TOPIC NO. 3 a.
All time during which an employee is required to be on duty or to be at the
LABOR STANDARDS
A. HOURS OF WORK
1. COVERAGE/EXCLUSIONS
(Article 82, Labor Code)
Who are covered by the labor standards provisions of the Labor Code?
Employees in all establishments, whether operated for profit or not, are covered by the
law on labor standards.
Who are excluded?
The following are excluded from the coverage of the law on labor standards:
a. Government employees;
b. Managerial employees;
c. Other officers or members of a managerial staff;
d. Domestic workers or kasambahay and persons in the personal service of
another;
e. Workers paid by results;
f. Non-agricultural field personnel; and
g. Members of the family of the employer.
2. NORMAL HOURS OF WORK
What is the total normal hours of work per day? Eight (8) hours daily.
What is overtime work? Any work in excess of eight (8) hours is considered
overtime work.
May normal working hours be reduced? Yes, provided that no corresponding
reduction is made on the employees wage or salary equivalent to an 8-hour work day.
In instances where the number of hours required by the nature of work is less than 8
hours, such number of hours should be regarded as the employees full working day.
What are flexible working hours? Flexible work arrangements refer to alternative
arrangements or schedules other than the traditional or standard work hours,
workdays and workweek. The effectivity and implementation of any of the flexible work
arrangements should be temporary in nature.
Under R.A. No. 8972, otherwise known as The Solo Parents Welfare Act
of 2000, solo parents are allowed to work on a flexible schedule. The phrase flexible
work schedule is defined in the same law as the right granted to a solo parent
employee to vary his/her arrival and departure time without affecting the core work
hours as defined by the employer.
COMPRESSED WORK WEEK
What is compressed work week? Compressed Workweek or CWW refers to a compensation includes built-in overtime pay and the same is duly approved by the
situation where the normal workweek is reduced to less than six (6) days but the total
number of work-hours of 48 hours per week remains. The normal workday is increased
to more than eight (8) hours but not to exceed twelve (12) hours, without
corresponding overtime premium. This concept can be adjusted accordingly in cases
where the normal workweek of the firm is five (5) days.
What are the conditions for its validity? The CWW scheme is undertaken as a
result of an express and voluntary agreement of majority of the covered
employees or their duly authorized representatives.
How should compensation be made under a valid CWW? Unless there is a more
favorable practice existing in the firm, work beyond eight (8) hours will not be
compensable by overtime premium provided the total number of hours worked
per day shall not exceed twelve (12) hours. In any case, any work performed
beyond twelve (12) hours a day or forty-eight (48) hours a week shall be subject to
overtime pay.
MEAL BREAK
(Article 85, Labor Code)
What is the rule on time-off for regular meal? Every employer is required to give
his employees, regardless of sex, not less than one (1) hour (or 60 minutes) time-off
for regular meals.
Is meal break compensable? Being time-off, it is not compensable hours worked.
In this case, the employee is free to do anything he wants, except to work. If he is
required, however, to work while eating, he should be compensated therefor.
WAITING TIME
(Article 84, Labor Code)
What is covered by compensable working hours? The following shall be
considered as compensable hours worked:
employers premises or to be at a prescribed workplace; and
b. All time during which an employee is suffered or permitted to work.
When is waiting time compensable? 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. Time spent waiting for work is
compensable if it is spent primarily for the benefit of the employer and [its] business.
OVERTIME WORK, OVERTIME PAY
(Article 87, Labor Code)
What are some basic principles on overtime work?
1. Work rendered after normal eight (8) hours of work is called overtime work.
2. In computing overtime work, "regular wage" or "basic salary" means "cash" wage
only without deduction for facilities provided by the employer.
3. "Premium pay" means the additional compensation required by law for work
performed within eight (8) hours on non-working days, such as regular holidays,
special holidays and rest days.
4. "Overtime pay" means the additional compensation for work performed beyond
eight (8) hours.
5. Illustrations on how overtime is computed:
a. For overtime work performed on an ordinary day, the overtime pay is plus
25% of the basic hourly rate.
b. For overtime work performed on a rest day or on a special day, the
overtime pay is plus 30% of the basic hourly rate which includes 30% additional
compensation as provided in Article 93 [a] of the Labor Code.
c. For overtime work performed on a rest day which falls on a special day,
the overtime pay is plus 30% of the basic hourly rate which includes 50%
additional compensation as provided in Article 93 [c] of the Labor Code.
d. For overtime work performed on a regular holiday, the overtime pay is plus
30% of the basic hourly rate which includes 100% additional compensation as
provided in Article 94 [b] of the Labor Code.
e. For overtime work performed on a rest day which falls on a regular
holiday, the overtime pay is plus 30% of the basic hourly rate which includes
160% additional compensation.
What is the distinction between PREMIUM PAY and OVERTIME PAY? Premium
pay refers to the additional compensation required by law for work performed within
eight (8) hours on non-working days, such as rest days and regular and special
holidays.
Overtime pay refers to the additional compensation for work performed
beyond eight (8) hours a day. Every employee who is entitled to premium pay is
likewise entitled to the benefit of overtime pay.
What is built-in overtime pay? In case the employment contract stipulates that the
DOLE, the non-payment by the employer of any overtime pay for overtime work is
justified and valid.
What is emergency overtime work? (Article 89, Labor Code).
a. General rule. The general rule remains that no employee may be compelled to
render overtime work against his will.
b. Exceptions when employee may be compelled to render overtime work:
1. 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;
2. 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 disasters or calamities;
3. When there is urgent work to be performed on machines, installations or
equipment, or in order to avoid serious loss or damage to the employer or some
other causes of similar nature;
4. When the work is necessary to prevent loss or damage to perishable goods;
5. 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; and
6. When overtime work is necessary to avail of favorable weather or
environmental conditions where performance or quality of work is dependent
thereon.
May an employee validly refuse to render overtime work under any of the
afore-said circumstances? No, When an employee refuses to render emergency
overtime work under any of the foregoing conditions, he may be dismissed on the
ground of insubordination or willful disobedience of the lawful order of the
employer.

Can overtime pay be waived? NO. The right to claim overtime pay is not subject to
a waiver. Such right is governed by law and not merely by the agreement of the
parties.
NIGHT WORK (R.A. NO. 10151),
NIGHT SHIFT DIFFERENTIAL (ARTICLE 86, LABOR CODE)
What is the new law on night work?
R.A. No. 10151 [JUNE 21, 2011].
a. Significance of the law.
R.A. No. 10151 has repealed Article 130 [Nightwork Prohibition] and Article 131
[Exceptions] of the Labor Code and accordingly renumbered the same articles.
Additionally, it has inserted a new Chapter V of Title III of Book III of the Labor
Code entitled Employment of Night Workers which addresses the issue on
nightwork of all employees, including women workers. Chapter V covers newly
renumbered Articles 154 up to 161 of the Labor Code.
b. Coverage of the law. The law on nightwork applies not only to women but to
all persons, who shall be employed or permitted or suffered to work at night,
except those employed in agriculture, stock raising, fishing, maritime transport
and inland navigation, during a period of not less than seven (7) consecutive
hours, including the interval from midnight to five o'clock in the morning, to
be determined by the DOLE Secretary, after consulting the workers
representatives/labor organizations and employers.
c. Night worker, meaning. "Night worker" means any employed person whose
work covers the period from 10 o'clock in the evening to 6 o'clock the
following morning provided that the worker performs no less than seven (7)
consecutive hours of work.
NIGHT SHIFT DIFFERENTIAL PAY
How is it reckoned and computed? Night shift differential is equivalent to 10% of
employee's regular wage for each hour of work performed between 10:00 p.m. and
6:00 a.m. of the following day.
What is the distinction between night shift differential pay and overtime pay?
When the work of an employee falls at night time, the receipt of overtime pay shall not
preclude the right to receive night differential pay. The reason is the payment of the
night differential pay is for the work done during the night; while the payment of the
overtime pay is for work in excess of the regular eight (8) working hours.
How is Night Shift Differential Pay computed?
1. Where night shift (10 p.m. to 6 a.m.) work is regular work.
a. On an ordinary day: Plus 10% of the basic hourly rate or a total of 110% of
the basic hourly rate.
b. On a rest day, special day or regular holiday: Plus 10% of the regular hourly
rate on a rest day, special day or regular holiday or a total of 110% of the regular
hourly rate.
2. Where night shift (10 p.m. to 6 a.m.) work is overtime work.
a. On an ordinary day: Plus 10% of the overtime hourly rate on an ordinary day
or a total of 110% of the overtime hourly rate on an ordinary day.
b. On a rest day or special day or regular holiday: Plus 10% of the overtime
hourly rate on a rest day or special day or regular holiday.
3. For overtime work in the night shift. Since overtime work is not usually eight (8)
hours, the compensation for overtime night shift work is also computed on the basis of
the hourly rate.
a. On an ordinary day. Plus 10% of 125% of basic hourly rate or a total of 110%
of 125% of basic hourly rate.
b. On a rest day or special day or regular holiday. Plus 10% of 130% of
regular hourly rate on said days or a total of 110% of 130% of the applicable
regular hourly rate.
PART-TIME WORK
What is part-time work? Part-time work is a single, regular or voluntary form of but excludes other wage-related benefits such as overtime pay, bonuses, night shift
employment with hours of work substantially shorter than those considered as normal
in the establishment. A part-time worker is an employed person whose normal hours
of work are less than those of comparable full-time workers.
Part-time work may take different forms depending on the agreed hours of
work in a day, the days of work in a week or other reference periods. In the
Philippines, however, the two most common and acceptable forms are four (4)
hours work per day and weekend work or two (2) full days per week.
CONTRACT FOR PIECE WORK
(SEE CIVIL CODE)
What is contract for piece work under the Civil Code? By the contract for a
piece of work, the contractor binds himself to execute a piece of work for the employer,
in consideration of a certain price or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.
B. WAGES
WAGE VS. SALARY
What is the basic distinction between wage and salary? The term wage is
used to characterize the compensation paid for manual skilled or unskilled labor.
Salary, on the other hand, is used to describe the compensation for higher or
superior level of employment.
What is the distinction in respect to execution, attachment or garnishment? In
cases of execution, attachment or garnishment of the compensation of an
employee received from work issued by the court to satisfy a judicially-determined
obligation, a distinction should be made whether such compensation is considered
wage or salary. Under Article 1708 of the Civil Code, if considered a wage, the
employees compensation shall not be subject to execution or attachment or
garnishment, except for debts incurred for food, shelter, clothing and medical
attendance.
If deemed a salary, such compensation is not exempt from execution or
attachment or garnishment. Thus, the salary, commission and other remuneration
received by a managerial employee (as distinguished from an ordinary worker or
laborer) cannot be considered wages. Salary is understood to relate to a position or
office, or the compensation given for official or other service; while wage is the
compensation for labor.
MINIMUM WAGE DEFINED
What are the attributes of wage? Wage has the following attributes:
1. It is the remuneration or earnings, however designated, for work done or to be done
or for services rendered or to be rendered;
2. It is 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;
3. It 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
4. It includes the fair and reasonable value, as determined by the DOLE Secretary, 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.
What is basic wage? Basic wage means all the remuneration or earnings paid
by an employer to a worker for services rendered on normal working days and hours
but does not include cost-of-living allowances, profit-sharing payments, premium
payments, 13th month pay or other monetary benefits which are not considered as
part of or integrated into the regular salary of the workers.
Further, as held in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda, the following should be excluded from the computation of
basic salary, to wit: payments for sick, vacation and maternity leaves, night
differentials, regular holiday pay and premiums for work done on rest days and
special holidays.
What is minimum wage? The minimum wage rates prescribed by law shall be
the basic cash wages without deduction therefrom of whatever benefits, supplements
or allowances which the employees enjoy free of charge aside from the basic pay.
What is statutory minimum wage? The term statutory minimum wage refers
simply to the lowest basic wage rate fixed by law that an employer can pay his
workers.
What is regional minimum wage rate? The term regional minimum wage
rates refers to the lowest basic wage rates that an employer can pay his workers,
as fixed by the Regional Tripartite Wages and Productivity Boards (RTWPBs),
and which shall not be lower than the applicable statutory minimum wage rates.
What are included/excluded in the term wage rate?
The term "wage rates" includes cost-of-living allowances as fixed by the RTWPB,
differential pay, holiday pay, premium pay, 13th month pay, premium pay, leave
benefits, among others.
Can COLA be integrated into the minimum wage? Yes. The cost-of-living
allowance (COLA) may be ordered integrated into the minimum wage by the Regional
Tripartite Wages and Productivity Board (RTWPB or Regional Board).
What is COLA? COLA is not in the nature of an allowance intended to reimburse
expenses incurred by employees in the performance of their official functions. It is not
payment in consideration of the fulfillment of official duty. As defined, cost of living
refers to the level of prices relating to a range of everyday items or the cost of
purchasing the goods and services which are included in an accepted standard level
of consumption. Based on this premise, COLA is a benefit intended to cover
increases in the cost of living.
 What is the NO WORK, NO PAY principle? The no work, no pay or fair
days wage for fair days labor means that if the worker does not work, he is
generally not entitled to any wage or pay. The exception is when it was the employer
who unduly prevented him from working despite his ableness, willingness and
readiness to work; or in cases where he is illegally locked out or illegally suspended or
illegally dismissed, or otherwise illegally prevented from working, in which event, he
should be entitled to his wage.
MINIMUM WAGE SETTING
What is a Wage Order? The term Wage Order refers to the order promulgated
by the Regional Board pursuant to its wage fixing authority.
When is it proper to issue a Wage Order? Whenever conditions in the region so
warrant, the Regional Board shall investigate and study all pertinent facts and based
on the prescribed standards and criteria, shall proceed to determine whether a Wage
Order should be issued. Any such Wage Order shall take effect after fifteen (15) days
from its complete publication in at least one (1) newspaper of general circulation in the
region.
What are the standards/criteria for minimum wage fixing? In the determination
of regional minimum wages, the Regional Board shall, among other relevant factors,
consider the following:
(1) Needs of workers and their families
1) Demand for living wages;
2) Wage adjustment vis--vis the consumer price index;
3) Cost of living and changes therein;
4) Needs of workers and their families;
5) Improvements in standards of living.
(2) Capacity to pay
1) Fair return on capital invested and capacity to pay of employers;
2) Productivity.
(3) Comparable wages and incomes
1) Prevailing wage levels.
(4) Requirements of economic and social development
1) Need to induce industries to invest in the countryside;
2) Effects on employment generation and family income;
3) Equitable distribution of income and wealth along the imperatives of economic
and social development.
What are the methods of fixing the minimum wage rates?
There are two (2) methods, to wit:
1. Floor-Wage method which involves the fixing of a determinate amount to be
added to the prevailing statutory minimum wage rates. This was applied in earlier
wage orders; and
2. Salary-Cap or Salary-Ceiling method where the wage adjustment is to be
applied to employees receiving a certain denominated salary ceiling. In other
words, workers already being paid more than the existing minimum wage (up to a
certain amount stated in the Wage Order) are also to be given a wage increase.
The Salary-Cap or Salary-Ceiling method is the preferred mode. The
distinction between the two (2) methods is best shown by way of an illustration. Under
the Floor Wage Method, it would be sufficient if the Wage Order simply set P15.00 as
the amount to be added to the prevailing statutory minimum wage rates; while in the
Salary-Ceiling Method, it would be sufficient if the Wage Order states a specific
salary, such as P250.00, and only those earning below it shall be entitled to the wage
increase.
MINIMUM WAGE OF WORKERS PAID BY RESULTS
What are the minimum wage rates of workers paid by results? According to
Article 124 of the Labor Code:
All workers paid by results, including those who are paid on piecework,
takay, pakyaw or task basis, shall receive not less than the prescribed wage rates
per eight (8) hours of work a day, or a proportion thereof for working less than eight
(8) hours.
Who are workers paid by results? They are workers who are engaged on pakyao,
piecework, task and other non-time work. They are so called because they are paid
not on the basis of the time spent on their work but according to the quantity, quality or
kind of job and the consequent results thereof.
What are the categories of workers paid by results? Workers paid by results
may be classified into:
a. Supervised workers; and
b. Unsupervised workers.
As the term clearly connotes, supervised workers are those whose
manner of work is under the control of the employer; while unsupervised workers are
those whose work is controlled more in the results than in the manner or method of
performing it.
The law does not make any categorical differentiation among the workers
paid by results. Thus, the workers may be on pakyao (sometimes spelled pakyaw),
takay or piece-rate or output basis. All of them are similar in character in that they are
all paid on the basis of the results of their work. When the law does not distinguish, we
should not distinguish.
WAGE RATE OF APPRENTICES AND LEARNERS
What is the wage rate of apprentices and learners? The wage rate of a learner
or an apprentice is set at seventy-five percent (75%) of the statutory minimum
wage.
WAGE RATE OF PERSONS WITH DISABILITY (PWDs)
What is the wage rate of PWD? Under R.A. No. 7277, the wage rate of PWDs had
been increased to and fixed at 100% of the applicable minimum wage.
COMMISSIONS
What is commission? Commission is the recompense, compensation or
reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker or
bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit of the principal.
Is commission part of wage? Commission may or may not be considered part of
wage/salary depending on the peculiar circumstances of a case and on the purpose
for which the determination is being made. For instance, the rule on the inclusion of
commissions for purposes of computing the separation pay may essentially differ from
the inclusionary rule thereof for purposes of computing the 13th month pay.
Is there a law which mandates the payment of commission? None. According to
Lagatic v. NLRC,1 there is no law which requires employers to pay commissions.
Is there a standard formula to compute commission? None. There is no law
which prescribes a method for computing commission. The determination of the
amount of commissions is the result of collective bargaining negotiations, individual
employment contracts or established employer practice.
DEDUCTIONS FROM WAGES
May employer deduct from wage of employees? The general rule is that an
employer, by himself or through his representative, is prohibited from making any
deductions from the wages of his employees. The employer is not allowed to make
unnecessary deductions without the knowledge or authorization of the employees.
Are there exceptions to this rule? Yes.
(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
DOLE Secretary.
(d) Deductions for loss or damage under Article 114 of the Labor Code;
(e) Deductions made for agency fees from non-union members who accept the
benefits under the CBA negotiated by the bargaining union. This form of deduction
does not require the written authorization of the non-bargaining union member
concerned;
(f) Deductions for value of meal and other facilities;
(g) Deductions for premiums for SSS, PhilHealth, employees compensation and
Pag-IBIG;
(h) Withholding tax mandated under the National Internal Revenue Code (NIRC);
(i) Withholding of wages because of the employees debt to the employer which is
already due;
(j) Deductions made pursuant to a court judgment against the worker under
circumstances where the wages may be the subject of attachment or execution but
only for debts incurred for food, clothing, shelter and medical attendance;
(k) When deductions from wages are ordered by the court;
NON-DIMINUTION OF BENEFITS
What is the applicability of the non-diminution rule in Article 100 of the Labor
Code? Albeit Article 100 is clear that the principle of non-elimination and non-
diminution of benefits apply only to the benefits being enjoyed at the time of the
promulgation of the Labor Code, the Supreme Court has consistently cited Article 100
as being applicable even to benefits granted after said promulgation. It has, in fact,
been treated as the legal anchor for the declaration of the invalidity of so many acts of
employers deemed to have eliminated or diminished the benefits of employees.
The 2014 case of Wesleyan University-Philippines v. Wesleyan
University-Philippines Faculty and Staff Association,1 succinctly pointed out that
the Non-Diminution Rule found in Article 100 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 any of the following:
(1) An express policy;
(2) A written contract; or
(3) A company practice.
There is not much controversy if the benefit involved is provided for under
Nos. 1 and 2 above. Thus, if it is expressly laid down in a written policy unilaterally
promulgated by the employer, the employer is duty-bound to adhere and comply by its
own policy. It cannot be allowed to renege from its commitment as expressed in the
policy.
If the benefit is granted under a written contract such as an employment
contract or a collective bargaining agreement (CBA), the employer is likewise under
legal compulsion to so comply therewith.
On No. 3 above, please see discussion below.
COMPANY PRACTICE
What is company practice? Company practice is a custom or habit shown by an
employers repeated, habitual customary or succession of acts of similar kind by
reason of which, it gains the status of a company policy that can no longer be
disturbed or withdrawn.
To ripen into a company practice that is demandable as a matter of right,
the giving of the benefit should not be by reason of a strict legal or contractual
obligation but by reason of an act of liberality on the part of the employer.
What are the criteria that may be used to determine existence of company
practice? Since there is no hard and fast rule which may be used and applied in
determining whether a certain act of the employer may be considered as having
ripened into a practice, the following criteria may be used to determine whether an act
has ripened into a company practice:
(1) The act of the employer has been done for a considerable period of time;
(2) The act should be done consistently and intentionally; and
(3) The act should not be a product of erroneous interpretation or construction of a
doubtful or difficult question of law or provision in the CBA
(See the 2013 case of Vergara, Jr. v. Coca-Cola Bottlers Philippines, Inc.2)
1. THE ACT OF THE EMPLOYER HAS BEEN DONE FOR A CONSIDERABLE
PERIOD OF TIME.
If done only once as in the case of Philippine Appliance Corporation
(Philacor) v. CA,3 where the CBA signing bonus was granted only once during the
1997 CBA negotiation, the same cannot be considered as having ripened into a
company practice.
In the following cases, the act of the employer was declared company
practice because of the considerable period of time it has been practiced:
(a) Davao Fruits Corporation v. Associated Labor Unions.4 - The act of the
company of freely and continuously including in the computation of the 13th
month pay, items that were expressly excluded by law has lasted for six (6) years,
hence, was considered indicative of company practice.
(b) Sevilla Trading Company v. A. V. A. Semana.5 - The act of including non-
basic benefits such as paid leaves for unused sick leave and vacation leave in the
computation of the employees 13th month pay for at least two (2) years was
considered a company practice.
(c) The 2010 case of Central Azucarera de Tarlac v. Central Azucarera de
Tarlac Labor Union-NLU,6 also ruled as company practice the act of petitioner
of granting for thirty (30) years, its workers the mandatory 13th month pay
computed in accordance with the following formula: Total Basic Annual Salary
divided by twelve (12) and Including in the computation of the Total Basic
Annual Salary the following: basic monthly salary; first eight (8) hours overtime
pay on Sunday and legal/special holiday; night premium pay; and vacation and
sick leaves for each year.
2. THE ACT SHOULD BE DONE CONSISTENTLY AND INTENTIONALLY. The
following cases may be cited to illustrate this principle:
(a) Tiangco v. Leogardo, Jr.,1 where the employer has consistently been granting
fixed monthly emergency allowance to the employees from November, 1976 but
discontinued this practice effective February, 1980 insofar as non-working days are
concerned based on the principle of no work, no pay. The Supreme Court ruled that
the discontinuance of said benefit contravened Article 100 of the Labor Code which
prohibits the diminution of existing benefits.
