I.

INTRODUCTION − welfare of the people is the supreme law

a. the interest of the public generally
A. Definition of Labor Law b. the means are reasonably necessary for the accomplishment of the purposes and not
widely oppressive upon individuals
− all the rules of law governing the conditions under which persons may work under the control of
other persons called employers
1) CMS Estate, Inc. v. SSS
− it is the body of rules and principles which governs the relation between labor and management in
the collective The Social Security Law was enacted pursuant to the policy of the government "to develop, establish
gradually and perfect a social security system which shall be suitable to the needs of the people
Labor Standards – prescribe the terms and conditions of employment as affecting wages or monetary
throughout the Philippines, and shall provide protection against the hazards of disability, sickness, old
benefits, hours of work, cost of living allowances, and occupational health, safety and welfare of the workers
age and death" (Sec. 2, RA 1161, as amended). It is thus clear that said enactment implements the
general welfare mandate of the Constitution and constitutes a legitimate exercise of the police power
B. Social Legislation
of the State.
− a law governing employer-employee relationship while the latter is not “at work” due to hazards
2) Fabie v. City of Manila
beyond his control arising from employment which immobilize him from working
It is very clear that the ordinance, if it be held to be reasonable, prescribes a rule in the interest of the
C. Classifications of Labor Law public of the City of Manila generally, as distinguished from the interest of individuals or of a particular
class. In determining its validity, therefore, the only questions which need be considered, are (1)
1) Maternity Children’s Hospital v. Hon. Secretary of Labor
whether its provisions are or are not reasonably necessary for the accomplishment of its purposes, and
Sec. 6, Rule II of the "Rules on the Disposition of Labor Standards cases in the Regional Offices" (supra) (2) whether they are or are not unduly oppressive upon individuals.
presently enforced
The purpose and object of the ordinance is avowedly and manifestly to protect and secure the health,
SECTION 6. Coverage of complaint inspection. — A complaint inspection shall not be limited to the
lives and property of the citizens of Manila against the ravages of fire and disease. The provision that
specific allegations or violations raised by the complainants/workers but shall be a thorough inquiry
denies permits for the construction of buildings within the city limits unless they “abut or face upon a
into and verification of the compliance by employer with existing labor standards and shall cover all
public street or alley or on a private street or alley which has been officially approved,” is in our opinion
workers similarly situated. (Emphasis supplied)
reasonably necessary to secure the end in view.
Article 129 of the Labor Code is not applicable as said article is in aid of the enforcement power of the
ii. Social Justice
Regional Director; hence, not applicable where the employee seeking to be paid underpayment of wages
is already separated from the service. His claim is purely a money claim that has to be the subject of
1) Sections 5 and 10, Art. II of the 1987 Constitution
arbitration proceedings and therefore within the original and exclusive jurisdiction of the Labor Arbiter.
Section 5. The maintenance of peace and order, the protection of life, liberty, and property, and
2) Batong Buhay Gold Mines, Inc. v. De la Serna
promotion of the general welfare are essential for the enjoyment by all the people of the blessings of
Labor standards refers to the minimum requirements prescribed by existing laws, rules and regulations democracy.
relating to wages, hours of work, cost of living allowance, etc. This is a labor standard case and is
Section 10. The State shall promote social justice in all phases of national development.
governed by Art. 128 of the Labor code as amended by E.O. 111. Exception clause in Art. 128:
(a) that the petitioner (employer) contests the findings of the labor regulations officer and raises
2) Sections 1 and 2, Art. XIII of the 1987 Constitution
issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary matters; and Section 1. The Congress shall give highest priority to the enactment of measures that protect and
(c) that such matters are not verifiable in the normal course of inspection. enhance the right of all the people to human dignity, reduce social, economic, and political inequalities,
and remove cultural inequities by equitably diffusing wealth and political power for the common good.
The enactment of RA 6715 subjected the power of the Regional Director to adjudicate employee money
To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its
claims. RA 7730 can be considered a curative statute to reinforce the conclusion that the Regional
increments.
Director has jurisdiction over the present labor standards case. Well-settled is the rule that jurisdiction
over the subject matter is determined by the law in force when the action was commenced, unless a Section 2. The promotion of social justice shall include the commitment to create economic
subsequent statute provides for its retroactive application, as when it is a curative legislation. opportunities based on freedom of initiative and self-reliance.

D. Legal Bases 3) Calalang v. Williams

i. Police Power The promotion of social justice, however, is to be achieved not through a mistaken sympathy towards
− enactment of labor and social laws can be justified under the exercise of the State’s inherent any given group. Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but
police power vested in the legislature the humanization of laws and the equalization of social and economic forces by the State so that justice
in its rational and objectively secular conception may at least be approximated. It is the promotion of
the welfare of all the people, the adoption by the Government of measures calculated to insure
economic stability of all the competent elements of society, through the maintenance of a proper
economic and social equilibrium in the interrelations of the members of the community, constitutionally,
through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the time-honored principle of salus populi est
suprema lex.
4) Terminal Facilities and Services Corp. v. NLRC
Wage Order No.6 was issued by the then President Marcos to increase the statutory minimum wage
rates and cost of living allowances of the employee in the private sector.
Article XIII, Section 3 of the Constitution states that “the State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full employment and equality of employment
opportunities for all.”
5) Philippine Telegraph and Telephone Corp. v. NLRC
The SC held that imposition of such supreme penalty would be very harsh and disproportionate to the
infraction committed by Toribiano. Considering that this is his first offense after having faithfully
iii.
rendered 7 long years of satisfactory service. While an employer has its own interests to protect and,
pursuant thereto, it may terminate an employee for a just cause, such prerogative to dismiss or lay off
an employee must not be abusively exercised. Such power should be tempered with compassion and
understanding. The employer should bear in mind that, in the execution of said prerogative, what is at
stake is not only the employee's position but his livelihood as well.
This ruling is only in keeping with the constitutional mandate for the State to afford full protection to
labor such that, when conflicting interests of labor and capital are to be weighed on the scales of social
justice, the heavier influence of the latter should be counterbalanced by the sympathy and compassion
the law must accord the underprivileged worker.
6) Manila Water Company v. Del Rosario
As a general rule, an employee who has been dismissed for any of the just causes enumerated under
Article 282 of the Labor Code is not entitled to a separation pay. Section 7, Rule I, Book VI of the
Omnibus Rules implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of an
employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee
as an act of “social justice” or on “equitable grounds." In both instances, it is required that the dismissal
(1) was not for serious misconduct; and (2) did not reflect on the moral character of the employee.
Considering that Del Rosario rendered 21 years of service to the company will not save the day for him.
Citing the case Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission:
If an employee’s length of service is to be regarded as a justification for moderating the penalty of
dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of undesirables.
7) PLDT v. NLRC
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. 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.
Rewarding rather than punishing the erring employee for his offense would lead to - If an 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 similar offense in his next employment because he thinks he can expect a like
leniency. This kind of 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.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed
by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.
Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those who invoke social justice may do so only if their
hands are clean and their motives blameless and not simply because they happen to be poor.
Protection of Labor Clause
1) Section 3, Art. XIII of the 1987 Constitution
Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized,
and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to
its just share in the fruits of production and the right of enterprises to reasonable returns to
investments, and to expansion and growth.
2) Philippine Movie Pictures Workers’ Association v. Premiere Productions, Inc.
* The right to labor is a constitutional as well as a statutory right. Every man has a natural right to the
fruits of his own industry. A man who has been employed to undertake certain labor and has put into
it his time and effort is entitled to be protected. The right of a person to his labor is deemed to be
property within the meaning of constitutional guarantees. That is his means of livelihood. He cannot be
deprived of his labor or work without due process of law
An ocular inspection of the establishment or premises involved is proper if the court finds it necessary,
but such is authorized only to help the court in clearing a doubt, reaching a conclusion, or finding the
truth. But it is not the main trial nor should it exclude the presentation of other evidence which the
parties may deem necessary to establish their case. It is merely an auxiliary remedy the law affords
the parties or the court to reach an enlightened determination of the case.
iv. Doctrine of Incorporation Lost of trust and confidence is a just cause for dismissal under Art. 282 of the Labor Code. However,
the petitioner failed to satisfy the two conditions to properly invoke the said ground, to wit:
1) Section 2, Art. II of the 1987 Constitution
Employer must show that the employee concerned holds a position of trust and confidence.
Section 2. The Philippines renounces war as an instrument of national policy, adopts the generally Jurisprudence provides for two positions of trust:
accepted principles of international law as part of the law of the land and adheres to the policy of peace, 1) managerial employees or those who by the nature of their position are entrusted with confidential
equality, justice, freedom, cooperation, and amity with all nations. and delicate matters and from whom greater fidelity to duty is correspondingly expected
i. International Convention 2) Cashiers, auditors, property custodians, or those in the normal routine exercise of their functions
ii. International Customs regularly handle significant amounts of the employer’s money or property
iii. General Principles of Law Recognized by Civil Nations
iv. Judicial Decisions Employer must establish the existence of an act justifying the loss of trust and confidence. To be valid
cause for dismissal, the act that betrays the employer’s trust must be real and founded on clearly
E. Labor and the Constitution established facts and the employee’s breach of the trust must be willful, it was done intentionally,
knowingly, and purposely without justifiable cause. Moreover, with respect to rank and file personnel,
i. Due Process of Law loss of trust and confidence as ground for valid dismissal, requires proof of involvement in the alleged
events in question, and that mere uncorroborated assertions and accusations by the employer will not
Due process is not a mere formality that may be dispensed with. It is a constitutional safeguard of the be sufficient.
highest order. Dismissal without conducting a formal investigation is arbitrary and unwarranted,
oppressive and abusive. The twin requirements of notice and hearing constitute essential elements of due The right of an employee to dismiss an employee on the ground of loss of trust and confidence must
process which cannot be dispensed without running afoul of the due process requirement of the not be exercised arbitrarily and without just cause. Unsupported by sufficient proof, loss of confidence
Constitution. without basis and may not be successfully invoked as a ground for dismissal as it is subject to abuse
because of its subjective nature. It must be founded on clearly established facts sufficient to warrant
1) Section 1, Art. III of the 1987 Constitution
the employees separation from work. Thus, the breach of trust or loss of confidence in this case not
borne by clearly established facts, dismissal on the said ground may not be invoked.
Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.
As to Issue 2: Supreme court reiterated, as found by the LA, that petitioner did not present any evidence
that respondent was given opportunity to explain his side considering that he was implicated for theft.
Equal Protection of the Law – no person or class of persons shall be denied the same protection of
the law which is enjoyed by other classes of persons under like circumstances, in their lives, in their
(1) The first written notice to be served on the employees should contain the specific causes or
liberty, and in their pursuit of happiness
grounds for termination against them, and a directive that the employees are given the opportunity
to submit their written explanation within a reasonable period. "Reasonable opportunity" under the
* aliens cannot invoke denial of equal protection
Omnibus Rules means every kind of assistance that management must accord to the employees to
2) Noblado v. Alfonso enable them to prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an opportunity to study the
For a dismissal to be valid, the.rule is that the employer must comply with both the substantive and accusation against them, consult a union official or lawyer, gather data and evidence, and decide on
the procedural due process requirements. Substantive due process requires that the dismissal must be the defenses they will raise against the complaint. Moreover, in order to enable the employees to
pursuant to either a just or an authorized cause under Articles 282, 283 or 284 of the Labor Code. intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
On the other hand, procedural due process in dismissal cases consists of the twin requirements of notice description of the charge will not suffice. Lastly, the notice should specifically mention which company
and hearing. rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against
the employees.
Also worth stressing is the fact that in termination cases, the employer bears the burden of proving
that the dismissal of the employee is for a just or an authorized cause. Here, respondent miserably (2) After serving the first notice, the employers should schedule and conduct a hearing or conference
failed to discharge her burden of proving that petitioners' dismissal was based on a just cause. wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence
3) Distribution & Control Products, Inc. v. Santos presented against them by the management. During the hearing or conference, the employees are
given the chance to defend themselves personally, with the assistance of a representative or counsel
As to issue no. 1: No. Our constitution, statutes, and jurisprudence uniformly guarantee to every
of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity
employee or worker tenurial security. This means that an employer shall not dismiss an employee
to come to an amicable settlement.
except for a just or authorized cause only after due process is observed. The Petitioner raised that the
termination of the respondent was based on their loss of trust and confidence and hiring him would be (3) After determining that termination of employment is justified, the employers shall serve the
inimical to them. employees a written notice of termination indicating that: (1) all circumstances involving the charge
 against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.
ii. Right to Assemble
1) Section 4, Art. III of the 1987 Constitution
Section 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or
the right of the people peaceably to assemble and petition the government for redress of grievances.
2) Phimco Industries, Inc. v. Phimco Industries Labor Association
To strike is to withhold or to stop work. The work stoppage may be accompanied by picketing by the
striking employees outside of the company compound. While a strike focuses on stoppage of work,
picketing focuses on publicizing the labor dispute and its incidents to inform the public of what is
happening in the company struck against. A picket simply means to march to and from the employer's
premises, usually accompanied by the display of placards and other signs making known the facts
involved in a labor dispute. It is a strike activity separate and different from the actual stoppage of
work. Protected picketing does not include obstructing exits and entrances to the company premises.
While the picket was moving, the movement was in circles and very close to the gates and it prevented
non-striking workers and vehicles from coming in and getting out. There were also blocking benches
and obstructions.
Article 264(e) of the Labor Code tells us that picketing carried on with violence, coercion or intimidation
is unlawful.
To meet the requirements of due process in the dismissal of an employee, an employer must furnish
him or her with two (2) written notices: (1) a written notice specifying the grounds for termination and
giving the employee a reasonable opportunity to explain his side and (2) another written notice
indicating that, upon due consideration of all circumstances, grounds have been established to justify
the employer's decision to dismiss the employee.
3) Davao City Water District v. Aranjuez
Section 6. Permissible Concerted Mass Action.– A concerted activity or mass action done outside of
government office hours shall not be deemed a prohibited concerted activity or mass action within the
contemplation of this omnibus rules provided the same shall not occasion or result in the disruption of
work or service.
Notably, however, a prohibited concerted mass action is defined not in Sec. 6 but in Sec. 5:
Section 5. Definition of Prohibited Concerted Mass Action.– As used in this Omnibus Rules, the phrase
“prohibited concerted activity or mass action” shall be understood to refer to any collective activity
undertaken by government employees, by themselves or through their employees organizations, with
the intent of effecting work stoppage or service disruption in order to realize their demands of force
concession, economic or otherwise, from their respective agencies or the government. It shall include
mass leaves, walkouts, pickets and acts of similar nature.
It is correct to conclude that those who enter government service are subjected to a different degree
of limitation on their freedom to speak their mind; however, it is not tantamount to the relinquishment
of their constitutional right of expression otherwise enjoyed by citizens just by reason of their
employment. Unarguably, a citizen who accepts public employment “must accept certain limitations on
his or her freedom.” But there are some rights and freedoms so fundamental to liberty that they cannot
be bargained away in a contract for public employment. It is the Court’s responsibility to ensure that
citizens are not deprived of these fundamental rights by virtue of working for the government.
iii. Right to Organization
1) Section 8, Art. III of the 1987 Constitution
Section 8. The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.
* government employees have the rights to organize and negotiate under the Constitution, but they
cannot call or join a strike arising from dissatisfaction on terms, and conditions of employment
iv. Non-impairment of Contracts
1) Section 10, Art. III of the 1987 Constitution
Section 10. No law impairing the obligation of contracts shall be passed.
* there is impairment when the law deprives a party to the contract of the benefits provided therein or
changes the terms of the contract by imposing new conditions
* the obligation of contracts is subordinated to the valid exercise of police power.
2) Anucension v. National Labor Union
It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not
absolute and unqualified. The prohibition is general, affording a broad outline and requiring construction
to fill in the details.
All contracts made with reference to any matter that is subject to regulation under the police power
must be understood as made in reference to the possible exercise of that power. Otherwise, important
and valuable reforms may be precluded by the simple device of entering into contracts for the purpose
of doing that which otherwise may be prohibited. The policy of protecting contracts against impairment
presupposes the maintenance of a government by virtue of which contractual relations are worthwhile
- a government which retains adequate authority to secure the peace and good order of society. The
contract clause of the Constitution must, therefore, be not only in harmony with, but also in
subordination to, in appropriate instances, the reserved power of the state to safeguard the vital
interests of the people.
Legislation impairing the obligation of contracts can be sustained when it is enacted for the promotion
of the general good of the people, and when the means adopted to secure that end are reasonable.
Both the end sought and the means adopted must be legitimate, i.e., within the scope of the reserved
power of the state construed in harmony with the constitutional limitation of that power.
3) Serrano v. Gallant Maritime Services, Inc.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however, as to laws already in
existence, their provisions are read into contracts and deemed a part thereof. Thus, the non-impairment
clause under Section 10, Article II is limited in application to laws about to be enacted that would in
any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing
the intention of the parties thereto.
R.A. No. 8042 was enacted in the exercise of the police power of the State to regulate a business,
profession or calling, particularly the recruitment and deployment of OFWs, with the noble end in view
of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.61 Police
 power legislations adopted by the State to promote the health, morals, peace, education, good order, Note that for an employee to be validly dismissed on this ground, the employer's orders, regulations,
safety, and general welfare of the people are generally applicable not only to future contracts but even or instructions must be: (1) reasonable and lawful, (2) sufficiently known to the employee, and (3)
to those already in existence, for all private contracts must yield to the superior and legitimate in connection with the duties which the employee has been engaged to discharge."
measures taken by the State to promote public welfare.
b. Peckson v. Robinsons Supermarket Corporation
v. Right against Involuntary Servitude
Under the doctrine of management prerogative, every employer has the inherent right to regulate,
1) Section 18, Art. III of the 1987 Constitution according to his own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, the time, place and manner of work, work supervision, transfer of
Section 18. No person shall be detained solely by reason of his political beliefs and aspirations. employees, lay-off of workers, and discipline, dismissal, and recall of employees. The only limitations
No involuntary servitude in any form shall exist except as a punishment for a crime whereof the party to the exercise of this prerogative are those imposed by labor laws and the principles of equity and
shall have been duly convicted. substantial justice. The Labor Code does not excuse employees from complying with valid company
policies and reasonable regulations for their governance and guidance.
vi. Protection to Employer
− right to self-organization Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a
− right to collective bargaining transfer is a movement from one position to another of equivalent rank, level or salary without break
− right to security of tenure in the service or a lateral movement from one position to another of equivalent rank or salary; (b)
− right to just and humane conditions of work the employer has the inherent right to transfer or reassign an employee for legitimate business
− right to collective negotiations purposes; (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is
− right to peaceful concerted activities effected as a form of punishment or is a demotion without sufficient cause; (d) the employer must
− right to strike be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee.
− right to a living wage For a transfer not to be considered a constructive dismissal, the employer must be able to show that
− right to participate in policy and decision-making processes such transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a
− right to just share in the fruits of production demotion in rank or a diminution of his salaries, privileges and other benefits.

1) Management Prerogative c. Imasen Philippines Manufacturing Corporation v. Alcon

− the right to hire or dismiss its employees only for just or authorized causes provided by law
The just causes for dismissing an employee are provided under Article 282 (now Article 296) of the
− such management right should be exercised in good faith because an abuse of this right is
destructive of industrial peace Labor Code. Under Article 282(a), serious misconduct by the employee justifies the employer in
terminating his or her employment.
a. St. Luke’s Medical Center, Inc. v. Sanchez
For misconduct or improper behavior to be a just cause for dismissal, the following elements must
concur: (a) the misconduct must be serious; (b) it must relate to the performance of the employee’s
The right of an employer to regulate all aspects of employment, aptly called "management
duties showing that the employee has become unfit to continue working for the employer; and (c) it
prerogative," gives employers the freedom to regulate, according to their discretion and best
must have been performed with wrongful intent.
judgment, all aspects of employment, including work assignment, working methods, processes to be
followed, working regulations, transfer of employees, work supervision, lay-off of workers and the
Dismissal situations (on the ground of serious misconduct) involving sexual acts, particularly sexual
discipline, dismissal and recall of workers. In this light, courts often decline to interfere in legitimate
intercourse committed by employees inside company premises and during workhours, are not usual
business decisions of employers. In fact, labor laws discourage interference in employers' judgment
violations and are not found in abundance under jurisprudence. Sexual acts and intimacies between
concerning the conduct of their business.
two consenting adults belong, as a principled ideal, to the realm of purely private relations. Whether
aroused by lust or inflamed by sincere affection, sexual acts should be carried out at such place, time
Among the employer's management prerogatives is the right to prescribe reasonable rules and
and circumstance that, by the generally accepted norms of conduct, will not offend public decency
regulations necessary or proper for the conduct of its business or concern, to provide certain
disciplinary measures to implement said rules and to assure that the same would be complied with. nor disturb the generally held or accepted social morals. Under these parameters, sexual acts
At the same time, the employee has the corollary duty to obey all reasonable rules, orders, and between two consenting adults do not have a place in the work environment.
instructions of the employer; and willful or intentional disobedience thereto, as a general rule, justifies
2) Limitations of Management Prerogative
termination of the contract of service and the dismissal of the employee. Article 296 (formerly Article
282) of the Labor Code provides:
a. Goya, Inc. v. Goya, Inc. Employees Union
Article 296. Termination by Employer. - An employer may terminate an employment for any of the
following causes: ***Definition: Management prerogative refers to the right of the employer to regulate all aspects of
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employment, such as the freedom to prescribe work assignments, working methods, processes to be
employer or his representative in connection with his work; followed, regulation regarding transfer of employees, supervision of their work, lay-off and discipline,
and dismissal and recall of work, presupposing the existence of employer-employee relationship.
 ***Definition: A collective bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all other terms
and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem convenient provided
these are not contrary to law, morals, good customs, public order or public policy. Thus, where the
CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is
mandated by the express policy of the law.
3)
This management prerogative of contracting out services, however, is not without limitation. In
contracting out services, the management must be motivated by good faith and the contracting out a.
should not be resorted to circumvent the law or must not have been the result of malicious arbitrary
actions.
As repeatedly held, the exercise of management prerogative is not unlimited; it is subject to the
limitations found in law, collective bargaining agreement or the general principles of fair play and
justice.
To reiterate, the CBA is the norm of conduct between the parties and compliance therewith is
mandated by the express policy of the law.
b. Supreme Steel Corporation v. Nagkakaisang Manggagawa ng Supreme Independent
Union
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and
compliance therewith is mandated by the express policy of the law. However, the exercise of
management prerogative is not unlimited. Managerial prerogatives are subject to limitations provided
by law, collective bargaining agreements, and general principles of fair play and justice. The CBA is
the norm of conduct between the parties and, as previously stated, compliance therewith is mandated
by the express policy of the law.
c. PLDT v. Paguio
There has been no change of cause of action from illegal demotion to 'illegal transfer. Illegal demotion
is a type of illegal transfer. Moreover, it is familiar and fundamental doctrine that it is not the title of
the action but the allegations in the pleading that determines the nature of the action.
As a rule, an employer is free to regulate, according to his own discretion and judgment, all aspects
of employment, including the transfer of employees. It is the employer's prerogative, based on its b.
assessment and perception of its employees' qualifications, aptitudes, and competence, to deploy its
employees in the various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company. An employee's right to security of tenure does not give him
such a vested right in his position as would deprive the company of its prerogative to change his
assignment or transfer him where he will be most useful.
HOWEVER (exception to GR), there are limits to the management prerogative. The prerogative
accorded management should not defeat the very purpose for which our labor laws exist: to balance
the conflicting interests of labor and management. By its very nature, management prerogative must
be exercised always with the principles of fair play and justice. In particular, the employer must be c.
able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. The
employer bears the burden of proving that the transfer of the employee has complied with the
foregoing test.
d. Royal Plant Workers Union v. Coca-Cola Bottlers Philippines
The Court has held that management is free to regulate, according to its own discretion and judgment,
all aspects of employment, including hiring, work assignments, working methods, time, place, and
manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers, and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be exercised in good faith
and with due regard to the rights of labor.
Rules on Marriage and Non-compete Clause
Philippine Telegraph and Telephone Company v. NLRC
Article 136 of the Labor Code states, “Stipulation against marriage – It shall be unlawful for an
employer to require as a condition of employment or continuation of employment that a woman shall
not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee
shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of marriage.”
The provision above does not apply to women employed in ordinary occupations only but in the whole
text, speaks of non-discrimination on the employment of women.
Petitioner’s policy of not accepting or considering as disqualified from work any women worker who
contracts marriage runs afoul of the test of, and the right against, discrimination afforded all women
workers by our labor laws (Article 130-138) and by no less than the Constitution (Article II, Section
14; Article XIII, Section 3; Article XIII, Section 14).
It is logical to presume that, in the absence of said standards or regulations which are as yet to be
established, the policy against marriage is patently illegal.
However, as she had undeniably committed an act of dishonesty, the three-month suspension shall
be upheld. Thus, her entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time her actual reinstatement, shall be reduced by deducting
therefrom the amount corresponding to her three months suspension.
Such policy likewise assaults good morals and public policy, tending as it does to deprive a woman
of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an
intangible and inalienable right.
Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc.
The prohibition against personal or marital relationships with employees of competitor companies
upon Glaxo’s employees is reasonable under the circumstances because relationships of that nature
might compromise the interests of the company.
The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection
clause are addressed only to the state or those acting under color of its authority.
Tiu v. Platinum Plans Philippines, Inc.
A non-involvement clause is not necessarily void for being in restraint of trade as long as there are
reasonable limitations as to time, trade, and place.
 In this case, the non-involvement clause has a time limit: two years from the time Tiu’s employment
with respondent ends. It is also limited as to trade, since it only prohibits Tiu from engaging in any
pre-need business akin to respondent’s.
Non-involvement clause not contrary to public welfare and not greater than is necessary to afford a
fair and reasonable protection to respondent.
Article 1306 of the Civil Code provides that parties to a contract may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
Article 1159 of the same Code also provides that obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good faith. Courts cannot stipulate
for the parties nor amend their agreement where the same does not contravene law, morals, good
customs, public order or public policy, for to do so would be to alter the real intent of the parties, and
would run contrary to the function of the courts to give force and effect thereto.15 Not being contrary
to public policy, the non-involvement clause, which petitioner and respondent freely agreed upon,
has the force of law between them, and thus, should be complied with in good faith.
d. Century Properties, Inc. v. Babiano
Hence, to allow Babiano to freely move to direct competitors during and soon after his employment
with CPI would make the latter's trade secrets vulnerable to exposure, especially in a highly
competitive marketing environment. As such, it is only reasonable that CPI and Babiano agree on
such stipulation in the latter's employment contract in order to afford a fair and reasonable protection
to CPI. Indubitably, obligations arising from contracts, including employment contracts, have the
force of law between the contracting parties and should be complied with in good faith. Corollary
thereto, parties are bound by the stipulations, clauses, terms, and conditions they have agreed to,
provided that these stipulations, clauses, terms, and conditions are not contrary to law, morals, public
order or public policy, as in this case.
From the foregoing, it is evidently clear that when he sought and eventually accepted the said position
with First Global, he was still employed by CPI as he has not formally resigned at that time.
Irrefragably, this is a glaring violation of the "Confidentiality of Documents and Non-Compete Clause"
in his employment contract with CPI, thus, justifying the forfeiture of his unpaid commissions.
F. Company Practice and Company Policy
1) Central Azucarera De Tarlac v. Central Azucarera De Tarlac Labor Union
The practice of petitioner in giving 13th-month pay based on the employees’ gross annual earnings which
included the basic monthly salary, premium pay for work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost 30 years and has ripened into a company policy or
practice cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given
to employees cannot be taken back or reduced unilaterally by the employer because the benefit has
become part of the employment contract, written or unwritten. The rule against diminution of benefits
applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a
practice over a long period of time and that the practice is consistent and deliberate. Nevertheless, the
rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult
question of law. But even in cases of error, it should be shown that the correction is done soon after
discovery of the error.
2) Metropolitan Bank and Trust Co. v. NLRC
To be considered a company practice, the giving of the benefits should have been done over a long period
of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on
long practice requires an indubitable showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law requiring payment thereof.
In other words, for over a decade, Metrobank has consistently, deliberately and voluntarily granted
improved benefits to its officers, after the signing of each CBA with its rank and file employees, retroactive
to January 1st of the same year as the grant of improved benefits and without the condition that the
officers should remain employees as of a certain date. This undeniably indicates a unilateral and voluntary
act on Metrobank’s part, to give said benefits to its officers, knowing that such act was not required by
law or the company retirement plan.
Court held that the grant of these benefits has ripened into company practice or policy which cannot be
peremptorily withdrawn. The common denominator in these cases appears to be the regularity and
deliberateness of the grant of benefits over a significant period of time. This constitutes voluntary
employer practice which cannot be unilaterally withdrawn or diminished by the employer without violating
the spirit and intent of Art. 100 of the Labor Code, to wit:
Art. 100. Prohibition against elimination or diminution of benefits.– Nothing in this Book shall be construed
to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time
of promulgation of this Code.
3) China Banking Corp. v. Borromeo
It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or
contrary to law, generally binding and valid on the parties and must be complied with until finally revised
or amended unilaterally or preferably through negotiation or by competent authority. Moreover,
management has the prerogative to discipline its employees and to impose appropriate penalties on
erring workers pursuant to company rules and regulations. With more reason should these truisms apply
to the respondent, who, by reason of his position, was required to act judiciously and to exercise his
authority in harmony with company policies.
His position the Assistant Vice- President, Branch Banking Group for the Mindanao area of the petitioner
Bank. His position carried authority for the exercise of independent judgment and discretion,
characteristic of sensitive posts in corporate hierarchy. As such, he was, as earlier intimated, required to
act judiciously and to exercise his authority in harmony with company policies.
II. PRELIMINARY TITLE
A. Articles 1-11 of the Labor Code
Article 1. Name of Decree. This Decree shall be known as the "Labor Code of the Philippines".
Article 2. Date of effectivity. This Code shall take effect six (6) months after its promulgation.
Article 3. Declaration of basic policy. The State shall afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations
between workers and employers. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work.
* protection to labor is not a license to condone wrongdoings
* where both parties have violated the law, neither party is entitled to protection
 * the liberal construction in favor of labor must not sacrifice the fundamental principles of due process
for the protection of the rich and the poor in order to attain proper justice
* protection to labor does not mean that every labor dispute will be decided in favor of the
workers. The law also recognizes the employer’s rights which are entitled to respect and
enforcement in the interest of fair play
Article 4. Construction in favor of labor. All doubts in the implementation and interpretation of the
provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.
* the worker’s welfare should be the primordial and paramount consideration
* those who have less in life should have more in law
B. Article 1700 and 1702 of the NCC
Article 1700. The relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages,
working conditions, hours of labor and similar subjects.
Article 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer.
C. Declaration of Basic Policy
1) Philippine Airlines, Inc. v. Santos
It is a fact that the sympathy of the Court is on the side of the laboring classes, not only because the
Constitution imposes such sympathy, but because of the one-sided relation between labor and capital.
The constitutional mandate for the promotion of labor is as explicit as it is demanding. The purpose is to
place the workingman on an equal plane with management — with all its power and influence — in
negotiating for the advancement of his interests and the defense of his rights. Under the policy of social
justice, the law bends over backward to accommodate the interests of the working class on the humane
justification that those with less privileges in life should have more privileges in law.
It is clear that the grievance was filed with Mr. Abad's secretary during his absence. Under Section 2 of
the CBA aforequoted, the division head shall act on the grievance within five (5) days from the date of
presentation thereof, otherwise "the grievance must be resolved in favor of the aggrieved party." It is
not disputed that the grievants knew that division head Reynaldo Abad was then "on leave" when they
filed their grievance which was received by Abad's secretary. This knowledge, however, should not
prevent the application of the CBA.
2) Agabon v. NLRC
To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins
the employer to give the employee the opportunity to be heard and to defend himself.
Article 282 of the Labor Code enumerates the just causes for termination by the employer:
(a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
the latter's representative in connection with the employee's work;
(b) gross and habitual neglect by the employee of his duties;
(c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly
authorized representative;
(d) commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and
(e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is
a form of neglect of duty, hence, a just cause for termination of employment by the employer.15 For a
valid finding of abandonment, these two factors should be present: (1) the failure to report for work or
absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more intention to work. The intent to discontinue
the employment must be shown by clear proof that it was deliberate and unjustified.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee
before terminating the employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284,
the employer must give the employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e.,
the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e.,
the manner of dismissal. Breaches of these due process requirements violate the Labor Code. Therefore
statutory due process should be differentiated from failure to comply with constitutional due process.
The dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate
the dismissal. However, the employer should be held liable for non-compliance with the procedural
requirements of due process.
The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow
the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an
indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule.
An employer is liable to pay indemnity in the form of nominal damages to an employee who has been
dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due
process.
D. Construction in Favor of Labor
1) Wesleyan University Phils. v. Wesleyan university Phils. Faculty and Staff Association
When the provision of the CBA is clear, leaving no doubt on the intention of the parties, the literal meaning
of the stipulation shall govem. However, if there is doubt in its interpretation, it should be resolved in
favor of labor, as this is mandated by no less than the Constitution.
2) San Miguel Foods, Inc. v. San Miguel Corporation Employees Union
Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of the
following unfair labor practices:
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment in
order to encourage or discourage membership in any labor organization. x x x
(i)To violate a collective bargaining agreement.
This is a complaint for unfair labor practices pursuant to Art. 248. For Labor Arbiter and NLRC to exercise
appellate jurisdiction, the allegations in the complaint should show that there was: (1) gross violation of
the CBA; and (2) violation pertains to the economic provisions of CBA.
 However the grievance machinery provision is not an economic provision, the second element not being When an employee accepts a promotion to a managerial position or to an office requiring full trust and
present, hence LA has no jurisdiction to this matter. confidence, he/she gives up some of the rigid guaranties available to ordinary workers.

