness, attitude and ability to cultivate and make the
land as productive as possible.
A landless beneficiary is one who owns less than
three (3) hectares of agricultural land.

0 )7 %
 AGRARIAN REFORM

Give the distribution lim it and award ceiling fo r benefi­

ciaries.

ANS. No qualified beneficiary may own more than

three (3) hectares of agricultural land. (Sec. 25, R. A.
6657)

ft ft ft

How are the lands awarded pursuant to the CARL paid

fo r by the beneficiaries?

ANS. Section 26 of the CARL provides:

Lands awarded pursuant to this Act shall be paid

for by the beneficiaries to the LBP in thirty (30) annual
amortizations at six percent (6%) interest per annum.
The payments for the first three (3) years after the
award may be at reduced amounts as established by
the PARC: Provided, that the first five (5) annual
payments may not be more than five percent (5%) of
the value of the annual gross production as established
by the DAR. Should the scheduled annual payments
after the fifth year exceed ten percent (10%) of the
annual gross production and failure to produce accord­
ingly is not due to the beneficiary’s fault, the LBP may
induce the interest rate or reduce the principal obliga­
tion to make the repayment affordable.
The LBP shall have a lien by way of mortgage on
the land awarded to the beneficiary, and this mortgage
may be foreclosed by the LBP fo r non-payment of an
aggregate of three (3) annual amortizations. The LBP
shall advise DAR of such proceedings and the latter
shall subsequently award the forfeited landholdings to
other qualified beneficiaries. A beneficiary whose
land, as provided herein, has been foreclosed shall
thereafter be permanently disqualified from becoming
a beneficiary under this Act.

1076
 AGRARIAN REFORM

May lands acquired under the C A R L be sold, transferred

or conveyed?

ANS. Section 27 of the CARL provides:

Lands acquired by beneficiaries under this Act may

not be sold, transferred or conveyed except through
hereditary succession, or to the government, or the
LBP, or other qualified beneficiaries for a period of ten
(10) years: Provided, however, that the children or
spouse of the transferor Shall have a right to repur­
chase the land from the government or LBP within a
period of two (2) years. Due notice of the availability
of the land shall be given by the LBP to the Barangay
Agrarian Reform Committee (BARC) of the barangay
where the land is situated. The Provincial Agrarian
Reform Coordinating Committee (PARCOM) as herein
provided, shall, in turn, be given due notice thereof by
the BARC.
If the land has not yet been fully paid by the
beneficiary, the rights to the land may be transferred or
conveyed, with prior approval to the DAR, to any heir
of the beneficiary or to any other beneficiary who, as a
condition for such transfer or conveyance, shall culti­
vate the land himself. Failing compliance herewith,
the land shall be transferred to the LBP which shall
give due to notice of the availability of the land in the
manner specified in the immediately preceding para­
graph.
In the event of such transfer to the LBP, the latter
shall compensate the beneficiary in one lump sum for
the amounts the latter has already paid, together with
the value of improvements he has made on the land.

* *

Give the scope of the quasi-judicial powers of the DAR.

ANS. Section 50 of the CARL provides:

The DAR is hereby vested with primary jurisdiction
to determine and adjudicate agrarian reform matters

1077
 AGRARIAN REFORM

involving the implementation of agrarian reform, ex­

cept those failing under the exclusive jurisdiction of
the Department of Agriculture (DA) and the Depart­
ment of Environment and Natural Resources (DENR).
It shall not be bound by technical rules of proce­
dure and evidence but shall proceed to hear and
decide all cases, disputes or controversies in a most
expeditious manner, employing all reasonable means
to ascertain the facts of every case in accordance with
justice and equity and the merits of the case. Toward
this end, it shall adopt a uniform rule of procedure to
achieve a just, expeditious and inexpensive determ i­
nation of every action or proceeding before it.
It shall have the power to summon witnesses,
administer oaths, take testimony, require submission
of reports, compel the production of books and docu­
ments and answers to interrogatories and issue sub­
poena, and subpoena duces tecum, and to enforce its
writs through sheriffs or other duly deputized offices.
It shall likewise have the power to punish direct and
indirect contempts in the same manner and subject to
the same penalties as provided in the Rules •of Court.
Responsible farm er leaders shall be allowed to
represent themselves, their fellow farmers, or their
organizations in any proceedings before the DAR:
Provided, however, that when there are two or more
representatives for any individual or group, the repre­
sentatives should choose only one among themselves
to represent such party or group before any DAR
proceedings.
Notwithstanding an appeal to the Court of Appeals,
the decision of the DAR shall be immediately execu­
tory.

* * *

Give the rules governing the distribution o f farms oper­

ated by corporations or other business associations.

ANS. Section 29 of the CARL provides:

1078
 AGRARIAN REFORM

In ifoe «?ase of farms owned o f operated by corpora­

tion or other business association, the following rules
shaii be observed by the PARC.
In genera!, lands shall be distributed directly to the
individual worker-beneficiaries.
in case it is not economically feasible and sound to
divide the land, then it shall be owned collectively by
the v;orker-beneficiaries who shall form a workers'
cooperative or association which w ill deal with the
corporation or business association. Until a new
agreement is entered into by and between the farm er
and the previous landowner shall be respected by both
the workers' cooperative or association and the corpo­
ration or business association.

ft ft Hr

Under what conditions may the beneficiary o r

landowner be allowed to convert an agricultural land fo r
non-agricultural purposes?

ANS. After the lapse of five (5) years from its

award, when the land ceases to be econom ically
feasible and sound for agricultural purposes, or the
locality has become urbanized and the land will have a
greater economic value for residential, commsrcial or
industrial purposes, the DAR, upon application of the
beneficiary or the landowner, with due notice to the
affected parties, and subject to existing laws, may
authorize the reclassification or conversion of the land
and its disposition; Provided, That the beneficiary shall
have fully paid his obligation. (Sec. 65, R. A. No.
6657)
* * *

Give the prohibited acts and om issions under the CARL.

ANS. Under Section 73 of the CARL, the following

are prohibited: n
 AGRARIAN REFORM

(a) The ownership or possession, for the purpose

of circumventing the provision of this Act, of agricul­
tural lands in excess of the total retention lim its or
award ceilings by any person, natural or juridical,
except those under the collective ownership by farmer-
beneficiaries.
(b) The forcible entry or illegal detainer by persons
who are not qualified beneficiaries under this Act to
avail themselves of the rights and benefits of the
Agrarian Reform Program.
(c) The conversion by any landowner of his agri­
cultural land into any non-agricultural use with intent to
avoid the application of this Act to his landholdings
and to dispossess his tenant farmers of the land tilled
by them.
(d) The willful prevention or obstruction by any
person, association or entity of the implementation of
the CARP.
(e) The sale, transfer, conveyance or change of
the nature of lands outside of urban centers and city
lim its either in whole or in part the effectivity of this
Act. The date of the registration of the deed of
conveyance in the Register of Deeds with respect to
titled lands and the date of the issuance of the tax
declaration to the transferee of the property with
respect to unregistered lands, as the case may be,
shall be conclusive for the purposes of this Act.
(f) The sale, transfer or conveyance by a benefi­
ciary of the right to use or any other usufructuary right
over the land he acquired by virtue of being benefi­
ciary, in order to circumvent the provisions of this Act.

* * *

Section 50 of R. A. 6657 grants the DAR primary

jurisdiction to determine and adjudicate “ agrarian re­
form matters” and exclusive original jurisdiction over
“ all matters involving the implementation o f agrarian
reform” except those falling under the exclusive ju ris ­
diction o f the Department of Agriculture and the Depart­
ment o f Environment and Natural Resources. But Sec­

1080
 AGRARIAN REFORM

tion 57 of the said law also provides that the Special

Agrarian Courts, which are Regional Trial Courts, shall
have original and exclusive jurisdiction over all peti­
tions fo r the determination o f ju s t compensation to
landowners and the prosecution fo r all criminal of­
fenses under the Act. Is an appeal to the DARAB
necessary before a petition fo r determination o f ju st
compensation may be commenced before the RTC?
Why?

ANS. No. The cases covered by Section 57 must

be considered exceptions from the plenitude of power
conferred on the DAR. After all, the DAR is merely an
administrative agency which cannot be granted ju ris­
diction over cases of eminent domain and over crim i­
nal cases. Valuation of property in eminent domain is
essentially a judicial function which cannot be vested
in administrative agencies. (Republic of the Philip­
pines vs. Court of Appeals, et al., G. R. No. 122256,
October 30, 1996)

* * *

May the Regional Trial Court, sitting as a Special Agrar­

ian Court (SAC), take cognizance of a petition fo r the
determination o f ju st compensation to landowners w ith­
out a preliminary determination of ju st compensation by
the Department o f Agrarian Reform Adjudication Board
(DARAB)? Explain.

ANS. Yes. Under Section 57 of R. A. No. 6657,

the Special Agrarian Courts have original and exclu­
sive jurisdiction over all petitions for the determination
of just compensation to landowners. This jurisdiction
would be undermined if the DAR would vest in admin­
istrative officials original jurisdiction in compensation
cases and make the RTC an appellate court for the
review of administrative decisions. (Land Bank of the
Philippines vs. Court of Appeals et al., G. R. No.
126337, November 16, 1999)

1081
 AGRARIAN REFORM

For the DARAB to have jurisdiction over a dispute, what

requirements must be established?

ANS. There must exist a tenancy relationship

between the parties. In order for a tenancy agreement
to take hold over a dispute, the following indispensable
elements must be present, to wit: 1) that the parties
are the landowner and the tenant or agricultural
lessee; 2) that the subject matter of the relationship is
an agricultural; 3) that there is consent between the
parties to the relationship; 4) that the purpose of the
relationship is to bring about agricultural production; 5)
there is personal cultivation on the part of the tenant or
agricultural lessee; and 6) that the harvest is shared
between the landowner and the tenant or agricultural
lessee. (Morta et al vs. Occidental et al., G. R. No.
123417, June 10, 1999)

* * *

State the procedure fo r the determination o f compensa­

tion cases under R. A. 6657.

ANS. The Land Bank of the Philippines is charged

with the initial responsibility of determining the value
of lands placed under land reform and the compensa­
tion to be paid for their taking. Through notice sent to
the landowner pursuant to Section 16(a) of the law, the
DAR makes an offer. In case the landowner rejects the
offer, a summary administrative proceedings is held
and afterward the provincial (PARAD), the regional
(RARAD) or the central (DARAB) adjudicator as the
case may be, depending on the value of the land, fixes
the price to be paid for the land. If the landowner does
not agree to the price fixed he may bring the matter to
the RTC acting as Special Agrarian Court. (Republic
of the Philippines vs. Court of Appeals et al., G. R.-
No. 122256, October 30, 1996)

* * *

1082
 AGRARIAN REFORM

Give the matters falling under the jurisdiction o f (1) the

DARAB and (2) the DAR Secretary.

ANS.

1. J u r is d ic tio n o f th e DARAB.

The Board shall have primary and exclusive ju ris­

diction, both original and appellate, to determine and
adjudicate all agrarian disputes involving the imple­
mentation of the Comprehensive Agrarian Reform
Program (CARP) under R. A. No. 3844 as amended
by the R. A. No. 6389, P. D. No. 27 and other
agrarian laws and their implementing rules and regula­
tions. Specifically, such jurisdiction shall include but
not limited to cases involving the following:

a) The rights and obligations of persons, whether

natural or judicial, engaged in the management, culti­
vation and use of all agricultural lands covered by the
CARP and other agrarian laws;
b) The valuation of land, and the prelim inary
determination and payment of just compensation, fix ­
ing and collection of lease rentals, disturbance com­
pensation, amortization payments, and sim ilar disputes
concerning the functions of the Land Bank of the
Philippines (LBP);
c) The annulment or cancellation of lease con­
tracts or deeds of sale or their amendments involving
lands under the administration and disposition of the
DAR or LBP;
d) Those cases arising from, o r connected with
membership or representation in compact farms, farm ­
ers’ cooperatives and other registered farm ers’ associ­
ations or organizations, related to lands covered by the
CARP and other agrarian laws;
e) Those involving the sale, alienationr mortgage,
foreclosure, preemption and redemption of agricultural
lands under coverage of the CARP or other agrarian
laws;
f) Those involving the issuance, correction and
cancellation of Certificates of Landownership Award

1083
 AGRARIAN REFORM

(CLOAs) and Emancipation Patents (EPs) which are

registered with the Land Registration Authority;
g) Those cases previously falling under the origi­
nal and exclusive jurisdiction of the defunct Court of
Agrarian Relations under Section 12 of P. D. No.
946, except sub-paragraph (Q) thereof and P. D. No.
815.
It is understood that the aforementioned cases,
complaints or petition were filed with the DARAB after
August 29, 1987.
Matters involving strictly the adm inistrative imple­
mentation of R. A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL) of 1988
and other agrarian laws as enunciated by pertinent
rules shall be the exclusive prerogative of and cogniz­
able by the Secretary of the DAR.
h) And such other agrarian cases, disputes, mat­
ters or concerns referred to it by the Secretary of the
DAR.

2. M atters U nder th e E x c lu s iv e J u r is d ic tio n

o f th e DAR S e cre ta ry.

(a) Classification and identification of landholdings

for coverage under the Comprehensive Agrarian Re­
form Program (CARP), including protests or opposi­
tions thereto and petitions for lifting of coverage;
(b) Identification, qualification or disqualification of
potential farm er-beneficiaries;
(c) Subdivision surveys of lands under CARP;
(d) Issuance, recall or cancellation of Certificates
of Land Transfer (CLTs) and CARP Beneficiary C ertifi­
cates (CBCs) in cases outside the purview of Presiden­
tial Decree (PD) No. 816, including the issuance,
recall or cancellation of Emancipation Patents (EPs) or
Certificates of Land Ownership Awards (CLOAs) not
yet registered with the Register of Deeds;
(e) Exercise of the right of retention by landowner;
(f) Application for exemption under Section 10 of
RA 6657 as implemented by DAR Adm inistrative Order
No. 13 (1990);

1084
 AGRARIAN REFORM

(g) Application for exemption pursuant to Depart­

ment of Justice (DOJ) Opinion No. 44 (1990) as
implemented by DAR Adm inistrative Order No. 6
(1994);
(h) Application for exemption under DAR Adminis­
trative Order No. 9 (1993);
(i) Application for exemption under Section 1 of
RA 7881, as implemented by DAR Adm inistrative
Order No. 3 (1995);
O’) Issuance of certificate of exemption for lands
subject of Voluntary O ffer to Sell (VOS) and Compul­
sory Acquisition (CA) found unsuitable for agricultural
purposes pursuant to DAR Memorandum Circular No.
34 (1997);
(k) Application for conversion of agricultural lands
to residential, commercial, industrial or other non-
agricultural uses including protests or oppositions
thereto;
(I) Right of agrarian reform beneficiaries to home-
lots;
(m) Disposition of excess area of the farm er-
beneficiary’s landholdings;
(n) Transfer, surrender or abandonment by the
farm sr-beneficiary of his farmholding and its disposi­
tion;
(o) Increase of awarded area by the farm er-
beneficiary;
(p) Conflict of claims in landed estates and settle­
ments; and
(q) Such other matters not mentioned above but
strictly involving the administrative implementation of
RA 6657 and other agrarian laws, rules and regulations
as determined by the Secretary.
APPENDIX
 APPENDIX

2003
BAR EXAMINATION QUESTIONS
IN LABOR AND SOCIAL LEGISLATION
(WITH ANSWERS)

QUESTION: May social justice as a guiding principle

in labor law be so used by the courts in sympathy with
the working man if it collides with the equal protection
clause of the Constitution? Explain. (5%)

ANSWER: Yes. Social justice is a means to insure

equality between labor and capital. Labor occupies a
position which is weaker than capital. Through social
justice, the State is able to make labor as strong as
capital, thereby providing equal protection. Social
justice is a means to insure equal protection.