3. THE ACT SHOULD NOT BE A PRODUCT OF ERRONEOUS INTERPRETATION
OR CONSTRUCTION OF A DOUBTFUL OR DIFFICULT QUESTION OF LAW OR
PROVISION IN THE CBA.
The general rule is that if it is a past error that is being corrected, no
vested right may be said to have arisen therefrom nor any diminution of benefit may
have resulted by virtue of the correction thereof. The error, however, must be corrected
immediately after its discovery; otherwise, the rule on non-diminution of benefits would
still apply.
The following cases would illuminate this principle:
(a) Globe Mackay Cable and Radio Corporation v. NLRC,2 where the Supreme
Court ruled on the proper computation of the cost-of-living allowance (COLA) for
monthly-paid employees. Petitioner corporation, pursuant to Wage Order No. 6
(effective October 30, 1984), increased the COLA of its monthly-paid employees by
multiplying the P3.00 daily COLA by 22 days which is the number of working days in
the company. The union disagreed with the computation, claiming that the daily COLA
rate of P3.00 should be multiplied by 30 days which has been the practice of the
company for several years. The Supreme Court, however, upheld the contention of the
petitioner corporation. It held that the grant by the employer of benefits through an
erroneous application of the law due to absence of clear administrative guidelines is
not considered a voluntary act which cannot be unilaterally discontinued.
(b) TSPIC Corp. v. TSPIC Employees Union [FFW],3 where the Supreme Court
reiterated the rule enunciated in Globe-Mackay, that an erroneously granted benefit
may be withdrawn without violating the prohibition against non-diminution of benefits.
No vested right accrued to individual respondents when TSPIC corrected its error by
crediting the salary increase for the year 2001 against the salary increase granted
under Wage Order No. 8, all in accordance with the CBA. Hence, any amount given to
the employees in excess of what they were entitled to, as computed above, may be
legally deducted by TSPIC from the employees salaries.
But if the error does not proceed from the interpretation or construction of
a law or a provision in the CBA, the same may ripen into a company practice.
Example:
(a) Hinatuan Mining Corporation and/or the Manager v. NLRC,4 where the
act of the employer in granting separation pay to resigning employees, despite
the fact that the Labor Code does not grant it, was considered an established
employer practice.
BONUS
What is the rule on its demandability and enforceability? Bonus, as a general
rule, is an amount granted and paid ex gratia to the employee.
It 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 employees
basic salaries or wages. If there is no profit, there should be no bonus. If profit is
reduced, bonus should likewise be reduced, absent any agreement making such
bonus part of the compensation of the employees.
When is bonus demandable and enforceable?
It becomes demandable and enforceable:
(1) If it has ripened into a company practice;
(2) If it is granted as an additional compensation which the employer agreed to give
without any condition such as success of business or more efficient or more productive
operation, hence, it is deemed part of wage or salary.
(3) When considered as part of the compensation and therefore demandable and
enforceable, the amount is usually fixed. If the amount thereof is dependent upon the
realization of profits, the bonus is not demandable and enforceable.
FACILITIES VS. SUPPLEMENTS
What are facilities? The term facilities includes articles or services for the
benefit of the employee or his family but does not include tools of the trade or
articles or services primarily for the benefit of the employer or necessary to the
conduct of the employers business. They are items of expense necessary for the
laborers and his familys existence and subsistence which 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.
What are supplements? The term supplements means extra remuneration or
special privileges or benefits given to or received by the laborers over and above
their ordinary earnings or wages.
What are the distinctions between facilities and supplements? The benefit or
privilege given to the employee which constitutes an extra remuneration over and
above his basic or ordinary earning or wage is supplement; and when said benefit or
privilege is made part of the laborers basic wage, it is a facility. The criterion is not so
much with the kind of the benefit or item (food, lodging, bonus or sick leave) given but
its purpose.
Thus, free meals supplied by the ship operator to crew members, out of
necessity, cannot be considered as facilities but supplements which could not be
reduced having been given not as part of wages but as a necessary matter in the
maintenance of the health and efficiency of the crew during the voyage.
What is the rule on deductibility of facilities and supplements?
Facilities are deductible from wage but not supplements.
WAGE DISTORTION/RECTIFICATION
What is wage distortion? Wage distortion contemplates a situation where an
increase in prescribed wage rates results in either of the following:
1. Elimination of the quantitative differences in the rates of wages or salaries; or
2. Severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate
the distinctions embodied in such wage structure based on the following criteria:
a. Skills;
b. Length of service; or
c. Other logical bases of differentiation.
Wage distortion presupposes a classification of positions and ranking of
these positions at various levels. One visualizes a hierarchy of positions with
corresponding ranks basically in terms of wages and other emoluments. Where a
significant change occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position from the next
higher level, and resulting in a parity between the lowest level and the next higher level
or rank, between new entrants and old hires, there exists a wage distortion. xxx. The
concept of wage distortion assumes an existing grouping or classification of
employees which establishes distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a differing wage rate for each of the
existing classes of employees.
What are the elements of wage distortion?
The four (4) elements of wage distortion are as follows:
(1) An existing hierarchy of positions with corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a
concomitant increase in the salary rate of a higher one;
(3) The elimination of the distinction between the two levels; and
(4) The existence of the distortion in the same region of the country.
Normally, a company has a wage structure or method of determining the
wages of its employees. In a problem dealing with wage distortion, the basic
assumption is that there exists a grouping or classification of employees that
establishes distinctions among them on some relevant or legitimate bases.
Involved in the classification of employees are various factors such as the
degrees of responsibility, the skills and knowledge required, the complexity of the
job, or other logical basis of differentiation. The differing wage rate for each of the
existing classes of employees reflects this classification.
What is the formula for rectifying or resolving wage distortion?
Following is the formula for the correction of wage distortion in the pay scale
structures:
Minimum Wage=% x Prescribed Increase = Distortion Adjustment
Actual Salary
The above formula was held to be just and equitable.
DIVISOR TO DETERMINE DAILY RATE
Who is a monthly-paid employee? A monthly-paid employee is one who is
paid his wage or salary for every day of the month, including unworked rest days,
special days or regular holidays.
Who is a daily-paid employee? A daily-paid employee is one who is paid his
wage or salary only on the days he actually worked, except in cases of regular
holidays wherein he is paid his wage or salary even if he does not work during those
days, provided that he is present or on leave of absence with pay on the working day
immediately preceding the regular holidays.
What are the factors/divisors in computing benefits and wage deductions?
Equivalent daily rate (EDR), the basis for deductions for absences and for computing
overtime pay and other benefits
Monthly Rate x 12
No. of Days Considered = Equivalent Daily Rate (EDR)
Paid in a Year
REST PERIODS
1. WEEKLY REST DAY
What is the duration of weekly rest period? 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.
Is the employers prerogative to determine the rest period of its employees
subject to limitations? Yes. The employer shall determine and schedule the weekly
rest day of his employees subject to CBA and to such rules and regulations as the
DOLE Secretary 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.
2. EMERGENCY REST DAY WORK
When can an employer require work on a rest day? The employer may require
any of its employees to work on their scheduled rest day for the duration of the
following emergency 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 and
property, or in case 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.
HOLIDAY PAY/PREMIUM PAY
1. COVERAGE, EXCLUSIONS
Who are covered by the law on holiday pay? Generally, all employees are
entitled to and covered by the law on holiday pay.
Who are excluded from its coverage?
The following are excluded:
a. Those of the government and any of the political subdivisions, including
government-owned and controlled corporations;
b. Those of retail and service establishments regularly employing less than ten (10)
workers;
c. Domestic workers or Kasambahays;
d. Persons in the personal service of another;
e. Managerial employees as defined in Book III of the Labor Code;
f. Field personnel and other employees whose time and performance is unsupervised
by the employer;
g. Those who are engaged on task or contract basis or purely commission basis;
h. Those who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof;
i. Other officers and members of the managerial staff;
j. Members of the family of the employer who are dependent on him for support.
What are REGULAR and SPECIAL HOLIDAYS?
A. Regular Holidays
New Years Day - 1 January (Wednesday)
Araw ng Kagitingan - 9 April (Wednesday)
Maundy Thursday - 17 April
Good Friday - 18 April
Labor Day - 1 May (Thursday)
Independence Day - 12 June (Thursday)
National Heroes Day - 25 August (Last Monday of August)
Bonifacio Day - 30 November (Sunday)
Christmas Day - 25 December (Thursday)
Rizal Day - 30 December (Tuesday)
B. Special (Non-Working) Days
Chinese New Year - 31 January (Friday)
Black Saturday - 19 April
Ninoy Aquino Day - 21 August (Thursday)
All Saints Day - 1 November (Saturday)
C. Special Holiday (for all schools)
EDSA Revolution Anniversary 25 February (Tuesday)
Not included in the enumeration above on regular holidays are (1) Eidl Fitr and
(2) Eidul Adha.
The reason is that proclamations declaring the observance of these
national holidays are issued after the approximate dates of the Islamic holidays have
been determined in accordance with the Islamic calendar (Hijra) or the lunar calendar,
or upon Islamic astronomical calculations, whichever is possible or convenient.
To this end, the National Commission on Muslim Filipinos (NCMF) shall
inform the Office of the President on which days the holidays shall respectively fall.
What is the total number of regular holidays? The total number of regular
holidays is twelve (12) days per year. This is important for purposes of reckoning
certain divisors and computation of employee benefits.
What is premium pay for holidays and rest days? Premium pay refers to the
additional compensation required by law to be paid for work performed within the
regular eight (8) hours on non-working days, such as rest days, regular and special
holidays.
 How is premium pay for holidays computed?
a. Regular Holidays
If the employee did not work, he/she shall be paid 100 % of his/her salary for
that day. Computation: (Daily rate + Cost of Living Allowance) x 100%. The COLA
is included in the computation of holiday pay.
If the employee worked, he/she shall be paid 200 % of his/her regular salary for
that day for the first eight hours. Computation: (Daily rate + COLA) x 200%. The
COLA is also included in computation of holiday pay.
If the employee worked in excess of eight hours (overtime work), he/she shall
be paid an additional 30 percent of his/her hourly rate on said day. Computation:
Hourly rate of the basic daily wage x 200% x 130% x number of hours worked.
If the employee worked during a regular holiday that also falls on his/her rest
day, he/she shall be paid an additional 30 % of his/her daily rate of 200 %.
Computation: (Daily rate + COLA) x 200%] + (30% [Daily rate x 200%)].
If the employee worked in excess of eight hours (overtime work) during a
regular holiday that also falls on his/her rest day, he/she shall be paid an
additional 30 % of his/her hourly rate on said day. Computation: (Hourly rate of
the basic daily wage x 200% x 130% x 130% x number of hours worked);
b. Special (Non-Working) Days
If the employee did not work, the no work, no pay principle shall apply,
unless there is a favorable company policy, practice, or CBA granting payment on
a special day.
If the employee worked, he/she shall be paid an additional 30 % of his/her daily
rate on the first eight hours of work. Computation: [(Daily rate x 130%) + COLA).
If the employee worked in excess of eight hours (overtime work), he/she shall
be paid an additional 30 % of his/her hourly rate on said day. Computation:
(Hourly rate of the basic daily wage x 130% x 130% x number of hours worked).
If the employee worked during a special day that also falls on his/her rest day,
he/she shall be paid an additional 50% of his/her daily rate on the first eight hours
of work. Computation: [(Daily rate x 150%) + COLA].
If the employee worked in excess of eight hours (overtime work) during a
special day that also falls on his/her rest day, he/she shall be paid an additional
30 % of his/her hourly rate on said day. Computation: (Hourly rate of the basic
daily wage x 150% x 130% x number of hours worked).
c. Special Holiday for all schools
For private establishments, 25 February 2014 is an ordinary workday and no
premium is required to be paid for work on said day.
On the other hand, employees in private schools, whether academic or
administrative personnel, shall be paid in accordance with the rules for pay on
special (non-working) days as stated above.
What are the effects of absences on the computation of holiday pay?
1. Employees on leave of absence with pay - entitled to holiday pay when they are
on leave of absence with pay.
2. Employees on leave of absence without pay on the day immediately
preceding the regular holiday may not be paid the required holiday pay if they
have not worked on such regular holiday.
3. Employees on leave while on SSS or employees compensation benefits -
Employers should grant the same percentage of the holiday pay as the benefit granted
by competent authority in the form of employees compensation or social security
payment, whichever is higher, if they are not reporting for work while on such benefits.
4. When day preceding regular holiday is a non-working day or scheduled rest
day - should not be deemed to be on leave of absence on that day, in which case,
employees are entitled to the regular holiday pay if they worked on the day
immediately preceding the non-working day or rest day.
2. HOLIDAY PAY/PREMIUM PAY OF TEACHERS, PIECE
WORKERS, TAKAY, SEASONAL WORKERS, SEAFARERS
Are private school teachers entitled to holiday pay during semestral
vacations? What about Christmas vacation
No, as far as regular holidays during semestral vacations are
concerned.
Yes, as far as regular holidays during Christmas vacation are
concerned.
Are hourly-paid teachers entitled to holiday pay? A school is exempted 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. However, it is liable to pay the faculty members their regular
hourly rate on days declared as special holidays or if, 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; and in case of extensions, said faculty
members shall likewise be paid their hourly rates should they teach during said
extensions.
Are piece-workers, takay and others paid by results entitled to holiday pay?
Yes. Where a covered employee is paid by results or output such as payment on
piece-work, his holiday pay should not be less than his average daily earnings for the
last seven (7) actual working days preceding the regular holiday. In no case,
however, should the holiday pay be less than the applicable statutory minimum wage
rate.
What are the distinctions between supervised and unsupervised workers
paid by results to determine their entitlement to holiday pay? The principal test to
determine entitlement to holiday pay is whether the employees time and performance
of the work are supervised or unsupervised by their employer. If supervised, the
employee is entitled to holiday pay. If unsupervised, he is not.
The distinctions between supervised and unsupervised workers paid by
results are as follows:
(1) Those whose time and performance are supervised by the employer. Here,
there is an element of control and supervision over the manner as to how the
work is to be performed. A piece-rate worker belongs to this category especially if
he performs his work in the company premises; and
(2) Those whose time and performance are unsupervised. Here, the employers
control is over the result of the work. Workers on pakyao and takay basis belong
to this group. Both classes of workers are paid per unit accomplished. Piece-rate
payment is generally practiced in garment factories where work is done in the
company premises, while payment on pakyao and takay basis is commonly
observed in the agricultural industry, such as in sugar plantations where the work
is performed in bulk or in volumes, hence, difficult to quantify.
Are seasonal workers entitled to holiday pay? Yes. Seasonal workers are entitled
to holiday pay while working during the season. They may not be paid the required
regular holiday pay during off-season where they are not at work.
Are seafarers entitled to holiday pay? Yes. Any hours of work or duty including
hours of watchkeeping performed by the seafarer on designated rest days and
holidays shall be paid rest day or holiday pay.
What are important principles on holiday pay?
In case of two (2) regular holidays falling on the same day, the worker should be
compensated as follows:
oIf unworked 200% for the two regular holidays;
oIf worked 200% for the two regular holidays plus premium of 100% for work
on that day.
Monthly-paid employees are not excluded from the coverage of holiday pay.
LEAVES
1. SERVICE INCENTIVE LEAVE
What is service incentive leave? Every covered employee who has rendered at
least one (1) year of service is entitled to a yearly service incentive leave of five (5)
days with pay.
The term at least one year of service should mean service within
twelve (12) months, whether continuous or broken, reckoned from the date the
employee started working, including authorized absences and paid regular holidays,
unless the number of working days in the establishment as a matter of practice or
policy, or that provided in the employment contract, is less than twelve (12) months, in
which case, said period should be considered as one (1) year for the purpose of
determining entitlement to the service incentive leave benefit.
Who are excluded from its coverage?
All employees are covered by the rule on service incentive leave except:
a. Those of the government and any of its political subdivisions, including government
owned and controlled corporations;
b. Domestic workers or kasambahays;
c. Persons in the personal service of another;
d. Managerial employees as defined in Book III of the Labor Code;
e. Field personnel and other employees whose performance is unsupervised by the
employer;
f. Those who are engaged on task or contract basis, purely commission basis, or those
who are paid in a fixed amount for performing work irrespective of the time consumed
in the performance thereof;
g. Those who are already enjoying the benefit provided in the law;
h. Those enjoying vacation leave with pay of at least five (5) days;
i. Those employed in establishments regularly employing less than ten (10)
employees;
j. Other officers and members of the managerial staff; and
k. Members of the family of the employer who are dependent on him for support.
Are unavailed service incentive leaves commutable to cash? Yes. The service
incentive leave is commutable to its money equivalent if not used or exhausted at the
end of the year.

2. MATERNITY LEAVE
What is maternity leave? Maternity leave is the period of time which may be
availed of by a woman employee, married or unmarried, to undergo and recuperate
from childbirth, miscarriage or complete abortion during which she is permitted to
retain her rights and benefits flowing from her employment.
What is the period of leave?
60 days for normal delivery
78 days for caesarian delivery
What is the amount granted?
Daily maternity benefit equivalent to one hundred percent (100%) of her average daily
salary credit for sixty (60) days or seventy-eight (78) days in case of caesarian
delivery/
What is the number of delivery or miscarriage covered? The maternity benefits
shall be paid only for the first four (4) deliveries or miscarriages/
Is an unmarried woman entitled to maternity leave benefit? Yes. For as long as
a woman is pregnant, she is entitled to maternity leave benefit regardless of whether
she is married or unmarried.
PATERNITY LEAVE
What is paternity leave benefit? Paternity leave covers a married male
employee allowing him not to report for work for seven (7) calendar days but
continues to earn the compensation therefor, on the condition that his spouse has
delivered a child or suffered miscarriage for purposes of enabling him to effectively
lend support to his wife in her period of recovery and/or in the nursing of the newlyborn
child.
Delivery includes childbirth or any miscarriage.
Spouse refers to the lawful wife. For this purpose, lawful wife refers to a woman
who is legally married to the male employee concerned.
Cohabiting refers to the obligation of the husband and wife to live together.
What is the covered total number of deliveries? Every married employee in the
private and public sectors is entitled to a paternity leave of seven (7) calendar days
with full pay for the first four (4) deliveries of the legitimate spouse with whom he is
cohabiting.
Paternity leave benefits are granted to the qualified employee after the
delivery by his wife, without prejudice to an employer allowing an employee to avail of
the benefit before or during the delivery, provided that the total number of days
should not exceed seven (7) calendar days for each delivery.
Is an unavailed paternity leave benefit convertible to cash?
No. In the event that the paternity leave benefit is not availed of, said
leave shall not be convertible to cash.
PARENTAL LEAVE
(R.A. No. 8972)
What is parental leave? Parental leave is the leave benefit granted to a male or
female solo parent to enable him/her to perform parental duties and responsibilities
where physical presence is required.
How many days may be availed of as parental leave? The parental leave shall
not be more than seven (7) working days every year to a solo parent who has
rendered service of at least one (1) year, to enable him/her to perform parental duties
and responsibilities where his/her physical presence is required. This leave shall be
non-cumulative.
It bears noting that this leave privilege is an additional leave benefit which
is separate and distinct from any other leave benefits provided under existing laws or
agreements.
Who is a solo parent?
The term "solo parent" refers to any individual who falls under any of the
following categories:
(1) A woman who gives birth as a result of rape and other crimes against chastity even
without a final conviction of the offender: Provided, That the mother keeps and raises
the child;
(2) Parent left solo or alone with the responsibility of parenthood due to death of
spouse;
(3) Parent left solo or alone with the responsibility of parenthood while the spouse is
detained or is serving sentence for a criminal conviction for at least one (1) year;
(4) Parent left solo or alone with the responsibility of parenthood due to physical and/or
mental incapacity of spouse as certified by a public medical practitioner;
(5) Parent left solo or alone with the responsibility of parenthood due to legal
separation or de facto separation from spouse for at least one (1) year, as long as
he/she is entrusted with the custody of the children;
(6) Parent left solo or alone with the responsibility of parenthood due to declaration of
nullity or annulment of marriage as decreed by a court or by a church as long as
he/she is entrusted with the custody of the children;
(7) Parent left solo or alone with the responsibility of parenthood due to abandonment
of spouse for at least one (1) year;
(8) Unmarried mother/father who has preferred to keep and rear her/his child/children
instead of having others care for them or give them up to a welfare institution;
(9) Any other person who solely provides parental care and support to a child or
children;
(10) Any family member who assumes the responsibility of head of family as a result of
the death, abandonment, disappearance or prolonged absence of the parents or solo
parent.
What is the effect of change of status of the solo parent? A change in the status
or circumstance of the parent claiming benefits under this Act, such that he/she is no
longer left alone with the responsibility of parenthood, shall terminate his/her eligibility
for these benefits.
Who are considered children under this law? "Children" refer to those living
with and dependent upon the solo parent for support who are unmarried, unemployed
and not more than eighteen (18) years of age, or even over eighteen (18) years but
are incapable of self-support because of mental and/or physical defect/disability.
Is an unavailed parental leave convertible to cash? No. In the event that the
parental leave is not availed of, said leave shall not be convertible to cash unless
specifically
agreed upon previously.
LEAVE FOR VICTIMS OF VIOLENCE
AGAINST WOMEN AND CHILDREN
(R.A. No. 9262)
What is this kind of leave? This special leave is granted to a woman employee
who is a victim under this law. It is for a total of ten (10) days of paid leave of
absence, in addition to other paid leaves under the law. It is extendible when the
necessity arises as specified in the protection order. Its purpose is to enable the
woman employee to attend to the medical and legal concerns relative to said law.
This leave is not convertible to cash.
What is the requirement for its entitlement? At any time during the application of
any protection order, investigation, prosecution and/or trial of the criminal case, a
victim of Violence Against Women and their Children (VAWC) who is employed shall
be entitled to said paid leave of up to ten (10) days. The Punong Barangay/kagawad
or prosecutor or the Clerk of Court, as the case may be, shall issue a certification at no
cost to the woman that such an action is pending, and this is all that is required for
the employer to comply with the 10- day paid leave.
SPECIAL LEAVE BENEFIT FOR WOMEN
What is this special leave benefit [GYNECOLOGICAL SURGERY LEAVE]? A
special leave benefit for women was granted under R.A. No. 9710, otherwise known
as The Magna Carta of Women [August 14, 2009]. Thus, any female employee in the
public and private sector regardless of age and civil status shall be entitled to a special
leave of two (2) months with full pay based on her gross monthly compensation
subject to existing laws, rules and regulations due to surgery caused by
gynecological disorders under the following terms and conditions:
1. She has rendered at least six (6) months continuous aggregate employment service
for the last twelve (12) months prior to surgery;
2. In the event that an extended leave is necessary, the female employee may use her
earned leave credits; and
3. This special leave shall be non-cumulative and non-convertible to cash.
Gynecological disorders refer to disorders that would require surgical
procedures such as, but not limited to, dilatation and curettage and those involving
female reproductive organs such as the vagina, cervix, uterus, fallopian tubes, ovaries,
breast, adnexa and pelvic floor, as certified by a competent physician. Gynecological
surgeries shall also include hysterectomy, ovariectomy, and mastectomy.