Article 4 of the Labor Code provides that "All doubts in the implementation and interpretation of the Sim is a managerial employee. Loss of trust and confidence is a valid ground for her dismissal. The
provisions of this Code, including implementing rules and regulations, shall be resolved in favor of labor." mere existence of a basis for believing that a managerial employee has breached the trust of the
Since the seniority rule in the promotion of employees has a bearing on salary and benefits, it may, employer would suffice for his/her dismissal.
following a liberal construction of Article 261 of the Labor Code, be considered an "economic provision"
of the CBA. 2) Santiago v. CF Sharp Crew Management

E. Rule Making Power The perfection of the employment contract: occurred when petitioner and respondent agreed on the
object and the cause, as well as the rest of the terms and conditions therein
1) Pagpalain Haulers, Inc. v. Trajano
The commencement of the employer-employee relationship: would have taken place had petitioner
Pagpalain cannot contend that DPO No. 9 is an invalid exercise of rule-making power by the Secretary of been actually deployed from the point of hire.
Labor. For an administrative order to be valid, it must:
1. Be issued on the authority of law Doctrine to remember: even before the start of any employer-employee relationship, contemporaneous
2. Must not be contrary to the law and Constitution with the perfection of the employment contract was the birth of certain rights and obligations, the
breach of which may give rise to a cause of action against the erring party.
DPO No. 9 has been issued on authority of law. Under the law, the Secretary is authorized to promulgate
rules and regulations to implement the Labor Code. Specifically, Article 5 of the Labor Code provides that If the breach was made by Paul, then consequently, he would also be liable for damages
[t]he Department of Labor and other government agencies charged with the administration and
CF Sharp’s act of preventing Paul from boarding MSV is a breach of contract - CF reneged on its
enforcement of this Code or any of its parts shall promulgate the necessary implementing rules and
obligation to deploy petitioner - so CF must answer for the actual damages suffered by Paul.
regulations. Consonant with this article, the Secretary of Labor and Employment promulgated the
Omnibus Rules Implementing the Labor Code. By virtue of this self-same authority, the Secretary
2) Sameer Overseas Placement Agency, Inc. v. Cabiles
amended the above-mentioned omnibus rules by issuing Department Order No. 9, Series of 1997.
The provisions of the Constitution as well as the Labor Code which afford protection to labor apply to
Moreover, Pagpalain has failed to show that Department Order No. 9 is contrary to the law or the
Filipino employees whether working within the Philippines or abroad. Moreover, the principle of lex loci
Constitution. At the risk of being repetitious, the Labor Code does not require a local or chapter to submit
contractus (the law of the place where the contract is made) governs in this jurisdiction. In the present
books of account in order for it to be registered as a legitimate labor organization. There is, thus, no
case, it is not disputed that the Contract of Employment entered into by and between petitioners and
inconsistency between the Labor Code and Department Order No. 9. Neither has Pagpalain shown that
private respondent was executed here in the Philippines with the approval of the Philippine Overseas
said order contravenes any provision of the Constitution.
Employment Administration (POEA). Hence, the Labor Code together with its implementing rules and
F. Applicability regulations and other laws affecting labor apply in this case.68 (Emphasis supplied, citations omitted)

i. Overseas Workers By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause
and after compliance with procedural due process requirements.
1) Sim v. NLRC
Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:
Art. 282. Termination by employer. An employer may terminate an employment for any of the
Art. 217 of the Labor Code – NLRC has jurisdiction over:
following causes:
1. Unfair labor practice cases
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
2. Termination disputes
or representative in connection with his work;
3. Cases involving wage, rates of pay, hours of work, and other terms and conditions of employment
(b) Gross and habitual neglect by the employee of his duties;
(when accompanied with a claim for reinstatement)
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
4. Claims for actual moral, exemplary and other forms of damages arising from the employer-
authorized representative;
employee relations
(d) Commission of a crime or offense by the employee against the person of his employer or any
5. Cases arising from any violation of Art.264 of this Code, including questions involving the legality
of strikes and lockouts immediate member of his family or his duly authorized representatives; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all (e) Other causes analogous to the foregoing.
other claims, arising from employer-employee relations, including those of persons in domestic
The burden of proving that there is just cause for termination is on the employer. "The employer must
or household service, involving an amount exceeding P5,000 regardless of whether accompanied
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause." Failure
with a claim for reinstatement.
to show that there was valid or just cause for termination would necessarily mean that the dismissal
was illegal.
Sec. 10 of RA 8042 – NLRC has jurisdiction over claims arising out of an employer-employee relationship
by virtue of any law or contract involving Filipino workers for overseas deployment
 To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the
employer has set standards of conduct and workmanship against which the employee will be judged;
2) the standards of conduct and workmanship must have been communicated to the employee; and 3)
the communication was made at a reasonable time prior to the employee’s performance assessment.
A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75 The
employer is required to give the charged employee at least two written notices before termination.76
One of the written notices must inform the employee of the particular acts that may cause his or her
dismissal.77 The other notice must "[inform] the employee of the employer’s decision."78 Aside from
the notice requirement, the employee must also be given "an opportunity to be heard."
ii. Government Employees
1) Article IX(b), Section 2(1) of the 1987 Constitution
Section 2. The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters.
2) NASECO v. NLRC
The 1987 Constitution provides that: The Civil Service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including government-owned or controlled
corporations with original charters.
At first glance, it would appear as if NASECO is subject to the Civil Service law it being a government
corporation. However, NASECO has no original charter because it is only a subsidiary corporation of
NIDC which is a subsidiary corporation of the PNB. It has no original charter and does not fall under
the said provision of the 1987 Constitution. Thus, it is governed by the Labor Code and not the Civil
Service Law.
3) Department of Health v. NLRC
Maintained to this day as a public medical center and health facility attached to the Department of
Health, the DJRMH exercises strictly governmental functions relating to the management and control
of the dreaded communicable Hansen's disease, commonly known as leprosy. As it is clearly an agency
of the Government, the DJRMH falls well within the scope and/or coverage of the Civil Service Law in
accordance with paragraph 1., Section 2, Article IX B, 1987 Constitution and the provisions of Executive
Order No. 292, otherwise known as the Administrative Code of 1987 and Presidential Decree No. 807,
otherwise known as the Civil Service Decree of the Philippines.
As the central personnel agency of the Government, the Civil Service Commission administers the Civil
Service Law. It is, therefore, the single arbiter of all contests relating to the civil service.6 The discharge
of this particular function was formerly lodged in one of its offices, the Merit Systems Protection Board
(MSPB) which was vested with the power, among others, "to hear and decide on appeal administrative
cases involving officials and employees of the civil service and its decision shall be final except those
involving dismissal or separation from the service which may be appealed to the Commission"
Worthy to note in this connection is the fact that the Labor Code itself provides that "the terms and
conditions of employment of government employees shall be governed by the Civil Service Law, rules
and regulations".
Conformably to the foregoing, it is, indeed, the Civil Service Commission which has jurisdiction over
the present controversy. Its decisions are subject to review by the Supreme Court.
iii. Employees of International Organizations
1) International Catholic Migration Commission v. Calleja
ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights, which
are guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3 (supra),
of the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code, 16 relied on by
the BLR Director and by Kapisanan.
"International organization" is generally used to describe an organization set up by agreement between
two or more states. Under contemporary international law, such organizations are endowed with some
degree of international legal personality such that they are capable of exercising specific rights, duties
and powers. Meanwhile, "Specialized agencies" are international organizations having functions in
particular fields.
The reason for such immunity is the assurance of unimpeded performance of their functions by the
agencies concerned. The grant of immunity from local jurisdiction to ICMC and IRRI is clearly
necessitated by their international character and respective purposes. The objective is to avoid the
danger of partiality and interference by the host country in their internal workings. The exercise of
jurisdiction by the Department of Labor in these instances would defeat the very purpose of immunity,
which is to shield the affairs of international organizations, in accordance with international practice,
from political pressure or control by the host country to the prejudice of member States of the
organization, and to ensure the unhampered performance of their functions.
III. EMPLOYER-EMPLOYEE RELATIONSHIP
Hiring by Competent Person:
a. If it is done by an agent with actual authority
b. If it is done by an agent with apparent authority
c. If it is done without authority, but subsequently ratified either expressly or impliedly
Suspension of Employer-Employee Relationship:
a. Regular seasonal employees are merely considered as on leave of absence without pay until they
are re-employed
b. The cessation of the milling activities at the end of the season is certainly not permanent or
definitive
c. Bona fide suspension of operation of a business or undertaking for a period not exceeding six (6)
months does not terminate employment relationship
d. Fulfillment by the employee of a military or civic duty does not terminate employment relationship
e. Regular employees of the work pool, while waiting for their assignment
f. An employee who was dismissed for a specific cause which turned out to be false or non-existent
is entitled to reinstatement
g. Filing by the employee of an illegal dismissal case does not severe employment relationship
h. Employees who stage a legal strike does not constitute severance of relationship
A. Proof of Employment
• existence of employer-employee relationship is the jurisdictional foundation for a compensation
claim
• employer-employee relationship is created by an employment contract, whether
implied or express
1) Doctor v. NII Enterprises
The Court recognizes the rule that in illegal dismissal cases, the employer bears the burden of proving
that the termination was for a valid or authorized cause. However, there are cases wherein the facts and
the evidence do not establish prima facie that the employee was dismissed from employment. Before the
employer must bear the burden of proving that the dismissal was legal, the employee must first establish
by substantial evidence the fact of his dismissal from service. If there is no dismissal, then there can be
no question as to the legality or illegality thereof.
Also, petitioners could not be deemed to have abandoned their work by merely being absent and without
clear intention of severing the employer-employee relationship. There being no dismissal and no
abandonment, the appropriate course of action is to reinstate the employee/s but without the payment
of backwages.
2) Tenaza v. R Villegas Taxi Transport
The burden of proof rests upon the party who asserts the affirmative of an issue.
In determining the presence or absence of an employer-employee relationship, the Court has consistently
looked for the following incidents, to wit:
(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 on the means and methods by which the work is
accomplished.
The last element, the so-called control test, is the most important element."
There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel
lists, serve as evidence of employee status.
3) Orozco v. Court of Appeals
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-
employee relationship between parties.24 The four elements of an employment relationship are: (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’s conduct.25
In other words, the test is whether the employer controls or has reserved the right to control the
employee, not only as to the work done, but also as to the means and methods by which the same is
accomplished.
Therefore, the control that PDI exercised over petitioner was only as to the finished product of her efforts,
i.e., the column itself, by way of either shortening or outright rejection of the column. The newspaper’s
power to approve or reject publication of any specific article she wrote for her column cannot be the
control contemplated in the "control test," as it is but logical that one who commissions another to do a
piece of work should have the right to accept or reject the product. The important factor to consider in
the "control test" is still the element of control over how the work itself is done, not just the end result
thereof.
Although petitioner had a weekly deadline to meet, she was not precluded from submitting her column
ahead of time or from submitting columns to be published at a later time. More importantly, respondents
did not dictate upon petitioner the subject matter of her columns, but only imposed the general guideline
that the article should conform to the standards of the newspaper and the general tone of the particular
section.
Where a person who works for another performs his job more or less at his own pleasure, in the manner
he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result
of his efforts and not the amount thereof, no employer-employee relationship exists.
B. Four-fold Test
a) The manner of selection and engagement of the employee
b) Mode of payment of wages
c) Presence or absence of the power of dismissal
d) Presence or absence of a power to control (with respect to the means and methods by which the
work is to be accomplished)
1) South East International Rattan, Inc. v. Coming
To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to
the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called "control
test." In resolving the issue of whether such relationship exists in a given case, substantial evidence –
that amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion – is sufficient. Although no particular form of evidence is required to prove the existence of
the relationship, and any competent and relevant evidence to prove the relationship may be admitted, a
finding that the relationship exists must nonetheless rest on substantial evidence.
The fact that a worker was not reported as an employee to the SSS is not conclusive proof of the absence
of employer-employee relationship. Nor does the fact that respondent’s name does not appear in the
payrolls and pay envelope records submitted by petitioners negate the existence of employer-employee
relationship. For a payroll to be utilized to disprove the employment of a person, it must contain a true
and complete list of the employee.37 In this case, the exhibits offered by petitioners before the NLRC
consisting of copies of payrolls and pay earnings records are only for the years 1999 and 2000; they do
not cover the entire 18-year period during which respondent supposedly worked for SEIRI.
In any controversy between a laborer and his master, doubts reasonably arising from the evidence are
resolved in favor of the laborer. As a regular employee, respondent enjoys the right to security of tenure
under Article 279 of the Labor Code and may only be dismissed for a just or authorized cause, otherwise
the dismissal becomes illegal.
2) Marsman & Company, Inc. v. Sta. Rita
To prove the element on the payment of wages, Sta. Rita submitted forms for leave application, with
either Marsman's logo or CPDSI's logo. Significantly, the earlier leave forms bore Marsman's logo but the
latest leave application of Sta. Rita already had CPDSI's logo. As to the power of dismissal, the letter
dated January 14, 2000 clearly indicated that CPDSI, and not Marsman, terminated Sta. Rita's services
by reason of redundancy. Sta. Rita failed to prove that Marsman had the power of control over his
employment at the time of his dismissal.
i. Control Test
a. rules that merely serve as guideline which only promote the result: no employer-employee
relationship
b. rules that fix the methodology and bind or restrict the party hired to the use of such means or
methods: has the effect of establishing employer-employee relationship
 c. skills rendered, source of instrumentalities and tools, location of the work, duration of the
relationship, the hired party’s discretion when and how long to work, manner of payment,
business of the hiring party, contract provisions on benefits (Sonza v. ABS-CBN)
d. the bus owner has control over a bus driver, an employee, although paid on commission basis (R
Transport v. Ejandra)
e. employment does not exist for a sales agent who receives commission on his gross sales (Abante
v. Lamadrid)
f. where there is less control in the exercise, the more likely the hired is an independent contractor
(Sonza v. ABS-CBN)
g. where the hirer cannot discipline or dismiss the hired person over his performance
h. the worker performs subject to employer’s specific conditions indicating control
i. activities of pakiao workers
1) Fuji Television Network, Inc. v. Espiritu
Arlene was a regular employee with a fixed-term contract. The burden of proving that she was an
independent contractor lies with Fuji. In labor cases, the quantum of proof required is substantial
evidence. "Substantial evidence" has been defined as "such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion." Once the employee establishes the
fact of dismissal, supported by substantial evidence, the burden of proof shifts to the employer to show
that there was a just or authorized cause for the dismissal and that due process was observed.
Art 280 of the Labor Code classifies employees into regular, project, seasonal, and casual. It further
classifies regular employees into two kinds: (1) those "engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer"; and (2) casual employees who
have "rendered at least one year of service, whether such service is continuous or broken." Another
classification of employees, i.e., employees with fixed-term contracts, was recognized in Brent School,
Inc. v. Zamora.
SC further discussed that there are employment contracts where "a fixed term is an essential and
natural appurtenance" such as overseas employment contracts and officers in educational institutions.
As to the validity of fixed term contracts, SC ruled that where from the circumstances it is apparent
that the periods have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down as contrary to public policy or morals. There are guidelines laid down in the case
of Brent that must be satisfied to recognize the validity of fixed-term contracts. Contracts of
employment for a fixed period are not unlawful. What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers from the capricious termination of
employment.
On the other hand, an independent contract is defined as one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account and under one’s own
responsibility according to one’s own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work except as to the results thereof. In
view of the "distinct and independent business" of independent contractors, no employer-employee
relationship exists between independent contractors and their principal. Independent contractors are
recognized under Article 106 of the Labor Code.
Existence of employer-employee relationship – In determining the existence of employer-employee
relationship, SC used the four-fold test. The elements of the four-fold test are the following: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
(4) the power of control, which is the most important element. The power to control refers to the
existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power. SC held that in this case, there exists an employer-employee
relationship between Fuji and Arlene.
The test for determining regular employment is whether there is a reasonable connection between the
employee’s activities and the usual business of the employer. Article 280 provides that the nature of
work must be "necessary or desirable in the usual business or trade of the employer" as the test for
determining regular employment.
Moreover, fixed-term contracts are strictly construed. Where an employee’s contract "had been
continuously extended or renewed to the same position, with the same duties and remained in the
employ without any interruption," then such employee is a regular employee. The continuous renewal
is a scheme to prevent regularization. Arlene’s contract indicating a fixed term did not automatically
mean that she could never be a regular employee. This is precisely what Article 280 seeks to avoid.
For dismissal under Article 284 to be valid, two requirements must be complied with: (1) the employee’s
disease cannot be cured within six (6) months and his "continued employment is prohibited by law or
prejudicial to his health as well as to the health of his co-employees"; and (2) certification issued by a
competent public health authority that even with proper medical treatment, the disease cannot be
cured within six (6) months. There is no evidence showing that Arlene was accorded due process. After
informing her employer of her lung cancer, she was not given the chance to present medical certificates.
Fuji immediately concluded that Arlene could no longer perform her duties because of chemotherapy.
What Fuji did was to inform her that her contract would no longer be renewed, and when she did not
agree, her salary was withheld.
2) Reyes v. Glaucoma Research Foundation, Inc.
Under the control test and economic control test, no employer-employee relationship existed between
Glaucoma and Reyes.
There are four standards in determining the existence of an employer-employee relationship, namely:
(a) the manner of selection and engagement of the putative employee; (b) the mode of payment of
wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control
of the putative employee's conduct.
1. Most determinative among these factors is the so- called "control test." This test is premised on
whether the person for whom the services are performed reserves the right to control both the end
achieved and the manner and means used to achieve that end.
Reyes argument: As evidence of respondents' supposed control over him, the organizational plans he
has drawn were subject to the approval of respondent corporation's Board of Trustees.
The court ruled that the Glaucoma’s power to approve or reject the organizational plans drawn by Reyes
cannot be the control contemplated in the "control test”. The important factor to consider in the "control
test" is still the element of control over how the work itself is done, not just the end result thereof.
2. Aside from the control test, the Supreme Court has also used the “economic reality test” in
determining whether an employer-employee relationship exists between the parties. Under this test,
the economic realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship between the
parties. The benchmark of economic reality in analyzing possible employment relationships for purposes
of applying the Labor Code ought to be the economic dependence of the worker on his employer.
3) Sonza v. ABS-CBN
Sonza is not an employee of ABS-CBN.
1. Selection and Engagement of Employee
Sonza contended that the "discretion used by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and qualification as complainant belies
respondent’s claim of independent contractorship.” The SC ruled that The specific selection and hiring
of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees,
is a circumstance indicative, but not conclusive, of an independent contractual relationship.
2. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA
asserts that this mode of fee payment shows that he was an employee of ABS-CBN. The SC ruled that
₱317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate
more an independent contractual relationship rather than an employer-employee relationship. SONZA
acting alone possessed enough bargaining power to demand and receive such huge talent fees for his
services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship. The payment
of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor.
3. Power of Dismissal
SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach of
contract, such as retrenchment to prevent losses as provided under labor laws. Whether SONZA
rescinded the Agreement or resigned from work does not determine his status as employee or
independent contractor.
4. Control Test
a. SONZA contended that ABS-CBN exercised control over the means and methods of his work. The
SC ruled that ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBN’s control. SONZA did not have to render eight
hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents
of SONZA’s script. ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming." 38Even though ABS-CBN provided SONZA with the place
of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did
not supervise and control his work.
b. SONZA further argued he was ABS-CBN’s employee because ABS-CBN subjected him to its rules
and standards of performance. The SC ruled that The code of conduct imposed on SONZA under the
Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas
(KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."
c. SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control
which ABS-CBN exercised over him. The SC ruled that the hiring of exclusive talents is a widespread
and accepted practice in the entertainment industry. This practice is not designed to control the means
and methods of work of the talent, but simply to protect the investment of the broadcast station.
4) R. Transport v. Ejandra
The fact that petitioner paid private respondent on commission basis did not rule out the presence of
an employee-employer relationship. Article 97(f) of the Labor Code clearly provides that an employees
wages can be in the form of commissions.
To constitute abandonment, two elements must concur: (1) the failure to report for work or absence
without valid or justifiable reason and (2) a clear intention to sever the employer-employee relationship.
Of the two, the second element is the more determinative factor and should be manifested by some
overt acts. Mere absence is not sufficient. It is the employer who has the burden of proof to show a
deliberate and unjustified refusal of the employee to resume his employment without any intention of
returning.
5) Abante v. Lamadrid Bearing and Parts
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied
the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages;
(3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power
of control. Of these four, the last one is the most important. The so-called "control test" is commonly
regarded as the most crucial and determinative indicator of the presence or absence of an employer-
employee relationship. Under the control test, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end achieved,
but also the manner and means to be used in reaching that end.
Applying the aforementioned test, an employer-employee relationship is notably absent in this case. It
is undisputed that petitioner Abante was a commission salesman who received 3% commission of his
gross sales. Yet no quota was imposed on him by the respondent; such that a dismal performance or
even a dead result will not result in any sanction or provide a ground for dismissal.
• He was not required to report to the office at any time or submit any periodic written report on
his sales performance and activities.
• Although he had the whole of Mindanao as his base of operation, he was not designated by
respondent to conduct his sales activities at any particular or specific place.
• He pursued his selling activities without interference or supervision from respondent company
and relied on his own resources to perform his functions.
• Respondent company did not prescribe the manner of selling the merchandise; he was left alone
to adopt any style or strategy to entice his customers.
• While it is true that he occasionally reported to the Manila office to attend conferences on
marketing strategies, it was intended not to control the manner and means to be used in reaching
the desired end, but to serve as a guide and to upgrade his skills for a more efficient marketing
performance.
6) Manila Golf Country Club v. IAC
In the very nature of things, caddies must submit to some supervision of their conduct while enjoying
the privilege of pursuing their occupation within the premises and grounds of whatever club they do
their work in. For all that is made to appear, they work for the club to which they attach themselves on
sufference but, on the other hand, also without having to observe any working hours, free to leave
anytime they please, to stay away for as long they like. It is not pretended that if found remiss in the
observance of said rules, any discipline may be meted them beyond barring them from the premises
which, it may be supposed, the Club may do in any case even absent any breach of the rules, and
without violating any right to work on their part. All these considerations clash frontally with the concept
of employment.
7) PRC v. Court of Appeals
Copra is the basic raw material of the petitioner-appellant's business. The facts show that the company
has, positive and direct control over the handling of copra immediately prior to its being fed into the
manufacturing process. The conveyor is owned by the company. They load it may carry and the time
 and manner of its operation are controlled by the appellant. A company employee ordered the supposed
independent contractor where to store copra, when to bring out copra, how much to load and where,
and what class of copra to handle. The appellant limited the number of workers which Mr. Garcia could
hire to assure that statutory minimum wages were paid from the lump sum payments, given for the
"pakiao " work. Mr. Garcia had no office of his own. He had no independent funds to pay the men
working under him. He could not work for any other company but was completely dependent on the
appellant. Mr. Vicente Garcia denies that he is an independent contractor. The control test is more than
satisfactorily met.
8) Royale Homes Marketing Corporation v. Alcantara
Four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) 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 four, the most determinative factor in ascertaining the existence of employer-employee
relationship is the "right of control test"
Not every form of control is equal to employer-employee relationship. Just because one is subjected to
company rules, regulations, and code of ethics does not necessarily mean they’re an employee. Just
because Alcantara is subject to the regulations, code of ethics, and periodic evaluation does not mean
Royale Homes exercises control over him. Control means the company dictating the means and
methods of how Alcantara was to perform and accomplish his task of soliciting sales.
Royale Homes only fixes the price, imposes requirements on prospective buyers, and lays down the
terms and conditions of the sale, including the mode of payment, which the independent contractors
must follow. Does not constitute as control.
Alcantara not having specific working hours and being free to solicit sales whenever is indicator of lack
of control. The element of payment of wages being absent is another indicator of the lack of employer-
employee relationship in this case. Alcantara did not receive a fixed monthly salary
As the party claiming the existence of employer-employee relationship, it behooved upon Alcantara to
prove the elements thereof. Alcantara failed to prove that he is an employee of Royale Homes. He is
only an independent contractor.
ii. Doctors and Hospitals
*there exists employer-employee relationship between resident physicians and training
hospitals unless:
a. unless there is training agreement between them
b. the training program is duly accredited or approved by the appropriate government agency
1) Calamba Medical Center, Inc. v. NLRC
Under the control test, an employer-employee relationship exists between a physician and a hospital if
the hospital controls both the means and the details of the process by which the physician is to
accomplish his task. Respondents maintained specific work-schedules which consists of 24-hour shifts.
Respondents’ work are monitored through its nursing supervisors, charge nurses and orderlies. Without
approval of the Medical Director, no operations can be undertaken. In addition, the fact that petitioner
enrolled respondents in SSS and Medicare program reflect their status as employees. Mandatory
coverage under SSS Law is premised on the existence of employer-employee relationship. As to the
sharing of hospital fees, the same is considered as another form of compensation. An employer-
employee relationship exists between resident physicians and the training hospitals, unless there is a
training agreement between them, and the training program is duly accredited or approved by the
appropriate government agency. In this case, respondents are not undergoing any specialization
training.
2) Ramos v. Court of Appeals
In other words, private hospitals, hire, fire and exercise real control over their attending and visiting
"consultant" staff. While "consultants" are not, technically employees, a point which respondent hospital
asserts in denying all responsibility for the patient's condition, the control exercised, the hiring, and the
right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship,
with the exception of the payment of wages. In assessing whether such a relationship in fact exists,
the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose
of allocating responsibility in medical negligence cases, an employer-employee relationship in effect
exists between hospitals and their attending and visiting physicians. This being the case, the question
now arises as to whether or not respondent hospital is solidarily liable with respondent doctors for
petitioner's condition.
The basis for holding an employer solidarily responsible for the negligence of its employee is found in
Article 2180 of the Civil Code which considers a person accountable not only for his own acts but also
for those of others based on the former's responsibility under a relationship of patria potestas. 77 Such
responsibility ceases when the persons or entity concerned prove that they have observed the diligence
of a good father of the family to prevent damage. 78 In other words, while the burden of proving
negligence rests on the plaintiffs, once negligence is shown, the burden shifts to the respondents
(parent, guardian, teacher or employer) who should prove that they observed the diligence of a good
father of a family to prevent damage.
C. Economic Reality Test
1) Reyes v. Glaucoma Research Foundation, Inc.
The Supreme Court has also used the economic reality test in determining whether an employer-
employee relationship exists between the parties. Under this test, the economic realities prevailing
within the activity or between the parties are examined, taking into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially
appropriate when, as in this case, there is no written agreement or contract on which to base the
relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic dependence of the
worker on his employer. In the instant case, as shown by the resume of [petitioner], he concurrently
held consultancy positions with the Manila International Airport Authority (from 04 March 2001 to
September 2003 and from 01 November 2004 up to the present) and the Anti-Terrorist Task Force for
Aviation and Air Transportation Sector (from 16 April 2004 to 30 June 2004) during his stint with the
Eye Referral Center (from 01 August 2003 to 29 April 2005). Accordingly, it cannot be said that the
[petitioner] was wholly dependent on [respondent] company.
2) Legatona v. Skycable Corporation
To prove employer-employee relationship - the following should be established by competent evidence:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and
4. the employer's power to control the employee with respect to the means and methods by which
the work is to be accomplished
 Under this control test, the person for whom the services are performed reserves the right to control
not only the end to be achieved, but also the means by which such end is reached.
Sending of new promos, new price listings, meetings and trainings of new account executives; imposing
quotas and penalties by Skycable does not prove control test - only indicates that respondent regularly
monitors the result of petitioners' work but in no way dictate upon them the manner in which they
should perform their duties
Two-tiered test in order to determine the true relationship between the employer and employee:
1. the putative employer's power to control the employee with respect to the means and methods
by which the work is to be accomplished; and
2. the underlying economic realities of the activity or relationship
For cases where there is no written agreement to base the relationship on and where the various tasks
performed by the worker brings complexity to the relationship with the employer.
Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists."
2) Universal Robina Sugar Milling Corporation v. NLRC
Article 280 of the Labor Code provides for three kinds of employment arrangements, namely: regular,
project/seasonal and casual.
Regular employment refers to that arrangement whereby the employee "has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer[.]"19
Under the definition, the primary standard that determines regular employment is the reasonable
connection between the particular activity performed by the employee and the usual business or trade
of the employer;20 the emphasis is on the necessity or desirability of the employee’s activity.

“In addition to the control test, the totality of the economic circumstances of the worker is taken into Thus, when the employee performs activities considered necessary and desirable to the overall business
light to determine the existence of employment relationship.” scheme of the employer, the law regards the employee as regular.

D. Kinds of Employment KINDS OF EMPLOYMENT

PROBATIONARY FIXED-TERM PROJECT SEASONAL CASUAL REGULAR Regular employment refers to that arrangement whereby the employee "has been engaged to perform
EMPLOYEE EMPLOYEES EMPLOYEES EMPLOYEES EMPLOYEES activities which are usually necessary or desirable in the usual business or trade of the employer[.]"19
Necessary and
Engaged for
Specified Once the Usually desirable on A project employment, on the other hand, contemplates on arrangement whereby "the employment
0-6 months seasoned
period of time project is done relievers the business of has been fixed for a specific project or undertaking whose completion or termination has been
projects
the enterprise
determined at the time of the engagement of the employee[.]"21 Two requirements, therefore, clearly
Employer should
need to be satisfied to remove the engagement from the presumption of regularity of employment,
inform employee:
(1) probationary Not more than 1 year of namely: (1) designation of a specific project or undertaking for which the employee is hired; and (2)
Engaged in a particular project
period; (2) 1 year service clear determination of the completion or termination of the project at the time of the employee’s
standards to be engagement.22 The services of the project employees are legally and automatically terminated upon
met the end or completion of the project as the employee’s services are coterminous with the project.
EXCEPT if repeated hiring to avoid security of
tenure; EXCEPT for construction workers Seasonal employment operates much in the same way as project employment, albeit it involves work
Period must be specified or service that is seasonal in nature or lasting for the duration of the season.25 As with project
TWIN NOTICE REQUIREMENT, NOT REQUIRED
employment, although the seasonal employment arrangement involves work that is seasonal or periodic
in nature, the employment itself is not automatically considered seasonal so as to prevent the employee
i. Regular
from attaining regular status. To exclude the asserted "seasonal" employee from those classified as
− Employee who has been engaged to perform activities which are usually necessary or desirable
regular employees, the employer must show that: (1) the employee must be performing work or
in the usual business of the employer
services that are seasonal in nature; and (2) he had been employed for the duration of the season.26
Hence, when the "seasonal" workers are continuously and repeatedly hired to perform the same tasks
1) Article 295 of the Labor Code
or activities for several seasons or even after the cessation of the season, this length of time may
likewise serve as badge of regular employment.
Article 295. "ART. 280. Regular and Casual Employment. - The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be
Casual employment, the third kind of employment arrangement, refers to any other employment
deemed to be regular where the employee has been engaged to perform activities which are usually
arrangement that does not fall under any of the first two categories, i.e., regular or project/seasonal
necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been ii. Project
determined at the time of the engagement of the employee or where the work or service to be − Employment has been fixed for a specific project whose completion or termination has been
performed is seasonal in nature and the employment is for the duration of the season. determined at the time of the engagement of the employer

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

1) Leyte Geothermal Power Progressive Employees Union v. PNOC

Article 280 of the Labor Code contemplates four (4) kinds of employees:
 a) regular employees or those who have been “engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer”;
b) project employees or those “whose employment has been fixed for a specific project or
undertaking[,] the completion or termination of which has been determined at the time of the
engagement of the employee”;
c) seasonal employees or those who work or perform services which are seasonal in nature, and
the employment is for the duration of the season; and
d) casual employees or those who are not regular, project, or seasonal employees.
Jurisprudence has added a fifth kind— a fixed-term employee.
WHAT IS A PROJECT? In the realm of business and industry, we note that “project” could refer to one
or the other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a
particular job or undertaking that is within the regular or usual business of the employer company, but
which is distinct and separate, and identifiable as such, from the other undertakings of the company.
Such job or undertaking begins and ends at determined or determinable times. The typical example of
this first type of project is a particular construction job or project of a construction company. A
construction company ordinarily carries out two or more [distinct] identifiable construction projects:
e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a
domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as “project employees,” and their services
may be lawfully terminated at completion of the project.
The term “project” could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times.
2) FVR Skills and Services Exponents, Inc. v. Seva
Respondents are regular employees, not project employees. Article 280 (now Article 294) of the Labor
Code governs the determination of whether an employee is a regular or a project employee. Under this
provision, there are two kinds of regular employees, namely: (1) those who were engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer; and
(2) those casual employees who became regular after one year of service, whether continuous or
broken, but only with respect to the activity for which they have been hired.
While project employees are those whose employment was fixed for a specific project or undertaking,
whose completion or termination had been determined at the time of engagement.
The primary standard in determining regular employment is the reasonable connection between the
particular activity performed by the employee and the employer's business or trade. This connection
can be ascertained by considering the nature of the work performed and its relation to the scheme of
the particular business, or the trade in its entirety.
Guided by this test, we conclude that the respondents' work as janitors, service crews and sanitation
aides, are necessary or desirable to the petitioner's business of providing janitorial and manpower
services to its clients as an independent contractor. Also, the respondents had already been working
for the petitioner as early as 1998.
3) William Construction Corp. v. Trinidad
The test for distinguishing a "project employee" from a "regular employee" is whether or not he has
been assigned to carry out a "specific project or undertaking," with the duration and scope of his
engagement specified at the time his service is contracted.
Generally, length of service provides a fair yardstick for determining when an employee initially hired
on a temporary basis becomes a permanent one, entitled to the security and benefits of regularization.
But this standard will not be fair, if applied to the construction industry, simply because construction
firms cannot guarantee work and funding for its payrolls beyond the life of each project. And getting
projects is not a matter of course. Construction companies have no control over the decisions and
resources of project proponents or owners. There is no construction company that does not wish it has
such control but the reality, understood by construction workers, is that work depended on decisions
and developments over which construction companies have no say.
Repeated and successive rehiring of project employees do not qualify them as regular employees, as
length of service is not the controlling determinant of the employment tenure of a project employee,
but whether the employment has been fixed for a specific project or undertaking, its completion has
been determined at the time of the engagement of the employee.
iii. Casual
1) Kimberly Clark (Phils.), Inc. v. Secretary of Labor
The law provides for two kinds of regular employees, namely: (1) those who are engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer; and
(2) those who have rendered at least one year of service, whether continuous or broken, with respect
to the activity in which they are employed.
Owing to their length of service with the company, these workers became regular employees, by
operation of law, one year after they were employed by KIMBERLY through RANK. While the actual
regularization of these employees entails the mechanical act of issuing regular appointment papers and
compliance with such other operating procedures as may be adopted by the employer, it is more in
keeping with the intent and spirit of the law to rule that the status of regular employment attaches to
the casual worker on the day immediately after the end of his first year of service. To rule otherwise,
and to instead make their regularization dependent on the happening of some contingency or the
fulfillment of certain requirements, is to impose a burden on the employee which is not sanctioned by
law.
That the first stated position is the situation contemplated and sanctioned by law is further enhanced
by the absence of a statutory limitation before regular status can be acquired by a casual employee.
The law is explicit. As long as the employee has rendered at least one year of service, he becomes a
regular employee with respect to the activity in which he is employed. The law does not provide the
qualification that the employee must first be issued a regular appointment or must first be formally
declared as such before he can acquire a regular status. Obviously, where the law does not distinguish,
no distinction should be drawn.
iv. Fixed-Term
1) Brent School v. Zamora
It should have no application to instances where a fixed period of employment was agreed upon
knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought
to bear upon the employee and absent any other circumstances vitiating his consent, or where it
 satisfactorily appears that the employer and employee dealt with each other on more or less equal
terms with no moral dominance whatever being exercised by the former over the latter.
v. Seasonal
1) Hacienda Bino v. Cuenca
The primary standard for determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer.
There is no doubt that the respondents were performing work necessary and desirable in the usual
trade or business of an employer. Hence, they can properly be classified as regular employees.
For respondents to be excluded from those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must have been employed only for the
duration of one season. While the records sufficiently show that the respondents’ work in the hacienda
was seasonal in nature, there was, however, no proof that they were hired for the duration of one
season only. In fact, the payrolls, submitted in evidence by the petitioners, show that they availed the
services of the respondents since 1991.
2) Universal Robina Sugar Milling Corporation v. Acibo
Article 280 of the Labor Code provides for three kinds of employment arrangements, namely: regular,
project/seasonal and casual. Regular employment refers to that arrangement whereby the employee
"has been engaged to perform activities which are usually necessary or desirable in the usual business
or trade of the employer[. "Under the definition, the primary standard that determines regular
employment is the reasonable connection between the particular activity performed by the employee
and the usual business or trade of the employer; the emphasis is on the necessity or desirability of the
employee’s activity. Thus, when the employee performs activities considered necessary and desirable
to the overall business scheme of the employer, the law regards the employee as regular.
A project employment, on the other hand, contemplates on arrangement whereby "the employment
has been fixed for a specific project or undertaking whose completion or termination has been
determined at the time of the engagement of the employee[.]" Two requirements, therefore, clearly
need to be satisfied to remove the engagement from the presumption of regularity of employment,
namely: (1) designation of a specific project or undertaking for which the employee is hired; and (2)
clear determination of the completion or termination of the project at the time of the employee’s
engagement. The services of the project employees are legally and automatically terminated upon the
end or completion of the project as the employee’s services are coterminous with the project.
Unlike in a regular employment under Article 280 of the Labor Code, however, the length of time of the
asserted "project" employee’s engagement is not controlling as the employment may, in fact, last for
more than a year, depending on the needs or circumstances of the project. Nevertheless, this length
of time (or the continuous rehiring of the employee even after the cessation of the project) may serve
as a badge of regular employment when the activities performed by the purported "project" employee
are necessary and indispensable to the usual business or trade of the employer. In this latter case, the
law will regard the arrangement as regular employment.
Seasonal employment operates much in the same way as project employment, albeit it involves work
or service that is seasonal in nature or lasting for the duration of the season. As with project
employment, although the seasonal employment arrangement involves work that is seasonal or periodic
in nature, the employment itself is not automatically considered seasonal so as to prevent the employee
from attaining regular status. To exclude the asserted "seasonal" employee from those classified as
regular employees, the employer must show that: (1) the employee must be performing work or
services that are seasonal in nature; and (2) he had been employed for the duration of the season.
Hence, when the "seasonal" workers are continuously and repeatedly hired to perform the same tasks
or activities for several seasons or even after the cessation of the season, this length of time may
likewise serve as badge of regular employment. In fact, even though denominated as "seasonal
workers," if these workers are called to work from time to time and are only temporarily laid off during
the off-season, the law does not consider them separated from the service during the off-season period.
The law simply considers these seasonal workers on leave until re-employed.
Clearly, therefore, the nature of the employment does not depend solely on the will or word of the
employer or on the procedure for hiring and the manner of designating the employee. Rather, the
nature of the employment depends on the nature of the activities to be performed by the employee,
considering the nature of the employer’s business, the duration and scope to be done, and, in some
cases, even the length of time of the performance and its continued existence.
vi. Probationary
1) Abbott Laboratories v. Alcaraz
An employer is deemed to have made known the standards that would qualify a probationary employee
to be a regular employee when it has exerted reasonable efforts to apprise the employee of what he/she
is expected to do to accomplish during the trial of probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of
maids, cooks, drivers, or messengers.
The dismissal was based on just cause under Art 297 of the Labor Code, but the employer in this case
failed to comply with the notice requirement – Valid dismissal + nominal damages
2) Woodridge School v. Pe-Benito
On March 31, 2001, the effective date of their dismissal, respondents were not regular or
permanent employees; they had not yet completed three (3) years of satisfactory service as
academic personnel which would have entitled them to tenure as permanent employees in
accordance with the Manual of Regulations for Private Schools. [34] On that date, Pe Benito's
contract of employment still had two months to run, while Balaguer's probationary employment
was to expire after one year and two months. A probationary employee is one who, for a
given period of time, is being observed and evaluated to determine whether or not he is
qualified for permanent employment. A probationary appointment affords the employer an
opportunity to observe the skill, competence and attitude of a probationer. The word
"probationary," as used to describe the period of employment, implies the purpose of the term
or period. While the employer observes the fitness, propriety and efficiency of a probationer
to ascertain whether he is qualified for permanent employment, the probationer at the same
time, seeks to prove to the employer that he has the qualifications to meet the reasonable
standards for permanent employment. [35] Probationary employees enjoy security of tenure in
the sense that during their probationary employment, they cannot be dismissed except for
cause or when he fails to qualify as a regular employee. [36] However, upon expiration of their
contract of employment, probationary employees cannot claim security of tenure and compel
their employers to renew their employment contracts.
3) A Prime Security Services, Inc. v. NLRC
Court holds that the latter became a regular employee upon completion of his six-month period of
probation. Private respondent started working on January 30, 1988 and completed the said period of
probation on July 27, 1988. Thus, at the time private respondent was dismissed on August 1, 1988, he
was already a regular employee with a security of tenure. He could only be dismissed for a just and
authorized cause.
There is no basis for subjecting private respondent to a new probationary or temporary employment
on January 30, 1988, considering that he was already a regular employee when he was absorbed by A'
Prime from Sugarland, its sister company.
4) Phil. Federation v. NLRC
The Labor Code comprehends three kinds of employees:
(a) regular employees or those whose work is necessary or desirable to the usual business of the
employer;
(b) project employees or those whose employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the employment
is for the duration of the season; and
(c) casual employees or those who are neither regular nor project employees
The Court ruled that where a contract of employment, being a contract of adhesion, is ambiguous, any
ambiguity therein should be construed strictly against the party who prepared it. Furthermore, Article
1702 of the Civil Code provides that, in case of doubt, all labor contracts shall be construed in favor of
the laborer. It added:
The contention of the petitioner that Abril is under probationary status is untenable, as it would result
in a violation of her right to security of tenure guaranteed in Section 3 of Article XIII of the
Constitution and in Articles 279 and 281 of the Labor Code.
Regardless of the designation petitioner may have conferred upon Abril’s employment status, it is,
however, undeniable that Abril having completed the probationary period and allowed to work
thereafter, became a regular employee who may be dismissed only for just or authorized causes under
Articles 282, 283 and 284 of the Labor Code, as amended. Therefore, the dismissal, premised on the
alleged expiration of the contract, is illegal and entitles respondent to the reliefs prayed for.
5) Mecado v. AMA Computer College
Teaching personnel are not governed purely by the Labor Code. The Labor Code is supplemented with
respect to the period of probation by special rules found in the Manual of Regulations for Private Schools.
On the matter of probationary period , Section 92 of the Manual provides:
Section 92. Probationary Period. - Subject in all instances to compliance with the Department and
school requirements, the probationary period for academic personnel shall not be more than three
(3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses
are offered on a trimester basis.
But the portion of Article 281 of the Labor Code still fully applies:
“The services of an employee who has been engaged on a probationary basis may be terminated for
a just cause when he fails to qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his engagement . An employee who is
allowed to work after a probationary period shall be considered a regular employee.”
On probationary employment:
Employment on probationary status affords management the chance to fully scrutinize the true worth
of hired personnel before the full force of the security of tenure guarantee of the Constitution comes
into play.
Labor, for its part, is given the protection during the probationary period
Under the Labor Code, the standards a probationary employee is to be judged must be made known to
them at the START of their probationary period, or at the very least under the circumstances of the
present case, at the start of the semester or the trimester during which the probationary standards are
to be applied.
E. When Terminated
An employer may not terminate the services of an employee except for a just or authorized cause. On the
other hand, an employee may terminate without just cause, employment relationship by serving a written
notice on the employer at least one (1) month in advance. However, he may terminate employment
relationship without serving notice on the employment for just causes.
An employee who was illegally dismissed is entitled to reinstatement without loss of seniority rights, full
backwages inclusive of allowances, damages and other benefits due him computed from the time of his
compensation was withheld up to the time of his actual reinstatement
1. JUST CAUSE
a. insubordination
b. serious misconduct
c. disobedience
d. gross & habitual neglect of duty
e. violation of company policy
2. AUTHORIZED CAUSE
a. installation of labor saving device
b. redundancy
c. retrenchment
d. closure of business
e. disease/illness
f. failure to meet standards of probationary employment
g. season/project contract causes
IV. RECRUITMENT AND PLACEMENT OF WORKERS
A. Recruitment Defined
− any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and
includes referrals, contract services, promising or advertising for employment, locally or abroad,
whether for profit or not: Provided, that any person or entity which in any manner, offers or promises
for a fee, employment to two or more persons shall be deemed engaged in recruitment and placement
1) People v. Panis
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) win constitute recruitment and
placement even if only one prospective worker is involved. The proviso merely lays down a rule of
evidence that where a fee is collected in consideration of a promise or offer of employment to two or
more prospective workers, the individual or entity dealing with them shall be deemed to be engaged in
the act of recruitment and placement. The words "shall be deemed" create that presumption.
 2) People v. Velasco
The essential elements of illegal recruitment committed in large scale are: (1) that the accused engaged
in acts of recruitment and placement of workers as defined under Article 13(b) of the Labor Code, or in
any prohibited activities under Article 34 of the same Code; (2) that the accused had not complied with
the guidelines issued by the Secretary of Labor and Employment with respect to the requirement to
secure a license or authority to recruit and deploy workers; and (3) that the accused committed the
unlawful acts against 3 or more persons. In simplest terms, illegal recruitment is committed by persons
who, without authority from the government, give the impression that they have the power to send
workers abroad for employment purposes. In Our view, despite Inovero’s protestations that she did not
commit illegal recruitment, the following circumstances contrarily convince Us that she was into illegal
recruitment.
B. Articles 13 to 38 of the Labor Code
ART. 13. Definitions. - (a) "Worker" means any member of the labor force, whether employed or
unemployed.
(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising
for employment, locally or abroad, whether for profit or not: Provided, That any person or entity which,
in any manner, offers or promises for a fee, employment to two or more persons shall be deemed engaged
in recruitment and placement.
(c) "Private fee-charging employment agency" means any person or entity engaged in recruitment and
placement of workers for a fee which is charged, directly or indirectly, from the workers or employers or
both.
(e) "Private recruitment entity" means any person or association engaged in the recruitment and
placement of workers, locally or overseas, without charging, directly or indirectly, any fee from the
workers or employers.
(g) "Seaman" means any person employed in a vessel engaged in maritime navigation.
(h) "Overseas employment" means employment of a worker outside the Philippines.
ART. 14. Employment promotion. - The Secretary of Labor shall have the power and authority:
(a) To organize and establish new employment offices in addition to the existing employment offices under the Department
of Labor as the need arises;
(b) To organize and establish a nationwide job clearance and information system to inform applicants registering with a
particular employment office of job opportunities in other parts of the country as well as job opportunities abroad;
(c) To develop and organize a program that will facilitate occupational, industrial and geographical mobility of labor and
provide assistance in the relocation of workers from one area to another; and
(d) To require any person, establishment, organization or institution to submit such employment information as may be
prescribed by the Secretary of Labor.
ART. 15. Bureau of Employment Services. - (a) The Bureau of Employment Services shall be primarily responsible for
developing and monitoring a comprehensive employment program. It shall have the power and duty:
1. To formulate and develop plans and programs to implement the employment promotion objectives of this Title;
2. To establish and maintain a registration and/or licensing system to regulate private sector participation in the recruitment
and placement of workers, locally and overseas, and to secure the best possible terms and conditions of employment for
Filipino contract workers and compliance therewith under such rules and regulations as may be issued by the Minister of
Labor;
3. To formulate and develop employment programs designed to benefit disadvantaged groups and communities;
4. To establish and maintain a registration and/or work permit system to regulate the employment of aliens;
5. To develop a labor market information system in aid of proper manpower and development planning;
6. To develop a responsive vocational guidance and testing system in aid of proper human resources allocation; and
7. To maintain a central registry of skills, except seamen.
(b) The regional offices of the Ministry of Labor shall have the original and exclusive jurisdiction over all matters or cases
involving employer-employee relations including money claims, arising out of or by virtue of any law or contracts involving
Filipino workers for overseas employment except seamen: Provided, That the Bureau of Employment Services may, in the
case of the National Capital Region, exercise such power, whenever the Minister of Labor deems it appropriate. The decisions
of the regional offices of the Bureau of Employment Services, if so authorized by the Minister of Labor as provided in this
Article, shall be appealable to the National Labor Relations Commission upon the same grounds provided in Article 223 hereof.
The decisions of the National Labor Relations Commission shall be final and inappealable. (Superseded by Exec. Order 797,
May 1, 1982).
(c) The Minister of Labor shall have the power to impose and collect fees based on rates recommended by the Bureau of
Employment Services. Such fees shall be deposited in the National Treasury as a special account of the General Fund, for the
promotion of the objectives of the Bureau of Employment Services, subject to the provisions of Section 40 of Presidential
Decree No. 1177.
ART. 17. Overseas Employment Development Board. - An Overseas Employment Development Board is hereby created
to undertake, in cooperation with relevant entities and agencies, a systematic program for overseas employment of Filipino
workers in excess of domestic needs and to protect their rights to fair and equitable employment practices. It shall have the
power and duty:
1. To promote the overseas employment of Filipino workers through a comprehensive market promotion and development
program;
2. To secure the best possible terms and conditions of employment of Filipino contract workers on a government-to-
government basis and to ensure compliance therewith;
3. To recruit and place workers for overseas employment on a government-to-government arrangement and in such other
sectors as policy may dictate;
4. To act as secretariat for the Board of Trustees of the Welfare and Training Fund for Overseas Workers.
Regulatory Powers of the POEA:
a. issuance of license
b. suspension, cancellation or revocation of license
c. approval of transfer of business address
d. approval of establishment of executive office outside of the registered address
e. approval of appointment of representatives or agents
f. accreditation of principal or projects
g. revocation of accreditation
h. closure of agencies engaged in illegal recruitment
i. registration of any change in the composition of the BoD
ART. 19. Office of Emigrant Affairs. - (a) Pursuant to the national policy to maintain close ties with Filipino migrant
communities and promote their welfare as well as establish a data bank in aid of national manpower policy formulation, an
Office of Emigrant Affairs is hereby created in the Department of Labor. The Office shall be a unit at the Office of the Secretary
and shall initially be manned and operated by such personnel and through such funding as are available within the Department
and its attached agencies. Thereafter, its appropriation shall be made part of the regular General Appropriations Decree.
(b) The office shall, among others, promote the well-being of emigrants and maintain their close link to the homeland by:
1) serving as a liaison with migrant communities;
2) provision of welfare and cultural services;
3) promote and facilitate re-integration of migrants into the national mainstream;
4) promote economic; political and cultural ties with the communities; and
5) generally to undertake such activities as may be appropriate to enhance such cooperative links.
ART. 20. National Seamen Board. - (a) A National Seamen Board is hereby created which shall develop and maintain a
comprehensive program for Filipino seamen employed overseas. It shall have the power and duty:
1. To provide free placement services for seamen;
2. To regulate and supervise the activities of agents or representatives of shipping companies in the hiring of seamen for
overseas employment and secure the best possible terms of employment for contract seamen workers and secure
compliance therewith;
3. To maintain a complete registry of all Filipino seamen.
(b) The Board shall have original and exclusive jurisdiction over all matters or cases including money claims, involving
employer-employee relations, arising out of or by virtue of any law or contracts involving Filipino seamen for overseas
employment. The decisions of the Board shall be appealable to the National Labor Relations Commission upon the same
grounds provided in Article 223 hereof. The decisions of the National Labor Relations Commission shall be final and
inappealable.
ART. 21. Foreign service role and participation. - To provide ample protection to Filipino workers abroad, the labor a. charging, imposing or accepting any amount of money, good or services, or any fee or
attaches, the labor reporting officers duly designated by the Secretary of Labor and the Philippine diplomatic or consular bond for any purpose whatsoever before employment or where the fee charged is
officials concerned shall, even without prior instruction or advice from the home office, exercise the power and duty:
excessive
(a) To provide all Filipino workers within their jurisdiction assistance on all matters arising out of employment;
(b) To insure that Filipino workers are not exploited or discriminated against;
b. engaging in acts of misrepresentation, in relation to recruitment and placement of
(c) To verify and certify as requisite to authentication that the terms and conditions of employment in contracts involving workers
Filipino workers are in accordance with the Labor Code and rules and regulations of the Overseas Employment Development c. inducing or attempting to induce an already employed worker to transfer from or leave
Board and National Seamen Board; his employment for another UNLESS the transfer is designed to liberate a worker from
(d) To make continuing studies or researches and recommendations on the various aspects of the employment market oppressive terms and conditions of employment
within their jurisdiction;
d. influencing or attempting to influence any person or entity not to employ any worker
(e) To gather and analyze information on the employment situation and its probable trends, and to make such information
available; and
e. obstructing or attempting to obstruct inspection
(f) To perform such other duties as may be required of them from time to time. f. substituting or altering employment contracts and other documents approved and
verified by the POEA
ART. 22. Mandatory remittance of foreign exchange earnings. - It shall be mandatory for all Filipino workers abroad g. failure to file reports as may be required by the POEA
to remit a portion of their foreign exchange earnings to their families, dependents, and/or beneficiaries in the country in h. unreasonable withholding or denying travel or other pertinent documents from workers
accordance with rules and regulations prescribed by the Secretary of Labor.
for monetary considerations
ART. 24. Boards to issue rules and collect fees. - The Boards shall issue appropriate rules and regulations to carry out i. engaging in recruitment activities in places other than specified in the license without
their functions. They shall have the power to impose and collect fees from employers concerned, which shall be deposited in previous authorization from POEA
the respective accounts of said Boards and be used by them exclusively to promote their objectives. j. appointing or designating agents, representatives or employees without prior approval
from POEA
ART. 32. Fees to be paid by workers. - Any person applying with a private fee-charging employment agency for
k. falsifying or altering travel documents
employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually
commenced employment. Such fee shall be always covered with the appropriate receipt clearly showing the amount paid.
l. deploying workers or seafarers to vessels not accredited by POEA
The Secretary of Labor shall promulgate a schedule of allowable fees. m. deploying workers whose employment and travel documents were not processed by
POEA
Fees to be Paid by Workers: n. publishing or causing the publication of overseas job vacancies in violation of the
a. placement fees prescribed rules
b. placement and documentation services o. failure to deploy workers without justifiable reasons
c. trade or skill testing p. disregard of lawful orders, notices and other processes issued by POEA
d. medical examination q. coercing workers to accept prejudicial arrangements in exchange for certain benefits
e. passport that rightfully belong to the workers
f. visa r. withholding of workers’ salaries or remittances without justifiable reasons
g. clearances
h. inoculation Grounds for REVOCATION of License
i. airport terminal fee a. violation of the conditions of license
j. notarials b. engaging in the acts of misrepresentation for the purpose of securing a license or renewal
thereof
Prohibition on Charging Fees: c. engaging in the recruitment or placement of workers in jobs harmful to public health or
a. placement fees cannot be collected from a hired worker until after e has signed the morality or to the dignity of the Republic of the Philippines
employment contract and shall be covered by receipts d. incurring an accumulated three (3) counts of suspension by an agency based on final and
b. manning agencies shall not charge any fee from seafarer-applicant for its recruitment and executory orders within the validity of its license
placement services
c. no other fees or charges including processing fees shall be imposed against any worker ART. 36. Regulatory power. - The Secretary of Labor shall have the power to restrict and regulate the
recruitment and placement activities of all agencies within the coverage of this Title and is hereby authorized
ART. 33. Reports on employment status. - Whenever the public interest requires, the Secretary of Labor may direct all to issue orders and promulgate rules and regulations to carry out the objectives and implement the
persons or entities within the coverage of this Title to submit a report on the status of employment, including job vacancies, provisions of this Title.
details of job requisitions, separation from jobs, wages, other terms and conditions and other employment data.