II

QUESTION: Pablo was a farm-hand in a plantation

owned by ABC & Co., working approximately 6 days a
week for g good 15 years. Upon Pablo’s death, his
widow filed a claim for burial grant and pension bene­
fits with the Social Secuity System (SSS). The claim
was denied on the ground that Pablo had not been a
registered member-employee. Pablo’s widow filed a
petition before the SSS, asking that ABC & Co. be
directed to pay the premium contributions of Pablo and
that his name be reported for SSS coverage. ABC &
Co. countered that Pablo was hired to plow, harrow
and burrow, using his own carabao and other imple­
ments and following his own schedule of work hours,
without any supervision from the company. If proven,

1089
 APPENDIX

would this factual setting advanced by ABC & Co. be

a valid defense against the petition? (8%)

ANSWER: No. From the facts given in the ques­

tion, Pablo was an employee of ABC & Co. He worked
within the plantation itself, six (6) days a week for
fifteen (15) years; he could have easily been subjected
to control by the company.
For the employer-employee relationship to arise, it
is not necessary that the employer actually exercises
the power of control over the employee; it is sufficient
that such power could have under the circumstances
been exercised. (Aurora Land Projects Corporation et
al vs. NLRC et al., G. R. No. 114733, January 2,
1997; MAM Realty Development Corp. vs. NLRC et
al., G. R. No. 114787, June 2, 1995)

II!

QUESTION: In a labor dispute, the Secretary of Labor

issued an “Assumption Order”. Give the legal implica­
tions of such an order. (5%)

ANSWER: The legal implications of the issuance

of “assumption order” in a labor dispute by the Secre­
tary of Labor, pursuant to Article 263 (g) of the Labor
Code, are:

(a) The assumption order has the effect of auto­

matically enjoining the intended or impending strike or
lockout. It is immediately executory and compliance
therewith cannot be excused by reason of the pen-
- dency of a petition questioning its validity.

(b) If the strike or lockout has already taken place

at the time of the issuance of the assumption order, all
striking or locked out employees shall immediately

1090
 APPENDIX

return to work and the employer shall immediately

resume opera ions and readmit all the workers under
the same terms and conditions prevailing before the
strike o r lockout.

(c) A strike that is undertaken despite the issuance

o f an assumption order becomes a prohibited activity
and thus illegal. (Art. 264(2)), Labor Code.

(d) Strikers, whether union officers or mere mem­

bers, who knowingly defy an assumption order loss
their employment. They are deemed to have aban­
doned their employment.

(e) The Secretary of Labor can take cognizance of

and decide an issue incidental to the labor dispute
over which he has assumed jurisdictions -or submitted
to him for resolution by the parties. (St. Scholastica’s
College vs. Torres e ta l., G. R. No. 100158, June 29,
1992; PASVIL/Pascual Liner, Inc. W orkers Union et al
vs. NLRC et al., G. R. No. 124823, July 28, 1999)

IV

QUESTION: Magdalo, a labor union in Oakwood, a

furniture manufacturing firm, after failing in its negotia­
tions with Oakwood, filed with the Department of Labor
and Employment (DOLE) a notice of strike. The DOLE
summoned Magdalo and Oakwood fo r conciliation
hearings to resolve the deadlock. Unable to agree
despite efforts of the DOLE, Magdalo called a strike
participated in by its officers and union members in­
cluding Cesar Trinio, a rank-and-file employee, who
led the “walk out." Oakwood filed a petition to declare
illegal the strike which Magdalo staged without observ­
ing the seven-day ban under the Labor Code. Oak-
wood claimed that the strike being illegal, all those who

1091
 APPENDIX

participated therein, including Cesar Trinio, could be

dismissed as, in fact, they were so dismissed by
Oakwood. Decide the case. (8%)

ANSW ER: The strike is illegal for failure of the

union to exhaust the seven-day waiting period before
staging it.

However, under Articie 264 of the Labor Code,

only the officers who knowingly participated in the
illegal strike would lose their employment; they are the
leaders. But mere union members, like Cesar Trinio,
will not lose their employment, unless it can be estab­
lished by substantial evidence that they committed
serious illegal acts in the course of the strike. (De
Ocampo et al vs. NLRC et al., G. R. No. 81077,
June 6, 1990; Association of Independent Unions et al
vs. NLRC et al., G. R. No. 120505, March 25, 1999)

v '

QUESTION: The Labor Code treats differently in

various aspects the employment of (i) managerial
employees, (ii) supervisory employees, and (iii) rank-
and-file employees. State the basic distinguishing
features of each type of employment. (6%)

ANSW ER: Under Article 212 (m) of the Labor

Code, a managerial employee is one who is vested
with powers or prerogatives to lay down and execute
management policies and/ or to hire, transfer, sus-
pencj, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in
the interest of the employer, effectively recommend
such managerial actions if the exercise of such author­
ity is not merely routinary or clerical in nature but
requir es the sue of independent judgment. All employ­

1092
 APPENDIX

ees not falling within any of the above definitions are

considered rank-and-file employees; they constitute
the bulk of the organization.

A managerial employee can lay down, and execute

management policies and/or can perform or undertake
personnel actions such as hiring and firing employees.
Supervisory employees can only recommend that cer­
tain management policies or personnel actions be
taken.

Managerial employees cannot exercise the right to

self-organization for purposes of collective bargaining.
Supervisory and rank-and-file personnel can exercise
such right.

VS

QUESTION: A case against an employer company

was filed charging it with having violated the prohibit
tion against offsetting undertime for overtime work on
another day. The complainants were able to show
that, pursuant to the Collective Bargaining Agreement
(CBA), employees of the union had been required to
work “overtime” on Saturday but were paid only at
regular rates of pay on the thesis that they were not
required to complete, and they did not in fact com­
plete, the eight-hour period daily from Monday through
Friday. Given the circumstances, the employer con­
tended that the employees were not entitled to over­
time compensation, i. e., with premium rates of p-iy.
Decide the controversy. (8%)

ANSWER: The contention of the employer is not

tenable. It is clear from the facts given in the question
that under the CBA work on Saturday was considered
overtime. It does not therefore matter whether or not

1093
 APPENDIX

the complainants were able to complete eight-hours

work on Saturday. Besides, the overtime work on
Saturday cannot be used to offset undertime from
Monday to Friday. Article 88 of the Labor Code
prohibits, to avoid unfairness to the workers, offsetting
of overtime work on one day and undertime on an­
other.

VII

QUESTION: There are instances when a certification

election is mandatory. What is the rationale for such a
legal mandate? (5%)

ANSWER: Certification election in certain in­

stances is made mandatory in order to expedite the
settlement of the issue of workers’ representation in
collective bargaining. Workers exercise their right to
collective bargaining through representatives of their
own choosing; such choice is ascertained through
certification election; and the employer is not obliged
to negotiate and bargain collectively with the workers
except through a duly certified bargaining agent. A
prolonged dispute as to which union represents tha
workers for purposes of collective bargaining is not
conducive to a stable industrial peace.

VIII

QUESTION: The employer company, in a directive

to the union president, ordered the transfer of some of
its employees, including a number of union officials, to
its plant offices. The order was opposed by the union.
Ultimately, the union filed an unfair labor practice
against the company alleging that the purported trans­
fer of its union officials was unjust and in violation of
the Collective Bargaining Agreement (CBA). Pursuant

1094
 APPENDIX

to the terms of the CBA, the dispute was re fe rre .! to a

voluntary arbitrator who later ruled on the issL is raised
by the parties. Could it later be validly asserteu that
the “decision” of the voluntary arbitrator would have • o
“compulsory” effect on the parties? Explain. (8%)

ANSW ER: No. The decision of a voluntary arbitra­

tor is binding on the parties. The voluntary arbitrator is
by law (Article 261, Labor Code) given original and.
exclusive jurisdiction to hear and decide certain dis­
putes. As a matter of fact, the policy under the
Constitution is to promote the preferential use o f volun­
tary modes of settling disputes and enforce their mu­
tual compliance therewith to foster industrial peace.
(Art. XIII, Sec. 3)
The Supreme Court has ruled that the award of
voluntary arbitrators acting within the scope of their
authority determines the rights of the parties, and their
decisions have the same legal effects as a judgm ent of
the courts; their findings of fact and law are conclusive,
and all matters in the award are thenceforth res judi­
cata, on the theory that the matter has been adjudged
by the tribunal that the parties have agreed to make
final as tribunal of last resort. (Volkschel Labor Union
vs. NLRC, G. R. No. L-39686, June 25, 1980) The
voluntary instrumentality. (Luzon Development Bar.k
Employees et al., G. R. No. 120319, October 6,
1995)

IX

QUESTION: At what particular point does a labor

organization acquire a legal personality?

(a) On the date the agreement to organize the

union is signe.d by the majority of all its mem­
bers; or

1095
 APPENDIX
V

(b) On the date the application for registration is

duly filed with the Department of Labor; or
(c) On the date appearing on the Certificate of
Registration; or
(d) On the date the Certificate of Registration is
actually issued; or
(e) None of the above.

Choose the correct answer. (5%)

ANSWER: Letter (d). Article 234 of the Labor

Code provides that the labor organization shall acquire
legal personality upon “issuance” of the certificate of
registration. To issue means to distribute, publish,
announce, or send out.

X
QUESTION: XYZ Employees Association filed a com­
plaint against ABC Bank for wrongful diminution of
benefits. It alleged that the bank had been providing
for a mid-year bonus equivalent to one-month basic
pay and a Christmas bonus equivalent to one-month
basic pay since 1971. Upon tha effectivity of Presi­
dential Decree (P. D.) No. 851 in 1975 which granted
the 13th month pay, the bank started giving its employ­
ees a one-month basis pay as mid-year bonus, one-
month basic pay as Christmas bonus, and one-month
basis pay as 13th month pay. In 1980, the bank was
placed under conservatorship and by virtue of a mone­
tary board resolution of the Central Bank, the bank
only gave one month basic pay mandated by P. D.
851, and it no longer gave its employees the traditional
mid-year and Christmas bonuses. Could ABC Bank
be compelled, given the circumstances, to continue
paying its employees the traditional mid-year and
Christmas bonuses in addition to the 13th month pay?
(8%)

1096
 APPENDIX

ANSWER: The grant of the mid-year and Christ­

mas bonuses was made to spur the employees to
greater efforts for the success of the business and
realization of bigger profits. But the bank cannot be
forced to distribute bonuses which it can no longer
afford to pay; as a matter of fact, it is already under
conservatorship. (Producers Bank of the Philippines
vs. NLRCetal., G. R. No. 100701, March 28, 2001)

XI

QUESTION: How do the provisions of the law on labor

relations interrelate, if at all, with the provisions per­
taining to labor standards? (5%)

ANSWER: The law on labor relations provides for

rights and procedures by which workers may be able
to obtain for their employer benefits which are over
and above the minimum terms and conditions of em­
ployment set by labor standard laws. Labor standard
laws do not guarantee lasting industrial peace; labor
relations laws, by enabling workers to obtain improves
of the benefits guaranteed by labor standard laws and
by providing for a mechanism by which disputes be­
tween the employer and his employees are expedi­
tiously settled, can assure a stable and lasting indus­
trial peace.

XII

QUESTION: Premiere Bank, a banking corporation,

being the creditor-mortgagee of XYZ & Co., a garment
firm, foreclosed the hypothecated assets of the latter.
Despite the foreclosure, XYZ & Co. continued its
business operations. A year later, the bank took
possession of the foreclosed property. The garment

1097
 APPENDIX

firm’s business operations ceased without a declara­

tion of bankruptcy. Jose Gaspar, an employee of XYZ
& Co., was dismissed from employment due to the
cessation of business of the firm. He fiied a complaint
against XYZ & Co. and the bank. The Labor Art>iter^
after hearing, so found the company liable, as claimed
by Jose Gaspar, for separation pay. Premiere Bank
was additionally found subsidiarily liable upon the
thesis that the satisfaction of labor benefits due to the
employee is superior to the right of a mortgagee of
property. Was the Labor Arbiter correct in his deci­
sion? (8%)

ANSWER: No. Article 110 of the Labor Code,

providing for the workers right of first preference, does
not create a lien in favor of the workers. On the other
hand, Premiere Bank, as creditor-mortgage of XYZ &
Co., is a lien holder, Jose Caspar’s right to separation
pay is subordinate to the lieu in favor of the bank.
Furthermore, no judicial proceedings in rem had been
instituted. (Development Bank of the Philippines vs.
NLRC etal., G. R. No. 86227, January 9, 1994)

XIII

QUESTION: Daisy’s Department Store hired Leo as a

checker to apprehend shoplifters. Leo later became
Chief of the Checkers Section and acquired the status
of a regular employee. By way of a cost-cutting
measure, Daisy’s decided to abolish the entire Check­
ers Section. The services of Leo, along with those of
his co-employees working in the same section, were
terminated on the same day. A month after the
dismissal of Leo, Daisy's engaged the services of
another person as an ordinary checker and with a
salary much lower than that which Leo used to receive.
Given the above factual settings (nothing more having

^1098
 APPENDIX

been established), could the dismissal of Leo be suc­

cessfully assailed by him? (8%)

ANSWER: Y@s„ He can assail his dismissal as

ineffectual. It was done without the department store
complying with the notice requirement provided by
Article 283 of the Labor Cede. Leo was dismissed on
the same day that the company decided to abolish the
checkers section; he should have been given a written
notice at least thirty (30) days prior to the intended
date of dismissal.

When the dismissal is ineffectual, the worker is not

however entitled to reinstatement, but to backwages
from the time his compensation was withheld from him
up to the date of finality of the judgment declaring his
for cause but effected by the employer without follow­
ing the procedure required by law. (Serrano vs. NLRC
and Isetann, G. R. No. 117040, January 27, 2000)

XIV

QUESTION: Oscar Pimentel was an agent supervisor,

rising from the ranks, in a corporation engaged in real
estate. In order to promote the business, the company
issued a memorandum to all agent supervisors requir­
ing them to submit a feasibility study within their re­
spective areas of operation. All agent supervisors
complied except Oscar. Reminded by the company to
comply with the memorandum, Oscar explained that
being a drop-out in school and uneducated, he would
be unable to submit the required study. The company
found the explanation unacceptable and terminated
his employment. Aggrieved, Oscar filed a complaint
for illegal dismissal against the company. Decide the
case. (8%)

1099
 APPENDIX

ANSWER: Oscar Pimentel cannot be validly dis­

missed for his failure to submit the required study.
Preparation of a feasibility study is not part of his
duties as a supervisor. The company must have
known, at the time of hiring, that he was a school
drop-out and would not be able to prepare a feasibility
study.

For insubordination or disobedience to be a valid

ground for dismissal, the same must be willful and the
order disobeyed must be in connection with the em­
ployee’s duties.

XV

QUESTION: Can an individual, the sole proprietor of a

business enterprise, be said to have violated the Anti-
Sexual Harassment Act of 1995 if he dearly discrimi­
nates against women in the adoption of policy stan­
dards for employment and promotions in the enter­
prise? Explain. (5%)

ANSWER: No. Violation of the Anti-Sexual Ha­

rassment Act requires demand for a sexual favor.

The act of discrimination against women employ­

ees may however be a violation of Article 135 of the
Labor Code.
SUPPLEMENT
 SUPPLEMENT - 1
1) Right to Seif-Organization; Labor Unions;
Violation of Rights and Conditions of Membership.

MARINO ET AL VS. GAMILLA ET AL.,

G. R. No. 132400. JANUARY 31. 2005.

1) Unlike the NLRC which is explicitly vested with

the jurisdiction over claims for actual, moral, exemplary
and other forms of damages, the BLR is not specifically
empowered to adjudicate claims of such nature arising
from intra-union or inter-union disputes. In fact, Art. 241 of
the Labor Code ordains the separate institution before the
regular courts of criminal and civil liabilities arising from
violations of the rights and conditions of union
membership; The Court has consistently held that where
no employer-employee 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 trial court that has
jurisdiction.

2) Right to Seif-Organization; Labor Unions;

Violation of Rights and Conditions of Membership.

VERCELES ET AL VS.
BUREAU OF LABOR RELATIONS ET AL.
G. R. NO. 152322. FEBRUARY 15. 2005.

(1) Where union members were indefinitely

suspended by the union without the benefit of a formal
charges sufficient in form and substance, the rule on
exhaustion of administrative' remedies cannot squarely
apply to them.

(2) The 30% support requirement needed to report

violations of rights and conditions of union membership
under Article 241 of the Labor Code is not mandatory. The
law provides that the report may be made by at least thirty
percent of all the members of the union or any member or
members especially concerned. The use of the permissive
"may” in the provision negates the notion that the assent of
30% of all the members is mandatory.

(3) An election of union officers perceptibly done to

hinder any resolution or decision made by the BLR-DOLE
and to preempt participation of some of the members is
invalid.

3) Right to Self-Organization; Labor Unions;

Jurisdiction of BLR.

BAUTISTA VS. COURT OF APPEALS

E T A L. G. R. NO. 123375. FEBRUARY28. 2005.