Is this leave similar to maternity leave? No. This leave should be distinguished
from maternity leave benefit, a separate and distinct benefit, which may be availed of
in case of childbirth, miscarriage or complete abortion.
A woman, therefore, may avail of this special leave benefit in case she
undergoes surgery caused by gynecological disorder and at the same time maternity
benefit as these two leaves are not mutually exclusive.
SERVICE CHARGE
 What are the kinds of establishment covered by the law on service charge?
The rules on service charge apply only to establishments collecting service charges,
such as hotels, restaurants, lodging houses, night clubs, cocktail lounges, massage
clinics, bars, casinos and gambling houses, and similar enterprises, including those
entities operating primarily as private subsidiaries of the government.
Who are the employees covered by this law? The same rules on service charges
apply to all employees of covered employers, regardless of their positions,
designations or employment status, and irrespective of the method by which their
wages are paid except those receiving more than P2,000.00 a month.
Who are not covered? Specifically excluded from coverage are employees who
are receiving wages of more than P2,000.00 a month. However, it must be pointed out
that the P2,000.00 ceiling is no longer realistic considering the applicable minimum
wages prevailing in the country. Hence, it must be disregarded.
How is the service charge distributed?
a. Percentage of sharing. All service charges collected by covered employers are
required to be distributed at the following rates:
1. 85% to be distributed equally among the covered employees; and
2. 15% to management to answer for losses and breakages and distribution to
employees receiving more than P2,000.00 a month, at the discretion of the
management.
b. Frequency of distribution. The share of the employees referred to above should
be distributed and paid to them not less often than once every two (2) weeks or twice a
month at intervals not exceeding sixteen (16) days.
Can the service charge be integrated into the wages of covered employees?
Yes. In case the service charge is abolished, the share of covered employees should
be considered integrated in their wages, in accordance with Article 96 of the Labor
Code. The basis of the amount to be integrated is the average monthly share of each
employee for the past twelve (12) months immediately preceding the abolition or
withdrawal of such charges.
What are some principles on service charge?
Tips and services charges are two different things. Tips are given by customers
voluntarily to waiters and other people who serve them out of recognition of
satisfactory or excellent service. There is no compulsion to give tips under the
law. The same may not be said of service charges which are considered integral
part of the cost of the food, goods or services
ordered by the customers.
Service charges are not in the nature of profit share and, therefore,
cannot be deducted from wage.
Who are covered by the 13th month pay law? Only 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 the 13th month pay benefit. Managerial
employees are not entitled to 13th month pay.
What is the minimum period of service required in a calendar year to be
entitled to 13th month pay? To be entitled to the 13th month pay benefit, it is
imposed as a minimum service requirement that the employee should have worked
for at least one (1) month during a calendar year.
When should 13th month pay be paid? It must be paid not later than December
24 of every year.
Who are excluded from its coverage? The following employers are not covered by
the 13th month pay law:
1. The government and any of its political subdivisions, including government-
owned and controlled corporations, except those corporations operating essentially
as private subsidiaries of the government.
2. Employers already paying their employees 13th month pay or more in a calendar
year or its equivalent at the time of the issuance of the Revised Guidelines.
3. Employers of those who are paid on purely commission, boundary, or task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except where the
workers are paid on piece-rate basis, in which case, the employer shall be covered by
the Revised Guidelines insofar as such workers are concerned.
Workers paid on piece-rate basis shall refer to those who are paid a
standard amount for every piece or unit of work produced that is more or less regularly
replicated without regard to the time spent in producing the same.
Are domestic workers or Kasambahays covered? Yes. They are now covered
under the Kasambahay Law.
Are extras, casuals and seasonal employees entitled to 13th month pay? Yes,
they are entitled thereto.
Is 13th month pay part of wage?
13th month pay which is in the nature of additional income, is based on wage but
not part of wage.
What is the minimum amount of the 13th month pay? The minimum 13th month
pay should not be less than one-twelfth (1/12) of the total basic salary earned by
an employee within a calendar year.
What is meant by basic salary or basic wage? Basic salary or basic wage
contemplates work within the normal eight (8) working hours in a day. This means
that the basic salary of an employee for purposes of computing the 13th month pay
should include all remunerations or earnings paid by the employer for services
rendered during normal working hours.
For purposes of computing the 13th month pay, basic salary should be
interpreted to mean not the amount actually received by an employee, but 1/12 of their
standard monthly wage multiplied by their length of service within a given calendar
year.
SEPARATION PAY
What are the separation pays expressly provided under the Labor Code?
The Labor Code prescribes the payment of separation pay only in the
following four (4) situations:
(1) When termination is due to authorized causes:
(1) installation of labor-saving devices;
(2) redundancy;
(3) retrenchment; or
(4) closing or cessation of business operations; and
(5) disease.
What are separation pays provided in jurisprudence? In accordance with
jurisprudence, the following separation pay may be cited:
(1) Separation pay in lieu of reinstatement; and
(2) Separation pay as financial assistance in cases where the dismissal was held
valid and legal but the employee is given financial assistance by reason of long years
of service, unblemished record, substantial justice, etc.
What is the prevailing doctrine regarding grant of financial assistance?
THE TOYOTA DOCTRINE. Under this doctrine, all grounds in Article 282 of the
Labor Code, except analogous causes, would not merit payment of financial
assistance.
In the following cases, the Toyota doctrine was applied; hence, no
financial assistance was awarded because the grounds invoked are in accordance
with Article 282:
Reno Foods v. Nagkakaisang Lakas ng Manggagawa (NLM), where it was
maintained that labor adjudicatory officials and the Court of Appeals must demur
the award of separation pay based on social justice when an employees
dismissal is based on serious misconduct or willful disobedience; gross and
habitual neglect of duty; fraud or willful breach of trust; or commission of a crime
against the person of the employer or his immediate family grounds under
Article 282 of the Labor Code that sanction dismissals of employees.
Equitable PCI Bank v. Dompor, Moya v. First Solid Rubber Industries, Inc.,
and Unilever Philippines, Inc. v. Rivera, where the infractions committed by the
respondent constituted serious misconduct or willful disobedience resulting to
loss of trust and confidence
Central Philippines Bandag Retreaders, Inc. v. Diasnes, and Quiambao v.
Manila Electric Company, involving gross and habitual neglect of duties due to
respondents repeated and continuous absences without prior leave and frequent
tardiness.
Exception to Toyota doctrine: When termination is based on analogous
causes. Toyota, however, makes a distinction when the grounds cited are the
analogous causes for termination under Article282(e), like inefficiency,
incompetence, ineptitude, poor performance and others. It declared that in these
cases, the NLRC or the courts may opt to grant separation pay anchored on social
justice in consideration of the length of service of the employee, the amount
involved, whether the act is the first offense, the performance of the employee and
the like, using the guideposts enunciated in PLDT on the propriety of the award of
separation pay.
Illustrative cases.
Yrasuegui v. Philippine Airlines, Inc., where the dismissal of petitioner (an
international flight attendant) due to his obesity was held valid as an analogous
 cause under Article 282(e) of the Labor Code. The Supreme Court, however, as
an act of social justice and for reason of equity, awarded him separation pay
equivalent to one-half (1/2) months pay for every year of service, including his
regular allowances. The Court observed that his dismissal occasioned by his
failure to meet the weight standards of his employer was not for serious
misconduct and does not reflect on his moral character.
THE SOLIDBANK DOCTRINE. Under this 2010 doctrine, as distinguished from
just cause termination, employees terminated due to authorized cause are not
entitled to be paid additional separation pay by way of financial assistance.
The reason is that the employer is only required under the law to pay his employees
separation pay in accordance with Article 283 of the Labor Code. That is all that the
law requires. The Court should refrain from adding more than what the law requires,
as the same is within the realm of the legislature.
RETIREMENT PAY
a. ELIGIBILITY
Who are covered under the retirement pay law? The following employees are
eligible to avail of retirement benefits under Article 287 of the Labor Code:
1. All employees in the private sector, regardless of their position, designation or
status and irrespective of the method by which their wages are paid;
2. Part-time employees;
3. Employees of service and other job contractors;
4. Domestic helpers or persons in the personal service of another;
3. Underground mine workers;
4. Employees of government-owned and/or controlled corporations organized under
the Corporation Code (without original charters).
Who are excluded? Article 287, as amended, does not apply to the following
employees:
1. Employees of the national government and its political subdivisions, including
government-owned and/or controlled corporations, if they are covered by the Civil
Service Law and its regulations.
2. Employees of retail, service and agricultural establishments or operations
regularly employing not more than ten (10) employees. These terms are defined as
follows:
a. Retail establishment is one principally engaged in the sale of goods to end-
users for personal or household use. It shall lose its retail character qualified for
exemption if it is engaged in both retail and wholesale of goods.
b. Service establishment is one principally engaged in the sale of service to
individuals for their own or household use and is generally recognized as such.
c. Agricultural establishment/operation refers to an employer which is
engaged in agriculture. This term refers to all farming activities in all branches
and includes, among others, the cultivation and tillage of soil, production,
cultivation, growing and harvesting of any agricultural or horticultural
commodities, dairying, raising of livestock or poultry, the culture of fish and other
aquatic products in farms or ponds, and any activities performed by a farmer or
on a farm as an incident to, or in conjunction with, such farming operations, but
does not include the manufacture and/or processing of sugar, coconut, abaca,
tobacco, pineapple, aquatic or other farm products.
What is the optional and compulsory retirement age?
a. Under Article 287. This article provides for two (2) types of retirement:
(1) Optional retirement upon reaching the age of sixty (60) years.
(2) Compulsory retirement upon reaching the age of sixty-five (65) years.
It is the employee who exercises the option under No. 1 above.
b. Under retirement plan. The optional and compulsory retirement schemes provided
under Article 287 come into play only in the absence of a retirement plan or
agreement setting forth other forms of optional or compulsory retirement schemes.
Thus, if there is a retirement plan or agreement in an establishment providing for an
earlier or older age of retirement (but not beyond 65 which has been declared the
compulsory retirement age), the same shall be controlling.
c. Retirement at an earlier age or after rendering certain period of service. Based
on Article 287 the employers and employees are free to agree and stipulate on the
retirement age, either in a CBA or employment contract. It is only in the absence of
such agreement that the retirement age shall be fixed by law, that is, in accordance
with the optional and compulsory retirement age prescribed under Article 287.
d. By mutual agreement, employers may be granted the sole and exclusive
prerogative to retire employees at an earlier age or after rendering a certain
period of service.
Cainta Catholic School v. Cainta Catholic School Employees Union
[CCSEU], where the Supreme Court upheld the exercise by the school of its option to
retire employees pursuant to the existing CBA where it is provided that the school
has the option to retire an employee upon reaching the age limit of sixty (60) or
after having rendered at least twenty (20) years of service to the school, the last
three (3) years of which must be continuous. Hence, the termination of
employment of the employees, arising as it did from an exercise of a management
prerogative granted by the mutually-negotiated CBA between the school and the union
is valid.
e. To be valid, retirement at an earlier age must be voluntarily consented to by
the employee.
In Jaculbe v. Silliman University, the Supreme Court ruled that in order
for retirement at an earlier age to be valid, it must be shown that the employees
participation in the plan is voluntary. An employer is free to impose a retirement age of
less than 65 for as long as it has the employees consent. Stated conversely,
employees are free to accept the employers offer to lower the retirement age if they
feel they can get a better deal with the retirement plan presented by the employer.
What is the minimum years of service required for entitlement under the law?
Five (5) years is the minimum years of service that must be rendered by the employee
before he can avail of the retirement benefits upon reaching optional or compulsory
retirement age under Article 287.
What is the retirement age of underground mine workers? The optional
retirement age of underground mine workers is 50 years of age; while the
compulsory retirement age is 60 years old.
What is the minimum number of years of service required of underground
mine workers? Minimum years of service is also 5 years.
Are the retirement benefits of underground mine workers similar to ordinary
retirees? Yes. In fact, other than the retirement age, all other requirements as well as
benefits provided in the law are applicable to underground mine workers.
AMOUNT OF RETIREMENT PAY
What is retirement pay under the law?
a. One-half () month salary. In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the establishment, an employee,
upon reaching the optional or compulsory retirement age specified in Article 287, shall
be entitled to retirement pay equivalent to at least one-half () month salary for every
year of service, a fraction of at least six (6) months being considered as one (1) whole
year.
b. Components of one-half () month salary. For purposes of determining the
minimum retirement pay due an employee under Article 287, the term one-half
month salary shall include all of the following:
(1) Fifteen (15) days salary of the employee based on his latest salary rate.
(2) The cash equivalent of five (5) days of service incentive leave;
(3) One-twelfth (1/12) of the 13th month pay due the employee; and
(4) All other benefits that the employer and employee may agree upon that
should be included in the computation of the employees retirement pay.
c. One-half () month salary means 22.5 days. One-half [] month salary is
equivalent to 22.5 days arrived at after adding 15 days plus 2.5 days representing
one-twelfth [1/12] of the 13th month pay plus 5 days of service incentive leave.
What are some principles on retirement benefits?
1/12 of 13th month pay and 5 days of service incentive leave (SIL) should not be
included if the employee was not entitled to 13th month pay and SIL during his
employment.
Example: R & E Transport, Inc. v. Latag,1 where it was held that employees
who are not entitled to 13th month pay and SIL pay while still working should not
be paid the entire 22.5 days but only the fifteen (15) days salary. In other words,
the additional 2.5 days representing one-twelfth [1/12] of the 13th month pay and
the five (5) days of SIL should not be included as part of the retirement benefits.
The employee in this case was a taxi driver who was being paid on the
boundary system basis. It was undisputed that he was entitled to retirement
benefits after working for fourteen (14) years with R & E Transport, Inc. However,
he was not entitled to the 13th month pay since Section 3 of the Rules and
Regulations Implementing P.D. No. 851 exempts from its coverage employers of
those who are paid on purely boundary basis. He was also not entitled to the 5-
day service incentive leave pay pursuant to the Rules to Implement the Labor
Code which expressly excepts field personnel and other employees whose
performance is unsupervised by the employer.
But in the 2010 case of Serrano v. Severino Santos Transit,2 which
involves a bus conductor (petitioner) who worked for 14 years for respondent bus
company which did not adopt any retirement scheme. It was held herein that even
if petitioner as bus conductor was paid on commission basis, he falls within the
coverage of R.A. 7641 (Retirement Pay Law, now Article 287 of Labor Code).
This means that his retirement pay should include the cash equivalent of the 5-
day SIL and 1/12 of the 13th month pay for a total of 22.5 days. The affirmance by
the Court of Appeals of the reliance by the NLRC on R & E Transport case was
held erroneous. For purposes of applying the law on SIL as well as on retirement,
there is a difference between drivers paid under the boundary system and
 conductors paid on commission basis. This is so because in practice, taxi drivers
do not receive fixed wages. They retain only those sums in excess of the
boundary or fee they pay to the owners or operators of the vehicles.
Conductors, on the other hand, are paid a certain percentage of the bus earnings
for the day. It bears emphasis that under P.D. No. 851 and the SIL Law, the
exclusion from its coverage of workers who are paid on a purely commission
basis is only with respect to field personnel.
RETIREMENT BENEFITS OF WORKERS PAID BY RESULTS
What are the retirement benefits of workers paid by results? For covered
workers who are paid by results and do not have a fixed monthly rate, the basis for
the determination of the salary for fifteen (15) days shall be their average daily salary
(ADS). The ADS is the average salary for the last twelve (12) months reckoned from
the date of their retirement, divided by the number of actual working days in that
particular period.
RETIREMENT BENEFITS OF PART-TIME WORKERS
How should the retirement benefits of part-time workers be computed?
Applying the principles under Article 287, as amended, the components of retirement
benefits of part-time workers may also be computed at least in proportion to the
salary and related benefits due them.
J. WOMEN WORKERS
a. PROVISIONS AGAINST DISCRIMINATION
What are acts of discrimination under the Labor Code?
(a) Payment of a lesser compensation, including wage, salary or other form of
remuneration and fringe benefits, to a female employee as against a male employee,
for work of equal value; and
(b) Favoring a male employee over a female employee with respect to promotion,
training opportunities, study and scholarship grants solely on account of their sexes.
What are acts of discrimination under the Magna Carta of Women? R.A. No.
9710, otherwise known as The Magna Carta of Women, is a comprehensive
womens human rights law that seeks to eliminate discrimination against women by
recognizing, protecting, fulfilling and promoting the rights of Filipino women, especially
those in marginalized sector.
Based on the definition of the term Discrimination Against Women in
R.A. No. 9710, the following are considered discriminatory acts:
1. Any gender-based distinction, exclusion, or restriction which has the effect or
purpose of impairing or nullifying the recognition, enjoyment, or exercise by women,
irrespective of their marital status, on a basis of equality of men and women, of
human rights and fundamental freedoms in the political, economic, social, cultural, civil
or any other field;
2. Any act or omission, including by law, policy, administrative measure, or practice,
that directly or indirectly excludes or restricts women in the recognition and promotion
of their rights and their access to and enjoyment of opportunities, benefits or
privileges;
3. A measure or practice of general application that fails to provide for mechanisms to
offset or address sex or gender-based disadvantages or limitations of women, as a
result of which women are denied or restricted in the recognition and protection of their
rights and in their access to and enjoyment of opportunities, benefits, or privileges; or
women, more than men, are shown to have suffered the greater adverse effects of
those measures or practices; and
4. Discrimination compounded by or intersecting with other grounds, status, or
condition, such as ethnicity, age, poverty or religion.
Additionally, women are guaranteed their right to decent work. The State
shall progressively realize and ensure decent work standards for women that involve
the creation of jobs of acceptable quality in conditions of freedom, equity, security and
human dignity.
b. STIPULATION AGAINST MARRIAGE
Is the prohibition against marriage valid? Article 136 of the Labor Code
considers as an unlawful act of the employer to require as a condition for or
continuation of employment that a woman employee shall not get married or to
stipulate expressly or tacitly that upon getting married, a woman employee shall be
deemed resigned or separated.
It is likewise an unlawful act of the employer, to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of
her marriage.
What are the relevant pieces of jurisprudence on marriage?
1. Philippine Telegraph and Telephone Company v. NLRC.1 - It was declared here
that the company 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.
2. Star Paper Corp. v. Simbol, Comia and Estrella.2 - The following policies were
struck down as invalid for violating the standard of reasonableness which is being
followed in our jurisdiction, otherwise called the Reasonable Business Necessity
Rule:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative,
up to [the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another
female) developed a friendly relationship during the course of their employment
and then decided to get married, one of them should resign to preserve the policy
stated above.
3. Duncan Association of Detailman-PTGWO v. Glaxo Welcome Philippines,
Inc.3 In this case, the prohibition against marriage embodied in the following
stipulation in the employment contract was held as valid:
10. You agree to disclose to management any existing or future relationship you
may have, either by consanguinity or affinity with co-employees or employees of
competing drug companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from the Company as a
matter of Company policy.
The Supreme Court ruled that the dismissal based on this stipulation in
the employment contract is a valid exercise of management prerogative. The
prohibition against personal or marital relationships with employees of competitor
companies upon its employees was held reasonable under the circumstances
because relationships of that nature might compromise the interests of the company.
In laying down the assailed company policy, the employer only aims to protect its
interests against the possibility that a competitor company will gain access to its
secrets and procedures.
c. PROHIBITED ACTS
What are the prohibited acts against women under the Labor Code? Article 137
of the Labor Code and its implementing rule consider unlawful the followings acts of
the employer:
1. To discharge any woman employed by him for the purpose of preventing such
woman from enjoying maternity leave, facilities and other benefits provided under
the Labor Code;
2. To discharge such woman on account of her pregnancy, or while on leave or in
confinement due to her pregnancy;
3. To discharge or refuse the admission of such woman upon returning to her work for
fear that she may again be pregnant;
4. To discharge any woman or any other employee for having filed a complaint or
having testified or being about to testify under the Labor Code; or
5. To require as a condition for or continuation of employment that a woman employee
shall not get married or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by
reason of marriage.
d. ANTI-SEXUAL HARASSMENT ACT
(R.A. No. 7877)
What are the 3 situations contemplated under this law? R.A. No. 7877 declares
sexual harassment unlawful only in three (3) situations, namely:
(1) employment;
(2) education; and
(3) training environment.
Can sexual harassment be committed also against a man? Yes. Sexual
harassment is not the sole domain of women as men may also be subjected to the
same despicable act. Said law does not limit the victim of sexual harassment to
women.
Who are the persons who may be held liable for sexual harassment? Work,
education or training-related sexual harassment is committed by any 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 another, regardless of whether
the demand, request or requirement for submission is accepted by the object of said
act.
Further, any person who directs or induces another to commit any act of
sexual harassment as defined in the law, or who cooperates in the commission thereof
by another without which it would not have been committed, shall also be held liable
under the law.
How is sexual harassment committed in a work-related or employment
environment? In a work-related or employment environment, sexual harassment is
committed when:
1. The sexual favor is made 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, conditions, promotions, or privileges; or the refusal to
grant the sexual favor results in limiting, segregating or classifying the employee which
in any way would discriminate, deprive or diminish employment opportunities or
otherwise adversely affect said employee;
2. The above acts would impair the employees rights or privileges under existing labor
laws; or
3. The above acts would result in an intimidating, hostile, or offensive environment for
the employee.
What are duties of the employer in regard to sexual harassment complaints? It
is the duty of the employer to prevent or deter the commission of acts of sexual
harassment and to provide the procedures for the resolution or prosecution of acts of
sexual harassment.
The employer or head of office is required to:
1. promulgate appropriate rules and regulations, in consultation with and jointly
approved by the employees or students or trainees, through their duly designated
representatives, prescribing the procedure for the investigation of sexual harassment
cases and the administrative sanctions therefor. The said rules and regulations issued
shall include, among others, guidelines on proper decorum in the workplace and
educational or training institutions.
2. create a committee on decorum and investigation of cases on sexual harassment.
The committee shall conduct meetings, as the case may be, with officers and
employees, teachers, instructors, professors, coaches, trainors and students or
trainees to increase understanding and prevent incidents of sexual harassment. It shall
also conduct the investigation of alleged cases constituting sexual harassment.
EMPLOYMENT OF MINORS
(Labor Code and R.A. No. 7678, R.A. No. 9231)
Who is a child or working child? For legal purposes, the term child refers contract must be in writing and should contain the conditions set by law.
to any person less than eighteen (18) years of age.