ART. 37. Visitorial Power. - The Secretary of Labor or his duly authorized representatives may, at any
ART. 35. Suspension and/or cancellation of license or authority. - The Minister of Labor shall have
time, inspect the premises, books of accounts and records of any person or entity covered by this Title,
the power to suspend or cancel any license or authority to recruit employees for overseas employment for
require it to submit reports regularly on prescribed forms, and act on violation of any provisions of this
violation of rules and regulations issued by the Ministry of Labor, the Overseas Employment Development
Title.
Board, or for violation of the provisions of this and other applicable laws, General Orders and Letters of
Instructions. C. Migrant Workers and Overseas Filipino Act

Grounds for SUSPENSION and/or CANCELLATION of License: i. See definitions

 RA 8042
SEC. 3. DEFINITIONS. - For purposes of this Act:
(a) "Migrant worker" refers to a person who is to be engaged, is engaged or has been engaged in a
renumerated activity in a state of which he or she is not a legal resident to be used interchangeably
with overseas Filipino worker.
(b) "Gender-sensitivity" shall mean cognizance of the inequalities and inequities prevalent in society
between women and men and a commitment to address issues with concern for the respective interests
of the sexes.
(c) "Overseas Filipinos" refers to dependents of migrant workers and other Filipino nationals abroad
who are in distress as mentioned in Sections 24 and 26 of this Act.
ii. Direct Hires
− workers directly hired by employers for overseas employment as authorized by the Secretary of
Labor and Employment and processed by POEA
1. those hired by international organizations
2. those hired by members of the diplomatic corps
3. name hires or workers who are able to secure overseas employment opportunity with
an employer
iii. Solidary Liability
1) Pentagon International Shipping Services, Inc. v. Court of Appeals
Section 6. Transfer of Accreditation. The accreditation of a principal may be transferred to another
agency provided that transfer shall not involve any diminution of wages and benefits of workers
The transferee agency in these instances shall comply with the requirements for accreditation and shall
assume full and complete responsibility to all contractual obligations of the principals to its workers
originally recruited and processed by the former agency. Prior to the transfer of accreditation, the
Administration shall notify the previous agency and principal of such application.
As per the laws, before a transfer of accreditation can be effected, the transferee agency should likewise
have to comply with the requirements for accreditation contained in Section 2
2) Datuman v. First Cosmopolitan Manpower
Section 1 of Rule II of the POEA Rules and Regulations states that:
Section 1. Requirements for Issuance of License. - Every applicant for license to operate a private
employment agency or manning agency shall submit a written application together with the following
requirements:
f. A verified undertaking stating that the applicant:
(3) Shall assume joint and solidary liability with the employer for all claims and liabilities which
may arise in connection with the implementation of the contract; including but not limited to
payment of wages, death and disability compensation and repatriation.
This Court has, time and again, ruled that private employment agencies are held jointly and severally
liable with the foreign-based employer for any violation of the recruitment agreement or contract of
employment.
This joint and solidary liability imposed by law against recruitment agencies and foreign employers is
meant to assure the aggrieved worker of immediate and sufficient payment of what is due him. This is
in line with the policy of the state to protect and alleviate the plight of the working class.
The signing of the "substitute" contracts with the foreign employer/principal before the expiration of
the POEA-approved contract and any continuation of petitioner's employment beyond the original one-
year term, against the will of petitioner, are continuing breaches of the original POEA-approved
contract.
To be sure, Republic Act No. 8042 explicitly prohibits the substitution or alteration to the prejudice of
the worker of employment contracts already approved and verified by the Department of Labor and
Employment (DOLE) from the time of actual signing thereof by the parties up to and including the
period of the expiration of the same without the approval of the DOLE.
D. Prohibited Entities
i. Articles 16, 18, 25, and 26 of the Labor Code
ART. 16. Private recruitment. - Except as provided in Chapter II of this Title, no person or entity
other than the public employment offices, shall engage in the recruitment and placement of workers.
ART. 18. Ban on direct-hiring. - No employer may hire a Filipino worker for overseas employment
except through the Boards and entities authorized by the Secretary of Labor. Direct-hiring by members
of the diplomatic corps, international organizations and such other employers as may be allowed by the
Secretary of Labor is exempted from this provision.
Name Hire – worker who is able to secure contract for employment overseas on his own without the
assistance or participation of any agency
ART. 25. Private sector participation in the recruitment and placement of workers. - Pursuant
to national development objectives and in order to harness and maximize the use of private sector
resources and initiative in the development and implementation of a comprehensive employment
program, the private employment sector shall participate in the recruitment and placement of workers,
locally and overseas, under such guidelines, rules and regulations as may be issued by the Secretary
of Labor.
Persons or Entities in the Private Sector Who May Engage in the Recruitment and Placement
of Workers:
a. private employment agency
b. private recruitment entity
c. shipping or manning agency
d. such other persons or entities as may be authorized by the Secretary of Labor and
Employment
* the accreditation of a principal or project may be transferred to another agency provided that the
transfer does not involve any diminution of wage and benefits of workers
ART. 26. Travel agencies prohibited to recruit. - Travel agencies and sales agencies of airline
companies are prohibited from engaging in the business of recruitment and placement of workers for
overseas employment whether for profit or not.
ii. Part II, Rule 1, Section 2 of the 2002 POEA Rules and Regulations (Land-based)
Persons Disqualified from Engaging in Recruitment and Placement:
a. travel agencies and sales agencies of airline companies
b. officers or members of the Board of any corporations or members in a partnership engaged in
the business of a travel agency
 c. corporations and partnerships, when any of its officers, members of the board or partners, is also
an officer, member of the board or partner of a corporation or partnership engaged in the business
of a travel agency
d. persons, partnerships or corporation which have derogatory records
e. any officials or employees of the DOLE, POEA, OWWA, DFA and other government agencies
directly involved in the implementation of RA 8042
f. persons or partners, officers and Directors of corporations whose licenses have been previously
cancelled or revoked for violation of recruitment laws
iii. Part II, Rule 1, Section 2 of the 2003 POEA Rules and Regulations (Seafarers)
Section 2. Disqualification. The following are not qualified to engage in the business of recruitment and
placement of Filipino seafarers.
a. Travel agencies and sales agencies of airline companies;
b. Officers or members of the Board of any corporation or members in a partnership engaged in the
business of a travel agency;
c. Corporations and partnerships, when any of its officers, members of the board or partners, is also
an officer, member of the board or partner of a corporation or partnership engaged in the business of
a travel agency;
d. Persons, partnerships or corporations which have derogatory records, such as but not limited to the
following:
1. Those certified to have a derogatory record by the National Bureau of Investigation or by the Anti-
Illegal Recruitment Branch of the POEA;
2. Those against whom probable cause or prima facie finding of guilt for illegal recruitment or other
related cases exists;
3. Those convicted for illegal recruitment or other related cases and/or crimes involving moral
turpitude;
4. Those agencies whose licenses have been previously revoked or cancelled by the Administration
for violation of RA 8042, PD 442, as amended, and their implementing rules and regulations as well
as these rules and regulations.
All applicants for issuance/renewal of license shall be required to submit clearances from the National
Bureau of Investigation and Anti-illegal Recruitment Branch, POEA, including clearances for their
respective officers and employees.
e. Any official or employee of the DOLE, POEA, OWWA, DFA and other government agencies directly
involved in the implementation of R.A. 8042 and/or any of his/her relatives within the fourth civil degree
of consanguinity or affinity; and
f. Persons, partners, officers and directors of corporations whose licenses have been previously
cancelled or revoked for violation of recruitment laws.
E. Government Regulations
i. Articles 27-31 of the Labor Code
ART. 27. Citizenship requirement. - Only Filipino citizens or corporations, partnerships or entities at least seventy-
five percent (75%) of the authorized and voting capital stock of which is owned and controlled by Filipino citizens shall
be permitted to participate in the recruitment and placement of workers, locally or overseas.
ART. 28. Capitalization. - All applicants for authority to hire or renewal of license to recruit are required to have such
substantial capitalization as determined by the Secretary of Labor.
ART. 29. Non-transferability of license or authority. - No license or authority shall be used directly or indirectly by
any person other than the one in whose favor it was issued or at any place other than that stated in the license or
authority be transferred, conveyed or assigned to any other person or entity. Any transfer of business address,
appointment or designation of any agent or representative including the establishment of additional offices anywhere
shall be subject to the prior approval of the Department of Labor.
ART. 30. Registration fees. - The Secretary of Labor shall promulgate a schedule of fees for the registration of all
applicants for license or authority.
ART. 31. Bonds. - All applicants for license or authority shall post such cash and surety bonds as determined by the
Secretary of Labor to guarantee compliance with prescribed recruitment procedures, rules and regulations, and terms
and conditions of employment as may be appropriate.
1) Republic v. Humanlink Manpower Consultants, Inc.
One of the roles of the POEA is the regulation and adjudication of private sector participation in the
recruitment and placement of overseas workers. Article 25 of the Labor Code, as amended, reads that
pursuant to national development objectives and in order to harness and maximize the use of private
sector resources and initiative in the development and implementation of a comprehensive employment
program, the private employment sector shall participate in the recruitment and placement of workers,
locally and overseas, under such guidelines, rules and regulations as may be issued by the Secretary
of Labor.
This is echoed in Article 35 of the Labor Code, as amended, and Section 23(b.l), R.A. No. 8042 as
amended by R.A. No. 9422, where the legislature empowered the DOLE and POEA to regulate private
sector participation in the recruitment and overseas placement of workers, to wit: The Secretary of
Labor shall have the power to suspend or cancel any license or authority to recruit employees for
overseas employment for violation of rules and regulations issued by the Secretary of Labor, the
Overseas Employment Development Board, and the National Seamen Board, or for violation of the
provisions of this and other applicable laws, General Orders and Letters of Instruction.
F. Prohibited Acts
ART. 34. Prohibited practices. - It shall be unlawful for any individual, entity, licensee, or holder of
authority:
(a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of
allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount greater than
that actually received by him as a loan or advance;
(b) To furnish or publish any false notice or information or document in relation to recruitment or
employment;
(c) To give any false notice, testimony, information or document or commit any act of misrepresentation
for the purpose of securing a license or authority under this Code.
(d) To induce or attempt to induce a worker already employed to quit his employment in order to offer
him to another unless the transfer is designed to liberate the worker from oppressive terms and conditions
of employment;
(e) To influence or to attempt to influence any person or entity not to employ any worker who has not
applied for employment through his agency;
(f) To engage in the recruitment or placement of workers in jobs harmful to public health or morality or
to the dignity of the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor or by his duly authorized
representatives;
(h) To fail to file reports on the status of employment, placement vacancies, remittance of foreign
exchange earnings, separation from jobs, departures and such other matters or information as may be
required by the Secretary of Labor.
 (i) To substitute or alter employment contracts approved and verified by the Department of Labor from
the time of actual signing thereof by the parties up to and including the periods of expiration of the same
without the approval of the Secretary of Labor;
(j) To become an officer or member of the Board of any corporation engaged in travel agency or to be
engaged directly or indirectly in the management of a travel agency; and
(k) To withhold or deny travel documents from applicant workers before departure for monetary or
financial considerations other than those authorized under this Code and its implementing rules and
regulations.
G. Illegal Recruitment
ART. 38. Illegal recruitment. -
(a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of this Code,
to be undertaken by non-licensees or non-holders of authority, shall be deemed illegal and punishable
under Article 39 of this Code. The Department of Labor and Employment or any law enforcement officer
may initiate complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction,
enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in
large scale if committed against three (3) or more persons individually or as a group.
(c) The Secretary of Labor and Employment or his duly authorized representatives shall have the power to
cause the arrest and detention of such non-licensee or non-holder of authority if after investigation it is
determined that his activities constitute a danger to national security and public order or will lead to further
exploitation of job-seekers. The Secretary shall order the search of the office or premises and seizure of
documents, paraphernalia, properties and other implements used in illegal recruitment activities and the
closure of companies, establishments and entities found to be engaged in the recruitment of workers for
overseas employment, without having been licensed or authorized to do so.
1) People v. Mateo
The offense of illegal recruitment in large scale has the following elements:
(1) the person charged undertook any recruitment activity as defined under Section 6 of RA 8042; (2)
accused did not have the license or the authority to lawfully engage in the recruitment of workers;
(3) accused committed the same against three or more persons individually or as a group.
Money is not material to a prosecution for illegal recruitment considering that the definition of "illegal
recruitment" under the law includes the phrase "whether for profit or not." Besides, even if there is no
receipt for the money given by the private complainants to appellants, the former's respective testimonies
and affidavits clearly narrate the latter's involvement in the prohibited recruitment.
Well-settled is the rule that a person convicted for illegal recruitment under the [law] may, for the same
acts, be separately convicted for estafa under Article 315, par. 2(a) of the [Revised Penal Code]. The
elements of estafa are:
(1) the accused defrauded another by abuse of confidence or by means of deceit; and
(2) the offended party or a third party suffered damage or prejudice capable of pecuniary estimation."
2) People v. Gallo
To commit syndicated illegal recruitment, three elements must be established:
1. the offender undertakes either any activity within the meaning of "recruitment and placement"
defined under Article 13(b), or any of the prohibited practices enumerated under Art. 34 of the
Labor Code;
2. he has no valid license or authority required by law to enable one to lawfully engage in recruitment
and placement of workers;
3. the illegal recruitment is committed by a group of three (3) or more persons conspiring or
confederating with one another.
When illegal recruitment is committed by a syndicate or in large scale, i.e., if it is committed against
three (3) or more persons individually or as a group, it is considered an offense involving economic
sabotage.
Under Art. 13(b) of the Labor Code, "recruitment and placement" refers to "any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract
services, promising or advertising for employment, locally or abroad, whether for profit or not".
Even with a license, however, illegal recruitment could still be committed under Section 6 of Republic Act
No. 8042 ("R.A. 8042"), otherwise known as the Migrants and Overseas Filipinos Act of 1995, viz:
Sec. 6. Definition. – For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, or procuring workers and includes referring,
contract services, promising or advertising for employment abroad, whether for profit or not, when
undertaken by a non-licensee or non-holder of authority contemplated under Article 13(f) of Presidential
Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines: Provided, That
any such non-licensee 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
act, 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;
(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and
processing for purposes of deployment and processing for purposes of deployment, in cases where
the deployment does not actually take place without the worker’s fault. Illegal recruitment when
committed by a syndicate or in large scale shall be considered an offense involving economic
sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring or confederating with one another. It is deemed committed in large scale if committed
against three (3) or more persons individually or as a group
The persons criminally liable for the above offenses are the principals, accomplices and accessories. In
case of juridical persons, the officers having control, management or direction of their business shall be
liable.
3) People v. Matheus
The offense of illegal recruitment in large scale has the following elements: (1) the person charged
undertook any recruitment activity as defined under Section 6 of RA 8042; (2) accused did not have the
license or the authority to lawfully engage in the recruitment of workers; and, (3) accused committed the
same against three or more persons individually or as a group. These elements are obtaining in this case.
 Illegal recruiters need not even expressly represent themselves to the victims as persons who have the
ability to send workers abroad. It is enough that these recruiters give the impression that they have the
ability to enlist workers for job placement abroad in order to induce the latter to tender payment of fees.
H. Enforcement and Sanction
1) Salazar v. Achacoso
Under the 1987 Constitution, which states:
“…. no search warrant or warrant of arrest shall issue except upon probable cause to be determined
personally by the judge after examination under oath or affirmation of the complainant and the witnesses
he may produce, and particularly describing the place to be searched and the persons or things to be
seized.”
The Secretary of Labor, not being a judge, may no longer issue search or arrest warrants. Hence, the
authorities must go through the judicial process. To that extent, we declare Article 38, paragraph (c), of
the Labor Code, unconstitutional and of no force and effect.
For the guidance of the bench and the bar, the SC reaffirm the following principles:
a. Under Article III, Section 2, of the l987 Constitution, it is only judges, and no other, who may issue
warrants of arrest and search.
b. The exception is in cases of deportation of illegal and undesirable aliens, whom the President or the
Commissioner of Immigration may order arrested, following a final order of deportation, for the
purpose of deportation.
2) Serrano v. Gallant Maritime Services, Inc.
There can never be a justification for any form of government action that alleviates the burden of one
sector, but imposes the same burden on another sector, especially when the favored sector is composed
of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs
whose protection no less than the Constitution commands. The idea that private business interest can be
elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies
vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to achieve
that purpose without infringing on the constitutional rights of OFWs.
I. Jurisdiction
i. Regional Trial Court for Criminal Action – Section 9, RA 8042
SEC. 9. VENUE. – A criminal action arising from illegal recruitment as defined herein shall be filed with
the Regional Trial Court of the province or city where the offense was committed or where the offended
party actually resides at the same time of the commission of the offense: Provided, That the court
where the criminal action is first filed shall acquire jurisdiction to the exclusion of other courts. Provided,
however, That the aforestated provisions shall also apply to those criminal actions that have already
been filed in court at the time of the effectivity of this Act.
ii. NLRC for Money Claims – Section 10, RA 8042
SEC. 10. MONEY CLAIMS. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have 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 relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
iii. POEA for Administrative and Disciplinary Actions – Section 28, Omnibus Implementing
Rules of RA 8042
Section 28. Jurisdiction of the POEA. –
The POEA shall exercise original and exclusive jurisdiction to hear and decide:
(a) all cases, which are administrative in character, involving or arising out of violations of rules and
regulations relating to licensing and registration of recruitment and employment agencies or entities;
and
(b) disciplinary action cases and other special cases, which are administrative in character, involving
employers, principals, contracting partners and Filipino migrant workers.
V. ALIEN EMPLOYMENT
Validity of Alien Employment Permit
− 1 year (and in no case shall exceed 5 years)
Suspension of Alien Employment Permit
a. continued stay may result in damage to the interest of the industry or the country
b. when it is suspended by the employer or by order of the Court
A. Articles 39-42 of the Labor Code
ART. 39. Penalties. -
(a) The penalty of life imprisonment and a fine of One Hundred Thousand Pesos (P1000,000.00) shall be
imposed if illegal recruitment constitutes economic sabotage as defined herein;
(b) Any licensee or holder of authority found violating or causing another to violate any provision of this
Title or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of
imprisonment of not less than two years nor more than five years or a fine of not less than P10,000 nor
more than P50,000, or both such imprisonment and fine, at the discretion of the court;
(c) Any person who is neither a licensee nor a holder of authority under this Title found violating any
provision thereof or its implementing rules and regulations shall, upon conviction thereof, suffer the
penalty of imprisonment of not less than four years nor more than eight years or a fine of not less than
P20,000 nor more than P100,000 or both such imprisonment and fine, at the discretion of the court;
(d) If the offender is a corporation, partnership, association or entity, the penalty shall be imposed upon
the officer or officers of the corporation, partnership, association or entity responsible for violation; and
if such officer is an alien, he shall, in addition to the penalties herein prescribed, be deported without
further proceedings;
(e) In every case, conviction shall cause and carry the automatic revocation of the license or authority
and all the permits and privileges granted to such person or entity under this Title, and the forfeiture of
the cash and surety bonds in favor of the Overseas Employment Development Board or the National
Seamen Board, as the case may be, both of which are authorized to use the same exclusively to promote
their objectives.
ART. 40. Employment permit of non-resident aliens. - Any alien seeking admission to the Philippines
for employment purposes and any domestic or foreign employer who desires to engage an alien for
employment in the Philippines shall obtain an employment permit from the Department of Labor.
The employment permit may be issued to a non-resident alien or to the applicant employer after a
determination of the non-availability of a person in the Philippines who is competent, able and willing at
the time of application to perform the services for which the alien is desired.
For an enterprise registered in preferred areas of investments, said employment permit may be issued upon
recommendation of the government agency charged with the supervision of said registered enterprise.
ART. 41. Prohibition against transfer of employment. - (a) After the issuance of an employment
permit, the alien shall not transfer to another job or change his employer without prior approval of the
Secretary of Labor.
(b) Any non-resident alien who shall take up employment in violation of the provision of this Title and its
implementing rules and regulations shall be punished in accordance with the provisions of Articles 289 and
290 of the Labor Code.
In addition, the alien worker shall be subject to deportation after service of his sentence.
ART. 42. Submission of list. - Any employer employing non-resident foreign nationals on the effective
date of this Code shall submit a list of such nationals to the Secretary of Labor within thirty (30) days after
such date indicating their names, citizenship, foreign and local addresses, nature of employment and status
of stay in the country. The Secretary of Labor shall then determine if they are entitled to an employment
permit.
C. Anti-Dummy Law
Aliens are prohibited to be employed in establishments or entities which have under their name or control
a right, franchise, privilege, property, or business, the exercise or enjoyment of which is expressly reserved
by the Philippine Constitution or the law to citizens of the Philippines or to corporations or associations at
least sixty per centum of the capital of which is owned by such citizens.
D. D.O. 146-15, Sections 2 and 11
Section 2. Persons Exempted From Securing an Alien Employment Permit
a. all members of the diplomatic services and foreign government officials
b. officers and staff of international organizations of which the Philippine government is a member
c. foreign nationals elected as members of the Governing Board who do not occupy any other position,
but have only voting rights in the corporation
d. all foreign nationals granted exemption by law
e. owners and representatives of foreign principals whose companied are accredited by the POEA
f. foreign nationals who come to the Philippines to teach, present, and/or conduct research studies in
universities and colleges
g. resident foreign nationals
Section 11. Denial of Application for New or Renewal of AEPnon-compliance with any of the
requirements or conditions of the Alien Employment Permit
a. misrepresentation of facts in the application
b. submission of falsified or tampered documents
c. meritorious objection or information against the employment of the foreign national
d. foreign national has a derogatory record
e. employer terminated the employment of the foreign national
1) Almodiel v. NLRC
Considering further that petitioner herein held a position which was definitely managerial in character,
Raytheon had a broad latitude of discretion in abolishing his position. An employer has a much wider
discretion in terminating employment relationship of managerial personnel compared to rank and file
employees.7 The reason obviously is that officers in such key positions perform not only functions which
by nature require the employer's full trust and confidence but also functions that spell the success or
failure of an enterprise.
Likewise destitute of merit is petitioner's imputation of unlawful discrimination when Raytheon caused
corollary functions appertaining to cost accounting to be absorbed by Danny Ang Tan Chai, a resident
alien without a working permit. Article 40 of the Labor Code which requires employment permit refers to
non-resident aliens. The employment permit is required for entry into the country for employment
purposes and is issued after determination of the non-availability of a person in the Philippines who is
competent, able and willing at the time of application to perform the services for which the alien is desired.
Since Ang Tan Chai is a resident alien, he does not fall within the ambit of the provision.
F. WPP Marketing Communications, Inc. v. Galera
Whether Galera is entitled to the monetary award
This is Galera’s dilemma: Galera worked in the Philippines without a proper work permit but now wants to
claim employee’s benefits under Philippine labor laws.
G. General Milling Corp. v. Torres
In the first place, the second paragraph of Article 40 says: "[t]he employment permit may be issued to a
non-resident alien or to the applicant employer after a determination of the non-availability of a person in
the Philippines who is competent, able and willing at the time of application to perform the services for
which the alien is desired."
The permissive language employed in the Labor Code indicates that the authority granted involves the
exercise of discretion on the part of the issuing authority (DOLE Secretary). This is in accordance also to
the statement of objectives set forth in Article 12 of the Labor Code that the Secretary of Labor must take
into account in exercising his authority:
e) To regulate the employment of aliens, including the establishment of a registration and/or work permit
system;
VI. HUMAN RESOURCES DEVELOPMENT
A. Articles 59-81 of the Labor Code
Art. 59. Qualifications of apprentice. To qualify as an apprentice, a person shall:
Be at least fifteen (15) years of age;
Possess vocational aptitude and capacity for appropriate tests; and
Possess the ability to comprehend and follow oral and written instructions.
Trade and industry associations may recommend to the Secretary of Labor appropriate educational
requirements for different occupations.
Art. 60. Employment of apprentices. Only employers in the highly technical industries may employ
apprentices and only in apprenticeable occupations approved by the Secretary of Labor and Employment.
(As amended by Section 1, Executive Order No. 111, December 24, 1986)
Art. 61. Contents of apprenticeship agreements. Apprenticeship agreements, including the wage rates
of apprentices, shall conform to the rules issued by the Secretary of Labor and Employment. The period of
apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage rates below the
legal minimum wage, which in no case shall start below 75 percent of the applicable minimum wage, may
be entered into only in accordance with apprenticeship programs duly approved by the Secretary of Labor
and Employment. The Department shall develop standard model programs of apprenticeship. (As amended
by Section 1, Executive Order No. 111, December 24, 1986)
Art. 62. Signing of apprenticeship agreement. Every apprenticeship agreement shall be signed by the
employer or his agent, or by an authorized representative of any of the recognized organizations,
associations or groups and by the apprentice.
An apprenticeship agreement with a minor shall be signed in his behalf by his parent or guardian, if the
latter is not available, by an authorized representative of the Department of Labor, and the same shall be
binding during its lifetime.
Every apprenticeship agreement entered into under this Title shall be ratified by the appropriate
apprenticeship committees, if any, and a copy thereof shall be furnished both the employer and the
apprentice.
Art. 63. Venue of apprenticeship programs. Any firm, employer, group or association, industry
organization or civic group wishing to organize an apprenticeship program may choose from any of the
following apprenticeship schemes as the training venue for apprentice:
Apprenticeship conducted entirely by and within the sponsoring firm, establishment or entity;
Apprenticeship entirely within a Department of Labor and Employment training center or other public
training institution; or
Initial training in trade fundamentals in a training center or other institution with subsequent actual work
participation within the sponsoring firm or entity during the final stage of training.
Art. 64. Sponsoring of apprenticeship program. Any of the apprenticeship schemes recognized herein
may be undertaken or sponsored by a single employer or firm or by a group or association thereof or by a
civic organization. Actual training of apprentices may be undertaken:
In the premises of the sponsoring employer in the case of individual apprenticeship programs;
In the premises of one or several designated firms in the case of programs sponsored by a group or
association of employers or by a civic organization; or
In a Department of Labor and Employment training center or other public training institution.
Art. 68. Aptitude testing of applicants. Consonant with the minimum qualifications of apprentice-
applicants required under this Chapter, employers or entities with duly recognized apprenticeship programs
shall have primary responsibility for providing appropriate aptitude tests in the selection of apprentices. If
they do not have adequate facilities for the purpose, the Department of Labor and Employment shall
perform the service free of charge.
Art. 70. Voluntary organization of apprenticeship programs; exemptions.
The organization of apprenticeship program shall be primarily a voluntary undertaking by employers;
When national security or particular requirements of economic development so demand, the President of
the Philippines may require compulsory training of apprentices in certain trades, occupations, jobs or
employment levels where shortage of trained manpower is deemed critical as determined by the Secretary
of Labor and Employment. Appropriate rules in this connection shall be promulgated by the Secretary of
Labor and Employment as the need arises; and
Where services of foreign technicians are utilized by private companies in apprenticeable trades, said
companies are required to set up appropriate apprenticeship programs.
Art. 71. Deductibility of training costs. An additional deduction from taxable income of one-half (1/2)
of the value of labor training expenses incurred for developing the productivity and efficiency of apprentices
shall be granted to the person or enterprise organizing an apprenticeship program: Provided, That such
program is duly recognized by the Department of Labor and Employment: Provided, further, That such
deduction shall not exceed ten (10%) percent of direct labor wage: and Provided, finally, That the person
or enterprise who wishes to avail himself or itself of this incentive should pay his apprentices the minimum
wage.
Art. 72. Apprentices without compensation. The Secretary of Labor and Employment may authorize
the hiring of apprentices without compensation whose training on the job is required by the school or
training program curriculum or as requisite for graduation or board examination.
Art. 73. Learners defined. Learners are persons hired as trainees in semi-skilled and other industrial
occupations which are non-apprenticeable and which may be learned through practical training on the job
in a relatively short period of time which shall not exceed three (3) months.
Art. 74. When learners may be hired. Learners may be employed when no experienced workers are
available, the employment of learners is necessary to prevent curtailment of employment opportunities,
and the employment does not create unfair competition in terms of labor costs or impair or lower working
standards.
Art. 75. Learnership agreement. Any employer desiring to employ learners shall enter into a learnership
agreement with them, which agreement shall include:
The names and addresses of the learners;
The duration of the learnership period, which shall not exceed three (3) months;
The wages or salary rates of the learners which shall begin at not less than seventy-five percent (75%) of
the applicable minimum wage; and
A commitment to employ the learners if they so desire, as regular employees upon completion of the
learnership. All learners who have been allowed or suffered to work during the first two (2) months shall
be deemed regular employees if training is terminated by the employer before the end of the stipulated
period through no fault of the learners.
The learnership agreement shall be subject to inspection by the Secretary of Labor and Employment or his
duly authorized representative.
Art. 76. Learners in piecework. Learners employed in piece or incentive-rate jobs during the training
period shall be paid in full for the work done.
VII. TRAINING AND EMPLOYMENT OF SPECIAL WORKERS
A. Apprentice
i. Article 58 of the Labor Code
Art. 58. Definition of Terms. As used in this Title:
“Apprenticeship” means practical training on the job supplemented by related theoretical instruction.
An “apprentice” is a worker who is covered by a written apprenticeship agreement with an individual
employer or any of the entities recognized under this Chapter.
An “apprenticeable occupation” means any trade, form of employment or occupation which requires
more than three (3) months of practical training on the job supplemented by related theoretical
instruction.
“Apprenticeship agreement” is an employment contract wherein the employer binds himself to train the
apprentice and the apprentice in turn accepts the terms of training.
ii. RA 7796, Section 4 (j),(k),(l), and (m)
j. “Apprenticeship” training within employment with compulsory related theoretical instructions
involving a contract between an apprentice and an employer on an approved apprenticeable
occupation;
k. “Apprentice” is a person undergoing training for an approved apprenticeable occupation during an
established period assured by an apprenticeship agreement;
 l. “Apprenticeship Agreement” is a contract wherein a prospective employer binds himself to train the
apprentice who in turn accepts the terms of training for a recognized apprenticeable occupation
emphasizing the rights, duties and responsibilities of each party;
m. “Apprenticeable Occupation” is an occupation officially endorsed by a tripartite body and approved
for apprenticeship by the Authority;
iii. Child Abuse Law for Children below 15 years of age
Section 12. Employment of Children. – Children below fifteen (15) years of age may be employed
except:
When a child works directly under the sole responsibility of his parents or legal guardian and where only
members of the employer's family are employed: Provided, however, That his employment neither
endangers his life, safety and health and morals, nor impairs his normal development: Provided, further,
That the parent or legal guardian shall provide the said minor child with the prescribed primary and/or
secondary education; or
When a child's employment or participation in public & entertainment or information through cinema,
theater, radio or television is essential: Provided, The employment contract concluded by the child's
parent or guardian, with the express agreement of the child concerned, if possible, and the approval of
the Department of Labor and Employment: Provided, That the following requirements in all instances are
strictly complied with:
The employer shall ensure the protection, health, safety and morals of the child;
the employer shall institute measures to prevent the child's exploitation or discrimination taking into
account the system and level of remuneration, and the duration and arrangement of working time; and;
The employer shall formulate and implement, subject to the approval and supervision of competent
authorities, a continuing program for training and skill acquisition of the child.
In the above exceptional cases where any such child may be employed, the employer shall first secure,
before engaging such child, a work permit from the Department of Labor and Employment which shall
ensure observance of the above requirement.
rates below the legal minimum wage, which in no case shall start below 75 percent of the applicable
minimum wage, may be entered into only in accordance with apprenticeship programs duly approved
by the Minister of Labor and Employment. The Ministry shall develop standard model programs of
apprenticeship.
The apprenticeship agreement between petitioner and private respondent was executed on July 17,
1997 and the training started on the same day. Petitioner submitted its apprenticeship program for
approval only on July 25, 1997 and was approved on September 26, 1997. Clearly, the apprenticeship
agreement was enforced even before the TESDA approved petitioner's apprenticeship program. Thus,
the apprenticeship agreement is void because it lacked prior approval from the TESDA. Prior approval
from the TESDA is necessary to ensure that only employers in the highly technical industries may
employ apprentices and only in apprenticeable occupations. Thus, under RA 7796, employers can only
hire apprentices for apprenticeable occupations which must be officially endorsed by a tripartite body
and approved for apprenticeship by the TESDA.
Prior approval by the Department of Labor and Employment of the proposed apprenticeship program
is, therefore, a condition sine qua non before an apprenticeship agreement can be validly entered into.
2) Nitto Enterprises v. NLRC
Capili is a regular employee. Apprenticeship needs DOLE’s prior approval, or apprentice becomes
regular employee. Nitto did not comply with the requirements of the Art 61 of the Labor Code. It is
mandated that apprenticeship agreements entered into by the employer and apprentice shall be entered
only in accordance with the apprenticeship program duly approved by the Minister of Labor and
Employment.
Prior approval by the Department of Labor and Employment of the proposed apprenticeship program
is, therefore, a condition sine quo non” before an apprenticeship agreement can be validly entered into.
The act of filing the proposed apprenticeship program with the Department of Labor and Employment
is a preliminary step towards its final approval and does not instantaneously give rise to an employer-
apprentice relationship.
3) Atlanta Industries v. Sebolino