(1) The Bureau of Labor Relations has jurisdiction

over any inter-union or intra-union conflicts, such as
certification elections and elections of union officers, in the
public sector.

4) Right to Self Organization; Labor Unions; Legai

Personality.

LAGUNA AUTOPARTS
MANUFACTURING CORPORATION VS.
OFFICE OF SECRETARY OF LABOR AMD
EMPLOYMENT. G. R. NO. 157146. APRIL 29. 2005.

1) A local or chapter need not be independently

registered to acquire legal personality. Section 3, Rule VI
of the Implementing Rules of Book V, as amended by D.
O. No. 9 clearly states that a local/chapter constituted in
accordance with Section 1 of this Rule shall acquire tega!
personality from the date of filing of the complete
documents enumerated therein to the Regional Office.

2
 2) The legal personality of a labor organizatior
may not be subject to a collateral attack but only through t
separate action instituted particularly for the purpose o
assailing it.

3) The pronouncement of the Regional Office

through the Labor Relations Chief, that the union acquirei
a legal personality with the submission of the complet<
documentary requirements, cannot be challenged in <
petition for certification election.

4) The employer cannot in a certification electioi

case raise the question of lack of legal personality of thi
petitioning union. It has no legal standing to intervene in :
certification-election proceeding. The choice of j
bargaining agent is the sole concern of the employees.

5) The Supreme Court is not the proper venue t

consider the factual issue as to whether the union is ;
legitimate labor organization.

5) R ight to S e lf-O rg anization; Labor Unions

C om prom ise Agreem ent.

DUSIT HOTEL NIKKO ET AL VS.

NATIONAL UNION OF WORKERS IN HOTEL,
RESTAURANT AND ALLIED INDUSTRIES
ETAL.. G. R. No. 160391. AUGUST 9. 2005.

1) The compromise agreement entered be

the union and employer applies only to the members of th
bargaining unit who agreed to the termination of the
employment based on redundancy and receive
redundancy pay. It cannot bind an employee who is not
member of the bargaining unit and who did not receive an
redundancy pay or any monetary benefits under th
agreement or executed any deed or waiver in favor of th
company.

3
Q) Right to Self-Organization; Labor Unions; Legal
Personality

SAN MIGUEL CORPORATION

VS. MANDAUE PACKING PRODUCTS
PLANTS-SAN PACKAGING PRODUCT-SAH
MIGUEL CORPORATION MONTHLIES RANK-AM>
FILE UNION-FFW. G. R. NO. 152356. AUGUST 16. 2005.

1) The issuance of the certificate of registration by

the Bureau or Regional Office is not the operative act that
ests legal personality upon a local/chapter under
'Department Order No. 9. Such legal personality is
cquired from the filing of the complete documentary
squirements enumerated in Section 1, Rule VI.

2) However, where the federation issued a charter

certificate to the putative local/chapter but did not submit
Ine other required documents to the Regional Office or
Bureau, the legal personality of the local/chapter may bt-
deemed to have vested upon its filing of its petition for
certification election to which the required documents were;
attached. While the strict letter of the procedural rule was
r;ot complied with, labor laws are generally construed
berally in favor of labor, to give effect to the
constitutionally guaranteed right to self-organization.

3) Petitioner cites the cases of Toyota Motors and

Progressive Development Corporation-Pizza Hut v.
Ledesma (271 SCRA 593) wherein the Court ruled that the
question of prohibited membership of both supervisory and
rank-and-file employees in the same union must be
inquired into anterior to the granting of an order allowing a
certification election; and that a union composed of both of
these kinds of employees does not possess the requisite
personality to file for recognition as a legitimate labor
organization. It should be noted thought that in the more
recent (2003) case of Tagaytay Highlands International
Golf Club v. Tagaytay Highlands Employees Union,(395

4
SCRA 699) the Court, notwithstanding Toyota and
Progressive, ruled that after a certificate of registration is
issued to a union, its legal personality cannot be subject to
collateral attack, but questioned only in an independent
petition for cancellation.

7) C e rtifica tio n E le ctio n s; Appeal; S tand ing of

E m ployer to P articipate.

SMC QUARRY 2 WORKERS UNION

ETC. VS. TITAN MEGABAGS INDUSTRIAL
CORPORATION. G. R. NO. 150761, MAY 19. 2004.

(1) Under Article 259 of the Labor Code, as

amended, any party to a certification election may appeal
the order of the Med-Arbiter directly to the Secretary of
Labor who shall decide the same within fifteen(15)
calendar days.

(2) Along this line, Section 15, Rule XI, Book V of

the Omnibus Rules Implementing the Labor Code provides
that the Decision or Resolution of the Secretary of the
DOLE on appeal shall be final and executory. Upon finality
of the Decision of the Secretary, the entire records of the
case shall be remanded to the office of origin for
implementation of the Decision, unless restrained by the
appropriate court.

(3) In National Federation of Labor vs. Laguesma,

(304 SCRA 405) we ruled that the remedy of an aggrieved
party in a Decision or Resolution of the Secretary of the
DOLE is to timely file a motion for reconsideration as a
precondition for any further or subsequent remedy, and
then seasonably file a special civil action for certiorari-
under Rule 65 of the 1997 Rules of Civil Procedure. And
without a motion for reconsideration seasonably filed within
the ten-day reglementary period, the questioned Decision
or Resolution of the Secretary becomes final and
executory. Consequently, the merits of the case can no

5
longer be reviewed to determine if the Secretary could be
faulted for grave abuse of discretion.

(4) When a petition for certification election is filed

by a legitimate labor organization, it is good policy of the
employer not to have any participation or partisan interest
in the choice of the bargaining representative. While
employers may rightfully be notified or informed of petitions
of such nature; they should not, however, be considered
parties thereto with an inalienable right to oppose it.

8) Collective Bargaining Agreement; Interpretation.

MINDANAO STEEL CORPORATION VS.

MINSTEEL FREE WORKERS ORGANIZATION-
CAGAYAN DE PRO. G. R. NO. 130693. MARCH 4. 2004.

1) Where the CBA expressly stipulated that salary

increases, such as the P20.00 provided therein, shall not
include any wage increase that rray be provided by law as
a result of any economic change, the CBA increase cannot
be deemed compliance with an interim wage order
requiring the payment of an ECOLA.

2) In Mactan Workers Union vs. Aboitiz, (45 SCRA

577) we held that “the terms and conditions of a collective
bargaining contract constitute the law between the parties.
Those who are entitled to its benefits can invoke its
provisions. In the event that an obligation therein imposed
is not fulfilled, the aggrieved party has the right to go to
court for redress.”

9) Strikes and Lockout; Requisites for Validity

SAMAHANG MANGGAGAWA SA SULPICIO LINES,

INC-NAFLU E TA L. G. R. NO. 140992. MARCH 25. 2004

(1) A strike is a powerful weapon of the working

class. But like, a sensitive explosive, it must be handled

6
carefully, lest it blows up in the workers’ own hands. Thus,
the right to strike has to be pursued within the bounds of
law.

(2) There is no showing that the petitioner union

observed the 7-day strike ban; and that the results of the
strike vote were submitted by petitioners to the Department
of Labor and Employment at least seven(7) days before
the strike.

(3) In Gold City Integrated Port Service, Inc. vs.

NLRC, (245 SCRA 628) we stressed that the language of
the law leaves no room for doubt that the cooling-off period
and the seven-day strike ban after the strike vote report
were intended to be mandatory.

(4) As explained in National Federation of Labor

vs. NLRC (283 SCRA 275) with the enactment of Republic
Act No. 6715 which took effect on March 21,1989, the rule
now is that such requirements as the filing of a notice of
strike, strike vote, and notice given to the Department of
Labor are mandatory in nature. Thus, even if the union
acted in good faith in the belief that the company was
committing an unfair labor practice, if no notice of strike
and a strike vote were conducted, the said strike is illegal.

(5) The basic elements of a strike are present in

the case at bar. First, petitioner’s officers and members
numbering 167, in a concerted manner, did not report for
work on May 20, 1994; second, they gathered in front of
respondent’s office at Pier 12, North Harbor at Manila to
participate in a strike voting conducted by petitioner; and
third, such union activity was an aftermath of petitioner’s
second notice of strike by reason of respondent’s unfair
labor practice. Clearly, what transpired then was a strike
because the cessation of work by petitioner’s concerted
action resulted from a labor dispute.
 (6) Invoking compassion, petitioner pleads that its
officers who participated in the one-day strike should not
be dismissed from the service, considering that
respondent’s business activities were not interrupted,
much less paralyzed. While we sympathize with their
plight, however, we must take care that in the contest
between labor and capital, the results achieved are fair
and in conformity with the law.

(7) When the Secretary of Labor and Employment

certifies the labor dispute to the NLRC for compulsory
arbitration the latter is concomitantly empowered to resolve
all questions and controversies arising therefrom including
cases otherwise belonging and exclusively to the Labor
Arbiter.

10) S trike s and L o c k o u t; A rtic le 264, L a b o r Code.

SAN JUAN DE DIOS EDUCATIONAL

FOUNDATION EMPLOYEES UNION-
ALLIANCE OF FILlPINO WORKERS
ET AL. G. R. NO. 143341. MAY 28. 2004.

1) A strike declared in defiance of a return to work

order issued by the DOLE Secretary, as in a strike in a
hospital, is a prohibited activity under Article 264 of the
Labor Code; hence, the dismissal of the union officers is in
order.

2) The return-to-work order is deemed validly

served where copies of the same were left by the Sheriff
with the strikers at the picket line, although they refused to
acknowledge receipt thereof, and another copy left at their
counsel’s office. A sheriff’s report is an official statement
by him of his acts under the writs and processes issued by
the court in obedience to its directive and in conformity with
law. In the absence of contrary evidence, a presumption
exists that a sheriff has regularly performed his official
duty. To controvert the presumption arising therefrom,

8
there must be clear and convincing evidence. In this case,
the petitioners failed to adduce clear and convincing
evidence to overcome the presumption. The bare denial
by the petitioners of receiving copies of the order will not
suffice. ,

11) S trike s and L o c k o u ts ; A rtic le 263 (g), L a b o r Code;

R eturn to W o rk O rder.

MANILA DIAMOND HOTEL EMPLOYEES

UNION VS. COURT OF APPEALS ET AL.
G. R. NO. 140518. DECEMBER 16. 2004.

(1) Under Article 263(g), all workers must

immediately return to work and the employer must readmit
all of them under the same terms and conditions prevailing
before the strike or lockout. It must be pointed out that the
law uses the precise phrase of “under the same terms and
conditions,” revealing that it contemplates only actual
reinstatement. This is in keeping with the rationale that
any work stoppage or slowdown in that particular industry
can be inimical to the national economy. It is clear that
Article 263(g) was not written to protect labor from the
excesses of management, nor was it written to ease
management from expenses, which it normally incurs
during a work stoppage or slowdown. It was error to view
the assumption order of the Secretary as a measure to
protect the striking workers from any retaliatory action from
the Hotel. This Court reiterates that this law was written as
a means to be used by the State to protect itself from an
emergency or crisis. It is not for labor, nor is it for
management.

(2) The Secretary's subsequent order for mere

payroll reinstatement constitutes grave abuse of discretion
amounting to lack or excess of jurisdiction. Indeed, this
Court ahs always recognized the “great breadth of
discretion” by the Secretary once he assumes jurisdiction
over a labor dispute. However, payroll reinstatement in

9
lieu of actual reinstatement is a departure from the rule in
these cases and there must be showing of special
circumstances rendering actual reinstatement
impracticable, or otherwise not conducive to attaining the
purpose of the law in providing for assumption of
jurisdiction by the Secretary of Labor and Employment in a
labor dispute that affects the national interest. None,
appears to have been established in this case. Even in the
exercise of his discretion under Article 236(g), the
Secretary must always keep in mind the purpose of the
law. Time and again, this Court has held that when an
official by-passes the law on the asserted ground of
attaining a laudable objective, the same will not be
maintained if the intendment or purpose of the law would
be defeated.

12) Strikes and Lockouts; Article 263 (g), Labor Code;

Return to Work Order.

UNIVERSITY OF IMMACULATE CONCEPCION,

INC. VS. THE HONORABLE SECRETARY OF
LABOR ET A L. G. R. 151379. JANUARY 14: 2005.

(1) When the Secretary of Labor and Employment

assumes jurisdiction over labor disputes involving
industries indispensable to the national interest under
Article 263 (g) of the Labor Code, the said official may
interfere with the legitimate business decisions of the
employer.

(2) One of the substantive evils which Article

263(g) of the Labor Code seeks to curb is the exacerbation
of a labor dispute to the further detriment of the national
interest. The Secretary of Labor and Employment may
therefore order the employer (a university) to suspend the
effect of the termination of the employment of the
employees, which termination was the reason of one of the
notices of strike filed by the union.

10
 (3) It is not a question anymore of whether or not
the dismissed employees are part of the bargaining unit.
Any act committed during the pendency of the dispute that
tends to give rise to further contentious issues or increase
tensions between the parties should be considered an act
of exacerbation and should not be allowed.

(4) “Payroll reinstatement” of the employees, as an

exception to the actual reinstatement required by a return
to work order, may be allowed, pending final resolution of
the validity of their dismissal, in view of a “superseding
circumstance,” i.e., the final decision of the panel of
arbitrations as to the confidential nature of their positions.

13) S trike s and L o c k o u ts ; R e q u isite s fo r V a lid ity.

. BUKLURAN NG MANGGAGAWA SA CLOTHMAN

KNITTING CORPORATION ET AL VS. COURT OF
APPEALS ET A L. G. R. NO. 158158. JANUARY 17. 2005.

(1) A strike is considered to have taken place

where for five(5) days the president of the union and some
union members and other employees assembled in front of
the company carrying placards protesting among others
the closure of a department and the non-payment of their
benefits. It is of no moment that a department of the
company had been closed; the other divisions were still
functioning. There was a temporary work stoppage by
reason of a labor dispute. It was however illegal for failure
of the union to comply with the requisites provided for in
Article 263 of the Labor Code.

(2) Where the petitioners in the petition for

certiorari are the union and the officers and members of
the union’s Board of Directors', the certification on non­
forum shopping should be signed by all of them and not
only by the president of the union. The execution by the
individual petitioners of a special power of attorney
subsequent to the dismissal of the petition by the Court of

11
Appeals authorizing the union president to execute the
requisite certification does not cure the fatal defect in the
petition.

14) S trike s and L o c k o u ts ; R equisites fo r V alidity.

CAPITOL MEDICAL CENTER, INC. VS.

NLRC ET AL.. G. R. NO. 147080. APRIL 26. 2005.

(1) Aside from the mandatory notices embedded in

Article 263, paragraphs (c) and (f) of the Labor Code, a
union intending to stage a strike is mandated to notify the
NCMB of the meeting for the conduct of strike vote, at least
twenty-four(24) hours prior to such meeting. Unless the
NCMB is notified of the date, place and time of the meeting
of the union members for the conduct of a strike vote, the
NCMB would be unable to supervise the holding of the
same, if and when it decides to exercise its power of
supervision.

(2) A union is mandated to notify the NCMB of an

impending dispute in a particular bargaining unit via a
notice of strike. Thereafter, the NCMB, through its
conciliator-mediators, shall call the parties to a conference
at the soonest possible time in order to actively assist them
in exploring all possibilities for amicable settlement. In the
event of the failure in the conciliation/mediation
proceedings, the parties shall be encourage to submit their
dispute for voluntary arbitration. However, if the parties,
refuse, the union may hold a strike vote, and if the requisite
number of votes if obtained, a strike may ensue. The
purpose of the strike vote is to ensure that the decision to
strike broadly rests with the majority of the union members
in general and not with a mere minority, and at the same
time, discourage wildcat strikes, union bossism and even
corruption. A strike vote report submitted to the NCMB at
least seven days prior to the intended date of strike
ensures that a strike vote was, indeed, taken. In the event
that the report is false, the seven-day period affords the

12
members an opportunity to take the appropriate remedy
before it is too late. The 15 to 30 day cooling-off period is
designed to afford the parties the opportunity to amicably
resolve the dispute with the assistance of the NCMB
conciliator/mediator, while the seven-day strike ban is
intended to give the DOLE an opportunity to verify whether
the projected strike really carries the imprimatur of the
majority of the union members.