A working child refers to any child engaged as follows:
i. when the child is below eighteen (18) years of age, in work or economic activity
that is not child labor; and
ii. when the child below fifteen (15) years of age:
(a) in work where he/she is directly under the responsibility of his/her parents or
legal guardian and where only members of the childs family are employed; or
(b) in public entertainment or information which refers to artistic, literary, and
cultural performances for television show, radio program, cinema or film, theater,
commercial advertisement, public relations activities or campaigns, print
materials, internet, and other media.
What are the working hours of a child? The term hours of work includes (1) all
time during which a child is required to be at a prescribed workplace, and (2) all time
during which a child is suffered or permitted to work. Rest periods of short duration
during working hours shall be counted as hours worked.
The following hours of work shall be observed for any child allowed to
work under R.A. No. 9231 and its Implementing Rules:
(a) For a child below 15 years of age, the hours of work shall not be more than
twenty (20) hours per week, provided that the work shall not be more than four (4)
hours at any given day;
(b) For a child 15 years of age but below 18, the hours of work shall not be more
than eight (8) hours a day, and in no case beyond forty (40) hours a week; and
(c) No child below 15 years of age shall be allowed to work between eight (8)
oclock in the evening and six (6) oclock in the morning of the following day and no
child 15 years of age but below 18 shall be allowed to work between ten (10)
oclock in the evening and six (6) oclock in the morning of the following day.
What is the prohibition of employing minors in certain undertakings and
advertisements? No child below 18 years of age is allowed to be employed as a
model in any advertisement directly or indirectly promoting alcoholic beverages,
intoxicating drinks, tobacco and its by-products, gambling or any form of violence or
pornography.
L. HOUSEHELPERS
(Labor Code as amended by R.A. No. 7655,
An Act Increasing the Minimum Wage of Househelpers;
See also Household Service under the Civil Code)
(NOTE: The above provisions of the Labor Code on Househelpers
cited in the 2014 Syllabus have already been repealed by R.A. No.
10361, otherwise known as Domestic Workers Act or Batas
Kasambahay approved by President Benigno S. Aquino III on
January 18, 2013).
What is the coverage of the Kasambahay Law? R.A. No. 10361 applies to all
domestic workers employed and working within the country. It shall cover all parties
to an employment contract for the services of the following Kasambahay, whether on a
live-in or live-out arrangement, such as, but not limited to:
(a) General househelp;
(b) Yaya;
(c) Cook;
(d) Gardener;
(e) Laundry person; or
(f) Any person who regularly performs domestic work in one household on an
occupational basis.
Who are excluded from its coverage? The following are not covered:
(a) Service providers;
(b) Family drivers;
(c) Children under foster family arrangement; and
(d) Any other person who performs work occasionally or sporadically and not on an
occupational basis.
Who is a domestic worker or kasambahay? Domestic worker or
kasambahay refers to any person engaged in domestic work within an employment
relationship, whether on a live-in or live-out arrangement, such as, but not limited to,
general househelp, "yaya", cook, gardener, or laundry person, but shall exclude
service providers, family drivers, children who are under foster family arrangement, or
any person who performs domestic work only occasionally or sporadically and not on
an occupational basis.
This term shall not include children who are under foster family
arrangement which refers to children who are living with a family or household of
relative/s and are provided access to education and given an allowance incidental to
education, I.e., "baon", transportation, school projects, and school activities.
Because of these new terminologies prescribed in the law, the use of the
term househelper may no longer be legally correct.
Is the employment contract required to be in writing? Yes. The employment
What are the rights and privileges of a kasambahay? The rights and privileges
of the Kasambahay are as follows:
(a) Minimum wage;
(b) Other mandatory benefits, such as the daily and weekly rest periods, service
incentive leave, and 13th month pay;
(c) Freedom from employers' interference in the disposal of wages;
(d) Coverage under the SSS, PhilHealth and Pag-IBIG laws;
(e) Standard of treatment;
(f) Board, lodging and medical attendance;
(g) Right to privacy;
(h) Access to outside communication;
(i) Access to education and training;
(j) Right to form, join, or assist labor organization;
(k) Right to be provided a copy of the employment contract; (I) Right to certificate of
employment;
(m) Right to terminate the employment; and
(n) Right to exercise their own religious beliefs and cultural practices.
The foregoing rights and privileges are discussed below.
What is the minimum wage of kasambahay? Under the Kasambahay Law, the
following are the minimum wages of kasambahays:
(a) Two thousand five hundred pesos (P2,500.00) a month for those employed in
the National Capital Region (NCR);
(b) Two thousand pesos (P2,000.00) a month for those employed in chartered cities
and first class municipalities; and
(c) One thousand five hundred pesos (P1,500.00) a month for those employed in
other municipalities.
Are the minimum wages subject to review by the RTWPBs or Regional
Boards? Yes. After one (1) year from the effectivity of the Kasambahay Law, and
periodically thereafter, the Regional Tripartite and Productivity Wage Boards
(RTPWBs) shall review, and if proper, determine and adjust the minimum wage rates
of domestic workers.
What are some important principles on wage of kasambahay?
Frequency of payment of wages. - The wages of the Kasambahay shall be paid
at least once a month. This is so because the minimum wage rates are on a monthly
basis.
The equivalent minimum daily wage rate of the Kasambahay shall be
determined by dividing the applicable minimum monthly rate by thirty (30) days.
The amount of the minimum wage depends on the geographical area where the
Kasambahay works.
Payment of wages:
1. To whom paid. - It should be made on time directly to the Kasambahay to
whom they are due in cash at least once a month.
2. Deductions, prohibition; when allowed. - The employer, unless allowed by
the Kasambahay through a written consent, shall make no deductions from the
wages other than that which is mandated by law such as for SSS, Philhealth or
Pag-IBIG contributions.
 3. Mode of payment. - It should be paid in cash and not by means of
promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other
than the cash wage as provided for under this Act.
4. Pay slip. The employer shall at all times provide the Kasambahay with a
copy of the pay slip containing the amount paid in cash every pay day, and
indicating all deductions made, if any. The copies of the pay slip shall be kept by
the employer for a period of three (3) years.
5. Prohibition on Interference in the disposal of wages. It shall be unlawful
for the employer to interfere with the freedom of the Kasambahay in the
disposition of his/her wages, such as:
(a) Forcing, compelling, or obliging the Kasambahay to purchase
merchandise, commodities or other properties from the employer or from
any other person; or
(b) Making use of any store or services of such employer or any other
person.
6. Prohibition against withholding of wages. It shall be unlawful for an
employer, directly or indirectly, to withhold the wages of the Kasambahay. If the
Kasambahay leaves without any justifiable reason, any unpaid salary for a period
not exceeding fifteen (15) days shall be forfeited. Likewise, the employer shall not
induce the Kasambahay to give up any part of the wages by force, stealth,
intimidation, threat or by any other means whatsoever.
What are important terms and conditions of employment of kasambahay? The
following is a rundown of the basic terms and conditions that should be observed in
the employment of a Kasambahay:
a. Employable age. - Children whose age is below 15 years are absolutely prohibited
to work as Kasambahay.
b. Normal daily hours of work. Because R.A. No. 10361 does not contain any
provision on the number of normal hours of work that a Kasambahay should render in
a day but merely prescribes said daily rest period of eight (8) hours per day, it may be
concluded that the Kasambahay should work for at least a total of sixteen (16) hours
per day as normal hours of work. However, it must be noted that the Labor Code does
not contain any provision on the normal hours of work of househelpers. Article 1695
of the Civil Code, however, specifically provides that househelpers shall not be
required to work for more than ten (10) hours a day. Since R.A. No. 10361, a special
law, is the most recent piece of legislation, it should prevail over the general provision
of the Civil Code.
c. Normal daily hours of work for working child-kasambahay is eight (8) hours
per day.
d. 13th month pay. - The Kasambahay who has rendered at least one (1) month of
service is entitled to a 13th month pay which shall not be less than one-twelfth (1/12)
of his/her total basic salary earned in a calendar year.
The 13th month pay shall be paid not later than December 24 of every
year or upon separation from employment.
e. Daily rest period. The Kasambahay shall be entitled to an aggregate daily rest
period of eight (8) hours.
f. Weekly rest period. - The Kasambahay shall be entitled to at least twenty-four (24)
consecutive hours of rest in a week. The employer and the Kasambahay shall agree
in writing on the schedule of the weekly rest day but the preference of the
Kasambahay, when based on religious grounds, shall be respected.
g. Service incentive leave. - A Kasambahay who has rendered at least one (1) year
of service shall be entitled to an annual service incentive leave of at least five (5) days
with pay. 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.
h. Social security benefits. - A Kasambahay who has rendered at least one (1)
month of service shall be covered by the Social Security System (SSS), Employees
Compensation Commission (ECC), Philippine Health Insurance Corporation
(PhilHealth), and Home Development Mutual Fund or Pag-IBIG, and shall be entitled
to all the benefits in accordance with their respective policies, laws, rules and
regulations.
i. Obligation of employer to register and enrol with SSS, PhilHealth, and Pag-
IBIG. - As employer of the Kasambahay, he/she shall register himself/herself with, and
enroll the latter as his/her employee to the SSS, PhilHealth, and Pag-IBIG.
j. Deposits for loss or damage. - It shall be unlawful for the employer or any other
person to require a Kasambahay to make deposits from which deductions shall be
made for the reimbursement of loss or damage to tools, materials, furniture and
equipment in the household.
k. Standard of treatment. - The Kasambahay shall be treated with respect by the
employer or any member of the household. He/she shall not be subjected to any kind
of abuse, including repeated verbal or psychological, nor be inflicted with any form of
physical violence or harassment or any act tending to degrade his/her dignity, as
defined under the Revised Penal Code, Violence Against Women and their Children
Law (R.A. No. 9262), Special Protection of Children Against Child Abuse, Exploitation
and Discrimination Act (R.A. No. 7610) as amended by R.A. No. 9231, Anti-Trafficking
in Persons Act of 2003 (R.A. No. 9208), and other applicable laws.
l. Board, lodging and medical attendance. - The employer shall provide for the basic
necessities of the
Kasambahay, to include the following:
(1) At least three (3) adequate meals a day, taking into consideration the
Kasambahay's religious beliefs and cultural practices;
(2) Humane sleeping condition that respects the person's privacy for live-in
arrangement; and
(3) Appropriate rest and medical assistance in the form of first-aid medicines, in
case of illnesses and injuries sustained during service without loss of benefits.
m. Opportunities for education and training. - The Kasambahay shall be afforded
the opportunity to finish basic education, which shall consist of elementary and
secondary education. He/she may be allowed access to alternative learning systems
and, as far as practicable, higher education or technical vocational education and
training.
n. Membership in labor organization. - The Kasambahay shall have the right to join
a labor organization of his/her own choosing for purposes of mutual aid and
collective negotiation.
r. Health and safety. - The employer shall safeguard the safety and health of the
Kasambahay in accordance with the standards which the DOLE shall develop through
the Bureau of Working Conditions (BWC) and the Occupational Safety and Health
Center (OSHC) within six (6) months from the promulgation of this IRR. The said
standards shall take into account the peculiar nature of domestic work.
s. Prohibition on debt bondage. - It shall be unlawful for the employer or any person
acting on his/her behalf to place the Kasambahay under debt bondage. Debt
bondage refers to the rendering of service by the Kasambahay as security or
payment for a debt where the length and nature of service is not clearly defined or
when the value of the service is not reasonably applied in the payment of the debt.
t. Assignment to non-household work. - The employer shall not assign the
Kasambahay to work, whether in full or part-time, in a commercial, industrial or
agricultural enterprise at a wage rate lower than that provided for agricultural or
nonagricultural workers.
If so assigned, the Kasambahay will no longer be treated as such but
as a regular employee of the establishment.
What are the rules on termination of Kasambahay?
a. Pre-termination of employment. The following rules shall be observed:
(1) In case the duration of employment is specified in the contract, the
Kasambahay and the employer may mutually agree upon notice to terminate the
contract of employment before the expiration of its term.
(2) In case the duration is not determined by stipulation or by nature of service,
the employer or the Kasambahay may give notice to end the employment
relationship five (5) days before the intended termination of employment.
b. Termination of employment initiated by the Kasambahay. - The Kasambahay
may terminate the employment relationship at any time before the expiration of the
contract for any of the following causes:
(1) Verbal or emotional abuse of the Kasambahay by the employer or any
member of the household;
(2) Inhuman treatment including physical abuse of the Kasambahay by the
employer or any member of the household;
(3) Commission of a crime or offense against the Kasambahay by the employer
or any member of the household;
(4) Violation by the employer of the terms and conditions of the employment
contract and other standards set forth in the law;
(5) Any disease prejudicial to the health of the Kasambahay, the employer, or
members of the household; and
(6) Other causes analogous to the foregoing.
If the Kasambahay leaves without cause, any unpaid salary due, not
exceeding the equivalent of 15 days work, shall be forfeited. In addition, the employer
may recover from the Kasambahay deployment expenses, if any, if the services have
been terminated within six (6) months from employment.
c. Termination of employment initiated by the employer. - An employer may
terminate the employment of the Kasambahay at any time before the expiration of the
contract for any of the following causes:
(1) Misconduct or willful disobedience by the Kasambahay of the lawful order of
the employer in connection with the former's work;
(2) Gross or habitual neglect or inefficiency by the Kasambahay in the
performance of duties;
(3) Fraud or willful breach of the trust reposed by the employer on the
Kasambahay;
(4) Commission of a crime or offense by the Kasambahay against the person of
the employer or any immediate member of the employer's family;
(5) Violation by the Kasambahay of the terms and conditions of the employment
contract and other standards set forth under the law;
(6) Any disease prejudicial to the health of the Kasambahay, the employer, or
members of the household; and
(7) Other causes analogous to the foregoing.
If the employer dismissed the Kasambahay for reasons other than the
above, he/she shall pay the Kasambahay the earned compensation plus indemnity in
the amount equivalent to fifteen (15) days work.
d. Invalid ground for termination. - Pregnancy and marriage of the Kasambahay are
not valid grounds for termination of employment.
e. Employment Certification. - Upon the termination of employment, the employer
shall issue the Kasambahay, within five (5) days from request, a certificate of
employment indicating the nature, duration of the service and work description.
M. EMPLOYMENT OF HOMEWORKERS
What are important terms that should be noted in employment of
homeworkers?
a. Industrial homeworker. It refers to a worker who is engaged in industrial
homework.
b. Industrial homework. It refers to a system of production under which work for
an employer or contractor is carried out by a homeworker at his/her home. Materials
may or may not be furnished by the employer or contractor. It differs from regular
factory production principally in that, it is a decentralized form of production where
there is ordinarily very little supervision or regulation of methods of work.
c. Home. - It means any nook, house, apartment or other premises used regularly,
in whole or in part, as a dwelling place, except those situated within the premises or
compound of an employer, contractor/subcontractor and the work performed therein is
under the active or personal supervision by or for the latter.
d. Field personnel. It refers to a non-agricultural employee who regularly
performs his 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.
e. Employer. It refers to any natural or artificial person who, for his own account or
benefit, or on behalf of any person residing outside the Philippines, directly or
indirectly, or through any employee, agent, contractor, subcontractor or any other
person:
1. delivers or causes to be delivered any goods, articles or materials to be
processed or fabricated in or about a home and thereafter to be returned or to be
disposed of or distributed in accordance with his direction; or
2. sells any goods, articles or materials for the purpose of having such goods or
articles processed in or about a home and then repurchases them himself or
through another after such processing.
f. Contractor or subcontractor. - It refers to any person who, for the account or
benefit of an employer, delivers or causes to be delivered to a homeworker, goods or
articles to be processed in or about his home and thereafter to be returned, disposed
of or distributed in accordance with the direction of the employer.
g. Processing. - It refers to manufacturing, fabricating, finishing, repairing, altering,
packing, wrapping or handling in any way connected with the production or preparation
of an article or material.
How is homework paid?
Immediately upon receipt of the finished goods or articles, the employer is required to
pay the homeworker or the contractor or subcontractor, as the case may be, for the
work performed less the corresponding homeworkers share of SSS, PhilHealth and
ECC premium contributions which should be remitted by the contractor or
subcontractor or employer to the SSS with the employers share. However, where
payment is made to a contractor or subcontractor, the homeworker should likewise be
paid immediately after the goods or articles have been collected from the workers.
What are prohibited homeworks? No homework shall be performed on the
following:
1. Explosives, fireworks and articles of like character;
2. Drugs and poisons; and
3. Other articles, the processing of which requires exposure to toxic substances.
N. APPRENTICES AND LEARNERS
What are the distinctions between learnership and apprenticeship? The
following are the distinctions:
1. Practical training. Both learnership and apprenticeship involve practical training
on-the-job.
2. Training agreement. Learnership is governed by a learnership agreement; while
apprenticeship is governed by an apprenticeship agreement.
2. Occupation. Learnership involves learnable occupations consisting of semi-skilled
and other industrial occupations
which are non-apprenticeable; while apprenticeship concerns apprenticeable
occupations or any trade, form of
employment or occupation approved for apprenticeship by the DOLE Secretary.
3. Theoretical instructions. Learnership may or may not be supplemented by related
theoretical instructions; while
apprenticeship should always be supplemented by related theoretical instructions.
4. Ratio of theoretical instructions and on-the-job training. For both learnership
and apprenticeship, the normal
ratio is one hundred (100) hours of theoretical instructions for every two thousand
(2,000) hours of practical or onthe-
job training. Theoretical instruction time for occupations requiring less than two
thousand (2,000) hours for
proficiency should be computed on the basis of such ratio.
5. Competency-based system. Unlike in apprenticeship, it is required in learnership
that it be implemented based on
the TESDA-approved competency-based system.
6. Duration of training. Learnership involves practical training on the job for a period
not exceeding three (3) months; while apprenticeship requires for proficiency, more
than three (3) months but not over six (6) months of practical training on the job.
7. Qualifications. The law does not expressly mention any qualifications for learners;
while the following qualifications are required to be met by apprentices under Article 59
of the Labor Code:
(a) Be at least fourteen (14) years of age;
(b) Possess vocational aptitude and capacity for appropriate tests; and
(c) Possess the ability to comprehend and follow oral and written instructions.
8. Circumstances justifying hiring of trainees. Unlike in apprenticeship, in
learnership, the law, Article 74 of the
Labor Code, expressly prescribes the pre-requisites before learners may be validly
employed, to wit:
(a) When no experienced workers are available;
(b) The employment of learners is necessary to prevent curtailment of
employment opportunities; and
(c) The employment does not create unfair competition in terms of labor costs or
impair or lower working
standards.
9. Limitation on the number of trainees. In learnership, a participating enterprise is
allowed to take in learners only up to a maximum of twenty percent (20%) of its total
regular workforce. No similar cap is imposed in the case of apprenticeship.
10. Option to employ. In learnership, the enterprise is obliged to hire the learner after
the lapse of the learnership period; while in apprenticeship, the enterprise is given only
an option to hire the apprentice as an employee.
11. Wage rate. The wage rate of a learner or an apprentice is set at seventy-five
percent (75%) of the statutory minimum wage.
O. PERSONS WITH DISABILITY
(R.A. No. 7277, as Amended by R.A. No. 9442)
Who are persons with disability (PWDs)? Persons with Disability are those
suffering from restriction or different abilities, as a result of a mental, physical or
sensory impairment, to perform an activity in the manner or within the range
considered normal for a human being.
What is impairment? Impairment refers to any loss, diminution or aberration of
psychological, physiological, or anatomical structure or function.
What is disability? Disability means (1) a physical or mental impairment that
substantially limits one or more psychological, physiological or anatomical functions of
an individual or activities of such individual; (2) a record of such an impairment; or (3)
being regarded as having such an impairment.
What is handicap?
Handicap refers to a disadvantage for a given individual, resulting from an
impairment or a disability that limits or prevents the function or activity that is
considered normal given the age and sex of the individual.
b. RIGHTS OF PERSONS WITH DISABILITY
What are the rights of PWDs? Under the law, PWDs are entitled to equal
opportunity for employment. Consequently, no PWD shall be denied access to
opportunities for suitable employment. A qualified employee with disability 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.
What is the wage rate of PWDs? The wage rate of PWDs is 100% of the
applicable minimum wage.
What is the wage rate of PWD if hired as apprentice or learner? A PWD hired as
an apprentice or learner shall be paid not less than seventy-five percent (75%) of the
applicable minimum wage.
c. PROHIBITION ON DISCRIMINATION AGAINST PERSONS WITH
DISABILITY
What is the rule on discrimination against employment of PWDs? No entity,
whether public or private, shall discriminate against a qualified PWD by reason of
disability in regard to job application procedures, the hiring, promotion, or discharge of
employees, employee compensation, job training, and other terms, conditions and
privileges of employment. The following constitute acts of discrimination:
(a) Limiting, segregating or classifying a job applicant with disability in such a manner
that adversely affects his work opportunities;
(b) Using qualification standards, employment tests or other selection criteria that
screen out or tend to screen out a PWD unless such standards, tests or other
selection criteria are shown to be job-related for the position in question and are
consistent with business necessity;
(c) Utilizing standards, criteria, or methods of administration that:
(1) have the effect of discrimination on the basis of disability; or
(2) perpetuate the discrimination of others who are subject to common
administrative control.
(d) Providing less compensation, such as salary, wage or other forms of remuneration
and fringe benefits, to a qualified employee with disability, by reason of his disability,
than the amount to which a non-disabled person performing the same work is entitled;
(e) Favoring a non-disabled employee over a qualified employee with disability with
respect to promotion, training opportunities, study and scholarship grants, solely on
account of the latters disability;
(f) Re-assigning or transferring an employee with a disability to a job or position he
cannot perform by reason of his disability;
(g) Dismissing or terminating the services of an employee with disability by reason of
his disability unless the employer can prove that he impairs the satisfactory
performance of the work involved to the prejudice of the business entity; provided,
however, that the employer first sought to provide reasonable accommodations for
persons with disability;
(h) Failing to select or administer in the most effective manner employment tests which
accurately reflect the skills, aptitude or other factor of the applicant or employee with
disability that such tests purports to measure, rather than the impaired sensory,
manual or speaking skills of such applicant or employee, if any; and
(i) Excluding PWD from membership in labor unions or similar organizations.
TOPIC NO. 4
TERMINATION OF EMPLOYMENT
A. EMPLOYER-EMPLOYEE RELATIONSHIP
1. Four-Fold Test
What is the 4-fold test of existence of employer-employee relationship?
1. Selection and engagement of the employee;
2. Payment of wages or salaries;
3. Exercise of the power of dismissal; or
4. Exercise of the power to control the employees conduct.
These tests, however, are not fool-proof as they admit of exceptions.
The control test is the controlling test which means that the employer
controls or has reserved the right to control the employee not only as to the result
of the work to be done but also as to the means and methods by which the same is
to be accomplished.
What is the 2-tiered test of employment relationship? The two-tiered
test enunciated in Francisco v. NLRC, is composed of:
(1) The putative employers power to control the employee
with respect to the means and methods by which the work
is to be accomplished [control test]; and
(2) The underlying economic realities of the activity or
relationship [broader economic reality test].