The Department of Labor Employment shall promulgate rules and regulations necessary for the effective
implementation of this Section.
Section 14. Prohibition on the Employment of Children in Certain Advertisements. – No person
shall employ child models in all commercials or advertisements promoting alcoholic beverages,
intoxicating drinks, tobacco and its byproducts and violence.
iv.
1) Century Canning Corp. v. Court of Appeals
1.
Labor Code defines an apprentice as a worker who is covered by a written apprenticeship agreement
with an employer. One of the objectives of Title II (Training and Employment of Special Workers) of
the Labor Code is to establish apprenticeship standards for the protection of apprentices.
ART. 60. Employment of apprentices. - Only employers in the highly technical industries may employ
apprentices and only in apprenticeable occupations approved by the Minister of Labor and Employment.
ART. 61. Contents of apprenticeship agreements. - Apprenticeship agreements, including the wage
rates of apprentices, shall conform to the rules issued by the Minister of Labor and Employment. The
period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage
With the expiration of the first agreement and the retention of the employees, Atlanta had, to all intents
and purposes, recognized the completion of their training and their acquisition of a regular employee
status. To foist upon them the second apprenticeship agreement for a second skill which was not even
mentioned in the agreement itself, is a violation of the Labor Code’s implementing rules and is an act
manifestly unfair to the employees, to say the least. This we cannot allow.
Conditions of Employment
Articles 61, 72, and 124 of the Labor Code
Art. 61. Contents of apprenticeship agreements. Apprenticeship agreements, including the wage
rates of apprentices, shall conform to the rules issued by the Secretary of Labor and Employment. The
period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage
rates below the legal minimum wage, which in no case shall start below 75 percent of the applicable
minimum wage, may be entered into only in accordance with apprenticeship programs duly approved
by the Secretary of Labor and Employment. The Department shall develop standard model programs
of apprenticeship. (As amended by Section 1, Executive Order No. 111, December 24, 1986)
Art. 72. Apprentices without compensation. The Secretary of Labor and Employment may As used herein, a wage distortion shall mean a situation where an increase in prescribed wage rates
authorize the hiring of apprentices without compensation whose training on the job is required by the results in the elimination or severe contraction of intentional quantitative differences in wage or salary
school or training program curriculum or as requisite for graduation or board examination. rates between and among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of service, or other logical bases
Art. 124. Standards/Criteria for minimum wage fixing. The regional minimum wages to be of differentiation.
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain
the minimum standards of living necessary for the health, efficiency and general well-being of the All workers paid by result, including those who are paid on piecework, takay, pakyaw or task basis,
employees within the framework of the national economic and social development program. In the shall receive not less than the prescribed wage rates per eight (8) hours of work a day, or a proportion
determination of such regional minimum wages, the Regional Board shall, among other relevant factors, thereof for working less than eight (8) hours.
consider the following:
1. The demand for living wages; All recognized learnership and apprenticeship agreements shall be considered automatically modified
2. Wage adjustment vis-à-vis the consumer price index; insofar as their wage clauses are concerned to reflect the prescribed wage rates. (As amended by
3. The cost of living and changes or increases therein; Republic Act No. 6727, June 9, 1989)
4. The needs of workers and their families;
5. The need to induce industries to invest in the countryside; v. Enforcement
6. Improvements in standards of living;
1. Articles 65-67 of the Labor Code
7. The prevailing wage levels;
8. Fair return of the capital invested and capacity to pay of employers; Art. 65. Investigation of violation of apprenticeship agreement. Upon complaint of any interested person or upon
9. Effects on employment generation and family income; and its own initiative, the appropriate agency of the Department of Labor and Employment or its authorized representative
10. The equitable distribution of income and wealth along the imperatives of economic and social shall investigate any violation of an apprenticeship agreement pursuant to such rules and regulations as may be
development. prescribed by the Secretary of Labor and Employment.

Art. 66. Appeal to the Secretary of Labor and Employment. The decision of the authorized agency of the
The wages prescribed in accordance with the provisions of this Title shall be the standard prevailing
Department of Labor and Employment may be appealed by any aggrieved person to the Secretary of Labor and
minimum wages in every region. These wages shall include wages varying with industries, provinces Employment within five (5) days from receipt of the decision. The decision of the Secretary of Labor and Employment
or localities if in the judgment of the Regional Board, conditions make such local differentiation proper shall be final and executory.
and necessary to effectuate the purpose of this Title.
Art. 67. Exhaustion of administrative remedies. No person shall institute any action for the enforcement of any
Any person, company, corporation, partnership or any other entity engaged in business shall file and apprenticeship agreement or damages for breach of any such agreement, unless he has exhausted all available
register annually with the appropriate Regional Board, Commission and the National Statistics Office, administrative remedies.
an itemized listing of their labor component, specifying the names of their workers and employees
B. Learners
below the managerial level, including learners, apprentices and disabled/handicapped workers who
were hired under the terms prescribed in the employment contracts, and their corresponding salaries
Art. 73. Learners defined. Learners are persons hired as trainees in semi-skilled and other industrial
and wages.
occupations which are non-apprenticeable and which may be learned through practical training on the job
in a relatively short period of time which shall not exceed three (3) months.
Where the application of any prescribed wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and
APPRENTICES LEARNERS
the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be
− trained in apprenticeable occupations − trained in non-apprenticeable
resolved through the grievance procedure under their collective bargaining agreement and, if it remains
occupations
unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such
− full minimum wage instead of not less − always paid at not less than 75% of the
dispute shall be decided by the voluntary arbitrators within ten (10) calendar days from the time said
than 75% of the applicable minimum applicable minimum wage
dispute was referred to voluntary arbitration.
wage
In cases where there are no collective agreements or recognized labor unions, the employers and − if the training is a prerequisite to − paid in full work for done
workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled graduation or a requirement to taking
through the National Conciliation and Mediation Board and, if it remains unresolved after ten (10) the government board examination, the
calendar days of conciliation, shall be referred to the appropriate branch of the National Labor Relations hiring of apprentices without
Commission (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the compensation is authorized
dispute within twenty (20) calendar days from the time said dispute is submitted for compulsory − may be employed even when there are − may be employed only when there are
arbitration. experienced workers available no experienced workers available (to
preclude curtailment of job
The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of opportunities)
any increase in prescribed wage rates pursuant to the provisions of law or wage order. − must be 15 years of age − no age requirement needed
− highly skilled industry − semi-skiled industry
 − 6 months − 3 months
C. Handicapped Workers
i. Articles 78-81 of the Labor Code
Art. 78. Definition. Handicapped workers are those whose earning capacity is impaired by age or
physical or mental deficiency or injury.
Art. 79. When employable. Handicapped workers may be employed when their employment is
necessary to prevent curtailment of employment opportunities and when it does not create unfair
competition in labor costs or impair or lower working standards.
Art. 80. Employment agreement. Any employer who employs handicapped workers shall enter into
an employment agreement with them, which agreement shall include:
The names and addresses of the handicapped workers to be employed;
The rate to be paid the handicapped workers which shall not be less than seventy five (75%) percent
of the applicable legal minimum wage;
The duration of employment period; and
The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary of Labor or his duly
authorized representative.
Art. 81. Eligibility for apprenticeship. Subject to the appropriate provisions of this Code,
handicapped workers may be hired as apprentices or learners if their handicap is not such as to
effectively impede the performance of job operations in the particular occupations for which they are
hired.
1) Bernardo v. NLRC
The Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given
the same terms and conditions of employment as a qualified able-bodied person: “Section 5. Equal
Opportunity for Employment.--No disabled person shall be denied access to opportunities for suitable
employment. A qualified disabled employee shall be subject to the same terms and conditions of
employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances
as a qualified able bodied person." Since the Magna Carta accords them the rights of qualified able-
bodied persons, they are thus covered by Article 280 of the Labor Code.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of
respondent bank. With the exception of sixteen of them, petitioners performed these tasks for more
than six months. Thus, the following twenty-seven petitioners should be deemed regular employees
Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent
casuals of our lowly employees by the simple expedient of extending to them probationary
appointments, ad infinitum."
In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work. The
eloquent proof of this statement is the repeated renewal of their employment contracts. Why then
should they be dismissed, simply because they are physically impaired?
VIII. WORKING CONDITIONS AND REST PERIOD
Article 82 of the Labor Code
Article 82. Coverage. The provisions of this Title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic helpers,
persons in the personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those whose primary duty consists of the management of
the establishment in which they are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff.
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from
the principal place of business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty.
A. Exempt from Coverage
i. Government Employees
− those employed by the National Government or any of its political subdivisions including those
employed in government-owned or controlled corporations
1) Article IX(B), Section 2(1) of the 1987 Constitution
Section 2. (1) The civil service embraces all branches, subdivisions, instrumentalities, and agencies of
the Government, including government-owned or controlled corporations with original charters.
2) Carlos v. Villegas
This Court has explicitly declared that the Eight-Hour Labor Law was not intended to apply to civil
service employees who are still governed by the above provisions of the Revised Administrative Code.
As there appears to be no debate over the employment of petitioner-appellant and the other firemen
similarly situated as falling under the civil service, they being employees of the City of Manila, a
municipal corporation, in its governmental capacity, We perceive no reason to deviate from said ruling.
And as We hold that the above sections of the Revised Administrative Code are still legally in force, it
necessarily follows that Rule XV, section 3 of the Civil Service Rules, a similar provision promulgated
pursuant to that of Section 16(e) of the Civil Service Act of 1959 (Republic Act No. 2260) is likewise
applicable to petitioner-appellant. Said provision reads:.
SEC. 3. When the nature of the duties to be performed or the interest of the public service so requires,
the head of any Department or agency may extend the daily hours of work specified for any or all the
employees under him, and such extension shall be without additional compensation unless otherwise
provided by law. Office and employees may be required by the head of the Department or agency to
work on Saturdays, Sundays and public holidays also, without additional compensation unless otherwise
specifically authorized by law.
It needs no lengthy explanation that the nature of work of a fireman requires him to be always on the
alert to respond to fire alarms which may occur at any time of the day, for the exigency of the service
necessitates a round-the-clock observance of his duties, which situation excepts him from the
applicability of Section 562 of the Revised Administrative Code, as amended by Republic Act 18809 the
Forty-Hour a Week Work Law, which provides, in part: .1äwphï1.ñët
ii. Managerial Employee
− refer to those whose primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff.
1) Omnibus Rules, Book III, Rule 1, Section 2(b) & (c)
SECTION 2. Exemption. — The provisions of this Rule shall not apply to the following persons
if they qualify for exemption under the conditions set forth herein:
(b) Managerial employees, if they meet all of the following conditions: (1) Their primary duty
consists of the management of the establishment in which they are employed or of a department
or sub-division thereof. (2) They customarily and regularly direct the work of two or more
employees therein.
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities: (1) The primary duty consists of the performance of work directly related to
management policies of their employer; (2) Customarily and regularly exercise discretion and
independent judgment; and (3) (i) Regularly and directly assist a proprietor or a managerial
employee whose primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work along specialized
or technical lines requiring special training, experience, or knowledge; or (iii) execute, under
general supervision, special assignments and tasks; and (4) Who do not devote more than
20 percent of their hours worked in a work week to activities which are not directly and
closely related to the performance of the work described in paragraphs (1), (2) and (3) above.
2) San Miguel Corporation v. Layoc
Article 82 of the Labor Code states that the provisions of the Labor Code on working conditions and
rest periods shall not apply to managerial employees. The other provisions in the Title include normal
hours of work (Article 83), hours worked (Article 84), meal periods (Article 85), night shift differential
(Article 86), overtime work (Article 87), undertime not offset by overtime (Article 88), emergency
overtime work (Article 89), and computation of additional compensation (Article 90). It is thus clear
that, generally, managerial employees such as respondents are not entitled to overtime pay for services
rendered in excess of eight hours a day. Respondents failed to show that the circumstances of the
present case constitute an exception to this general rule.
We agree with petitioners’ position that given the discretion granted to the various divisions of SMC in
the management and operation of their respective businesses and in the formulation and
implementation of policies affecting their operations and their personnel, the "no time card policy"
affecting all of the supervisory employees of the Beer Division is a valid exercise of management
prerogative. The "no time card policy" undoubtedly caused pecuniary loss to respondents. However,
petitioners granted to respondents and other supervisory employees a 10% across-the-board increase
in pay and night shift allowance, in addition to their yearly merit increase in basic salary, to cushion
the impact of the loss. So long as a company’s management prerogatives are exercised in good faith
for the advancement of the employer’s interest and not for the purpose of defeating or circumventing
the rights of the employees under special laws or under valid agreements, this Court will uphold them.
3) Nawasa v. NWSA Consolidated Union
It is to be noted, however, that in the case at bar it has been stipulated that prior to the enactment of
Republic Act No. 1880, providing for the implementation of the 40-Hour Week Law, the Metropolitan
Water district had been paying 25% additional compensation for work on Sundays and legal holidays
to its employees and laborers by virtue of Resolution No. 47, series of 1948, of its board of Directors,
which practice was continued by the NAWASA when the latter took over the service. And in the collective
bargaining agreement entered into between the NAWASA and respondent unions it was agreed that all
existing benefit enjoyed by the employees and laborers prior to its effectivity shall remain in force and
shall form part of the agreement, among which certainly is the 25% additional compensation for work
on Sundays and legal holidays theretofore enjoyed by said laborers and employees. It may, therefore,
be said that while under Commonwealth Act No. 444 a public utility is not required to pay additional
compensation to its employees and workers for work done on Sundays and legal holidays, there is,
however, no prohibition for it to pay such additional compensation if it voluntarily agrees to do so. The
NAWASA committed itself to pay it additional compensation. It must pay not because of compulsion of
law but because of contractual obligation.
(2) The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth Act 444 it is not
obliged to pay an additional sum of 25% to its laborers for work done on Sundays and legal holidays,
yet it must pay additional compensation by virtue of the contractual obligation it assumed of under the
collective bargaining agreement;
4) National Sugar Refinery Corp. v. NLRC
It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, 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 authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All employees not falling within any of those
above definitions are considered rank-and-file employees of this Book."
"As used herein, 'managerial employees' refer to those whose primary duty consists of the management
of the establishment in which they are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff." (Emphasis supplied.)
'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify
for exemption under the condition set forth herein:
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status
of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of
their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general supervision special assignments
and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and
above."
While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of labor.
Management also has its own rights which, as such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined
more often than not toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the applicable law and doctrine. 5
Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits
which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law
requires prior compliance with the conditions set forth therein. With the promotion of the members of
respondent union, they occupied positions which no longer met the requirements imposed by law. Their
assumption of these positions removed them from the coverage of the law, ergo, their exemption
therefrom. If the union members really wanted to continue receiving the benefits which attach to their
former positions, there was nothing to prevent them from refusing to accept their promotions and their
corresponding benefits.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of
management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted implementing the JE Program. There is
no showing that the JE Program was intended to circumvent the law and deprive the members of
respondent union of the benefits they used to receive.
5) Penarada v. Baganga Plywood
Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards.
Labor standards provide the working conditions of employees, including entitlement to overtime pay
and premium pay for working on rest days.29 Under this provision, managerial employees are "those
whose primary duty consists of the management of the establishment in which they are employed or
of a department or subdivision."30
The Implementing Rules of the Labor Code state that managerial employees are those who meet the
following conditions:
"(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof;
"(2) They customarily and regularly direct the work of two or more employees therein;
"(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight."31
The Court disagrees with the NLRC’s finding that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also takes him out of the coverage of labor
standards. Like managerial employees, officers and members of the managerial staff are not entitled
to the provisions of law on labor standards.32 The Implementing Rules of the Labor Code define
members of a managerial staff as those with the following duties and responsibilities:
"(1) The primary duty consists of the performance of work directly related to management policies of
the employer;
"(2) Customarily and regularly exercise discretion and independent judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists
of the management of the establishment in which he is employed or subdivision thereof; or (ii) execute
under general supervision work along specialized or technical lines requiring special training,
experience, or knowledge; or (iii) execute under general supervision special assignments and tasks;
and
"(4) who do not devote more than 20 percent of their hours worked in a workweek to activities which
are not directly and closely related to the performance of the work described in paragraphs (1), (2),
and (3) above."33
Petitioner was a member of the managerial staff. His duties and responsibilities conform to the definition
of a member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing
the operation of the machines and the performance of the workers in the engineering section. This work
necessarily required the use of discretion and independent judgment to ensure the proper functioning
of the steam plant boiler. As supervisor, petitioner is deemed a member of the managerial staff.
iii. Field Personnel
− those 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.
1) Omnibus Rules, Book III, Rule I, Section 2(f)
Section 2(f). Non-agricultural field personnel if they regularly perform their duties away from
the principal or branch office or place of business of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
2) Far East Agricultural Supply, Inc. v. Lebatique
The records show that petitioners failed to prove that Lebatique abandoned his job. Nor was there a
showing of a clear intention on the part of Lebatique to sever the employer-employee relationship.
When Lebatique was verbally told by Alexander Uy, the company’s General Manager, to look for another
job, Lebatique was in effect dismissed. Even assuming earlier he was merely suspended for illegal use
of company vehicle, the records do not show that he was afforded the opportunity to explain his side.
It is clear also from the sequence of the events leading to Lebatique’s dismissal that it was Lebatique’s
complaint for nonpayment of his overtime pay that provoked the management to dismiss him, on the
erroneous premise that a truck driver is a field personnel not entitled to overtime pay.
On the second issue, Article 82 of the Labor Code is decisive on the question of who are referred to by
the term "field personnel." It provides, as follows:
ART. 82. Coverage. - The provisions of this title [Working Conditions and Rest Periods] shall apply to
employees in all establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the personal service of another, and
workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of work
in the field cannot be determined with reasonable certainty.
As correctly found by the Court of Appeals, Lebatique is not a field personnel as defined above for the
following reasons: (1) company drivers, including Lebatique, are directed to deliver the goods at a
specified time and place; (2) they are not given the discretion to solicit, select and contact prospective
clients; and (3) Far East issued a directive that company drivers should stay at the client’s premises
during truck-ban hours which is from 5:00 to 9:00 a.m. and 5:00 to 9:00 p.m.14 Even petitioners
admit that the drivers can report early in the morning, to make their deliveries, or in the afternoon,
depending on the production of animal feeds.15 Drivers, like Lebatique, are under the control and
supervision of management officers. Lebatique, therefore, is a regular employee whose tasks are
usually necessary and desirable to the usual trade and business of the company. Thus, he is entitled to
the benefits accorded to regular employees of Far East, including overtime pay and service incentive
leave pay.
3) Union of Filipro Employes v. Vivar, Jr.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as
"non-agritultural 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."
The requirement for the salesmen and other similarly situated employees to report for work at the
office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined
in the Code but an exercise of purely management prerogative of providing administrative control over
such personnel. This does not in any manner provide a reasonable level of determination on the actual
field work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen
and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home
station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface
projection.
Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable
certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage — This rule shall apply to all employees except:
(e) Field personnel and other employees whose time and performance is unsupervised by the employer
. . . (Emphasis supplied)
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales
target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses precisely because of
the difficulty in measuring their actual hours of field work. These employees are evaluated by the result
of their work and not by the actual hours of field work which are hardly susceptible to determination.
4) Mercidar Fishing Corp. v. NLRC
Art. 82 of the Labor Code provides:
Art. 82. Coverage. — The provisions of this Title [Working Conditions and Rest Periods] shall apply to
employees in all establishments and undertakings whether for profit or not, but not to government
employees, field personnel, members of the family of the employer who are dependent on him for
support, domestic helpers, persons in the personal service of another, and workers who are paid by
results as determined by the Secretary of Labor in appropriate regulations.
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of work
in the field cannot be determined with reasonable certainty.
In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen employed by
petitioner have no choice but to remain on board its vessel. Although they perform non-agricultural
work away from petitioner's business offices, the fact remains that throughout the duration of their
work they are under the effective control and supervision of petitioner through the vessel's patron or
master as the NLRC correctly held. Neither did petitioner gravely abuse its discretion in ruling that
private respondent had constructively been dismissed by petitioner.
5) Dasco v. Philtranco Service Enterprises
As a general rule, [field personnel] are those whose performance of their job/service is not supervised
by the employer or his representative, the workplace being away from the principal office and whose
hours and days of work cannot be determined with reasonable certainty; hence, they are paid specific
amount for rendering specific service or performing specific work. If required to be at specific places at
specific times, employees including cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee.
x x x At this point, it is necessary to stress that the definition of a "field personnel" is not merely
concerned with the location where the employee regularly performs is unsupervised by the employer.
As discussed above, field personnel are those who regularly perform their duties away from the principal
place of business of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is
also necessary to ascertain if actual hours of work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s
time and performance are constantly supervised by the employer.31
Guided by the foregoing norms, the NLRC properly concluded that the petitioners are not field personnel
but regular employees who perform tasks usually necessary and desirable to the respondents’ business.
Evidently, the petitioners are not field personnel as defined above and the NLRC’s finding in this regard
is supported by the established facts of this case: (1) the petitioners, as bus drivers and/or conductors,
are directed to transport their passengers at a specified time and place; (2) they are not given the
discretion to select and contract with prospective passengers; (3) their actual work hours could be
determined with reasonable certainty, as well as their average trips per month; and (4) the respondents
supervised their time and performance of duties.
In order to monitor their drivers and/or conductors, as well as the passengers and the bus itself, the
bus companies put checkers, who are assigned at tactical places along the travel routes that are plied
by their buses. The drivers and/or conductors are required to be at the specific bus terminals at a
specified time. In addition, there are always dispatchers in each and every bus terminals, who supervise
and ensure prompt departure at specified times and arrival at the estimated proper time. Obviously,
these drivers and/or conductors cannot be considered as field personnel because they are under control
and constant supervision of the bus companies while in the performance of their work.
iv. Members of the Family
1) Article 150 of the Family Code
Art. 150. Family relations include those:
(1) Between husband and wife;
(2) Between parents and children;
(3) Among brothers and sisters, whether of the full or halfblood. (217a)
v. Persons in the Personal Service of Another
1) Omnibus Rules, Book III, Rule I, Sec. 2(d)
(d) Domestic servants and persons in the personal service of another if they perform such
services in the employer's home which are usually necessary or desirable for the maintenance and
enjoyment thereof, or minister to the personal comfort, convenience, or safety of the employer as well
as the members of his employer's household.
a. Ultra Villa Food Haus v. Geniston
We find that private respondent was indeed the personal driver of petitioner, and not an employee of
the Ultra Villa Food Haus. There is substantial evidence to support such conclusion.
 Accordingly, the terms and conditions of private respondent's employment are governed by Chapter
III, Title III, Book III of the Labor Code 12 as well as by the pertinent provisions of the Civil Code.13
Thus, Article 141 of the Labor Code provides:
Art. 141. Coverage. — This Chapter shall apply to all persons rendering services in households for
compensation.
Domestic or household service" shall mean services in the employers home which is usually necessary
or desirable for the maintenance and enjoyment thereof and includes ministering to the personal
comfort and convenience of the members of the employers household, including services of family
drivers. (Emphasis supplied.)
Chapter III, Title III, Book III, however, is silent on the grant of overtime pay, holiday pay, premium
pay and service incentive leave to those engaged in the domestic or household service.
Moreover, the specific provisions mandating these benefits are found in Book III, Title I of the Labor
Code,14 and Article 82, which defines the scope of the application of these provisions, expressly
excludes domestic helpers from its coverage:
Art. 82. Coverage. — The provision of this title shall apply to employees in all establishments and
undertakings whether for profit or not; but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate regulations.
2) Domestic helpers
a. Batas Kasambahay (RA 10361)
Section 32. Termination of Service. – Neither the domestic worker nor the employer may
terminate the contract before the expiration of the term except for grounds provided for in Sections
33 and 34 of this Act. If the domestic worker is unjustly dismissed, the domestic worker shall be paid
the compensation already earned plus the equivalent of fifteen (15) days work by way of indemnity.
If the domestic worker leaves without justifiable reason, any unpaid salary due not exceeding the
equivalent fifteen (15) days work shall be forfeited. In addition, the employer may recover from the
domestic worker costs incurred related to the deployment expenses, if any: Provided, That the service
has been terminated within six (6) months from the domestic worker’s employment.
If the duration of the domestic service is not determined either in stipulation or by the nature of the
service, the employer or the domestic worker may give notice to end the working relationship five
(5) days before the intended termination of the service.
The domestic worker and the employer may mutually agree upon written notice to pre-terminate the
contract of employment to end the employment relationship.
Section 33. Termination Initiated by the Domestic Worker. – The domestic worker may
terminate the employment relationship at any time before the expiration of the contract for any of
the following causes:
(a) Verbal or emotional abuse of the domestic worker by the employer or any member of the
household;
(b) Inhuman treatment including physical abuse of the domestic worker by the employer or any
member of the household;
(c) Commission of a crime or offense against the domestic worker by the employer or any member
of the household;
(d) Violation by the employer of the terms and conditions of the employment contract and other
standards set forth under this law;
(e) Any disease prejudicial to the health of the domestic worker, the employer, or member/s of the
household; and
(f) Other causes analogous to the foregoing.
Section 34. Termination Initiated by the Employer. – An employer may terminate the services
of the domestic worker at any time before the expiration of the contract, for any of the following
causes:
(a) Misconduct or willful disobedience by the domestic worker of the lawful order of the employer in
connection with the former’s work;
(b) Gross or habitual neglect or inefficiency by the domestic worker in the performance of duties;
(c) Fraud or willful breach of the trust reposed by the employer on the domestic worker;
(d) Commission of a crime or offense by the domestic worker against the person of the employer or
any immediate member of the employer’s family;
(e) Violation by the domestic worker of the terms and conditions of the employment contract and
other standards set forth under this law;
(f) Any disease prejudicial to the health of the domestic worker, the employer, or member/s of the
household; and
(g) Other causes analogous to the foregoing.
b. Apex Mining Co., Inc. v. NLRC
Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or
"domestic servant" are defined as follows:
The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer
to any person, whether male or female, who renders services in and about the employer's home and
which services are usually necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the employer's family.
The foregoing definition clearly contemplates such househelper or domestic servant who is employed
in the employer's home to minister exclusively to the personal comfort and enjoyment of the
employer's family. Such definition covers family drivers, domestic servants, laundry women, yayas,
gardeners, houseboys and other similar househelps.

The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of
a company, like petitioner who attends to the needs of the company's guest and other persons
availing of said facilities. The mere fact that the househelper or domestic servant is working within
the premises of the business of the employer and in relation to or in connection with its business, as
in its staffhouses for its guest or even for its officers and employees, warrants the conclusion that
such househelper or domestic servant is and should be considered as a regular employee of the
employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII,
Section l(b), Book 3 of the Labor Code, as amended.
vi. Workers Paid by Results
1) Omnibus Rules, Book III, Rule VII, Section 9
SECTION 9. Workers Paid by Results. —
a) All workers paid by results, including those who are paid on piecework, takay, pakyaw, or task
basis, shall receive not less than the applicable statutory minimum wage rates prescribed under the
 Act for the normal working hours which shall not exceed eight hours work a day, or a proportion
thereof for work of less than the normal working hours.
b) The wage rates of workers who are paid by results shall continue to be established in accordance
with Article 101 of the Labor Code, as amended and its implementing regulations.
2) David v. Macasio
ii.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage
payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is
on the task itself, in the sense that payment is reckoned in terms of completion of the work, not in
terms of the number of time spent in the completion of work.45 Once the work or task is completed,
the worker receives a fixed amount as wage, without regard to the standard measurements of time
generally used in pay computation.
In Macasio’s case, these circumstances show a "pakyaw" or task basis engagement that all three
tribunals uniformly found. In sum, the existence of employment relationship between the parties is
determined by applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine
the parties’ relationship as it is simply a method of pay computation. Accordingly, Macasio is David’s
employee, albeit engaged on "pakyaw" or task basis.
B. Work Hours
Article 84. Hours worked. Hours worked shall include (a) all time during which an employee is required
to be on duty or to be at a prescribed workplace; and (b) all time during which an employee is suffered
or permitted to work.
Rest periods of short duration during working hours shall be counted as hours worked.
i. Rationale
1) Manila Terminal Co., Inc. v. NLRC
"A contract of employment, which provides for a weekly wage for a specified number of hours, sufficient
to cover both the statutory minimum wage and overtime compensation, if computed on the basis of
the statutory minimum wage, and which makes no provision for a fixed hourly rate or that the weekly
wage includes overtime compensation, does not meet the requirements of the Act."
The principle of estoppel and the laches cannot well be invoked against the Association. In the first
place, it would be contrary to the spirit of the Eight Hour Labor Law, under which as already seen, the
laborers cannot waive their right to extra compensation. In the second place, the law principally
obligates the employer to observe it, so much so that it punishes the employer for its violation and
leaves the employee or laborer free and blameless. In the third place, the employee or laborer is in
such a disadvantageous position as to be naturally reluctant or even apprehensive in asserting any
claim which may cause the employer to devise a way for exercising his right to terminate the
employment.
The employee in rendering extra service at the request of his employer has a right to assume that the
latter has complied with the requirement of the law, and therefore has obtained the required permission
from the Department of Labor.
Moreover, the Eight-Hour Law, in providing that "any agreement or contract between the employer and
the laborer or employee contrary to the provisions of this Act shall be null avoid ab initio,"
(Commonwealth Act No. 444, sec. 6), obviously intended said provision for the benefit of the laborers
or employees. The employer cannot, therefore, invoke any violation of the act to exempt him from
liability for extra compensation. This conclusion is further supported by the fact that the law makes
only the employer criminally liable for any violation. It cannot be pretended that, for the employer to
commit any violation of the Eight-Hour Labor Law, the participation or acquiescence of the employee
or laborer is indispensable, because the latter in view of his need and desire to live, cannot be
considered as being on the same level with the employer when it comes to the question of applying for
and accepting an employment.
Change in Work Hours
1) Union Carbide Labor Union v. Union Carbide Philippines, Inc.
Although Article XIX of the CBA provides for the duration of the agreement, this does not necessarily
mean that the company can no longer change its working schedule, for Section 2, Article II of the same
CBA expressly provides that:
Sec. 2. In the exercise of its functions of management, the COMPANY shall have the sole and exclusive
right and power, among other things, to direct the operations and the working force of its business in
all respects; to be the sole judge in determining the capacity or fitness of an employee for the position
or job to which he has been assigned; to schedule the hours of work, shifts and work schedules; to
require work to be done in excess of eight hours or Sundays or holidays as the exigencies of the service
may require; to plan, schedule, direct, curtail and control factory operations and schedules of
production; to introduce and install new or improved methods or facilities; to designate the work and
the employees to perform it; to select and hire new employees; to train new employees and improve
the skill and ability of employees from one job to another or form one shift to another; to classify or
reclassify employees; and to make such changes in the duties of its employees as the COMPANY may
see fit or convenient for the proper conduct of its business.
Verily and wisely, management retained the prerogative, whenever exigencies of the service so require,
to change the working hours of its employees. And as long as such prerogative is exercised in good
faith for the advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this Court will
uphold such exercise (San Miguel Brewery Sales Force Union (PTGWO) vs. Ople, 170 SCRA 25 [1989]).
2) Sime Darby Pilipinas, Inc. v. NLRC
The right to fix the work schedules of the employees rests principally on their employer. In the instant
case petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its business
operations and its improved production.6 It rationalizes that while the old work schedule included a 30-
minute paid lunch break, the employees could be called upon to do jobs during that period as they were
"on call." Even if denominated as lunch break, this period could very well be considered as working
time because the factory employees were required to work if necessary and were paid accordingly for
working. With the new work schedule, the employees are now given a one-hour lunch break without
any interruption from their employer. For a full one-hour undisturbed lunch break, the employees can
freely and effectively use this hour not only for eating but also for their rest and comfort which are
conducive to more efficiency and better performance in their work. Since the employees are no longer
required to work during this one-hour lunch break, there is no more need for them to be compensated
for this period. We agree with the Labor Arbiter that the new work schedule fully complies with the
daily work period of eight (8) hours without violating the Labor Code.7 Besides, the new schedule
applies to all employees in the factory similarly situated whether they are union members or not.8
Even as the law is solicitous of the welfare of the employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives.10 Thus, management is free to
regulate, according to its own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and manner of work, processes to be followed,
 supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers.11 Further, management retains the prerogative,
whenever exigencies of the service so require, to change the working hours of its employees. So long
as such prerogative is exercised in good faith for the advancement of the employer's interest and not
for the purpose of defeating or circumventing the rights of the employees under special laws or under
valid agreements, this Court will uphold such exercise.
While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the interest of
simple fair play.
3) Department Order No. 21, Series 1990
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees
will derive from the adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for establishments wishing to save on
energy costs, promote greater work efficiency and lower the rate of employee absenteeism, among
others. Workers favor the scheme considering that it would mean savings on the increasing cost of
transportation fares for at least one (1) day a week; savings on meal and snack expenses; longer
weekends, or an additional 52 off-days a year, that can be devoted to rest, leisure, family
responsibilities, studies and other personal matters, and that it will spare them for at least another day
in a week from certain inconveniences that are the normal incidents of employment, such as commuting
to and from the workplace, travel time spent, exposure to dust and motor vehicle fumes, dressing up
for work, etc. Thus, under this scheme, the generally observed workweek of six (6) days is shortened
to five (5) days but prolonging the working hours from Monday to Friday without the employer being
obliged for pay overtime premium compensation for work performed in excess of eight (8) hours on
weekdays, in exchange for the benefits abovecited that will accrue to the employees.
4) Bisig Mangggagawa sa Tryco v. NLRC
Management's prerogative of transferring and reassigning employees from one area of operation to
another in order to meet the requirements of the business is, therefore, generally not constitutive of
constructive dismissal. When the transfer is not unreasonable, or inconvenient, or prejudicial to the
employee, and it does not involve a demotion in rank or diminution of salaries, benefits, and other
privileges, the employee may not complain that it amounts to a constructive dismissal.21 However, the
employer has the burden of proving that the transfer of an employee is for valid and legitimate grounds.
The employer must show that the transfer is not unreasonable, inconvenient, or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other
benefits.22
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of
salaries, benefits and other privileges of the petitioners. The Court has previously declared that mere
incidental inconvenience is not sufficient to warrant a claim of constructive dismissal. Moreover, the
adoption of a compressed workweek scheme in the company will help temper any inconvenience that
will be caused the petitioners by their transfer to a farther workplace.
iii. Hospital Employees
1) San Juan De Dios Employees Association v. NLRC
Accordingly, only Article 83 of the Labor Code which appears to have substantially incorporated or
reproduced the basic provisions of Republic Act No. 5901 may support Policy Instructions No. 54 on
which the latter's validity may be gauged. Article 83 of the Labor Code states:
Art. 83. Normal Hours of Work. — The normal hours of work of any employee shall not exceed eight
(8) hours a day.
Health personnel in cities and municipalities with a population of at least one million (1,000,000) or in
hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular office hours
for eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except where the
exigencies of the service require that such personnel work for six (6) days or forty-eight (48) hours, in
which case they shall be entitled to an additional compensation of at least thirty 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. (Emphasis supplied)
A perusal of Republic Act No. 5901 reveals nothing therein that gives two days off with pay for health
personnel who complete a 40-hour work or 5-day workweek. In fact, the Explanatory Note of House
Bill No. 16630 (later passed into law as Republic Act No. 5901) explicitly states that the bill's sole
purpose is to shorten the working hours of health personnel and not to dole out a two days off with
pay.
Sec. 15. Additional Pay Under the Act and C.A. No. 444. (a) Employees of covered hospitals and clinics
who are entitled to the benefits provided under the Eight-Hour Labor Law, as amended, shall be paid
an additional compensation equivalent to their regular rate plus at least twenty-five percent thereof for
work performed on Sunday and Holidays, not exceeding eight hours, such employees shall be entitled
to an additional compensation of at least 25% of their regular rate.
(b) For work performed in excess of forty hours a week, excluding those rendered in excess of eight
hours a day during the week, employees covered by the Eight-Hour Labor Law shall be entitled to an
additional straight-time pay which must be equivalent at least to their regular rate.
C. Compensable Hours
i. General Rule
1) Omnibus Rules, Book III, Rule 1, Sections 3(a) & 4(a)
SECTION 3. Hours worked. — The following shall be considered as compensable hours worked:
(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 work place; and (b) All time during which an employee is
suffered or permitted to work.
SECTION 4. Principles in determining hours worked. — The following general principles
shall govern in determining whether the time spent by an employee is considered hours worked
for purposes of this Rule: (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.
2) Omnibus Rules, Book III, Rule 1, Section 3(b)
SECTION 3. Hours worked. — The following shall be considered as compensable hours worked:
(b) All time during which an employee is suffered or permitted to work.
ii. Special Rules (c) In case of actual or impending emergencies or there is urgent work to be performed on
machineries, equipment or installations to avoid serious loss which the employer would otherwise
1) Rest Period suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods.cralaw
a. Paragraph 2, Article 84 of the Labor Code
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
Article 84. Hours worked. x x x compensable working time.
Rest periods of short duration during working hours shall be counted as hours worked.
iii. Philippine Airlines v. NLRC
b. Omnibus Rules, Book III, Rule I, Section 7
Art. 83 and 85 of the Labor Code read:
SECTION 7. Meal and Rest Periods. — Every employer shall give his employees, regardless of sex,
not less than one (1) hour time-off for regular meals, except in the following cases when a meal Art. 83. Normal hours of work. — The normal hours of work of any employee shall not exceed eight
period of not less than twenty (20) minutes may be given by the employer provided that such shorter (8) hours a day.
meal period is credited as compensable hours worked of the employee:
Health personnel in cities and municipalities with a population of at least one million (1,000,000) or
(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen (16) hours a day; in hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular office
(c) In case of actual or impending emergencies or there is urgent work to be performed on hours for eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except where
the exigencies of the service require that such personnel work for six (6) days or forty-eight (48)
machineries, equipment or installations to avoid serious loss which the employer would otherwise
hours, in which case they shall be entitled to an additional compensation of at least thirty per cent
suffer; and
(30%) of their regular wage for work on the sixth day. For purposes of this Article, "health personnel"
(d) Where the work is necessary to prevent serious loss of perishable goods.
shall include: resident physicians, nurses, nutritionists, dieticians, pharmacists, social workers,
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other
compensable working time. hospital or clinic personnel. (emphasis supplied)

c. Omnibus Rules, Book III, Rule I, Section 4(b) Art. 85. Meal periods. — Subject to such regulations as the Secretary of Labor may prescribe, it shall
be the duty of every employer to give his employees not less than sixty (60) minutes time-off for
SECTION 4. Principles in determining hours worked. — The following general principles shall their regular meals.
govern in determining whether the time spent by an employee is considered hours worked for
purposes of this Rule: Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:
Sec. 7. Meal and Rest Periods. — Every employer shall give his employees, regardless of sex, not less
(b) An employee need not leave the premises of the work place in order that his rest period shall not than one (1) hour time-off for regular meals, except in the following cases when a meal period of not
be counted, it being enough that he stops working, may rest completely and may leave his work less than twenty (20) minutes may be given by the employer provided that such shorter meal period
place, to go elsewhere, whether within or outside the premises of his work place. is credited as compensable hours worked of the employee;
(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;
2) Meal Period
(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
a. Regular Meal Period
machineries, equipment or installations to avoid serious loss which the employer would otherwise
suffer; and
i. Article 85 of the Labor Code
(d) Where the work is necessary to prevent serious loss of perishable goods.