(3) The requirement of giving notice of the conduct

of a strike vote to the NCMB at least 24 hours before the
meeting for the said purpose is designed to (a) inform the
NCMB of the intent of the union to conduct a strike vote,
(b) give the NCMB ample time to decide on whether or not
there is a need to supervise the conduct of the strike vote
to prevent any acts of violence and/or irregularities
attendant thereto; and (c) should the NCMB decide on its
own initiative or upon the request of an interested party
including the srnpioyer, to supervise the strike vote, to give
it ample time to prepare for the deployment of the requisite
personnel, including peace officers if need be. Unless and
until the NCMB is notified at least 24 hours of the union’s
decision to conduct a strike vote, and the date, place and
time thereof, the NCMB cannot determine for itself whether
to supervise a strike vote meeting or not and insure its
peaceful and regular conduct. The failure of a union to
comply with the requirement of the giving cf notice to the
NMCB at least 24 hours prior to the holding of a strike vote
meeting will render the subsequent strike staged by the
union illegal.

15) S trike s and L o c k o u ts ; A rtic le 263(g), L a b o r Code.

CAPITOL MEDICAL CENTER, INC. VS. HON. C.

TRAJANO. ET AL.. G. R. No. 155690. JUNE 30. 2005.

(1) The discretion to assume jurisdiction may be

exercised by the Secretary of Labor and Employment
without the necessity of prior notice or hearing given to any

13
of the parties. The rationale for his primary assumption of
jurisdiction can justifiably rest on his own consideration of
the exigency of the situation in relation to the national
interests.

(2) The pendency of a petition for cancellation of

union registration does not preclude collective bargaining.

16) Unfair Labor Practices; Refusal to Bargain

Collectively.

GENERAL MILLING CORPORATION

VS. COURT OF APPEALS ET A L,
G. R. NO. 146728. FEBRUARY 11. 2004.

1) The employer’s refusal to make a counter­

proposal to the union’s proposal for CBA negotiations is an
indication of its bad faith. Where the employer did not
even bother to submit an answer to the bargaining
proposals of the union, there is a clear evasion of the duty
to bargain collectively.

2) The CBA proposed by the union may thus be

unilaterally imposed on the erring employer-lock, stock and
barrel.
3) Under ordinary circumstances, it is not
obligatory upon either side of a labor controversy to
precipitately accept or agree to the proposals of the other.
But an erring party should not be allowed to resort with
impunity to schemes feigning negotiations by going
through empty gestures. Thus, by imposing on the
employer the provisions of the draft CBA proposed by the
union, the interests of equity and fair play were properly
served and both parties regained equal footing, which was
lost when the employer thwarted the negotiations for new
economic terms of the CBA.

14
17) Unfair Labor Practices; Duty to Bargain
Colllectively.

STANDARD CHARTERED BANK

EMPLOYEES UNION (NUBE) VS. CONFESSOR
ET A L, G. R. No. 114974, JUNE 16, 2004

(1) Article 248(a) of the Labor Code, considers it

an unfair labor practice when an employer interferes,
restrains or coerces employees in the exercise of their right
to self-organization or the right to form association. The
right to self-organization necessarily includes the right to
collective bargaining.

(2) 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 or on the right to collective bargaining of
the employees. ULP under Article 248(a) in connection
with Article 243 of the Labor Code is committed.

(3) In order to show that the employer committed

ULP under the Labor Code, substantial evidence is
required to support the claim. Substantial evidence has
been defined as such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion. In
the case at bar, the union bases its claim of interference on
the alleged suggestions of the employer’s representative to
exclude the Federation president from the Union’s
negotiating panel.

(4) The circumstances that occurred during the

negotiation do not show that the suggestion made is an
anti-union conduct from which it can be inferred that the
Bank consciously adopted such act to yield adverse effects
on the free exercise of the right to self-organization and
collective bargaining of the employees, especially

15
considering that such was undertaken previous to the
commencement of the negotiation and simultaneously with
the union’s suggestion that the bank lawyers be excluded
from its negotiating panel.

(5) Surface bargaining is defined as “going through

the motions of negotiating” without any legal intent to reach
an agreement. The resolution of surface bargaining
allegations never presents an easy issue. The
determination of whether a party has engaged in unlawful
surface bargaining is usually a difficult one because it
involves, at bottom, a question of the intent of the party in
question, and usually such intent can only be inferred from
the totality of the challenged party’s conduct both at and
away from the bargaining table. It involves the question of
whether an employer’s conduct demonstrates an
unwillingness to bargain in good faith or is merely hard
bargaining.

(6) The minutes of meetings from March 12, 1993

to June 15, 1993 do not show that the Bank had any
intention of violating its duty to bargain with the union.
Records show that after the union sent its proposal to the
Bank on February 17, 1993, the latter replied with a list of
its counter-proposals on February 24, 1993. Thereafter,
meetings were set for the settlement of their differences.
The minutes of the meetings show that both the Bank and
the Union exchanged economic and non-economic
proposals and counter-proposals.

(7) The union has not been able to show that the
Bank had done acts, both at and away from the bargaining
table, which tend to show that it did not want to reach an
agreement with the union or to settle the differences
between it and the Union. Admittedly the parties were not
able to agree and reached a deadlock. However, it is
herein emphasized that the duty to bargain "does not
compel either party to agree to a proposal or require the
making of a concession.” Hence, the parties’ failure to

16
agree did not amount to ULP under Article 248(g) for
violation of the duty to bargain.

(8) While the refusal to furnish requested

information is in itself an unfair labor practice, and also
supports the inference of surface bargaining, in the case at
bar, the union negotiator, in a meeting dated May 18,
1993, requested that the Bank to validate its guestimates
on the data of the rank and file. However, he failed to put
his request in writing as provided for in Article 242© of the
Labor Code.

(9) The approval of the CBA and the release of

signing bonus do not necessarily mean that the Union
waived its ULP claim against the Bank during the past
negotiations. After all, the conclusion of the CBA was
included in the order of the SOLE, while the signing bonus
was included in the CBA itself. Moreover, the Union twice
filed a motion for reconsideration respecting its LUP
charges against the Bank before the SOLE.

(10) The Union is not guilty of ULP for engaging in

blue-sky bargaining or making exaggerated or
unreasonable proposals. The Bank failed to show that the
economic demands made by the Union were exaggerated
or unreasonable. The minutes of the meeting show that
the Union based its economic proposals on data of rank
and file employees and the prevailing economic benefits
received by bank employees from other foreign banks
doing business in the Philippines and other branches of
the Bank in the Asian region.

o O o

17
 SUPPLEMENT - il
SERIOUS MISCONDUCT

Misconduct is a 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 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
employee’s work to constitute just cause for his separation.

A female employee’s absence for 16 days,

considering that she had just delivered a child, can hardly
be considered a forbidden act, a dereliction of duty; much
less does it imply wrongful intent on the part of the
employee. Her failure to formai'y inform of the company of
her pregnancy cannot also be considered as grave
misconduct directly connected to her work as to constitute
just cause for her separation. (Lakpue Drug, Inc. et al vs.
Belga, G. R. No. 166379, October 20, 2005)

GROSS AND HABITUAL NEGLECT

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 cause is derived from the right of
the employer to select and engage his employees.

Habitual neglect implies repeated failure to perform

one’s duties for a period of time. The employee’s 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 warning, constitute gross
misconduct. Habitual absenteeism without leave constitute

18
gross negligence and is sufficient to justify dismissal of an
employee.

The employee’s repeated negligence is not

tolerable; neither should it merit the penalty of suspension
only. The record of an employee is a relevant
consideration in determining the penalty that should be
meted out: She committed several infractions in the past
and despite the warnings and suspension, she continued
to display a neglectful attitude towards her work: An
employee’s 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
she had consistently committed which justified her
dismissal. (Challenge Socks Corporation vs. Court of
Appeals et al., G. R. No. 165268, November 8, 2005)

Gross negligence under Article 282 of the Labor

Code, as amended, connotes want of care in the
performance of one’s duties, while habitual neglect implies
repeated failure to perform one’s duties for a period of
time, depending upon the circumstances. The employee’s
repeated failure to submit his daily coverage reports on
time, as well as his failure to submit the doctors’ call cards
constitute habitual neglect of duties and a just cause
employment. (Dennis A. Chua vs. NLRC, et al., G. R. No.
146780, March 11, 2005)
LOSS OF TRUST AND CONFIDENCE

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. And in order to constitute a just cause for
dismissal, the act complained of must be so related to the
performance of the duties of the dismissed employee as
would show that he or she is unfit to continue working for
the employer.

The position of project controller of a construction

company required trust and confidence, for it related to the
handling of business expenditures or finances. However,
his act allegedly constituting breach of trust and
confidence was not in any way related to his official
functions and responsibility as controller. In fact, the
questioned act, disposing of property belonging to the
company but placed in his name to avoid the effects of
agrarian reform laws pertained to an unlawful scheme
deliberately engaged in by the company in order to evade
a constitutional and legal mandate. (Phil. National
Construction Corp. vs. Rolando Matias, G. R. No. 156283,
May 6, 2005)

The dismissal of the finance officer of a realty

company allegedly due to loss of trust and confidence
cannot be upheld where the basis therefor, such as
inefficient accounting and financial policies and failure to
come out with an E-VAT study, did not translate to financial
losses. (Baiba vs. Peak Development, Inc. et al., G. R. No
148288, August 12, 2005)

Recent decisions distinguish the treatment of

managerial 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

20
events in question and that mere uncorroborated
assertions and accusations by the employer will riot
suffice. But as regards a managerial employee, mere
existence of a basis for believing that such employee has
breached the trust of his employer wouid suffice for his
dismissal. (Dr. Ernesto I. Maquiling vs. Phil Tuberculosis
Society, Inc., G. R. No. 143384, February 4, 2005)

ABANDONMENT

Abandonment is the deliberate and unjustified

refusal of an employee to resume his employment; it is a
form of neglect of duty, and a just cause for dismissal. But
where it is established that the employee repeatedly
pleaded to be readmitted to work, he cannot be validly
dismissed for abandonment. (Neeco il vs. NLRC et al., G.
R. No. 157603, June 23, 2005)

The filing by the employee of a complaint for illegal

dismissal on the day of effectivity of his dismissal is proof
of his desire to return to work and negates the charge of
abandonment of work. (Northwest Tourism Corporation et
al. vs. Court of Appeals et al., G. R. No. 150591, June 27,
2005)

ANALOGOUS CAUSE

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 employee’s attitude problem is a valid ground for his
termination. It is a situation analogous to loss of trust and
confidence that must be duly proved by the employer.

21
 Similarly, compliance with the twin requirement of notice
and hearing must also be proven by the employer

a' But the employee's supposed “attitude? problem”

must be shown by clear and convincing evidence. The
mere mention of negative feedback from the employee’s
team members is not sufficient proof of her attitude
problem. And her failure to refute the employer’s
allegation of her negative attitude does not amount to
admission. (Heavylift Manila, Inc. et al vs. Court of
Appeals etal., G: R. No. 154410, October 20, 2005)
ji ^nsrnyofqme airi s-muaa's oi ssvoiqrna ns to isai/isi
REDUNDANCY

yibiisv ;The general rule is that the charactenzation by an

employee’s- services as no longer
necessary or sustainable is an exercise of business
judgment on the part of the employer. The wisdom or
soundness of such characterization or decision is not, as a
general rule subject to discretionary review on the part of
the LiSbor Arbiter, the NLRC and the CA?t Such
characterization may, however, be rejecied if the same is
found to be in violation of the law or is arbitrary or
malicious.

The dismissal of workers allegedly due to

“downsizing” of a department has thus been ruled to be
illegal where the obvious purpose was to debilitate the
union and decapitate its leadership, no fair and reasonable
parameters to determine who among the employees
should be supposedly ‘retired” due to redundancy, the
employees were not properly apprised of the existence of
i the special retirement program, and the downsizing of
personnel was not even among the measures
recommended by the auditing firm commissioned to
conduct a study of the corporation and its operations to
identify changes to achieve cost effectiveness and global
competitiveness. (Lopez Sugar Corporation vs Franco et
al., G R. No. 148195, May 16, 2005)

22
RETRENCHMENT . tjgts
In'P/1
The requirements for retrenchment are:. (1)(
undertaken to prevent losses, which are not merely d e v
minimis, but substantial, sen§y^(j i ^ f i ^ ^ d
expected, are reasonably imminent as perceived
o ^ g ^ / p ^ s i ^ e g ^ c j f ^ c M y - ) ^ e^Rlf&yeRof?) the
eraplgygr^rM^iWHttSO
the,^Q tE );€it te ^ ^ p p ^ g jo rijth ^ p H o /^ ^ ^ s M e p ^ c ^ d ^ te ,^ ,
retrenchment;; (3) the employer ,pays;^ h e : r

at le a s t,^i^Q !^ !R ^y J ^r(eyery y e a r^^s ^ r^ic ^

is higher; $ ) t ^ j,ej^pfo;ye|ilmust

vyould'pt^H^taiged a§t$if>g f e s t ! ^ 9 ^ § ® s ; y " thf^,

relren^irnent ^ ^ b ^ i ^ € | r t § | f r^ i^ o q fl r !s is ,S!^V^

Even assuming that the employersro josses :s

v v ^ ^ f» ^ |e d ^ j^ f|i^ g ^ a p d that | h § ^ p l p y e r ^ ^ n ^ b ^
s e r v e ^ d ^ i j ^ t e r Kg @t i s 'tp the workers^andq
the DOLE, b u y ^ a jle c i K Jrriplement the-retrenchment
program in a just and proper manner as it did not use a
reasonable and fair standard in the computation of the
employees’ demerits points for purposes of determining
who among the workers should be dismissed, the
retrenchment program is invalid. The employer’s failure to
use a reasonable and fair standard in the selection of the
workers to0b^ dismissed jS[|Kj| r^erejy^ gr$c$5% f l by^a
substa^tiy^, jiny;f|idjt§s^4hei
dismissaj.^Afiolaiet a I cws>r%Hile^rl^lning Corporation et#!.,;
G. R. No.147756, August 9, 2005) "

Where the garments company failed to present

eyid^fic^ showing that it suffered from serious financial
losses and to comply; with the one-month notice „
requirement to the th e ,,
dismissal of the employees of3i;etrenshgT£nt is »■
unlawful The employer did not present audited financial
documents, like yearly balance sheets, profit and loss
statements, and annual income tax returns. It also failed to
refuie the employees’ allegation that it established another
garments company immediately after it supposedly ceased
operations. (Stanley Garments Specialist et la vs. Gomez
e t a l , G R. No. 154818, August 11, 2005)

Normally, the condition of business losses is shown

by audited financial documents like yearly balance sheets,
profi' and loss statements and annual income tax returns.
The financial statements must be prepared and signed by
independent auditors failing which they can be assailed as
self-s.erying documents. Where company losses were duly
established by financial documents audited by Joaquin
Cunarian & Co. showing that the aquaculture operations of
the company accumulated losses amounting to
P145,848,172 00 in 1992 resulting in the closure of its
Calatrava Aquaculture Center in Negros Occidental,
P11,393,071,00 in 1993 and P80,325,608.00 in 1994
wnich led to the closure of its San Fernando Shrimp
Processing Plant in Pampanga and the Bacolod Shrimp
Processing Plant in 1995, it was held that the company
has proven substantial business reverses justifying
retrenchment of its employees.

For termination due to retrenchment to be valid,

however, the law requires that written notices of the
intended retrenchment be served by the employer on the
worker and on the DOLE at ;east one (1) month before the
actual date of the retrenchment, in order to give employees
some time to prepare for the eventual loss of their jobs, as
well as to give DOLE the opportunity to ascertain the verity
of the alleged cause of termination.

The employees, however, were merely verbally

informed on September 10, 1995 by the company
manager that effective the following day or on September
11f 1995, they were no longer to report for work as SMC
would be closing its operations. Nominal damages of
P5C,000.00 per employee is warranted. (San Miguel
Corporation vs. Prospero A. Aballa et al., G. R. No.
149011, June 28, 2005)

Where the employees had barely two weeks’ notice

of the intended retrenchment program, the one-month
notice rule was violated. Such rule is mandatory
regardless of whether the retrenchment is temporary or
permanent. (Phil. Telegraph and Telephone Co. vs. NLRC
et al., G. R. No. 147002, April 15, 2005)

To prove that it incurred losses, the company

presented its Income Tax Return and Audited Financial
Statements for the year 2000 alone. Previously, however,
the company had admittedly enjoyed profitable initial years
of operation. This situation falls short of the stringent
requirement of the law that the employer must sufficiently
and convincingly prove its allegation of substantial losses.
It is necessary to 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. (Blucor Minerals
Corporation, et al. vs. Alfredo M. Amaiilla, G. R. No.
161217, May 4, 2005)

CLOSURE/CESSATION OF BUSINESS

The closure of operation of an establishment or

undertaking not due to serious business losses or financial
reverses includes both the complete cessation of
operations and the cessation of only part of a company’s
activities.