Employment relationship under the control test is
determined by asking whether the person for whom the
services are performed reserves the right to control not only
the end to be achieved but also the manner and means to
be used in reaching such end.
The broader economic reality test calls for the
determination of the nature of the relationship based on the
circumstances of the whole economic activity, namely:
(1) The extent to which the services performed are an
integral part of the employers business;
(2) The extent of the workers investment in equipment
and facilities;
(3) The nature and degree of control exercised by the
employer;
(4) The workers opportunity for profit and loss;
(5) The amount of initiative, skill, judgment or foresight
required for the success of the claimed independent
enterprise;
(6) The permanency and duration of the relationship
between the worker and the employer; and
(7) The degree of dependency of the worker upon the
employer for his continued employment in that line of
business.
Under the economic reality test, the proper
standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued
employment in that line of business.
Following the broader economic reality test, the Supreme Court
found petitioner in Orozco v. The Fifth Division of the Honorable Court of
Appeals,6 who is a columnist in the Philippine Daily Inquirer (PDI), not an
employee of PDI but an independent contractor. Thus:
Petitioners main occupation is not as a columnist for respondent
but as a womens rights advocate working in various womens
organizations. Likewise, she herself admits that she also contributes
articles to other publications. Thus, it cannot be said that petitioner was
dependent on respondent PDI for her continued employment in
respondents line of business.
The inevitable conclusion is that petitioner was not respondent
PDIs employee but an independent contractor, engaged to do
independent work.
Is it necessary to have a written contract of employment in order to establish
employer-employee relationship? No. It may be an oral or written contract. A written
contract is not necessary for the creation and validity of the relationship.
The only exception is in the case of Kasambahay where it is required
that the contract of employment should be in writing.
2. KINDS OF EMPLOYMENT
What are the general classifications of employment? There are five (5)
classifications of employment:
(a) Regular employees referring to 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 referring to 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 referring to those who work or perform services which are
seasonal in nature, and the employment is for the duration of the season;
(d) Casual employees referring to those who are not regular, project, or seasonal
employees;
(e) Fixed-term employees whose term is freely and voluntarily determined by the
employer and the employee.
a. PROBATIONARY EMPLOYMENT
How is probationary period, say, of 6 months computed? The 6-month
probationary period should be reckoned from the date of appointment up to the
same calendar date of the 6th month following.
May probationary period be extended?
Yes, but only upon the mutual agreement by the employer and the probationary
employee.
What is the effect of allowing a probationary employee to work beyond the
probationary period? He is considered a regular employee.
What is the effect if there is no written contract providing for probationary
employment? If there is no written contract, the employee is considered a regular
employee from day one of his employment. And even if there is one, he is deemed
regular if there is no stipulation on probationary period.
What are the grounds to terminate probationary employment? Under Article
281, a probationary employee may be terminated only on three (3) grounds, to wit:
1. For a just cause; or
2. For authorized cause; or
3. When the probationary employee fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the
employee at the start of the employment.
Is procedural due process required in termination of probationary
employment?
Yes, but only in the case of Numbers 1 and 2 above.
No, in the case of No. 3 above.
When should termination of probationary employment be made? Termination to
be valid must be done prior to lapse of probationary period. Termination a few days
after lapse of probationary period cannot be done without due process as he has
already become a regular employee by that time.
b. REGULAR EMPLOYMENT
How does one become a regular employee? Under the Labor Code, regular
employment may be attained in either of three (3) ways, namely:
1. By nature of work. - The employment is deemed regular when the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer.
2. By period of service. - The employment is reckoned as regular when the employee
has rendered at least one (1) year of service, whether such service is continuous or
broken, with respect to the activity in which he is employed and his employment shall
continue while such activity exists.
3. By probationary employment. - The employment is considered regular when the
employee is allowed to work after a probationary period.
Is the manner or method of paying wage material in determining regularity of
employment? No. The manner and method of payment of wage or salary is
immaterial to the issue of whether the employee is regular or not.
c. PROJECT EMPLOYMENT
What is the litmus test of project employment? The litmus test of project
employment, as distinguished from regular employment, is whether or not the project
employees were assigned to carry out a specific project or undertaking, the
duration and scope of which were specified at the time the employees were
engaged for that project.
A true project employee should be assigned to a project which begins and
ends at determined or determinable times and be informed thereof at the time of
hiring.
What are the indicators of project employment? Either one or more of the
following circumstances, among others, may be considered as indicator/s that an
employee is a project employee:
1. The duration of the specific/identified undertaking for which the worker is
engaged is reasonably determinable.
2. Such duration, as well as the specific work/service to be performed, are defined in
an employment agreement and is made clear to the employee at the time of hiring.
3. The work/service performed by the employee is in connection with the particular
project or undertaking for which he is engaged.
4. The employee, while not employed and awaiting engagement, is free to offer
his services to any other employer.
5. A report of the termination of employment in the particular project/undertaking is
submitted to the DOLE Regional Office having jurisdiction over the workplace, within
thirty (30) days following the date of his separation from work.
6. An undertaking in the employment contract by the employer to pay completion
bonus to the project employee as practiced by most construction companies.
Is length of service material in determining validity of project employment? No.
Length of service is not a controlling determinant of employment tenure.
What are some principles on project employment?
1. Project employees should be informed of their status as such at inception of the
employment relationship.
2. There must be a written contract of project employment stating the duration of the
project employment as well as the particular work or service to be performed. A written
project employment contract is an indispensable requirement.
3. Intervals in employment contracts indicate project employment.
4. Continuous, as opposed to intermittent, rehiring shows that employee is regular.
5. Project-to-project basis of employment is valid.
On termination of project employment.
1. Project employees enjoy security of tenure only during the term of their project
employment.
2. Project employees have presumably become regular employees if they are allowed
to work beyond the completion of the project or any phase thereof to which they were
assigned or after the day certain which they and their employer have mutually agreed
for its completion. Having become regular employees, they can no longer be
terminated on the basis of the completion of the project or any phase thereof to which
they were deployed.
d. SEASONAL EMPLOYMENT
Can a seasonal employee become a regular seasonal employee? Yes, provided
the following requisites are complied with:
1. The seasonal employee should perform work or services that are seasonal in
nature; and
2. They must have also been employed for more than one (1) season.
Can a regular seasonal worker file an illegal dismissal case in the event he is
not hired for the next season? Yes. The reason is, being a regular seasonal
employee, the employer should re-hire him in the next season. During off-season, his
employment is deemed suspended and he is considered as being on leave of absence
without pay.
e. CASUAL EMPLOYMENT
What is the most important distinguishing feature of casual employment? The
most important distinction is that the work or job for which he was hired is merely
incidental to the principal business of the employer and such work or job is for a
definite period made known to the employee at the time of engagement.
When does a casual employee become regular? Casual employee becomes
regular after one year of service by operation of law. The one (1) year period should be
reckoned from the hiring date. Repeated rehiring of a casual employee makes him a
regular employee.
f. FIXED-TERM EMPLOYMENT
What are the requisites in order for fixed-term employment to be valid? The
two (2) requisites or criteria for the validity of a fixed-term contract of employment are
as follows:
1. The fixed period of employment was knowingly and voluntarily agreed upon by
the parties, without any force, duress or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or
2. It satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by
the former on the latter.
Is fixed-term employment valid if the job is directly related to the principal
business of the employer? Yes. Fixed-term employment is the only exception to the
rule that one becomes regular if he is made to perform activities directly related to the
principal business of the employer (Regularity by virtue of nature of work)
When does a fixed-term employee become regular?
1. When he is allowed to work beyond the agreed fixed term.
2. When there are successive renewals of fixed-period contracts.
NOTE: The practice of hiring of employees on a uniformly fixed 5-month basis and
replacing them upon the expiration of their contracts with other workers with the same
employment status circumvents their right to security of tenure.
3. JOB CONTRACTING
Is job contracting valid if the contractor-supplied employees are engaged to
perform not merely peripheral but core jobs with the principal? Yes, per the 2012
case of Digital Telecommunications Philippines, Inc. v. Digitel Employees Union
(DEU), where the Court recognized the management prerogative to farm out any of its
activities, regardless of whether such activity is peripheral or core in nature.
b. DEPARTMENT ORDER NO. 18-A (Series of 2011)
What is this issuance? This is the prevailing implementing rules on legitimate job
contracting.
c. DEPARTMENT CIRCULAR NO. 01-12
What is this issuance? This was issued by the DOLE Secretary to clarify that
Department Order No. 18-A, Series of 2011, is not applicable to Business
Processing Outsourcing (BPO)/Knowledge Process Outsourcing (KPO) and the
Construction Industry because:
(1) BPOs and KPOs since these companies may hire employees in accordance with
applicable laws, and maintain these employees based on business requirements,
which may or may not be for different clients of the BPOs at different periods of the
employees' employment.
(2) the Construction Industry because the licensing and the exercise of regulatory
powers over the construction industry are lodged with the Philippine Contractors
Accreditation Board (PCAB), which is under the Construction Industry Authority of the
Philippines (ClAP), and not with the DOLE. Thus, the DOLE, through its regional
offices, shall not require contractors licensed by PCAB in the Construction Industry to
register under D.O. 18-A, Series of 2011. Moreover, findings of violation/s on labor
standards and occupational health and safety standards shall be coordinated with
PCAB for its appropriate action, including the possible cancellation/suspension of the
contractors license.
d. TRILATERAL RELATIONSHIP IN JOB CONTRACTING
What is meant by trilateral relationship? As distinguished from employment
contract which is bilateral in nature, involving as it does only two (2) parties, namely:
(1) the employer, and (2) the employee, in legitimate job contracting, there are three
(3) parties involved, to wit:
1. The principal who decides to farm out a job, work or service to a contractor;
2. The contractor who has the capacity to independently undertake the performance
of the job, work or service; and
3. The contractual workers engaged by the contractor to accomplish the job, work or
service.
e. EFFECTS OF LABOR-ONLY CONTRACTING
LEGITIMATE JOB CONTRACTING.
What are the requisites of legitimate job contracting?
(1) The contractor must be duly registered with the DOLE. If not registered, the
contractor is presumed a labor-only contractor.
(2) The contractor 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;
(3) The contractor has substantial capital and/or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of the business; and
(4) The Service Agreement between principal and contractor should ensure
compliance with all the rights and benefits of workers under Labor Laws such as
labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.
Absence of any of the foregoing requisites makes it a labor-only contracting
arrangement.
What is the amount of substantial capital under the new Rules?
1. In the case of corporations, partnerships or cooperatives paid-up capital
stocks/shares of at least P3 Million; or
2. In the case of single proprietorship - a net worth of at least P3 Million.
Substantial capital and investment in tools, etc. are two separate
requirements.
Substantial capital and investment in tools, equipment, implements,
machineries and work premises should be treated as two (2) distinct and separate
requirements in determining whether there is legitimate job contracting arrangement.
May individuals engage in legitimate job contracting? Yes. Legitimate job
contracting may not only be engaged by corporation, partnership or single
proprietorship. Individuals may become legitimate job contractors themselves for as
long as they have SPECIAL SKILLS or TALENTS.
Are individuals engaged as legitimate job contractors required to fulfill the
requisites of legitimate job contracting as afore-described? NO. They need not be
registered as independent contractors with DOLE; they need not have substantial
capital. All that they are required is to have their tools consisting of SPECIAL SKILLS
or TALENTS.
What are examples of individuals as independent contractors?
1. Sonza v. ABS-CBN Broadcasting Corporation - TV and radio talents and others
with special talents and skills are not employees but legitimate independent
contractors.
2. Orozco v. The Fifth Division of the Honorable Court of Appeals- A newspaper
columnist is not an employee but an independent contractor of the newspaper
publishing the column.
3. Jose Mel Bernarte v. Philippine Basketball Association3 - Basketball or soccer
referee or umpire, an independent contractor.
4. Semblante and Pilar v. CA, Gallera de Mandaue, et al.4 Cockpit masiador and
sentenciador are independent contractors.
5. Escasinas v. Shangri-las Mactan Island Resort5 - A doctor may be engaged as
an independent contractor.
Respondent hotel resort, pursuant to Article 157 of the Labor Code
which requires that an employer which employs more than 200 workers,
should furnish its employees with the services of a full-time registered
nurse, a parttime physician and dentist, and an emergency clinic, engaged the
services of respondent doctor who, in turn, hired petitioners as full-time
registered nurses. Petitioners contend that they are regular employees of
respondent hotel resort. The Supreme Court, in holding that respondent doctor
is an independent contractor and that petitioners are employees of the doctor
and not of respondent hotel resort, declared:
Against the above-listed determinants, the Court holds that
respondent doctor is a legitimate independent contractor. That Shangri-la
provides the clinic premises and medical supplies for use of its employees
and guests does not necessarily prove that respondent doctor lacks
substantial capital and investment. Besides, the maintenance of a clinic
and provision of medical services to its employees is required under Art.
157, which are not directly related to Shangri-las principal business -
operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who
underwrites the following: salaries, SSS contributions and other benefits
of the staff; group life, group personal accident insurance and life/death
insurance for the staff with minimum benefit payable at 12 times the
employees last drawn salary, as well as value added taxes and
withholding taxes, sourced from her P60,000.00 monthly retainer fee and
70% share of the service charges from Shangri-las guests who avail of
the clinic services.
With respect to the supervision and control of the nurses and
clinic staff, it is not disputed that a document, Clinic Policies and
Employee Manual claimed to have been prepared by respondent doctor
exists, to which petitioners gave their conformity and in which they
acknowledged their co-terminus employment status. It is thus presumed
that said document, and not the employee manual being followed by
Shangri-las regular workers, governs how they perform their respective
tasks and responsibilities.
Contrary to petitioners contention, the various office directives
issued by Shangri-las officers do not imply that it is Shangri-las
management and not respondent doctor who exercises control over them
or that Shangri-la has control over how the doctor and the nurses perform
their work. The letter addressed to respondent doctor dated February 7,
2003 from a certain Tata L. Reyes giving instructions regarding the
replenishment of emergency kits is, at most, administrative in nature,
related as it is to safety matters; while the letter dated May 17, 2004 from
Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the
clinic from receiving cash payments from the resorts guests is a matter of
financial policy in order to ensure proper sharing of the proceeds,
considering that Shangri-la and respondent doctor share in the guests
payments for medical services rendered. In fine, as Shangri-la does not
control how the work should be performed by petitioners, it is not
petitioners
LABOR-ONLY CONTRACTING.
When is there labor-only contracting?
(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 of control over the performance of the
work of the employee.
NOTE: Even if only one of the two (2) elements above is present, there is
labor-only contracting.
What are the effects of labor-only contracting?
1. The labor-only contractor will be treated as the agent or intermediary of the
principal. Since the act of an agent is the act of the principal, representations made by
the labor-only contractor to the employees will bind the principal.
2. The principal will become the employer as if it directly employed the workers
supplied by the labor-only contractor to undertake the subcontracted job or service. It
will be responsible to them for all their entitlements and benefits under labor laws.
3. The principal and the labor-only contractor will be solidarily treated as the direct
employer.
4. The employees will become employees of the principal, subject to the classifications
of employees under Article 280 of the Labor Code.
What are the distinctions between legitimate job contracting and labor-only
contracting? The chief distinctions between legitimate job contracting, on the one
hand, and the prohibited labor-only contracting, on the other, may be summed up as
follows:
1. In the former, no employer-employee relationship exists between the contractual
employees of the job contractor and the principal; while in the latter, an employer-
employee relationship is created by law between the principal and the contractual
employees supplied by the labor-only contractor.
2. In the former, the principal is considered only an indirect employer, as this term is
understood under Article 107 of the Labor Code; while in the latter, the principal is
considered the direct employer of the contractual employees in accordance with the
last paragraph of Article 106 of the Labor Code.
3. In the former, the joint and several obligation of the principal and the legitimate job
contractor is only for a limited purpose, that is, to ensure that the employees are paid
their wages. Other than this obligation of paying the wages, the principal is not
responsible for any claim made by the contractual employees; while in the latter, the
principal becomes jointly and severally or solidarily liable with the labor-only contractor
to the latters employees in the same manner and extent that the principal is liable to
employees directly hired by him/her, as provided in Article 106 of the Labor Code, as
amended.
4. In the former, the legitimate job contractor undertakes to perform a specific job for
the principal; while in the latter, the labor-only contractor merely provides, supplies,
recruits and places the personnel to work for the principal.
What are the prohibitions other than labor-only contracting? 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." "Cabo" refers to a person or group of
persons or to a labor group which, in 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.
(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. DISMISSAL FROM EMPLOYMENT
What is meant by two-fold due process requirement? Dismissal of employees
requires the observance of the two-fold due process requisites, namely:
1. Substantive aspect which means that the dismissal must be for any of the (1) just
causes provided under Article 282 of the Labor Code or the company rules and
regulations promulgated by the employer; or (2) authorized causes under Articles 283
and 284 thereof; and
2. Procedural aspect which means that the employee must be accorded due process,
the elements of which are notice and the opportunity to be heard and to defend
himself.
What is the distinction between JUST CAUSES and AUTHORIZED CAUSES? A
dismissal based on a just cause means that the employee has committed a wrongful
act or omission; while a dismissal based on an authorized cause means that there
exists a ground which the law itself allows or authorizes to be invoked to justify the
termination of an employee even if he has not committed any wrongful act or omission
such as installation of labor-saving devices, redundancy, retrenchment, closure or
cessation of business operations or disease.
1. JUST CAUSES
What are the just causes under the Labor Code? The just causes in the Labor
Code are found in the following provisions thereof:
(1) Article 282 - (Termination by the Employer) which provides for the following
grounds:
(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.
(2) Article 264(a) - (Prohibited Activities) which provides for the termination of the
following:
(a) Union officers who knowingly participate in an illegal strike and therefore
deemed to have lost their employment status.
(b) Any employee, union officer or ordinary member who knowingly participates in
the commission of illegal acts during a strike (irrespective of whether the strike is
legal or illegal), is also deemed to have lost his employment status.
(3) Article 263(g) - (National Interest Cases) where strikers who violate orders,
prohibitions and/or injunctions as are issued by the DOLE Secretary or the NLRC, may
be imposed immediate disciplinary action, including dismissal or loss of employment
status.
(4) Article 248(e) - (Union Security Clause) where violation of the union security
agreement in the CBA may result in termination of employment. Under this clause, the
bargaining union can demand from the employer the dismissal of an employee who
commits a breach of union security arrangement, such as failure to join the union or to
maintain his membership in good standing therein. The same union can also demand
the dismissal of a member who commits an act of disloyalty against it, such as when
the member organizes a rival union.
What are just causes under jurisprudence?
In addition to the just causes mentioned in the Labor Code, just causes are also found
in prevailing jurisprudence. The following may be cited as just causes in accordance
with prevailing jurisprudence:
1. Violation of Company Rules and Regulations or Company Code of Discipline.
2. Theft of property owned by a co-employee as distinguished from company-owned
property which is considered serious misconduct.
3. Incompetence, inefficiency or ineptitude.
4. Failure to attain work quota.
5. Failure to comply with weight standards of employer.
6. Attitude problem.
Is dismissal based on Company Code of Discipline or Company Rules and
Regulations illegal? No.
In the 2013 case of Sampaguita Auto Transport Corporation v. NLRC,
the Supreme Court pronounced that the Court of Appeals erred in ruling that the
dismissal of private respondent, a bus driver of petitioner, was illegal because the
grounds upon which petitioners based respondents termination from employment,
viz.: hindi lahat ng schedule nailalabas, []mababa ang revenue ng bus, laging
kasama an[g] asawa sa byahe and maraming naririnig na kwento tungkol sa kanya,
naguutos ng conductor para kumita sa hindi magandang paraan[,] xxx are not among
those enumerated under Article 282 of the Labor Code as just causes for termination
of employment. The irregularities or infractions committed by private respondent in
connection with his work as a bus driver constitute serious misconduct or, at the very
least, conduct analogous to serious misconduct, under the above-cited Article 282 of
the Labor Code. The requirement in the company rules that: 3. to obey traffic rules
and regulations as well as the company policies. 4. to ensure the safety of the
riding public as well as the other vehicles and motorist (sic) is so fundamental
and so universal that any bus driver is expected to satisfy the requirement whether or
not he has been so informed.
I. SERIOUS MISCONDUCT
1. REQUISITES.
For misconduct or improper behavior to be a just cause for dismissal, the following
requisites must concur:
1. It must be serious; and
2. It must relate to the performance of the employees duties; and
3. It must show that he has become unfit to continue working for the employer.
All the above three (3) requisites must concur.
2. SOME PRINCIPLES ON SERIOUS MISCONDUCT.
Serious misconduct implies that it must be of such grave and aggravated
character and not merely trivial or unimportant.
Simple or minor misconduct would not justify the termination of the services of
an employee.
Possession or use of shabu or other drugs is a valid ground to terminate
employment.
Immorality, as a general rule, is not a just ground to terminate employment. The
exception is when such immoral conduct is prejudicial or detrimental to the
interest of the employer.
Immoral act committed beyond office hours is a valid ground to terminate
employment.
Sexual intercourse inside company premises constitutes serious misconduct.
The act of a 30-year old lady teacher in falling in love with a 16-year old
student is not immoral.
Fighting is a ground for termination but only the instigator or aggressor and not
the victim who was constrained to defend himself should be dismissed.
Challenging superiors to a fight is a just cause for termination.
 Assaulting another employee is a just cause for termination.
Utterance of obscene, insulting or offensive words constitutes serious
misconduct.
Gambling within company premises is a serious misconduct.
Rendering service to business rival is a just cause to terminate employment.
Selling products of a competitor is a just cause for termination.
Organizing a credit union by employees in a bank is a serious misconduct.
Deceiving a customer for personal gain is a just cause for termination.
Contracting work in competition with employer constitutes serious misconduct.
Intoxication which interferes with the employees work constitutes serious
misconduct.
The act of a teacher in pressuring a colleague to change the failing grade of a
student is serious misconduct.
Sexual harassment is a just ground to dismiss.
Sleeping while on duty is a ground for termination.
Dismissal is too harsh a penalty for eating while at work.
Pilferage or theft of company-owned property is a just cause to terminate.
Theft of funds or property not owned by employer is not a ground to
terminate.
Act of falsification is a valid ground to terminate employment.
Punching-in of time cards of other employees is a just cause for termination.
II. INSUBORDINATION OR WILLFUL DISOBEDIENCE OF LAWFUL
ORDERS
1. REQUISITES.
One of the fundamental duties of an employee is to obey all reasonable
rules, orders and instructions of the employer.
In order to validly invoke this ground, the following requisites must be
complied with, to wit:
1. The employees assailed conduct must have been willful or intentional, the
willfulness being characterized by a wrongful and perverse attitude; and
2. The order violated must be based on a reasonable and lawful company rule,
regulation or policy and made known to the employee and must pertain to the duties
for which he has been engaged to discharge.