Article 85. Meal periods. Subject to such regulations as the Secretary of Labor may prescribe, it
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
shall be the duty of every employer to give his employees not less than sixty (60) minutes time-off
compensable working time.
for their regular meals.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be
ii. Omnibus Rules, Book III, Rule I, Section 7
inferred that employees must take their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return to their posts on time.
SECTION 7. Meal and Rest Periods. — Every employer shall give his employees, regardless of sex,
not less than one (1) hour time-off for regular meals, except in the following cases when a meal
b. Shorter Meal Period
period of not less than twenty (20) minutes may be given by the employer provided that such shorter
meal period is credited as compensable hours worked of the employee:
3) Waiting Time
(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen (16) hours a day;
a. Omnibus Rules, Book III, Rule I, Section 5(a)
 SECTION 5. Waiting time. — (a) Waiting time spent by an employee shall be considered
as working time if waiting is an integral part of his work or the employee is required or
engaged by the employer to wait.
4) On Call
a. Omnibus Rules, Book III, Rule I, Section 5(b)
SECTION 5. Waiting time. — (b) An employee who is required to remain on call in the
employer's premises or so close thereto that he cannot use the time effectively and gainfully
for his own purpose shall be considered as working while on call. An employee who is not
required to leave word at his home or with company officials where he may be reached is
not working while on call.
5) Inactive Due to Work Interruption
a. Omnibus Rules, Book III, Rule I, Section 4(d)
SECTION 4. Principles in determining hours worked. — The following general principles
shall govern in determining whether the time spent by an employee is considered hours
worked for purposes of this Rule:
(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.
b. University of Pangasinan Faculty Union v. University of Pangasinan
It is beyond dispute that the petitioner’s members are full-time employees receiving their monthly
salaries irrespective of the number of working days or teaching hours in a month. However, they find
themselves in a most peculiar situation whereby they are forced to go on leave during semestral
breaks. These semestral breaks are in the nature of work interruptions beyond the employees’
control. The duration of the semestral break varies from year to year dependent on a variety of
circumstances affecting at times only the private respondent but at other times all educational
institutions in the country. As such, these breaks cannot be considered as absences within the
meaning of the law for which deductions may be made from monthly allowances. The "No work, no
pay" principle does not apply in the instant case. The petitioner’s members received their regular
salaries during this period. It is clear from the aforequoted provision of law that it contemplates a
"no work" situation where the employees voluntarily absent themselves. Petitioners, in the case at
bar, certainly do not, ad voluntatem, absent themselves during semestral breaks. Rather, they are
constrained to take mandatory leave from work. For this they cannot be faulted nor can they be
begrudged that which is due them under the law. To a certain extent, the private respondent can
specify dates when no classes would be held.
It is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence,
we have the principle of "No pay, no ECOLA" the converse of which finds application in the case at
bar. Petitioners cannot be considered to be on leave without pay so as not to be entitled to ECOLA,
for, as earlier stated, the petitioners were paid their wages in full for the months of November and
December of 1981, notwithstanding the intervening semestral break. This, in itself, is a tacit
recognition of the rather unusual state of affairs in which teachers find themselves. Although said to
be on forced leave, professors and teachers are, nevertheless, burdened with the task of working
during a period of time supposedly available for rest and private matters. There are papers to correct,
students to evaluate, deadlines to meet, and periods within which to submit grading reports. Although
they may be considered by the respondent to be on leave, the semestral break could not be used
effectively for the teacher’s own purposes for the nature of a teacher’s job imposes upon him further
duties which must be done during the said period of time. Learning is a never ending process.
Teachers and professors must keep abreast of developments all the time. Teachers cannot also wait
for the opening of the next semester to begin their work. Furthermore, we may also by analogy apply
the principle enunciated in the Omnibus Rules Implementing the Labor Code to wit:
Sec. 4. Principles in Determining Hours Worked. —
"(d) The time during which an employee is inactive by reason of interruptions in his work beyond his
control shall be considered 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." (Emphasis supplied).
Thus, the semestral break may also be considered as "hours worked." For this, the teachers are paid
regular salaries and, for this, they should be entitled to ECOLA. The legal principles of "No work, no
pay; No pay, no ECOLA" must necessarily give way to the purpose of the law to augment the income
of employees to enable them to cope with the harsh living conditions brought about by inflation; and
to protect employees and their wages against the ravages brought by these conditions.
c. Durabuilt Recapping Plant & Company v. NLRC
Thus, we have held that where the failure of workers to work was not due to the employer's fault,
the burden of economic loss suffered by the employees should not be shifted to the employer. Each
party must bear his own loss.
6) Lectures, Trainings and Meetings
a. Omnibus Rules, Book III, Rule I, Section 6
SECTION 6. Lectures, meetings, training programs. — Attendance at lectures, meetings,
training programs, and other similar activities shall not be counted as working time if all of the
following conditions are met:
(a) Attendance is outside of the employee's regular working hours;
(b) Attendance is in fact voluntary; and
(c) The employee does not perform any productive work during such attendance.
7) Travel Time
a. Rada v. NLRC
Private respondent does not hesitate to admit that it is usually the project driver who is tasked with
picking up or dropping off his fellow employees. Proof thereof is the undisputed fact that when
petitioner is absent, another driver is supposed to replace him and drive the vehicle and likewise pick
up and/or drop off the other employees at the designated points on EDSA. If driving these employees
to and from the project site is not really part of petitioner's job, then there would have been no need
to find a replacement driver to fetch these employees. But since the assigned task of fetching and
delivering employees is indispensable and consequently mandatory, then the time required of and
used by petitioner in going from his residence to the field office and back, that is, from 5:30 a.m. to
7:00 a.m. and from 4:00 p.m. to around 6:00 p.m., which the labor arbiter rounded off as averaging
three hours each working day, should be paid as overtime work. Quintessentially, petitioner should
be given overtime pay for the three excess hours of work performed during working days from
January, 1983 to December, 1985.
8) No-work, No Pay Principle
a. Prieto v. NLRC
Article 279 of the Labor Code provides: Security of Tenure — In cases of regular employment, the
employer shall not terminate the services of an employee except for a just cause or when authorized
by this title. An employee who was unjustly dismissed from work shall be entitled to reinstatement
without lose of seniority rights and to his backwages computed from the time his compensation was
withheld from him up to the time of reinstatement.
The Court also ruled that there was an employer-employee relationship between the parties for the
record shows that petitioners became employees of Saudi Services and Operating Company, Ltd.,
and later of Saudi Arabian Morrison, both entities being represented by AR and Sons International
Development Corporation, which admitted in its Comment that the petitioners were "hired and
deployed abroad . . ." This relationship is even more firmly supported by the Agency Worker
Agreements between the petitioners and AR and Sons acting for SSOC which were approved by the
POEA, and by the second contract under which the petitioners were deployed to SAM, its other
principal, by AR and Sons.
The principle of "no work, no pay" does not apply in this case for, as correctly pointed out by POEA,
the fact that the complainants had not worked at the jobsite was not of their own doing. If they were
not able to work at all, it was because they refused to sign the third contract providing for another
lowering of their salaries in violation of their first agreement as approved by the POEA. They had a
right to insist on the higher salaries agreed upon in the original contract and to reject the subsequent
impositions of SAM, which obviously thought the petitioners would have to accept because they had
no choice.
Section 2(e) of Rule V, Book I of the Omnibus Rules Implementing the Labor Code requires a private
employment agency to assume all responsibilities for the implementation of the contract of
employment of an overseas worker. Section 10(a) (2) provides that a private employment agency
can be sued jointly and severally with the principal or foreign-based employer for any violation of the
recruitment agreement or the contract of employment.
While, Book II, Rule II, Section 1(f) (3) of the new Rules and Regulations Governing Overseas
Employment substantially reiterates Rule II of Book II, Section 1(d) (3) of 1985 POEA Rules, which
governs this case which provides that a private employment agency shall 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. There is no doubt that, under the facts established in this case, AR
and Sons is jointly and solidarily liable with overseas employer SAM for the claims of the petitioners.
b. Odango v. NLRC
Section 2, Rule IV, Book III of the Implementing Rules and Policy Instructions No. 9 issued by the
Secretary (then Minister) of Labor are null and void since in the guise of clarifying the Labor Code’s
provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion.
The Labor Code is clear that monthly-paid employees are not excluded from the benefits of holiday
pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor
excludes monthly-paid employees from the said benefits by inserting, under Rule IV, Book III of the
implementing rules, Section 2 which provides that monthly-paid employees are presumed to be paid
for all days in the month whether worked or not.
Even assuming that Section 2, Rule IV of Book III is valid, petitioners’ claim will still fail. The basic
rule in this jurisdiction is "no work, no pay." The right to be paid for un-worked days is generally
limited to the ten legal holidays in a year.15 Petitioners’ claim is based on a mistaken notion that
Section 2, Rule IV of Book III gave rise to a right to be paid for un-worked days beyond the ten legal
holidays. In effect, petitioners demand that ANTECO should pay them on Sundays, the un-worked
half of Saturdays and other days that they do not work at all. Petitioners’ line of reasoning is not only
a violation of the "no work, no pay" principle, it also gives rise to an invidious classification, a violation
of the equal protection clause. Sustaining petitioners’ argument will make monthly-paid employees a
privileged class who are paid even if they do not work.
The use of a divisor less than 365 days cannot make ANTECO automatically liable for underpayment.
The facts show that petitioners are required to work only from Monday to Friday and half of Saturday.
Thus, the minimum allowable divisor is 287, which is the result of 365 days, less 52 Sundays and
less 26 Saturdays (or 52 half Saturdays). Any divisor below 287 days means that ANTECO’s workers
are deprived of their holiday pay for some or all of the ten legal holidays. The 304 days divisor used
by ANTECO is clearly above the minimum of 287 days.
iii. Night Work
1) Article 86 of the Labor Code
Article 86. Night shift differential. Every employee shall be paid a night shift differential of not less
than ten percent (10%) of his regular wage for each hour of work performed between ten o’clock in the
evening and six o’clock in the morning.
2) The Shell Company of the Philippine Islands v. National Labor Union
Commonwealth Law No. 444 is not applicable to this case, it being evident that it has a specific purpose,
namely: (a) set the maximum workday in 8 hours; (b) indicate certain exceptional cases in which work
may be authorized outside of said working day; (c) provide a bonus, which should not be less than
25% of the regular salary, for overtime or work in excess of 8 hours.
The work last night that the Shell company demands of its workers is not perhaps an "overtime", in the
sense that this word is used in Commonwealth Law no. 444, but it is a full day of work, also of 8 hours:
only which, instead of being done by day, is done at night. In other words, the night work in question
here is not only an unexcess, extension or "overtime" of regular day work, but it is another type of
work, absolutely independent of the daytime. t is one thing to work on Sunday days and official holidays,
and another thing is to work at night or outside the eight-hour day on weekdays.
And with respect to the appreciation that night work is heavier and more expensive than day work and,
therefore, deserves higher pay, there is also no reason to revoke or alter it. There is no possible
argument against the universal fact that regular, normal and ordinary work is that of day, and that
night work is very exceptional and justified only for certain imperatively unavoidable reasons. For
something humanity has always worked by day.
Reasons for hygiene, medicine, morals, culture, sociology, establish in common that the work of nocho
has many disadvantages, and when there is no choice but to do so, it is only fair that it be better than
ordinary to compensate until it is true. point to the worker of such inconveniences. Undoubtedly, night
work not only in the long run affects the health of the worker, but also deprives him of certain things
that make life relatively pleasant, such as,for example, a complete and uninterrupted rest and certain
times of solace. ,leisure or spiritual and cultural expansion that you might have when you finish work
in the afternoon and during the first hours of the night. It is said that the worker can rest during the
day after having worked all night; But can the rest of the day give the body that tonic and that full
 reparative effect that only the natural rest at night can provide? It is also said that some prefer to work
at night under our scorching weather, thus avoiding the heat of the day. We fear, however, that this is
better spoken than practiced. We believe that since time immemorial the universal rule is that man
works at night more for an irremediable need than for pleasurable convenience.
Nightwork cannot be considered as desirable, either from the point of view of the employer or of the
wage earner. It is uneconomical unless overhead costs are unusually heavy. Frequently the scale of
wages is higher as an inducement to employees to accept employment on the night shift, and the rate
of production is generally lower.
3) National Semiconductor Distribution v. NLRC
For sure, private respondent cannot adequately prove the fact of non-payment of night shift differentials
since the pertinent employee files, payrolls, records, remittances and other similar documents are not
in his possession but in the custody and absolute control of petitioner. By choosing not to fully and
completely disclose information to prove that it had paid all the night shift differentials due to private
respondent, petitioner failed to discharge the burden of proof. Consequently, no grave abuse of
discretion can be ascribed to the NLRC for sustaining the Labor Arbiter when it ruled thus —
It is not disputed that complainant was regularly assigned to a night shift (10:00 P.M. to 7:00 A.M.).
Under Section 2, Rule II, Book Three of the Implementing Rules of the Labor Code, complainant is
entitled to an additional benefit of not less ten percent (10%) of his regular wage for each hour of work
performed. The record is bereft of evidence that respondent has paid complainant this benefit. The best
evidence for respondent corporation would have been the payrolls, vouchers, daily time records and
the like which under Sections 6, 7, 8, 11 and 12, Rule X, Book III of the Implementing Rules it is obliged
to keep. Its failure gives rise to the presumption that either it does not have them or if it does, their
presentation is prejudicial to its cause.
iv. Overtime Work
1) Articles 87 – 89 of the Labor Code
Article 87. Overtime work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus
at least twenty-five percent (25%) thereof. Work performed beyond eight hours on a holiday or rest
day shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday
or rest day plus at least thirty percent (30%) thereof.
Article 88. Undertime not offset by overtime. Undertime work on any particular day shall not be
offset by overtime 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 the additional compensation required
in this Chapter.
Article 89. Emergency overtime work. Any employee may be required by the employer to perform
overtime work in any of the following cases:
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;
When it is necessary to prevent loss of life or property or in case of imminent danger to public safety
due to an actual or impending emergency in the locality caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity;
When there is urgent work to be performed on machines, installations, or equipment, in order to
avoid serious loss or damage to the employer or some other cause of similar nature;
When the work is necessary to prevent loss or damage to perishable goods; and
Where the completion or continuation of the work started before the eighth hour is necessary to
prevent serious obstruction or prejudice to the business or operations of the employer.
Any employee required to render overtime work under this Article shall be paid the additional
compensation required in this Chapter.
2) Rationale
a. Philippine National Bank v. Philippine National Bank Employees Association
Verily, there can be no other reason than that he is made to work longer than what is commensurate
with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is
supposed to do. When he thus spends additional time to his work, the effect upon him is multi-
faceted: he puts in more effort, physical and/or mental; he is delayed in going home to his family to
enjoy the comforts thereof; he might have no time for relaxation, amusement or sports; he might
miss important pre-arranged engagements; etc., etc. It is thus the additional work, labor or service
employed and the adverse effects just mentioned of his longer stay in his place of work that justify
and is the real reason for the extra compensation that he called overtime pay.
Overtime work is actually the lengthening of hours developed to the interests of the employer and
the requirements of his enterprise. It follows that the wage or salary to be received must likewise be
increased, and more than that, a special additional amount must be added to serve either as
encouragement or inducement or to make up fop the things he loses which We have already referred
to. And on this score, it must always be borne in mind that wage is indisputably intended as payment
for work done or services rendered. Thus, in the definition of wage for purposes of the Minimum Wage
Law, Republic Act No. 602, it is stated:
'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time task, piece, commission
basis or other method of calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done or for services rendered
or to be rendered and includes the fair and reasonable value as determined by the Secretary of Labor,
of board, lodging or other facilities customarily furnished by the employer to the employee.
So also with the longevity pay; manifestly, this was not based on the daily or monthly amount of
work done or service rendered it was more of a gratuity for their loyalty, or their having been in the
bank's employment for consideration periods of time. Indeed, with particular reference to the
longevity pay, the then existing collective bargaining contract expressly provided: "... That this
benefit shall not form part of the basic salaries of the officers so affected."
In regard to the first question, We have already pointed out to start with, that as far as longevity pay
is concerned, it is beyond question that the same cannot be included in the computation of overtime
pay for the very simple reason that the contrary is expressly stipulated in the collective bargaining
agreement and, as should be the case, it is settled that the terms and conditions of a collective
bargaining agreement constitute the law between the parties. The contention of PEMA that the
express provision in the collective bargaining agreement that "this benefit (longevity pay) shall not
form part of the basic salaries of the officers so affected" cannot imply the same Idea insofar as the
computation of the overtime pay is concerned defies the rules of logic and mathematics. If the basic
pay cannot be deemed increased, how could the overtime pay be based on any increased amount at
all?
b. Caltex Regular Employees at Manila Office v. Caltex Philippines, Inc.
 Overtime work consists of hours worked on a given day in excess of the applicable work period, which 4)
here is eight (8) hours. 12 It is not enough that the hours worked fall on disagreeable or inconvenient
hours. In order that work may be considered as overtime work, the hours worked must be in excess a.
of and in addition to the eight (8) hours worked during the prescribed daily work period, or the forty
(40) hours worked during the regular work week Monday thru Friday.
In the present case, under the 1985 CBA, hours worked on a Saturday do not, by that fact alone,
necessarily constitute overtime work compensable at premium rates of pay, contrary to petitioner's
assertion. These are normal or regular work hours, compensable at regular rates of pay, as provided
in the 1985 CBA; under that CBA, Saturday is not a rest day or a "day off". It is only when an
employee has been required on a Saturday to render work in excess of the forty (40) hours which
constitute the regular work week that such employee may be considered as performing overtime
work on that Saturday. We consider that the statutory prohibition against offsetting undertime one
day with overtime another day has no application in the case at bar.
The company practice of allowing employees to leave thirty (30) minutes earlier than the scheduled
off-time had been established primarily for the convenience of the employees most of whom have
had to commute from work place to home and in order that they may avoid the heavy rush hour
vehicular traffic. There is no allegation here by petitioner Union that such practice was resorted to by
Caltex in order to escape its contractual obligations; the shortened work period did not result in ii.
likewise shortening the work required for purposes of determining overtime pay, as well as for
purposes of determining premium pay for work beyond forty (40) hours within the calendar week.
Work performed on a Saturday is accordingly to be paid at regular rates of pay, as a rule, unless the
employee shall have been required to render work in excess of forty (40) hours in a calendar week.
The employee must, however, have in fact rendered work in excess of forty (40) hours before hours
subsequently worked become payable at premium rates.
3) Proof of Entitlement
a. Cagampan v. NLRC
The contract provision means that the fixed overtime pay of 30% would be the basis for computing
the overtime pay if and when overtime work would be rendered. Simply, stated, the rendition of
overtime work and the submission of sufficient proof that said work was actually performed are
conditions to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees
the right to overtime pay but the entitlement to such benefit must first be established. Realistically b.
speaking, a seaman, by the very nature of his job, stays on board a ship or vessel beyond the regular
eight-hour work schedule. For the employer to give him overtime pay for the extra hours when he
might be sleeping or attending to his personal chores or even just lulling away his time would be
extremely unfair and unreasonable.
b. Loon v. Powermaster
The petitioners are not entitled to overtime and premium pays
However, the CA was correct in its finding that the petitioners failed to provide sufficient factual basis
for the award of overtime, and premium pays for holidays and rest days. The burden of proving
entitlement to overtime pay and premium pay for holidays and rest days rests on the employee
because these are not incurred in the normal course of business.43 In the present case, the petitioners
failed to adduce any evidence that would show that they actually rendered service in excess of the
regular eight working hours a day, and that they in fact worked on holidays and rest days.
5)
Special Rules
Seamen
i. NASSCO v. CIR
We can not agree with the Court below that respondent Malondras should be paid overtime
compensation for every hour in excess of the regular working hours that he was on board his vessel
or barge each day, irrespective of whether or not he actually put in work during those hours. Seamen
are required to stay on board their vessels by the very nature of their duties, and it is for this reason
that, in addition to their regular compensation, they are given free living quarters and subsistence
allowances when required to be on board. It could not have been the purpose of our law to require
their employers to pay them overtime even when they are not actually working; otherwise, every
sailor on board a vessel would be entitled to overtime for sixteen hours each day, even if he had
spent all those hours resting or sleeping in his bunk, after his regular tour of duty. The correct criterion
in determining whether or not sailors are entitled to overtime pay is not, therefore, whether they
were on board and can not leave ship beyond the regular eight working hours a day, but whether
they actually rendered service in excess of said number of hours.
Stolt-Nilsen Marine Services v. NLRC
Petitioners have conveniently adopted the view that the "guaranteed or fixed overtime pay of 30%
of the basic salary per month" embodied in their employment contract should be awarded to them as
part of a "package benefit." They have theorized that even without sufficient evidence of actual
rendition of overtime work they would automatically be entitled to overtime pay. Their theory is
erroneous for being illogical and unrealistic. Their thinking even runs counter to the intention behind
the provision. The contract provision means that the fixed overtime pay of 30% would be a basis for
computing the overtime pay if and when overtime work would be rendered. Simply stated, the
rendition of overtime work and the submission of sufficient proof that the said work was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay which
would be computed on the basis of 30% of the basic monthly salary. In short, the contract provision
guarantees the right to overtime pay but the entitlement to such benefit must first be established.
Realistically speaking, a seaman, by the very nature of his job, stays on board a ship or vessel beyond
the regular eight-hour work schedule. For the employer to give him overtime pay for the extra hours
when he might be sleeping or attending to his personal chores or even just lulling away his time
would be extremely unfair and unreasonable.
No off setting
i. Detective and Protective Bureau, Inc. v. United Employees Welfare Association
Nevertheless the law give them the right to extra compensation. And they could not be held to have
impliedly waived such extra compensation, for the obvious reason that they could not have expressly
waived it. There was no agreement in the contract to the effect that the overtime wages corresponded
to the payment for the 2-days off. And if there were, it will be null and void. The law gave the
employees the right to extra compensation; and this right was not waived by the security guards.
The CIR is empowered to make the order for the purpose of setting disputes between employer and
employee. The employee, in rendering extra service at the request of his employer has a right to
assume that the latter has complied with requirement of the law, and therefore has obtained the
required permission from the Department of Labor.
Emergency Overtime Work