For any bona fide reason, an employer can lawfully

close shop anytime. Just as no law forces anyone to go
into business, no law can compel anybody to continue the
same. It would be stretching the intent and spirit of the law
if a court interferes with management’s prerogative to close
or cease its business operations just because the business
is not suffering from any loss or because of the desire to
provide the workers continued employment.

25
 But where the employer failed to prove that the
closure of a department was due to substantial losses, the
workers’ dismissal was ruled to be nonetheless valid, on
the ground of closure not due to serious business losses or
reverses, entitling the workers to separation pay (Alabang
Country Club, Inc. et al. vs. NLRC, et al., G. R. No.
157611, August 9, 2005)

The existence of business losses is not required to

justify the closure or cessation of establishment or
undertaking as a ground to terminate employment of
employees: Abolition or closure could be justified on other
grounds such as extinct demand. But the employer must
present sufficient and convincing evidence to support such
claim o f extinct demand. (Capitol Medical Center Inc. vs.
Mens, G. R. No. 155098, September 16, 2005)

INVOLUNTARY CLOSURE

Where the rubber and banana plantations were

taken over by the Department of Agrarian Reform pursuant
to the government’s Comprehensive Agrarian , 'w o rm
Program, resulting in the severance of the employees’
services due to c££3€$gn |^fat|ie«'plan^ajSons.:- busi^es^
operations, it was ruled that the employees ware not
e^titl^grii 92sggaxat(o,ii -pay as the cessation of, business
came about involuntarily. The closure of business
operations contemplated under Article 283 refers ic -■
voluntary act or decision on the part of the employer.; r o t
one forced upon it, as in this case, by an act of the Law or
State to benefit the workers by making them agrarian lot
beneficiaries...(Manaban et. al vs. Sarphil Corporation et
al.f G. R. No. 150915, April 11, 2005)

DISMISSAL DUE TO DISEASE

fsaob of sviJepcnena a ■*
For a dismissal on the ground of disease to be
considered valid, tv/o requisites must concur, (a) tne
employee which cannot be cui;ejdn

26
within six months and his continued employment is
prohibited by law or prejudicial to his health or to the health
of his co-employees, and (b) a certification to that effect
must be issued by a competent public health authority.

In the present case, there was no proof that the

dispatcher/welder’s continued employment was prohibited
by law or prejudicial to his health and that of his co­
employees. No medical certificate by a competent public
health authority was submitted that the disease was
suffering from (cataract) cannot be cured within a period of
six months. In the absence of such certification, his
dismissal must necessarily be declared illegal. (Manly
Express Inc. and Siu Eng T. Ching v. Romualdo Payong,
Jr., G. R. No. 167462, October 25, 2005)

CONSTRUCTIVE DISMISSAL

An employee has been held to have been

constructively dismissed where he was replaced as
operations manager, instructed to go on indefinite leave,
and during which period his salaries were withheld. He
was asked to return to work only after more than three
years and only after the NLRC promulgated its decision
reversing the labor arbiter’s, dismissal of his complaint.
(Dynamic Signmaker Outdoor Advertising Services, Inc. et
al vs. Potongan, G. R. No. 156589, June 27, 2005)

A transfer amounts to constructive dismissal when

the transfer *is unreasonable, unlikely, inconvenient,
impossible, or prejudicial to the employee. It is defined
as an involuntary resignation resorted when a clear
discrimination, insensibility or disdain by an employer
becomes unbearable to the employee.

It has thus been ruled that the transfer o f b a n k

security guard from Santiago City to Malabor o»ty s::nply
because he failed to wear his perch'ng cap, and despite
the request of the client bank mat he be retained in

27
Santiago City, amounts to a constructive dismissal.
(Philippine Industrial Security Agency Corporation vs.
Percival Aguinaldo, G. R. No. 149974, June 15, 2005)

RESIGNATION; WHEN CONSIDERED VOLUNTARY

Where the managerial employee’s letter of

resignation was categorical that he was resigning “to
embark on management consultancy in the field of
strategic planning and import/export”, it was ruled that the
resignation was voluntary, it appearing that he could not
have been coerced and intimidated into signing the same
as he was no ordinary employee with limited education; he
had a Bachelor of Arts Degree in Economics from the
University of Santo Tomas, had completed academic
requirements for Masters of Business Economics, studied
law for two(2) years at Adamson University, and had a
good professional record. (Domondon vs. NLRC et al., G.
R. No. 154376, September 30, 2005)

PROCEDURAL REQUIREMENTS FOR TERMINATION

Where the first notice sent to the employee sought

to be dismissal did not contain the particulars of the
charges nor the circumstances in which the violation
happened, was couched is in general terms that it only
mentioned the specific sections of the code of discipline
that was violated without defining what such violation was,
and did not state that the employee was in fact facing a
possible dismissal from the company, it was ruled that the
notice was legally deficient. (Cruz vs. Coca Bottlers Phils.,
Inc. et al, G. R. No. 165586, June 15, 2005)

SUFFICIENCY OF NOTICE OF DISMISSAL

There is no requirement that the notices of

dismissal themselves be couched in the form and
language of judicial or quasi-judicial decisions. What is
required is that the employer conduct a formal investigation

28
process, with notices duly served on the employees
informing them of the fact of investigation, and
subsequently, if warranted, a separate notice of dismissal.
Through the formal investigatory process, the employee
must be accorded the right to present his/her side, which
must be considered and weighed by the employer. The
employee must be sufficiently apprised of the nature of the
charge against him/her, so as to. be able to intelligently
defend against the charges. .

The employer bank has been ruled to have

complied with the two-notice rule prescribed in Article
277(b) of the Labor Code where the employees were given
all avenues to present their side and disprove the
allegations of the bank, An informal meeting was held
between the branch manager, of the employees and the
vice-president of the employees union; employees
admitted having used an account to divert funds intended
for other accounts; a special audit investigation was
conducted to determine the extent of the fraudulent
transactions; and based on the results of the investigation,
the bank sent show-cause memoranda to the employees,
asking them to explain their lapses, under pain of
disciplinary action. The memoranda, which constitute the
first notice, specified the various questionable acts
committed by the employees.

Afterwards, the employees submitted their

respective replies to the memoranda. This, very well
complies with the requirement for hearing, by which the
employees were afforded the opportunity to defend
themselves. The second notice came in the form of the
termination memoranda, informing the employees of their
dismissal from service. From the foregoing, it is clear that
the required procedural due process for their termination
was strictly complied with. (Romeo C. Cadiz, et al vs.
Court of Appeals, et al, G. R. No. 153784, October 25,
2005)

29
 The requirement of law mandating the giving of
notices of intention to dismiss must be complied with even
if the ground for dismissal is supposed serious business
losses The employer’s failure to comply with this
requirement taints its actuations with bad faith. (Mayon
Hotel & Restaurant et al vs. Adana et al., G. R. No.
157634, May 16, 2005)

INDEMNITY IN CASE DISMISSAL

IS FOR CAUSE BUT WITHOUT
STATUTORY DUE PROCESS.

It is well established that the twin requirements of

notice and hearing constitute the essential elements of due
process, and neither of those elements can be eliminated
without running afoul of the constitutional guaranty. These
requisites cannot be replaced as they are not mare
technicalities, but requirements of due process to which
every emoloyee is entitled to ensure that the employer’s
prerogative to dismiss is not exercised arbitrarily. Pursuant
to the case of Agabon v. NLRC, (G. R. No. 158693,
November 17, 2004) the prevailing doctrine is that where
the dismissal is for just cause, the lack of statutory due
process does riot nullify the dismissal or render it illegal.
The employer, however, should indemnify the employee in
the form of nominal damages to vindicate or recognize the
employee’s right that was violated. The amount of such
damages is addressed to the sound discretion of the court,
taking into account the relevant circumstances. In this
case, the amount of P20,000;00 is sufficient for the
purpose. (Cornelio C. Cruz vs. Coca-Cola Bottlers Phils.,
Inc., G. R. No. 165506, June 15, 2005)

BURDEN OF PROOF IN ILLEGAL DISMISSAL CASES

In termination cases, the burden of proof rests upon

the employer to show that the dismissal is for just and valid
cause; failure to do so would necessarily mean that the
dismissal was illegal. The employer’s case succeeds or
fails on the strength of its evidence and not on the
weakness of the employee’s defense, if cio'.'bi exists
between the evidence presented by the employer and t^e
•employee, the scales of justice must be tilted in favor of the
latter. Moreover, the quantum of proof required in
determining the legality of an employee’s dismissal is oniy
substantial evidence. Substantial evidence is more than a
mere scintilla of evidence or relevant evidence as a
reasonable mind might accept as adequate to r v h >, <a
conclusion, even if other minds, equally reasonat-',,;, might
conceivably opine otherwise.

The printout of tapes recording the supposed

unauthorized overseas calls made during the worker’s tour
of duty, not authenticated by the proper officer of the
company, is without any probative value to establish Liie
cause for the worker’s dismissal (Philippine Long Distance
Telephone Co. vs. Tiarnson, G. R. Nos. 164684-85
November 11, 2005)

PROOF OF EMPLOYEES’ CONSPIRACY TO DEFRAUD

EMPLOYER

The conspiracy among employees to defraud the

airline through the refund of used or flown tickets need not
be established by direct evidence. The offense could not
have been committed by a single employee. The rule finds
more application in administrative proceedings w here A.!*,5
quantum of evidence required is substantial evidence, not.
proof beyond reasonable doubt. (Philippine Airlines, inc.
vs. Court of Appeals et al., G. R. No. 159556, May 26,
2005)

EXTINCTION OF CLAIM FOR UNPAID SALARIES

AND SEPARATION PAY THRU COMPENSATION

Compensation is a mode of extinguishing to the

concurrent amount the debts of persons who in their own
right are creditors and debtors of each other. The object of

31
compensation is the prevention of unnecessary suits and
payments thru the mutual extinction by operation of law of
concurring debts.

Legal compensation is proper in the employee and

the employer are creditors and debtors of each other. The
employee owes the employer P476,365.69, representing
the value of the tools, equipment and construction
materials of the latter for which the former is accountable.
On the other hand, in a final and executory judgment in a
labor case, the employer was ordered to pay the employer
P52,188.81 representing unpaid salaries and P28.500
representing separation pay. The debts, consisting of a
sum of money, are due, liquidated, and demandable.
Thus, compensation is proper up to the concurrent amount
in this case where the employer owes the employer
P80,688.81 for unpaid salaries and separation pay while
the employee owes the employer P476,365.69. (Casimiro
R. Nadela vs. Engineering and Construction Corporation of
Asia, G. R. No. 145259, October 25, 2005)

VOLUNTARY RESIGNATION PAY

In Hinatuan Mining Corporation and/or the Manager

vs. National Labor Relations and Margo Batister (G. R. Mo
117394, February 21, 1997), it was held that while it is true
that under the Labor Code, an employee who voluntarily
res'g; is 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
err.plcyar's practice or policy. (Hanford Philippines, inc., et
al vs. Shirley Joseph, G. R. No. 158251, March 31, 2005)

REINSTATEMENT

An employee who is dismissed without just or

authorized cause is entitled to either reinstatement or

32
separation pay if reinstatement is no longer viable, and to
backwages. Reinstatement is not feasible in case of a
strained employer-employee relationship or when the work
or position formerly held by the dismissed employee no
longer exists. In lieu of reinstatement, the dismissed
employee is entitled to payment of separation pay at the
rate of one(1) month salary for every year of service, aside
from full backwages. (Capitol Medical Center, Inc. vs.
Meris, G. R. No. 155098, September 16, 2005)

Reinstatement is the restoration to a state or

condition from which one had been removed or separated.
In providing foremost for the reinstatement of an illegally
dismissed employee, the Labor Code not only recognizes
the security of tenure granted by law to regular employees,
but also gives substance and meaning to the protection
accorded by the Constitution to labor. Employment is
significant to every working man. It is the means by which
he sustains himself and his family, hence, the law
mandates the reinstatement of an illegally dismissed
employee to his former position. Payment of separation
pay as a substitute for reinstatement is allowed only under
exceptional circumstance. (Pheschem Industrial Corp. et
al. vs. Pablito V. Moldez, G. R. No. 161158)

AWARD OF DAMAGES IN ILLEGAL DISMISSAL CASES

The employer terminated the employees’

employment in an underhanded manner, and has used
and abused the quasi-judicial and judicial precises to
resist payment of the employees’ rightful claims, thereby
protracting the case and causing the unnecessary dogging
of dockets of the court. It also forced respondents to
unnecessary hardship and financial expense. !rdeed, the
circumstances of the case would have called for exemplary
damages, as the dismissal was effected >n a wanton,
oppressive or malevolent manner, and public policy
requires that these acts must be suppressec and

33
discouraged. (Mayon Hotel & Restaurant, et al. vs.
Rolando Adana, et al., G. R. No. 157634, May 16, 2005)

Award of moral damages cannot be sustained

solely upon the premise that the employer fired his
employee without just cause or due process. Additional
facts must be pleaded and proven to warrant the grant of
moral damages under the Civil Code, such as that the act
of dismissal was attended by bad faith or fraud, or was
oppressive to labor, or done in a manner contrary to
morals, good customs, or public policy; and of course, that
social humiliation, wounded feelings, grave anxiety, etc.,
resulted therefrom. There being no moral damages, the
award of exemplary damages does not lie. (Capitol
Medical Center, Inc., et al. vs. Dr. Cesar Meris, G. R. No.
155098, September 16, 2005)

With respect to attorney’s fees, in actions for

recovery of wages or where an employee was forced to
litigate and thus incurred expenses to protect his rights and t
interests, a maximum of ten percent (10%) of the total
monetary awa<*d by way of attorney’s fees is justifiable
under Article 111 of the Labor Code, Section 8, Rule VII!,
Book ill of its Implementing Rules, and paragraph 7, Article
2208 of the Civil Code. Although an express finding of
facts and law is still necessary to prove the merit of the
award, there need not be any showing that the employer
acted maliciously or in bad faith when it withheld the
wages. There need only be a showing that the lawful
wages were not paid accordingly. (San Miguel Corporation
vs. Prospero A. Aballa, et al., G. R. No. 149011, Jun<r '’8.
2005)

LIABILITY OF PRESIDENT OF CORPORATION FOR

’LLEGAL DISMISSAL

KL, as the president, actively managed the

business of KP Inc. In fact, she was the one who decided
employees' transfer to the employment agencies, and
if

34
 signed the memoranda ordering such transfer, in bad faith.
In labor cases, particularly, corporate directors and officers
are solidarity liable with the corporation for the termination
of employment of corporate employees done with malice or
in bad faith. In fact, in Naguiat v. NLRC, (G. R. No.
116123, March 13, 1994) the Court held that the president
of a corporation, who actively manages the business, falls
within the meaning of an “employer” as contemplated by
the Labor Code, and may be held jointly and severally
liable for the obligations of the corporation to its dismissed
employees. Thus, in the present case, KL and KP Inc. are
jointly and severally liable for the latter’s obligations to the
employees. (Kay Products, Inc., et al vs. Hon. Court of
Appeals, et al., G. R. No. 162472, July 28, 2005)

o O o

35
 SUPPLEMENT - III
As a general proposition, an arbitrator is confined to
the interpretation and application of the collective
bargaining agreement. He does not sit to dispense his
own brand of industrial justice: his award is legitimate only
in so far as it draws its essence from the CBA, i.e., when
there is a rational nexus between the award and the CBA
under consideration. It is said that an arbitral award does
not draw its essence from the CBA; hence, there is an
unauthorized amendment or alteration thereof, if:

1. It is so unfounded in reason and fact;

2. It is so unconnected with the working and

purpose of the agreement;

3. It is without factual support in view of its

language, its context, and any other indicia of the parties’
intention;

4. It ignores or abandons the plain language of the

contract;

5. It is mistakenly based on a crucial assumption

which concededly is a nonfact;

6. It is unlawful, arbitrary or capricious, and

7. It is contrary to public policy.

A CBA is more than a contract; it is a generalized

code to govern a myriad of cases which the draftsmen
cannot wholly anticipate. It covers the whole employment
relationship and prescribes the rights and duties of the
parties. It is a system of industrial self-government with
the grievance machinery at the very heart of the system.
The parties solve their problems by molding a system of
private law for all the problems which may arise and to

36
provided for their solution in a way which will generally
accord with the variant needs and desires of the parties.

If the terms of a CBA are clear and have no doubt

upon the intention of the contracting parties, the literal
meaning of its stipulation shall prevail. However, if, in a
CBA, the parties stipulate that the hires must be presumed
of employment qualification standards but fail to state such
qualification standards in said CBA, the VA may resort to
evidence extrinsic of the CBA to determine the full
agreement intended by the parties. When a CBA may be
expected to speak on a matter, but does not, its sentence
imports ambiguity on that subject. The VA is not merely to
rely on the cold and cryptic words on the fact of the CBA
but is mandated to discover the intention of the parties.
Recognizing the inability of the parties to anticipate or
address all future problems, gaps may be left to be filled in
by reference to the practices of the industry, and the step
which is equally a part of the CBA although not expressed
in it. In order to ascertain the intention of the contracting
parties, their contemporaneous and subsequent acts shall
be principally considered. The VA may also consider and
rely upon negotiating and contractual history of the parties,
evidence of past practices interpreting ambiguous
provisions. The VA has to examine such practices to
determine the scope of their agreement, as where the
provision of the CBA ha been loosely formulated.
Moreover, the CBA must be construed liberally rather than
narrowly and technically and the Court must place a
practical and realistic construction upon it. (United
Kimberly-Clark Employees Union, et al. vs. Kimberly -
Clark Phils., Inc., G. R. No. 162957, March 6, 2006)

Where the workers were dismissed because they

incurred absences in excess of the number allowed for a
particular year despite a previous warning for their
absences in the two immediately preceding years, it was

37
 (a) Is the compromise agreement valid and binding
on the union members? Why?

ANS. The ratification of the compromise

agreement by a majority of the union membership binds
the minority. Besides, most of the employees complaining
received their benefits under the agreement; they are
estopped from assailing the same. And they got a very
good bargain; without the compromise agreement they
would not have received their separation pay; by reason of
the staggering losses sustained by the Bank, it was not
legally obliged to pay separation benefit.

(b) Did Republic Act No. 7169 revive the

relationship between the employees and the Bank? Why?

ANS. No. The forcible closure of the Bank by

operation of law permanently severed the employer-
employee relationship between it and its employees.

(c) Was the Compromise Agreement valid

considering that it was not signed in the presence of the
Labor Arbiter before whom the case is pending? Why?

ANS. Yes. The submission of the agreement for

approval by joint motion of the parties cured whatever
effect the singing of thereof in the absence of the Labor
Arbiter would have caused. (Cornista-Domingo et al vs.
NLRC et al., G. R. No. 156761, October 17, 2006)
* * *

May a Labor Arbiter, in the execution of decision,

order the levy of properties that had been sold by the
employer to another corporation after the promulgation of
the Supreme Court decision affirming his decision? Why?

ANS. Yes. Under Article 1387 of the Civil Code,

alienations by onerous title are presumed fraudulent when

40
 made by persons against whom some judgment has been
rendered in any instance or some writ of attachment has
been issued. The effect of this presumption is to shift the
burden to the transferor and transferee that the sales were
not fraudulently made. (Lim et al vs. The Court of Appeals
et al., G. R. No. 149748. November 16, 2006)
* * *

May the Supreme Court in a labor case disregard

the application of its own rules? Why? Cite and example.

ANS. Yes. It is within the inherent power of the

Court to suspend its own rules in particular cases in order
to do justice. Where, for example, what is at stake in the
protection of the rights of almost a hundred employees to
the satisfaction of a judgment rendered by the Court which
has become final and executory for more than seven(7)
years, and extant in the records is a scheme to thwart the
execution of the decision, the lapse of the period to appeal
as well as requirements on verification, certification on
. non-forum shopping, and statement of material dates may
' be disregarded. (Urn et al vs. The Court of Appeals et al.,
G. R. No. 149748, November 16, 2006)
* * *

Who has the burden of showing that the worker’s

monetary claims have been paid? Explain.

x ANS.: The employer. Moreover, one who pleads

payment has the burden of proving it. The reason for the
rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents - which will show
that overtime, differentials, stervice 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, the burden of showing with
legal certainty that the obligation has been discharged with

41
payment falls on the debtor, in accordance with the rule
that one who pleads payment has the burden of proving it.
Only when the debtor introduces evidence that the
obligation has been extinguished does the burden shift to
the creditor, who is then under a duty of producing
evidence to show why payment does not extinguish the
obligation. In this case, petitioner, was unable to present
ample evidence to prove its claim that respondent had
received all his salaries and benefits in full. (G & M
Philippines, Inc. vs. Romil V. Cuambot, G. R. No. 162308,
November 22, 2006y

Where the accounting clerk worked for the

company for almost three(3) years without any mention of
any project to which she was specifically assigned; the
company failed to present any project employment
contracts covering the period when she was allegedly a
project worker; she continued to work for the company
even after the expiration of her supposed project
employment contract; and most important of all, the
company did not report the termination of her employment
to the Department of Labor; it was held that her
employment was regular. (Philippine Long Distance
Telephone Co., Inc. vs. Ylagan, G. R. No. 155645,
November 24, 2006)
■. ft 'it a

A project employee is assigned to carry out a

speuifio project or undertaking the duration and scope ot
which are specified at the time the employee is engaged in
the project. A project is a job or undertaking which is
distinct, separate and identifiable from the undertakings of
the company. A project employee is assigned to a project
which begins and ends at determined or determinable
times. (Philippine Long Distance Telephone Co., Inc. vs.
MayfiorT. Ylagan, G. R. No, 155645, November 24, 2006)
 Petitioner’s illness and disability were the direct
results of the demands of, his shipboard employment
contract and the harsh ,and inhumane treatment of the
officers on board the vessel “Olandia." For no justifiable
reason, respondents refused to pay their contractual
obligations in bad faith. Further, it cannot be gainsaid that
petitioner’s disability is not only physical but mental as well
because, of the severe depression, nriental torture, anguish,
embarrassment, anger, sleepless, nights and. anxiety that
befell him. To protect his rights and interest, petitioner Was
constrained to institute his complaint below and hire the
services of an attorney. (Robert B. Cabuyoc vs. Inter-
Qrient-Navigaticn Shipmanagement, Inc.. et al., G. R. no.
1666.49, November 24, 2006)
* ^ *

Reinstatement means restoration to a state or

condition from which one had been removed or separated.
The person, reinstated assumes the position he had
occupied prior to his. dismissal. Reinstatement'
presupposes .that the previous position from which one had
been removed ■still exists, or that there is an unfilled
position-which is ; substantially equivalent or of similar
nature: as the one previously occupied by the employee.

Reinstatement means restoration to the former

position occupied, prior to dismissal or to substantially
equivalent position. Reinstatement does hot mean
promotion. Promotion is based primarily; on an employee’s
performance during a certain period. Just because their
contemporaries are already occupying‘ Higher pdsitio'ns
doesnot automatically entitle respondents J9a similar
pOj'M^ns^, (Asian Terminals, Inc., et al. ,vs. Renato , P.
Villanueva, et al.. G. R. No. 143219, November 28, 2006)
fleaK'nsiq sfij iii sii # A ^ocnq tHnt bs>bo vt
erit figuorijie bn.A tn&rncMjpe jneWs! srlf gniau .3..GG
 Where the company claimed that 123 employees
participated in the strike which was declared illegal, but the
affidavits it submitted show that only 23 employees
participated therein it was ruled that dismissal of all the
employees is unwarranted. Uncontested notices of
termination sent to the employees cannot be given the
stature of substantial evidence, for other than they were
unilaterally prepared by the company and evidently self-
serving, they are not enough to convince even the
unreasonable mind. (Times Transportation Co., Inc. vs.
NLRC etal., G. R. Nos. 148500-01, November29, 2006)
* * *

Cannery Multi-Purpose Cooperative (CAMPCO), a

cooperative organized under the Cooperative Code of the
Philippines, and duly registered with the Cooperative
Development Authority on January 6, 1993, entered into a
Service Contract-with DOLE Philippines, Inc., which was
engaged principally in the production and processing of
pineapple for the export market, whereby for a certain
amount it (CAMPCO) will perform services for DOLE to
assist the latter in its daily operations and perform add jobs
as may be assigned. It was further stipulated among
others that CAMPCO carried on an independent legitimate
business, that it must provide all tools and equipment
necessary in the performance of its work, and that it must
undertake the contract work on its own account and
responsibility, and according to its manner and method,
free from the direction and control of DOLE, and it must
pay the workers the prescribed minimum wage, remit their
SSS/Medicare premiums and submit to DOLE copies of
payments and proof of SSS/Medicare remittance.

Pursuant to the aforesaid Service Contract,

members of CAMPCO rendered services to DOLE,
depending on the needs of the latter at any given time.
They v>-orked as fruit processing attendants in the premises
of DC_E, using the iatter’s equipment And although the
contract was only for a period of six months, the same was
renewed/extended for succeeding years without any
written agreement.

(a) Is CAMPCO a mere labor-only contractor

considering that the workers assigned to DOLE were
members of the cooperative and the Service Contract
provided that the CAMPCO carried on an independent
legitimate business? Why?

ANS.: Yes. CAMPCO is a mere labor-only

contractor. A cooperative, as soon as it is registered with
the Cooperative Development Authority attains a juridical
personality of its own, separate and distinct from its
members, and such corporate fiction cannot be pierced in
the instant case. It also appeared that at the time of the
establishment of CAMPCO it only had a paid-up capital of
P6,600.00; that DOLE was its only client and the tools,
machineries and equipment actually used by CMAPCO
members when rendering services to DOLE belonged to
the latter; that CAMPCO members before working for
DOLE had to undeigo instructions and pass the training
provided by the latter’s personal who also deterred the
work assignments of the members who also worked within
the company premises alongside regular employees
performing identical jobs; that CAMPCO was not engaged
to perform a specific and special job or service; and that
CAMPCO members performed services not only directly
related but very vital to DOLE’S business of production and
processing of pineapple products for export.

(b) Are the finding of the Secretary of Labor and

Employment, in proceedings under Article 128 of the Labor
Code (visitoriai power) where the parties appeared, to the
effect that CAMPCO was a mere labor only contractor and
the workers it provided to DOLE were employees of the
latter, res judicata in an illegal dismissal case filed by
CAMPCO members before the Labor Arbiter? Why?
 aS « ANS.: Yes. The visitoriai and enforcement-power
granted to the Secretary of Labor and Employment by
Article 128 of the Labor Code is in the nature of a quasi
judicial power. The findings therein to the effect that
CMAPCO was a mere labor only contractor are considered
binding upon other tribunals, based on the rule on
condusiveness of judgment. The orderly administration of
justice requires that the judgments of a court or quasi­
judicial body must reach a point of finality set by the law,
rules and regulations, so as to write finis to disputes once
and for all; otherwise, litigations will never end. (DOLE
Philippines, Inc. vs. Esteva et al., G. R. No. 161115,
November 30, 2006)
# * *

to ; Where the by-laws of the corporation did not

specify the general manager as among its corporate
officers, there is no basis for making this officer personally
liable for the workers’ monetary claims. (Pamplona
Plantation Co. vs. Acosta et al., G.' R. No. 153193,
December 6, 2006)

It has been ruled that the notice requirements for

the dismissal of a worker have been satisfied where (1) the
worker, through the union president, received a copy of the
memoranda charging her with falsification; (2) but instead
of utilizing the administrative inquiry as a reasonable
avenue to thresh out her claims and defenses, she ignored
the same; and (3) she received through registered mail a
copy of the termination letter (Salazar vs. Philippine
Duplicators, Inc. et al., G. R No 154628, December 6,
2006)

46
 State the lament of the Supreme Court on labor
only contracting.

P AIMS.: Ways and means contrived by employers to

countermand labor laws granting regular employment
status to their workers are numerous and long. For
instance, they toss the poor workers from one job
contractor to another, make them go through endless
applications, lining up, paperwork documentation, and
physical examinations; make them sign five or ten-month-
only job contracts, yet re-hire them after brief “rest
periods,” but not after requiring them to go through the
whole application and selection process once again;
prepare and have them sign waivers, quitclaims, ana the
like; refuse to issue them identification cards, receipts or
any other concrete proof of employment or documentary
proof of payment of their salaries; fail to enroll them for
entitlement to social security and other benefits; give them
positions, titles or designations that connote short-term
employment.

Others are more creative: they set up “distributors"

or “dealers” which are, in reality, shell or dummy
companies. In this manner, the mother company avoids
the employer-employee relations, and is thus shielded from
liability from employee claims in case of illegal dismissal,
closure, unfair labor practices and the like. In those
instances the poor employees, finding the shell or dummy
company to be without assets, often end up confused and
without recourse as to whom to run after. They sue the
mother company which conveniently sets up the defense
of absence of employer-employee relations. In San Miguel
Corporation v! MAERC Integrated Services, inc., we took
note of the practice of hiring employees through labor
contractors that catered exclusively to the employment
needs of SMC or its divisions or other specific business
interests, such that after the specific SMG business or
division ceases to do business, the labor contractor
likewise ceases its operations.

47
 The contrivances may be many and the schemes
ingenious and imaginative. But this Court will not hesitate
to put pen to a line and defend the worker’s right to be
secure in his (or her) proprietary right to regular
employment and his right to a secure employment, viz, one
that is free from fear and doubt, that anytime he could be
removed, retrenched, his contract not renewed or he might
not be re-hired. The ramifications may seem trivial, but we
cannot allow the ordinary Filipino worker’s right to tenurial
security to be put in jeopardy by recurrent but abhorrent
practices that threaten the very lives of those that depend
on him. (San Miguel Corporation v. NLRC, et al., G. R. No.
147566, December 6, 2006)
* * *

To perfect its appeal, an employer should post a

bond, even if it were only partial. Non-posting of the bond
within the reglementary period divests the NLRC of its
jurisdiction to entertain the appeal. (Rural Bank of Corn et
al vs. Cortes, G. R. No. 164888, December 6, 2006)
* * *

When may a seaman be considered guilty of

desertion?

ANS.: For a seaman to be considered as guilty of

desertion, it is essential that there be evidence to prove
that if he leaves the ship or vessel in which he had
engaged to perform a voyage, he ha the dear intention of
abandoning his duty and of not returning to the ship or
vessel. Where the shipowner failed to present clear and
convincing proof to show that when the seaman jumped
ship, he no longer had the intention of returning, there can
be no desertion. The fact alone that he jumped off the ship
where he was stationed, swam to shore and sought
medical assistance for the injury he sustained is not an

48
sufficient basis for the shipowner to conclude that he had
the intention of deserting his post. Settled is the rule that
in termination cases, the burden of proof rests upon the
employer to show that the dismissal is for a just and valid
cause. (PCI Shipping Philippines, Inc. et al vs. NLRC, et
al., G. R. No. 153031, December 14, 2006)
* * *

Where there was evidence that there was cheating

in connection with the promotion contest of a fast food
chain, it was held that the managers of the branches
where the anomalies were committed may be dismissed
for loss of trust and confidence. Their position required a
high degree of responsibility that necessarily included
unearthing of fraudulent and irregular activities. (Muaje-
Tuazon et al vs. Wenphil Corporation et al., G. R. No.
162447, December 27, 2006)

The contradictory findings of the NLRC and the

Court of Appeals provide sufficient justification for the
Supreme Court to review the facts. (Muaje-Tuazon et al.
vs. Wenphil Corporation et al., G. R. No. 162447,
December 27, 2006)

2007

Where initially a school alleged that the principal of

its high .school department took an envelope containing
money left by the cashier in the comfort room but later
changed its charge and accused her of exhibiting a hostile
attitude during the investigation into the incident, it was
held that her dismissal was without any basis. (AMA
Computer College, Inc. et al vs. Garay, G. R. No. 162468,
January 23, 2007)

49
 In October, 2001 the company convened its key
officers and department heads to finally decide whether to
implement a voluntary retirement/voluntary separation
program or a retrenchment. During the meeting the
Executive Director of the company expressed her interest
and volunteered to personally participate in the downsizing
program of the company’s personnel. She thereafter
submitted a letter signifying her intention to avail herself of
the Voluntary Retirement Program of the company
provided that she was paid a separation package
equivalent to 1.25 month pay for every year of service.
She was paid over P3 million, she executed a Receipt and
Release Waiver and Quitclaim on the same day She
however later on denied due execution of the document
and alleged that she signed the same under duress and
intimidation. She claimed that she was threatened'that
she would not receive anything if she did not sign the
waiver with the prospect of receiving nothing she
consented to sign it. She filed her complaint for illegal
dismissal almost six(6) months after her separation from
the company. She tried to land another job but failed: Is
the waiver that she signed valid and binding?

ANS.: Yes. She. is a well-educated woman holding

a managerial position. It is highly improbable that with her
employment stature and educational attainment, she could
have been duped into signing a retirement letter against
her will. In signifying her intention to retire, she even made
a proposition as to the amount she believed she was
entitled to. Being a woman of high educational attainment
and qualifications, she is expected to know the impoit of
everything she executes. Having been granted a
retirement package which is very much higher than the
amount being received by an employee terminated for an
authorized cause under Article 283 or one who retires
under Article 287 of the Labor Code, we are not swayed by
her argument tnat she was intimidated or coerced in
signing her retirement letter. Indeed, it is safe to conclude

50
that such retirement package was the reason why she
opted to retire. (Amkor Technology Philippines, Inc. et al.
vs. Nory A. Juangco, et al., G. R. No. 166507, January 23,
2007)

* * *

Cite an example of a concerted activity which has

been considered a strike.

ANS.: One hundred six (106) members of union,

whose respective applications for leave of absence on
September 21, 1999 were disapproved, opted not to report
for work on said date, and gathered in front of the
company premises to hold a mass protest action. They
deliberately absented themselves and instead wore red
ribbons, carried placards with slogans such as: “YES
KAMI SA STRIKE,” “PROTESTA KAMI,” “SAHOD,
KARAPATAN NG MANGGAGAWA IPAGLABAN,” “CBA-
‘WAG BABOYIN,” “STOP UNION BUSTING.” They
marched to and fro in front of the company’s premises
during working hours. Thus, they engaged in a concerted
activity which already affected the company’s operations.
The mass concerted activity constituted a strike. (Santa ’
Rosa Coca-Cola Plant Employees Union, et al. vs. Coca-
Cola Bottlers Phils., Inc., G. R. Nos. 164302-03, January
24, 2007)

* * *

What is a shop steward?

ANS.: A shop steward is appointed by the union in

a shop, department, or plant and serves as representative
of the union, charged with negotiating and adjustment of
grievances of employees with the supervisor of the
employer. He is the representative of the union members

51
in a building or other workplace. Black’s l.aw Dictionary
defines a shop steward as a union official who represents
members in a particular department. His duties include the
conduct of initial negotiations for settlement of grievances.
He is to help other members when they have concerns
with the employer or other work-related issues. He is the
first person that workers turn to for assistance or
information. If some has a problem at work, the steward
will help them sort it out or, if necessary, help them file a
complaint. In the performance of his duties, he has to take
cognizance of and resolve, in the first instance, the
grievances of the members of the union. He is empowered
to decide for himself whether the grievance or complaint of
a member of the union is valid, and if valid, to resolve the
same with the supervisor failing which, the matter would be
elevated to the Grievance Committee

It is quite clear that the jurisdiction of shop stewards

and the supervisors includes the determination of the
issues arising from the interpretation or even
implementation of a provision of the CBA, or from any
order or memorandum, circular or assignments issued y
the appropriate authority in the establishment. In fine, they
are part and parcel of the continuous process of grievance
resolution designed to preserve and maintain peace
among the employees and their employer. They occupy
positions of trust and laden with awesome responsibilities.
(Santa Rosa Coca-Cola Plant Employees Union, et al. vs.
Coca-Cola Bottlers Phils., Inc., G. R. Nos. 164302-03,
January 24, 2007)
it ie *

The proceedings before the Labor Arbiter are nul!

and void if he disregarded and violated Section 6(c) of
Presidential Decree 902-A, as amended, which mandates
the suspension of all actions for claims against a
corporation placed under a management committee by the
SEC. Hence, the Labor Arbiter’s decision, issued in
violation of the suspension order, could not achieve a final
and executory status. (Lingkod Manggagawa sa
Rubberworld et al., vs. Rubberworld (Phils.) Inc. et al., G.
R. No. 153882, January 29, 2007)
* * *

A union officer may be declared to have lost his

employment status if he knowingly participates in an illegal
strike, whereas a union member may be similarly faulted if
he knowingly participates in the commission of illegal acts,
such as obstruction of free ingress to and egress from the
company premises and intimidation and harassment of
non-striking employees, during the strike. Substantial
evidence suffices to prove participation in the commission
of illegal acts. (Chuayuco Steel Mfg. Corp. vs. Buklod ng
Manggagawa sa Chuayuco Steel Manufacturing
Corporation, G. R. No. 167347, January 31, 2007)
* * *

The prescriptive period for filing a claim for unpaid

commissions is not interrupted by a filing of a civil case
before the Regional Trial Court which is dismissed for lack
of jurisdiction. The dismissal of the case effectively
cancelled the tolling of the prescriptive period within which
to file the money claim, leaving the claimant is exactly the
same position as though no civil case had been filed at all.
(Intercontinental Broadcasting Corporation vs.
Panganiban, G. R. No. 151407, February 6, 2007)
•k ie *

The NLRC cannot order the reinstatement of

complainants who did not affix their signatures to the
Memorandum of Appeal. The other complainants who did
not sign the Memorandum are presumed to be satisfied
with adjudication of the Labor Arbiter. (Solgus Corporation
vs. Court of Appeals et al., G. R. No. 157488, February 6,
2007)
* * *

After the submission of their position papers, replys

and rejoinders, the parties shall not be allowed to allege
facts, or present evidence to prove facts not referred to
and any cause or causes of action not included in the
complaint or positions papers, affidavits and other
documents. Consequently, affidavits of desistance
supposedly executed by the complainants but alleged only
for the first time in the employer's memorandum deserve
scant consideration, mosi especially because the
complainants deny having executed the same and the
notaries public before whom they were allegedly
acknowledged issued a certification that- no such
documents were acknowledged by the complainants
before them. (Solgus Corporation vs. Court of Appeals et
al., G. R. No. 157488, February 6, 2007)
* * *

Give the effects of the pendency of the employer’s

rehabilitation proceedings upon the claims of the
employees.

ANS. Where the company has been placed under

a management committee or rehabilitation receiver, all
actions, including labor cases shall be automatically
suspended in whatever stage they may be found. This is
to enable the management committee or rehabilitation
receiver to effectively exercise its/his powers free from any
judicial or extrajudicial interference that might unduly
hinder or prevent the rescue of the debtor company.
(Philippine Airlines, Inc. et al. vs. Zamora, G. R. No.
166966, February 6, 2007)
* * *

54
 Give the effects of the pendency of the employer’s
rehabilitation proceedings upon the claims of the
employees.

ANS. Where the company has been placed under

a management committee or rehabilitation receiver, all
actions, including labor cases shall be automatically
suspended in whatever stage they may be found. This is
to enable the management committee or rehabilitation
receiver to effectively exercise its/his powers free from any
judicial or extrajudicial interference that might unduly
hinder or prevent the rescue of the debtor company.
(Philippine Airlines, Inc. et al.- vs. Zamora, G. R. No.
166966, February 6, 2007)
* * *

The act of subordinate in imputing robbery to a

superior has been ruled to be serious misconduct,
considering that the same was fabricated and made
because of the former’s exasperation and anger at the
latter’s repeated acts of opening his drawer without prior
permission while he was on leave. (Torreda vs. Toshiba
Information Equipment (Phils.) Inc. et al., G. R. No.
165960, February 8, 2007)
* * *

The death of a seaman during the term of

employment makes the employer liable to his heirs for
death compensation benefits. Once it is established that
the seaman died during the effectivity of his employment
contract, the employer is liable. However, if the seaman
dies after the termination of his contract of employment, his
beneficiaries are not entitled to the death benefits
enumerated above.

In the present case, Virgilio was repatriated for

medical reasons; he arrived in the Philippines on March 8,

55
2000 for surgical repair after he was diagnosed with
umbilical hernia. Virgilio’s employment was thus
terminated upon his repatriation on March 8, 2000.
Consequently, when he died on March 18, 2001, his
employment with petitioners had long been terminated.
Hence, respondents are not entitled to receive death
benefits under the Contract from petitioners. (Prudential
Shipping and Management Corp., et al' vs. Emerlinda A.
Sta. Rita, etc., etal., G. R. No. 166580, February 8, 2007)
* * *

May the Labor Arbiter refrain from executing a

decision favorable tc an employee during the pendency of
a review by the Supreme Court or the Court of Appeals
even in the absence of an order enjoining the execution of
the decision? Why?

ANS.: Yes, when circumstances so warrant. The

Labor Arbiter must exercise extreme prudence and
observe judicial courtesy to avoid injustice to the employer.
(Panuncillo vs. CAP Philippines, inc., G. R. No. 161305,
February 9, 2007)
* ☆ ' *

Is the order of the NLRC for the reinstatement of an

employee self-executory? Explain.

ANS. No. Under Article 224 of the Labor Code, a

writ of execution of a final and executory judgment of the
NLRC is required for the enforcement of the decision.
Consequently, where no writ of execution was issued by
the NLRC, the employee would not be entitled to wages
during the pendency of the case for review before the
appellate courts. It is only the Labor Arbiter’s order for
reinstatement that is, under Article 223 of the Labor Code,
immediately executory and self-executory. (Panuncillo vs.
CAP Philippines, Inc., G. R. No. 161305, February 9,2007)

56
immediately executory and self-executory. (Panuncillo vs.
CAP Philippines, inc., G. R, No. 161305, February 9, 2007)
* * *

Where relief salesmen of San Miguel Corporation

were issued several contracts of employment supposedly
with fixed periods, it was held that they were regular
employees considering that they performed activities
necessary or desirable in the usual business or trade of
SMC; furthermore circumstances existed indicating that ihe
supposed fixed period employment contracts were part of
a scheme to preclude them from acquiring tenurial
security. (Fabela et al vs. San Miguel Corporation et ai.,
G. R. No. 150658, February 9, 2007)
* * *

Jimmy was a truck driver of an animal feeds

manufacturing company. He delivered animal feeds to the
company’s clients. He and other drivers were directed to
deliver the feeds at a specified time and place, were not
given the discretion to solicit, select and contact
prospective clients, were required to stay in the client’s
premises during truck-ban hours, and can report early in
the morning to make their deliveries or in the afternoon,
depending on the production of animal feeds.

(a) May Jimmy be classified as “field personnel”

and hence not entitled to overtime compensation and
incentive leave benefits? Why?

ANS.: No. His time and performance were

constantly supervised by the company. He is therefore
entitled to overtime compensation and service incentive
leave benefits.

(b) What is the prescriptive period for claiming his

overtime compensation and service incentive leave?

57
 ANS.: Jimmy can claim for the overtime pay
withheld for the period within three(3) years preceding the
filing of his complaint. With respect to service incentive
leave, the three(3) year prescriptive period commences at
thb time he was dismissed. (Far East Agricultural Supply,
Inc. et al vs. Libatique et ai., G. R. No. 162813, February
12, 2007)
★ -k it

Schonfeld, a Canadian citizen, and a consultant in

environmental engineering water supply and sanitation,
was hired in Canada to work in the Philippines for Pacicon
Philippines, Inc. (PPI), a domestic corporation, and a
subsidiary of Pacific Consultants international of Japan
(PCIJ). His salary was paid partly by PPI and PCIJ. The
letter of employment, executed in Japan, provided that
issues between the parties will be resolved in the London
Court of Arbitration. Schonfeld was issued an alien
employment permit by the DOLE.

(a) Schonfeld later on filed a complaint for illegal

dismissal before the Labor Arbiter against PPI and its
President, Henricksen. Does the Labor Arbiter have
jurisdiction over the case considering that Schonfeld was
hired outside the Philippines? Why?

ANS. Yes. Employer-employee relationship arose

between him and PPI. He was even issued an alien
employment permit by the DOLE with PPI as his employer.

(b) Does the principle of forum non conveniens

apply''' Why?

ANS.: No. In the first place, the Labor Code does

not include this principle as a ground for the dismissal or
the complaint. Secondly, the propriety of dismissing a
based on this principle requires a factual
deter,■nipaxior. *»nd is properly considered as a defense.
Finally, the Labor Arbiter is one to which the parties may
conveniently resort to; he is in a position to make an
intelligent decision as to the law and the facts; and he has
the power to enforce his decision.

(c) Does not the stipulation that venue of the acti

will be in the court of arbitration in London bar the
complaint before the Labor Arbiter?

ANS.: No. Venue stipulations, in the absence of

restrictive words like “only”, “solely” and “exclusively”, are
merely permissive. (Pacific Consultants International Asia,
Inc. et al vs. Schonfeld, G. R. No. 166920, February 19,
2007)
* * *

A seaman may be validly dismissed for

drunkenness, disorderly behavior and disobedience, and
these may be proven by the entries made in the logbook
by the master of the vessel. (Cansino vs. Prudential
Shipping and Management Corporation et al., G. R. No.
155338, February 20, 2007)
★ * *

Alteration in the employment contract of seaman,

unilaterally made by the master of the vessel, increasing
the salary of the former, is valid and binding though not
approved by the POEA as this redounded to the seaman’s
benefit. (Cansino vs. Prudential Shipping and
Management Corporation et al., G. R. No. 155338,
February 20, 2007)
* * *

The precipitate filing of a petition for certiorari under

Rule 65 without first moving for the reconsideration of the
assailed NLRC resolution warrant the outright dismissal of

59
the case, most especially where there was o explanation in
the petition as to the omission to file the required motion
for reconsideration. Certiorari is not a shield from the
adverse consequences of an omission to file the required
motion for reconsideration. (Solinas el al vs. Digital
Communications Phils., Inc. et al., G. R. No 148628,
February 28, 2007)
* * *

The temporary transfer of a typist/secretary in the

Office of Dean of the College of Law to the Office of the
Principals of the High School Department of a university
was held not to be constructive dismissal, considering that
the same was not prompted by malevolence or ill-will, but
was intended to prevent controversy in the College of Law.
A law student had filed a complaint against the employee
for alleged irregularities in the performance of her work. A
university is more than a business venture; it is first and
foremost an educational institution engaged in teaching
and preparing the youth for the career paths they intend to
take. It could not afford to have a discordant student and a
college tainted with controversy. (Duldulao vs. The Court
of Appeals et al., G. R. No. 164893, March 1, 2007)
* * it

No constructive dismissal has been held to have

occurred where the Assistant Vice-President of a savings
bank availed himself of the early retirement program and
was duly paid his retirement benefits, there being no
showing that his separation from employment was due to
involuntary resignation caused by discrimination.
(Portuguez vs. GSIS Family Bank et al., G. R. No. 169570,
March 2, 2007)

60
 ANS. Yes. The hotel is engaged in the hotel and
restaurant business and one of the de luxe hotels
operating in Metro Manila catering mostly to foreign tourist
groups and businessmen. It serves as venue for local and
international conventions and conferences. The hotel
provides employment to more than 700 employees as well
as conducts business with entities dependent on its
continued operation. It also provides substantial
contribution to the government coffers in the form of
foreign exchange earnings and tax payments.
Undoubtedly, a work stoppage thereat will adversely affect
the hotel, its employees, the industry, and the economy as
a whole. (Manila Hotel Employees Association, et al. vs.
Manila Hotel Corp., G. R. No. 154591, March 5, 2007)
* * ★

Lolita worked as a field laborer of Del Monte

Philippines. She incurred, without prior permission, thirty
six(36) absences due to pregnancy related sickness such
as urinary tract infection. Under company rules, an
employee who has incurred six(6) or more absences
without prior permission or subsequent justification is
subject to dismissal. Lolita had a long history of
unauthorized absences committed several years
beforehand. Lolita was thus dismissed for gross and
habitual neglect. Is her dismissal lawful? Why?

ANS: No. The dismissal is in violation of Article

137 of the Labor Code which prohibits discharge of an
employee on account of the tetter's pregnancy. (Del Monte
Philippines, Inc. vs. Velasco, G. R. No. 153477, March 6,
2007)
* ★ ★

Where an x-ray technician failed, despite repeated

notices from the hospital, to submit the proper certificate of
registration, as required by law, to practice radiology

61
 Where an x-ray technician failed, despite repeated
notices from the hospital, to submit the proper certificate of
registration, as required by law, to practice radiology
and/or x-ray technologist in the Philippines, her separation
from employment was held to be valid. Her continued
employment without the certificate of registration exposed
the hospital to possible sanctions and even to a revocation
of its license to operate. (St. Luke’s Medical Center
Employees’ Association et al vs. NLRC et al., G. R. No.
162053, March 7, 2007)
* ★ *

The employment of a rectangular power press

machine operator, in charge of manufacturing covers for
rectangular tin cans in a company engaged in the
manufacture of tin cans has been held to be regular by the
nature of the work he performed, notwithstanding that he
was made to sign a contract providing that his employment
was only for five(5) months. Such contract was a contract
of adhesion; he was compelled to sign the contract just so
he could be hired. It cannot be said that the parties dealt
with each other on more or less equal terms, with no moral
dominance exercised by the company over the worker.
(Rowell Industrial Corporation vs. Court of Appeals et al.,
G. R. NO. 167714, March 7, 2007)
* * *

Distinguish between regular employees by nature

of work and regular employees by years of service.

ANS. Regular employees by nature of work are

employees who perform a particular activity which is
necessary or desirable in the usual business or trade of the
employer regardless of their length of service. Their
employment is for an indefinite period. Regular employees
by length of service are those who have been performing
the job, not usually necessary or desirable in the usual

62
business or trade of the employer, for at least a year.
Their regular employment is only as long as the activity in
which they are engaged actually exists.
* v *

The collective bargaining agreement between the

Manila Jockey Club, Inc., a corporation which conducts,
operates and maintain horse races and the Manila Jockey
Club Employees Union provided that the parties will
observe a seven-hour work schedule, that is, from 9:00
a.m. to 12:00 noon and 1:00 p.m. to 5:00 p.m., from
Monday to Saturday. The CBA also reserved in the
company certain management prerogatives, including the
determination of the work schedule. When the race days
and hours thereof were changed, the Club issued a
memorandum changing the work schedule of monthly-paid
employees to 1:00 p.m. to 8:00 p.m. when horse races
were held, that is, every Tuesday and Thursday. The 9:00
a.m. to 5:00 p.m. schedule for non-race days was however
maintained for non-race days.

a) Is the memorandum violative of the collective

bargaining agreement? Why?

ANS. No. The CBA expressly reserved in favor of

the Club the prerogative to change existing methods or
facilities to change the schedules of work.

b) The Union also contended that the change in

work schedule deprived them of the opportunity to render
overtime work with pay and therefore violated Article 100
of the Labor Code. Is this contention tenable? Why?

ANS. No. The CBA did not guarantee over work

for all the employees but merely provided that all work
performed in excess of seven(7) hours work schedule and
on days not included within the work week shall be
considered overtime and paid as such. The Club was not

63
obliged to allow all its employees to render overtime work
everyday for the whole year, but only those employees
whose services were needed after their regular working
hours and only upon instructions of management. The
overtime pay was not given to each employee consistently,
deliberately and unconditionally but as a compensation for
additional services rendered. (Manila Jockey Club
Employees Labor Union-PTGWO vs. Manila Jockey Club,
Inc., G. R. No. 167760, March 7, 2007)
* * *

In view of the disapproval by the Senior Vice-

President of her proposal to hold a Halloween party in the
office, the Department Secretary, sent an e-mail message
to her officemates stating among others: “He was so
unfair...para bang palagi siyang iniisahan sa trabaho.
Solohin na lang niya bukas ang office.” She urged her
officemates to bring their kids instead to McDonalds the
next day during office hours.

(a) May the Department Secretary be dismissed for

sending the aforesaid e-mail message?

ANS. Yes, for improper conduct or acts of

discourtesy or disrespect to fellow employees tending to
undermine the authority and credibility of management.

(b) Should not her twelve(12) years of service and

lack of. previous derogatory records mitigate her liability?

ANS. No. The longer an employee stays in the

service of the company, the greater is his responsibility for
knowledge and compliance with the norms of conduct and
code of discipline in the company.

(c) During the investigation conducted by the

company, she was not informed of her right to counsel.
Was she accorded due process prior to her dismissal?
 counsel. She is entitled to indemnity of P30.000.00.
(Punzal vs. ETSI Technologies, Inc. et al., G. R. No.
170384-85, March 9, 2007)
* * *

Pursuant to Section 1 of Republic Act No. 7730,

, approved in June, 1994, amending Article 128(b) of the
Labor Code the Secretary of Labor and Employment or his
duly authorized representative, in the exercise of their
visitoriai and enforcement powers, are authorized to issue
compliance orders without any restriction with respect to
the jurisdictional amount of P5,000.00 provided under
Articles 129 and 217 of the Code. An Order issued by the
Regional Director pursuant to Article 128 of the Code
requiring an employer to pay a sum of more than
P800,000.00 to its employees is thus valid. (V. L.
Enterprises et al vs. Court of Appeals et al., G. R. No.
167512, March 12, 2007)
* * *

The heirs of an employee who dies in the course of

his employment, like a seaman lost at sea, may maintain
an action for damages against the employer based on
Article 1711 of the Civil Code (Candano Shipping Lines,
Inc. vs. Sugata-on, G. R. No. 163212, March 13, 2007)
* ★ *

The dismissal of employees of a restaurant has

been held to be illegal where only photocopies of
statements upon which the dismissal was based were
submitted and such statements did not even bear the
dates of execution. (Cabalen Management Co., Inc. et al.
vs. Quiambao et al., G. R. No. 169494, March 14, 2007)

AC
 The retirement plan of the university medical
center, which was contributory in character, provided for
compulsory or automatic retirement when the employee
has reached the age of 65 years or after 35 years of
uninterrupted service. May these conditions for retirement
be made to apply to one who started working long before
the adoption of the retirement plan and had already
rendered 35 years of service but was only 57 years old?
Why?

ANS. No. The compulsory retirement age under

the Labor Code is 65 years. Of course, an employer is
free to impose a retirement age less than 65 years but the
employee must consent thereto. Retirement is the result of
a bilateral act of the parties, a voluntary agreement
between the employees and the employee whereby the
latter, after reaching a certain age agrees to sever the
employer-employee relationship. (Jaculbe vs. Siliman
University, G. R. No. 156934, March 16, 2007)
* * *

After filing a complaint before the NLRC for illegal

dismissal, Dominie instituted with the Metropolitan Trial
Court a complaint against her employers for moral and
exemplary damages and attorney’s fees that she allegedly
suffered because of the humiliating manner she was
dismissed. Does the MTC have jurisdiction over her
complaint. Why?

ANS. No. It appears that her alleged injury is

directly related to .the employer-employee relationship of
the parties. The complaint is barred by the “reasonable
causes connection rule," which recognizes the jurisdiction
of labor arbiters over claims for damages in connection
with termination of employment. The allegations in her
complaint unmistakably relate to the manner of her alleged
illegal dismissal. There is splitting of the cause of action.
(Kawachi et al vs. Del Quero et al., G. R. No. 163768,
March 27, 2007).

66
 KfpuWic of tfje jeijflippines

Congress of tfje pfjifippines

jflfttro jfflanfla
Xfyirtnntf} Congress
Ujiril Kegufac # m to n
Begun and held in Metro Manila, on Monday, the nineteenth day of
February, two thousand seven.

[ R e p u b l ic A c t No. 9481 ]

AN ACT STRENGTHENING THE WORKERS1 CONSTRUCTIONAL

RIGHTTO SELF-ORGANIZATION, AMENDING FOR THE PUR­
POSE PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHER­
WISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES.

Be it enacted by the Senate and House o f Representatives of the Philippines

in Congress assembled;

SECTION I. Article234ofPresidentialDecreeNo.442, as amended,

otherwise as the Labor Code ot'the Philippines, is hereby further
amended to read as follows;

“ART. 234. Requirements o f Registration.— A federation, national

anion or industry or trade union center or an independent union shall
acquire legal personality and shall be entitled to the rights and privileges
granted by law to legitimate labor organizations upon issuance o f the
certificate o f registration based on the following requirements:
 (b) The names of its officers, their addresses, the principal address
f the labor organization, the minutes of the organizational meetings
id the list o f the workers who participated in such meetings;

(c) In case the applicant is an independent union, the names of all

smembers comprising at least twenty percent (20%) of all the employ-
‘5 in the bargaining unit where it seeks to operate;

(d )If the applicant union has been in existence for one or more
sars, copies o f its annual financial reports; and

(e) Four copies o f the constitution and by-laws of the applicant

lion, minutes o f its adoption or ratification, and the list o f the mem-
;rs who participated in it"

SEC. 2 A new provision is hereby inserted into the Labor Cods as

rticle 234-A to read as follows:

“ART. 234-A. CharteringartdCreatimofaLocalChapter.— Adulyreg-

tered federation or national union may directly create a local chapter
rissuing a charter certificate indicating the establishment of the local
Lapter. The chapter shall require legal personality only for purposes of
Ing a petition for certification election from the date it was issued a
tarter certificate.

The chapter shall be entitled to all other rights and privileges of k

jitimate labor Organization only upon, the submission of the following
cutnents in addition to its charter certificate:

(a) The names o f the chapter’s officers, their addresses, and the
incipal office o f the chapter; and

(b)The chapter’s constitution and by-laws: Provided, That where

e chapter's constitution and by-laws are the same as that of the {ed­
ition or the national union, this fact shall be indicated a c c o rd in g ly .

The additional supporting requirements shall be ce^fied ^ndar

th by the secretary or treasurer of the chapter and Jttes e V its
►sident “
 SEC. 3. Article 238 o f the Labor Code is hereby amended to read
as follows:

"ART, 238. Cancellation of Registration.—The certificate o f regis­

tration of any legitimate labor organization, whether national or local,
maybe cancelled by the Bureau, after due hearing, only on the grounds
.specified in Article 239 hereof."

SEC. 4. A new provision is hereby inserted into the Labor Code as

Article 238-A to read as follows:

“ART. 238-A. Effect o f a Petition for Cancellation of Registration.— A

petition for cancellation of union registration shall not suspend the
proceedings for certification election nor shall it prevent the filing o f a
petition for certification election.

In case o f cancellation, nothingherein shall restrict the right of the

union to seek just and equitable remedies in the appropriate courts."

SEC. 5. Article 239 o f the Labor Code is amended to read as fol­

lows:

“ART. 239. Grounds for Cancellation o f Union Registration.—The fol­

lowing may constitute grounds for cancellation of union registration:

(a) Misrepresentationrfalse statement or fraud in connection w

the adoption or ratification o f the constitution and by-laws or amend­
ments thereto, the minutes o f ratification, and the list o f members who
took part in the ratification;

(^Misrepresentation, false statements or fraud in connection

Vrith the election o f officers, minutes of the election of officers, and the
list o f voters;

(c) Voluntary dissolution by the members.”

SEC. 6. A new provision, Article 239-A is inserted into the Labor

Code to read as follows:
 “ART. 239-A. Voluntary Cancellation ofRegistration.— The registra­
tion of a legitimate labor organization may be cancelled by the organiza­
tion itself: Provided, That at least two-thirds of its general membership
votes, in a meeting duly called for that purpose to dissolve the organi­
sation: Provided, further, That an application to cancel registration is
thereafter submitted by the board o f the organization, attested to by
the president thereof”

SEC, 7 A new provision, Article 242-A is hereby inserted into the

Labor Code to read as follows:

'“ART. 242-A. ReportorialRequirements.— The fbllowingare documents

required to be submitted to the Bureau by the legitimate labor organiza­
tion concerned:

(a) Its constitution and by-laws, or amendments thereto, the min­

utes o f ratification, and the list of members who took part in the ratifica­
tion o f the constitution andby-laws within thirty (3 0) days from adoption
3r ratification of the constitution and by-laws or amendments thereto;

(b)Its list of Officers, minutes o f the elections of officers, and list

rf voters within thirty (30) days from election;

(c) Its annual financial report within thirty (30) days after the
lose o f every fiscal year: and

(d) Its list o f members at least once a year or whenever required by

he Bureau.

Failure to comply with the above requirements shall not be a

round for cancellation of union registration but shall subject the err-
ng officers or members to suspension, expulsion from membership, or
ny appropriate pe nalty.”

SEC, 8. Article 245 of the Labor Code is hereby amended to read

s follows:

“ART. 245. Ineligibility of Managerial Employees to Join any Labor

Organization; Rightof Supervisory Employees.— Managerial employees are
O t e li p i b l p tn ir n n ase icf- nr f n r m - m u c — . -------- :-------...
employees shall not be eligible for membership in the collective bar-
gaining unit of the rank-and-file employees but may join, assist or form
separate collective bargaining units and/or legitimate labor organiza­
tions o f their own. The rank and file union and the supervisors' union
operating within the same establishment may join the same federation
or national union."

SEC. 9. A new provision, Article 245-A is inserted into the Labor

Code to read as follows:

“ART. 245-A. Effect o f Inclusion asMembers o f Employees Outside the

Bargaining U nit—The inclusion as union members o f employees outside
thebargainingunit shall not be a ground for the cancellation o f the regis­
tration o f the union. Said employees are automatically deemed removed
from the list o f membership o f said union.”

SEC-10. Article 256 of the Labor Code is hereby amended to read

as follows:

“ART. 256. Representation Issue in Organized Establishments.— In

organized establishments, when a verified petition questioning the ma­
jority status o f the incumbent bargainingagentis filed by any legitimate
labor organization including a national union or federation which has
already issued a charter certificate to its local chapter participating in the
certification election or a local chapter which has been issued a charter
certificate by the national union or federation before the Department
of Labor and Employment within the sixty (60)-day period before the
expiration of the collective bargaining agreement, the Med-Arbiter shall
automatically order an election by secret ballot when the verified peti­
tion is supported by the written consent o f at least twenty-five percent
(25%) of all the employees in the bargaining unit to ascertain the will of
the employees in the appropriate bargaining unit. To have a valid elec­
tion, at least a majority of all eligible voters in the unit must have cast
their votes. The labor union receiving the majority o f the valid votes cast,
shall be certified as the exclusive bargaining agent of all the workers in
the unit. When an election which provides for three or more choices re­
sults in no choice receiving a majority of the valid votes cast, a run-off
election shall be conducted between the labor unions receiving the two
highest number o f votes: Provided, That the total number of votes o f all
cast. In cases where the petition was filed by a national union or federa­
tion; it shall not be required to disclose the names o f the local chapters
officers and members.

A t the expiration of the freedom period, the employer shall con­

tinue to recognize the majority status o f the incumbent bargaining agent
where no petition for certification election is filed ”

SEC. 11. Article 257 of the Labor Code is hereby amended to read
as follows:

"ART. 257. Petitions in Unorganized Establishments.— In any estab­

lishment where there is no certified bargaining agent, a certification
election shall automatically be conducted by the Med-Arbiter Upon the
filing o f a petition by any legitimate labor organization, including a na­
tional union or federation which has already issued a charter certificate
to its local/chapter participating in the certification election or a local/
chapter which has been issued a charter certificate by the national union
or federation. In cases where the petition was filed by a national union
or federation, it shall not be required to disclose the names of the local
chapter's officers and members.”

SEC. 12. A new provision, Article 258-Ais hereby inserted into the
Labor Code to read as follows:

SEC. 12. A new provision, Article 258-A is hereby inserted into the
Labor Code to read as follows:

“ART. 258-A. Employer as Bystander.— In all cases, whether the

petition for certification election is filed by an employer or a legitimate
labor organization, the employer shall not be considered a party thereto
with a concomitant right to oppose a petition for certification election.
The employers participation in such proceedings shall be limited to: (1)
being notified or informed of petitions o f such nature; and (2) submit'
ting the list of employees during the pre-election conference should the
Med-Arbiter act favorably on the petition.”

SEC. 13. Separability Clause.— If any part, section or provision of

this Act shall be held invalid or unconstitutional, the other provisions
 SEC. 14. RepealmgClauss.— Presidential Decree No.442, as amend­
ed, otherwise known as the Labor Code of the Philippines, and all other
acts, laws, presidential issuances, rules and regulations are hereby re­
pealed, modified or amended accordingly.

SEC, 15. Effectivity Clause.— This Act shall take effect fifteen (15)
days after its publication in the Official Gazette or in at least two news­
papers o f general circulation.

This Act which is a consolidation of Senate Bill No, 2466and House

Bill No. 1351 was finally passed by the Senate and the House of Repre­
sentatives on February 20,2007.

OSCAR u^¥ABES
G^¥ABES
Secretary o f the Senate

Approved:
GLORj A MACAPAGAL-ARROYO
President o f the Philippines

Lapsed into law on M AY 25 200?

withoulh the signature o f the President,
in aceortiancc with Article VI,
Section 27 (I) of ihe Constitution.