2. SOME PRINCIPLES ON INSUBORDINATION.
Making false allegations in complaint does not constitute insubordination.
Failure to answer memo to explain constitutes willful disobedience.
Another notice is required in case of termination on the ground of failure to
answer memo to explain.
Refusal to undergo random drug testing constitutes both serious
misconduct and insubordination.
Refusal to render overtime to meet production deadline constitutes
insubordination.
Refusal to comply with a lawful transfer constitutes insubordination.
III. GROSS AND HABITUAL NEGLECT OF DUTIES
1. REQUISITES.
The following are the requisites:
(1) There must be negligence which is gross and/or habitual in character; and
(2) It must be work-related as would make him unfit to work for his employer.
2. SOME PRINCIPLES ON GROSS AND HABITUAL NEGLECT OF DUTIES.
Simple negligence is not sufficient to terminate employment.
The negligence must be gross in character which means absence of that diligence
that an ordinarily prudent man would use in his own affairs.
As a general rule, negligence must be both gross and habitual to be a valid ground
to dismiss.
Habituality may be disregarded if negligence is gross or the damage or loss is
substantial. Habitual negligence implies repeated failure to perform ones duties for a
period of time, depending upon the circumstances.
Actual damage, loss or injury is not an essential requisite.
Gross negligence may result to loss of trust and confidence.
Absences, if authorized, cannot be cited as a ground to terminate employment.
Tardiness or absenteeism, if not habitual, cannot be cited as a ground to terminate
employment.
Tardiness or absenteeism, if habitual, may be cited as a ground to terminate
employment.
Tardiness or absenteeism, if habitual, may be tantamount to serious misconduct.
Absences or tardiness due to emergency, ailment or fortuitous event are justified and
may not be cited as just cause to terminate employment.
Unsatisfactory or poor performance, inefficiency and incompetence are
considered just causes for dismissal only if they amount to gross and habitual neglect
of duties.
IV. ABANDONMENT OF WORK
1. CONCEPT.
Abandonment is a form of neglect of duty; hence, a just cause for termination of
employment under Article 282 [b] of the Labor Code.
2. REQUISITES.
To constitute abandonment, two (2) elements must concur, namely:
1. The employee must have failed to report for work or must have been absent without
valid or justifiable reason; and
2. There must have been a clear intention on the part of the employee to sever the
employer-employee relationship manifested by some overt act.
3. SOME PRINCIPLES ON ABANDONMENT.
Mere absence is not enough to constitute abandonment.
Clear intention to sever employment relationship is necessary.
Due process in abandonment cases consists only of the service of 2 notices to the
employee, viz.:
a. First notice directing the employee to explain why he should not be declared
as having abandoned his job; and
b. Second notice to inform him of the employers decision to dismiss him on the
ground of abandonment.
No hearing is required to validly dismiss an employee for abandonment.
Notices in abandonment cases must be sent to employees last known address per
record of the company. The employer need not look for the employees current
whereabouts.
Immediate filing of a complaint for illegal dismissal praying for reinstatement negates
abandonment.
Lapse of time between dismissal and filing of a case is not a material indication of
abandonment. Hence, lapse of 2 years and 5 months or 20 months or 9 months or 8
months before filing the complaint for illegal dismissal is not an indication of
abandonment. Under the law, the employee has a 4-year prescriptive period within
which to institute his action for illegal dismissal.
Filing of a case to pre-empt investigation of the administrative case is tantamount to
abandonment.
When what is prayed for in the complaint is separation pay and not
reinstatement, the filing of complaint does not negate abandonment
It is abandonment when what is prayed for in the complaint is separation pay and it
was only in the position paper that reinstatement was prayed for.
Employment in another firm coinciding with the filing of complaint does not indicate
abandonment.
Offer of reinstatement by employer during proceedings before Labor Arbiter and
refusal by employee does not indicate abandonment but more of a symptom of
strained relations between the parties.
An employee may be absolved from the charge of abandonment of work but
adjudged guilty of AWOL. These two grounds are separate and distinct from each
other.
An employee who failed to report for work after the expiration of the duly approved
leave of absence is considered to have abandoned his job.
An employee who failed to comply with the order for his reinstatement is deemed to
have abandoned his work.
An employee who, after being transferred to a new assignment, did not report for
work anymore is deemed to have abandoned his job.
An employee who deliberately absented from work without leave or permission from
his employer for the purpose of looking for a job elsewhere is deemed to have
abandoned his work.
Imprisonment or detention by military does not constitute abandonment.
Absence to evade arrest is not a valid justification. To do so would be to place an
imprimatur on the employees attempt to derail the normal course of the administration
of justice.
V. FRAUD
1. REQUISITES.
The following are the requisites of this ground:
1. There must be an act, omission, or concealment;
2. The act, omission or concealment involves a breach of legal duty, trust, or
confidence justly reposed;
3. It must be committed against the employer or his/her representative; and
4. It must be in connection with the employees' work.1
2. SOME PRINCIPLES ON FRAUD.
Failure to deposit collection constitutes fraud.
Lack of damage or losses is not necessary in fraud cases. The fact that the
employer did not suffer losses from the dishonesty of the dismissed employee
because of its timely discovery does not excuse the latter from any culpability.
Lack of misappropriation or shortage is immaterial in case of unauthorized
encashment of personal checks by teller and cashier.
Restitution does not have absolutory effect.
VI. WILLFUL BREACH OF TRUST AND CONFIDENCE
1. REQUISITES.
For the doctrine of loss of trust and confidence to apply, the following requisites must
be satisfied:
(1) The employee holds a position of trust and confidence;
(2) There exists an act justifying the loss of trust and confidence, which means that the
act that betrays the employers trust must be real, i.e., founded on clearly established
facts;
(3) The employees breach of the trust must be willful, i.e., it was done intentionally,
knowingly and purposely, without justifiable excuse; and
(4) The act must be in relation to his work which would render him unfit to perform it.
2. GUIDELINES.
As a safeguard against employers who indiscriminately use loss of trust and
confidence to justify arbitrary dismissal of employees, the Supreme Court, in addition
to the above elements, came up with the following guidelines for the application of the
doctrine:
(1) The loss of confidence must not be simulated;
(2) It should not be used as a subterfuge for causes which are illegal, improper or
unjustified;
(3) It may not be arbitrarily asserted in the face of overwhelming evidence to the
contrary; and
(4) It must be genuine, not a mere afterthought, to justify earlier action taken in bad
faith.
The foregoing guidelines have been prescribed by the Supreme Court due
to the subjective nature of this ground which makes termination based on loss of trust
and confidence prone to abuse.
3. SOME PRINCIPLES ON THE DOCTRINE OF LOSS OF TRUST AND
CONFIDENCE.
Employees position must be reposed with trust and confidence.
Position of trust and confidence is one where a person is entrusted with confidence
on delicate matters, or with the custody, handling, or care and protection of the
employers property.
Two (2) classes of positions of trust.
The first class consists of managerial employees or those who, by the
nature of their position, are entrusted with confidential and delicate matters and from
whom greater fidelity to duty is correspondingly expected. They refer to those vested
with the powers or prerogatives to lay down and execute management policies and/or
to hire, transfer suspend, lay-off, recall, discharge, assign or discipline employees or to
effectively recommend such managerial actions. Their primary duty consists of the
management of the establishment in which they are employed or of a department or a
subdivision thereof.
The second class includes cashiers, auditors, property custodians, or
those who, in the normal and routine exercise of their functions, regularly handle
significant amounts of [the employers] money or property. They are fiduciary rank-
and-file employees, who, though rank-and-file, are routinely charged with the custody,
handling or care and protection of the employer's money or property, or entrusted with
confidence on delicate matters, and are thus classified as occupying positions of trust
and confidence.
Rules on termination of managerial and supervisory employees different from
those applicable to rank-and-file employees. Thus, with respect to rank-and-file
personnel, loss of trust and confidence as a ground for valid dismissal requires proof
of involvement in the alleged events in question and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. But as regards a
managerial employee, the mere existence of a basis for believing that he has
breached the trust of his employer would suffice for his dismissal.
There must be some basis for the loss of trust and confidence which means that
there is reasonable ground to believe, if not to entertain the moral conviction, that the
concerned employee is responsible for the misconduct and that the nature of his
participation therein rendered him absolutely unworthy of trust and confidence
demanded by his position.
Dismissal due to feng shui mismatch is not a valid ground to lose trust and
confidence.
Command responsibility of managerial employees is a ground to dismiss.
Confidential employee may be dismissed for loss of trust and confidence.
Grant of promotions and bonuses negates loss of trust and confidence.
Long years of service, absence of derogatory record and small amount involved are
deemed inconsequential insofar as loss of trust and confidence is concerned.
Dropping of criminal charges or acquittal in a criminal case arising from the same act
does not affect the validity of dismissal based on loss of trust and confidence.
Full restitution does not absolve employee of offense which resulted in the loss of
trust and confidence.
VII. COMMISSION OF CRIME OR OFFENSE
1. REQUISITES.
The following are the requisites for the valid invocation of this ground:
1. A crime or offense was committed by the employee;
2. It was committed against any of the following persons:
(a) His employer;
(b) Any immediate member of his employers family; or
(c) His employers duly authorized representative.
2. SOME PRINCIPLES ON THE COMMISSION OF CRIME OR OFFENSE.
Because of its gravity, work-relation is not necessary. Neither is it necessary to show
that the commission of the criminal act would render the employee unfit to perform his
work for the employer.
VIII. OTHER ANALOGOUS CAUSES
1. ANALOGOUS CAUSES UNDER ESTABLISHED
JURISPRUDENCE.
The following may be cited as analogous causes:
1) Violation of company rules and regulations.
2) Theft of property owned by a co-employee, as distinguished from theft of property
owned by the employer.
3) Incompetence, inefficiency or ineptitude.
4) Failure to attain work quota.
5) Failure to comply with weight standards of employer.
6) Attitude problem is analogous to loss of trust and confidence.
IX. TERMINATION DUE TO ENFORCEMENT OF UNION SECURITY
CLAUSE
What is a union security clause?
The union security clause is a stipulation in a CBA which allows the
parties thereto to enter into an agreement requiring membership in the exclusive
collective bargaining agent which successfully negotiated said CBA as a condition for
continued employment with the exception of employees who are already members of
another union at the time of the signing of the CBA.
What are the effects of application of this clause? The following are the effects:
a. On members of the bargaining union/agent. They are not allowed to resign or
terminate their membership therefrom. Any member of the bargaining agent who
resigns or is expelled therefrom may be recommended to the employer by the
bargaining agent for termination of his employment.
b. On non-members of the bargaining union/agent but members of the minority
union/s. They are not bound by the union security clause if they are members of the
minority or other unions at the time of the signing of the CBA.
Hence, they cannot be compelled to resign from their union/s in order to
join the bargaining agent.
c. On non-members of the bargaining union/agent or of any minority union/s. If
not a member of the bargaining agent or any other unions in the bargaining unit at the
time of the signing of the CBA by reason of the fact that he is excepted from the
coverage of the bargaining unit, the employee cannot be compelled to join the
bargaining agent.
d. On new employees hired after the signing of the CBA containing the union
security clause. They can be compelled to join the bargaining agent. If they refuse,
they can be recommended for termination.
Is there an exception to this rule? Yes. An employee cannot be compelled to join a
union based on religious ground. For example: members of the Iglesia ni Kristo (INK)
cannot be compelled to join a union; hence, they are not bound by the union security
doctrine.
What are the requisites in order to validly terminate employees based on this
clause?
(1) The union security clause is applicable;
(2) The bargaining union is requesting for the termination of employment due to
enforcement of the union security provision in the CBA; and
(3) There is sufficient evidence to support the unions decision to expel the employee
from the union.
All the foregoing requisites should be complied with to justify the
termination of employment.
OTHER CAUSES PER DEPARTMENT ORDER NO. 147-15, SERIES OF 2015 (07
SEPTEMBER 2015):1
An employee found positive for use of dangerous drugs shall be dealt with
administratively which shall be a ground for suspension or termination.2
An employee shall not be terminated from work based on actual, perceived or
suspected HIV status.3
An employee shall not be terminated on basis of actual, perceived or
suspected Hepatitis B status.
An employee who has or had Tuberculosis shall not be discriminated against.
He/she shall be entitled to work for as long as they are certified by the company's
accredited health provider as medically fit and shall be restored to work as soon as
his/her illness is controlled.5
An employee may also be terminated based on the grounds provided for
under the CBA.
2. AUTHORIZED CAUSES
What are the 2 classes of authorized cause termination?
Under the Labor Code, authorized causes are classified into two (2)
classes, namely:
(1) Business-related causes. Referring to the grounds specifically mentioned in
Article 283, to wit:
a. Installation of labor-saving device;
b. Redundancy;
c. Retrenchment;
d. Closure or cessation of business operations NOT due to serious business
losses or financial reverses; and
e. Closure or cessation of business operations due to serious business losses
and financial reverses.
(2) Health-related causes. Referring to disease covered by Article 284 of the Labor
Code.
What are the common requisites applicable to the authorized causes under
Article 283? The following are the five (5) common requisites applicable to the ALL
the grounds under Article 283:
1. There is good faith in effecting the termination;
2. The termination is a matter of last resort, there being no other option available to
the employer after resorting to cost-cutting measures;
3. Two (2) separate written notices are served on both the affected employees and
the DOLE at least one (1) month prior to the intended date of termination;
4. Separation pay is paid to the affected employees, to wit:
(a) If based on (1) installation of labor-saving device, or (2) redundancy. -
One (1) month pay or at least one (1) month pay for every year of service,
whichever is higher, a fraction of at least six (6) months shall be considered as
one (1) whole year.
(b) If based on (1) retrenchment, or (2) closure NOT due serious business
losses or financial reverses. One (1) month pay or at least one-half ()
month pay for every year of service, whichever is higher, a fraction of at least six
(6) months shall be considered as one (1) whole year.
(c) If closure is due to serious business losses or financial reverses, NO
separation pay is required to be paid.
(d) In case the CBA or company policy provides for a higher separation pay, the
same must be followed instead of the one provided in Article 283.
5. Fair and reasonable criteria in ascertaining what positions are to be affected by
the termination, such as, but not limited to: nature of work; status of employment
(whether casual, temporary or regular); experience; efficiency; seniority; dependability;
adaptability; flexibility; trainability; job performance; discipline; and attitude towards
work.
Failure to follow fair and reasonable criteria in selecting who to terminate
would render the termination invalid.
I. INSTALLATION OF LABOR-SAVING DEVICE
What are the additional requisites unique to this ground?
In addition to the five (5) common requisites above, the unique requisites are as
follows:
1. There must be introduction of machinery, equipment or other devices; and
2. The purpose for such introduction must be valid such as to save on cost, enhance
efficiency and other justifiable economic reasons.
II. REDUNDANCY
What are the additional requisites unique to this ground?
The additional requisites are as follows:
1. There must be superfluous positions or services of employees;
2. The positions or services are in excess of what is reasonably demanded by the
actual requirements of the enterprise to operate in an economical and efficient
manner; and
3. There must be an adequate proof of redundancy such as but not limited to the new
staffing pattern, feasibility studies/proposal, on the viability of the newly created
positions, job description and the approval by the management
of the restructuring.
III. RETRENCHMENT
What are the additional requisites unique to this ground?
Per latest issuance of the DOLE, 3 the following are the additional requisites:
1. The retrenchment must be reasonably necessary and likely to prevent business
losses;
2. The losses, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or if only expected, are reasonably imminent;
3. The expected or actual losses must be proved by sufficient and convincing
evidence; and
4. The retrenchment must be in good faith for the advancement of its interest and not
to defeat or circumvent the employees' right to security of tenure.
This is the only statutory ground in Article 283 which requires this kind of proof. The
other grounds of closure or cessation of business operations may be resorted to with
or without losses.
What are some relevant principles on retrenchment?
The fact that there has been economic or other crisis besetting a particular sector
or the country as a whole is not sufficient justification for retrenchment.
The phrase retrenchment to prevent losses means that retrenchment must
be undertaken by the employer before the losses anticipated are actually sustained or
realized. The employer need not keep all his employees until after his losses shall
have materialized. Otherwise, the law could be vulnerable to attack as undue taking of
property for the benefit of another.
Best evidence of losses - financial statements audited by independent
auditors (not by internal auditors).
Best evidence of losses in a government-controlled corporation - financial
statements audited by COA.
Income tax returns, not valid since they are self-serving documents.
Mere affidavit on alleged losses is not sufficient.
Retrenchment effected long after the business losses is not valid.
Profitable operations in the past do not affect the validity of retrenchment.
Retrenchment due to liquidity problem is not valid.
Sharp drop in income is not a ground to justify retrenchment. A mere decline in
gross income cannot in any manner be considered as serious business losses. It
should be substantial, sustained and real.
Litany of woes, in the absence of any solid evidence that they translated into
specific and substantial losses that would necessitate retrenchment, will not suffice to
justify retrenchment.
Rehiring of retrenched employees does not necessarily indicate illegality of
retrenchment.
In an enterprise which has several branches nationwide, profitable
operations in some of them will not affect the validity of the retrenchment if
overall, the financial condition thereof reflects losses.
IV. CLOSURE OR CESSATION OF BUSINESS OPERATIONS
Can an employer close its business even if it is not suffering from business
losses? Yes. In fact, closure involves two (2) situations:
(a) When NOT due to serious business losses or financial reverses; or
(b) When due to serious business losses or financial reverses
It is only in the first that payment of separation pay is required. No such
requirement is imposed in the second.
What are some relevant principles on closure?
Principle of closure under Article 283 applies in cases of both total and partial
closure or cessation of business operations. Management may choose to close only a
branch, a department, a plant, or a shop.
Closure of department or section and hiring of workers supplied by independent
contractor as replacements is valid.
Relocation of business may amount to cessation of operations.
Closure of business to merge or consolidate with another or to sell or dispose all
of its assets, held valid.
Audited financial statements necessary only in closure due to losses.
V. DISEASE
1. THE DEOFERIO DOCTRINE ON THE REQUISITES.
Disease is one of the authorized causes to terminate employment. In the 2014 case of
Deoferio v. Intel Technology Philippines, Inc.,1 the Supreme Court divided into two
the requisites that must be complied with before termination of employment due to
disease may be justified, namely:
(1) Substantive requisites; and
(2) Procedural requisites.
1.1. THE DEOFERIO RULE ON SUBSTANTIVE REQUISITES.
The following are the three (3) substantive requisites:
(1) An employee has been found to be suffering from any disease;
(2) His continued employment is prohibited by law or prejudicial to his health, as well
as to the health of his co-employees; and
(3) A competent public health authority issues a medical certificate that the disease is
of such nature or at such a stage that it cannot be cured within a period of six (6)
months even with proper medical treatment.2
1.2. THE DEOFERIO RULE ON PROCEDURAL REQUISITES.
Deoferio, finally pronounced the rule that the employer must furnish the employee two
(2) written notices in terminations due to disease, namely:
(1) The notice to apprise the employee of the ground for which his dismissal is sought;
and
(2) The notice informing the employee of his dismissal, to be issued after the
employee has been given reasonable opportunity to answer and to be heard on his
defense.
Due process in termination due to disease is similar to due process for just
cause termination but different from authorized cause termination under Article
298 [283].
From these perspectives, it was held in Deoferio that the CA erred in not
finding that the NLRC gravely abused its discretion when it ruled that the twin-notice
requirement does not apply to Article 284 (Disease) of the Labor Code. This
conclusion is totally devoid of any legal basis; its ruling is wholly unsupported by law
and jurisprudence. In other words, the NLRCs unprecedented, whimsical and arbitrary
ruling, which the CA erroneously affirmed, amounted to a jurisdictional error.
2. THE FUJI RULE THE EMPLOYEE SHOULD BE GIVEN THE CHANCE TO
PRESENT COUNTERVAILING MEDICAL CERTIFICATES. Subsequent to Deoferio,
another 2014 case, Fuji Television Network, Inc. v. Arlene S. Espiritu,3 has further
expounded on the due process requirement in termination due to disease, this time by
categorically specifying the right of the ailing employee to present countervailing
evidence in the form of medical certificates to prove that his dismissal due to disease
is not proper and therefore illegal.
Respondent Arlene was petitioners news correspondent/producer tasked
to report Philippine news to Fuji through its Manila Bureau field office. She was
successively given yearly fixed-term employment contracts until she was diagnosed
with lung cancer sometime in January 2009 when the Chief of News Agency of Fuji
informed her that the company will have a problem renewing her contract since it
would be difficult for her to perform her job. She, however, insisted that she was still fit
to work as certified by her attending physician. Subsequently, Arlene and Fuji signed a
non-renewal contract where it was stipulated that her contract would no longer be
renewed after its expiration on May 31, 2009 and that the parties release each other
from liabilities and responsibilities under the employment contract. Arlene received her
unpaid salaries and bonuses but she affixed her signature on the non-renewal contract
with the initials U.P. for under protest. The day after Arlene signed the non-renewal
contract, she filed a complaint for illegal dismissal and attorneys fees with the Labor
Arbiter, alleging that she was forced to sign the non-renewal contract when Fuji came
to know of her illness and that Fuji withheld her salaries and other benefits for March
and April 2009 when she refused to sign. Arlene claimed that she was left with no
other recourse but to sign the non-renewal contract, and it was only upon signing that
she was given her salaries and bonuses, in addition to separation pay equivalent to 4
years.
The Supreme Court declared respondent Arlene as having been
constructively dismissed. It was likewise held here that respondent was not afforded
due process, thus:
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. It did not ask her how her condition would affect her
work. Neither did it suggest for her to take a leave, even though she was
entitled to sick leaves. Worse, it did not present any certificate from a
competent public health authority. 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. Thus, the Court of Appeals correctly upheld the
finding of the National Labor Relations Commission that for failure of
Fuji to comply with due process, Arlene was illegally dismissed.
What are some salient points to consider under this ground?
If the disease or ailment can be cured within the period of six (6) months with
proper medical treatment, the employer should not terminate the employee but merely
ask him to take a leave of absence. The employer should reinstate him to his former
position immediately upon the restoration of his normal health.
In case the employee unreasonably refuses to submit to medical examination or
treatment upon being requested to do so, the employer may terminate his services on
the ground of insubordination or willful disobedience of lawful order.
A medical certificate issued by a companys own physician is not an
acceptable certificate for purposes of terminating an employment based on Article 284,
it having been issued not by a competent public health authority, the person referred
to in the law.
A competent public health authority refers to a government doctor whose
medical specialization pertains to the disease being suffered by the employee.
For instance, if the employee suffers from tuberculosis, the medical certificate should
be issued by a government-employed pulmonologist who is competent to make an
opinion thereon. If the employee has cardiac symptoms, the competent physician in
this case would be a cardiologist.
The medical certificate should be procured by the employer and not by the
employee.