c. Section 10, Rule I, Book III, Rules Implementing Labor Code
SECTION 10. Compulsory overtime work. — In any of the following cases, an employer may
require any of his employees to work beyond eight (8) hours a day, provided that the employee
required to render overtime work is paid the additional compensation required by these regulations:
(a) When the country is at war or when any other national or local emergency has been declared
by Congress or the Chief Executive;
(b) When overtime work is necessary to prevent loss of life or property, or in case of imminent
danger to public safety due to actual or impending emergency in the locality caused by serious
accident, fire, floods, typhoons, earthquake, epidemic or other disaster or calamities;
(c) When there is urgent work to be performed on machines, installations, or equipment, in order
to avoid serious loss or damage to the employer or some other causes of similar nature;
ii.
(d) When the work is necessary to prevent loss or damage to perishable goods;
(e) When the completion or continuation of work started before the 8th hour is necessary to prevent
serious obstruction or prejudice to the business or operations of the employer; or
(f) When overtime work is necessary to avail of favorable weather or environmental conditions
where performance or quality of work is dependent thereon.
In cases not falling within any of these enumerated in this Section, no employee may be made to
work beyond eight hours a day against his will.
D. Weekly Rest Period
i. Articles 91 – 93 of the Labor Code
Article 91. Right to weekly rest day. It shall be the duty of every employer, whether operating for
profit or not, to provide each of his employees a rest period of not less than twenty-four (24) consecutive
hours after every six (6) consecutive normal work days.
The employer shall determine and schedule the weekly rest day of his employees subject to collective
bargaining agreement and to such rules and regulations as the Secretary of Labor and Employment may
provide. However, the employer shall respect the preference of employees as to their weekly rest day
when such preference is based on religious grounds.
Article 92. When employer may require work on a rest day. The employer may require his
employees to work on any day:
In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon,
earthquake, epidemic or other disaster or calamity to prevent loss of life and property, or imminent
danger to public safety;
In cases of urgent work to be performed on the machinery, equipment, or installation, to avoid serious
loss which the employer would otherwise suffer;
In the event of abnormal pressure of work due to special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
To prevent loss or damage to perishable goods;
Where the nature of the work requires continuous operations and the stoppage of work may result in
irreparable injury or loss to the employer; and
Under other circumstances analogous or similar to the foregoing as determined by the Secretary of
Labor and Employment.
Article 93. Compensation for rest day, Sunday or holiday work. Where an employee is made or
permitted to work on his scheduled rest day, he shall be paid an additional compensation of 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.
When the nature of the work of the employee is such that he has no regular workdays and no regular
rest days can be scheduled, he shall be paid an additional compensation of at least thirty percent (30%)
of his regular wage for work performed on Sundays and holidays.
Work performed on any special holiday shall be paid an additional compensation of at least thirty percent
(30%) of the regular wage of the employee. Where such holiday work falls on the employee’s scheduled
rest day, he shall be entitled to an additional compensation of at least fifty per cent (50%) of his regular
wage.
Where the collective bargaining agreement or other applicable employment contract stipulates the
payment of a higher premium pay than that prescribed under this Article, the employer shall pay such
higher rate.
Omnibus Rules, Book III, Rule III, Sections 1-9
SECTION 1. General statement on coverage. — This Rule shall apply to all employers whether
operating for profit or not, including public utilities operated by private persons.cralaw
SECTION 2. Business on Sundays/Holidays. — All establishments and enterprises may operate or
open for business on Sundays and holidays provided that the employees are given the weekly rest day
and the benefits as provided in this Rule.cralaw
SECTION 3. Weekly rest day. — Every employer shall give his employees a rest period of not less than
twenty-four (24) consecutive hours after every six consecutive normal work days.cralaw
SECTION 4. Preference of employee. — The preference of the employee as to his weekly day of rest
shall be respected by the employer if the same is based on religious grounds. The employee shall make
known his preference to the employer in writing at least seven (7) days before the desired effectivity of
the initial rest day so preferred.cralaw
Where, however, the choice of the employee as to his rest day based on religious grounds will inevitably
result in serious prejudice or obstruction to the operations of the undertaking and the employer cannot
normally be expected to resort to other remedial measures, the employer may so schedule the weekly
rest day of his choice for at least two (2) days in a month.cralaw
SECTION 5. Schedule of rest day. — (a) Where the weekly rest is given to all employees
simultaneously, the employer shall make known such rest period by means of a written notice posted
conspicuously in the work place at least one week before it becomes effective.cralaw
(b) Where the rest period is not granted to all employees simultaneously and collectively, the employer
shall make known to the employees their respective schedules of weekly rest through written notices
posted conspicuously in the work place at least one week before they become
SECTION 6. When work on rest day authorized. — An employer may require any of his employees
to work on his scheduled rest day for the duration of the following emergencies and exceptional
conditions:
(a) In case of actual or impending emergencies caused by serious accident, fire, flood, typhoon,
earthquake, epidemic or other disaster or calamity, to prevent loss of life or property, or in cases of force
majeure or imminent danger to public safety;
(b) In case of urgent work to be performed on machineries, equipment or installations to avoid serious
loss which the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to special circumstances, where the employer cannot
ordinarily be expected to resort to other measures;
(d) To prevent serious loss of perishable goods;
 (e) Where the nature of the work is such that the employees have to work continuously for seven (7)
days in a week or more, as in the case of the crew members of a vessel to complete a voyage and in
other similar cases; and
(f) When the work is necessary to avail of favorable weather or environmental conditions where
performance or quality of work is dependent thereon.cralaw
No employee shall be required against his will to work on his scheduled rest day except under
circumstances provided in this Section: Provided, However, that where an employee volunteers to work
on his rest day under other circumstances, he shall express such desire in writing, subject to the
provisions of Section 7 hereof regarding additional compensation.cralaw
SECTION 7. Compensation on rest day/Sunday/holiday. — (a) Except those employees referred to
under Section 2, Rule I, Book Three, an employee who is made or permitted to work on his scheduled
rest day shall be paid with an additional compensation of at least 30% of his regular wage. An employee
shall be entitled to such additional compensation for work performed on a Sunday only when it is his
established rest day.cralaw
(b) Where the nature of the work of the employee is such that he has no regular work days and no regular
rest days can be scheduled, he shall be paid an additional compensation of at least 30% of his regular
wage for work performed on Sundays and holidays.cralaw
(c) Work performed on any special holiday shall be paid with an additional compensation of at least 30%
of the regular wage of the employees. Where such holiday work falls on the employee's scheduled rest
day, he shall be entitled to additional compensation of at least 50% of his regular
(d) The payment of additional compensation for work performed on regular holiday shall be governed by
Rule IV, Book Three, of these regulations.cralaw
(e) Where the collective bargaining agreement or other applicable employment contract stipulates the
payment of a higher premium pay than that prescribed under this Section, the employer shall pay such
higher rate.cralaw
SECTION 8. Paid-off days. — Nothing in this Rule shall justify an employer in reducing the
compensation of his employees for the unworked Sundays, holidays, or other rest days which are
considered paid-off days or holidays by agreement or practice subsisting upon the effectivity of the Code.
SECTION 9. Relation to agreements. — Nothing herein shall prevent the employer and his employees
or their representatives in entering into any agreement with terms more favorable to the employees than
those provided herein, or be used to diminish any benefit granted to the employees under existing laws,
agreements, and voluntary employer practices.
iii. San Miguel Corporation v. Inciong
Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides:
a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a
calendar year
b) Basic salary shall include all remunerations on earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree
No. 525 or Letter of Instructions No. 174, profit sharing payments and all allowances and monetary
benefits which are not considered or integrated as part of the regular or basic salary of the employee at
the time of the promulgation of the Decree on December 16, 1975.
Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are
deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No.
174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of the regular
basic salary of tile employee at the time of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued
by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as
part of the basic salary and in the computation of the 13th-month pay.
It is clear that overtime pay is an additional compensation other than and added to the regular wage or
basic salary, for reason of which such is categorically excluded from the definition of basic salary under
the Supplementary Rules and Regulations Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph (c) work performed on any special holiday shall be paid an
additional compensation of at least thirty percent (30%) of the regular wage of the employee.
It is likewise clear that prernium for special holiday which is at least 30% of the regular wage is an
additional compensation other than and added to the regular wage or basic salary. For similar reason it
shall not be considered in the computation of the 13th- month pay.
iv. Davao Fruits Corp. v. ALU
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their
employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the "Rules
and Regulations Implementing Presidential Decree No. 851," thus:
SECTION 2. . . .
(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a
calendar year.
(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee for
services rendered but may not include cost of living allowances granted pursuant to Presidential Decree
No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary
benefits which are not considered or integrated as part of the regular or basic salary of the employee at
the time of the promulgation of the Decree on December 16, 1975.
The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and
Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic
salary," thus:
4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be
included in the computation of the 13th month pay.
Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee,
but excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits
which have not been considered as part of the basic salary of the employee as of December 16, 1975.
The exclusion of cost-of-living allowances and profit sharing payments shows the intention to strip "basic
salary" of payments which are otherwise considered as "fringe" benefits. This intention is emphasized in
the catch all phrase "all allowances and monetary benefits which are not considered or integrated as part
of the basic salary." Basic salary, therefore does not merely exclude the benefits expressly mentioned
but all payments which may be in the form of "fringe" benefits or allowances (San Miguel Corporation v.
Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations Implementing P.D. No.
851 are very emphatic in declaring that overtime pay, earnings and other renumerations shall be excluded
in computing the thirteenth month pay.
 In other words, whatever compensation an employee receives for an eight-hour work daily or the daily
wage rate in the basic salary. Any compensation or remuneration other than the daily wage rate is
excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for work
done on rest days special holidays, as well as pay for regular holidays, are likewise excluded in computing
the basic salary for the purpose of determining the thirteen month pay.
A company practice favorable to the employees had indeed been established and the payments made
pursuant thereto, ripened into benefits enjoyed by them.
E. Holidays, Service Incentive Leave and Service Charges
i. Holiday Pay
Exempted Empoyees:
1. government employees including those employed in government-owned or controlled corporations
with original charters
2. employees of retail and service establishments regularly employing less than then (10) workers
3. domestic helpers
4. managerial employees
5. officers and members of a managerial staff
6. field personnel and other employees whose time is unsupervised by the employer
7. workers who are paid by results
8. members of the family of the employer who are dependent upon him for support
9. persons in the personal service of another
1) Article 94 of the Labor Code
Article 94. Right to holiday pay. Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10) workers;
The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate; and
As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth
of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-
fifth and thirtieth of December and the day designated by law for holding a general election.
2) Mantrade/FMMC Division Employees and Workers Union v. Bacungan
A voluntary arbitrator by the nature of her functions acts in a quasijudicial capacity. There is no reason
why her decisions involving interpretation of law should be beyond this court’s review.
We agree with petitioner’s contention that Section 2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9 issued by the then Secretary of Labor are null and void since in the guise of
clarifying the Labor Code’s provisions on holiday pay, they in effect amended them enlarging the scope
of their exclusion.
"From the above-cited provisions, it is clear that monthly paid employees are not excluded from the
benefits of holiday pay. However, the implementing rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly paid employees from the said benefits by inserting under Rule IV,
Book III of the implementing rules, section 2, which provides that: ‘employees who are uniformly paid
by the month, irrespective of the number of working days therein , with the salary of not less than the
statutory or established minimum wage shall be presumed to be paid for all days in the month whether
worked or not."
While additional exclusion is only in the form of a presumption that all monthly paid employees have
already been paid holiday paid, it constitutes a taking away or a deprivation which must be in the law
if it is to be valid. An administrative interpretation which diminishes the benefits of labor more than
what the statute delimits or withholds is obviously ultra vires."
3) David v. Macasio
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor
Code - provisions governing working conditions and rest periods.
Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and
SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one hand and
"workers who are paid by results" on the other hand, are not covered by the Title I provisions. The
wordings of Article82 of the Labor Code additionally categorize workers "paid by results" and "field
personnel" as separate and distinct types of employees who are exempted from the Title I provisions
of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than (10) workers[.]
SECTION 1. Coverage. – This Rule shall apply to all employees except:
(e)Field personnel and other employees whose time and performance is unsupervised by the employer
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.
[emphases ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To
be excluded from their coverage, an employee must be one of those that these provisions expressly
exempt, strictly in accordance with the exemption. Under the IRR, exemption from the coverage of
holiday and SIL pay refer to "field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged on task or contract basis[.]" Note that
unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged
on task basis" as a separate and distinct category from employees classified as "field personnel."
Rather, these employees are altogether merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those
who are engaged on task basis, per se, are excluded from the SIL and holiday payment since this is
what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable interpretation
of this rule may be conceded to be within the discretion granted to the LA and NLRC as the quasi-
judicial bodies with expertise on labor matters.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from
the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the
holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore validly qualifies and
limits the general exclusion of "workers paid by results" found in Article 82 from the coverage of holiday
and SIL pay.
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely
commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms that they
follow.
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and
SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general rule
is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions specifically
provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the
worker engaged on pakyaw or task basis also falls within the meaning of "field personnel" under the
law, then he is not entitled to these monetary benefits.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRC’s ruling
dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.
4) Faculty in Private School
a. Omnibus Rules, Book III, Rule IV, Section 8(a)
SECTION 8. Holiday pay of certain employees. — (a) Private school teachers, including faculty
members of colleges and universities, may not be paid for the regular holidays during semestral
vacations. They shall, however, be paid for the regular holidays during Christmas vacation
b. Jose Rizal College v. NLRC
Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended),
which reads:
Art. 94. Right to holiday pay — (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10)
workers;
(b) The employer may require an employee to work on any holiday but such employee shall be paid
a compensation equivalent to twice his regular rate; ... "
and in the Implementing Rules and Regulations, Rule IV, Book III, which reads:
SEC. 8. Holiday pay of certain employees. — (a) Private school teachers, including faculty members
of colleges and universities, may not be paid for the regular holidays during semestral vacations.
They shall, however, be paid for the regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is under
obligation to give pay even on unworked regular holidays to hourly paid faculty members subject to
the terms and conditions provided for therein.
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.
PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is hereby
set aside, and a new one is hereby RENDERED:
(a) exempting petitioner from paying hourly paid faculty members their pay for regular holidays,
whether the same be during the regular semesters of the school year or during semestral, Christmas,
or Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their regular hourly rate on days declared as
special holidays or for some reason classes are called off or shortened for the hours they are supposed
to have taught, whether extensions of class days be ordered or not; in case of extensions said faculty
members shall likewise be paid their hourly rates should they teach during said extensions.
5) Divisor
a. Trans-Asia Phils. Employees Association v. NLRC
Trans-Asia's inclusion of holiday pay in petitioners' monthly salary is clearly established by its
consistent use of the divisor of "286" days in the computation of its employees' benefits and
deductions. The use by Trans-Asia of the "286" days divisor was never disputed by petitioners. A
simple application of mathematics would reveal that the ten (10) legal holidays in a year are already
accounted for with the use of the said divisor. As explained by Trans-Asia, if one is to deduct the
unworked 52 Sundays and 26 Saturdays (derived by dividing 52 Saturdays in half since petitioners
are 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 is already incorporated into the said divisor.
Nevertheless, petitioners' cause is not entirely lost. The Court notes that there is a need to adjust the
divisor used by Trans-Asia to 287 days, instead of only 286 days, in order to properly account for the
entirety of regular holidays and special days in a year as prescribed by Executive Order No. 203 13
in relation to Section 6 of the Rules Implementing Republic Act 6727. 14
However, due to the fact that the rest days of petitioners 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. No. 203 always falls on the last Sunday of August, National Heroes Day. Thus, the divisor
that should be used in the present case should be 287 days.
b. Union of Filipro Employees v. Vivar, Jr.
Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by
respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise
the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a
constant figure for the purpose of computing overtime and night differential pay and commutation of
sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for
computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower
daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of
the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the
dividend, which represents the employee's annual salary, should correspondingly be increased to
incorporate the holiday pay.
6) Sundays
a. Wellington Investment and Manufacturing Corporation v. Trajano
Apparently the monthly salary was fixed by Wellington to provide for compensation for every working
day of the year including the holidays specified by law — and excluding only Sundays. In fixing the
salary, Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays
 from the 365 days normally comprising a year and used the difference, 314, as basis for determining
the monthly salary. The monthly salary thus fixed actually covers payment for 314 days of the year,
including regular and special holidays, as well as days when no work is done by reason of fortuitous
cause, as above specified, or causes not attributable to the employees.
There is no provision of law requiring any employer to make such adjustments in the monthly salary
rate set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to
the legal provisions bearing on the point, otherwise to reckon a year at more than 365 days. As
earlier mentioned, what the law requires of employers opting to pay by the month is to assure that
"the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365
days divided by twelve," 17 and to pay that salary "for all days in the month whether worked or not,"
and "irrespective of the number of working days therein."18 That salary is due and payable regardless
of the declaration of any special holiday in the entire country or a particular place therein, or any
fortuitous cause precluding work on any particular day or days (such as transportation strikes, riots,
or typhoons or other natural calamities), or cause not imputable to the worker. And as also earlier
pointed out, the legal provisions governing monthly compensation are evidently intended precisely
to avoid re-computations and alterations in salary on account of the contingencies just mentioned,
which, by the way, are routinely made between employer and employees when the wages are paid
on daily basis.
7) Muslim Holiday
a. San Miguel Corporation v. Court of Appeals
Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of Presidential Decree No.
1083,8 otherwise known as the Code of Muslim Personal Laws, which states:
Art. 170. Provinces and cities where officially observed. - (1) Muslim holidays shall be officially
observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North Cotabato,
Iligan, Marawi, Pagadian, and Zamboanga and in such other Muslim provinces and cities as may
hereafter be created;
(2) Upon proclamation by the President of the Philippines, Muslim holidays may also be officially
observed in other provinces and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code, which
provides:
Art. 94. Right to holiday pay. -
(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall be paid
a compensation equivalent to twice his regular rate; x x x.
Assuming arguendo that the respondent’s position is correct, then by the same token, Muslims
throughout the Philippines are also not entitled to holiday pays on Christian holidays declared by law
as regular holidays. We must remind the respondent-appellant that wages and other emoluments
granted by law to the working man are determined on the basis of the criteria laid down by laws and
certainly not on the basis of the worker’s faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that "x x x nothing herein shall
be construed to operate to the prejudice of a non-Muslim."
In addition, the 1999 Handbook on Workers’ Statutory Benefits, approved by then DOLE Secretary
Bienvenido E. Laguesma on 14 December 1999 categorically stated:
Considering that all private corporations, offices, agencies, and entities or establishments operating
within the designated Muslim provinces and cities are required to observe Muslim holidays, both
Muslim and Christians working within the Muslim areas may not report for work on the days
designated by law as Muslim holidays.9
ii. Service Incentive Leave
1) Article 95 of the Labor Code
Article 95. Right to service incentive leave. Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.
This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
Secretary of Labor and Employment after considering the viability or financial condition of such
establishment.
The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any
court or administrative action.
2) RA 10361
Section 29. Leave Benefits. – A domestic worker who has rendered at least one (1) year of service
shall be entitled to an annual service incentive leave of five (5) days with pay: Provided, That any
unused portion of said annual leave shall not be cumulative or carried over to the succeeding years.
Unused leaves shall not be convertible to cash.
3) JPL Marketing v. Court of Appeals
JPL cannot escape the payment of 13th month pay and service incentive leave pay to private
respondents. Said benefits are mandated by law and should be given to employees as a matter of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a
13th month pay not later than 24 December of every year. However, employers not paying their
employees a 13th month pay or its equivalent are not covered by said law.
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of service.
Unless specifically excepted, all establishments are required to grant service incentive leave to their
employees. The Court has held in several instances that "service incentive leave is clearly demandable
after one year of service."42
Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above
the minimum wage. The Court rules that the difference between the minimum wage and the actual
salary received by private respondents cannot be deemed as their 13th month pay and service incentive
leave pay as such difference is not equivalent to or of the same import as the said benefits contemplated
by law.
While computation for the 13th month pay should properly begin from the first day of employment, the
service incentive leave pay should start a year after commencement of service, for it is only then that
the employee is entitled to said benefit.
4) Imbuido v. NLRC
We agree with the findings of the NLRC that petitioner is a project employee. A project employee is one
whose employment has been fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season. 31
In the instant case, petitioner was engaged to perform activities which were usually necessary or
desirable in the usual business or trade of the employer, as admittedly, petitioner worked as a data
encoder for private respondent, a corporation engaged in the business of data encoding and
keypunching, and her employment was fixed for a specific project or undertaking the completion or
termination of which had been determined at the time of her engagement, as may be observed from
the series of employment contracts 32 between petitioner and private respondent, all of which
contained a designation of the specific job contract and a specific period of employment.
The evidence on record reveals that petitioner was employed by private respondent as a data encoder,
performing activities which are usually necessary or desirable in the usual business or trade of her
employer, continuously for a period of more than three (3) years, and contracted for a total of thirteen
(13) successive projects. We have previously ruled that "[h]owever, the length of time during which
the employee was continuously re-hired is not controlling, but merely serves as a badge of regular
employment." 37 Based on the foregoing, we conclude that petitioner has attained the status of a
regular employee of private respondent.
With regard to petitioner's claim for service incentive leave pay, we agree with the labor arbiter that
petitioner is entitled to service incentive leave pay, as provided in Article 95 of the Labor Code, which
reads:
Art. 95 - Right to service incentive leave -
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.
Having already worked for more than three (3) years at the time of her unwarranted dismissal,
petitioner is undoubtedly entitled to service incentive leave benefits.
5) Davao Integrated Port Stevedoring Services v. Abarquez
A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract
executed upon request of either the employer or the exclusive bargaining representative incorporating
the agreement reached after negotiations with respect to wages, hours of work and all other terms and
conditions of employment, including proposals for adjusting any grievances or questions arising under
such agreement.
While the terms and conditions of a CBA constitute the law between the parties, it is not, however, an
ordinary contract to which is applied the principles of law governing ordinary contracts. 4 A CBA, as a
labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs
the relations between labor and capital, is not merely contractual in nature but impressed with public
interest, thus, it must yield to the common good. As such, it must be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic construction upon it, giving
due consideration to the context in which it is negotiated and purpose which it is intended to serve. 5
It is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they
comply with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to
wit: (1) the employee-applicant must be regular or must have rendered at least one year of service
with the company; and (2) the application must be accompanied by a certification from a company-
designated physician.
Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and
vacation leave benefits, among others, are by their nature, intended to be replacements for regular
income which otherwise would not be earned because an employee is not working during the period of
said leaves. It is only fair and reasonable for petitioner-company not to stipulate a fixed 15-day sick
leave with pay for its regular intermittent workers since, as the term "intermittent" implies, there is
irregularity in their work-days.
Well-settled is it that the said privilege of commutation or conversion to cash, being an existing benefit,
the petitioner-company may not unilaterally withdraw, or diminish such benefits. 10 It is a fact that
petitioner-company had, on several instances in the past, granted and paid the cash equivalent of the
unenjoyed portion of the sick leave benefits of some intermittent workers. 11 Under the circumstances,
these may be deemed to have ripened into company practice or policy which cannot be peremptorily
withdrawn.
6) Ganzon, Inc. v. NLRC
Private respondents were made to sign employment contracts purportedly as project employees but
which were renewed every three (3) months. With this backdrop, we agree with the finding of the Labor
Arbiter that —
. . . . with the successive contracts of employment where the complainants continued to perform the
same kind of work throughout the entire period of their employment, which was for more than one
year, it is clear that complainants' tasks were usually necessary or desirable in the usual business or
trade of the respondent company. There can be no escape from the conclusion that the complainants
were regular employees of the respondent as provided by Article 280 of the Labor Code . . . . 5
Moreover, the Labor Arbiter correctly ruled that the supposed fixed periods of employment of private
respondents as stated in their employment contracts precluded their acquisition of tenurial security.
We agree with petitioner in this regard that the Labor Arbiter should not have awarded such money
claims that went beyond three (3) years. There are ten (10) regular holidays9 and five (5) days of
service incentive leave in a year. At most, private respondents can only claim thirty (30)-day holiday
pay and fifteen (15)-day service incentive leave pay with respect to their amended complaint of 25
January 1991. Any other claim is now barred by prescription.
7) De Guzman v. Court of Appeals
Article 291 of the Labor Code provides:
ART. 291. Money Claims. -- All money claims arising from employer-employee relations accruing during
the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued;
otherwise they shall be forever barred.
Undisputed is the fact that an employer-employee relation exists between the parties in this case. Thus,
any money claim arising from the said agreement is merely a consequence of the employer-employee
relation. We take this occasion to emphasize that the language of Article 291 of the Labor Code does
not limit its application only to money claims specifically recoverable under said Code, 11 but covers all
money claims arising from employer-employee relation.12 Since petitioners demand for unpaid
retirement/separation benefits is a money claim arising from their employment by private respondent,
Article 291 of the Labor Code is applicable. Therefore, petitioners claim should be filed within three
years from the time their cause of action accrued, or be forever barred by prescription. The petitioners
 cause of action accrued when they were dismissed from employment on November 16, 1992, without
payment of their retirement and separation benefits as provided in their CBA. It is from this date that
the three-year prescriptive period is reckoned.
It should be noted further that Article 291 of the Labor Code is a special law applicable to money claims
arising from employer-employee relations; thus, it necessarily prevails over Article 1144 of the Civil
Code, a general law. Basic is the rule in statutory construction that where two statutes are of equal
theoretical application to a particular case, the one designed therefor specially should prevail.
iii. Paternity Leave (RA 8187)
An Act Granting Paternity Leave Of Seven (7) Days With Fullpay To All Married Employees In The Private
And Public Sectors For The First Four (4) Deliveries Of The Legitimate Spouse With Whom He Is Cohabiting
And For Other Purposes
iv. Maternity Leave (RA 11210) - An Act Increasing the Maternity Leave Period to One
Hundred Five (105) Days for Female Workers With an Option to Extend for an Additional
Thirty (30) Days Without Pay, and Granting an Additional Fifteen (15) Days for Solo
Mothers, and for Other Purposes
Section 3. Grant of Maternity Leave.— All covered female workers in government and the private sector, including those
in the informal economy, regardless of civil status or the legitimacy of her child, shall be granted one hundred five (105)
days maternity leave with full pay and an option to extend for an additional thirty (30) days without pay: Provided, That in
case the worker qualifies as a solo parent under Republic Act No. 8972, or the "Solo Parents’ Welfare Act", the worker shall
be granted an additional fifteen (15) days maternity leave with full pay.
Enjoyment of maternity leave cannot be deferred but should be availed of either before or after the actual period of delivery
in a continuous and uninterrupted manner, not exceeding one hundred five (105) days, as the case may be.
Maternity leave shall be granted to female workers in every instance of pregnancy, miscarriage or emergency termination of
pregnancy, regardless of frequency: Provided, That for cases of miscarriage or emergency termination of pregnancy, sixty
(60) days maternity leave with full pay shall be granted.
Section 4. Maternity Leave for Female Workers in the Public Sector.— Any pregnant female worker in the government
service, regardless of employment status, in National Government Agencies (NGAs), Local Government Units (LGUs),
Government-Owned or -Controlled Corporations (GOCCs), or State Universities and Colleges (SUCs), shall be granted a
maternity leave of one hundred five (105) days with full pay regardless if the delivery was normal or
caesarian: Provided, That, in case the employee qualifies as a solo parent under Republic Act No. 8972, or the "Solo Parents’
Welfare Act", the employee shall be paid an additional maternity benefit of fifteen (15) days. An additional maternity leave
of thirty (30) days, without pay, can be availed of, at the option of the female worker: Provided, further, That, the head of
the agency shall be given due notice, in writing, at least forty-five (45) days before the end of her maternity leave: Provided,
finally, That no prior notice shall be necessary in the event of a medical emergency but subsequent notice shall be given to
the head of the agency.
Maternity leave of sixty (60) days, with full pay, shall be granted for miscarriage or emergency termination of pregnancy.
Section 5. Maternity Leave for Female Workers in the Private Sector.— Any pregnant female worker in the private
sector shall be granted a maternity leave of one hundred five (105) days with full pay, regardless of whether she gave birth
via caesarian section or natural delivery, while maternity leave of sixty (60) days with full pay shall be granted for miscarriage
or emergency termination of pregnancy.
(a) A female Social Security System (SSS) member who has paid at least three (3) monthly contributions in the twelve (12)-
month period immediately preceding the semester of her childbirth, miscarriage, or emergency termination of pregnancy
shall be paid her daily maternity benefit which shall be computed based on her average monthly salary credit for one hundred
five (105) days, regardless of whether she gave birth via caesarian section or natural delivery, subject to the following
conditions:
In case the employee qualifies as a solo parent under Republic Act No. 8972, or the "Solo Parents’ Welfare Act", the employee
shall be paid an additional maternity benefit of fifteen (15) days.
(b) An additional maternity leave of thirty (30) days, without pay, can be availed of, at the option of the female
worker: Provided, That the employer shall be given due notice, in writing, at least forty-five (45) days before the end of her
maternity leave: Provided, further, That no prior notice shall be necessary in the event of a medical emergency but
subsequent notice shall be given to the head of the agency.
Section 6. Allocation of Maternity Leave Credits.— Any female worker entitled to maternity leave benefits as provided
for herein may, at her option, allocate up to seven (7) days of said benefits to the child’s father, whether or not the same is
married to the female worker: Provided, That in the death, absence, or incapacity of the former, the benefit may be allocated
to an alternate caregiver who may be a relative within the fourth degree of consanguinity or the current partner of the female
worker sharing the same household, upon the election of the mother taking into account the best interests of the
child: Provided, further, That written notice thereof is provided to the employers of the female worker and alternate
caregiver: Provided, furthermore, That this benefit is over and above that which is provided under Republic Act No. 8187, or
the "Paternity Leave Act of 1996": Provided, finally, That in the event the beneficiary female worker dies or is permanently
incapacitated, the balance of her maternity leave benefits shall accrue to the father of the child or to a qualified caregiver as
provided above.
Section 8. Maternity Leave With Pay in Case of Childbirth, Miscarriage, or Emergency Termination of Pregnancy
After the Termination of an Employee’s Service.— Maternity leave with full pay shall be granted even if the childbirth,
miscarriage, or emergency termination of pregnancy occurs not more than fifteen (15) calendar days after the termination
of an employee’s service, as her right thereto has already accrued: Provided, That such period is not applicable when the
employment of the pregnant woman worker has been terminated without just cause, in which case the employer will pay her
the full amount equivalent to her salary for one hundred five (105) days for childbirth and sixty (60) days for miscarriage or
emergency termination of pregnancy based on her full pay, in addition to the other applicable daily cash maternity benefits
that she should have received had her employment not been illegally terminated.
Section 9. Maternity Leave Credits.— The maternity leave can be credited as combinations of prenatal and postnatal leave
as long as it does not exceed one hundred five (105) days and provided that compulsory postnatal leave shall not be less
than sixty (60) days.
v. Solo Parent Leave (RA 8972)
Section 8. Parental Leave. - In addition to leave privileges under existing laws, parental leave of not
more than seven (7) working days every year shall be granted to any solo parent employee who has
rendered service of at least one (1) year.
vi. Special Leave for Women
1) RA 9710
Section 15. Women in the Military – x x x Further, women in the military, police; and other similar
services shall be entitled to leave benefits such as maternity leave, as provided for by existing laws.
Section 18. Special Leave Benefits for Women. - A woman employee having rendered continuous
aggregate employment service of at least six (6) months for the last twelve (12) months shall be
entitled to a special leave benefit of two (2) months with full pay based on her gross monthly
compensation following surgery caused by gynecological disorders.
2) RA 9262
 SECTION 43. Entitled to Leave. – Victims under this Act shall be entitled to take a paid leave of
absence up to ten (10) days in addition to other paid leaves under the Labor Code and Civil Service
Rules and Regulations, extendible when the necessity arises as specified in the protection order.
Any employer who shall prejudice the right of the person under this section shall be penalized in
accordance with the provisions of the Labor Code and Civil Service Rules and Regulations. Likewise,
an employer who shall prejudice any person for assisting a co-employee who is a victim under this Act
shall likewise be liable for discrimination.
vii. Service Charges
Article 96. Service charges. All service charges collected by hotels, restaurants and similar
establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The share of the employees shall be equally distributed
among them. In case the service charge is abolished, the share of the covered employees shall be
considered integrated in their wages.
1) Philippine Hotelier, Inc. v. NUWHRAIN-APL-IUF-Dusit
The Court agrees with Dusit Hotel that the increased salaries of the employees should be used as bases
for determining whether they were entitled to ECOLA under WO No. 9. The very fact that the NLRC
decreed that the salary increases of the Dusit Hotel employees shall be retroactive to 1 January 2001
and 1 January 2002, means that said employees were already supposed to receive the said salary
increases beginning on these dates. The increased salaries were the rightful salaries of the hotel
employees by 1 January 2001, then again by 1 January 2002. Although belatedly paid, the hotel
employees still received their salary increases.
It must be noted that the hotel employees have a right to their share in the service charges collected
by Dusit Hotel, pursuant to Article 96 of the Labor Code of 1991, to wit:
Article 96. Service charges. – All service charges collected by hotels, restaurants and similar
establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The share of employees shall be equally distributed among
them. In case the service charge is abolished, the share of the covered employees shall be considered
integrated in their wages.
Since Dusit Hotel is explicitly mandated by the afore-quoted statutory provision to pay its employees
and management their respective shares in the service charges collected, the hotel cannot claim that
payment thereof to its 82 employees constitute substantial compliance with the payment of ECOLA
under WO No. 9. Undoubtedly, the hotel employees’ right to their shares in the service charges collected
by Dusit Hotel is distinct and separate from their right to ECOLA; gratification by the hotel of one does
not result in the satisfaction of the other.
2) Section 3 and 4, Rule V, Book III, Rules Implementing Labor Code
SECTION 3. Definition of certain terms. — The term "at least one-year service" shall mean service
for not less than 12 months, whether continuous or broken reckoned from the date the employee
started working, including authorized absences and paid regular holidays unless the working days in
the establishment as a matter of practice or policy, or that provided in the employment contract is less
than 12 months, in which case said period shall be considered as one year.
SECTION 4. Accrual of benefit. — Entitlement to the benefit provided in this Rule shall start
December 16, 1975, the date the amendatory provision of the Code took effect.
F. Wages
− remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to
be rendered, and includes the fair and reasonable value.
 tips NOT part of wages
 supplements NOT part of wages
i. Facilities vs Supplements
1) Our Haus Realty Dev. Corp v. Parian
No substantial distinction between deducting and charging a facility’s value from the employee’s wage;
the legal requirements for creditability apply to both. In reality, deduction and charging both operate
to lessen the actual take-home pay of an employee; they are two sides of the same coin. In both, the
employee receives a lessened amount because supposedly, the facility’s value, which is part of his
wage, had already been paid to him in kind. As there is no substantial distinction between the two, the
requirements set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:
a. proof must be shown that such facilities are customarily furnished by the trade;
b. the provision of deductible facilities must be voluntarily accepted in writing by the employee; and
c. The facilities must be charged at fair and reasonable value. 40
In a string of cases, we have concluded that one of the badges to show that a facility is customarily
furnished by the trade is the existence of a company policy or guideline showing that provisions for a
facility were designated as part of the employees’ salaries. 41 Our Haus failed to prove that it was
traditionally giving the respondents their board and lodging. This document did not state whether these
benefits had been consistently enjoyed by the rest of Our Haus’ employees. Moreover, the records
reveal that the board and lodging were given on a per project basis.
If it were customary among construction companies to provide board and lodging to their workers and
treat their values as part of their wages, we would have more reason to conclude that these benefits
were really facilities.
However, Our Haus could not really be expected to prove compliance with the first requirement since
the living accommodation of workers in the construction industry is not simply a matter of business
practice. Peculiar to the construction business are the occupational safety and health (OSH) services
which the law itself mandates employers to provide to their workers. This is to ensure the humane
working conditions of construction employees despite their constant exposure to hazardous working
environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of 1998, 43 employers
engaged in the construction business are required to provide the following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitary and washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilities for men and women workers.
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation of
DOLE DO No. 13, mandates that the cost of the implementation of the requirements for the construction
safety and health of workers, shall be integrated to the overall project cost.44 The rationale behind this
is to ensure that the living accommodation of the workers is not substandard and is strictly compliant
with the DOLE’s OSH criteria. As part of the project cost that construction companies already charge to
their clients, the value of the housing of their workers cannot be charged again to their employees’
salaries.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test set by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the
employer’s convenience, it will not be considered as a facility but a supplement. 45 Here, careful
consideration is given to the nature of the employer’s business in relation to the work performed by
the employee. This test is used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly redounds to the
employers’ greater advantage.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the employees’ wages but not
the value of supplements. Facilities include articles or services for the benefit of the employee or his
family but exclude tools of the trade or articles or services primarily for the benefit of the employer or
necessary to the conduct of the employer’s business. 47
The law also prescribes that the computation of wages shall exclude whatever benefits, supplementsor
allowances given to employees. Supplements are paid to employees on top of their basic pay and are
free of charge.48 Since it does not form part of the wage, a supplement’s value may not be includedin
the determination of whether an employer complied with the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities but
as supplements. The Court, at this point, makes a distinction between "facilities" and "supplements".
It is of the view that the food and lodging, or the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements.
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers overand above their ordinary earnings or wages. "Facilities", on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so
thatby express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay
for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part
of the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or
item (food, lodging, bonus or sick leave) given, but in the purpose for which it is given.In the case at
bench, the items provided were given freely by SLLfor the purpose of maintaining the efficiency and
health of its workers while they were working attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given
by the employer.
2) Mabeza v. NLRC
Granting that meals and lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal requirements. Without
satisfying these requirements, the employer simply cannot deduct the value from the employee's ages.
First, proof must be shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value. 27
These requirements were not met in the instant case. Private respondent "failed to present any
company policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he
failed to provide proof of the employee's written authorization; and, he failed to show how he arrived
at the valuations. 29
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose. 31 Considering, therefore, that hotel workers are required to work
different shifts and are expected to be available at various odd hours, their ready availability is a
necessary matter in the operations of a small hotel, such as the private respondent's hotel.
3) Mayon Hotel v. Adana
The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage:
We cannot consider the cost of meals in the Orders as applicable to [respondents]. [Respondents] were
not interviewed by the DOLE as to the quality and quantity of food appearing in the applications of
[petitioners] for facility evaluation prior to its approval to determine whether or not [respondents] were
indeed given such kind and quantity of food. Also, there was no evidence that the quality and quantity
of food in the Orders were voluntarily accepted by [respondents].
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities
could not be deducted without compliance with certain legal requirements. As stated in Mabeza v.
NLRC,87 the employer simply cannot deduct the value from the employee's wages without satisfying
the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are charged
at fair and reasonable value. The records are clear that petitioners failed to comply with these
requirements. There was no proof of respondents' written authorization. Indeed, the Labor Arbiter found
that while the respondents admitted that they were given meals and merienda, the quality of food
served to them was not what was provided for in the Facility Evaluation Orders and it was only when
they filed the cases that they came to know of this supposed Facility Evaluation Orders.
4) Atok Big Wedge Mutual Benefit Association v. Atok-Big Wedge Mining Company
An agreement to deduct certain facilities received by the laborers from their employer is not a waiver
of the minimum wage fixed by the law. Wage, as defined by section 2 of Republic Act No. 602, "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." Thus, the law permits the deduction
of such facilities from the laborer's minimum wage of P4, as long as their value is "fair and reasonable".
It is not here claimed that the valuations fixed in the Agreement of October 29, 1952 are not fair and
reasonable.
The meaning of the term "supplements" has been fixed by the Code of Rules and Regulations
promulgated by the Wage Administration Office to implement the Minimum Wage Law, as:
extra renumeration or benefits received by wage earners from their employees and include but are not
restricted to pay for vacation and holidays not worked; paid sick leave or maternity leave; overtime
rate in excess of what is required by law; sick, pension, retirement, and death benefits; profit-sharing;
 family allowances; Christmas, war risk and cost-of-living bonuses; or other bonuses other than those
paid as a reward for extra output or time spent on the job.
"Supplements", therefore, constitute extra renumeration or special privileges or benefits given to or
received by the laborers over and above their ordinary earnings or wages. Facilities, on the other hand,
are items of expense necessary for the laborer's and his family's existence and subsistence, so that by
express provision of the law (sec. 2 [g]) they form part of the wage and when furnished by the employer
are deductible therefrom since if they are not so furnished, the laborer would spend and pay for them
just the same. It is thus clear that the facilities mentioned in the agreement of October 29, 1952 do
not come within the term "supplements" as used in Art. 19 of the Minimum Wage Law.
SEC. 4. Commonwealth Act No. 444 (otherwise known as the Eight Hour Labor Law) provides:
No person, firm, or corporations, business establishment or place or center of labor shall compel an
employee or laborer to work during Sundays and holidays, unless he is paid an additional sum of at
least twenty-five per centum of his regular renumeration:
The minimum legal additional compensation for work on Sundays and legal holidays is, therefore, 25
per cent of the laborer's regular renumeration. Under the Minimum Wage Law, this minimum additional
compensation is P1 a day (25 per cent of P4, the minimum daily wage).
ii. Bonus
1) Define
− payment in excess of regular or guaranteed wages
a. Metro Transit Org., Inc. v. NLRC
A "bonus" is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It
is something given in addition to what is ordinarily received by or strictly due to the recipient.
The general 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.8 A bonus, however, is a demandable or enforceable obligation when it
is made part of the wage or salary or compensation of the employee.9 Whether or not a bonus forms
part of wages depends upon the circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any conditions imposed for
its payment, such as success of business or greater production or output, then it is part of the wage.
But if it is paid only if profits are realized or if a certain level of productivity is achieved, it can not be
considered part of the wage. Where it is not payable to all but only to some employees and only when
their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize
therefor, not a part of the wage. 10
The demand for this increase was based on a company practice, admitted by Metro, of granting a
salary increase (and a premium) to supervisory employees whenever rank-and-file employees were
granted a salary increase. The demanded increase therefore is not a bonus that is generally not
demandable as a matter of right. The demanded increase, in this instance, is an enforceable obligation
so far as the supervisory employees of Metro are concerned.
b. Phil. Duplicators, Inc. v. NLRC
c.
More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment
constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than
as a demandable or enforceable obligation.
As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It
is an act of generosity of the employer for which the employee ought to be thankful and grateful. It
is also granted by an enlightened employer to spur the employee to greater efforts for the success of
the business and realization of bigger profits. . . . . From the legal point of view a bonus is not and
mandable and enforceable obligation. It is so when It is made part of the wage or salary or
compensation. In such a case the latter would be a fixed amount and the former would be a contingent
one dependent upon the realization of profits. . . .6 (Emphasis supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association,7 the Court
amplified:
Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its
payment. If it is an additional compensation which the employer promised and agreed to give without
any conditions imposed for its payment, such as success of business or greater production or output,
then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity
achieved, it cannot be considered part of wages. It is also paid on the basis of actual or actual work
accomplished. If the desired goal of production is not obtained, or the amount of actual work
accomplished, the bonus does not accrue.”
More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal
Bank v. National Labor Relations Commission:9
A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to demand as a
matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in
addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is
basically a management prerogative which cannot be forced upon the employer "who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages . . ."
If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow
that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of
employees when the time comes to compute their 13th month pay.
The doctrine set out in the decision of the Second Division is, accordingly, that additional payments
made to employees, to the extent they partake of the nature of profit-sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay
due to employees. Such additional payments are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
We recognize that both productivity bonuses and sales commissions may have an incentive effect.
But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to
the productivity or profit generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A productivity bonus is something
extra for which no specific additional services are rendered by any particular employee and hence not
legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other
hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent
or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a
salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral
part of such salesman's basic pay.
Philippine National Construction Corporation v. NLRC
 Likewise, private respondents are not entitled to the mid-year bonus they are claiming. A bonus is a
gift from the employer and the grant thereof is a management prerogative. Petitioner may not be
compelled to award a bonus to private respondents whom it found guilty of serious misconduct.
A bonus is a gratuity or an act of liberality of the giver which the recipient has no right to demand as
a matter of right. It is something given in addition to what is ordinarily received by or strictly due the
recipient. The granting of a bonus is basically, a management prerogative which cannot be forced
upon the employer who may not be obliged to assume the onerous burden of granting bonuses or
other benefits aside from the employee's basic salaries or wages. (citations omitted)
We further held in Metro Transit Organizations, Inc. vs. NLRC17 that a bonus becomes a demandable
or enforceble obligation only when it is made part of the wage or salary or compensation of the
employee. thus:
The general 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. A bonus, however, is a demandable or enforceable obligation when it is
made part of the wage or salary or compensation of the employee. Whether or not a bonus forms
part of wages depends upon the circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any conditions imposed for
its payment, such as success of business or greater production or output, then it is part of the wage.
But if it is paid only if profits are realized or if a certain level of productivity is achieved, it cannot be
considered part of the wage. Where it is not payable to all but only to some employees and only when
their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize
therefor, not a part of the wage.
2) Bonus as Demandable Obligation
− if it is given without any condition; hence, it is a part of the wage or salary
− if the grant is the result of an agreement such as the CBA
− if it is given on account of company policy or practice
− if the grant is mandated by law
a. M.E. Grey v. Insular Lumber Company
Bonus is a voluntary act dependent upon the goodwill of the employer. Here it ceased to be a
unilateral act. It became contractual. Here it was clearly agreed that bonus may be given to plaintiff
provided that certain condition is met and if this condition is met the obligation to pay the bonus
cannot be eluded. It does not appear that a similar condition was imposed upon other American
employees, and there being no such showing, it is unfair to place plaintiff under a similar predicament
more so when the condition imposed refers to the special service to be rendered by the plaintiff.
Considering that plaintiff has rendered this service and has given to the company the profit expected
of him, it is fair and just that he be given the bonus to which he is entitled under the contract.
b. Claparols v. CIR
WE uniformly held that "a bonus is not a demandable and enforceable obligation, except when it is a
part of the wage or salary compensation"
In Atok Big Wedge Mining Co. vs. Atok Big Wedge Mutual Benefit Association (92 Phil. 754), this
Court, thru Justice Labrador, held:
Whether or not bonus forms part of wages depends upon the condition or circumstance for its
payment. If it is an additional compensation WHICH THE EMPLOYER PROMISED AND AGREED to give
without any condition imposed for its payment ... then it is part of the wage.
In Altomonte vs. Philippine American Drug Co. (106 Phil. 137), the Supreme Court held that an
employee is not entitled to bonus where there is no showing that it had been granted by the employer
to its employees periodically or regularly as to become part of their wages or salaries. The clear
implication is that bonus is recoverable as part of the wage or salary where the employer regularly
or periodically gives it to employees.
American jurisprudence equally regards bonuses as part of compensation or recoverable wages.
Thus, it was held that "... it follows that in determining the regular rate of pay, a bonus which in fact
constitutes PART OF AN EMPLOYEE'S compensation, rather than a true gift or gratuity, has to be
taken into consideration."
As such, bonus for a given year earmarked as a matter of tradition for distribution to employees has
formed part of their recoverable wages from the company. Moreover, with greater reason, should
recovery of bonuses as part of back wages be observed in the present case since the company, in
the light of the very admission of company accountant Francisco Cusi, distributes bonuses to its
employees even if the company has suffered losses. Specifically, petitioner company has done this in
1962.
3) Bonus as Part of Wages
− if it is an additional compensation which the employer promised and agreed to give
without any condition imposed for its payment
− if it has ripened into a practice through the passage of a considerable length of time
and has consequently become a part of the terms and conditions of employment or by
virtue of its long and regular concession
a. Davao Fruits Corp. v. ALU
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay
their employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of
the "Rules and Regulations Implementing Presidential Decree No. 851," thus:
(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within
a calendar year.
(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee
for services rendered but may not include cost of living allowances granted, profit-sharing payments,
and all allowances and monetary benefits which are not considered or integrated as part of the regular
or basic salary of the employee at the time of the promulgation of the Decree
The Department of Labor and Employment issued the "Supplementary Rules and Regulations
Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic salary,"
thus:
4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not
be included in the computation of the 13th month pay.
Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee,
but excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary
benefits which have not been considered as part of the basic salary of the employee as of December
16, 1975. The exclusion of cost-of-living allowances and profit sharing payments shows the intention
to strip "basic salary" of payments which are otherwise considered as "fringe" benefits. This intention
is emphasized in the catch all phrase "all allowances and monetary benefits which are not considered
or integrated as part of the basic salary." Basic salary, therefore does not merely exclude the benefits
expressly mentioned but all payments which may be in the form of "fringe" benefits or allowances.
 In other words, whatever compensation an employee receives for an eight-hour work daily or the
daily wage rate in the basic salary. Any compensation or remuneration other than the daily wage rate
is excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for
work done on rest days special holidays, as well as pay for regular holidays, are likewise excluded in
computing the basic salary for the purpose of determining the thirteen month pay.
The first method involves the fixing of determinate amount that would be added to the prevailing
statutory minimum wage. The other involves "the salary-ceiling method" whereby the wage
adjustment is applied to employees receiving a certain denominated salary ceiling. The first method
was adopted in the earlier wage orders, while the latter method was used in R.A. Nos. 6640 and
6727.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic
salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for work
performed on rest days and special holidays, pay for regular holidays and night differentials. As such
they are deemed not part of the basic salary and shall not be considered in the computation of the
13th-month pay.
From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation
of its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves,
premiums for work done on rest days and special holidays, and pay for regular holidays. A company
practice favorable to the employees had indeed been established and the payments made pursuant
thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by
the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue
of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the labor
of the Philippines, which prohibit the diminution or elimination by the employer of the employees'
existing benefits.
4) Productivity Bonus
− something extra for which no specific additional services are rendered by any particular
employee
− NOT legally demandable
a. Phil. Duplicators, Inc. v. NLRC
Productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a
corporation; such bonuses closely resemble profit-sharing payments and have no clear director
necessary relation to the amount of work actually done by each individual employee.
5) Basic Salary v. Fringe Benefits
iii. Minimum Wage
Article 99. Regional minimum wages. The minimum wage rates for agricultural and non-agricultural
employees and workers in each and every region of the country shall be those prescribed by the Regional
Tripartite Wages and Productivity Boards.
Precisely, Republic Act No. 6727 was intended to rationalize wages, first, by providing for full-time
boards to police wages round-the-clock, and second, by giving the boards enough powers to achieve
this objective; that if Republic No. 6727 intended the boards alone to set floor wages, the Act would
have 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.
ART. 124. Standards / Criteria for Minimum Wage Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain
the minimum standards of living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social development program. In the
determination of such regional minimum wages, the Regional Board shall, among other relevant
factors, consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of emphasis employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic and social
development.12
The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonably 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.24

TIME WAGES PRODUCTION WAGES The concept of "minimum wage" is, however, a different thing, and certainly, it means more than
− pay by the hour, day or month, without − pay related to the amount of work the setting a floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies
specifying the amount of work to be done individual or group performs regardless of the effort of the State, as Republic Act No. 6727 expresses it, "to promote productivity-improvement
the time involved and gain-sharing measures to ensure a decent standard of living for the workers and their families;
to guarantee the rights of labor to its just share in the fruits of production; to enhance employment
1) Purpose generation in the countryside through industry dispersal; and to allow business and industry
reasonable returns on investment, expansion and growth,"25 and as the Constitution expresses it,
a. Employers Confederation of the Philippines v. NWPC to affirm "labor as a primary social economic force."26

The determination of wages has generally involved two methods, the "floor-wage" method and the 2) Standards of Fixing Minimum Wage
"salary-ceiling" method. We quote:
a. Section 2, Chapter III, Rules Implementing RA 6727
 Section 2. Standards/Criteria for Minimum Wage Fixing. - The regional minimum wages
to be established by the Boards shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general
well-being of the workers within the framework of the national economic and social
development programs. In the determination of regional minimum wages, the Boards, shall
among other relevant factors, consider the following:
− The demand for living wages;
− Wage adjustment vis-à-vis the consumer price index;
− The cost of living and changes or increases therein
− The needs of workers and their families;
− The need to induce industries to invest in the countryside;
− Improvements in standards of living;
− The prevailing wage levels;
− Fair return of the capital invested and capacity to pay of employers;
− Effects on employment generation and family income; and
− The equitable distribution of income and wealth along the imperatives of economic and
social development.
3) Exempted
Section 1. WHO MAY BE EXEMPTED. Upon application with and as determined by the Board, based on
compliance with the criteria and requirements in the applicable rules and regulations, the following
may be exempted from the applicability of this Order:
a. Distressed establishments;
b. Establishments whose Total Assets Including those arising from loans but exclusive of the land on
which the particular business entity’s office, plant and equipment are situated, are not more than
P3Million;
c. Retail/Service establishments employing not more than ten (10) workers;
d. Establishments adversely affected by natural calamities;
e. Micro and small indigenous exporters as certified by the Export Development Council.
4) Non-negotiable and Non-waivable
a. Philippine American Management Company v. Philippine American Management
Employees Association
More plainly put, the question of minimum wage is not negotiable. What the law decrees must be
obeyed. It is as simple as that. That is why it is obvious that petitioners cannot successfully invoke
the principles associated with the institution of collective bargaining. Nor is this all. The approach
followed by petitioners ignores a relevant provision of the Industrial Peace Act. 47 There is thus set
forth in categorical language an exception to the primordial concept underlying the Industrial Peace
Act that working conditions are to be fixed not by respondent Court but by the parties themselves.
5) Non Diminution
a. Wesleyan University Phils. Wesleyan University Phils. Faculty and Staff Association
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if
the benefit is based on an express policy, a written contract, or has ripened into a practice.40 To be
considered a practice, it must be consistently and deliberately made by the employer over a long
period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a
doubtful or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.
The practice of giving two retirement benefits to petitioner’s employees is supported by substantial
evidence.
There is nothing in Article XVI of the CBA to indicate or even suggest that the "Plan" referred to in
the CBA is the PERAA Plan. Besides, any doubt in the interpretation of the provisions of the CBA
should be resolved in favor of respondent. For if it were true that petitioner was already implementing
a one-retirement policy, there would have been no need for such announcement. Equally damaging
is the letter-memorandum45 dated May 11, 2006, entitled "Suggestions on the defenses we can
introduce to justify the abolition of double retirement policy," prepared by the petitioner’s legal
counsel.
b. Republic Planters Bank v. NLRC
Under Section 14(a), Rule 1 of the Rules and Regulations Implementing Book VI of the Labor Code,
it is provided:
Sec. 14. Retirement Benefits. — (a) An employee who is retired pursuant to a bonafide retirement
plan or in accordance with the applicable individual or collective agreement or established employer
policy shall be entitled to all the retirement benefits provided therein . . .
A punctilious perusal of the records leads us to the same conclusion, i.e., that PNB-RB has adopted
the policy of granting gratuity benefits to its retiring officers based on the salary rate of the next
higher rank. It continued to adopt this practice even after the expiration of the 1971-1973 CBA. The
grant was consistent and deliberate although petitioner knew fully well that it was not required to
give the benefits after the expiration of the 1971-1973 CBA. Under these circumstances, the granting
of the gratuity pay on the basis of the salary rate of the rank next higher may be deemed to have
ripened into company practice or policy which can no longer be peremptorily withdrawn. 12 Any
benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued
or eliminated by the employer by virtue of Sec. 10 of the Rules and Regulations Implementing P.D.
No. 851 and Art. 100 of the Labor Code which prohibit the diminution or elimination by the employer
of the employees' existing benefits.
The conversion of leave credits into their cash equivalent is aimed primarily to encourage workers to
work continuously and with dedication for the company. Companies offer incentives, such as the
conversion of the accumulated leave credits into their cash equivalent, to lure employees to stay with
the company. Leave credits are normally converted into their cash equivalent based on the last
prevailing salary received by the employee. Considering all these, the accumulated leave credits
should be converted based on the upgraded salary of the retiree, which is the salary rate of the rank
next higher.
Gratuity pay, unlike salary, is paid to the beneficiary for the past services or favor rendered purely
out of the generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a worker for
actual services rendered or for actual performance. It is a money benefit or bounty given to the
worker, the purpose of which is to reward employees who have rendered satisfactory service to the
company. Salary, on the other hand, is a part of labor standard law based on the actual amount of
work rendered or the number of days worked over the period of years. Hence, petitioner's attempt
to apply the salary structure to determine gratuity would eradicate the very essence of a gratuity
award, and make it partake of the character of a wage or salary given on the basis of actual work or
performance. Such was never the intendment of the law and would run counter to essential social
justice. 16
 c. Sevilla Trading Company v. Semana
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as
the basis in the determination of his 13th-month pay. Any compensations or remunerations which
are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations
are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction
No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of the regular a.
basic salary of the employee at the time of the promulgation of the Decree
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13th-month pay.
When petitioner Sevilla Trading still included over the years non-basic benefits of its employees, such
as maternity leave pay, cash equivalent of unused vacation and sick leave, among others in the
computation of the 13th-month pay, this may only be construed as a voluntary act on its part. Putting
the blame on the petitioner’s payroll personnel is inexcusable.
b.
iv. Payment of Wages
Article 102. Forms of payment. No employer shall pay the wages of an employee by means of
promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even
when expressly requested by the employee.
Payment of wages by check or money order shall be allowed when such manner of payment is customary
on the date of effectivity of this Code, or is necessary because of special circumstances as specified in
appropriate regulations to be issued by the Secretary of Labor and Employment or as stipulated in a
collective bargaining agreement.
1) Place of Payment — As a general rule, the place of payment shall be at or near the place of
undertaking. Payment in a place other than the work place shall be permissible only under the
following circumstances:
(a) When payment cannot be effected at or near the place of work by reason of the deterioration
of peace and order conditions, or by reason of actual or impending emergencies caused by fire,
flood, epidemic or other calamity rendering payment thereat impossible;
(b) When the employer provides free transportation to the employees back and forth; and
(c) Under any other analogous circumstances; Provided, That the time spent by the employees in
collecting their wages shall be considered as compensable hours worked;
(d) No employer shall pay his employees in any bar, night or day club, drinking establishment,
massage clinic, dance hall, or other similar places or in places where games are played with stakes
of money or things representing money except in the case of persons employed in said places.
2) Direct Payment of Wages
Article 105. Direct payment of wages. Wages shall be paid directly to the workers to whom they are
due, except:
In cases of force majeure rendering such payment impossible or under other special circumstances
to be determined by the Secretary of Labor and Employment in appropriate regulations, in which
case, the worker may be paid through another person under written authority given by the worker
3)
for the purpose; or
Where the worker has died, in which case, the employer may pay the wages of the deceased worker
to the heirs of the latter without the necessity of intestate proceedings. The claimants, if they are all
of age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they
are his heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be
executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be presented to the
employer who shall make payment through the Secretary of Labor and Employment or his
representative. The representative of the Secretary of Labor and Employment shall act as referee in
dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the
employer of any further liability with respect to the amount paid.
Section 6, Rule VIII, Book III, Rules Implementing the Labor Code
SECTION 6. Wages of deceased employee. — The payment of the wages of a deceased employee
shall be made to his heirs without the necessity of intestate proceedings. When the heirs are of age,
they shall execute an affidavit attesting to their relationship to the deceased and the fact that they
are his heirs to the exclusion of all other persons. In case any of the heirs is a minor, such affidavit
shall be executed in his behalf by his natural guardian or next of kin. Upon presentation of the affidavit
to the employer, he shall make payment to the heirs as representative of the Secretary of Labor and
Employment.
Conseguera v. GSIS
The GSIS offers two separate and distinct systems of benefits to its members — one is the life
insurance and the other is the retirement insurance. These two distinct systems of benefits are paid
out from two distinct and separate funds that are maintained by the GSIS.
Section 24 of Commonwealth Act 186, as amended by Rep. Act 660, partly read as follows:
(a) Life insurance fund. — This shall consist of all premiums for life insurance benefit and/or earnings
and savings therefrom. It shall meet death claims as they may arise or such equities as any member
may be entitled to, under the conditions of his policy, and shall maintain the required reserves to the
end of guaranteeing the fulfillment of the life insurance contracts issued by the System …
(b) Retirement insurance fund. — This shall consist of all contributions for retirement insurance
benefit and of earnings and savings therefrom. It shall meet annuity payments and establish the
required reserves to the end of guaranteeing the fulfillment of the contracts issued by the System.
In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary
in the life insurance policy. Retirement insurance is primarily intended for the benefit of the employee
— to provide for his old age, or incapacity, after rendering service in the government for a required
number of years. If the employee reaches the age of retirement, he gets the retirement benefits even
to the exclusion of the beneficiary or beneficiaries named in his application for retirement insurance.
The beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance
if the employee dies before retirement. If the employee failed or overlooked to state the beneficiary
of his retirement insurance, the retirement benefits will accrue to his estate and will be given to his
legal heirs in accordance with law, as in the case of a life insurance if no beneficiary is named in the
insurance policy. GSIS had correctly acted when it ruled that the proceeds of the retirement insurance
of the late Jose Consuegra should be divided equally between his first living wife Rosario Diaz, on the
one hand, and his second wife Basilia Berdin and his children by her, on the other.
Workers’ Preference in Case of Bankruptcy
 Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an
employer’s business, his workers shall enjoy first preference as regards their wages and other monetary
claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims
shall be paid in full before claims of the government and other creditors may be paid.
a. Development Bank of the Philippines v. Santos
Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the Revised Rules and Regulations
Implementing the Labor Code provide:
Article 110. Worker preference in case of bankruptcy in the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to
a share in the assets of the employer.
Article 10. Payment of wages in case of bankruptcy. Unpaid wages earned by the employee before
the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first
preference and shall be paid in full before other creditors may establish any claim to the assets of
the employer.
It is quite clear from the provisions that a declaration of bankruptcy or a judicial liquidation must be
present before the worker's preference may be enforced. Thus, Article 110 of the Labor Code and its
implementing rule cannot be invoked by the respondents in this case absent a formal declaration of
bankruptcy or a liquidation order. Following the rule in Republic v. Peralta, supra, to hold that Article
110 is also applicable in extra-judicial proceedings would be putting the worker in a better position
than the State which could only assert its own prior preference in case of a judicial proceeding.
Therefore, as stated earlier, Article 110 must not be viewed in isolation and must always be reckoned
with the provisions of the Civil Code.
v. Prohibition Regarding Wages
1) Non-interference
Article 112. Non-interference in disposal of wages. No employer shall limit or otherwise interfere with
the freedom of any employee to dispose of his wages. He shall not in any manner force, compel, or
oblige his employees to purchase merchandise, commodities or other property from any other person,
or otherwise make use of any store or services of such employer or any other person.
a. Omnibus Rules, Book III, Rule VIII, Section 12
SECTION 12. Non-interference in disposal of wages. — No employer shall limit or otherwise interfere
with the freedom of any employee to dispose of his wages and no employer shall in any manner
oblige any of his employees to patronize any store or avail of the services offered by any person.
2) Wage Deduction
Article 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make
any deduction from the wages of his employees, except:
In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
For union dues, in cases where the right of the worker or his union to check-off has been recognized
by the employer or authorized in writing by the individual worker concerned; and
In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and
Employment.
a. Omnibus Rules, Book III, Rule VIII, Section 13
SECTION 13. Wages deduction. — Deductions from the wages of the employees may be made by the
employer in any of the following cases:
(a) When the deductions are authorized by law, including deductions for the insurance premiums
advanced by the employer in behalf of the employee as well as union dues where the right to check-
off has been recognized by the employer or authorized in writing by the individual employee himself.
(b) When the deductions are with the written authorization of the employees for payment to the
third person and the employer agrees to do so; Provided, That the latter does not receive any
pecuniary benefit, directly or indirectly, from the transaction.
b. Galvadores v. Trajano
Article 222(b) of the Labor Code provides:
Article 222. Appearance and Fees.
(b) No attorney's fees, negotiation fees or similar charges of any kind arising from any collective
bargaining negotiations or conclusion of the collective bargaining agreement shall be imposed on any
individual member of the contracting 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, agreement or
arrangement of any sort to the contrary shall be null and void.
While Article 242 of the same Code reads:
Art. 242. Rights and conditions of membership in a labor organization. The following are the rights
and conditions of membership in a labor organization:
(o) Other than for mandatory activities under the Code, no special assessment, attorney's fees,
negotiation fees or any other extraordinary fees may be checked off "from any amount due an
employee without individual written authorization duly signed by the employee. The authorization
should specifically state the amount, purpose and beneficiary of the deduction.
The Omnibus Rules Implementing the Labor Code also provide that deductions from wages of the
employees may only be made by the employer in cases authorized by law, including deductions for
insurance premiums advanced by the employer on behalf of the employees as well as union dues
where the right to check-off is authorized in writing by the individual employee himself. 3
The provisions are clear. No check-offs from any amounts due employees may be effected without
individual written authorizations duly signed by the employee specifically stating the amount, purpose
and beneficiary of the deduction. The required individual authorizations in this case are wanting.
c. When Allowed
− when the deductions are authorized by law, including deductions for the insurance premiums
advanced by the employer in behalf of the employees as well as union dues where the right ot
check-off has been recognized by the employer or authorized in writing by the individual
employee himself
 − when the deductions are with the written authorization of the employees for a payment to a
third person and the employer agrees to do so
− when deductions are made pursuant to the order of the court
− when deductions, as agency fees, are made against the salary or wage of a non-member of the
union; provided, he accepts the benefits in the CBA
− when deductions are made for habitual tardiness or absence as a form of disciplinary measure
Authorized Deductions by Law:
− deductions for facilities supplied by an employer
− deductions for loss or damage to tools, materials, equipment supplied by the employer in a
trade, occupation or business where the practice of making deduction is recognized
− deduction for taxes withheld pursuant to the NIRC
− deductions for social security, Philhealth and PAG-IBIG premiums
− deductions for employee’s compensation premiums
− deductions for a demandable debt due the employer
− deductions made in case of judgment against the debtor-worker where the wages may be
the subject of attachment or execution but only for debts incurred for food, shelter, clothing
and medical attendance
Check-Off: system by which union dues and other assessments are deducted from the employee’s
wage by the employer upon authorization from the worker or by mandate of the lawLoss
i. Labadan v. Forest Hill Academy
On the deduction of 10% tithe, Article 113 of the Labor Code instructs:
ART. 113. No employer, in his own behalf or in behalf of any person, shall make any deduction from
the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor,
as does Rule VIII, Section 10 of the Rules Implementing Book III of the Labor Code reading:
SEC. 10. Deductions from the wages of the employees may be made by the employer in any of the
following cases:
(a) When the deductions are authorized by law, including deductions for the insurance premiums
advanced by the employer in behalf of the employee as well as union dues where the right to check-
off has been recognized by the employer or authorized in writing by the individual employee himself;
(b) When the deductions are with the written authorization of the employees for payment to a third
person and the employer agrees to do so, provided that the latter does not receive any pecuniary
benefit, directly or indirectly, from the transaction. (Emphasis and underscoring supplied)
In the absence then of petitioner’s written conformity to the deduction of the 10% tithe from her
salary, the deduction made by Forest Hills was illegal.
ii. Manila Trading and Supply Co. v. Manila Trading Labor Association
Check-off may be enforced with the consent of the employer or by authority in writing by the
employees. When the union and the employer agree, the attitude of the employees is a immaterial.
When the employees duly authorize the check-off, as provided by the last clause. the employer`s
consent is unnecessary and its recognition of the right is obligatory. If this were not so; if in the any
case the employer's conformity were essential, it would have to be concluded that the second clause
is superfluous and meaningless.
Under the above rule it is clear that check-off may now be allowed if the employer is so authorized
in writing by the employee upon the theory that it is necessary to promote the welfare and integrity
of the union to which he belongs. If we were to interpret the check-off system as one dependent
solely upon the will of the employer, this objective would be defeated.
iii. Section 7, Rule Vii, Book III, Rules Implementing the Labor Code
SECTION 7. Basis of Minimum Wages Rates. — The statutory minimum wage rules prescribed under
the Act shall be for the normal working hours, which shall not exceed eight hours work a day.
iv. Section 14, Rule VII, Book III, Rules Implementing the Labor Code
SECTION 14. Transfer of Personnel. — The transfer of personnel to areas outside the National Capital
Region shall not be a valid ground for the reduction of the wage rates being enjoyed by the workers
prior to such transfer. The workers transferred to the National Capital Region shall be entitled to the
minimum wage rate applicable therein.
d. Legal Compensation
i. Cebu People’s Multi-Purposes Cooperative v. Carbonilla
Basic is the rule that an employer may validly terminate the services of an employee for any of the
just causes enumerated under Article 296 (formerly Article 282) of the Labor Code,76 namely:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
As may be gathered from the tenor of CPMPC's Notice of Dismissal, it is apparent that Carbonilla,
Jr.'s employment was terminated on the grounds of, among others, serious misconduct and loss of
trust and confidence.
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 petitioner should not be taken singly and separately. Fitness for continued employment
cannot be compartmentalized into tight little cubicles of aspects of character, conduct and ability
separate and independent of each other. Indeed, the employer cannot be compelled to retain a
misbehaving employee, or one who is guilty of acts inimical to its interests.
Carbonilla, Jr.'s award of unpaid salaries and 13th month pay were validly offset by his
accountabilities to CPMPC in the amount of P129,455.00.103 Pursuant to Article 1278104 in relation to
 Article 1706105 of the Civil Code and Article 113 (c)106 of the Labor Code, compensation can take place
between two persons who are creditors and debtors of each other. 107 Considering that Carbonilla, Jr.
had existing debts to CPMPC which were incurred during the existence of the employer-employee
relationship, the amount which may be due him in wages was correctly deducted therefrom.
e. Loss, Damage or Deposit
Article 114. Deposits for loss or damage. No employer shall require his worker to make deposits
from which deductions shall be made for the reimbursement of loss of or damage to tools, materials,
or equipment supplied by the employer, except when the employer is engaged in such trades,
occupations or business where the practice of making deductions or requiring deposits is a recognized
one, or is necessary or desirable as determined by the Secretary of Labor and Employment in
appropriate rules and regulations.
i. Section 14, Rule VIII, Book III, Rules Implementing the Labor Code
SECTION 14. Deduction for loss or damage. — Where the employer is engaged in a trade, occupation
or business where the practice of making deductions or requiring deposits is recognized to answer
for the reimbursement of loss or damage to tools, materials, or equipment supplied by the employer
to the employee, the employer may make wage deductions or require the employees to make
deposits from which deductions shall be made, subject to the following conditions:
(a) That the employee concerned is clearly shown to be responsible for the loss or damage;
(b) That the employee is given reasonable opportunity to show cause why deduction should not be
made;
(c) That the amount of such deduction is fair and reasonable and shall not exceed the actual loss
or damage;
(d) That the deduction from the wages of the employee does not exceed 20 percent of the
employee's wages in a week.
ii. Five J. Taxi v. NLRC
Article 114 of the Labor Code provides as follows:
Art. 114. Deposits for loss or damage. — No employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the employer is engaged in such trades,
occupations or business where the practice of making deposits is a recognized one, or is necessary
or desirable as determined by the Secretary of Labor in appropriate rules and regulations.
Anent the issue of illegal deductions, 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, and as claimed by the respondents (petitioners in the
present case), complainant(s) (private respondents herein) were made to shoulder the expenses for
washing, the amount doled out was paid directly to the person who washed the unit, thus we find
nothing illegal in this practice, much more (sic) to consider the amount paid by the driver as illegal
deduction in the context of the law." 6 (Words in parentheses added.)
Consequently, private respondents are not entitled to the refund of the P20.00 car wash payments
they made. It will be noted that there was nothing to prevent private respondents from cleaning the
taxi units themselves, if they wanted to save their P20.00.
iii. Nina Manufacturing and Metal Arts, Inc. v. Montecillo
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall make
any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
Article 114. Deposits for loss or damage. – No employer shall require his worker to make deposits
from which deductions shall be made for the reimbursement of loss of or damage to tools, materials,
or equipment supplied by the employer, except when the employer is engaged in such trades,
occupations or business where the practice of making deposits is a recognized one, or is necessary or
desirable as determined by the Secretary of Labor in appropriate rules and regulations.
It was the respondents who merely stopped reporting for work. While it is conceded that the new
policy will impose an additional burden on the part of the respondents, it was not intended to result in
their demotion. Neither is a diminution in pay intended because as long as the workers observe due
diligence in the performance of their tasks, no loss or damage shall result from their handling of the
gold entrusted to them, hence, all the amounts due to the goldsmiths shall still be paid in full. Further,
the imposition of the new policy cannot be viewed as an act tantamount to discrimination, insensibility
or disdain against the respondents.
Article 113 of the Labor Code is clear that there are only three exceptions to the general rule that no
deductions from the employees' salaries can be made. The exception which finds application in the
instant petition is in cases where the employer is authorized by law or regulations issued by the
Secretary of Labor to effect the deductions. On the other hand, Article 114 states that generally,
deposits for loss or damages are not allowed except in cases where the employer is engaged in such
trades, occupations or business where the practice of making deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor in appropriate rules or regulations.
While employers should generally be given leeways in their exercise of management prerogatives, we
agree with the respondents and the CA that in the case at bar, the petitioners had failed to prove that
their imposition of the new policy upon the goldsmiths under Niña Jewelry's employ falls under the
exceptions specified in Articles 113 and 114 of the Labor Code.
While the petitioners are not absolutely precluded from imposing the new policy, they can only do so
upon compliance with the requirements of the law.44 In other words, the petitioners should first
establish that the making of deductions from the salaries is authorized by law, or regulations issued
by the Secretary of Labor. Further, the posting of cash bonds should be proven as a recognized practice
in the jewelry manufacturing business, or alternatively, the petitioners should seek for the
determination by the Secretary of Labor through the issuance of appropriate rules and regulations
that the policy the former seeks to implement is necessary or desirable in the conduct of business.
f. Withholding Wages
Article 111. Attorney’s fees. In cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.
It shall be 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.
 Article 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up
any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without
the worker’s consent.
i. SHS Perforated Materials, Inc. v. Diaz
ART. 116. Withholding of wages and kickbacks prohibited. – It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up
any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without
the worker’s consent.
Any withholding of an employee’s wages by an employer may only be allowed in the form of wage
deductions under the circumstances provided in Article 113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall make
any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor.
As correctly pointed out by the LA, "absent a showing that the withholding of complainant’s wages
falls under the exceptions provided in Article 113, the withholding thereof is thus unlawful." 13
It would be absurd to require respondent to tolerate the unlawful withholding of his salary for a longer
period before his employment can be considered as so impossible, unreasonable or unlikely as to
constitute constructive dismissal. Even granting that the withholding of respondent’s salary on
November 30, 2005, would not constitute an unlawful act, the continued refusal to release his salary
after the payroll period was clearly unlawful. The petitioners’ claim that they prepared the check
ready for pick-up cannot undo the unlawful withholding. In this case, the withholding of respondent’s
salary does not fall under any of the circumstances provided under Article 113. There was no
dishonest purpose or ill will involved as they believed there was a justifiable reason to withhold his
salary. Thus, although they unlawfully withheld respondent’s salary, it cannot be concluded that such
was made in bad faith.
ii. Articles 1706 and 1708 of the New Civil Code
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.
Article 1708. The laborer's wages shall not be subject to execution or attachment, except for debts
incurred for food, shelter, clothing and medical attendance.
g. Garnishment
i. Gaa v. Court of Appeals
That a laborer, within the statute exempting from garnishment the wages of a "laborer," is one whose
work depends on mere physical power to perform ordinary manual labor, and not one engaged in
services consisting mainly of work requiring mental skill or business capacity, and involving the
exercise of intellectual faculties.
A "laborer" is one who performs menial or manual services and usually looks to the reward of a day's
labor or services for immediate or present support.
Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what
are to be exempted from attachment and execution. The term "wages" as distinguished from "salary",
applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured
by the day, week, month, or season, while "salary" denotes a higher degree of employment, or a
superior grade of services, and implies a position of office: by contrast, the term wages " indicates
considerable pay for a lower and less responsible character of employment, while "salary" is
suggestive of a larger and more important service
"'Wages' are the compensation given to a hired person for service, and the same is true of 'salary'.
The words seem to be synonymous, convertible terms, though we believe that use and general
acceptation have given to the word 'salary' a significance somewhat different from the word 'wages'
in this: that the former is understood to relate to position of office, to be the compensation given for
official or other service, as distinguished from 'wages', the compensation for labor."
vi. Recovery of Wages
1) Balladares v. Peak Ventures Corp.
The Secretary of Labor or his duly authorized representatives is now empowered to hear and decide,
in a summary proceeding, any matter involving the recovery of any amount of wages and other
monetary claims arising out of employer-employee relations at the time of the inspection, even if the
amount of the money claim exceeds ₱5,000.00.
However, if the labor standards case is covered by the exception clause in Article 128 (b) of the Labor
Code, then the Regional Director will have to endorse the case to the appropriate Arbitration Branch of
the NLRC. In order to divest the Regional Director or his representatives of jurisdiction, the following
elements must be present: (a) that the employer contests the findings of the labor regulations officer
and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.
The rules also provide that the employer shall raise such objections during the hearing of the case or
at any time after receipt of the notice of inspection results.
In this case, the Regional Director validly assumed jurisdiction over the money claims of private
respondents even if the claims exceeded ₱5,000 because such jurisdiction was exercised in accordance
with Article 128(b) of the Labor Code and the case does not fall under the exception clause.1avvphi1
2) Meteoro v. Creative Creatures
The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Regional Director, have
jurisdiction to enforce compliance with labor standards laws under the broad visitorial and enforcement
powers conferred by Article 128 of the Labor Code, and expanded by Republic Act (R.A.) No. 7730,15 to
wit:16
Art. 128. Visitorial and Enforcement Power –
(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers,
shall have access to employer’s records and premises at anytime of the day or night whenever work
is being undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or which
 may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations
issued pursuant thereto.
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee relation still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the power to issue compliance orders
to give effect to the labor standards provisions of this Code and other labor legislation based on the
findings of labor employment and enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized representatives shall issue writs of
execution, to the appropriate authority for the enforcement of their orders, except in cases where
the employer contests the findings of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection.
This notwithstanding, the power of the Regional Director to hear and decide the monetary claims of
employees is not absolute. The last sentence of Article 128 (b) of the Labor Code, otherwise known as
the "exception clause," provides an instance when the Regional Director or his representatives may be
divested of jurisdiction over a labor standards case.
Under prevailing jurisprudence, the so-called "exception clause" has the following elements, all of which
must concur:
(a) that the employer contests the findings of the labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary matters; and
(c) that such matters are not verifiable in the normal course of inspection. 24
3) Tang-an v. Philippine Transmarine Carriers
'Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate
and, thus, incur expenses to protect his rights and interests, a monetary award by way of attorney's
fees is justifiable under Article Ill of the Labor Code; Section 8, Rule VIII, Book III of its Implementing
Rules; and paragraph 7, Article 208 of the Civil Code. The award of attorney's fees is proper, and 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.'
G. 13th Month Pay
Employers not Covered by 13th Month Pay Law:
− government and any of its political subdivisions, except those corporations operating essentially as
private subsidiaries of the government
− employers already paying their employees a 13th month pay or more in a calendar year or its
equivalent at the time of issuance of 13th month pay law
− employers of household helpers and persons in the personal service of another in relation to such
workers
− employers of those who are paid on purely commission, boundary, or task basis, and those who
are paid a fixed amount for performing such work
i. Dentech Manufacturing Corporation v. NLRC
On August 13, 1986, President Corazon C. Aquino issued Memorandum Order No. 28 which modified
Section 1 of Presidential Decree No. 851. The said issuance eliminated the Pl,000.00 salary ceiling.
From the foregoing, it clearly appears that the petitioners have no basis to claim that the company is
exempted from complying with the pertinent provisions of the law relating to the payment of 13th month
compensation.
The Pl,000.00 salary ceiling provided in Presidential Decree No. 851 pertains to basic salary, not total
monthly compensation. The petitioners admit that the private respondents work only five days a week
and that they each receive a basic daily wage of P40.00 only. A simple computation of the basic daily
wage multiplied by the number of working days in a month results in an amount of less than Pl,000.00.
Thus, there is no basis for the contention that the company is exempted from the provision of Presidential
Decree No. 851 which mandated the payment of 13th month compensation to employees receiving less
than P1,000.00 a month.
The rules and regulations implementing Presidential Decree No. 851 provide that a distressed employer
shall qualify for exemption from the requirements of the Decree only upon prior authorization from the
Secretary of Labor and Employment. As correctly pointed out by the Solicitor General, no such prior
authorization had been obtained by the petitioner firm.
The refund of the cash bond filed by the private respondents is in order. Article 114 of the Labor Code
prohibits an employer from requiting his employees to file a cash bond or to make deposits, subject to
certain exceptions, to wit-
Art. 114. Deposits for loss or damage.- No employer shall require his worker to make deposits from which
deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such trades, occupations or business
where the practice of making deductions or requiring deposits is a recognized one, or is necessary or
desirable as determined by the Secretary of Labor in appropriate rules and regulations.
The petitioners have not satisfactorily disputed the applicability of this provision of the Labor Code to the
case at bar. Considering further that the petitioners failed to show that the company is authorized by law
to require the private respondents to file the cash bond in question
ii. Archilles Manufacturing Corporation v. NLRC
Paragraph 6 of the Revised Guidelines on the Implementation of the 13th Month Pay Law (P. D. 851)
provides that "(a)n employee who has resigned or whose services were terminated at any time before
the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time
he worked during the year, reckoned from the time he started working during the calendar year up to
the time of his resignation or termination from the service . . . The payment of the 13th month pay may
be demanded by the employee upon the cessation of employer-employee relationship.
Furthermore, Sec. 4 of the original Implementing Rules of P.D. 851 mandates employers to pay their
employees a 13th month pay not later than the 24th of December every year provided that they have
worked for at least one (1) month during a calendar year. In effect, this statutory benefit is automatically
vested in the employee who has at least worked for one month during the calendar year. As correctly
stated by the Solicitor General, such benefit may not be lost or forfeited even in the event of the
employee's subsequent dismissal for cause without violating his property rights.
iii. Central Azucarera De Tarlac v. Central Azucarera De Tarlac Labor Union
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income
based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary
 earned by an employee within a calendar year. All rank-and-file employees, regardless of their
designation or employment status and irrespective of the method by which their wages are paid, are
entitled to this benefit, provided that they have worked for at least one month during the calendar year.
If the employee worked for only a portion of the year, the 13th-month pay is computed pro rata.
The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines
13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a
calendar year;
(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree
No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary
benefits which are not considered or integrated as part of the regular or basic salary of the employee
at the time of the promulgation of the Decree on December 16, 1975.
The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are not part
of the basic salary shall not be included in the computation of the 13th-month pay. The practice of
petitioner in giving 13th month pay for almost thirty (30) years and has ripened into a company policy or
practice which cannot be unilaterally withdrawn.
iv. Songco v. NLRC
The commissions were in the form of incentives or encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs particularly assigned to them, still these commissions
are direct remuneration services rendered which contributed to the increase of income of Zuellig .
Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees,
receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales,
217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are part of petitioners' wage or
salary.
Since the commissions in the present case were earned by actual market transactions attributable to
petitioners, these should be included in their separation pay. In the computation thereof, what should be
taken into account is the average commissions earned during their last year of employment.
v. Phil Duplicators, Inc. v. NLRC
In the instant case, there is no question that the sales commission earned by the salesmen who make or
close a sale of duplicating machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage"
or salary of petitioner's salesmen. Sales commissions received for every duplicating machine sold
constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for
doing their job. The portion of the salary structure representing commissions simply comprised an
automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman.
The sales commissions were an integral part of the basic salary structure of Philippine Duplicators'
employees salesmen. These commissions are not overtime payments, nor profit-sharing payments nor
any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the
selling price of the goods sold by each salesman, were properly included in the term "basic salary" for
purposes of computing their 13th month pay.
If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that
such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees
when the time comes to compute their 13th month pay.
Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A
productivity bonus is something extra for which no specific additional services are rendered by any
particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales
commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly
proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific
results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and
operates as an integral part of such salesman's basic pay.
vi. Iran v. NLRC
The intent of P.D. No. 851 is the granting of additional income in the form of 13th month pay to employees
not as yet receiving the same and not that a double burden should be imposed on the employer who is
already paying his employees a 13th month pay or its equivalent. 19 An employer who pays less than
1/12th of the employees basic salary as their 13th month pay is only required to pay the difference. 20
The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It
does not cover amounts for other years claimed by private respondents. It cannot be presumed that the
same amounts were given on said years. Hence, petitioner is entitled to credit only the amounts paid for
the particular year covered by said vouchers.
IX. SPECIAL GROUP OF WORKERS
A. Women
i. RA 10151
"Article 158. Women Night Workers. - Measures shall be taken to ensure that an alternative to night work
is available to women workers who would otherwise be called upon to perform such work:
"(a) Before and after childbirth, for a period of at least sixteen (16) weeks, which shall be divided between
the time before and after childbirth;
ii. RA 7192 (AN ACT PROMOTING THE INTEGRATION OF WOMEN AS FULL AND EQUAL
PARTNERS OF MEN IN DEVELOPMENT AND NATION BUILDING AND FOR OTHER
PURPOSES)
Sec. 5. Equality in Capacity to Act. — Women of legal age, regardless of civil status, shall have the
capacity to act and enter into contracts which shall in every respect be equal to that of men under similar
circumstances.
In all contractual situations where married men have the capacity to act, married women shall have equal
rights.
To this end:
(1) Women shall have the capacity to borrow and obtain loans and execute security and credit
arrangement under the same conditions as men;
 (2) Women shall have equal access to all government and private sector programs granting agricultural
credit, loans and non-material resources and shall enjoy equal treatment in agrarian reform and land
resettlement programs;
(3) Women shall have equal rights to act as incorporators and enter into insurance contracts; and
(4) Married women shall have rights equal to those of married men in applying for passport, secure visas
and other travel documents, without need to secure the consent of their spouses.
In all other similar contractual relations, women shall enjoy equal rights and shall have the capacity to
act which shall in every respect be equal to those of men under similar circumstances.
Sec. 6. Equal Membership in Clubs. —
Sec. 7. Admission to Military Schools. —
Sec. 8. Voluntary Pag-IBIG, GSIS and SSS Coverage. — Married persons who devote full time to
managing the household and family affairs shall, upon the working spouse's consent, be entitled to
voluntary Pag-IBIG (Pagtutulungan — Ikaw, Bangko, Industriya at Gobyerno), Government Service
Insurance System (GSIS) or Social Security System (SSS) coverage to the extent of one-half (1/2) of
the salary and compensation of the working spouse. The contributions due thereon shall be deducted
from the salary of the working spouse.
iii. RA 7877 (AN ACT DECLARING SEXUAL HARASSMENT UNLAWFUL IN THE EMPLOYMENT,
EDUCATION OR TRAINING ENVIRONMENT, AND FOR OTHER PURPOSES)
Section 2. Declaration of Policy. - The State shall value the dignity of every individual, enhance the development of its
human resources, guarantee full respect for human rights, and uphold the dignity of workers, employees, applicants for
employment, students or those undergoing training, instruction or education. Towards this end, all forms of sexual
vi.
harassment in the employment, education or training environment are hereby declared unlawful.
Section 3. Work, Education or Training -Related, Sexual Harassment Defined. - Work, education or training-related sexual
harassment is committed by an employer, employee, manager, supervisor, agent of the employer, teacher, instructor,
professor, coach, trainor, or any other person who, having authority, influence or moral ascendancy over another in a work
or training or education environment, demands, requests or otherwise requires any sexual favor from the other, regardless
of whether the demand, request or requirement for submission is accepted by the object of said Act.
(a) In a work-related or employment environment, sexual harassment is committed when:
(1) The sexual favor is made as a condition in the hiring or in the employment, re-employment or continued employment
of said individual, or in granting said individual favorable compensation, terms of conditions, promotions, or privileges;
or the refusal to grant the sexual favor results in limiting, segregating or classifying the employee which in any way
would discriminate, deprive ordiminish employment opportunities or otherwise adversely affect said employee;
(2) The above acts would impair the employee's rights or privileges under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or offensive environment for the employee.
(b) In an education or training environment, sexual harassment is committed:
(1) Against one who is under the care, custody or supervision of the offender;
(2) Against one whose education, training, apprenticeship or tutorship is entrusted to the offender;
(3) When the sexual favor is made a condition to the giving of a passing grade, or the granting of honors and scholarships,
or the payment of a stipend, allowance or other benefits, privileges, or consideration; or
(4) When the sexual advances result in an intimidating, hostile or offensive environment for the student, trainee or
apprentice.
Any person who directs or induces another to commit any act of sexual harassment as herein defined, or who cooperates
in the commission thereof by another without which it would not have been committed, shall also be held liable under this
Act.
iv. RA 11323 (An Act Increasing the Bed Capacity of Don Emilio Del Valle Memorial Hospital
(DEDVMH) in the Municipality of Ubay, Province of Bohol From Fifty (50) to Three
Hundred (300) Beds, Upgrading its Services and Facilities and Professional Health Care,
Authorizing the Increase of its Medical Personnel and Appropriating Funds Therefor)
v. RA 9262 (AN ACT DEFINING VIOLENCE AGAINST WOMEN AND THEIR CHILDREN,
PROVIDING FOR PROTECTIVE MEASURES FOR VICTIMS, PRESCRIBING PENALTIES
THEREFORE, AND FOR OTHER PURPOSES)
SECTION 2. Declaration of Policy.- It is hereby declared that the State values the dignity of women and
children and guarantees full respect for human rights. The State also recognizes the need to protect the
family and its members particularly women and children, from violence and threats to their personal
safety and security.
SECTION 7. Venue.- The Regional Trial Court designated as a Family Court shall have original and
exclusive jurisdiction over cases of violence against women and their children under this law. In the
absence of such court in the place where the offense was committed, the case shall be filed in the Regional
Trial Court where the crime or any of its elements was committed at the option of the compliant.
SECTION 35. Rights of Victims. – In addition to their rights under existing laws, victims of violence
against women and their children shall have the following rights:
(a) to be treated with respect and dignity;
(b) to avail of legal assistance form the PAO of the Department of Justice (DOJ) or any public legal
assistance office;
(c) To be entitled to support services form the DSWD and LGUs'
(d) To be entitled to all legal remedies and support as provided for under the Family Code; and
(e) To be informed of their rights and the services available to them including their right to apply for a
protection order.
RA 11210 (An Act Increasing the Maternity Leave Period to One Hundred Five (105) Days
for Female Workers With an Option to Extend for an Additional Thirty (30) Days Without
Pay, and Granting an Additional Fifteen (15) Days for Solo Mothers, and for Other
Purposes)
Section 3. Grant of Maternity Leave.— All covered female workers in government and the private sector, including those
in the informal economy, regardless of civil status or the legitimacy of her child, shall be granted one hundred five (105)
days maternity leave with full pay and an option to extend for an additional thirty (30) days without pay: Provided, That
in case the worker qualifies as a solo parent under Republic Act No. 8972, or the "Solo Parents’ Welfare Act", the worker
shall be granted an additional fifteen (15) days maternity leave with full pay.
Enjoyment of maternity leave cannot be deferred but should be availed of either before or after the actual period of delivery
in a continuous and uninterrupted manner, not exceeding one hundred five (105) days, as the case may be.
Maternity leave shall be granted to female workers in every instance of pregnancy, miscarriage or emergency termination
of pregnancy, regardless of frequency: Provided, That for cases of miscarriage or emergency termination of pregnancy,
sixty (60) days maternity leave with full pay shall be granted.
Section 4. Maternity Leave for Female Workers in the Public Sector.— Any pregnant female worker in the government
service, regardless of employment status, in National Government Agencies (NGAs), Local Government Units (LGUs),
Government-Owned or -Controlled Corporations (GOCCs), or State Universities and Colleges (SUCs), shall be granted a
maternity leave of one hundred five (105) days with full pay regardless if the delivery was normal or
caesarian: Provided, That, in case the employee qualifies as a solo parent under Republic Act No. 8972, or the "Solo
Parents’ Welfare Act", the employee shall be paid an additional maternity benefit of fifteen (15) days. An additional
maternity leave of thirty (30) days, without pay, can be availed of, at the option of the female worker: Provided,
further, That, the head of the agency shall be given due notice, in writing, at least forty-five (45) days before the end of
her maternity leave: Provided, finally, That no prior notice shall be necessary in the event of a medical emergency but
subsequent notice shall be given to the head of the agency.
Maternity leave of sixty (60) days, with full pay, shall be granted for miscarriage or emergency termination of pregnancy.
Section 5. Maternity Leave for Female Workers in the Private Sector.— Any pregnant female worker in the private sector
shall be granted a maternity leave of one hundred five (105) days with full pay, regardless of whether she gave birth via
 caesarian section or natural delivery, while maternity leave of sixty (60) days with full pay shall be granted for miscarriage
or emergency termination of pregnancy.
In case the employee qualifies as a solo parent under Republic Act No. 8972, or the "Solo Parents’ Welfare Act", the
viii.
employee shall be paid an additional maternity benefit of fifteen (15) days.
(b) An additional maternity leave of thirty (30) days, without pay, can be availed of, at the option of the female
worker: Provided, That the employer shall be given due notice, in writing, at least forty-five (45) days before the end of
her maternity leave: Provided, further, That no prior notice shall be necessary in the event of a medical emergency but
subsequent notice shall be given to the head of the agency.
Section 10. Maternity Leave Benefits for Women in the Informal Economy and Voluntary Contributors to the SSS.—
Section 11. Maternity Benefits for Female Workers Who are Non-Members of the SSS.—
Section 12. Maternity Leave of a Female Worker With Pending Administrative Case. —
vii. Philippine Telegraph and Telephone Company v. NLRC
In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138
thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the
right of women to be provided with facilities and standards which the Secretary of Labor may establish
to ensure their health and safety. For purposes of labor and social legislation, a woman working in a
nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be considered as an
employee under Article 138. Article 135, on the other hand, recognizes a woman's right against
discrimination with respect to terms and conditions of employment on account simply of sex. Finally, and
this brings us to the issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the
marriage of a female employee.
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman
worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded
all women workers by our labor laws and by no less than the Constitution. Contrary to petitioner's
assertion that it dismissed private respondent from employment on account of her dishonesty, the record
discloses clearly that her ties with the company were dissolved principally because of the company's
policy that married women are not qualified for employment in PT & T, and not merely because of her
supposed acts of dishonesty.
The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner
PT & T. The Labor Code state, in no uncertain terms, as follows:
Art. 136. Stipulation against marriage. — It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate expressly
or tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of
marriage.
It is logical to presume that, in the absence of said standards or regulations which are as yet to be
established, the policy of respondent against marriage is patently illegal.
Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right
of a woman to be free from any kind of stipulation against marriage in connection with her employment,
but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the
freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible
and inalienable right. 38 Hence, while it is true that the parties to a contract may establish any
agreements, terms, and conditions that they may deem convenient, the same should not be contrary to
law, morals, good customs, public order, or public policy. 39 Carried to its logical consequences, it may
even be said that petitioner's policy against legitimate marital bonds would encourage illicit or common-
law relations and subvert the sacrament of marriage.
Del Monte Philippines, Inc. v. Velasco
Respondent’s sickness was pregnancy-related and, therefore, the petitioner cannot terminate
respondent’s services because in doing so, petitioner will, in effect, be violating the Labor Code which
prohibits an employer to discharge an employee on account of the latter’s pregnancy.
Article 137 of the Labor Code provides:
Art. 137. Prohibited acts. – It shall be unlawful for any employer:
(1) To deny any woman employee the benefits provided for in this Chapter or to discharge any woman
employed by him for the purpose of preventing her from enjoying any of the benefits provided under
this Code;
(2) To discharge such woman on account of her pregnancy, while on leave or in confinement
due to her pregnancy; or
(3) To discharge or refuse the admission of such woman upon returning to her work for fear that she
may again be pregnant. (Emphasis supplied)
But it must be emphasized that under petitioner’s company rules, absences may be subsequently
justified.
B. Minors
i. RA 7610 (AN ACT PROVIDING FOR STRONGER DETERRENCE AND SPECIAL PROTECTION
AGAINST CHILD ABUSE, EXPLOITATION AND DISCRIMINATION, AND FOR OTHER
PURPOSES)
Section 12. Employment of Children. – Children below fifteen (15) years of age may 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 family are employed: Provided, however, That his employment neither endangers his life, safety and health
and morals, nor impairs his normal development: Provided, further, That the parent or legal guardian shall provide the
said minor child with the prescribed primary and/or secondary education; or
(2) When a child's employment or participation in public & entertainment or information through cinema, theater, radio or
television is essential: Provided, The employment contract concluded by the child's parent or guardian, with the express
agreement of the child concerned, if possible, and the approval of the Department of Labor and Employment: Provided,
That the following requirements in all instances are strictly complied with:
(a) The employer shall ensure the protection, health, safety and morals of the child;
(b) the employer shall institute measures to prevent the child's exploitation or discrimination taking into account the
system and level of remuneration, and the duration and arrangement of working time; and;
(c) The employer shall formulate and implement, subject to the approval and supervision of competent authorities, a
continuing program for training and skill acquisition of the child.
ii. RA 6758 (AN ACT PROHIBITING THE EMPLOYMENT OF CHILDREN BELOW 15 YEARS OF
AGE IN PUBLIC AND PRIVATE UNDERTAKINGS, AMENDING FOR ITS PURPOSE SECTION
12, ARTICLE VIII OF R.A. 7610)
"Sec. 12. Employment of Children. — 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 family are employed: Provided, however, That his employment neither
endangers his life, safety, health and morals, nor impairs his normal development; Provided, further,
 That the parent or legal guardian shall provide the said minor child with the prescribed primary and/or
secondary education; or
(2) Where a child's employment or participation in public entertainment or information through cinema,
theater, radio or television is essential: Provided, The employment contract is concluded by the child's
parents or legal guardian, with the express agreement of the child concerned, if possible, and the
approval of the Department of Labor and Employment: and Provided, That the following requirements
in all instances are strictly complied with:
(a) The employer shall ensure the protection, health, safety, morals and normal development of the
child;
(b) The employer shall institute measures to prevent the child's exploitation or discrimination taking
into account the system and level of remuneration, and the duration and arrangement of working
time; and
(c) The employer shall formulate and implement, subject to the approval and supervision of
competent authorities, a continuing program for training and skills acquisition of the child.
In the above exceptional cases where any such child may be employed, the employer shall first secure,
before engaging such child, a work permit from the Department of Labor and Employment which shall
ensure observance of the above requirements.
The Department of Labor and Employment shall promulgate rules and regulations necessary for the
effective implementation of this Section."
(b) It shall be unlawful for a labor contractor or subcontractor, if any, to refuse to refer for employment
or otherwise discriminate against any individual because of such person’s age.
(c) It shall be unlawful for a labor organization to:
(1) Deny membership to any individual because of such individual’s age;
(2) Exclude from its membership any individual because of such individual’s age; or
(3) Cause or attempt to cause an employer to discriminate against an individual in violation of this Act.
(d) It shall be unlawful for a publisher to print or publish any notice of advertisement relating to
employment suggesting preferences, limitations, specifications, and discrimination based on age.
Section 6. Exceptions. - It shall not be unlawful for an employer to set age limitations in employment if:
(a) Age is a bona fide occupational qualification reasonably necessary in the normal operation of a
particular business or where the differentiation is based on reasonable factors other than age;
(b) The intent is to observe the terms of a bona fide seniority system that is not intended to evade the
purpose of this Act;
(c) The intent is to observe the terms of a bona fide employee retirement or a voluntary early retirement
plan consistent with the purpose of this Act: Provided, That such retirement or voluntary retirement
plan is in accordance with the Labor Code, as amended, and other related laws; or
(d) The action is duly certified by the Secretary of Labor and Employment in accordance with the
purpose of this Act.

iii. RA 10361, Sec 4(d) and (h)

ii. DO No. 170 Series of 2017 (IMPLEMENTING RULES AND REGULATIONS ON REPUBLIC ACT
NO. 10911 OTHERWISE KNOWN AS THE “ANTI-AGE DISCRIMINATION IN EMPLOYMENT
(d) Domestic worker or "Kasambahay" refers to any person engaged in domestic work within an ACT”)
employment relationship such as, but not limited to, the following: general househelp, nursemaid or
"yaya", cook, gardener, or laundry person, but shall exclude any person who performs domestic work X. LABOR ONLY CONTRACTING
only occasionally or sporadically and not on an occupational basis.
The term shall not include children who are under foster family arrangement, and are provided access to A. Articles 106 to 109 of the Labor Code
education and given an allowance incidental to education, i.e. "baon", transportation, school projects and
school activities.
Article 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the former’s work, the employees of the contractor and of the latter’s
(h) Working children, as used under this Act, refers to domestic workers who are fifteen (15) years old subcontractor, if any, shall be paid in accordance with the provisions of this Code.
and above but below eighteen (18) years old.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
C. Elderlies with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
i. RA 10911 (An Act Prohibiting Discrimination Against Any Individual in Employment on
Account of Age and Providing Penalties Therefor)
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
Section 5. Prohibition of Discrimination in Employment on Account of Age -
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as
(a) It shall be unlawful for an employer to:
well as differentiations within these types of contracting and determine who among the parties involved
(1) Print or publish, or cause to be printed or published, in any form of media, including the internet,
shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any notice of advertisement relating to employment suggesting preferences, limitations, specifications,
any provision of this Code.
and discrimination based on age;
(2) Require the declaration of age or birth date during the application process;
There is "labor-only" contracting where the person supplying workers to an employer does not have
(3) Decline any employment application because of the individual’s age;
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
(4) Discriminate against an individual in terms of compensation, terms and conditions or privileges of
others, and the workers recruited and placed by such person are performing activities which are directly
employment on account of such individual’s age;
related to the principal business of such employer. In such cases, the person or intermediary shall be
(5) Deny any employee’s or worker’s promotion or opportunity for training because of age;
considered merely as an agent of the employer who shall be responsible to the workers in the same
(6) Forcibly lay off an employee or worker because of old age; or
manner and extent as if the latter were directly employed by him.
(7) Impose early retirement on the basis of such employee’s or worker’s age.
Article 107. Indirect employer. The provisions of the immediately preceding article shall likewise apply
to any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
Article 108. Posting of bond. An employer or indirect employer may require the contractor or
subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will
answer for the wages due the employees should the contractor or subcontractor, as the case may be, fail
to pay the same.
Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability under
this Chapter, they shall be considered as direct employers.
B. DO 18-A
“Trilateral Relationship” refers to the relationship in a contracting or subcontracting arrangement where
there is a contract for a specific job, work or service between the principal and the contractor, and a
contract of employment between the contractor and its workers. There are three (3) parties involved in
these arrangements: the principal who decides to farm out a job, work or service to a contractor; the
contractor who has the capacity to independently undertake the performance of the job, work or service;
and the contractual workers engaged by the contractor to accomplish the job, work or service.
Section 4. Legitimate contracting or subcontracting. Contracting or subcontracting shall be legitimate if
all the following circumstances concur:
(a) The contractor must be registered in accordance with these Rules and carries a distinct and
independent business and undertakes to perform the job, work or service on its own responsibility,
according to its own manner and method, and free from control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof;
(b) The contractor has substantial capital and/or investment; and
(c) The Service Agreement ensures compliance with all the rights and benefits under Labor Laws.
Section 5. Trilateral relationship in contracting arrangements; Solidary liability. In legitimate contracting
or subcontracting arrangement there exists:
(a) An employer-employee relationship between the contractor and the employees it engaged to
perform the specific job, work or service being contracted; and
(b) A contractual relationship between the principal and the contractor as governed by the provisions
of the Civil Code.
In the event of any violation of any provision of the Labor Code, including the failure to pay wages, there
exists a solidary liability on the part of the principal and the contractor for purposes of enforcing the
provisions of the Labor Code and other social legislation, to the extent of the work performed under the
employment contract.
However, the principal shall be deemed the direct employer of the contractor’s employee in cases where
there is a finding by a competent authority of labor-only contracting, or commission of prohibited activities
as provided in Section 7, or a violation of either Sections 8 or 9 hereof.
Section 6. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited.
For this purpose, labor only contracting shall refer to an arrangement where:
(a) The contractor does not have substantial capital or investments in the form of tools, equipment,
machineries, work premises, among others, and the employees recruited and placed are performing
activities which are usually necessary or desirable to the operation of the company, or directly related
to the main business of the principal within a definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed within or outside the premises of the principal;
or
(b) The contractor does not exercise the right to control over the performance of the work of the
employee.
Section 7. Other Prohibitions. Notwithstanding Section 6 of these Rules, the following are hereby declared
prohibited for being contrary to law or public policy:
A. Contracting out of jobs, works or services when not done in good faith and not justified by the
exigencies of the business such as the following:
(1) Contracting out of jobs, works or services when the same results in the termination or reduction of
regular employees and reduction of work hours or reduction or splitting of the bargaining unit.
(2) Contracting out of work with a “Cabo”.
(3) Taking undue advantage of the economic situation or lack of bargaining strength of the contractor’s
employees, or undermining their security of tenure or basic rights, or circumventing the provisions of
regular employment, in any of the following instances:
(i) Requiring them to perform functions which are currently being performed by the regular employees
of the principal; and
(ii) Requiring them to sign, as a precondition to employment or continued employment, an antedated
resignation letter; a blank payroll; a waiver of labor standards including minimum wages and social
or welfare benefits; or a quitclaim releasing the principal, contractor or from any liability as to
payment of future claims.
(4) Contracting out of a job, work or service through an in-house agency.
(5) Contracting out of a job, work or service that is necessary or desirable or directly related to the
business or operation of the principal by reason of a strike or lockout whether actual or imminent.
(6) Contracting out of a job, work or service being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their rights to self-organization as provided in Art.
248 (c) of the Labor Code, as amended.
(7) Repeated hiring of employees under an employment contract of short duration or under a Service
Agreement of short duration with the same or different contractors, which circumvents the Labor Code
provisions on Security of Tenure.
(8) Requiring employees under a subcontracting arrangement to sign a contract fixing the period of
employment to a term shorter than the term of the Service Agreement, unless the contract is divisible
into phases for which substantially different skills are required and this is made known to the employee
at the time of engagement.
(9) Refusal to provide a copy of the Service Agreement and the employment contracts between the
contractor and the employees deployed to work in the bargaining unit of the principal’s certified
bargaining agent to the sole and exclusive bargaining agent (SEBA).
(10) Engaging or maintaining by the principal of subcontracted employees in excess of those provided
for in the applicable Collective Bargaining Agreement (CBA) or as set by the Industry Tripartite Council
(ITC).
B. Contracting out of jobs, works or services analogous to the above when not done in good faith and not
justified by the exigencies of the business.
C. DO 174
Under DO 174, labor-only contracting refers to the following arrangements:
− the contractor or sub-contractor does not have substantial capital. DO 174-17 increased the amount
of substantial capital, from at least PHP3 million to at least PHP5 million in case of corporations,
partnerships, and cooperatives. As for a single proprietorship, the owner must have a net worth of
at least PHP5 million.
− the contractor or subcontractor does not have investments in the form of tools, equipment,
machineries, supervision work premises, among others.
− the contractor’s or subcontractor’s employees recruited and placed are performing activities which
are directly related to the main business operation of the principal.
− the contractor or subcontractor does not exercise the right to control over the performance of the
work of the employee, then it is also considered labor-only contracting under DO 173-14.
DO 147-17 also prohibits the following employment arrangements for being contrary to law or public
policy:
− When the principal farms out work to a CABO, which is a person or group of persons or a labor
group which under the guise of a labor organization, cooperative or any entity, supplies workers to
an employer, with or without any monetary or other consideration, whether in the capacity of an
agent of the employer or as an ostensible independent contractor;
− Contracting out of job or work through an in-house agency;
− Contracting out of job or work through an in-house cooperative which merely supplies workers to
the principal;
− Contracting out of a job or work by reason of a strike or lockout whether actual or imminent;
− Contracting out of a job or work being performed by union members and such will interfere with,
restrain or coerce employees in the exercise of their rights to self-organization;
− Requiring the contractor’s/subcontractor’s employees to perform functions which are currently
being performed by the regular employees of the principal;
− Requiring the contractor’s/subcontractor’s employees to sign, as a precondition to employment or
continued employment, an antedated resignation letter; a blank payroll; a waiver of payroll
standards including minimum wages and social or welfare benefits; or a quitclaim releasing the
principal or contractor from liability as to payment of future claims; or require the employee to
become a member of a cooperative;
− Repeated hiring by the contractor or subcontractor of employees under an employment contract or
short duration;
− Requiring employees under a contracting or subcontracting arrangement to sign a contract fixing
the period of employment to a term shorter than the term of the Service Agreement, unless the
Contract is divisible into phases for which substantially different skills are required and this is made
known to the employee at the time of engagement; and
− Other practices, schemes or employment arrangements designed to circumvent the right of workers
to security of tenure.
D. Phil. Bank Communications v. NLRC
In the case of Viana vs. AI-Lagdan and Pica, 99 Phil. 408 (1956), this Court listed certain factors to be
taken into account in determining the existence of an employer-employee relationship. These factors are:
1) The selection and engagement of the putative employee;
2) The payment of wages;
3) The power of dismissal- and
4) The power to control the putative employees' conduct, although the latter is the most important
element.
Articles 106 and 107 of the Labor Code of the Philippines (Presidential Decree No. 442, as amended)
provides as follows:
ART. 106. Contractor or sub-contractor.—Whenever an employer enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions in this Code.
In the event that the contractor or sub-contractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or sub-contructor
to such employees to the extent of the work performed under the contract in the same manner and
extent that he is liable to employees directly employed by him
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provisions of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
ART. 107. Indirect employer. — The provisions of the immediately preceding Article shall likewise apply
to any person, part, nership association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters
into a contract with a contractor for the performance of work for the employer, does not thereby create
an employer-employes relationship between himself and the employees of the contractor. Thus, the
employees of the contractor remain the contractor's employees and his alone. Nonetheless when a
contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who
contracted out the job to the contractor becomes jointly and severally liable with his contractor to the
employees of the latter "to the extent of the work performed under the contract" as such employer were
the employer of the contractor's employees. The law itself, in other words, establishes an employer-
employee relationship between the employer and the job contractor's employees for a limited purpose,
i.e., in order to ensure that the latter get paid the wages due to them.
Section 9 of Rule VIII of Book III entitled "Conditions of Employment," of the Omnibus Rules
Implementing the Labor Code provides as follows:
Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shag
be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are to the principal
business or operations of the c workers are habitually employed,
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him
 (c) For cases not file under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of
each case and after considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare
of the workers. (Emphasis supplied)
In contrast, job contracting-contracting out a particular job to an independent contractor is defined by
the Implementing Rules as follows:
Sec. 8. Job contracting. — There is job contracting permissible under the Code if the following conditions
are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method free from the control
and direction of his employer or principal in all matters connected with the performance of the
work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.
In the present case, the undertaking of (CESI) was to provide its client-thebank-with a certain number
of persons able to carry out the work of messengers. Such undertaking of CESI was complied with when
the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the
premises and office equipment of the bank and not those of (CESI) Messengerial work-the delivery of
documents to designated persons whether within or without the bank premises — is of course directly
related to the day-to-day operations of the bank.
(CESI) was engaged in "labor-only" or attracting vis-a-vis the petitioner and in respect c Ricardo Orpiada,
and that consequently, the petitioner bank is liable to Orpiada as if Orpiada had been directly, employed
not only by (CESI) but also by the bank. It may well be that the bank may in turn proceed against (CESI)
to obtain reimbursement of, or some contribution to, the amounts which the bank will have to pay to
Orpiada.
E. San Miguel Corporation v. Maerc Integrated Services, Inc.
However, in Vinoya v. NLRC,30 we clarified that it was not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises, etc., to be considered an
independent contractor. In fact, jurisprudential holdings were to the effect that in determining the
existence of an independent contractor relationship, several factors may be considered, such as, but not
necessarily confined to, whether the contractor was carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of specified pieces of work; the control and supervision of the workers; the power of the
employer with respect to the hiring, firing and payment of the workers of the contractor; the control of
the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner
and terms of payment.31
In comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor.
Moreover, while MAERC's investments in the form of buildings, tools and equipment amounted to more
than P4 Million, we cannot disregard the fact that it was the SMC which required MAERC to undertake
such investments under the understanding that the business relationship between petitioner and MAERC
would be on a long term basis. Nor do we believe MAERC to have an independent business. Not only was
it set up to specifically meet the pressing needs of SMC which was then having labor problems in its
segregation division, none of its workers was also ever assigned to any other establishment, thus
convincing us that it was created solely to service the needs of SMC.
In legitimate job contracting, the law creates an employer-employee relationship for a limited
purpose, i.e., to ensure that the employees are paid their wages.34 The principal employer becomes
jointly and severally liable with the job contractor only for the payment of the employees' wages whenever
the contractor fails to pay the same. Other than that, the principal employer is not responsible for any
claim made by the employees.
On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for
a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely
an agent of the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer. The principal
employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of
the employees.
This distinction between job contractor and labor-only contractor, however, will not discharge SMC from
paying the separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only
contractor; in which case, petitioner's liability is that of a direct employer and thus solidarily liable with
MAERC.
F. Wack Wack Golf and Country Club v. NLRC
It must be recalled that said respondents availed of the special separation package offered by the
petitioner. This special separation package was thought of and agreed by the two parties (Wack Wack
and the Union) after a series of discussions and negotiations to avert any labor unrest due to the closure
of Wack Wack.35 Priority was given to the employees of the F & B Department, but was, likewise, offered
to the other employees who may wish to avail of the separation package due to the reconstruction of
Wack Wack. Respondents do not belong to the F & B Department and yet, on their own volition opted to
avail of the special separation package. They held responsible positions in the petitioner-employer, so
they presumably understood the contents of the documents they signed. There is no showing that the
execution thereof was tainted with deceit or coercion. Further, the respondents were paid hefty amounts
of separation pay indicating that their separation from the company was for a valuable consideration.
Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a
valid and binding undertaking.37 As in contracts, these quitclaims amount to a valid and binding
compromise agreement between the parties which deserve to be respected. 38 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
must be recognized as a valid and binding undertaking. …40
When the respondents voluntarily signed their quitclaims and accepted the separation package offered
by the petitioner, they, thenceforth, already ceased to be employees of the petitioner. Nowhere does it
appear in the Agreement that the petitioner assured the respondents of continuous employment in Wack
Wack. Qualified employees were given priority in being hired by its concessionaires and/or contractors
such as BSMI when it entered into a management contract with the petitioner.
The ruling of the NLRC is wrong. An independent contractor is one who undertakes "job contracting," i.e.,
a person who: (a) carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of the work except
as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments,
machineries, work premises and other materials which are necessary in the conduct of the business.
Jurisprudential holdings are to the effect that in determining the existence of an independent contractor
relationship, several factors may be considered, such as, but not necessarily confined to, whether or not
the contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of specified pieces
of work; the control and supervision of the work to another; the employer’s power with respect to the
hiring, firing, and payment of the contractor’s workers; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment. 41
There is indubitable evidence showing that BSMI is an independent contractor and has sufficient capital
and resources to undertake its principal business. It had provided management services to various
industrial and commercial business establishments. Its Articles of Incorporation proves its sufficient
capitalization. In December 1993, Labor Secretary Bienvenido Laguesma, in the case of In re Petition for
Certification Election Among the Regular Rank-and-File Employees Workers of Byron-Jackson (BJ)
Services International Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services
Employees Chapter,42 recognized BSMI as an independent contractor. As a legitimate job contractor, there
can be no doubt as to the existence of an employer-employee relationship between the contractor and
the workers.43
BSMI admitted that it employed the respondents, giving the said retired employees some degree of
priority merely because of their work experience with the petitioner. In accordance with its own
recruitment policies, the respondents were made to sign applications for employment, accepting the
condition that they were hired by BSMI as probationary employees only. Not being contrary to law,
morals, good custom, public policy and public order, these employment contracts, which the parties are
bound are considered valid. Unfortunately, after a study and evaluation of its personnel organization,
BSMI was impelled to terminate the services of the respondents on the ground of redundancy. This right
to hire and fire is another element of the employer-employee relationship45 which actually existed
between the respondents and BSMI, and not with Wack Wack.
There being no employer-employee relationship between the petitioner and respondents Cagasan and
Dominguez, the latter have no cause of action for illegal dismissal and damages against the petitioner.
G. Aliviado v. Protector and Gamble Philippines, Inc.
ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another
person for the performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him. (Emphasis and underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department
Order No. 18-02,24 distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job[,]
work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the
principal; or
ii) [T]he contractor does not exercise the right to control over the performance of the work of the
contractual employee.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.
In the instant case, the financial statements26 of Promm-Gem show that it has authorized capital stock
of ₱1 million and a paid-in capital, or capital available for operations, of ₱500,000.00 as of 1990.27 It also
has long term assets worth ₱432,895.28 and current assets of ₱719,042.32. Promm-Gem has also proven
that it maintained its own warehouse and office space with a floor area of 870 square meters.28 It also
had under its name three registered vehicles which were used for its promotional/merchandising
business.29 Promm-Gem also has other clients30 aside from P&G.31 Under the circumstances, we find that
Promm-Gem has substantial investment which relates to the work to be performed; that Promm-Gem
supplied its complainant-workers with the relevant materials, such as markers, tapes, liners and cutters,
necessary for them to perform their work. Promm-Gem also issued uniforms to them; that Promm-Gem
already considered the complainants working under it as its regular, not merely contractual or project,
employees.32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE
Department Order No. 18-02, which speaks of contractual employees.
"Where ‘labor-only’ contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the ‘labor-only’ contractor."39 The statute
establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly employed by the principal
employer.
H. First Philippine Industrial Corp. v. Calimbas
The fact that DGMS had only a capitalization of ₱75,000.00, without an investment in tools, equipment,
etc., does not necessarily constitute the latter as labor-only contractor since it has shown its adequacy
of resources, directly or indirectly, in the performance of completion of the job, work or service contracted
out, including operating costs, administrative costs such as training, overhead and other costs as are
necessary to enably (sic) DGMS to exercise control, supervision, or direction over its employees in all
aspects in performing or completing the job, work or services contracted out.
Article 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another
person for the performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting-out of labor
to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job-contracting as well as differentiations
within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
I.
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
In the same manner, Sections 8 and 9 of DOLE Department Order No. 10, Series of 1997, state:
Sec. 8. Job contracting. – There is job contracting permissible under the Code if the following conditions
are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting. –
(a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are directly
related to the principal or operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of
each case and after considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare
of the workers.
Given the foregoing standards, we sustain the findings of the CA that respondents are petitioner’s
employees and that DGMS is engaged in labor-only contracting.
First, in Vinoya v. National Labor Relations Commission, 12 this Court categorically stated that the actual
paid-in capital of ₱75,000.00 could not be considered as substantial capital. Thus, DGMS’s actual paid-in
capital in the amount of ₱75,000.00 does not constitute substantial capital essential to carry out its
business as an independent job contractor. DGMS has no substantial equipment in the form of tools,
equipment and machinery. As a matter of fact, respondents were using office equipment and materials
owned by petitioner while they were rendering their services at its offices.
Second, petitioner exercised the power of control and supervision over the respondents. Furthermore,
the fact that DGMS did not assign representatives to supervise over respondents’ work in petitioner’s
company tends to disprove the independence of DGMS. It is axiomatic that the test to determine the
existence of independent contractorship is whether one claiming to be an independent contractor has
contracted to do the work according to his own methods and without being subjected to the control of
the employer, except only to the results of the work. Obviously, on this score alone, petitioner cannot
rightly claim that DGMS was an independent job contractor inasmuch as respondents were subjected to
the control and supervision of petitioner while they were performing their jobs."
Alilin v. Petron Corporation
The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract for
Services in June 2000 is DOLE Department Order No. 10, series of 1997,43 the pertinent provision of
which reads:
Section 4. (f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal and the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility; and
(ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.
Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3 (d)
and (e) and Section 5 hereof, the principal may engage the services of a contractor or subcontractor for
the performance of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of
products or services, provided that the normal production capacity or regular workforce of the principal
cannot reasonably cope with such demands;
 (b) Works or services temporarily or occasionally needed by the principal for undertakings requiring
expert or highly technical personnel to improve the management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for the duration
of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the
principal, including casual work, janitorial, security, landscaping, and messengerial services, and work
not related to manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturers’ products which do not involve the act of
selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or
equipment the performance of which is beyond the competence of the regular workforce or production
capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute services for absent
regular employees, provided that the period of service shall be coextensive with the period of absence
and the same is made clear to the substitute employee at the time of engagement. The phrase "absent
J.
regular employees" includes those who are serving suspensions or other disciplinary measures not
amounting to termination of employment meted out by the principal, but excludes those on strike where
all the formal requisites for the legality of the strike have been prima facie complied with based on the
records filed with the National Conciliation and Mediation Board.
"Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to
farm out with a contractor or subcontractor the performance of a specific job, work, or service within a
definite or predetermined period, regardless of whether such job, work or, service is to be performed or
completed within or outside the premises of the principal. Under this arrangement, the following
conditions must be met: (a) the contractor carries on a distinct and independent business and undertakes
the contract work on his account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters connected with the
performance of his work except as to the results thereof; (b) the contractor has substantial capital or
investment; and (c) the agreement between the principal and contractor or subcontractor assures the
contractual employees’ entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social welfare benefits." 44 Labor-only
contracting, on the other hand, is a prohibited act, defined as "supplying workers to an employer who
does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer." 45 "[I]n distinguishing between
prohibited labor-only contracting and permissible job contracting, the totality of the facts and the
surrounding circumstances of the case shall be considered." 46 Generally, the contractor is presumed to
be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like. However, where the principal is the one claiming that
the contractor is a legitimate contractor, as in the present case, said principal has the burden of proving
that supposed status.47 It is thus incumbent upon Petron, and not upon petitioners as Petron insists, 48 to
prove that RDG is an independent contractor.
Petron failed to discharge the burden of proving that RDG is a legitimate contractor. Hence, the
presumption that RDG is a labor-only contractor stands.
"[A] finding that a contractor is a ‘labor-only’ contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed
contractor."53 In this case, the employer employee relationship between Petron and petitioners becomes
all the more apparent due to the presence of the power of control on the part of the former over the
latter.
The Court finds, however, that while the jobs performed by petitioners may be menial and mechanical,
they are nevertheless necessary and related to Petron’s business operations. If not for these tasks,
Petron’s products will not reach the consumers in their proper state. Indeed, petitioners’ roles were vital
inasmuch as they involve the preparation of the products that Petron will distribute to its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to
petitioners, the Court notes the undisputed fact that for many years, it was the same able-bodied
individuals (petitioners) who performed the tasks for Petron. The engagement of petitioners for the same
works for a long period of time is a strong indication that such works were indeed necessary to Petron’s
business.
Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent of Petron.
Consequently, the employer-employee relationship which the Court finds to exist in this case is between
petitioners as employees and Petron as their employer.
Manila Memorial Park Cemetery, Inc. v. Lluz
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person
for the performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as
well as differentiations within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis supplied)
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only
contracting and assume the existence of an employer-employee relationship if found to be engaged in
labor-only contracting. The provisions state:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists
a trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job,
work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the principal;
or
ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.
Section 7. Existence of an employer-employee relationship. – The contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in
the event of any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as
declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof.isi (Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or
services under the law and its implementing rules are allowed. However, contracting must be made to a
legitimate and independent job contractor since labor rules expressly prohibit labor-only contracting.
Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and any of the following elements are present:
1) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the principal;
or
2) The contractor does not exercise the right to control the performance of the work of the contractual
employee.13
However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial
capital or investment in the form of tools, equipment, machinery, work premises and other materials
since it is Manila Memorial which owns the equipment used in the performance of work needed for
interment and exhumation services. A perusal of the Service Contract would reveal that respondent Ward
is still subject to petitioner’s control as it specifically provides that although Ward shall be in charge of
the supervision over individual respondents, the exercise of its supervisory function is heavily dependent
upon the needs of petitioner Memorial Park.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting
unless the contractor overcomes the burden of proving that it has substantial capital, investment, tools
and the like. In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading
had any substantial capital, investment or assets to perform the work contracted for. Thus, the
presumption that Ward Trading is a labor-only contractor stands. Consequently, Manila Memorial is
deemed the employer of respondents.
K. Mago v. Sunpower
Jobcrest is a legitimate and independent contractor.
Article 106 of the Labor Code defines labor-only contracting as a situation "where the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer." DOLE
Department Order (DO) No. 18-02, the regulation in force at the time of the petitioners' assignment to
Sunpower, reiterated the language of the Labor Code:
Section 5. Prohibition against labor-only contracting. x x x [L]abor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform
a job, work or service for a principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the
principal; or
ii) the contractor does not exercise the right to control over the performance of the work of the
contractual employee.
Thus, in order to become a legitimate contractor, the contractor must have substantial capital or
investment, and must carry a distinct and independent business free from the control of the principal. In
addition, the Court requires the agreement between the principal and the contractor or subcontractor to
assure the contractual employees' entitlement to all labor and occupational safety and health standards,
free exercise of the right to self-organization, security of tenure, and social welfare benefits.
Furthermore, the Court considers job contracting or subcontracting as permissible when the principal
agrees to farm out the performance of a specific job, work or service to the contractor, for a definite or
predetermined period of time, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal. Ordinarily, a contractor is presumed to be a
labor-only contractor, unless the contractor is able to discharge the burden of overcoming this
presumption. In cases when it's the principal claiming the legitimacy of the contractor, then the burden
is borne by the principal.
But since the petitioners do not dispute that Jobcrest was a duly-registered contractor under Section 11
of DOLE DO No. 18-02, there is no operative presumption that Jobcrest is a labor-only contractor.
Jobcrest has substantial capital.
Evidently, Jobcrest had substantial capital to perform the business process services it provided Sunpower.
It has its own office, to which the petitioners admittedly reported to, possessed numerous assets for the
conduct of its business, and even continuously earned profit as a result. The Court can therefore
 reasonably conclude from Jobcrest's financial statements that it carried its own business independent Moreover, it is evident from how this controversy unfolded that CBMI maintains the power to discipline
from and distinctly outside the control of its principals. the respondents. In accordance with the terms of the 2010 Contract of Services, an Incident Report was
prepared by PPI's Store Manager who then submitted the same to CBMI. Pursuant to its power of
Suncrest does not control the manner by which the petitioners accomplished their work. supervision over the respondents, CBMI initiated the investigation86 and on the basis thereof imposed
upon the respondents preventive suspension from August 5 to 19, 2010.87 It may not be amiss to point
out that the respondents' participation in these proceedings is indicative of their recognition of CBMI's
The Court finds that the evidence clearly points to Jobcrest as the entity that exercised control over the
disciplinary authority over them.
petitioners' work with Sunpower. Upon the petitioners' assignment to Sunpower, Jobcrest conducted a
training and certification program, during which time, the petitioners reported directly to the designated
Jobcrest trainer. The affidavit of Jobcrest's Operations Manager, Kathy T. Morales (Kathy), states that All these, without doubt indicate that CBMI possesses the power of control over the respondents; which
operational control over Jobcrest employees was exercised to make sure that they conform to the quantity in turn supports the conclusion that CBMI carries a business independent of PPI.
and time specifications of the service agreements with Jobcrest's clients. She narrated that manager and
shift supervisors were assigned to the premises of Sunpower, with the task to oversee the M. Philippine Pizza, Inc. v. Cayetano
accomplishment of the target volume of work. She also mentioned that there is administrative control
over Jobcrest employees because they monitor the employees' attendance and punctuality, and the Court finds that the NLRC did not in fact gravely abuse its discretion in holding that CBMI is a legitimate
employees' observance of other rules and regulations. job contractor, and consequently, the employer of respondents. As the NLRC aptly pointed out, CBMI is
presumed to have complied with all the requirements of a legitimate job contractor, considering the
All things considered, Sunpower is not the statutory employer of the petitioners. The circumstances Certificates of Registration issued to it by the DOLE. Although not a conclusive proof of legitimacy, the
obtaining in this case, as supported by the evidence on record, establish that Jobcrest was a legitimate certification nonetheless prevents the presumption of labor-only contracting from arising. It gives rise to
and independent contractor. There is no reason for this Court to depart from the CA's findings. a disputable presumption that the contractor's operations are legitimate. The NLRC was also correct in
holding that CBMI has substantial capital and investment. Based on CBMI's 2012 General Information
L. Consolidated Building Maintenance, Inc. v. Asprec Sheet, it has an authorized capital stock in the amount of P10,000,000.00 and subscribed capital stock
in the amount of P5,000,000.00, P3,500,000.00 of which had already been paid-up. Additionally, its
audited financial statements50 show that it has considerable current and noncurrent assets amounting
DO No. 18-02 reiterates the prohibition against labor-only contracting.
to P85,518,832.00. Taken together, CBMI has substantial capital to properly carry out its obligations with
PPI, as well as to sufficiently cover its own operational expenses.
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
More importantly, the NLRC correctly gave credence to CBMI's claim that it retained control over
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
respondents, as shown by the deployment of at least one (1) CBMI supervisor in each Pizza Hut branch
and any of the following elements are present:
to regularly oversee, monitor, and supervise the employees' attendance and performance. This claim was
i. The contractor or subcontractor does not have substantial capital or investment which relates to the
further substantiated by CBMI's area coordinators, who admitted in their Affidavits51 that: (a) they
job, work, or service to be performed and the employees recruited, supplied or placed by such
oversee, monitor, and ensure CBMI employees' compliance with company policies, rules, and regulations
contractor or subcontractor are performing activities which are directly related to the main business of
whichever Pizza Hut branch they may be assigned; (b) they are responsible for ensuring that CBMI
the principal; or
employees perform their tasks and functions in the manner that CBMI mandates; (c) they regularly visit
ii. The contractor does not exercise the right to control the performance of the work of the contractual
and monitor each area of deployment; (d) they track and confirm the attendance and punctuality of CBMI
employee.
employees; and (e) they constantly inform CBMI's Human Resource Department (HRD) Manager of any
company violations committed by the employees.
The Certificate of Registration issued by DOLE recognizes CBMI as an independent contractor as of
February 13, 2008, and regards the validity of the latter's registration as such until February 14, 2011,
well within the period relevant to this appeal. In this light, it then becomes incumbent upon the
respondents to rebut the presumption of regularity to prove that CBMI is not a legitimate contractor as
determined by the DOLE, which they failed to do. In this case, the Court finds that CBMI has established
compliance with the requirements of legitimate job contracting previously cited.

From the financial records, it can be gleaned that CBMI has substantial capital to maintain manpower
business, as evidenced by its Audited Financial Statements.

Above all, CBMI maintains the "right of control" over the respondents. For purposes of determining
whether a job contractor is engaged in legitimate contracting or prohibited labor-only contracting, DO
No. 18-02, defines the "right of control" as:
[T]he right reserved to the person for whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and means in achieving that end.