3. DUE PROCESS
(a) Twin-Notice Requirement
(b) Hearing; Meaning of Opportunity to be Heard
What is the latest rule on due process? Due process means compliance with
both STATUTORY due process and CONTRACTUAL due process.
CONSTITUTIONAL due process is not applicable (Per Agabon
doctrine).
Statutory due process refers to the one prescribed in the Labor Code
(Article 277[b]); while contractual due process refers to the one prescribed in the
Company Rules and Regulations (Per Abbott Laboratories doctrine).
Contractual due process was enunciated in the 2013 en banc ruling in
Abbott Laboratories, Philippines v. Pearlie Ann F. Alcaraz.1 Thus, it is now
required that in addition to compliance with the statutory due process, the employer
should still comply with the due process procedure prescribed in its own company
rules. The employers failure to observe its own company-prescribed due process will
make it liable to pay an indemnity in the form of nominal damages, the amount of
which is equivalent to the P30,000.00 awarded under the Agabon doctrine.
Are the twin-notice requirement and hearing required in all cases of
termination? No. The two-notice requirement and hearing are required only in case of
just cause termination in the following order:
1. Service of first written notice;
2. Conduct of hearing; and
3. Service of second written notice.
What is the King of Kings Transport doctrine on just cause procedural due
process? Based on this doctrine which was enunciated in King of Kings Transport,
Inc. v. Mamac,2 the following requirements should be complied with in just cause
termination:
(1) First written notice.
The first written notice to be served on the employee should:
a) Contain the specific causes or grounds for termination against him;
b) Contain a directive that the employee is given the opportunity to submit his written
explanation within the reasonable period of FIVE (5) CALENDAR DAYS from receipt
of the notice:
1) to enable him to prepare adequately for his defense;
2) to study the accusation against him;
3) to consult a union official or lawyer;
4) to gather data and evidence; and
5) to decide on the defenses he will raise against the complaint.
c) Contain a detailed narration of the facts and circumstances that will serve as basis
for the charge against the employee. This is required in order to enable him to
intelligently prepare his explanation and defenses. A general description of the charge
will not suffice.
d) Specifically mention which company rules, if any, are violated and/or which among
the grounds under Article 282 is being charged against the employee.
(2) Hearing required, After serving the first notice, the employer should schedule and
conduct a hearing or conference wherein the employee will be given the opportunity
to:
1) explain and clarify his defenses to the charge/s against him;
2) present evidence in support of his defenses; and
3) rebut the evidence presented against him by the management.
During the hearing or conference, the employee is given the chance to
defend himself personally, with the assistance of a representative or counsel of his
choice. Moreover, this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
(3) Second written notice.
After determining that termination of employment is justified, the employer shall serve
the employees a written notice of termination indicating that:
1) all circumstances involving the charge/s against the employee have been
considered; and
2) grounds have been established to justify the severance of his employment.
What is the Perez doctrine on hearing? The Perez doctrine enunciates the new
guiding principle on the hearing requirement. It has interpreted the term ample
opportunity to be heard as follows:
(a) Ample opportunity to be heard means any meaningful opportunity (verbal or
written) given to the employee to answer the charges against him and submit evidence
in support of his defense, whether in a hearing, conference or some other fair, just and
reasonable way.
(b) A formal hearing or conference is no longer mandatory. It becomes mandatory
only under any of the following circumstances:
(1) When requested by the employee in writing; or
(2) When substantial evidentiary disputes exist; or
(3) When a company rule or practice requires it; or
(4) When similar circumstances justify it.
(c) the ample opportunity to be heard standard in the Labor Code prevails over
the hearing or conference requirement in its Implementing Rules and Regulations.
This is how the Supreme Court resolved the conflict in the following provisions of the
Labor Code and its implementing rules:
The Perez doctrine is now the prevailing rule as shown by a catena of
cases which cited it after its promulgation.
Are the twin-notice requirement and hearing applicable to authorized cause
termination? No. Due process in authorized cause termination is deemed complied
with upon the separate and simultaneous service of a written notice of the intended
termination to both:
(1) the employee to be terminated; and
(2) the appropriate DOLE Regional Office, at least one (1) month before the intended
date of the termination specifying the ground/s therefor and the undertaking to pay the
separation pay required under Article 283 of the Labor Code.
For obvious reason, hearing is not required.
Are the twin-notice requirement and hearing applicable to an abandonment
case which is a just cause to terminate employment? No. Although considered as
a just cause to terminate employment, the due process requirement is different. No
hearing is required (since the employee has already abandoned his job) but the
following notices should be complied with:
1) First notice asking the employee to explain why he should not be declared as
having abandoned his job; and
2) Second notice informing him of the employers decision to dismiss him on the
ground of abandonment.
What are some notable principles on the hearing requirement?
If employee does not answer, hearing should still proceed.
Outright termination violates due process.
Investigation still required even if incident was witnessed by many.
Meeting, dialogue, consultation or interview is not the hearing required by law. It
may not be a substitute for the actual holding of a hearing.
Prior consultation with union is not part of the due process requirement.
Cross-examination or confrontation of witnesses is not necessary in company
investigations.
Co-conspirators confession is not sufficient to merit dismissal.
What are the instances where hearing is not required?
Hearing is not required in the following cases:
1. Termination of project, seasonal, casual or fixed-term employment.
2. Termination of probationary employment on the ground of failure of the
probationary employee to qualify as a regular employee in accordance with
reasonable standards made known to him at the start of the employment.
3. Termination due to abandonment of work.
4. Termination due to authorized causes under Article 283 (installation of labor-saving
device, redundancy, retrenchment or closure of business or cessation of operations).
In such cases, there are no allegations which the employees should refute and defend
themselves from.
5. Termination due to disease under Article 284.
6. Termination by the employee (resignation) under Article 285.
7. Termination after 6 months of bona-fide suspension of operation under Article 286.
For purposes of satisfying due process, what is required is simply that the notices
provided under Article 283 be served to both the affected employees and the DOLE at
least one (1) month before the termination becomes effective.
8. Termination due to retirement under Article 287.
9. Termination due to closure or stoppage of work by government authorities
when non-compliance with the law or implementing rules and regulations poses grave
and imminent danger to the health and safety of workers in the workplace.
10. Termination of employee who has admitted his guilt for the offense charged.
What are the seven (7) standard situations in termination cases?
The rules on termination of employment in the Labor Code and pertinent jurisprudence
are applicable to seven (7) different situations, namely:
1. The dismissal was for a just cause under Article 282, for an authorized cause under
Article 283, or for health reasons under Article 284, and due process was observed
This termination is LEGAL.
2. The dismissal was without a just or authorized cause but due process was observed
This termination is ILLEGAL.
3. The dismissal was without a just or authorized cause and due process was not
observed This termination is ILLEGAL.
4. The dismissal was for a just or authorized cause but due process was not observed
This termination is LEGAL.
5. The dismissal was for a non-existent cause This termination is ILLEGAL.
6. The dismissal was not supported by any evidence of termination This termination
is NEITHER LEGAL NOR ILLEGAL as there is no dismissal to speak of.
Reinstatement is ordered not as a relief for illegal dismissal but on equitable ground.
7. The dismissal was brought about by the implementation of a law This termination
is LEGAL.
C. RELIEFS FOR ILLEGAL DISMISSAL
1. RELIEFS UNDER ARTICLE 279 OF THE LABOR CODE.
Under this article, an illegally dismissed employee is entitled to the following reliefs:
(1) Reinstatement without loss of seniority rights and other privileges;
(2) Full backwages, inclusive of regular allowances; and
(3) Other benefits or their monetary equivalent.
2. OTHER RELIEFS NOT FOUND IN ARTICLE 279 BUT AWARDED IN ILLEGAL
DISMISSAL CASES PER JURISPRUDENCE.
The following reliefs that are awarded in illegal dismissal cases are missing in Article
279:
(1) Award of separation pay in lieu of reinstatement.
(2) Award of penalty in the form of nominal damages in case of termination due to
just or authorized cause but without observance of procedural due process.
(3) Reliefs to illegally dismissed employee whose employment is for a fixed period.
The proper relief is only the payment of the employees salaries
corresponding to the unexpired portion of the employment contract.
(4) Award of damages and attorneys fees.
(5) Award of financial assistance in cases where the employees dismissal is
declared legal but because of long years of service, and other considerations, financial
assistance is awarded.
(6) Imposition of legal interest on separation pay, backwages and other monetary
awards.
1. REINSTATEMENT
a. REINSTATEMENT PENDING APPEAL
(Article 223, Labor Code)
Is reinstatement pending appeal solely applicable to reinstatement ordered by
the Labor Arbiter? Yes. Reinstatement is self-executory or immediately executory
only if it is ordered by the Labor Arbiter. This means that the employee ordered
reinstated need not file any motion for the issuance of writ of execution to enforce
reinstatement.
The employer, in fact, is required to manifest within 10 days from his
receipt of the order of reinstatement which of the two (2) options he is taking:
(1) To reinstate the employee to his former position or to a substantially equivalent
position; or
(2) To reinstate him in the payroll, which means the employee need not report for work
but only for the purpose of getting his wage.
There is no way the employer can disregard the reinstatement order.
Posting of a bond does not stay the execution of immediate reinstatement.
In contrast, if ordered by the NLRC, on appeal, or the Court of Appeals,
under a Rule 65 certiorari petition, or even by the Supreme Court, reinstatement is not
immediately executory. This means that the employee reinstated should still file a
motion for issuance of writ of execution to enforce the reinstatement.
Are there instances where writ of execution of Labor Arbiters reinstatement
order is still required? Yes, under the 2011 NLRC Rules of Procedure, there are two
(2) instances when a writ of execution should still be issued immediately by the Labor
Arbiter to implement his order of reinstatement, even pending appeal, viz.:
(1) When the employer disobeys the Rules-prescribed directive to submit a report of
compliance within ten (10) calendar days from receipt of the decision; or
(2) When the employer refuses to reinstate the dismissed employee.
The Labor Arbiter shall motu proprio issue a corresponding writ to satisfy
the reinstatement wages as they accrue until actual reinstatement or reversal of the
order of reinstatement.
The employee need not file a motion for the issuance of the writ of
execution since the Labor Arbiter shall thereafter motu proprio issue the writ. Employer
may be cited for contempt for his refusal to comply with the order of reinstatement.
 Employer is liable to pay the salaries for the period that the employee was
ordered reinstated pending appeal even if his dismissal is later finally found to be legal
on appeal.
What are some relevant principles on reinstatement pending appeal?
The Labor Arbiter cannot exercise option of employer by choosing payroll
reinstatement pending appeal.
If the former position is already filled up, the employee ordered reinstated under
Article 223 should be admitted back to work in a substantially equivalent position.
Reinstatement to a position lower in rank is not proper.
Reinstatement cannot be refused on the basis of the employment elsewhere of
the employee ordered reinstated.
The failure of the illegally dismissed employee who was ordered reinstated to
report back to work does not give the employer the right to remove him, especially
when there is a reasonable explanation for his failure.
No reinstatement pending appeal should be made when antipathy and
antagonism exist.
If reinstatement is not stated in the Labor Arbiters decision (neither in the
dispositive portion nor in the text thereof), reinstatement is not warranted.
b. SEPARATION PAY IN LIEU OF REINSTATEMENT
Is separation pay applicable only to reinstatement as an alternative remedy?
Yes. Separation pay, as a substitute remedy, is only proper for reinstatement but not
for backwages.
This remedy is not found in the Labor Code but is granted in case
reinstatement is no longer possible or feasible, such as when any of the following
circumstances exists:
(1) Where the continued relationship between the employer and the employee is no
longer viable due to the strained relations and antagonism between them (Doctrine of
Strained Relations).
(2) When reinstatement proves impossible, impracticable, not feasible or unwarranted
for varied reasons and thus
hardly in the best interest of the parties such as:
(a) Where the employee has already been replaced permanently as when his
position has already been taken over by a regular employee and there is no
substantially equivalent position to which he may be reinstated.
(b) Where the dismissed employees position is no longer available at the time of
reinstatement for reasons not attributable to the fault of the employer.
(c) When there has been long lapse or passage of time that the employee was
out of employers employ from the date of the dismissal to the final resolution of
the case or because of the realities of the situation.
(d) By reason of the injury suffered by the employee.
(e) The employee has already reached retirement age under a Retirement Plan.
(f) When the illegally dismissed employees are over-age or beyond the
compulsory retirement age and their reinstatement would unjustly prejudice their
employer.
(3) Where the employee decides not to be reinstated as when he does not pray for
reinstatement in his complaint or position paper but asked for separation pay instead.
(4) When reinstatement is rendered moot and academic due to supervening events,
such as:
(a) Death of the illegally dismissed employee.
(b) Declaration of insolvency of the employer by the court.
(c) Fire which gutted the employers establishment and resulted in its total
destruction.
(d) In case the establishment where the employee is to be reinstated has closed
or ceased operations.
(5) To prevent further delay in the execution of the decision to the prejudice of private
respondent.
(6) Other circumstances such as
(a) when reinstatement is inimical to the employers interest;
(b) reinstatement does not serve the best interests of the parties involved;
(c) the employer is prejudiced by the workers continued employment; or
(d) that it will not serve any prudent purpose as when supervening facts
transpired which made execution unjust or inequitable.
What is the amount of separation pay in lieu of reinstatement? Per
prevailing jurisprudence, the following are the components of separation pay in lieu of
reinstatement>
(1) The amount equivalent to at least one (1) month salary or to one (1) month salary
for every year of service, whichever is higher, a fraction of at least six (6) months being
considered as one (1) whole year.
(2) Allowances that the employee has been receiving on a regular basis.
What is the period covered? From start of employment up to the date of finality of
decision except when the employer has ceased its operation earlier, in which case, the
same should be computed up to the date of closure.
What is the salary rate to be used in computing it? The salary rate prevailing at
the end of the period of putative service should be the basis for computation which
refers to the period of imputed service for which the employee is entitled to
backwages.
What are some important principles on separation pay in lieu of
reinstatement?
1. Award of separation pay and backwages are not inconsistent with each other.
Hence, both may be awarded to an illegally dismissed employee. The payment of
separation pay is in addition to payment of backwages.
2. Reinstatement cannot be granted when what is prayed for by employee is
separation pay in lieu thereof.
BACKWAGES
What is the Bustamante doctrine?
In 1996, the Supreme Court changed the rule on the reckoning of backwages. It
announced a new doctrine in the case of Bustamante v. NLRC,1 which is now
known as the Bustamante doctrine. Under this rule, the term full backwages
should mean exactly that, i.e., without deducting from backwages the earnings derived
elsewhere by the concerned employee during the period of his illegal dismissal.
What are the components of backwages?
The components of backwages are as follows:
1. Salaries or wages computed on the basis of the wage rate level at the time of the
illegal dismissal and not in accordance with the latest, current wage level of the
employees position.
2. Allowances and other benefits regularly granted to and received by the employee
should be made part of backwages.
What are some principles on backwages?
Salary increases during period of unemployment are not included as
component in the computation of backwages.
Dismissed employees ability to earn is irrelevant in the award of backwages.
In case reinstatement is ordered, full backwages should be reckoned from the
time the compensation was withheld (which, as a rule, is from the time of illegal
dismissal) up to the time of reinstatement, whether actual or in the payroll.
If separation pay is ordered in lieu of reinstatement, full backwages should
be computed from the time of illegal dismissal until the finality of the decision. The
justification is that along with the finality of the Supreme Courts decision, the issue on
the illegality of the dismissal is finally laid to rest.
If the illegally dismissed employee has reached the optional retirement age of
60 years, his backwages should only cover the time when he was illegally dismissed
up to the time when he reached 60 years. Under Article 287, 60 years is the optional
retirement age.
If the employee has reached 65 years of age or beyond, his full backwages
should be computed only up to said age.
The contention of the employer that backwages should be reckoned only
up to age 60cannot be sustained.
If employer has already ceased operations, full backwages should be computed
only up to the date of the closure. To allow the computation of the backwages to be
based on a period beyond that would be an injustice to the employer.
Any amount received during payroll reinstatement is deductible from
backwages.
LIMITED BACKWAGES
When is the award of backwages limited?
(1) When the dismissal is deemed too harsh a penalty;
(2) When the employer acted in good faith; or
(3) Where there is no evidence that the employer dismissed the employee.
Thus, the backwages will not be granted in full but limited to 1 year, 2 years or 5
years.
PREVENTIVE SUSPENSION
When is preventive suspension proper to be imposed?
Preventive suspension may be legally imposed against an errant employee only while
he is undergoing an investigation for certain serious offenses. Consequently, its
purpose is to prevent him from causing harm or injury to the company as well as to his
fellow employees. It is justified only in cases where the employees continued
presence in the company premises during the investigation poses a serious and
imminent threat to the life or property of the employer or of the employees co-
workers. Without this threat, preventive suspension is not proper.
What are some relevant principles in preventive suspension?
Preventive suspension is not a penalty. Preventive suspension, by itself, does
not signify that the company has already adjudged the employee guilty of the charges
for which she was asked to answer and explain.
Preventive suspension is neither equivalent nor tantamount to dismissal.
If the basis of the preventive suspension is the employees absences and
tardiness, the imposition of preventive suspension on him is not justified as his
presence in the company premises does not pose any such serious or imminent threat
to the life or property of the employer or of the employees co-workers simply by
incurring repeated absences and tardiness.
Preventive suspension does not mean that due process may be disregarded.
Preventive suspension should only be for a maximum period of thirty (30) days.
After the lapse of the 30-day period, the employer is required to reinstate the worker to
his former position or to a substantially equivalent position.
During the 30-day preventive suspension, the worker is not entitled to his wages
and other benefits. However, if the employer decides, for a justifiable reason, to extend
the period of preventive suspension beyond said 30-day period, he is obligated to pay
the wages and other benefits due the worker during said period of extension. In such a
case, the worker is not bound to reimburse the amount paid to him during the
extension if the employer decides to dismiss him after the completion of the
investigation.
Extension of period must be justified. During the 30-day period of preventive
suspension, the employer is expected to conduct and finish the investigation of the
employees administrative case. The period of thirty (30) days may only be extended if
the employer failed to complete the hearing or investigation within said period due to
justifiable grounds. No extension thereof can be made based on whimsical, capricious
or unreasonable grounds.
Preventive suspension lasting longer than 30 days, without the benefit of valid
extension, amounts to constructive dismissal.
Indefinite preventive suspension amounts to constructive dismissal.
CONSTRUCTIVE DISMISSAL
When is there constructive dismissal? Constructive dismissal contemplates any
of the following situations:
1) An involuntary resignation resorted to when continued employment is rendered
impossible, unreasonable or unlikely;
2) A demotion in rank and/or a diminution in pay; or
3) A clear discrimination, insensibility or disdain by an employer which becomes
unbearable to the employee that it could foreclose any choice by him except to forego
his continued employment.
What is the test of constructive dismissal? The test of constructive dismissal is
whether a reasonable person in the employees position would have felt compelled to
give up his position under the circumstances. It is an act amounting to dismissal but
made to appear as if it were not. In fact, the employee who is constructively dismissed
may be allowed to keep on coming to work. Constructive dismissal is, therefore, a
dismissal in disguise. The law recognizes and resolves this situation in favor of the
employees in order to protect their rights and interests from the coercive acts of the
employer.
What are examples of constructive dismissal or forced resignation?
Denying to the workers entry to their work area and placing them on shifts not
by weeks but almost by month by reducing their workweek to three days.
Barring the employees from entering the premises whenever they would report
for work in the morning without any justifiable reason, and they were made to wait for a
certain employee who would arrive in the office at around noon, after
they had waited for a long time and had left.
Sending to an employee a notice of indefinite suspension which is tantamount to
dismissal.
Imposing indefinite preventive suspension without actually conducting any
investigation.
Changing the employees status from regular to casual constitutes constructive
dismissal.
Preventing the employee from reporting for work by ordering the guards not to let
her in. This is clear notice of dismissal.
TOPIC NO. 5
MANAGEMENT PREROGATIVES
What are management prerogatives?
Management prerogatives are granted to the employer to regulate every
aspect of their business, generally without restraint in accordance with their own
discretion and judgment. This privilege is inherent in the right of employers to
control and manage their enterprise effectively. Such aspects of employment
include hiring, work assignments, working methods, time, place and manner of work,
tools to be used, processes to be followed, supervision of workers, working
regulations, transfer of employees, lay-off of workers and the discipline, dismissal and
recall of workers.
What are the limitations to the exercise of these prerogatives?
1. Limitations imposed by:
a) law;
b) CBA;
c) employment contract;
d) employer policy;
e) employer practice; and
f) general principles of fair play and justice.
2. It is subject to police power.
3. Its exercise should be without abuse of discretion.
4. It should be done in good faith and with due regard to the rights of labor.
A. DISCIPLINE
What are the components of the right to discipline?
The right or prerogative to discipline covers the following:
1) Right to discipline;
2) Right to dismiss;
3) Right to determine who to punish;
4) Right to promulgate rules and regulations;
5) Right to impose penalty; proportionality rule;
6) Right to choose which penalty to impose; and
7) Right to impose heavier penalty than what the company rules prescribe.
B. TRANSFER OF EMPLOYEES
What are the various kinds of transfer?
a. Two (2) kinds of transfer. - A transfer means a movement:
1. From one position to another of equivalent rank, level or salary, without a break in
the service; or
2. From one office to another within the same business establishment.
What are salient points to consider in transfer?
The exercise of the prerogative to transfer or assign employees from one office
or area of operation to another is valid provided there is no demotion in rank or
diminution of salary, benefits and other privileges. The transfer should not be
motivated by discrimination or made in bad faith or effected as a form of punishment or
demotion without sufficient cause.
Commitment made by the employee like a salesman in the employment
contract to be re-assigned anywhere in the Philippines is binding on him.
Even if the employee is performing well in his present assignment,
management may reassign him to a new post.
The transfer of an employee may constitute constructive dismissal when:
1) When the transfer is unreasonable, inconvenient or prejudicial to the employee;
2) When the transfer involves a demotion in rank or diminution of salaries, benefits and
other privileges; and
3) When the employer performs a clear act of discrimination, insensibility, or disdain
towards the employee, which forecloses any choice by the latter except to forego his
continued employment.
The refusal of an employee to be transferred may be held justified if there is a
showing that the transfer was directed by the employer under questionable
circumstances. For instance, the transfer of employees during the height of their
unions concerted activities in the company where they were active participants
is illegal.
An employee who refuses to be transferred, when such transfer is valid, is
guilty of insubordination or willful disobedience of a lawful order of an employer
under Article 282 of the Labor Code.
Refusal to transfer due to parental obligations, additional expenses,
inconvenience, hardship and anguish is
not valid. An employee could not validly refuse lawful orders to transfer based
on these grounds.
Refusal to transfer to overseas assignment is valid.
Refusal to transfer consequent to promotion is valid.
Transfer to avoid conflict of interest is valid.
A transfer from one position to another occasioned by the abolition of the position
is valid.
C. PRODUCTIVITY STANDARD
How may productivity standards be imposed?
The employer has the prerogative to prescribe the standards of productivity which the
employees should comply. The productivity standards may be used by the employer
as:
1. an incentive scheme; and/or
2. a disciplinary scheme.
As an incentive scheme, employees who surpass the productivity standards or quota
are usually given additional benefits.
As a disciplinary scheme, employees may be sanctioned or dismissed
for failure to meet the productivity standards or quota.
Illustrative cases:
In the 2014 case of International School Manila v. International School
Alliance of Educators (ISAE),1 the teacher was held guilty of gross inefficiency
meriting her dismissal on the basis of the Courts finding that she failed to measure up
to the standards set by the school in teaching Filipino classes.
In the 2012 case of Reyes-Rayel v. Philippine Luen Thai Holdings
Corp.,2 the validity of the dismissal of petitioner who was the Corporate Human
Resources (CHR) Director for Manufacturing of respondent company, on the ground of
inefficiency and ineptitude, was affirmed on the basis of the Courts finding that
petitioner, on two occasions, gave wrong information regarding issues on leave and
holiday pay which generated confusion among employees in the computation of
salaries and wages.
In another 2012 case, Realda v. New Age Graphics, Inc.,3 petitioner, a
machine operator of respondent company, was dismissed on the ground, among
others, of inefficiency. In affirming the validity of his dismissal, the Supreme Court
reasoned: xxx (T)he petitioners failure to observe Graphics, Inc.s work standards
constitutes inefficiency that is a valid cause for dismissal. Failure to observe prescribed
standards of work, or to fulfill reasonable work assignments due to inefficiency may
constitute just cause for dismissal. Such inefficiency is understood to mean failure to
attain work goals or work quotas, either by failing to complete the same within the
allotted reasonable period, or by producing unsatisfactory results.
D. GRANT OF BONUS
See discussion on this under Topic III (Labor Standards) above.
E. CHANGE OF WORKING HOURS
What is the extent of the exercise of this prerogative? Employers have the
freedom and prerogative, according to their discretion and best judgment, to regulate
and control the time when workers should report for work and perform their respective
functions. Manila Jockey Club Employees Labor Union PTGWO, v. Manila
Jockey Club, Inc.4 - The validity of the exercise of the same prerogative to change
the working hours was affirmed in this case. It was found that while Section 1, Article
IV of the CBA provides for a 7-hour work schedule from 9:00 a.m. to 12:00 noon and
from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays, Section 2, Article XI thereof
expressly reserves to respondent the prerogative to change existing methods or
facilities and to change the schedules of work. Consequently, the hours of work of
regular monthly-paid employees were changed from the original 9:00 a.m. to 5:00 p.m.
schedule to 1:00 p.m. to 8:00 p.m. when horse races are held, that is, every Tuesday
and Thursday. The 9:00 a.m. to 5:00 p.m. schedule for non-race days was, however,
retained. Respondent, as employer, cited the change in the program of horse races as
reason for the adjustment of the work schedule. It rationalized that when the CBA was
signed, the horse races started at 10:00 a.m. When the races were moved to 2:00
p.m., there was no other choice for management but to change the work schedule as
there was no work to be done in the morning. Evidently, the adjustment in the work
schedule is justified.
F. RULES ON MARRIAGE BETWEEN EMPLOYEES OF
COMPETITOR-EMPLOYERS
What is the best illustrative case of this prerogative? Duncan Association of
Detailman-PTGWO v. Glaxo Welcome Philippines, Inc.5 - The contract of
employment in this case expressly prohibited an employee from having a relationship
with an employee of a competitor company. It provides: 10. You agree to disclose to
management any existing or future relationship you may have, either by consanguinity
or affinity with co-employees or employees of competing drug companies. Should it
pose a possible conflict of interest in management discretion, you agree to resign
voluntarily from the Company as a matter of Company policy.
The Supreme Court ruled that this stipulation is a valid exercise of
management prerogative. The prohibition against personal or marital relationships with
employees of competitor-companies upon its employees is reasonable under the
circumstances because relationships of that nature might compromise the interests of
the company. In laying down the assailed company policy, the employer only aims to
protect its interests against the possibility that a competitor company will gain access
to its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information.
G. POST-EMPLOYMENT BAN
Is a non-compete clause valid? Yes. The employer and the employee are free to
stipulate in an employment contract prohibiting the employee within a certain period
from and after the termination of his employment, from:
(1) starting a similar business, profession or trade; or
(2) working in an entity that is engaged in a similar business that might compete with
the employer.
The non-compete clause is agreed upon to prevent the possibility that
upon an employees termination or resignation, he might start a business or work for a
competitor with the full competitive advantage of knowing and exploiting confidential
and sensitive information, trade secrets, marketing plans, customer/client lists,
business practices, upcoming products, etc., which he acquired and gained from his
employment with the former employer. Contracts which prohibit an employee from
engaging in business in competition with the employer are not necessarily void for
being in restraint of trade.
What are the requisites in order for a non-compete clause to be valid? A non-
compete clause is not necessarily void for being in restraint of trade as long as there
are reasonable limitations as to time, trade, and place.
Example:
The non-compete clause (called Non-Involvement Provision) in the 2007
case of Daisy B. Tiu v. Platinum Plans Philippines, Inc., provides as follows: 8.
NON-INVOLVEMENT PROVISION The EMPLOYEE further undertakes that during
his/her engagement with EMPLOYER and in case of separation from the Company,
whether voluntary or for cause, he/she shall not, for the next TWO (2) years thereafter,
engage in or be involved with any corporation, association or entity, whether directly or
indirectly, engaged in the same business or belonging to the same pre-need industry
as the EMPLOYER. Any breach of the foregoing provision shall render the
EMPLOYEE liable to the EMPLOYER in the amount of One Hundred Thousand Pesos
(P100,000.00) for and as liquidated damages.
Starting on January 1, 1993, petitioner worked for respondent as Senior
Assistant Vice-President and Territorial Operations Head in charge of its Hongkong
and Asean operations under a 5-year contract of employment containing the
aforequoted clause. On September 16, 1995, petitioner stopped reporting for work. In
November 1995, she became the Vice- President for Sales of Professional Pension
Plans, Inc., a corporation engaged also in the pre-need industry. Consequently,
respondent sued petitioner for damages before the RTC of Pasig City. Respondent
alleged, among others, that petitioners employment with Professional Pension Plans,
Inc. violated the above-quoted non-involvement clause in her contract of employment.
Respondent thus prayed for P100,000 as compensatory damages; P200,000 as moral
damages; P100,000 as exemplary damages; and 25% of the total amount due plus
P1,000 per counsels court appearance, as attorneys fees.
Petitioner countered that the non-involvement clause was unenforceable
for being against public order or public policy: First, the restraint imposed was much
greater than what was necessary to afford respondent a fair and reasonable
protection. Petitioner contended that the transfer to a rival company was an accepted
practice in the pre-need industry. Since the products sold by the companies were more
or less the same, there was nothing peculiar or unique to protect. Second, respondent
did not invest in petitioners training or improvement. At the time petitioner was
recruited, she already possessed the knowledge and expertise required in the pre-
need industry and respondent benefited tremendously from it. Third, a strict application
of the noninvolvement clause would amount to a deprivation of petitioners right to
engage in the only work she knew.
In upholding the validity of the non-involvement clause, the trial
court ruled that a contract in restraint of trade is valid provided that there is a
limitation upon either time or place. In the case of the pre-need industry, the trial
court found the two-year restriction to be valid and reasonable.
On appeal, the Court of Appeals affirmed the trial courts ruling. It
reasoned that petitioner entered into the contract on her own will and volition. Thus,
she bound herself to fulfill not only what was expressly stipulated in the contract, but
also all its consequences that were not against good faith, usage, and law. The
appellate court also ruled that the stipulation prohibiting non-employment for two years
was valid and enforceable considering the nature of respondents business.
In affirming the validity of the Non-Involvement Clause, the Supreme
Court ratiocinated as follows:
xxx 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 petitioners employment with respondent ends. It is also limited as
to trade, since it only prohibits petitioner from engaging in any pre-need
business akin to respondents. It is limited as to place since the pprohibition covers
only Hongkong and Asean operations.
More significantly, since petitioner was the Senior Assistant Vice-
President and Territorial Operations Head in charge of respondents Hongkong and
Asean operations, she had been privy to confidential and highly sensitive marketing
strategies of respondents business. To allow her to engage in a rival business soon
after she leaves would make respondents trade secrets vulnerable especially in a
highly competitive marketing environment. In sum, we find the non involvement
clause not contrary to public welfare and not greater than is necessary to afford
a fair and reasonable protection to respondent.
Thus, as held by the trial court and the Court of Appeals, petitioner is
bound to pay respondent P100,000 as liquidated damages. While we have equitably
reduced liquidated damages in certain cases, we cannot do so in this case, since it
appears that even from the start, petitioner had not shown the least intention to fulfill
the non-involvement clause in good faith.
TOPIC NO. 6
SOCIAL WELFARE LEGISLATION
A. SSS LAW
(R.A. No. 8282)
Who are covered employers?
a. An employer or any person who uses the services of another person in business,
trade, industry or any undertaking.
b. A social, civic, professional, charitable and other non-profit organizations which hire
the services of employees are considered employers.
c. A foreign government, international organization or its wholly-owned instrumentality
such as an embassy in the Philippines, may enter into an administrative agreement
with the SSS for the coverage of its Filipino employees.
Who are compulsorily covered employees?
a. A private employee, whether permanent, temporary or provisional, who is not over
60 years old.
b. A domestic worker or kasambahay who has rendered at least one (1) month of
service.
c. A Filipino seafarer upon the signing of the standard contract of employment between
the seafarer and the manning agency which, together with the foreign ship owner, act
as employers.
d. An employee of a foreign government, international organization or their wholly-
owned instrumentality based in the Philippines, which entered into an administrative
agreement with the SSS for the coverage of its Filipino workers.
e. The parent, spouse or child below 21 years old of the owner of a single
proprietorship business.
Are self-employed persons covered? Yes. A self-employed person, regardless of
trade, business or occupation, with an income of at least P1,000 a month and not over
60 years old, should register with the SSS. Included, but not limited to, are the
following self-employed persons:
a. Self-employed professionals;
b. Business partners, single proprietors and board directors;
c. Actors, actresses, directors, scriptwriters and news reporters who are not under an
employer-employee relationship;
d. Professional athletes, coaches, trainers and jockeys;
e. Farmers and fisherfolks; and
f. Workers in the informal sector such as cigarette vendors, watch-your-car boys,
hospitality girls, among others.
Unless otherwise specified, all provisions of the law, R.A. No. 8282,
applicable to covered employees shall also be applicable to the covered self-employed
persons.
A self-employed person shall be both employee and employer at the same time.
Who may be covered voluntarily?
1. Separated Members - A member who is separated from employment or ceased to
be self-employed/OFW/non-working spouse and would like to continue contributing.
2. Overseas Filipino Workers (OFWs) - A Filipino recruited in the Philippines by a
foreign-based employer for employment abroad or one who legitimately entered a
foreign country (i.e., tourist, student) and is eventually employed.
3. Non-working spouses of SSS members - A person legally married to a currently
employed and actively paying SSS member who devotes full time in the management
of household and family affairs may be covered on a voluntary basis, provided there is
the approval of the working spouse. The person should never have been a member of
the SSS. The contributions will be based on 50 percent (50%) of the working spouses
last posted monthly salary credit but in no case shall it be lower than P1,000.
What is the effective date of coverage?
For compulsory coverage:
1. For employer - Compulsory coverage of the employer shall take effect on the first
day of his operation or on the first day he hires employee/s. The employer is given
only 30 days from the date of employment of employee to report the person for
coverage to the SSS.
2. For employee - Compulsory coverage of the employee shall take effect on the first
day of his employment.
3. For self-employed - The compulsory coverage of the self-employed person shall
take effect upon his registration with the SSS or upon payment of the first valid
contribution, in case of initial coverage.
For voluntary coverage:
1. For an OFW upon first payment of contribution, in case of initial coverage.
2. For a non-working spouse upon first payment of contribution.
3. For a separated member on the month he/she resumed payment of
contribution.
Who are excluded employers? Government and any of its political subdivisions,
branches or instrumentalities, including corporations owned or controlled by the
Government with original charters.
Who are excluded employees?
Workers whose employment or service falls under any of the following circumstances
are not covered:
(1) Employment purely casual and not for the purpose of occupation or business of
the employer;
(2) Service performed on or in connection with an alien vessel by an employee if he is
employed when such vessel is outside the Philippines;
(3) Service performed in the employ of the Philippine Government or instrumentality or
agency thereof;
(4) Service performed in the employ of a foreign government or international
organization, or their wholly-owned instrumentality: Provided, however, That this
exemption notwithstanding, any foreign government, international organization or their
wholly-owned instrumentality employing workers in the Philippines or employing
Filipinos outside of the Philippines, may enter into an agreement with the Philippine
Government for the inclusion of such employees in the SSS except those already
covered by their respective civil service retirement systems: Provided, further, That the
terms of such agreement shall conform with the provisions of R.A. No. 8282 on
coverage and amount of payment of contributions and benefits: Provided, finally, That
the provisions of this Act shall be supplementary to any such agreement; and
(5) Such other services performed by temporary and other employees which may be
excluded by regulation of the Social Security Commission. Employees of bona-fide
independent contractors shall not be deemed employees of the employer engaging the
service of said contractors.
What are the classifications of benefits? The SSS benefits may be classified into
two (2) as follows:
(a) Social security benefits:
1) Sickness
2) Maternity
3) Retirement
4) Disability
5) Death and funeral.
(b) Employees compensation benefits.
Who are primary beneficiaries?
The following are primary beneficiaries:
1. The dependent spouse until he or she remarries;
2. The dependent legitimate, legitimated or legally adopted, and illegitimate
children who are not yet 21 years of age.
The dependent illegitimate children shall be entitled to 50% of the share
of the legitimate, legitimated or legally adopted children. However, in the absence of
the dependent legitimate, legitimated children of the member, his/her dependent
illegitimate children shall be entitled to 100% of the benefits
Who are secondary beneficiaries?
The following are secondary beneficiaries:
1. The dependent parents, in the absence of the primary beneficiaries.
2. Any other person designated by the member as his/her secondary beneficiary, in
the absence of all the foregoing primary beneficiaries and dependent parents.
B. GSIS LAW
(R.A. No. 8291)
Who are compulsorily required to become members of the GSIS?
1. All government personnel, whether elective or appointive, irrespective of status of
appointment, provided they are receiving fixed monthly compensation and have not
reached the mandatory retirement age of 65 years, are compulsorily covered as
members of the GSIS and shall be required to pay contributions.
2. However, employees who have reached the retirement age of 65 or more shall also
be covered, subject to the following rules:
An employee who is already beyond the mandatory retirement age of 65
shall be compulsorily covered and be required to pay both the life and retirement
premiums under the following situations:
a. An elective official who at the time of election to public office is below 65 years of
age and will be 65 years or more at the end of his term of office, including the period/s
of his re-election to public office thereafter without interruption.
b. Appointive officials who, before reaching the mandatory age of 65, are appointed
to government position by the President of the Republic of the Philippines and shall
remain in government service at age beyond 65.
c. Contractual employees including casuals and other employees with an employee-
government agency relationship are also compulsorily covered, provided they are
receiving fixed monthly compensation and rendering the required number of working
hours for the month.
What are the classes of membership in the GSIS? Membership in the GSIS is
classified either by type or status of membership.
As to type of members, there are regular and special members:
(a) Regular Members are those employed by the government of the Republic of the
Philippines, national or local, legislative bodies, government-owned and controlled
corporations (GOCC) with original charters, government financial institutions (GFIs),
except uniformed personnel of the Armed Forces of the Philippines, the Philippine
National Police, Bureau of Jail Management and Penology (BJMP) and Bureau of Fire
Protection (BFP), who are required by law to remit regular monthly contributions to the
GSIS.
(b) Special Members are constitutional commissioners, members of the judiciary,
including those with equivalent ranks, who are required by law to remit regular monthly
contributions for life insurance policies to the GSIS in order to answer for their life
insurance benefits defined under RA 8291.
As to status of membership, there are active and inactive members.
(a) Active member refers to a member of the GSIS, whether regular or special, who
is still in the government service and together with the government agency to which he
belongs, is required to pay the monthly contribution.
(b) Inactive member a member who is separated from the service either by
resignation, retirement, disability, dismissal from the service, retrenchment or, who is
deemed retired from the service under this Act.
When does membership become effective? The effective date of membership
shall be the date of the members assumption to duty on his original appointment or
election to public office.
What is the effect of separation from the service?
A member separated from the service shall continue to be a member, and shall be
entitled to whatever benefits he has qualified to in the event of any contingency
compensable under the GSIS Law.
Who are excluded from the compulsory coverage of the GSIS Law? The
following employees are excluded from compulsory coverage:
(a) Uniformed personnel of the Armed Forces of the Philippines (AFP), Philippine
National Police (PNP), Bureau of Fire Protection (BFP) and Bureau of Jail
Management and Penology (BJMP);
(b) Barangay and Sanggunian Officials who are not receiving fixed monthly
compensation;
(c) Contractual Employees who are not receiving fixed monthly compensation; and
(d) Employees who do not have monthly regular hours of work and are not receiving
fixed monthly compensation.
What are the kinds of benefits under the GSIS Law? The following are the
benefits under the GSIS Law:
(a) Compulsory Life Insurance Benefits under the Life Endowment Policy (LEP)
(b) Compulsory Life Insurance Benefits under the Enhanced Life Policy (ELP)
(c) Retirement Benefits
(d) Separation Benefit
(e) Unemployment Benefit
(f) Disability Benefits
(g) Survivorship Benefits
(h) Funeral Benefits
Who are beneficiaries under the GSIS Law? There are two (2) kinds of
beneficiaries under the GSIS Law as follows:
1. Primary beneficiaries The legal dependent spouse until he/she remarries and
the dependent children.
2. Secondary beneficiaries The dependent parents and, subject to the restrictions
on dependent children, the legitimate descendants.
Who are dependents under the GSIS Law? Dependents shall be the following:
(a) the legitimate spouse dependent for support upon the member or pensioner;
(b) the legitimate, legitimated, legally adopted child, including the illegitimate child, who
is unmarried, not gainfully employed, not over the age of majority, or is over the age of
majority but incapacitated and incapable of selfsupport due to a mental or physical
defect acquired prior to age of majority; and
(c) the parents dependent upon the member for support. Gainful Occupation Any
productive activity that provided the member with income at least equal to the
minimum compensation of government employees.
C. LIMITED PORTABILITY LAW
(R.A. No. 7699)
What is limited portability scheme? R.A. No. 7699 was enacted to enable those
from the private sector who transfer to the government service or from the government
sector to the private sector to combine their years of service and contributions which
have been credited with the SSS or GSIS, as the case may be, to satisfy the required
number of years of service for entitlement to the benefits under the applicable laws.
What is totalization? The term totalization refers to the process of adding up the
periods of creditable services or contributions under each of the Systems, SSS or
GSIS, for the purpose of eligibility and computation of benefits.
What is portability? On the other hand, the term portability refers to the transfer of
funds for the account and benefit of a worker who transfers from one system to the
other.
How are benefits computed? All services rendered or contributions paid by a
member personally and those that were paid by the employers to either System shall
be considered in the computation of benefits which may be claimed from either or both
Systems. However, the amount of benefits to be paid by one System shall be in
proportion to the services rendered or periods of contributions made to that System.
Benefits refer to the following:
1. Old-age benefit;
2. Disability benefit;
3. Survivorship benefit;
4. Sickness benefit;
5. Medicare benefit, provided that the member shall claim said benefit from the
System where he was last a member; and
6. Such other benefits common to both Systems that may be availed of through
totalization.
When does totalization apply?
a. if a worker is not qualified for any benefits from both Systems; or
b. if a worker in the public sector is not qualified for any benefits from the GSIS; or
c. if a worker in the private sector is not qualified for any benefits from the SSS.
For purposes of computation of benefits, totalization applies in all cases
so that the contributions made by the worker-member in both Systems shall provide
maximum benefits which otherwise will not be available. In no case shall the
contribution be lost or forfeited.
What is the effect if worker is not qualified after totalization? If after totalization,
the worker-member still does not qualify for any benefit as listed in the law, the
member will then get whatever benefits correspond to his/her contributions in either or
both Systems.
What is the effect if worker qualifies for benefits in both Systems? If a worker
qualifies for benefits in both Systems, totalization shall not apply.
D. EMPLOYEES COMPENSATION
COVERAGE AND WHEN COMPENSABLE
What is the State Insurance Fund [SIF]? The State Insurance Fund (SIF) is built
up by the contributions of employers based on the salaries of their employees as
provided under the Labor Code.
There are two (2) separate and distinct State Insurance Funds: one
established under the SSS for private sector employees; and the other, under the
GSIS for public sector employees. The management and investment of the Funds are
done separately and distinctly by the SSS and the GSIS. It is used exclusively for
payment of the employees compensation benefits and no amount thereof is
authorized to be used for any other purpose.
What are the agencies involved in the implementation of the Employees
Compensation Program (ECP)? There are three (3) agencies involved in the
implementation of the Employees Compensation Program (ECP). These are: (1) The
Employees Compensation Commission (ECC) which is mandated to initiate,
rationalize and coordinate policies of the ECP and to review appealed cases from (2)
the Government Service Insurance System (GSIS) and (3) the Social Security
System (SSS), the administering agencies of the ECP.
Who are covered by the ECP?
a. General coverage. The following shall be covered by the Employees
Compensation Program (ECP):
1. All employers;
2. Every employee not over sixty (60) years of age;
3. An employee over 60 years of age who had been paying contributions to the
System (GSIS/SSS) prior to age sixty (60) and has not been compulsorily retired; and
4. Any employee who is coverable by both the GSIS and SSS and should be
compulsorily covered by both Systems.
b. Sectors of employees covered by the ECP. - The following sectors are covered
under the ECP:
1. All public sector employees including those of government-owned and/or controlled
corporations and local government units covered by the GSIS;
2. All private sector employees covered by the SSS; and
3. Overseas Filipino workers (OFWs), namely:
a. Filipino seafarers compulsorily covered under the SSS. a. Medical Benefits
b. Land-based contract workers provided that their employer, natural or juridical, is b. Disability Benefits
engaged in any trade, industry or business undertaking in the Philippines; otherwise, 1. Temporary total disability
they shall not be covered by the ECP. 2. Permanent total disability
3. Permanent partial disability
When is the start of coverage of employees under the ECP? c. Death Benefit
The coverage under the ECP of employees in the private and public sectors starts on d. Funeral Benefit
the first day of their employment.

What are the benefits under the ECP? The following are the benefits provided
under the Labor Code: