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Aside from being one of two sources of the States authority to enact labor laws, the Constitution is of fundamental significance in this field of law. The 1987 Constitution embodies new provisions directly affecting the tights and welfare of labor. The present Constitution introduces new provisions which are significant to labor law. These may be summarized as follows: a) It defines new State policies on labor, b) It guarantees individual and collective rights of workers; and c) It contains nationalistic provisions protecting Filipino labor.

2. NEW CONSTITUTIONAL POLICIES CONCERNING LABOR. The Constitution adopts the following new policies regarding labor:

Art XII, Sec. 18. The state affirms labor as a primary social economic force. It shall protect the right of workers and promote their welfare.

This is the first time that a Philippine Constitution gives explicit recognition to the role of labor in social and economic development. It also states a policy of protection for the rights and welfare of notices.

Art. XII, Sec. 12. The State shall promote the preferential use of Filipino labor domestic materials and locally produced goods, and adopt measures that help make them more competitive.

This is a strongly nationalistic policy favoring Filipino labor, raw materials and finished products which the State seeks to promote and strengthen.

Art. XIII, Sec. 3.... The State shall promote the principle of said responsibility between workers and employers, and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance the, with to foster industrial peace.

For the first time the Constitution expresses a -preference in the method of resolving industrial disputes. This is through the use of voluntary modes such as negotiation, collective bargaining, voluntary arbitration, mediation and conciliation. The reason is that these modes are less frictional and entail less social costs to the parties, to government, and to society as a whole.

Art. XIII, Sec. 14, The State shall project working women by providing safe and healthful working conditions, taking into account their maternal functions, and provide such facilities and opportunities that will enhance their welfare and enable them to realize their full potential in the service of the nation. The protection of working women, which the previous Constitution mentioned only incidentally, is now given a separate title in view of the important role of women in Filipino society.

3. RESTATEMENT OF OTHER CONSTITUTIONAL POLICIES. The Constitution also restates and rephrases policies established in the previous Constitution, and readapts them for further implementation.

These policies are: The State shall afford fish protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for...

(Art. XIII, Sec.3) This is a more positive and comprehensive restatement of the Protection to Labor clause. . . . The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production, and the right of enterprises to reasonable returns on investments, and to expansion and growth. (Art. XIII, Sec3)

This policy precludes the State from adopting a laissez faire policy on labor relations due to the public interest involved therein, it also provides guidelines by which the States regulatory power shall be exercised.

4. CONSTITUTIONAL RIGHTS OF LABOR. The Constitution is the bedrock of the most fundamental rights of labor. These rights guaranteed by the Constitution may be classified into two, namely: a) individual rights of workers; and b) collective rights of labor in general.

The individual rights of workers are found in Art. III, Bill of Rights, which is described as the charter of individual liberties. While all persons enjoy these rights, their particular application to workers carries a certain significance which requires special consideration.

The collective rights of labor in general are enshrined in the Protection to Labor clause, Art. XIII, Sec. 3. These two sets of rights are not identical. In fact they may possibly conflict with each other, as will be noted later.


5. RIGHT TO DUE PROCESS Sect. I - No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws. (Art. 111, Const.)

This is the due process/equal protection clause. An early application of the due process clause interpreted the right to property to include a workers right to his labor and to the fmits of his industry. Hence, a worker cannot be deprived of his job or his wages without die process of law (Philippine Moving Pictures Workers Association vs. Premier Productions, 92 Phil 843). In a more recent case the Supreme Court declared that It is a principle well

recognized in this jurisdiction, that ones employment, profession, trade or calling is a property right, and the wrongful interference therewith is an actionable wrong. The right is considered to be property within the protection of the Constitutional guarantee of due. process of law (Calianta vs. Carnation Phil., 145 SCRA 268 citing Femandt, Constitution of the Phil. 2nd Ed. pp. 512-513).

6. FREEDOM OF EXPRESSION. Sec. 4 - - No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. (Art. III, Const.)

The freedom of expression clause quoted above is derived from the Philippine Bill of 1902 which replicated verbatim the corresponding provision in the U. S. Constitution (1935), reaffirmed in the 1972 Constitution, and now appears in the 1987 Constitution which adds expression to the freedoms protected. American jurisprudence interpreting this provision has applied it to cover the labor practice of picketing. Hence, it has been declared that by peaceful picketing, working men communicate their grievances. As a means of communicating the fact of a labor dispute, peaceful picketing may be a phase of the Constitutional right of free utterance. But recognition of peaceful picketing as an exercise of free speech does not imply that the States must be without power to confine the sphere of communication to that directly related to the dispute. (Carpenters and Joiners Union vs. Ritters Cafe, 315 U.S. 722) In a more direct statement, it has been held that what is protected is the element of communication, not the act of patrolling or marching which may be subject to reasonable regulation. (International Brotherhood of Teamsters vs. Hanke, 1950)

The first local application of this guarantee to a case of peaceful picketing is recorded in Mortera vs. CIR (79 Phil. 345). This protection was expanded to apply to cases even where employer-employee relationship was absent. (de Leon vs. NLU, 100 Phil. 789, PAFLU s. Barot, 99 Phil. 1008) However, subsequent doctrines have established the power of the court to limit the exercise of the right to parties involved in the labor dispute, or having a direct interest to the context of this issue. (PAFLU vs. Cloribel, 27 SCRA 465 ; RPM Workers Association vs. Reyes, 124 Phil. 1442) In the later case of Liwayway Publications vs. Permanent Concrete Workers Union. et al (108 SCRA 16), the Supreme Court,

while allowing that peaceful picketing is a phase of the freedom of expression guaranteed by the Constitution and could not be curtailed even in the absence of employer-employee relationship, maintained that this is not an absolute right. The courts, it ruled, are not without power to localize the sphere of demonstration, whose interest are foreign to the context of the dispute. Thus the right may be recognized at the instance of an innocent - bystander who is not involved in the labor dispute if it appears that the result of the picketing is to create an impression that a labor dispute exists between him and the picketing union. (See also TUPAS vs. Cscolluela, 140 SCRA 302) The prohibition against injunction does not apply when petitioned by a third party whose property is sought to be levied in satisfaction of a judgment debt against another (Penalosa vs. Villanueva, 177 SCRA 778). Courts, in the exercise of their equity jurisdiction, may issue injunction where the concerted activities are aimed at compelling the employer to ignore a clear mandate of the law. (Bulletin Publishing Corp. vs. Sanchez, 144 SCRA 628)

These antecedent rulings amortize the limitation of the exercise of picketing in certain cases allowed by law or equity.

Moreover, the law also prescribes the instances when injunction may lie against strikes, and picketing may be enjoined or restrained. (Art. 318, Sec. 3 (c) Art. 264 LC as amended by BP 227)Apart from these, the principle remains that no general injunction shall lie against peaceful picketing. The freedom of expression is available to individual workers subject to the legal limitation of industrial peace t air their valid grievances. (Kap. Manggagawa ng Camara Shoes vs. Camara Shoes, 111 SCRA478)

7. FREEDOM OF ASSOCIATION. The pertinent text in the Bill of Rights provides:

Sec. 8 -- The right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged (Art.!!!, Const.).The freedom of association clause, which now embraces employees in the public sector, carries a special

significance to the rights of the individual worker. The Supreme Court has described this freedom as both a right and a privilege. This implies not only the right to join a labor union, but also the privilege of not joining one, of selecting which union to join, and of disaffiliating from a union. (Victoriano vs. Elizalde Rope Workers Union, 59 SCRA 54)

The exception to this right arises when it runs into conflict with the collective right of labor to self-organization as expressed in the union security clause of collective bargaining agreements. Hence, a closed shop provision in a CBA, while it has a generally prospective application to new workers, was held to apply to old workers who were not members of any union, but not to those who already belonged to another union at the time of the signing of the CBA. (Art. 249-e; Juat vs. CIR, 15 SCRA 395) The rationale of the collective right of labor was explained thusly: Petitioners, although entitled to disaffiliate from their union and to form a new organization of their own must, however, suffer the consequences of their separation from the union under the security clause of the CBA. Inherent in every labor union is the right to self-preservation; when they seek the disintegration of the very union to which they belong, they thereby forfeit their rights to remain as members. Prudence and equity, as well as the dictates of law and justice, therefore compel mandate of the adoption by the labor union of such corrective and remedial measures, in keeping with its laws and regulations, for its preservation and continued existence, lest by its folly and inaction the labor union amble and fan. (Milar vs. Inciong, 121 SCRA 444)

A closed shop provision in the CBA, where applicable, does not however mean automatic termination, Actual dismissal based on this clause should not be characterized with arbitrariness, and must always be with due process to the employee Manila Mandarin Employees Union vs. NLRC, 154 SCRA 368; Sauyo vs. Canizares, 211 SCRA 361; Kalaw vs. NLRC, 202 SCRA 7) Under a maintenance of membership clause, the duty to remain a member of the bargaining union exists only for the duration of the CBA. Freedom of association is unconstitutionally invaded if such duty is stipulated beyond that period. This duty ceases to be binding only during the 60-day freedom period before the expiration of the CBA. (Tnduay Distillery Labor Union vs. Thnduay Distillery, Inc. and NLRC, 149 SCRA 470).

Another restriction in the application of a union security clause is that the sanction involved therein must be explicitly stated, and cannot be implied. If the clause does not expressly give the right to dismiss the worker upon its violation, the employer cannot do so, as the right to dismiss must be clear, categorical and express. Manila Cordage Co. vs. dR. 78 SCRA 398) In a more recent case, however, the dismissal of union members for violating a union security clause requiring membership in good standing as a condition of their continued employment was held to be valid and privileged, and did not constitute an unfair labor practice. (Tanduay Distillery Labor Union vs. Thnduay Distillery, Inc. & NLRC, supra) For the first time, the Constitution grants government employees individually the freedom of association (Art. III, Sec. 8), and collectively, the right to self-organization (Art.IX, Sec. 2 [5]; Art.XHI, Sec. 3). These rights are further regulated by Sec. 6, Ex. 0. No. 180.

8. NON-IMPAIRMENT CLAUSE. The Bill of Right provides a guarantee of non-impairment as follows:

Sec. 10 - No law impairing the obligation of contracts shall be passed. From the standpoint of a workers right, this guarantee could be described more relevantly as the right to the sanctity of employment contracts.

The contracts protected by the non-impairment clause are confined to those respecting property or property rights, such as employment contracts. The obligation of such contracts refers to the duty of performing the contracts according to their terms and intent. Thus, a subsequent law or ordinance which destroys or diminishes the value of these contracts or deviates from their terms impairs their obligation.

However, the principal limitation to this cause is the Police Power of he State. When lawfully exercised, this inherent power may be justifiably used even to the extent of impairing the obligation of contracts, because the Police Power is superior to the non-impairment clause. (Pantranco vs. Public Service Commission, 70

Phil. 221; Abe vs. Foster Wheeler Corp., 110 Phil, 198; Asia Bed Factory vs. National Bed and Kapok Industries Workers Union, 100 Phil. 837)

9. FREE ACCESS TO COURTS AND QUASI JUDICIAL BODIES. This individual right is guaranteed in this Bill of Rights provision:

Sec. 11 -- Free access to the courts and quasi - judicial bodies, and adequate legal assistance shall not be denied to any person by reason of poverty. (Art.III, Const.)

This right is quite relevant to the individual worker as it affords the worker a double protection which could otherwise be negated on account of poverty. The protection of free access has been expanded-- more relevantly to labor -- to include quasi-judicial bodies which have jurisdiction over labor cases. The second guarantee of adequate legal assistance is a new Constitutional right of individual workers. It seeks to offset the disadvantage that a worker, due to limited resources, may not be able to afford competent legal services. This right is now being protected by both public and private entities.

10. RIGHT TO SPEEDY DISPOSITION OF CASES. The text establishing this right provides:

Sec. 16 -- All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial or administrative bodies. (Art. III, Const.)

The scope of this right is broad enough to cover all forms of labor disputes. The right is of particular significance to the worker whose limited resources do not give him the capability to sustain a protracted litigation. Oftentimes, the worker finds himself so hard-pressed and subjected to delay that he agrees to unfair

settlements or altogether abandons enforcing his right due to this inability. This guarantee seeks to prevent such an unjust situation.

The right, however, does not mean undue haste in the proceedings; it means that these are to be conducted with reasonable promptness consistent with the due administration of justice.

11. RIGHT AGAINST INVOLUNTARY SERVITUDE. This right is embodied in the following provision:

Sec. 18(2)-- No involuntary servitude in any form shall exist except as a punishment for a crime whereof the party shall have been duly convicted. (Art. III Const.)

This prohibition covers the following practices: a) Slavery or the state of entire subjection of one person to the will of another and b) Involuntary servitude generally, or a condition of enforced compulsory service of one to another. Its purpose, from a labor standpoint is . . . to make labor free, by prohibiting that control by which the personal service of one man is disposed of or coerced for anothers benefit, which is the essence of involuntary servitude. (Bailey vs. Alabama, 219 U.S. 119)

Hence, gratuitous services to secure payment of a loan is not only denounced, but also subjects the creditor to criminal prosecution if he shall compel the debtor to work for him, against his will, as household servant or farm laborer. (de los Reyes vs. Alojado, 16 Phil. 499; Art. 274, Penal Code)

But a return-to-work order in a labor dispute issued under Sec. 19 of C.A. 103 was upheld when challenged as volatile of this clause. The Court ruled in this regard that An employee entering into a contract of employment voluntarily accepts, among other conditions, those prescribed in said Section 19. . . The voluntaries of the employees entering into it or not --- with such implied condition, negatives the possibility of involuntary servitude ensuing. . . (Kaisahan vs. Gotamco Sawsmills, 80 Phil. 521)

By extension, this does not justify an employee from choosing to do certain tasks, and refusing to do others entailed in his job. This is clearly beyond the pale of this prohibition.


12. RIGHT TO SELF-ORGANIZATION. The Protection to Labor clause, Art, XIII Sec. 3, ensures this right of labor in these words: It (the State) shall guarantee the rights of all workers to self-organization...

This right is protected because of the underlying reason that workers and their employer are placed not upon a position of equality but upon a position of the quality. Only a well-organized, high-minded labor union speaking with a single, yet potent, voice can hope to deal with a powerful employer with some semblance of equality. This reason lies at the very root of unionism. The protection refers to all workers, which includes government employees in the civil service (Art. III, Sec. 8; Art. IX, Sec. 2[5J; Sec.6, Ex. 0. No. 111), and in government-owned and controlled corporations without original charters. This right is however subject to two limitations, via:

a) High-level employees whose functions are normally considered as policy-making or managerial or whose duties are of a highly confidential nature shall not be eligible to join the organization of rank-and-file government employees (Sec. 3, Ex. 0. No. 180); and b) The right does not apply to members of the Armed Forces of the Philippines, including police officers, policemen, firemen and jail guards (Sec. 4, Id.).

Certain exclusions are also provided among employees in the private sector, such as managerial employees, members of cooperatives, etc.

13. RIGHT TO COLLECTIVE BARGAINING NEGOTIATION. This right, which is also given by the Protection to Labor clause, is corollary to the right to self-organization. It infers the existence of a labor organization, and indicates its role in fostering industrial peace. Without this companion right, a labor union will have no voice or power to represent the workers interests before their employee and it would be inutile. With it, workers are enabled to negotiate with the employer on the same level and with more persuasiveness than if they were to bargain individually and independently for the improvement of their respective conditions. The terms collective bargaining and negotiation are often used interchangeably. How they differ with related terms such as grievance procedures and arbitration was well pointed out by Professors Cox and Dunlop in the Harvard Law Review, thus: Collective bargaining normally takes the form of negotiation when major conditions of employment to be written into an agreement are under consideration, and of grievance committee meetings and arbitration when questions arising from the administration of an agreement are at stake. (Republic Savings Bank vs. CIR, 21 SCRA226, citing Harvard Law Review, 1097,1105 [1950)This right is applicable to government employees in the civil service, but with certain restrictions. Thus, terms and conditions of employment, or improvements thereof; except those that are fixed by law, may be the subject of negotiations between duly recognized employees organizations and appropriate government authorities (Sec. 13, Ex. 0. No. 180, Underscoring supplied). Obviously, terms and conditions fixed by law cannot be changed by negotiation.

14. RIGHT TO PEACEFUL CONCERTED ACTIVITIES. This is another corollary to the right to self-organization as it affords to labor unions the potential for action to enforce their demands. The right is established in the protection to labor clause which provides in pertinent part: It (the State) shall guarantee the rights of all workers to peaceful concerted activities, including the right to strike in accordance with law. . . (Art. XIII, Sec. 3). The term concerted activities is defined as the activities of two or more employees for the purpose of securing benefits or changes in terms and conditions of employment, or for mutual aid or protection

with respect to their collective interest as employees. This definition comprehensively covers a wide range of acts from grievances and representations to strikes. Resolution of industrial disputes through voluntary initiatives has the advantage of simplicity, certainty and privacy. But the coercive versions of stokes and picketing, because of their far-reaching consequences to the economy and to the larger interest of society, are subject to regulation.

The Constitution itself in guaranteeing this tight, qualifies it with the condition that concerted activities should be peaceful, and that the right to strike be in accordance with law.

In this light, the question has been raised whether government employees in the civil service - - who have been granted generally the right to self-organization, and qualifiedly, the night to collective bargaining -also have the right to strike. The Supreme Court, in a 1989 decision, answered in the negative. It noted that while the Constitution recognizes the right of government employees to organize, it is silent as to whether such recognition also includes the right to strike. Resorting to the intent of the framers of the organic law, it observed that the members of the Constitutional Commission intended to limit the right to the formation of unions and associations only, without including the right to strike. It cited Executive Order No. 180 regulating the exercise of the right to organize government employees which provides in Sec. 14 thereof that the Civil Service law and rules governing concerted activities and strikes in the government service shall be observed, subject to any legislation that may be enacted by Congress. It stated that the President was apparently referring to Memorandum Circular No. 6 Series of 1987 of the Civil Service Law dated April 21, 1987 which, prior to the enactment by Congress of applicable laws concerning strikes by government employees, enjoins under pain of administrative sanctions all government employees from staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which with result in temporary stoppage or disruption of public service. It continued that in the absence of any legislation allowing government employees to strike, recognizthg their right to do so, or regulating the exercise of the tight, they are prohibited from striking, by express provision of Memorandum Circular No. 6 and as implied in Executive Order No.

The court also passed upon the question of which entity had jurisdiction over the case. It held that the Regional Trial Court, in the exercise of its general jurisdiction under B.P. 129, had jurisdiction over petitioners claim fo1 damages and for the issuance of a writ of injunction to stop the strike, since the Labor

Code did not apply to government employees. (SSS Employees Association, et. al. vs. Court of Appeals, et al., 175 SCRA 686.) In a more recent decision, the Court ruled En Banc that as a general rule, even in the absence of express statutory prohibition like Memorandum Circular No. 6. public employees are denied the right to strike or engage in work stoppage against a public employer. The right of the sovereign to prohibit strikes or work stoppages by public employees was clearly recognized at common law. To grant employees of the public sector the right to strike there must be a clear and direct legislative authority therefore In the absence of any express legislation allowing government employees to strike, recognizing their right to do so, or regulating the exercise of the right, employees in the public service may not engage in strike, walk-outs and temporary work stoppage like workers in the private sector .(Bangalisan vs. CA, July 31, 1997)

Parenthetically, and to complete our discussion on the rights of government employees in this context, it is to be noted that employees of government-owned and controlled corporations, organized under the Corporation Code as well as those working in establishments whose controlling interests have been acquired by government financial institutions have the same rights in this regard as employees of private corporations. In the former case because such employees are engaged in proprietary functions of government (NARIC Workers Union vs. Alvendia, 107 Phil. 404) and are not members of the civil service, and in the latter because they are employed in entities which retain their essentially private character and profit motivation. (AGW vs. Minister of Labor,124SCRA 1)

15. RIGHT TO SECURITY OF TENURE. Under previous laws, an employer could terminate the services of an employee with or without just cause, by simply giving him one month notice, or compensation (mesada) in lieu thereof. This placed the employee at the mercy of the employer on whom he depended for his and his family's livelihood.

This tenuous relationship has been drastically changed and rectified by the Labor Code in view of the right to security of tenure

guaranteed by the Constitution (Art. XIII, Sec. 3). Tenure in employment means the right to continue in employment until the same is terminated under conditions required by law. Art. XIII, Sec. 3 of the Constitution guarantees to workers security of tenure. (Palmeria vs. NLRC, 247 SCRA 57)

16. RIGHT TO HUMANE CONDITIONS OF WORK. This collective right ensures that working conditions take into account the health, safety and welfare of workers. The Labor Code is replete with provisions that address this concern. For instance, its entire Book IV on Health. Safety anti Social Welfare Benefits relates to medical and dental services, occupational health and safety, and a compensation program for employees and their dependents in the event of work-connected disability or death. The Ill of Book Ill regulates the working conditions for special groups of employees: working women, minors, house helpers and home workers. The Code also empowers the Secretary of Labor to order stoppage of work or suspension of operations of an establishment when non-compliance with the law poses grave and imminent danger to the health and safety of workers in the workplace (Art. 128-c). These provisions, to cite only a few examples, illustrate the implementation of this Constitutional right of workers.

17. RIGHT TO A LIVING WAGE. The right to a living wage is a new right established in the present Constitution (Art. XIII, Sec. 3 ). The term refers not merely to the worker, but to his family as well, and the intent is to secure the means whereby a worker can secure the health, decency, well being and an improved quality of life for his family. This sight is therefore imbued with social justice implications.

A living wage is not the same as a minimum wage. For a minimum wage is a floor wage, fellow which remuneration cannot fall. Thus, it is basically a quantitative concept which, despite all the factors considered, may still be equated with the term subsistence wage. This has been accurately described in Blacks Law Dictionary as the least wage on which an ordinary individual can be self-sustaining, and obtain the ordinary requirements of life. (Id. Rev. 4th Ed, citing Asso. Industries of Oklahoma vs. Industrial Welfare Confirm mission, 185 Ok. 177)

But a living wage takes into consideration not only the worker himself, but also his family. It concerns not only his ordinary requirements of life, like food and shelter, but all the additional requirements of his family -- like education, clothing, health care, entertainment, etc. This is therefore a qualitative concept intended to secure the social end of eventually freeing the people from poverty, and providing an improved quality of life for all. (Art. II, Sec. 9, Constitution)

18. RIGHT TO PARTICIPATE IN POLICY AND DECISIONMAKING. The Protection to Labor clause also contains a new provision which states in pertinent part: . . They (all officers ) shall also participate hi policy and decision-making processes affecting their rights and benefits as may be provided by law. . (Art. XIII, Sec.3)

As worded, this provision does not establish a right; it merely allows such a right if the legislature enacts the corresponding law. This status was firmed up as a right upon the effectively of Rep. Act. No. 6715 on March 21, 1989. Section 22 of this amendatory law provides on this point. Any provision of law to the contrary notwithstanding, workers shall have the right, subject to such rules and regulations as the Secretary of Labor and Employment: may promulgate, to participate in policy and decision-making processes of the establishment where they are employed insofar as said processes will directly affect their rights, benefits and welfare. For this purpose, workers and employers may form labor- management councils: provided, that the representatives of the workers in such labor-management councils shall be elected by at least the majority of all employees in said establishment. (id.)

This right does not apply to all types of policy and decision-making by management, but only to those that directly affect the rights, benefits and welfare of workers. Aside from establishing this right, Rep. Act No.6715 also dispelled all doubts about the legitimacy of labor-management councils which are allowed even in organized establishments precisely to implement this pailicipatory right. In unorganized establishments, such councils are allowed to assist in promoting industrial peace. (Sec.33-h, R.A. 6715; Sec. 14-h, BP Big. 130).

19. OTHER FEATURES PROTECTING FILIPINO LABOR. The Constitution also embodies other new provisions favorable to Filipino labor Specifically, it contains new nationalistic measures which further augment those currently in force.

The basic nationalistic policy on labor is articulated as follows:

The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make competitive.: ( Art Xlii, Sec. 12). Consistent with this declared policy, the Constitution nationalizes new fields of endeavor. Thus: The practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law (Art. XII, Sec.14). Educational institutions, other than those established by religious groups and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least sixty per centum of the capital of which is owned by such citizens. The Congress may, however, require increased Filipino equity participation in all educational institutions. The control and administration of educational institutions shall be vested in citizens of the Philippines . . (Art. XJV, Sec.4 (2)) * The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations wholly-owned and managed by such citizens. . Only Filipino citizens or corporations or associations at least seventy per centum of the capital of which is owned by such citizens shall be allowed to engage in the advertising industry. . . (Art. XVI, Sec.II [2])




1. THE LABOR CODE: AN OVERVIEW. The Labor Code of the Philippines was enacted into law by Presidential Decree No. 442, which was approved on May 1,1974 and took effect six months later, on November 1, 1974, except its provisions on the employees compensation program which became applicable to contingencies occurring on or after January 1, 1975.

The Code comprises a Preliminary Title and Seven Books. Aside from the Preliminary Title which serves as preface, and Book VII which sets rules on prescriptions, transitory and final provisions, its substantive I labor laws are distributed as follows:

Book I -- Pre-Employment and Book II -- Human Resources Development Program: Labor Policies; Book III -- Conditions of Employment, Book IV, Title One -- Medical, Dental and Occupational Safety and Book VI--Post Employment: Labor Standards laws; Book IV-- Title 11-Employees Compensation and State Insurance Fund, Title 111 -- Medicare, and Title IV - Adult Education: Social laws, and Book V -- Labor Relations: Labor Relations Law.


Philippines is distinguished from other labor codes and laws in that it is oriented toward national development, partaking of the character a developmental law. Hence, it does not merely regulate an essentially contractual type of employer-employee relationship, but is also a tool of national development in its provisions to promote employment, develop human resources, provide a national manpower plan, and similar measures. This unique character of the Code is particularly evident in its Books I and II.

According to the Secretary of Labor, the Code can be summarily described one sentence: It represents the updating of all labor laws to make them more responsive to the priorities of development and employment, as well as social justice.

3. THE BASIC APPROACH: TRIPARTISM. TRIPARTISM is the participation and cooperation among government, labor and management in the evolvement and formulation of labor policies and standards. The Labor Code itself is a product of TRIPARTISM, and this mode toward a consensus among the parties directly concerned is evident in its policies and provisions. This approach has been accorded a broader application as it has been given the status of a State policy. Toward this end, workers and employers shall, as far as practicable, be represented in decision and policy-making bodies of the government (Sec. 32-a R.A. 6715). Similarly, the Secretary of Labor and Employment, or his duly authorized representatives, may from time to time call a national, regional, or industrial tripartite conference of representatives of government, workers and employers for the consideration and adoption of voluntary codes of principles designed to promote industrial peace based on social justice or to align labor movement i1ations with established priorities in economic and social development (Art.275, Labor Code as amended by R.A. 6715)

TRIPARTISM is also evident in some provisions of the Code, as in industry boards, apprenticeship programs, compulsory arbitration proceedings, and others.

4. PROMOTING FULL EMPLOYMENT. This objective which informs both Books I and II of the Labor Code is aimed at implementing the Constitutional mandate to promote full employment. (Art. XIII,


Normally, this is not a germane topic for a labor law or code as there is no employer-employee relationship to speak of. Its treatment as a matter of concern in the first two books of the Labor Code illustrates the developmental character of this Code. This objective is sought to be attained principally through improved manpower training, allocation and utilization (Art. 12 LC). Manpower training is treated in Book II, while manpower allocation and utilization are promoted by provisions in Book I which, inter alia:

a) Empower the Secretary of Labor to establish new employment offices ,and develop programs that will facilitate occupational ,industrial and geographical mobility of labor, and provide assistance in the relocation of workers; (Art. I4LQ b) Task the Bureau of Local Employment to develop plans and programs to implement employment promotion objectives; (Alt 15 LC) c) Regulate the recruitment and placement of workers, both domestic and overseas. (Art 25 and if)

Book I also contains a Title that regulates employment of non-resident aliens.

5. RECRUITMENT AND PLACEMENT OF WORKERS. The original policy in this regard was to phase out within a 4-year period from the effectively of the Code all private, fee-charging employment agencies This policy was prompted by a two-fold purpose: a) to eliminate malpractices that had characterized the resentment and placement business, thus enabling government to have firmer control of the labor mai*et; and b) to reach the same end prescribed by ILO Convention No. 96, to which the Philippines is a signatory.

This policy was replaced by a new one introduced by PD 1412 which allowed private sector participation in this activity, subject to the control and supervision of government. This was brought about by the price spiral of crude oil in the mid-fifties, which was followed

by an industrialization drive by Mid-East countries resulting in a heavy demand for relatively inexpensive but skilled Filipino labor for overseas employment. The Labor Code defines recruitment and placement as any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not. Provided, that any person or entity which in any manner, offers or promises for a fee employment to two or more persons, shall be deemed engaged in recruitment and placement. (Art. 13-b, LC; People vs. Turda, 233 SCRA 702)

The proviso regarding number of persons in the above definition is not to be interpreted strictly. According to the Supreme Court, this was intended neither to impose a condition on a basic rule nor to provide an exception thereto, but merely to create a presumption. . . The words shall be deemed create that presumption, (People vs. Panis, 142 SCRA 664)

6. GOVERNMENT AGENCIES REGULATING RECRUITMENT ACTIVITIES. The Philippine Overseas Employment Administration (POEA) is the present government entity tasked with promoting the overseas employment of Filipino workers, securing the best employment terms and conditions therefore, ensuring their compliance therewith and recruiting and placing overseas workers on a government- to-government arrangement. The recruitment of domestic workers is under the supervision of the Bureau of Local Employment (BLE) of the Department of Labor and Employment (DOLE), which also absorbed the functions of the defunct Bureau of Apprenticeship. These two offices were created by Exec. Order No.797, May 1, 1982, and were retained in Exec. Order No. 126 , January 30, 1987.

In view of the official functions of the POEA, there is now a ban on direct hires. This means that no foreign employer, principal or contracting partner may directly hire a Filipino worker for overseas employment except through the POEAor through agencies authorized by the DOLE This allows as exceptions the hiring by members of the diplomatic service, officials and employees of international organizations, and such other categories of employers as may be authorized by the Secretary subject to guidelines as the POEA may prescribe.

Name hires, which are individual! workers who are able to secure contracts for overseas employment on their own, without the assistance or participation of any government agency or entity, are not covered by this ban. Nevertheless, their contracts for overseas employment shall be processed by the POEA.

In the case of domestic recruitment, the general rule is that no person or entity other than the public employment offices (of the government), shall engage in the recruitment and placement of workers. However the private employment sector may participate the recruitment and placement of local workers under such guideline, rules and regulations as may be issued by the Secretary of Labor. (Arts. 16 & 25 LC)

7. THE PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION. The POEA is the main government agency that carries out the promotion and development of overseas employment for Filipino workers. It is a quasi-judicial body with authority to adjudicate disputes arising out of, or in connection with, the employment of Filipino overseas recruitment and placement of Filipino workers.

In general, the POEA takes cognizance of the following types of cases recruitment violation cases, employer-employee relations cases involving Filipino overseas workers, illegal recruitment cases insofar as their administrative aspects are concerned, and disciplinary actions against Filipino contract workers.

The POEA is not bound by the technical rules of procedure and evidence. Its proceedings are non-litigious in nature, and the technicalities of law and procedure, and the rules obtaining in courts of law shall not apply. Hence, in cases before the POEA, a fact may be deemed established if it is supported by substantial evidence, which is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. (Rase vs.NLRC, 237 SCRA 523; Kiaveness Maritime Agency vs. Palmos, 232 SCRA 448)

The POEA has no jurisdiction to hear and decide a claim for

enforcement of a foreign judgment. Such a claim must be brought before the regular courts. (Rances vs. NLRC; 246 SCRA 250)

8. RECRUITMENT VIOLATION CASES These cases are brought by any aggrieved person or by the POEA motu propio for the suspension, cancellation or revocation of a license or authority of any agency (cf. Art 34 LC; Bk VI, Rule 1, Sec. 2&3, BkVI, POEARu1es). These are pre employment cases, administrative in character involving or arising out of recruitment laws and rules, including money claims arising there from, or violation of conditions for the issuance of license to recruit workers. They are conducted by a hearing officer who makes his recommendation to the Adjudication Office within 30 days from submission of the case. Cancellation or revocation orders are issued only by the SOLE or his duly designated representative; suspension orders may be issued by the Administrator or his designated OIC. Petitions for review may be ified with the SOLE within ten calendar days from the order Motions for reconsideration are treated as petitions for review. This jurisdiction of the SOLE, vested by the 1991 Rules and Regulations, is to be given retroactive effect. (Alindao vs. Joson, 264 SCRA 211) The filing of a petition will not stay the execution of the order of suspension unless restrained by the Secretary. After the order has become final and executory the Administrator shall, upon motion of the party in interest, issue a writ of execution requiring the enforcement of the POEA to execute the same.

9. QUALIFICATIONS FOR PARTICIPATION IN OVERSEAS RECRUITMENT. In order to be allowed to participate in the overseas employment program, applicants should possess the following qualifications:

(a) Citizenship -- at least 75% of the authorized and voting capital stock is owned and controlled by Filipino citizens; (b) Capitalization -- a minimum capitalization of P 1 million in case of a single proprietorship or partnership, or in minimum paid-up capital, in case of a corporation: (c) No disqualifications -- the applicant should not be otherwise disqualified by law or regulation

to engage in the recruitment and placement of workers for overseas employment.

To operate a private employment or manning agency, persons possessing these qualifications have to submit a written application therefore and comply with the requirements prescribed by the Rules (cf. Book II, Rule 2, POEA Rules).

10. DISQUALIFICATIONS FROM OVERSEAS RECRUITMENT. The following are not qualified to participate in the recruitment and placement of Filipino workers overseas:

(a) Travel agencies and sales agencies of airline companies; (b) Officers or members of the board of any corporation or members in a partnership engaged in the business of a travel agency; (c) Corporations and partnerships, when any of its officers, members of the board or partner of a corporation or partnership is also an officer, member of the board or partner of a corporation or partnership engaged in the business of a travel agency; (d) Persons, partnerships or corporations which have derogatory records, or those convicted of crimes involving moral turpitude; (e) Persons employed in the DOLE or in other government offices directly involved in the overseas employment program, and their relatives within the fourth degree of consanguinity or affinity, and (f) Persons, partners, officers and directors of corporations whose license has been previously cancelled or revoked for violation of the Labor Code or its implementing rules or other relevant laws, decrees, rules and regulations, and issuances (Book II, Rule I, POEA Rules).

11. MINIMUM STANDARDS FOR EMPLOYMENT CONTRACTS. The following are considered the minimum requirements for contracts of


(a) Guaranteed wages for regular working hours and overtime pay for services rendered beyond regular working hours both of which shall be in accordance with the standards established by the POEA; (b) Free transportation from point of hire to site of employment and return; (c) Free emergency medical and dental treatment and facilities; (d) Just causes for the termination of the contract or of the services of the workers; (e) Workmens compensation benefits and war hazard protection; (f) Repatriation of workers remains and properties in case of death to the point of hire, or if this is not possible under the circumstances, the proper disposition thereof, upon prior arrangement with the workers next- of-kin and the nearest Philippine embassy consulate or regional labor center, (g) Assistance on remittance of workers salaries, allowances or allotments to the beneficiaries; and (h) Free and adequate board and lodging facilities or compensatory food allowance at prevailing cost-of-living standards at the jobsite.

Overseas contract workers are provided with mandatory life and accident insurance coverage to be provided by the employer without any cost to the workers. Life insurance coverage is set at a maximum face value of P 50,000, with an equal coverage of P50,000 if death is due to accident, murder or assault. Employers and principals are obliged to adopt these minimum requirements for employment contracts, but if their existing insurance package provides for a superior coverage, this is deemed compliance with this requirement.

Employment contracts shall provide for these minimum standards and recognize prevailing labor and social laws at the Site of employment

and international conventions. All employers and principals shall adopt these standards in the hiring of workers, without prejudice to their adoption of other terms and conditions of employment over and above such minimum standards.

Any ambiguity in overseas employment contracts shall be interpreted against the parties who drafted them (Cadalin vs. POEA, 238 SCRA 721). 12. EMPLOYER-EMPLOYEE RELATIONS CASES. The POEA has original and exclusive jurisdiction to hear and decide all claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas employment, including seamen, such as, but not limited to:

(a) Violation of terms and conditions of employment; (b) Disputes relating to the implementation and interpretation of employment contracts; (c) Money claims of workers against their employer and/or their duly authorized agents in the Philippines or vice versa; (d) Claims for death, disability and other benefits arising out of employment; and (e) Violations of, or non-compliance with, any compromise agreement entered into by and between the parties in an overseas employment contract.

Decisions and orders of the POEA in these cases become final after the lapse of ten calendar days from receipt of a copy thereof if no appeal or motion for reconsideration is perfected or filed. Appeals are raised to the National Labor Relations Commission only on any of

these grounds :

a) if there is prima facie evidence of abuse of discretion on the part of the hearing officer or the administrator, b) if the decision or award was secured thru fraud or coercion; c) if made purely on questions of law; d) fraud or coercion, including graft and corruption, and/ore) if serious errors in the findings of fact are raised which, if not corrected, would cause grave and irreparable damage or injury to the appellant. (Book VII, Rule 5, Sec.2, POEA Rules)

13. LIABILITIES OF OVERSEAS EMPLOYMENT AGENCIES. A private employment agency may be sued jointly and solitarily with its foreign principal for violation of recruitment agreements and contracts of employment (Catan vs. NLRC, 160 SCRA 691). The liability of a private employment agency with the employer is joint and solitary (Alga Moher Intl Placement Services vs. Atienza, 166 SCRA 174). By the same token, a local crewing agent is solidarily liable for all obligations arising from the crewmans shipboard contract. In this regard, a final settlement obtained thmugh coercion is invalid.(Llobera vs. NLRC, 162 SCRA 788) A local crewing agent is also solidarily liable for damages due to the death of a seaman arising from an accident in a foreign port. (Eastern Shipping Lines vs. POEA, 166 SCRA 533)

An overseas contract worker with one year of service is a regular employee. (Land Housing Development Corp. vs. NLRC, 166 SCRA 605) Consequently, an overseas contract worker dismissed without due process is entitled to unpaid salaries corresponding to the unexpired portion of his employment contract. Releases and quitclaims signed by the employee are considered null and void. (Miguelvs. NLRC, 162 SCRA 441) Ibis was affirmed in a later case which further held that this is a verified undertaking in the agencys application for a license to operate. In addition, the agencys appointment by the employer empowers it to sue and be sued jointly and solitarily with its foreign principal for any violation of the recruitment agreement and contract of employment. Royal Crown International vs. NLRC, et al., 179 SCRA 569) In view of this agency relationship with the foreign principal, service of process upon any

agent of a foreign corporation, whether o not engaged in business in the Philippines, constitutes personal service upon the principal, and accordingly judgment may be rendered against the said foreign corporation.(Id. citing Facilities Management Corporation vs. de la Cruz, 89 SCRA 131)

A judgment against an overseas employment agency is initially enforced against its cash and surety bonds ified with the POEA. (del Rosario vs. NLRC, 187 SCRA 777) The cash bond is exempt from execution since employment-related claims are not mentioned in Sec. 12, Rule 39 of the Rules of Court. Nor may it be subject to execution by judgment of a regular court in favor of a travel agency from the recruitment agency.(Capricom Intl burs vs. CA, 184 SCRA 123) The purpose of the surety bond is to ensure that if the rights of overseas workers are violated by their employers, recourse would still be available to them against local companies that recited them for the foreign principals. (stronghold Insurance vs. CA, 205 SCRA 605) Upon approval of the recruitment license, the applicant must post a surety bond to answer for valid claims arising from violations of conditions for accreditation, contracts of employment, or grant or use of the license. Country Bankers Insurance Corporations vs. NLRC et al, 246 SCRA 360) The POEA can go against this bond for violations by recruiters of the conditions of their license. (JMM Promotions and Management Inc. vs. NLRC, 228 SCRA 129) The surety bond required of recruitment agencies is answerable, even if filed after the departure of the worker for his place of work. (Country Bankers Insurance Corp. vs. NLRC, supra)

There is an exception to the solidity liability of employment agencies. This was allowed where the workers themselves persuaded the recruiter to send them back abroad despite their knowledge that the foreign employer might not pay their wages. and they agreed not to hold the recruiter responsible therefor. (Feagle Constructions Corporation vs. Gayda, 186 SCRA 589)

14. MIGRANT WORKERS DESKS. Early in 2000, the NLRC created a Migrant Workers Desk (MWD) at its head offices in Banawe, Quezon City. Other MWDs were also designated in every regional arbitration branch all over the country. Any overseas Filipino worker can file a complaint in any of these MWDs against his foreign employer who may have violated the terms of

his contract of employment. Details about their agencies and contracts may be secured from the POEA for accurate information.

The complaint must be subscribed and sworn to by the complainant before an administering officer. It is then docketed and raffled to a labor arbiter who will hear and decide the case. The decision of the labor arbiter when not appealed becomes final and executory. If the claim is dismissed the case is terminated. If the claim is granted the decision shall be executed. The winning party should file a motion for a writ of execution with the labor arbiter who issued the decision.

If the decision is appealed, the appeal is filed with the same labor arbiter who decided the case but addressed to the NLRC with payment of the proper appeal fees and/or filing of an appeal or supersedes board, which shall be in effect until final disposition of the case.

15. ILLEGAL RECRUITMENT. To give substance to the constitutional policy of promoting full employment, but without prejudice to justice and development, the Labor Code has established the crime of illegal recruitment. The Code has defined this crime as:

Any recruitment activities, including the prohibited practices enumerated under Art. 34 of the Code, to be undertaken by nonlicensees or non-holders or authority shall be deemed illegal and punishable. .

Thus the crime of illegal recruitment is committed where a person undertakes any recruiting activity defined under Art. 13 (b), LC without a license or authority to do so; or commits any prohibited practice enumerated under Art .34 LC, whether or not he has such license or authority. Hence, a holder of a license or authority is not exempt from committing the crime of illegal recruitment. The crime is qualified if committed by or against three or more persons, individually or as a group. (People vs. Coronacion, 237 SCRA 227: People vs. Comia, 236 SCRA 185; People vs. Sendon, 228 SCRA 489; People vs. Bodozo, 215 SCRA 33)

There is illegal recruitment when one gives the impression of her ability to send a worker abroad--even if she did not invite or entice people for overseas employment--as long as she is a

non-licensee or non-holder of authority. (Flores vs. People, 211 SCRA 622; People vs. Manungas Jr. 231 SCRA 1) An employee who actually makes referrals to the agency of which she is a part is engaged in recruitment activity. Referral is the act of passing along or forwarding of an applicant for employment after an initial interview to a selected employer, placement officer or bureau. (People vs. Goce, 247 SCRA 780)

Illegal recruitment when committed by a syndicate or in a large scale shall be considered an offense involving economic sabotage illegal recruitment is deemed committed by a syndicate if carried out by a group of three or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme as delined by law. illegal recruitment is deemed committed in large scale if committed against three or more persons, individually or as a group (Art. 38-b, LC).

When illegal recruitment is committed by a syndicate or in large scale it becomes an offense involving economic sabotage, and shall be penalized with life imprisonment and a fine of P 100,000. (People vs. Avendaflo, 216 SCRA 187) The penalties imposed for this crime are:

a) Life imprisonment and a fine of P100,000 if the illegal recruitment constitutes economic sabotage as defined in the law; b) For any licensee or holder of authority found violating or causing another to violate the Code or its implementing rules, imprisonment of not less than two years nor more than eight years or a fine of not less than P10,000 nor more than P50,000 or both, at the discretion of the court; c) If the violator is neither a licensee nor a holder of authority, imprisonment of not less than four years nor more than eight years, or a fine of not less than P20,000 nor more than P100,000 or both, at the discretion of the court; d) If the offender is a corporation, partnership, association or entity, the penalty shall be imposed upon the officer or officers thereof (People vs. Garcia et al., 271 SCRA), and if such officer is an alien, he shall in addition to the penalties prescribed, be deported without further proceedings.

e) In every case, convictions shall carry the automatic revocation of the license or authority and all permits and privileges granted to such person under the law, and the forfeiture of the cash and surety bonds.

In one case, it was held that receipt of payment by a recruitment agency after the expiration of its license for services rendered before its expiration is not illegal recruitment for purposes of criminal prosecution. (Aquino vs. CA, 204 SCRA 240)

The role of the POEA in illegal recruitment cases is to provide legal assistance to victims of this violation, assist in the prosecution of such cases, conduct surveillance operations of companies or establishments suspected of engaging in this practice, and work for the issuance of a closure order by the Secretary, the Administrator, or by a Regional Director, after an ex pane preliminary examination. Despite the arrest and detention power provided by Sec. 38 (c) of the Code to the Secretary of Labor or his duly authorized representative, they cannot lawfully issue search and arrest warrants for this purpose. This provision was held unconstitutional and of no force and effect, since under the Constitution (Art. III, Sec. 2) only a judge .may issue such warrants. (Salazar vs. Achacos and Marquez, 183 SCRA 145) 16. DISCIPLINARY ACTIONS INVOLVING OVERSEAS WORKERS. The POEA may undertake disciplinary action against a contract worker motu propio or upon the filing of a complaint for breach of discipline.

The grounds for this action constitute commission by the workers of any of the offenses enumerated in the Rules or similar offenses while working overseas. (cf. Book VII Rule 7, POEA Rules).

Breach of discipline may be penalized by stem warning, repatriation at the workers expense, suspension or disqualification from the overseas employment program. In the case of seamen, they may be desisted from the registry. These penalties are without prejudice to whatever civil or criminal liability that may be imposed by appropriate courts for such offenses. Contract workers against whom penalties have been imposed or with pending obligations imposed upon them through an order, decision or resolution shall be included in the POEA blacklist. Such workers shall be disqualified from overseas employment unless properly cleared by the POEA or until their suspension is served or lifted.

Contract workers or seamen who have a pending complaint for disciplinary action and those against whom a warrant of arrest or hold order has been issued by the appropriate agency are placed on the watch list.

17, EMPLOYMENT OF NON-RESIDENT ALIENS. The provisions of the Code on this topic have a wider application than its title might suggest. They apply to all aliens, resident or non-resident, actually employed or seeking employment in the Philippines, as well as to their present or prospective employers.

All employed resident aliens are required to register with the Bureau of Local Employment under such guidelines issued by it. Resident or non-resident aliens seeking local employment must first secure an employment permit from the Bureau before they can be employed here.

As a general rule, an employment permit issued by the DOLE is the principal requirement. This is issued after their determination of the non- availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. For an enterprise registered in preferred areas of investment, the permit may be issued upon recommendation of the government agency charged with the supervision of the registered enterprise concerned (Art. 40, LC).

An employment permit is subject to certain conditions, viz: a) after its issuance, the alien shall not transfer to another job or change his employer without the prior approval of the Secretary (Art. 41-a, LC); b) if employed in an apprentice able occupation, the non-resident alien worker and his employer shall bind themselves to train at least two Filipino understudies for every alien worker for a period determined by the SOLE; and c) the alien worker shall not engage in any gainful employment other than that for which he was issued a permit (Book I rule 14, Secs. 2 & 3, OR).

Occupations nationalized or restricted by the Constitution or special laws are generally not available to aliens. An opinion of the Secretary of Justice on this matter indicates two possible exceptions, viz:

a) where the Secretary of Justice specifically authorizes the employment of foreign technical personnel; and b) where aliens are elected members of the board of corporations in proportion to their allowable participation in the capital of such corporations.




1. OBJECTIVES OF THE PROGRAM. The objectives of the human resources development program are:

a) to develop human resources; b) establish training institutions; and c) formulate such plans and programs as will ensure efficient allocation, development and utilization of the nations manpower, and thereby promote employment and accelerate economic and social growth (Art. 432, LC).

It is evident that these objectives are complementary to those enumerated in Book I (cf. Art. 12. LC).

2. THE NATIONAL MANPOWER AND YOUTH COUNCIL. To carry out these objectives, the Labor Code reinstated the National Manpower and Youth Council (NMYC)4 attached to the Department of Labor and Employment for policy and program coordination.5 The Council is composed of the Secretary of Labor as ex-officio chairman, the Secretary of Education, Culture and Sports as ex-officio vice-chairman, and as ex-officio members: the Director General of the National Economic Development Authority, the Secretary of Agriculture, the Chairman of the Civil Service Commission, the Secretary of Social Welfare, the Secretary of Local Governments, the Secretary of Science and technology, the Secretary of Trade and Industry, as well as the Director General of the Council who is a non-voting member.

In addition, the President shall appoint from the private sector two representatives each from national organizations of employers, national organizations of workers, and national family and youth organizations, each for a term of three years (Art. 45, LC). 3. RESPONSIBILITIES OF THE NMYC. The most significant responsibility of the NMYC is the formulation of a long-term national manpower plan for the optimum allocation, development and utilization of manpower for employment, entrepreneurship, and economic and social growth. This manpower plan, after adoption by the Council, shall be updated annually and submitted for approval by the President. When approved, it shall be the controlling plan for the development of manpower resources for the entire country (Art. 46, LC).

The NMYC is also tasked with the following additional functions:

a) to establish national, regional and local skills centers to promote and develop skills, as well as formulate and administer national skills standards for selected industry trades; b) to administer training programs in instructor and entrepreneurial development, vocational and trade skills, and other fields of employment, and to assist any employer or organization in training schemes designed to attain its

objectives; c) establish industry boards to assist in the establishment of manpower development skills and such other functions as will provide direct participation of employers and workers in particular industries toward the fulfillment of the Councils objectives, and d) to administer ongoing technical assistance programs and/or grants-in-aid for manpower and youth development, including those which may be entered into with international and foreign organizations and nations.

4. THE PRIVATE SECTORS ROLE IN HUMAN RESOURCES DEVELOPMENT. The establishment of the NMYC as a national government agency in charge of the manpower development program does not preclude the participation of private sector in this undertaking.

To begin with, the private sector is adequately represented by the six appointive members of the Council itself. Then too, private sector participates in the formulation of national skills standards, and in the composition of industry boards.

In fact, the law establishes an incentive scheme to encourage such participation by allowing an additional deduction from taxable income of one-half of the value of labor training expense incurred for development programs, provided that such programs, other than apprenticeship, are approved by the Council, and the deduction does not exceed 10 percent of direct labor wage (cost) (Art. 52, LC). This incentive applies to private management development programs which are no less a part of the national manpower resources, subject to the same conditions (Op. Sec. Jus., June 23, 1978). But training programs undertaken by private training institutions operating for profit do not qualify. Regarding the second condition, direct labor costs means that portion of wages and salaries which can be identified with or charged directly to a product, project or service. However, this value cannot be determined in the case of businesses such as banks, building and loan associations, insurance and financing companies, stock brokers, educational institutions, consultancy firms, and other business endeavors not involving direct labor in the production of goods and services which could serve as basis for enforcing the 10 percent limitation on deductible training

expenses. For lack of basis, the incentive scheme is unenforceable as to these establishments (Op. Sec. Jus. June 23, 1978).

5. TRAINING AND EMPLOYMENT OF SPECIAL WORKERS. To help meet the demand of the economy for trained manpowei Title 11 of this Book regulates the training and employment of special workers, i.e., apprentices, learners, handicapped workers and trainees.

An apprentice is a worker who is covered by a written apprenticeship agreement with an individual employer or any of the entities recognized under the Labor Code in an approved apprentice able occupation.

A learner is a person hired as a trainee in semi-skilled and other industrial occupations which are non-apprentice able and which may be learned through practical training on the job in a relatively short period of time which shall not exceed three months. A handicapped worker is one whose earning capacity is impaired by age, physical or mental deficiency or injury A trainee is a person qualified to undergo a. training system for the purpose of acquiring and developing job qualifications.

6. THE CONCEPT OF APPRENTICESHIP IN HISTORICAL CONTEXT. In the Labor-Management Congress of 1958, which had as a main objective the formulation of an action plan to resolve unemployment, it was revealed that despite the countrys chronic and widespread unemployment, it was really in dire need of skilled workers. This was attributed to an oversupply of unskilled and semi-skilled workers and a dearth of skilled workers and craftsmen. To remedy this, it was recommended that impetus be given to apprenticeship programs along the guidelines provided by the first Apprenticeship Law, Rep. Act No. 1826 of June 22, 1957. Shortly thereafter, a new Apprenticeship Law was enacted -- Rep.Act No 2628, which took effect on June 18, 1960. Under these laws, apprenticeship meant building up a skilled labor force through a program that would help the unemployed learn a trade by doing it, and making them earn while learning it.

PD No, 173, issued on April 12,1973, sought to align apprenticeship as an instrument of employment generation and manpower policy. This decree expanded the concept of apprenticeship beyond the area of skilled labor, and made it applicable to more advanced undertakings such as operational, commercial, technological, supervisory and even managerial responsibilities.

The Labor Code embodies the present law on apprenticeship. A pertinent amendment by Ex. 0. No.111, December 24, 1986 restricted the employment of apprentices to highly technical industries and only in approved apprentice able occupations, limited the period of apprenticeship to six months, and established closer government regulation of apprenticeship programs.

7.QUALIFICATION AND EMPLOYMENT OF APPRENTICES. To qualify as an apprentice, a person shall:

a) be at least 14 years of age;

b) possess vocational aptitude and capacity for apprenticeship as established through appropriate tests; and c) possess the ability to comprehend and follow oral and written instructions.

The minimum age requirements prescribed by the Omnibus Rules (R.7 Sec. 6), as well as the Code, for apprentices are at variance with the minimum age of 15 for working minors (Art. 139, LC) since apprenticeships are oriented mainly toward training rather than employment.

Completion of a high school course6 is no longer required; it suffices that the apprentice possess the ability to comprehend and follow oral and written instructions. For particular occupations, trade and industry associations may recommend to the Secretary of Labor appropriate educational requirements.

The main qualification for an apprentice is the vocational aptitude and capacity for apprenticeship as established through appropriate

tests. Employers or entities with duly recognized apprenticeship programs have the primary responsibilities for providing appropriate aptitude tests in the selection of apprentices. If they do not have adequate facilities for this purpose, the Department of Labor shall perform this service free of charge (Art. 68, LC).

The employment of apprentices is allowed only upon the concurrence of two conditions, namely: a) the employer is engaged in a highly technical industry; and b) the apprentice is employed in an apprentice able occupation approved by the Secretary of Labor (Art. 60, LC as amended by Ex. 0. No. 111, December 24, 1986). The law does not define highly technical industries, but Sec. 2 of the Rules Implementing Ex. 0. No. 111 states that highly technical industries means trade, business enterprise, industry or other activity which is engaged in the application of advanced technology. It does not elaborate further leaving this a question of fact to be resolved on a case-to-case basis. An apprenticeable occupation is defined as any trade, form of employment or occupation which requires more than three months of practical training on the job supplemented by related theoretical instructions. (Art. 57-C, LC).

8. APPRENTICESHIP AGREEMENTS. As amended, apprenticeship agreements, including wage rates of apprentices, shall conform to the rules issued by the Secretary of Labor and Employment. The period of employment shall not exceed six months. Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75 per cent of the applicable minimum wage, may be entered into only in accordance with apprenticeship programs duly approved by the Secretary of Labor The Secretary shall develop standard model programs of apprenticeship (Art. 61, LC as am. Ex. 0. No. 111).

As to form, the apprenticeship agreement should be in writing (Art. 58 [b], LC). This is necessary not only to safeguard the rights of the apprentice, but also to protect the employment from charges of illegal dismissal. (Roxas Surveying Co. vs. NLRC 125 SCRA 36)

Every apprenticeship agreement shall be signed by the parties thereto. If the apprentice is a minor, it shall be signed in his behalf by parent or guardian, or if the latter is not available, by an authorized representative of the Department of Labor, and the same shall be binding during its lifetime. The agreement shall be ratified by the appropriate apprenticeship committee,7 if any, and a copy thereof shall be furnished both the employer and the

apprentice. Art. 62, LC).

Where the apprenticeship agreement has no force and effect, the worker hired as apprentice should be considered a regular employee. (Nitto Enterprises vs. NLRC, 248 SCRA 651)

9. WAGES OF APPRENTICES. Under the law, wage rates of apprentices, which shall be contained in t he apprenticeship agreement, shall conform to the rules issued by the Secretary of Labor and Employment (Art. 61, LC as amended). Now the rule issued by the SOLE in this respect is that the wage rate of the apprentice shall start at 75 percent of the minimum wage for the first six months; there after he shall be paid the full minimum wage, including the full cost-of-living allowance (Sec. 29, Rules Implementing Ex. 0. No. 111).

The following implications may be drawn from this rule:

a) Since the period of apprenticeship shall not exceed six months (Art. 61, LC as amended; Sec. 19, Rules Implementing Ex. 0. No. Ill), the specified wage rate is fixed for the entire duration of the apprenticeship period. Thereafter, if the apprentice is allowed to continue, he is deemed to be a regular employee under the pertinent tests for this relationship; b) While the law impliedly allows employers to device their own apprenticeship programs not in accordance with the standard model programs developed by the DOLE if they paid their apprentices the applicable minimum wage (Art. 61, LC as amended by Ex. 0. No. 111), Sec. 29 of the Implementing Rules in effect removes this option by fixing their wage rates below the applicable minimum. c) The incentive scheme provided by law (Art. 71, LC), allowing persons or entities organizing an apprenticeship program an additional deduction from taxable income of one-half of the value of labor training expenses incurred for developing the productivity and effectiveness of apprentices is also effectively negated by Sec. 29 of the Rules because one of the conditions prescribed by law to avail of this incentive is that the

employer should pay his apprentices the minimum wage, which condition becomes impossible under the said Rule.

There appears to be a discrepancy here which is indicated for revision under the proper conditions.

10. THE APPRENTICESHIP PROGRAM. As discussed above, under the rule (Sec. 29 Implementing Rules) obtaining at present --- and until and unless this rule is revoked- -apprenticeship programs may be entered into only in accordance with apprenticeship programs duly approved by the SOLE. The Secretary shall develop standard model programs of apprenticeship (Art. 61, LC as amended by Ex. 0. No. 11). This means that such programs must adhere to the pro forma models developed by the SOLE.

Prior approval by the Secretary of a proposed apprenticeship program is a condition sine qua non before an apprenticeship agreement can be validly entered into. (Nitto Enterprises vs. NLRC, supra) his requirement, plus the tact that apprenncesmp agreements snail conform to the rules issued by the SOLE, indicate the close government regulation on apprenticeships.

As regards venue of apprenticeship programs, the law allows any employer or entity to choose from any of the following training venues: a) entirely by and within the sponsoring firm, establishment or entity; b) entirely within a DOLE training center or other public training institution; or c) initial training in trade fundamentals in a training center or other institution, with subsequent actual work participation within the sponsoring firm or entity during the final stage of training (Art. 63, LC).

Apprenticeship programs may be sponsored by a single employer or firm, or by a group or association thereof, or by a civic organization. Actual training of apprentices may be undertaken: a) in the premises of the sponsoring employer in the case of individual apprenticeship

programs; b) in the premises of one or several designated firms in the case of programs sponsored by a group or association of employers or by a civic organization, or c) in a DOLE training center or other public training institution (Art. 64,LC).

The distinctive character of apprenticeship training programs is not only the period involved, which is more than three months, but also the method which consists of practical toil-the-job training supplemented by theoretical instruction.8 The responsibility for theoretical instruction rests on the employer, if conducted in his plant. If he is not prepared to assume this responsibility, the same may be delegated to an appropriate government agency (Art. 69, LC).

1l.NATURE OF THE APPRENTICESHIP RELATION; EXCEPTIONS. From the foregoing, it is evident that the apprenticeship relation is generally contractual in nature, and is primarily a voluntary undertaking by the employers and apprentices concerned. However; this allows certain exceptions where apprenticeship programs are compulsory namely:

a) When national security or particular requirements of economic development so demand, the President may require compulsory training of apprentices in certain trades, occupations, jobs or employment levels where shortage of trained manpower is deemed critical as determined by the SOLE; (Rule VI, Sec. 41 - a, OR )and b) Where services of foreign technicians are utilized by private companies in apprentice able tasks, said companies are required to set up appropriate apprenticeship programs (Id. Sec. 41 - b, OR).

Compensation, which is also subject to stipulation, similarly allows an exception. The SOLE may authorize the hiring without compensation of apprentices whose training on the job is required by the school or training program curriculum or as a requisite for graduation or board examination (Art. 72, LC).

12. VALID CAUSES TO TERMINATE APPRENTICESHIP AGREEMENT. Either party to an apprenticeship agreement may tenanted the same after the probationary period9only for a valid cause, such as any of the following:

By the employer a) Habitual absenteeism in on-the-job training and related theoretical instruction; b) Willful disobedience of company rules or in subordination to lawful orders of a superior; c) Poor physical condition, permanent disability or prolonged illness which incapacitates the apprentice from working; d) Theft or malicious destruction of company property and/or equipment; e) Poor efficiency of performance on the job or in the classroom for a prolonged period despite warnings duly given to the apprentice and f) Engaging in violence or other forms of gross misconduct inside the employers premises.

By the apprentice_ a) Substandard or deleterious working conditions within the employers premises; b) Repeated violation by the employer of the terms of the apprenticeship agreement; c) Cruel or inhuman treatment by the employer or his subordinates; d) Personal problems which in the opinion of the apprentice shall prevent him from a satisfactory performance of his job, and

e) Bad health or continuing illness (Rule VI, /Sec. 25, Omnibus Rules).

13. VIOLATION OF APPRENTICESHIP AGREEMENTS. Upon complaint of any interested person or upon its own initiative, the appropriate agency of the DOLE or its authorized representative shall investigate any violation of an apprenticeship agreement pursuant to such rules and regulations as may be prescribed by the Secretary of Labor (Art. 65, LC),

The decision of such agency may be appealed by any aggrieved person to the Secretary of Labor within five days from receipt of the decision. The decision of the SOLE shall be final and executory (Art. 66, LC).

No person shall institute any action for the enforcement of any apprenticeship agreement or damages for the breach of any such agreement, unless he has exhausted all available administrative remedies (Art. 67, LC).

14. LEARNERS. Learners make up another kind of special workers (See definition in Sec. 5, supra ). They may be hired under the following circumstances which must concur:

a) when no experienced workers are available; b) when their employment is necessary to prevent curtailment of employment opportunities; and c) such employment will not create unfair competition in terms of labor costs nor impair working standards. An employer who intends to employ a learner has to submit in writing to the Apprenticeship Division of the Regional Office concerned, copy furnished the Bureau (BLE), his leadership program which the

Division shall evaluate to determine if the occupation is learnable, and the program sufficient for training purposes. A leamership program shall be subject to periodic inspection by the SOLE or his duly authorized representative (Rule VII, Sec. 3, Omnibus Rules). A leadership program may be cancelled if, upon inquiry, it is found that the justification for the program no longer exists (Rule VII, Sec. 7 Id .).

15. THE LEARNER SHIP AGREEMENT. A leamership agreement shall include:

a) The names and addresses of the employer and the learner b) The occupation to be learned and the duration bf the training period which shall not exceed three months; c) The wage of the learner which shall be at least 75 percent of the applicable minimum wage; and d) A commitment to employ the learner, if he so desires, as a regular employee upon completion of training. All learners who have been allowed or suffered to work during the first two months shall be deemed regular employees if training is terminated by the employer before the end of the stipulated period through no fault of the learner (Art. 75, LC; Rule VII, Sec. 4 , Omnibus Rules).

From the foregoing, it is evident that learner ship differs from apprenticeship with respect to the circumstances that justify their employment, the nature of the occupation concerned, the period and method of training, and the commitment to employment. 16. HANDICAPPED WORKERS AND TRAINEES. What determines a handicapped worker is not his age or physical or mental disability per se (see definition, Sec. 5, supra), but how such disability relates to his work in a way that reduces his effectiveness therein, and impairs his earning capacity. Thus, a veteran worker in a printing press who has lost a forearm due to an accident, but continues to work there as a supervisor is not a handicapped worker. Neither is a one-legged business executive who is a wizard in corporate financing. Nor is a college professor who

is retained to teach his subject long beyond his retirement age. It is whether or not a workers disability impairs his earning capacity that determines a handicapped worker.

Handicapped workers may be employed when their employment is necessary to prevent curtailment of employment opportunities, and when it does not create unfair competition m labor costs or impair working standards. This is similar to the conditions justifying the employment of learners, minus the first condition of unavoidability of experienced workers. Hence, handicapped workers may be employed even if experienced workers are available. The reason is mainly humanitarian. In a recent case the Supreme Court ruled that handicapped workers who worked for more than six months and whose contracts were renewed are deemed regular employees since they were qualified to perform the responsibilities of their position. (Bernardo vs. NLRC et al, 310 SCRA 166)

Contents of employment agreements with handicapped workers are prescribed in the law (Art. 80, LC, Rule VIII, Sec. 3, Omnibus Rules). Like the other special workers, their rate of pay shall not be less than 75 percent of the legal minimum wage.

Handicapped workers are not precluded from being employed as apprentices or learners if their handicap is not such as to effectively impede the performance of job operations in the particular trade or occupation which is the subject of the apprenticeship or learner ship program. (Rep. Act No. 7277)

In 1994 Congress passed R.A. No. 7686 authorizing a dual training system as one of the preferred means of creating a dependable pool of trained operators, craftsmen and technicians for the economy; subject to several requirements under this law. A trainee is entitled to an allowance which in no case shall start below 75 percent of the minimum daily wage for a days work. CHAPTER V CONDITIONS OF EMPLOYMENT: HOURS OF WORK

1. EMPLOYER-EMPLOYEE RELATIONSHIP. The application of labor standards laws is predicated on the existence of an employer- employee relationship. This relationship is one wherein the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the means to be used in reaching such end. Absent this relationship, labor standards laws will not apply.

2. TESTS TO DETERMINE THE RELATIONSHIP. Jurisprudence has established a number of tests to determine the presence of employeremployee relationship. These are: a) the right to control test; b) selection and engagement of worker, c) the economic test, or payment of wages by whatever means; and d) power of dismissal.

The most decisive of these, as declared in a long line of decisions, is the right to control test. However, not every kind of control indicates an employer-employee relationship. If the employert issues rules that serve merely as guidelines toward achieving a desired result without dictating the means or methods to be employed in attaining it, control is lacking and does not fulfill the test. Those that control or fix the methodology, and bind or restrict the party hired to the use of such means constitute the required control, for they address both the result and the means to achieve it. (Insular Life Ass. Co. vs. NLRC, 179 SCRA 459) Hence, there is no employer- employee relationship if the employer exercises control only with respect to the result or amount of collections of collection agents, and not with respect to the means and methods of collection. (Singer Sewing Machine Co. vs. Drilon, 193 SCRA 270) This test also distinguishes an employee from an independent contractor To illustrate, where an insurance agent is [ free to adopt his own selling methods, and to sell insurance at his own time, he is deemed to be an independent contractor, not an employee. His claims for unpaid commissions should be litigated in an ordinary civil suit, not in a labor proceeding. (Insular Life Assurance Co. vs. NLRC, Supra; Grepalife Assurance Corp. vs. NLRC, 187 SCRA 694; Cosmopolitan Funeral Homes, Inc. vs. Maalat, 187 SCRA773) A further implication is that an agent, not being an employee, is not entitled to join a labor union. The Supreme Court has pointed out that right of control refers merely to the existence of the right and not to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee. It is enough that the former has the right to wield the power. (Megascope General Services vs. NLRC, 274 SCRA 147) In a more recent case, the Court deemed

effective control sufficient to establish employer-employee relationship. Thus, a contract with the earmarks of an agency, and stipulating that respondent was an independeht contractor, was held to be one of employment because it provided conditionalities that indicated such a relationship. Specifically, these terms were: respondent was to serve exclusively the petitioner (negating the concept of independent contractor); he was required to meet certain manpower and production quotas; and petitioner controlled the assignment to and removal of soliciting agents from his unit. These were construed to mean that respondent was under such effective control of the petitioner as to create between them an employer-employee relationship under the decisive criterion of the right-to-control test. (Insular Life Assurance Co. vs. NLRC et al,, March 12, 1998) By the same token, the relationship between jeepney operators and drivers under a boundary system is that of employer-employee, which is applicable by analogy to the relationship between taxi operators and drivers. (Martinez vs. NLRC, 272 SCRA 793)

A parallel in effective control can be drawn in the case of a college professor who is given a free hand in conducting his class work. Although appearing to be free of supervision, he is still under the effective control of his school in subject and class assignments, schedu1es grading norms, etc. Hence, a college professor is an employee of the school or university where he teaches.

The selection and hiring of personnel (b) and the power to terminate them for cause (d) also indicate an employer-employee relationship because these are aspects of an employers prerogatives in relation to his employees.

The economic test (c) has been applied liberally by the Supreme Court as the existing economic conditions prevailing between the parties which does not require the actual payment of wages to determine employer-employee relationship. Hence, under this view, the act of including a persons name in the company payroll satisfies the test. (Sevilla vs. Cou4 of Appeals, 160 SCRA 171) Similarly, the registration by the employer of a laborer with the Social Security System confirms the relationship as coverage under the SSS is premised on the existence of such relationship. (Flores vs. Nuestro and NLRC, 160 SCRA 328; Cosmopolitan Funeral Homes, Inc. vs. Maalat, supra) By the sapie token, submission by the employer of shipping articles to the POEA and payment of contributions to the Welfare Fund are tacit recognition of an employees status at the time of his death. (Eastern Shipping Lines vs. POEA, 160 SCRA 533)

3. THE RULE ON HOURS OF WORK. The cardinal rule on hours of work is: The nominal hours of work of any employee shall not exceed eight hours a day (Art. 83, LC). This does not mean that no employee may work more than eight hours a day, but if work is performed beyond eight cores in a day, the worker should be paid for the overtime work an additional compensation equivalent to his regular wage plus at least 25 percent thereof. If the overtime work is performed on a holiday or rest day, the additional compensation shall be at least 30 per cent of the regular rate of the first eight hours of such holiday or rest day (Art. 87, LC). This additional compensation is called overtime pay.

Health personnel in cities and municipalities with a population of at least one million or in hospitals and clinics with a bed capacity of at least 100 shall hold regular omce hours for eight hours a day for five days a week, or a total of 40 hours a week, exclusive of time for meals, except where the exigencies of the service require that such personnel work for six days or 48 hours, in which case they shall be entitled to an additional compensation of at least 30 per cent of their regular wage for work on the sixth day. The term health personnel includes resident physicians, nurses, nutritionists, dietitians, pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel (Art 83 LC).

4. APPLICATION OF THE RULE. The rule on hours of work applies to employees in all establishments and undertakings, whether for profit or not. Exceptions to the rule are those employees excluded by Art. 82 of the Code, namely: government employees, managerial emp1oyees field personnel, members of the family who are dependent on him for support, domestic helpers, persons in the personal service of another and workers who are paid by results as determined by the Secretary of Labor in appropriate regulation. These exclusions are mainly due to the nature of the employment or work involved or the special relationship of the employee to the employer.

Government employees of the national government or any of its political subdivisions, including those employed in government-owned or controlled corporation (with original charters) are excluded because they are not covered by the Labor Code but by the Civil Service Law, Rules and Regulations.

Managerial employees are described under Book Ill, Rule 1, Sec. 1 of the Omnibus Rules in a broad sense to comprise not only managerial employees per Se, but also those described as members of a managerial staff. The descriptions given are not strict requirements, but merely guidelines to characterize the nature of their employment.

Field personnel are non-agricultural workers who regularly perform their duties away from the office or place of business of the employed and whose actual hours of work in the field cannot be determined with reasonable certainty. (Union of Filipino Employees vs. Vivar, 205 SCRA 200)

Domestic servants and persons in the personal service of another are exempted if they perform such services in the employers home which are usually necessary or desirable for the maintenance and enjoyment thereof, or minister to the personal comfort, convenience, or safety of the employer as well as the members of the employers household.

Members of the family of the employer are exempted if they are dependent on him for support. Otherwise, they are not.

5. COMPUTATION OF HOURS WORKED. The criterion for computing hours worked is provided by the Labor Code. viz: Hours worked shall include a) all time during which an employee is required to be on duty or to be at a prescribed work place; and b) all time duringwhich an employee is suffered or permitted to work. (Art. 84, LC)

It is noteworthy that this standard does not require that a worker be actually working so that the time may be considered working time; it is enough that he be required to be on duty. The Omnibus Rules clarify this point more explicitly, thus: regardless of whether or not such hours are spent in productive laborer involve physical or mental exertion. (Rule 1, Sec. 4-a)

Moreover, a worker need not be at his usual place of work to put in working time. It suffices if he is required to be at a prescribed workplace to fulfill this purpose.

This is a favorable reform of the Labor Code over the repealed Eight Hour Labor Law (Comm. Act No. 444) which applied the present rule

on hours of work only when the work is continuous, but not when it is intermittent, and thus discounted the time when the worker was not actually working, could leave his workplace and could rest completely (Sec. 1, Id).

Entitlement to overtime pay must first be established by proof that said overtime work was actually performed before an employee may avail of this benefit. In the case of seamen, the criterion is not whether they were on board and could not leave the ship beyond the regular eight hours, but whether they actually rendered service in excess of said number of hours. (Cagampan vs. NLRC, 195 SCRA 533) This criterion was reiterated in the more recent case of Stolt Nielsen Marine Services, Inc. vs. NLRC, 264 SCRA 307)

6. THE CONSENSUAL CHARACTER OF OVERTIME WORK. A viable overtime situation requires the consent of both parties. This consent may be express or implied. On the part of the employed consent is express when he requests his employee to work more than eight hours in a 1 day. It is implied when, with knowledge that his employee is working : beyond the normal hours of work, he suffers or permits such employee to do so; here his consent is implied from his knowledge coupled with sufferance or permission (cf. Art. 84, LC). On the other hand, an employee gives his consent expressly when he agrees explicitly to the request to work overtime, or impliedly when, without expressly agreeing, he actually works overtime.

The employer cannot be compelled to give overtime work, for this is bitter of his own managerial decision. Neither can an employee be d to render overtime work against his will (save in emergency cases) use this is a labor standard prescribed by law to protect the health well- being of the worker. lb hold otherwise would be to defeat the. use of the law.

The rule is different in the emergency situations described in the , in which --as the Omnibus Rules12 put it ---compulsory overtime : is justified. In any of such cases any employee may be required by employer to perform overtime work. In these cases, it may be said consent is supplied by the law. The employee who renders overtime in any of these cases shall be paid the additional compensation hired

by law. (Art. 89, LC).

7. RULES APPLICABLE TO VARIOUS WORK SITUATIONS. real work -a-day routine contains many incidents that may put to test general rule on hours of work. Accordingly, rules have been formulated very these different incidents, as follows:

a) Waiting Time - Waiting time spent by an employee shall be considered working time if waiting is an integral part of his work or the employee is required or engaged by the employer to wait

Waiting is an integral part of some types of work. For instance: workers in an assembly-line type of manufacture have to wait for the completion of a previous stage before they can work on their own stage in the process; a bus inspector boards a bus, checks the passengers tickets, and after a few blocks alights and waits for the next bus to do the same, or drivers of company delivery trucks who wait in the parking lot for their delivery orders and loading of the merchandise before they can start their delivery trips. In these and similar cases, waiting may be said to be an integral part of the work and that the employees concerned were engaged to wait.

In other kinds of work, however, waiting is not an integral part of the job, and when it arises, the employee may be said to be waiting to be engaged. Hence, a 30-minute assembly time practiced by employees of a company can be considered idle time, and is therefore not compensable. (Africa vs. MOLE, 170 SCRA 776) In cases like this the wait is considered working time if it bene fitted the employer, and not if it benefited only the workers.

b) Subject to Call-- An employee who is required to remain on call in the employers premises or so close thereto that he cannot use the time effectively and gainfully for his own purpose

shall be considered working while on call. An employee who is not required to leave word at his home or with company officials where he may be reached is not subject to call (Book III, Rule I, Sec. 5-b OR). Conversely, if he is required to leave word where he may be reached, he is deemed to be on call even if he is away from his employers premises. It is immaterial whether or not the call comes through, for the employee is thus deprived of using the time gainfully for his own purpose.

c) Brief Rest Periods --- Work interruptions of short duration, such as coffee breaks, going to the wash room, etc. are considered working time for these intervals are too brief to be utilized effectively and gainfully in the employees own interest (Book III, Rule I, Sec. 4-d, OR).

d) Travel Time - Time spent in travel is working time if it is required by the employer, or is taken for the employers benefit. If neither of these conditions is present, it is deemed an employees personal time.

e) Lectures, Meetings, Training Programs --- Attendance in these and other similar activities is not counted as working time if all these conditions are met: attendance is outside of the employees regular working hours; attendance is in fact voluntary and the employee does not perform any productive work during such attendance (Book III, Rule I, Sec. 6 OR).

f) Necessary Work --- If the work performed was necessary, or it benefitted the employer, or the employee could not abandon his work because he had no replacement, all time spent for such work is considered as hours worked if the work was with the knowledge of his employer or immediate supervisor (Book Ill, Rule 1, Sec. 4-b OR).

g) Brownouts/Work Interruptions --Brownouts of short duration, but not exceeding 20 minutes, shall be treated as hours worked, whether used productively by the employees or not. If they last more than 20 minutes, the time may

not be treated as hours worked if the employees can leave their workplace or go elsewhere whether within or without the work premises; or the employees can use the time effectively for their own interest. In this case, the employer may extend the working hours beyond the regular schedule on that day to compensate for the loss of productive man-hours without being liable for overtime pay (Policy Instruction No. 36, May 22, 1978).

The time during which an employee is inactive by reason of work interruptions beyond his control is considered working time, either if the imminence of the resumption of work requires the employees presence at the place of work or if the interval is too brief to be utilized effectively and gainfully in the employees own interest (Book III, Rule 1 Sec. 4-c OR).

h) Meal Periods --- Generally, meal periods not less than one hour are deemed time-off from work, and fall within an employees personal time. However, there are cases when an employer may allow shorter meal periods of not less than 20 minutes (cf. Book III, Rule 1, Sec. 7 OR). In these extra ordinary cases, the shorter meal period is credited as hours worked of the employee.

8. OVERTIME OFFSETTING UNDER TIME. If an employee incurs under time work on any particular day, this may be offset by work on the same day compensating the number of hours of under time. But such under time cannot be Offset by overtime work on any other day. In the first situation, there is no overtime work since the employee, although working beyond his regular schedule, merely fills out the normal eight hours work in a day. In the second case, overtime work is present, and this shall make the employer liable for overtime pay.

Similarly, permission given to the employee to go on leave on some other day of the week shall not exempt the employer from paying the additional compensation for overtime work (Art. 88 LC).

9. COMPUTATION OF OVERTIME PAY. The term regular wage in the definition of overtime pay includes the cash wage only without deduction on account of facilities by the employer (Art. 90 LC).

In computing overtime pay, the daily cash wage has to be simplified into the hourly wage rate (HWR). If the employee is on daily wage basis, this is determined by dividing his regular wage by 8, which is the number of work hours in a day. If the employee is on a monthly basis, his HWR is arrived at by dividing his annual salary by the total work days in the year, and then dividing the quotient by 8. In either case, with the hourly wage rate determined, the formula for computing overtime pay may be expressed in this manner. HWR + OT Rate x Hours of Overtime Work

The overtime rate is not a fixed factor of .25 (25%) for this is only the minimum rate required by law. Indeed, the employer may, on his own initiative or by agreement, grant a higher overtime rate. And the law itself prescribes higher overtime rates on certain days, thus: 30 percent for rest days or holidays, and 50 percent for rest days which are also holidays.

10. COMPONENTS OF REGULAR WAGE. In the Labor Code, the basis for computing overtime pay is the regular wage. This term is more expansive than regular pay or regular base pay,. and includes fringe benefits regularly received by employees. (Nawasa vs. Nawasa Consolidated Unions, 11 SCRA 766) If a CBA uses the term regular base pay, this is allowable so long as the resulting overtime pay is not less than the statutory wage plus at least 25 percent thereof. Hence, if an employer should adopt regular base pay as basis, it must use a premium higher than 25 percent to be able to arrive at an equivalent not less than the statutory requirement. (Manggagawa ng PRC vs. Phil. Refining Co., 194 Phil. 608) If a particular rule in computing overtime pay is provided in the CBA, this rule with prevail. (Shell Oil Workers Union vs. Shell Oil Co., 70 SCRA 223)

The comprehensive guidelines for determining the components of regular wage as basis for overtime pay were outlined in Philippine National Bank vs. PEMA, 115 SCRA507, thus:

First, the pertinent stipulations in the CBA are controlling, provided the result is not less than the statutory requirement;

In the absence of any specific provision in the CBA, what are decisive are two germane considerations: a) whether or not the additional pay is for extra work done or services rendered; and b) whether or not the same is intended to be permanent and regular, not contingent nor temporarily and given only to remedy a situation which can change anytime.

Hence, COLA and longevity pay are excluded as unrelated to work done or services rendered. (PNB vs. PEMA, supra) In an En Banc resolution, the Supreme Court held that productivity bonuses are generally tied to the productivity or capacity for revenue production of a corporation; such bonuses closely resemble profit-sharing payments, and have no clear, direct or necessary relation to the amount of work actually done by each individual employee. (Phil. Duplicators Inc. vs. NLRC, 241 SCRA 380)

The decision in the PEMA case did not state when the additional pay is considered permanent and regular implicitly leaving this question to be resolved on a case-to-case basis. But in the NAWASA case, supra, it was held that extra benefits given for at least three months were deemed to be regular.

11. NIGHT SHIFT DIFFERENTIAL. Every employee shall be paid a night shift differential of not less than 10 percent of his regular wage for each hour worked between ten oclock in the evening and six oclock in the morning of the following day.

This additional compensation recognizes the universal fact that regular, normal and ordinary work is that performed during the day, and that work done at night is very exceptional and justified only on grounds of inevitable necessity. When there is no other alternative but to perform night work. It is but just that the worker should earn a greater pay than for ordinary work to compensate him to some extent for the inconvenience. (Shell Co. of the Phil. vs. National Labor Union, 81 Phil. 315)

Excepted from this rule are the following: a) government employees in the civil service; b) those of retail and service establishments regularly employing not more than five workers; C) domestic helpers

and persons in the personal service of another, d) managerial employees as defined in Book Ill of the Code; and e) field personnel and other employees whose time and performance are unsupervised by the employer; including those who are engaged on task or control basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof (Book Ill, Rule 2, Sec. 1 OR). When night work coincides with an employees overtime work, l shall be entitled to his regular wage plus at least 25 percent thereof and an additional amount of no less than 10 per cent of such overtime rate for each hour of work performed between 10 P.M. and 6 A.M. When night work is performed during an employees rest day, or on national days, he shall be paid an additional compensation equivalent to his regular wage plus at least 30 percent, and an additional amount of not less than 10 percent of such premium pay for each hour of the night period covered. By the same token, for night work during regular holidays, an employee shall be entitled to his holiday pay plus an additional compensation of no less than 10 percent of such pay for each hour of the night period covered (Book III, Rule 2, Sec. 3-5 OR).

In a proper case, receipt by an employee of overtime pay will not preclude his right to night differential pay. The latter is payment for work done during the night, and the former is payment for the excess of the regular eight-hour work. (NARIC vs. Workers Union, 105 Phil. 891)

An employer is not justified in withdrawing or reducing any benefits, supplements or payments as provided in existing individual or collective agreements or employer practice or policy by reason of this statutory policy.



1. RIGHT TO A WEEKLY REST DAY. It is the duty of every employer, whether operating for profit or not, to provide each of his employees a rest period of not less than 24 consecutive hours after every six consecutive normal work days (Art. 91-a LC).

The provision does not specify the rest day, unlike its repealed forerunner, the Blue Sunday Law (Rep. Act No. 946). In this manner, the Labor Code reflects its developmental character by promoting economic activities throughout the week, instead of only during six days thereof. Moreover, this requirement induces employers to hire one more worker to take the place of the worker who is on his rest day in a seven-day operation schedule. At the same time, it fulfills the workers need for rest to restore his energies after a sustained period of work. Hence, a workers rest day could be any day other than Sunday which is generally no longer a rest day but a regular working day. However, there are cases when Sunday could still be a workers rest day viz:

a) if it is the regularly designated rest day; b) if it is determined as the rest day through the workers preference based on religious grounds; and c) when it is deemed the rest day for employees with irregular work schedules.

2. DESIGNATION OF REST DAY. The employer shall determine and schedule the weekly rest day of his employees subject to the collective bargaining agreement and to the rules and regulations of the Secretary of Labor. However, the employer shall respect the preference of employees as to their weekly rest days when such preference is based on religious grounds.

When the weekly rest schedule is given to all employees simultaneously this shall be announced by the employer by means of a written notice posted conspicuously in the workplace at least one

week before it becomes effective. If assigned individually, the employer shall post written notices of the employees respective schedules in the same manner (Book II, Rule 3. Sec. 3 OR).

Where the choice of employees as to their rest day based on religious grounds will inevitably result in serious prejudice or obstruction to the operations of the understanding, and the employer cannot normally be expected to resort to other remedial measures, the employer may so schedule the weekly rest day of their choice for at least two days in a month (Book II, Rule 3, Sec. 4 OR).

3. WORK ON A REST DAY. Generally an employee cannot be compelled to work on his rest day. However, he may be required to do so in the emergency and exceptional conditions described in Art. 92 of the Labor Code.

The rules are silent as to whether employees are entitled to premium pay in these urgent cases. It is noteworthy that it mentions additional compensation only in cases where an employee volunteers to work on his rest day under other circumstances (than those emergency conditions enumerated). The implication appears to be that in those enumerated cases no premium pay is forthcoming since they are contingencies affecting lives, properties, and the jobs of the employees concerned, which call for volunteer services extended without compensation. (Book III, Rule 3, Sec. 6 OR).

Under circumstances other than the foregoing, where an employee volunteers to work on his rest day, he should express such desire in writing, in which case he shall be entitled to premium pay (Book HI, Rule 3, Sec. 6 OR).

4. ADDITIONAL COMPENSATION FOR WORK ON REST DAYS. An employee who is required or permitted to work on his scheduled rest day shall be paid with an additional compensation of at least 30 percent of his regular wage. If he works on a Sunday, he. is entitled to such additional compensation only when Sunday is his established rest day (Book HI, Rule 3, Sec. 7 OR).

When an employee works on a scheduled rest day falling on a national special day, he shall be entitled to an additional compensation of 50 percent of his regular wage. When he works on his scheduled rest day which falls on a regular holiday, he shall be entitled to an additional premium pay of at least 30 percent of his regular holiday pay based on his regular wage rate. If he performs overtime work on a regular holiday which is also his rest day, he shall be paid an additional compensation for the overtime work equivalent to his rest day - holiday pay for the first eight hours, plus 30 percent thereof. The regular rest day--holiday pay of an employee shall consist of 200 percent of his regular wage plus 30 percent thereof (Book III, Rule 4, Sec. 5 OR).

5. NATURE OF REST DAYS. Generally rest days are considered unpaid off-days. Consequently, work during rest days entails a compensation of the regular wage plus a premium pay of 30 percent thereof: However, if it is proved that, by agreement or otherwise, they are paid off- days, only the premium of 30 percent would have to be paid for work on these days, except if the CBA or employer practice provides for pay for rest days even if un worked. CHAPTER VII



1. KINDS OF HOLIDAYS. There are two kinds of holidays: regular holidays and special days. Regular holidays are designated by law, and need no further proclamation for their observance. Special days need * specific proclamation by the President to be observed as holidays.

Executive Order No. 203, January 30, 1987, issued an official list of these two kinds of holidays unless otherwise modified by law, order or proclamation. The list enumerates the following:

Regular Holidays--New Years Day, January 1; Maundy Thursday, movable; Good Friday, movable; Araw ng Kagitingan, April 9; Labor Day, May 1; Independence Day, June 12; National Heroes Day, last Sunday of August; Bonifacio Day, November 30; Christmas Day, December 25; and Rizal Day, December 30. Nationwide Special Days--All Saints Day, November 1; Last day of the year, December 31.

This Executive Order also provides that all laws, orders, issuances, rules and regulations or parts thereof inconsistent with it to be repealed or modified accordingly (Sec. 3 E.O. 203). Both types of holidays are considered regular working days in the sense that commercial and industrial firms may remain open for business as usual on such days. But wage rates are higher for work done on these holidays.

2. HOLIDAY PAY. Regular holidays are paid days. This means that every employee is entitled to his regular daily wage on regular holidays even if unworked. This is called holiday pay. It is intended to benefit daily-paid workers whose employment and income are circumscribed on regular holidays through no fault on their part, by the principle of no work, no pay.

Since a worker is guaranteed by law a holiday pay of 100 percent of his daily wage on such holidays, even if unworked, should he be permitted or suffered to work on a regular holiday, not exceeding eight hours, he would be entitled to be paid at least 200 percent of his regular daily wage. And if the holiday work falls on his scheduled rest day, he should be paid an additional premium pay of at least 30 percent of his holiday pay of 200 percent--in effect, 230 percent of his regular daily wage rate.

For work performed in excess of eight hours on a regular holiday, a higher overtime rate of 30 percent is added to his holiday/rest day pay. Another premium of 30 percent is computed on this overtime rate if the overtime work is done on a regular holiday which also happens to be the workers rest day.

When two regular holidays fall on the same date -- as happened on April 9, 1998 (Maundy Thursday and Araw ng Kagitingan) -- a worker

is entitled to double holiday pay (200 percent of his regular daily wage) even if he does not work. One who works on this day is entitled to the additional compensation of 200 percent on top of his regular daily wage. If it is also a workers scheduled rest day, he is entitled to an additional 30 percent premium thereon. The Bureau of Working Conditions of DOLE based this rule on Art. 94, LC, which grants the right to holiday pay, and on Ex.O. 203, which enumerates the regular holidays.

3. EFFECT OF ABSENCES ON HOLIDAY PAY. Every worker is entitled to holiday pay when a regular holiday occurs while he is on leave of absence with pay. The same rule applies if he is availing of SSS, Employees Compensation or equivalent benefits, or if he is placed on leave against his will, there being work to do.

But a worker who is on leave of absence without pay on the day immediately preceding a regular holiday would forfeit his holiday pay if he does not work on such holiday. Where the day immediately preceding the holiday is a non-working day or the scheduled rest day of the worker, he shall be entitled to holiday pay if he worked on the day immediately preceding the non-working or rest day. The purpose of this requirement is to discourage malingering among workers who might view the holiday pay as a compensating factor for being absent.

Stated differently, for a worker to lose his entitlement to holiday pay, two conditions must concur: a) he is on leave without pay on the day immediately preceding the regular holiday (or immediately preceding a non-working or rest day prior thereto); and b) he does not work on such regular holiday. If only one of these, conditions is present, he would be entitled to holiday pay.

In the case of two successive regular holidays, like Maundy Thursday and Good Friday, a worker would lose his pay for both holidays if he absents himself from work on the day immediately preceding the first holiday unless he works on the first holiday, in which case he would be entitled to holiday pay of 200 percent on the first, and 100 percent on the second holiday. If he also works on the second holiday, he would be entitled to a holiday pay of 200 percent on both days.


In cases of temporary shutdowns or cessation of work, such as in inventory-taking or turnaround and repair of equipment, and the like, a worker is entitled to holiday pay for the regular holidays falling within the period.

If the cessation of operation is due to business reverses, and is authorized by the Secretary of Labor, the employer may not pay his employees for the regular holidays during the suspension of work.

Seasonal employees who do not work during off-season are not entitled to pay for the regular holidays occurring during their off-season. Workers assigned to skeleton crews that work during the off-season have the right to be paid on regular holidays falling in that duration.

5. HOLIDAY PAY FOR CERTAIN EMPLOYEES. The Omnibus Rules state that faculty members of private colleges and universities may not be paid for the regular holidays during semestral vacations but shall be paid for such holidays during Christmas vacations (Book III, Rule 4, Sec. 8-a)

However, hourly-paid faculty members of such schools are held not entitled to pay on regular holidays--whether during semestral or vacation breaks--because these are known to both the school and faculty members concerned as no-class days, and the latter do not expect payment for said unworked days. But such faculty members must be paid (their regular rate) when a special day is proclaimed or when classes are called off or shortened due to typhoons, rallies, etc. This, it was held is in line with the declared purpose of holiday pay, which is to prevent elimination of monthly income due to work interruption. In this connection, the Supreme Court also noted that Book III, Rule IV of the Omnibus Rules is not justified by Art. 94 of the Labor Code which is silent as to faculty members paid by the hour. (Jose Rizal College vs. NLRC, 156 SCRA 27) It is debatable whether foreknowledge of regular holidays (or noclass days) is a determining factor for entitlement to holiday pay, but this is the doctrine obtaining at present for hourly-paid teachers. If this rule were applied generally, it would lead to the unwarranted conclusion that no worker is entitled to holiday pay. Expectation of payment or not is obviously a theoretical question.

Piece-rate workers are entitled to the minimum wage and 13th month pay, but not to holiday pay. (Samahang Manggagawa sa Bandolino vs. NLRC, 275 SCRA 633)

6. HOLIDAY PREMIUM. Special days, unlike regular holidays, are not paid days, in keeping with the principle of no work no pay. However, a worker who works on a special day is entitled to be paid an additional compensation of at least 30 percent of his regular wage. This is called holiday premium. Where such work on a spcia1 day falls on a worker scheduled rest day, he shall be entitled to an additional compensation of at least 50 percent of hits regular wage. The overtime rate on special holidays which are also scheduled rest days is at least 30 percent of the workers holiday premium/rest day pay.

Special days are generally regarded as unpaid off-days, in which case these rules will apply. However, if it can be proved by agreement or otherwise that they are paid off-days, the workers shall be entitled only to the premium pay, but not to his regular wage.

7. SERVICE INCENTIVE LEAVES. This benefit means that every worker who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay. Its purpose is to encourage a workers loyalty and dedication to his work. The term at least one year of service means service for twelve months, whether continuous or broken, reckoned from the date the worker started working, including authorized absences and paid regular holidays, unless the employer by practice, policy or contract considers a year as less than twelve months, in which case such period shall be considered as one year.

This benefit applies to all workers, except: a) government employees in the civil service; b) domestic helpers and persons in the personal service of another, c) managerial employees as defined in Book ill of the Labor Code; d) field personnel and other employees whose hours of work are unascertained (Union-of Filipino Employees vs. Vivar, 205 SCRA 200), including those on task or contract basis, purely commission basis, or those paid a fixed amount irrespective

of the time involved; e) those who are already enjoying this benefit; f) those enjoying vacation with pay of at least five days; and g) those employed in fins regularly employing less than ten employees.

The service incentive leave is commutable to its money equivalent if it is not used or exhausted at the end of the year The award of service incentive leave is a statutory benefit which cannot be denied to qualified workers; the same is true with respect to the 13th month pay as mandated by PD 851 (infra). (Osias Academyvs. DOLE, 19ISCRA6I2; Dentech Manufacturing Corp. vs. NLRC, 172 SCRA 588)

Illegally dismissed employees maybe awarded the money equivalent of service incentive leave that would have accrued if they were not illegally dismissed. This is not limited to three years, because the amendatory law, Rep. Act 6715, has lifted this restriction. Hence, it is fair and legal that its computation should be up to the date of their actual instatements. (Leiden Fernandez et al. vs. NLRC, Jan. 28.1998) 8. SERVICE CHARGES. All service charges collected by hotels, restaurants and similar establishments are to be distributed at the rate of 85 percent for the employees, and 15 percent for the management. The employees share shall be apportioned equally among all employees, regardless of position or employment status, who are receiving P 2,000 or less per month. The managements share shall be for its disposition to answer for losses and breakages, or at its discretion, to distribute this to employees receiving more than P 2,000 a month. Payment of employees share shall be not less than once every two weeks, or twice a month at intervals not exceeding 16 days.

In case the service charge is abolished, the share of the employees shall be considered integrated in their wages. This integration shall be based on the average monthly share of each employee for the past twelve months immediately preceding the abolition of the service charge.

To determine whether the compensation of employees in these establishments conforms to increases in the statutory minimum wages, only 50 percent of the credited service charges shall be included. Where the credited amount is less than the increase prescribed by a

minimum wage law or wage order, the employer shall pay the difference to conform to the prescribed minimum wage (Rules on PD 1614).



1.THE NATURE OF WAGES. The Labor Code defines wages to mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services tendered or to be rendered (Art. 97-f LC).

Wages then are the remuneration of labor, just as profit is the return of management, and interest the earnings of capital.

While payment of wages is usually fixed according to time, it may be ascertained on the other bases given in the legal definition without altering Its nature. Thus, payment of compensation by way of commissions does not militate against the conclusion that the person so paid Is an employee. (Cosmopolitan Funeral Home, Inc. vs. Maalat., 187 SCRA 108) And earned sales commissions are part of the monthly salary of employees for the purpose of computing their separation pay. (Songco vs. NLRC, 183 SCRA 610; Santos vs. NLRC, 154 SCRA 166) In line with this, the Omnibus Rules authorize the Department of Labor and Employment to establish the proper rates for payment of wages by result, piecework or project basis (Book Ill, Rule 7, Sec. 8 OR).

2. WAGES VS. SALARIES. In Consunji vs. kucan, 159 SCRA 107, the Supreme Court took occasion to compare the concepts of wages and salaries.

It observed that in a broad sense, the two terms are synonymous and used interchangeably. But strictly speaking, it pointed out the differences between the two in these respects:

a) Wages applies to compensation for manual labor skilled or unskilled; salaries denotes a higher degree of employment, or a superior grade of services, and implies a position or office. b) Wages indicates inconsiderable pay for a lower or less responsible character of employment; salaries suggests a larger and more permanent or fixed compensation for more important service.

3. ELEMENTS OF WAGES. In a broad sense, the term wages comprises two elements: the cash wage and facilities. The cash wage is the monetary currency paid by an employer to an employee for work or services rendered. Facilities are articles or services customarily given for the benefit of the employee or his family, excluding tools of the trade or articles or services primarily for the benefit of the employer or necessary to the conduct of the employers business. Since facilities form part of wages, their fair and reasonable value may be deducted from the cash wage. The criterion for facilities is purpose. If voluntary given as a necessary matter in the maintenance of health and efficiency of the worker, these are facilities, (State Marine Corp. vs. Cebu Seamens Asso., 7 SCRA 294) Facilities are such vital necessities that, if not given, the employee would have to buy them nonetheless, e.g. meals, lodging, essential utilities, etc. Facilities are not to be confused with supplements. ,As the term suggests, supplements are extra remuneration given to an employee, such as paid sick leaves, overtime pay in excess of the legal rate, profit-sharing, bonuses, etc. Because supplements are not deemed part of wages, their value cannot be deducted from the cash wage. A benefit or privilege granted to an employee for the convenience of the employer is not a facility but a supplement. (Mabeza vs. NLRC, 271 SCRA 670)

Certain requirements apply concerning the deduction of the value of facilities given by the employer. These are: a) the facilities customarily furnished; b) they are voluntarily accepted in writing by the employee; and c) they are charged at a fair and reasonable value.

The Labor Code prescribes that the fair and reasonable value of facilities deductible from the cash wage shall not include any profit to the employer or to any person affiliated with the employer (Art. 97-f, LC). The Secretary of Labor has determined this to be the cost of operation and maintenance, including adequate depreciation, plus reasonable allowance (not more than 5.5 percent interest on the depreciated caped invested by the employer), provided that if the total so computed is more than the fair rental value or the fair price of the commodities for sale, such fair rental value or fair price shall be the reasonable cost of the operation and maintenance (Rule VII, Sec. 6, OR). Where the employer provides subsidized meals or snacks to his employees, the subsidy shall not be less than 30 percent of the fair and reasonable value of such facilities. In this case, the employer may deduct from wages not more than 70 percent of the value of the meals and snacks (Id., Sec. 4 OR).

4. CIRCUMSTANCES REGARDING PAYMENT OF WAGES. The law regulates the circumstances surrounding the payment of wages. Hence, it provides the following rules in point:

A. Form of Wages.--As a general rule, wages shall be paid in legal tender. Payment by check or money order is allowed where such manner of payment is customary, where it is stipulated in a collective agreement, or even at the option of the employer where all the following conditions are met:

1) there is a bank or other facility for encashment within a radius of one kilometer from the workplace; 2) the employer, or any of his agents or representatives, does not receive any pecuniary benefit directly or indirectly from the arrangement; 3) the employees are given reasonable time during banking hours to withdraw their wages from the bank, which rune shall be considered as compensable hours worked if done during working hours; and

4) the check payment is with the written consent of the employees concerned if there is no collective agreement authorizing this manner of payment.

The Labor Code prohibits payment of wages by means of promissory notes, vouchers, coupons, tokens, tickets, chits or any object other than legal tender, even when expressly requested by the employee. This prohibition is more stringent than that provided by the Penal Code covering this same act, among others, as Other Similar Coercions under its Art 288 which carries the exempting clause unless expressly requested by the employee. Hence, an employer who pays wages in any of these prohibited forms under this circumstance still incurs absolute liability under the Labor Code, although his liability under the Penal Code is qualified by the said exempting clause.

B. Time of Payment-- Wages are to be paid at least once every two weeks, or twice a month, at intervals not exceeding 16 days. If this is not possible due to force majeure or circumstances beyond the employees control, the employer should pay the wages immediately after such contingency has ceased. In no case may an employer pay wages with less frequency than once a month (Art. 1013. LC).

Payment of wages of employees engaged to perform a task which cannot be completed in two weeks shall be subject to the following conditions, in the absence of a collective bargaining agreement or arbitration award:

1) that payments are made at intervals not exceeding 16 days, in proportion to the amount of work completed; and 2) that final settlement is made upon completion of the work (Id). C. Place of Payment--As a general rule, the place of payment shall be at or near the place of undertaking. Payment at some other place is permissible only under the following circumstances:

1) when due to the deterioration of peace and order conditions, or by reason of actual or impending emergencies caused by calamity, payment at or near the workplace is impossible; 2) when the employer provides free transportation to the employees back and forth; and 3) under any other analogous circumstances, provided that the time spent by the employees in collecting their wages shall be considered as hours worked.

Prohibited places or payment are basis, night or day clubs, drinking establishments, massage clinics, dance halls, or similar places, and in places where games are played with stakes of money or things representing money, except in the case of persons employed in said establishments.

D. Direct Payment of Wages--Wages are to be paid directly to the employee entitled thereto, except in the following cases:

1) where the employer is authorized in writing by the employee to pay his wages to a member of his family; 2) where payments to another person of any part of the employees wage is:

a) specifically required by law, even without the employees consent, e.g. withholding tax, SSS and Medicare contributions; b) authorized by law, with the employees written consent, e.g. insurance premiums of the employee, union check-offs, payments to a cooperative, deductions for facilities; or

c) authorized by law, even without the employees consent, e.g. deposits for loss or breakage (Art. 114, LC), court judgments for support. 3) In case of death of the employee, his wages may be paid to his heirs without the necessity of intestate proceedings. If the heirs are all of age, they should execute an affidavit attesting to their relationship to the deceased, and the fact that they are his heirs to the exclusion of all other persons. If any of the heirs is a minor, the affidavit should be executed in his behalf by his natural guardian or next of kin. The affidavit is to be presented to the employer who shall make payment through the representative of the Secretary of Labor. This official shall act as referee in dividing the amount paid among the heirs.

5. RESPONSIBILITY FOR PAYMENT OF WAGES. The employer is the person responsible for the payment of wages of his employees. Under the law, the term employer includes any person acting directly or indirectly in the interest of an employer in relation to an employee, while an employee includes any individual employed by an employer The law further defines the term employ as including to suffer or permit to work (Art. 97-b, c & e, LC). These definitions broaden the scope of the employment situation, as well as the responsibility for the payment of wages.

This obligation, as well as others established by the Labor Code, may give rise to liability if not fulfilled by an employer Where the employer is a corporation or artificial person, is it the corporation itself or its officers concerned that incurs the liability, whether civil or criminal? This question brings into play the doctrine of corporate fiction which holds that a duly registered corporation acquires a legal personality separate and distinct from that of its stockholders, officers and members. However this doctrine is not inviolable due to a counterpoint dictum, by way of exception, which allows piercing the veil of corporate fiction under certain circumstances.

The question of whether a corporation is a mere alter ego is one of fact. Piercing the veil of corporate fiction may be allowed only if the following elements concur:

(1) control -- not mere stock control, but complete domination -- not only of finances, but of

policy and business practice in respect to the transaction attacked, must have been such that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) such control must have been used by the defendant to commit a fraud or a wrong to perpetrate the violation of a statutory or other positive right; and (3) the said control and breach of duty must have proximately caused the injustice or unjust loss complained of. (PNB vs. Andrada Electric and Engineering Co., April 17, 2002)

The rationale for this is that the fiction of corporate personality was envisaged for convenience and to serve justice, therefore it should not be used as a subterfuge to commit injustice and circumvent labor laws. (Indino vs. NLRC, 178 SCRA 168) Jurisprudence has applied this exception in cases involving unpaid wages and backwages, (A. C. Ransom Labor Union vs. Ople, 150 SCRA 498), in overseas recruitment (del Rosario vs. NLRC, 187 SCRA 777), in unfair labor practices (NAFW vs. Ople, 143 SCRA 124), and in illegal dismissals (Pabalan and Lagdameo vs. NLRC et al, 184 SCRA 495) As the Supreme Court has ruled, the shield of corporate fiction should be pierced when it is deliberae1y and maliciously designed to evade financial obligations to employees. (Pabalan and Lagdameo vc NLRC et al., supra)

As a general rule, officers of a corporation are not personally liable for their official acts, unless it is shown that they have exceeded their authority or acted with malice or in bad faith. By extension, mere ownership by a single stockholder or by another corporation of all or nearly all capital stocks of a corporation is not by itself sufficient ground for disregarding corporate personality (Pabalan and Lagdameo vs. NLRC, supra). Although in one case the Court ruled that one who is president and general manager and owner of a corporation is in fact and legal effect the corporation, but the case involved the elements of unfair labor practice and laches. (Carmelcraft Corp. vs. NLRC, 186 SCRA 393)

For the separate juridical personality of a corporation to be disregarded there must be some fraud or wrongdoing which must be clearly and convincingly established; intent to evade payment cannot be presumed nor implied. In case of non-payment of wages, if the person responsible cannot determined, the person liable is the

president as he appears to be the manager when the violation took place. His liability is joint and several with all who may thereafter succeed to this office. This continuing liability is indicated, otherwise the workers may be deprived of their rights thru the election of a president without liable assets. (A.C. Ransom Labor Union vs. Ople, supra) In overseas recruitment cases, the agency president may also incur personal liability on the same grounds, but judgment should initially be enforced against the cash and surety bonds filed with the POEA (Rule II, Sec.4.). These are subject to replenishment, and failure to replenish shall cause suspension or replenishment, and failure to replenish shall cause suspension or cancellation of the recruiter's license. (del Rosario vs. NLRC, supra)

Another instance where corporate personality may be disregarded is where he employer corporation is no longer existing and is unable to satisfy the judgment in favor of employees, in which case the president should be held personally liable for acting on behalf of the corporation. (Gudez vs. NLRC, 183 SCRA 644)

6. ADDED LEVELS OF RESPONSIBILITY. The law sets an additional level of responsibility for payment of wages in contracting situation where an employer contracts with another person for the formers work or who, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project, wherein the principal is deemed an indirect employer (Arts.106 and 107, LC). In both cases, the principal concerned is liable jointly and severally with his contractor or sub-contractor to do so.

However, the employer or indirect employer may require the contractor or sub-contractor to furnish a bond equal to the cost of labor under the contract on condition that the bond will answer for the wages due the employees in case of failure to pay the same (Art.108, LC).

7. C0NTRACTlNG/SUBCONTRACTING ARRANGEMENTS. On Feb. 21, 2002 the DOLE issued its latest rules governing contracting and subcontracting arrangements. The rules, known as Dept. Order No. 18- 02, established a trilateral relationship in such arrangements. This relationship involves the principal who farms out a job or service, the contractor or subcontractor who has

the capacity to undertake the performance of the job or service, and the contractual workers engaged by the contractor or subcontractor to accomplish such work or service.

In this relationship the contractor or subcontractor shall be considered the employer of the contractual employees in the application of the Labor Code and other pertinent laws. The principal shall be deemed the employer of the contractual workers:

(a) where there is a labor-only contracting, or (b) where the contracting arrangement falls within the specific prohibitions imposed by the rules (infra).

The contractual workers shall be entitled to all the rights and privileges due regular employees under the Labor Code 8. GENERAL AND SPECIFIC PROHIBITIONS

(A) General Prohibitions

Labor-only contracting is declared prohibited. This refers to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job or service for a principal, and either of these elements is present:

(a) the contractor or subcontractor does not have substantial capital or investment actually and directly used in the performance or completion of the job or service, and the employees recruited or supplied are performing activities directly related to the main business of the principal; or (b) the contractor does not exercise the right to control over the performance of the work of the contractual employees. This prohibition applies without prejudice to the Labor Code provision against unfair labor practice

(Art. 248-c).

(B) Specific Prohibitions are:

(a) Contracting Out a job or service not done in good faith nor justified by the exigencies of the business, where it results in the termination of regular employees and reduction of work hours or of the bargaining unit. (b) Contracting out work with a Cabo, i.e. a person or group which, in the guise of a labor organization, supplies workers to an employer with or without any monetary consideration in the capacity of agent or ostensible independent contractor. (c) Exploiting the weakness of a contractual employee to undermine his security of tenure, basic rights, or circumventing the provisions of regular employment, in any of the following instances: i) In addition to his assigned functions, requiring contractual employees to do work currently being done by the regular employees of the principal or of the contractor or subcontractor; ii) Requiring him to sign, as a precondition to employment or continued employment, an antedated resignation letter, a blank payroll, a waiver of labor standards, or a quitclaim releasing the principal contractor or subcontractor from any liability as to payment of future claims, and iii) Requiring him to sign a contract fixing the period of employment to a term shorter than the term of the contract between the principal and the contractor or subcontractor, unless the latter contract is divisible into phases requiring different skills, and this is made known to the employee at the time of engagement. (d) Contracting out of a job or service through an in-house agency engaged in the supply of labor, which is owned, managed or controlled by the principal, and which operates solely for the principal; (e) Contracting out of a job or service directly related to the business or operations of the principal by reason of a strike or lockout whether actual or

imminent; (f) Contracting out of a job or service being performed by union members when it will restrain or coerce employees in the exercise of their right to self organization as provided by the Labor Code.

9. OTHER REQUIREMENTS. Dept. Order No. 18-02 also imposes the following requirements:

(a) It establishes a registration system for contractors and subcontractors to install effective labor market information and monitoring. Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting. Registered contractors are to apply for renewal of registration every three years. (b) It requires the principal or the contractor or subcontractor to produce a copy of their contracts in the ordinary course of inspection. (c) it requires the contractor or subcontractor to submit an annual report to the appropriate regional office.

10. DISTINCTIONS AND IMPLICATIONS. Distinguishing between these two types of contracting arrangements is crucial in determining the consequences arising there from. In one case, the Supreme Court held that a firm could not be considered a labor-only contractor because it had substantial capital (P1 million fully subscribe and paid for), noting that the law (Art. 106 LC) does not require. both substantial capital and investment in the form of tools, equipment, machinery, etc. Further, the Court observed that While the services furnished may be considered directly related to the principal business of the employer (ef. Art. 106), nevertheless they are not necessary in the conduct of the principal business of the employer (Neri vs. NLRC et al., 224 SCRA 717).

The pivotal consideration to distinguish these two types of contracting is this: In job contracting, the contractor is an independent businessman with substantial capitalization or

investment, engaged in rendering a certain job or service, who contracts with a principal to perform a specific job or service relevant to the principals business, using his own resources and under his own responsibility. On the other hand, a labor-only contractor is basically a recruiter who contracts to furnish manpower to a principal. The other factors are secondary and supplemental. Thus, in one case, the Supreme Court dismissed the argument that the contractor was not a labor- only contractor because it possessed substantial capital or investment in the form of office equipment, tools and trained service personnel by holding that the definition of labor-only contracting in the Rules must be read in conjunction with the definition of job contracting in the same Rules (Phil. Bank of Communications vs. NLRC, 146 SCRA 347). And in another case, it ruled that a service contractor which provided helpers, janitors, janitresses, firemen, and mechanics to a garments manufacturer performed jobs directly related to the business of the principal, considering that they were rehired every year for three years (Guarin, et al., vs. NLRC & Lipercon Services, 178 SCRA 267).

A more definitive ruling was made by the Court in a recent case. It held that two elements must exist for a finding of labor-only contracting: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and (b) he workers recruited and placed by such person are performing activities directly related to the principal business of such employer. Regarding the second requirement, the Court noted that if the activities performed may be considered directly related to the principal business of the employer, they do not fall within this requirement if they are not necessary to its operation but are merely incidental thereto, as opposed to being integral, without which production and company sales will not suffer. (Filsyn vs. NLRC, June 14, 1996; Underscoring suplied)

Other criteria have been advanced to characterize an independent contactor. These are: an independent business, nature and extent of the work, skills required, term and duration of the relationship, right to assign performance of a specific piece of work, right to control and discipline workers, payment of worker's wages, control of work premises, whether or not the contractor supplies the tools, equipment and materials for the job, and the mode, manner and terms of payment (Brotherhood Labor Unity Movement vs. Zamora, 147 SCRA 49). These criteria are helpful in differentiating one with the other, but the main consideration, drawn from the Rules and applied in jurisprudence, remains as explained above.

The legal implications of these types of contracting are as follows:

1. Jon contracting is permissible under the law; labor-only contracting is prohibited as contrary to the public policy because its runs counter to the constitutional policy to promote full employment, and impairs the rights of workers.

2. Earlier, it was held that in labor-only contracting, an employer- employee relationship exists between the principal and the contractor including the latter's "contract workers" ( Broadway Motors vs. NLRC and Apolinario, 156 SCRA 522). But in a later case, this pronouncement was modified to the effect that the labor- only contractor is considered merely an agent of the principal. (Industrial Timber Corp. vs. NLRC, 169 SCRA 841). Consequently, the resultant liability must be shouldered by either one or shared by both. (Tabas vs. California Mfg. Co., 169 SCRA 497)

3. The principal in job contracting is deemed an indirect employer. He is jointly and severally liable for the wages of the contractor's employees in the event the latter fails to pay the same. The principal in this case is also liable for the violations of the Code committed by the contractor to the same extent as a direct employer (Art. 109 LC). Thus, it has been held that both direct and indirect employers are jointly and severally liable for violations of labor standards laws, which include wages and other employment benefits and unfair labor practices (Deferia vs. NLRC, 194 SCRA 525) The principal in labor-only contracting is directly and singularly liable for the wages of the workers placed by his contractor in the same manner and extent as if the latter were directly employed by him. This liability covers not only wages, but also allowances, 13th month pay, overtime pay, holiday pay, plus reinstatement and back wages in proper cases. The indirect employer is solidarity liable with the contractor for the 13th month pay of the latters employees. Although not part of the Labor Code, violation of this requirement is deemed to be a violation of the Code. (San Miguel Corp. vs. NLRC, 209 SCRA 632; Aquino vs. NLRC, 206 SCRA 118) But the principals liability is limited to the civil liability involved (Art. 104, LC). While the extent of liability may not be appreciably different

between the two, the nature of the liability differs: jointly and severally in one, singly and directly in the other. 4. A finding of labor-only contracting is equivalent to a finding that there is employer-employee relationship between the owner of the project and the employees of the contractor. (Industrial Tunber Corp. vs. NLRC, supra) Casual employees in this situation become regular employees after completing one year of service, whether continuous or broken, (Phil. Bank of Communications vs. NLRC, supra; BLUM vs. Zamora, supra) unless they were contracted for a specific project. However, if such workers form a union, ask for collective bargaining, and charge the principal with unfair labor practice for refusing, this will not prosper if the principal already has a recognized bargaining agent in the bargaining unit. They should follow the Codes procedure for this. (BLUM vs. Zamora, supra) Should a wage increase supervene in a job contracting situation, the principal is not obliged to pay this directly. It is sufficient that he reimburse the contractor who should pay the wage increase directly, since there is no privacy of contract between the principal and the contractors workers. (Eagle Security Agency vs. NLRC, 172 SCRA479)

11. WORKER PREFERENCE IN CASE OF BANKRUPTCY. The law protects workers in case of bankruptcy or insolvency of the employer This protection is established in Art. 110 of the Labor Code creating a worker preference in such an unlimited period, aid covers not merely unpaid wages, but other monetary claims as well.

Before its latest amendment, Art. 110 made no mention of how worker preference stood in relation to the governments claims against the employer. This question was resolved in favor of the government in a case involving unpaid taxes and customs charges due the government since these constituted a special lien on the property of the debtor The ruling also pointed out that Art. 110 should be read together with the Civil Code provisions on concurrence and preference of credits, 13and that worker preference cannot rise higher than special preferred credits as it falls under ordinary preferred credits. (Republic vs. Peralta, 150 SCRA 37)

The amendment introduced by R. A. 6715 expressly provided the priority of worker preference over not only government claims, but also those of other creditors in these words: xxx Such unpaid wages

and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid. Nevertheless, subsequent jurisprudence has reaffirmed the Peralta doctrine to the effect that worker preference is subject to the Civil Code scheme on classification and preference of credits. The Supreme Court has held that Art. 110 does not create a lien, but only a preference which applies to claims that do not create a charge on particular property (DBPvs. NLRC, 183 SCRA 328; Bolinao vs. Padolina, 186 SCRA 368; DBP vs. Santos, 171 SCRA 138). Hence, a mortgage credit is superior to worker preference, for a-preference applies only to claims which do not attach to specific property, whereas a mortgage creates a lien or charge on a particular property. A mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. It creates a real right enforceable against the whole world. It is a lien on an identified property, which a preference is (DBP vs. NLRC, supra; Hautea vs. NLRC, 230 SCRA 119)

An NLRC decision (Pascua vs. Cag. Valley Med. Center, Dec. 28, 1983) expressed the view that Art. 110 did not require a declaration of bankruptcy and judicial liquidation. However, later Supreme Court decisions have ruled to the contrary. Thus, the Court has categorically stated that a declaration of bankruptcy or a judicial liquidation must be present before this preference may be enforced. Art. 110 cannot be invoked absent a formal declaration of bankruptcy or a liquidation order The reason adduced by the Court is that there must be a judicial proceeding or a proceeding in rem before preference of credits can be applied in order to bind all interested persons, whether known to the parties or not. This is necessary for an authoritative, fair and binding adjudication4. (Bolinao vs. Padolina, supra; Comm. of Internal Revenue vs NLRC, 238 SCRA 42)

The court observed that in the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvents properties among his creditors. So there must first be some proceeding where notice to all the insolvents creditors may be given and where the claims of preferred creditors may be bindingly adjudicated. The preferred right of creditors attains significance only after properties of the debtor have been inventoried and liquidated, and the claims of other creditors have been established (DBP vs. NLRC, supra). Going further, the Court pointed out that a declaration of bankruptcy or a judicial liquidation is still required as creditors have to be identified, and assets inventoried to effect the preference. Absent such declaration, this preference

cannot be invoked. lb effect this remedy, the Court said, workers may institute involuntary insolvency proceedings against the employer, where their claims can be asserted against the latters assets. (DBP vs. NLRC, supra; DBP vs. Santos, supra) In the final analysis, the significance of Art. 110 in the same scheme of concurrence and preference of credits is to raise workers money claims into first priority among ordinary preferred credits under Art. 2244 of the Civil Code. (Banco Filipino vs. NLRC, 188 SCRA 700)

12. PROHIBITED ACTS REGARDING WAGES. The law prohibits the following acts regarding wages:

a) Interference in the disposal of wages--No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages. He shall not in any manner force, compel, or oblige his employees to purchase merchandise, commodities, or other property from the employer or from any other person, or otherwise make use of any store or services of such employer or any other person (Art. 112, LC). It is the element of compulsion that makes this act reprehensible. Compelling patronage is also penalized as Other Similar Coercins under Art 288 of the Penal Code. b) Unlawful deductions on wages--It is unlawful to make any deduction from the wages of any employee for the benefit of the employer or his representative or immediacy as consideration of a promise of employment or retention in employment (Art. 117, LC). It is also unlawful for an employer to reduce wages and benefits, discharge or in any manner discriminate against any employee who has filed any complaint or instituted any proceeding to recover wages, or has testified or is about to testify in such proceedings (Art. 118 LC).

No employer, in his own behalf or in behalf of any person, may make any deduction from the wages of his employees, except in the cases allowed by law, such as: i) When specifically required bylaw, even without the employees consent, e.g. Withholding Tax, SSS f Medicare contributions. ii) When authorized by law, with the employees consent, e.g. reimbursement for insurance premiums

paid by the employer on the workers insurance, check-offs on union dues, deductions on the value of facilities, payments to employees cooperatives. iii) When authorized by law, even without the employees consent , e.g. deposit for loss or damage, court judgments for support. iv) When the deductions are authorized by regulations issued by the Secretary of Labor. C) Deposits for loss or damage--In general, the Code prohibits an employer from requiring his worker o make deposits kom which deductions shall be made for the reimbursement of loss or damage to tools, materials or equipment supplied by the employer The exception is when the employer is engaged in such trade, occupation or business where making deductions or requiring deposits is a recognized practice, or is necessary or desirable as determined in appropriate rules and regulations (Art. 114 LC), The pertinent rule allows this practice based on the above premise, but subject to the following conditions:

i) that the employee concerned is clearly shown to be responsible for the loss or damage; ii) that the employee is given reasonable opportunity to show cause why deduction should not be made; iii) that the amount of such deductions is fair and reasonable, and shall not exceed the actual loss or damage; and iv) that the deduction from the wages of the employee does not exceed 20 percent of his weekly wages (Sec. 14, Rule VIII OR). d) Withholding of Wages and Kickbacks -. It is unlawful for any person, directly or indirectly to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat of dismissal or by any other means whatsoever without the workers consent (Art. 116 LC). Parenthetically, it may be noted that in cases of unlawful withholding of wages the culpable party may be assessed attorneys

fees equivalent to 10 percent of the amount of wages recovered (Art. 111-a L,C; Lantion vs. NLRC, 181 SCRA513). In any judicial or administrative proceeding for recovery of wages, it is unlawful to demand or accept attorneys fees which exceed 10 percent of the amount of wages recovered (Art. 111-b LC).

e) False Reporting--It is likewise unlawful for any person to make any statement, report or record filed or kept pursuant to the provisions of the Labor Code, knowing such statement, report or record to be false in any material respect (Art. 119 LC).

13. ADMINISTRATION AND ENFORCEMENT MEASURES. The Labor Code has established measures to administer its provisions seafaring wages, and to enforce the rights created thereby in an equitable and expeditious manner. These measures are explained below:

A. Visitorial and Enforcement Powers

These two complementary powers to administer and enforce the law are conferred by the Code on the Secretary of Labor or his duly authorized representatives, i. e. the Regional Directors.

The victorial power is established by Art. 128 (a). This power grants to said officials, including labor regulation officers, access to employers records and premises at any time of the day or night whenever work is being undertaken there, and the right to copy from such records, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or aid in the enforcement of the Code and of any labor law, wage order or rules issued pursuant thereto.

The enforcement power is provided by Art. 128 (b), as amended by Ex. 0. 111. In its amended form, this provision states in pertinent part:... where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized

representatives shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code arid other labor legislation based on the findings of labor regulations officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority in the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officer and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the normal course of inspection.

These two powers ate thus subject to qualification. The Visitorial power must be conducted in the workplace while work is being undertaken there. The enforcement power, to be validly exercised, must conform to the following conditions:

a) The employer-employee relationship still exists. The purpose is to assure the worker the rights and benefits due him under labor standards law without having to go through arbitration. The worker need not litigate to get what legally belongs to him. (Maternity Childrens Hospital vs. Secretary of Labor et. al., 174 SCRA 632) b) The findings of labor regulations officers or industrial safety engineers were made in the course of inspections (cf. Policy Instructions No. 37, DOLE; PD 1391). c) The employer does not contest such findings nor raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the normal source of inspection. A contest of this nature by the employer may divest the Regional Director of jurisdiction to exercise his enforcement power. (SSK Parts Corp. vs. Camas, 181 SCRA 676)

Awards granted as a result of the proper exercise of the visitorial and enforcement powers are not confined to those employees who signed the complaint inspection but are applicable to all who were employed by the establishment concerned at the time the complaint was filed, even if they were not signatories thereto. This is because these powers are relevant to, and exercise able over establishments, not over individual members or employees thereof. What is sought to be achieved by their exercise is the observance of, and/or compliance by such firm or establishment with labor

standards laws. Necessarily, in case of an award resulting from their violation by such establishment, all the employees should benefit there from. However, the award will not apply to those who were no longer employed with the establishment at the time the complaint was filed, having resigned or retired from their jobs. Maternity Childrens Hospital vs. Secretary of Labor, supra)

In considering these two powers, it is relevant to note that, as worded, the visitorial power is broader in application than the enforcement power For the visitorial power may be exercised to determine violations or aid in the enforcement of the Code and of any labor law, wage order or rules issued pursuant thereto. This scope is extensive enough to include labor relations law as well. On the other hand, the enforcement power is granted to order and administer x x x compliance with the labor standards provisions of this Code and other labor legislation. . . . which covers only labor standards laws. This is in line with the policy transferring labor standards cases from the arbitration system to the enforcement system (Policy Instructions No. 7, DOLE). This is intended to provide workers immediate access to the rights and benefits that belong to them., without being inconvenienced by arbitration or litigation processes that are not only nerve-wracking, but also financially burdensome in the long run. (Matemity Childrens Hospital vs. Secretary of Labor supra)

B. Recovery of Wages, Simple Money Claims

Art. 129 of the Labor Code, as amended, confers yet another power on the Regional Director or any of the duly authorized hearing officers of the Department, namely, that upon complaint of any interested party, through summary proceedings and after due notice, to hear and decide any matter involving the recovery of wages and other monetary claims and benefits, including legal interests, owing to an employee or person employed in domestic or household service or house helper under this Code, arising from employer-employee relations; Provided, that each complaint does not include a claim for retirement: Provided further, that the aggregate money claim of each employee or house helper does not exceed P5,000. . . (Underscoring supplied.) This is commonly called the recovery power.

In order that a Regional Director may have jurisdiction over cases involving recovery of wages and other monetary claims and benefits, all the following requirements of Sec. 2., R.A. 6715 must be

present. viz:

a) The claim is presented by an employee or person employed in domestic/household service, or house helper b) The claim arises from employer-employee relationship. c) The complaint does not include a claim for reinstatement. If employer-employee relationship no longer exists, and the claimant does not seek reinstatement, it becomes a mere money claim cognizable by the labor arbiter, not by the Regional Director (Star Security Detective Investigation Agency vs. Secretary of Labor, 187 SCRA 358) d) The aggregate money claim, including legal interest, of each employee or house helper does not exceed P5,000. If it does, the labor arbiter has exclusive jurisdiction. (Servandos Inc. vs. Secretary of Labor, 184 SCRA 664; Aboitiz Shipping Corp. vs. de la Sema, 184 SCRA 551) Otherwise, jurisdiction over money claims of workers is conferred on Regional Directors, concurrently with Labor Arbiters. (M. Ramirez Industries vs. SOLE, 266 SCRAIII)

The Code provision (Art. 129 LC as am.) establishing this power in its present form, including the requirements for its exercise, was introduced by R.A. 6715 which took effect on March 21, 1989 (15 days after its publication). This amendment followed the rulings in Briad Agricultural Development Corp. vs. de Ia Sema, 179 SCRA 270 and in Camus Engineering vs. Secretary of LaboL Subsequently, the Court gave the amendments retroactive effect, being curative in nature, and modified its decisions in these two cases. The correct doctrine is now stated in the Servandos Inc. and Aboitiz Shipping cases, supra.

The appeals procedure differs for these two powers. Orders of the Regional Director in the exercise of the enforcement power are generally final and executory unless appealed to the Secretary of Labor within ten calendar days from receipt thereof (Rule IV, Sec. 1, Rules on the Disposition of Labor Standards. Cases). Decisions or awards made by the Regional Director under the recovery power may be appealed within five calendar days from the submission of the last pleading required or allowed under its rules (Sec. 2, R.A. 6715). In

both cases, the grounds for appeal are the same: prima facie evidence of abuse of discretion on the part of the Regional Director, the order was secured through fraud, coercion, or graft and corruption; the appeal is made on purely questions of law; or serious errors in findings of fact which if not corrected, would cause grave or irreparable damage or injury to the appellant. These are the same grounds for appeal from the decision of labor arbiters (Art.223, LC, as am.).

14. COMPROMISE AGREEMENTS. Any compromise settlement including those involving labor standards laws, voluntarily agreed upon 1 the parties with the assistance of the Bureau of Labor Relations or it Regional Office shall be final and binding upon the parties. The NLRC any court shall not assume jurisdiction over issues involved there except in case of non-compliance thereof or if there is prima fact evidence that the settlement was obtained through fraud, misrepresentation or coercion (Art. 227 LC).

A similar rule, with specific reference to the visitorial power state Should the parties arrive at an agreement as to the whole or part of to dispute, said agreement shall be reduced in writing and signed by the part in the presence of the Regional Director or his duly authorized representative (Rule II, Sec. 8 Rules on the Disposition of Labor Standards Cases).

The requirement of assistance or presence of the said labor officials important because if disregarded, the agreement is deemed not duly executed. (Atilano vs. de la Sema, 182 SCRA 886)



1. COST OF LIVING ALLOWANCE: NATURE AND SCOPE. This wage-type benefit was originally

designated Emeiency Living Allowance when it was first mandated by PD 525 on July 31, 1974 w help meet the increase in the daily expense of workers as a result of escalating prices occasioned by the global energy crisis in the 70s. It was given as some form of compromise. While it increased the labor costs of employers, it was provided that the allowance was not in the nature of wages. Hence, it was not to be included in the computation of additional compensation and other employee benefits.

Since then, a succession of other decrees increased this allowance which became better known as Cost-of -Living Allowance, or COLA for short. Two of these decrees--PD 1614 and Ex. 0. 178--integrated the allowances granted by five Wage Orders into basic wages.

This allowance applies to employees, regardless of employment status, working in commercial, industrial and agricultural establishments, as well as non-profit institutions, provided they are receiving less than the cut-off wage ceiling per month. This refers to the basic wage, not the gross wage. Additional benefits not an integral part of the basic wage are not to be included. The previous exception of distressed industries was eliminated by PD 1364, May 1, 1978.

2. BASIS FOR ENTITLEMENT TO COLA. As with all labor standards, COLA is predicated on employer-employee relationship. But the criterion to determine if a worker is entitled to this allowance in a given instance is whether or not the worker concerned is being paid his basic pay (linpiem. Rules oWage Orders Nos. 2, 3, 5, & 6; Globe Mckay vs. NLRC, 163 SCRA 71). Hence, if a worker is not entitled to his basic pay, neither is he entitled to his COLA. The application of this guideline involves the effect of CBA stipulations. Thus, monthly-paid employees whose monthly salaries cover all days in a month are deemed paid their basic wages, and should be entitled to their COLA on all those days even if unworked. Conversely, if the CBA computes monthly basic pay on the basis of five days a week (or 22 days a month) the employees COLA should be computed on this basis. The CBA is the law between the parties, and if not acceptable, it can be the subject of future negotiations. (Globe Mckay vs. NLRC, supra)


Employees are paid their full COLA even if on leave of absence, if such leave is authorized by the employer or when the same is with pay. But deductions from the COLA may be made corresponding to the number of days in which an employee was on leave of absence without pay, in the absence of any agreement or practice to the contrary.

Payment of this allowance is in the form of cash, and made on regular paydays. Originally, the allowance could be given in kind, at the option of the employer, provided these are in the form of basic prime commodities, but this option has been abolished.

4. WAGE INCREASE INSTEAD OF COLA INCREASE. An employer may grant a wage increase instead of an increased cost-of-living allowance mandated by law, and the same would constitute compliance therewith, provided the wage increase is not less than the increase in allowance required by law, and that the grant was prompted by a desire on the part of the employer to comply with such law.

The implication is that for a wage increase to be deemed motivated in compliance with a law or order increasing allowance, the wage grant should be made after such law or order, for how can one claim a desire to commonly with a law or order that is not yet issued? Moreover, if the wage increase was given due to a stipulation in the Collective Bargaining Agreement, or of some other agreement as a result of concerted activities, this does r t fulfill the second condition and will not constitute compliance. In such cases, the employer will have to abide by the decreed COLA increase, in addition to the wage increases given.

If the wage increase was given before the law or order requiring a COLA increase, it should fall within the cut-off period provided in such law or order to be considered compliance therewith. If the grant falls outside this period, it cannot be so treated, for this would result in a diminution of benefits already enjoyed.

5.13TH MONTH PAY: NATURE. The 13th month pay is a year- end pay equivalent to one-twelfth of the basic salary of an employee within a calendar year, which is demandable as a legal obligation. The 13th- month pay is in the nature of wages while bonuses are mere supplements or fringe benefits. (Marcopper Mining Corp. vs. Ople, 106 SCRA 75) It is a

statutory benefit which cannot be denied to employees. (Osias Academy vs, DOLE, 192 SCRA 612) However, it is not included in the computation of additional employee benefits.

The 13th-month pay was established by PD. 851 on December 16, 1975 with the stated purpose of protecting the level of real wage from inflation, using the Christmas season as an opportune time to show concern for the plight of the working masses so they may properly celebrate Christmas and New Year. The basic salary on which this pay is determined includes all remuneration or earnings paid by an ep1oyer to an employee for services rendered, but doe. Include the COLA granted by RD. 525, profit- sharing payments, overtime pay, and all allowances and monetary benefits which are not considered integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.(Davao Fruits Corp. vs. ALU, 225 SCRA 562) However, these benefits should be included if by individual or collective agreement, company practice or policy, they are treated as part of the basic salary of the employees. The total gross basic salary accordingly earned during the year is divided by twelve to arrive at the 13th month pay. Basic salary is defined in Sec. 2, PD 851 to include all remunerations or earnings paid by an employer to an employee for services rendered, but may not include cost-of-living-allowance, profit - sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975 (Underscoring supplied). The question has been presented before the Supreme Court: What is considered basic salary in a remunerative scheme consisting of a fixed or guaranteed wage plus sales commission? The Supreme Court has held that in such a scheme the fixed or guaranteed wage is patently the basic salary, for this is what the employee receives for a standard work period. The Court noted that commissions are given for extra efforts exerted in consummating sales or other related transactions. As such, they are additional pay which do not form part of the basic salary

Hence the Supreme Court ruled that the computation of the 13th Month Pay should be confined to the concept provided in PD 851, and should be stripped of other payments properly considered as fringe benefits or additional pay, which do not form part of basic salary.

The Court also took the occasion to distinguish this doctrine from its ruling in Songco vs. NLRC (183 SCRA 610) wherein the concept involved was the term salary.... without the restrictive adjective, basic. Thus, it said, the term was construed in its generic sense to refer to all types of remunerations for services rendered, including commissions.

Insofar as the 13th Month Pay is concerned, the Supreme Court has in this case adopted a restrictive computation of the basic salary involved in its payment. (Boie-Thlceda Chemical vs. de la Sema; Phil. Fuji Xerox Corp. vs. Trajano et al., 228 SCRA 329)

Barely a month earlier, the Court had issued a drivel event ruling on the same issue in a case involving salesmen who were given small fixed or guaranteed wages, with sales commissions forming the bulk of their earnings. Citing the codal definition of wages (Art. 97-f LC, supra), the Court held that commissions are direct remunerations for services rendered, given the small wages the salesmen received. Sales commissions are a percentage of the sales closed by a salesman, and operate as an integral part of his basic pay. However, medical representatives are not salesmen; they do not effect the sale of any article at all. Additional payments made to them are not sales commissions but partake the nature of profit-sharing bonuses. They are properly excluded from the ambit of basic salary for purposes of computing the 13th Month Pay. The same applies to overtime pay, fringe benefits, and other remunerations not part of basic salary. (Phil. Duplicators vs. NLRC 227 SCRA 747) In a later case where bus drivers and conductors received their commissions as pay if these were more than the minimum wage, but were automatically entitled to the basic minimum pay in case the commissions were less than the basic minimum for eight hours work, the Court ruled that the commissions formed part of their wages or salaries. (Phil. Agricultural Commercial & Industrial Workers Union vs. NLRC, 247 SCRA 256)

These apparently contrary decisions indicate that there is no categorical doctrine on this issue, for much depends on the facts of each case. They also recall a statement made earlier by the Court that Where a decision may be made to rest on informed judgment rather than on rigid rules, all the equities of the case must be accorded their due weight.

RD. No. 851 originally excluded from this benefit employees

receiving a basic salary of more than P 1,000 a month. This salary ceiling was removed by Memorandum Order No. 28 on August 13, 1986 which entitled all rank-and-file employees to this benefit regardless of their basic monthly salaries. The exemption from this requirement originally granted by the decree for distressed employers was likewise abolished by PD. No. 1364.

The decree provides the 13th-month pay to be paid not later than December 24 of each year. An employer, however, may give one-half of this pay before the opening of the school year, and the other half before December 24 of the year. The frequency of payment of this benefit may be the subject of negotiation between the employer and the bargaining agent of the workers. 6. EMPLOYEES COVERED. All rank-and-file employees are entitled to the 13th month pay regardless of the amount of their monthly basic salary, if their employers are not otherwise exempted from the application of P.D. No. 851. Such employees are entitled to this benefit regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided they have worked for at least one month during a calendar year Any employee who has rendered this minimum service requirement is entitled to a proportionate benefit under the law.

Employees who are paid on piece work basis are by law entitled to the 13th-month pay. Those who are paid a fixed or guaranteed wage plus commissions are also entitled to this pay based on their total earnings during the calendar year on both their fixed wage and commissions.

For employees with multiple employers, these rules apply. Government employees working part-time in a private enterprise, including private schools, as well as employees working in two or more private firms, whether on full or part-time basis, are entitled to the 13th-month pay from all their private employers, regardless of their total earnings from each or all their employers. Private school teachers, including faculty members of universities and colleges, are entitled to this benefit regardless of the number of months they teach, or are paid within a year, If they have rendered service for at least one month within a year.

An employee who has resigned or whose services were terminated at

any time before the 13th-month pay falls due is entitled to this monetary benefit in proportion to the length of time he worked during the year reckoned from the time he started working during the calendar year up to the time of his resignation or termination from service. This may be demanded by the employee upon the cessation of his employment. Thus, it has been held that the 13th month pay as a statutory benefit is automatically vested in the employee who has worked for at least one month during the calendar year. Such benefit may not be lost or forfeited even in the event of the employees subsequent dismissal for cause, without violating his property rights. (Archilles Manufacturing Corp. vs. NLRC, 244 SCRA 750)

7. EMPLOYERS EXEMPTED. The following employers are not bound by the 13th-month pay requirement:

a) 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; b) Employers of household helpers and persons in the personal service of another in relation to such workers: c) Employers of those who are paid on purely commission, boundary or task basis, and those who are paid a fixed amount for 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 grant the required 13th-month pay to such workers; and d) Employers already paying their employees a 13th- month pay or more in a calendar year, or its equivalent. The term its equivalent (supra) is deemed to include Christmas, mid-year bonl4s, cash bonuses and other payments amounting to not less than one-twelfth of the basic salary, but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employees, as well as non-monetary benefits. Where an employer pays less than the required one-twelfth of the employees salary the employer shall pay the

difference. Jurisprudence has interpreted the term its equivalent to approximate the legal requirement in all respects. And if the grant is at variance with the law, it is regarded as a contractual obligation distinct from the legal obligation.

Hence, the grant must reflect the same intent as the law, namely magnanimity. If the bonus is provided in graduated amounts depending on length of service of employees, its purpose is to give bigger awards to long-service employees, which is a purpose not found in the law. Hence, the provision is meant to be in addition to the legal requirement. (United CMC Textile Workers Union vs. Valenzuela, 149 SCRA 424; Universal Corn Products vs. NLRC, 153 SCRA 191)

The amount of the bonus should be not less than that of the legal obligation. Should it be less, the employer can make up the difference. This is well within the letter and spirit of the law. (Brokenshire Memorial Hospital vs. NLRC, 143 SCRA564; Doleffi vs. Leogardo, 117 SCRA 938) A CBA stipulation granting a bonus following years in which the company has been in profitable operation was deemed conditional, as opposed to the mandatory language of the law In this regard, it was held that to qualify as an equivalent, the bonus must be certain, not conditional, and paid with regularity (Marcopper Mining Corp. vs. Ople, supra). In a later case, however, the court ruled that the 13th month pay is meant to aid those not already receiving the same, but is not meant to impose a double burden on the employer already paying its equivalent, regardless of the conditional character of the grant so long as there is actual payment. Otherwise, it would amount to a penalty for the employers munificence or liberality. (NFSW vs. Ovejera, 114 SCRA 354) A bonus stipulation in the CBA should also be general in scope, applicable to all employees, not only a few, for the legal obligation benefits all employees regardless of their designation or employment status so long as they have worked at least one month during the calendar year

Finally, if the intent of the employer is to include, or integrate a Christmas bonus with the 13th-month pay, there would be no need for having a specific provision on Christmas bonus in the C13A. The presence of such a stipulation in the CBA---particularly after the effectively of P. D. 851--- creates the presumption that it was

meant to be in addition to the legal requirement. (Universal Corn Products vs. NLRC, supra)

If a bonus, not 13th-month pay, is given by an employer, Ii decrease in mid-year or year-end bonus does not constitute a diminution of salaries. Bonus is a gratuity or act of liberality of the giver, which the recipient cannot demand as a matter of right. (lladers Royal Bank vs. NLRC, 189 SCRA 274)

As a rule, a bonus is an act of liberality which cannot be demanded as a matter or right. But a bonus becomes a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised and agreed to give without any conditions instead for its payment, such as successful business or greater production or output, then it is of he Where it is not payable to all, but only to some employees and only when their labor becomes more efficient or productive, it is only an inducement for efficiency, a prize therefore, and not a part of the wage. (Metro Transit Organization vs. NLRC, 245 SCRA 767)

After the acceptance of a promise by the employer to pay bonus, the same cannot be withdrawn, but may be enforced by the employee. (Marcos vs. NLRC, 248 SCRA 146)



1. THE WAGE RATIONALIZATION ACT. In June 1989, Congress enacted R. A. No. 6727 known as the Wage Rationalization Act. This law, amending pertinent provisions of the Labor Code, revolutionized the system and procedure for fixing minimum wage rates. It changed the scheme of prescribing minimum

wages from the national level to regional tripartite Wages and Productivity Boards, and promoted collective bargaining as the primary mode of setting and adjusting wage rates in a fair and equitable manner under prevailing conditions. There are two basic methods of adjusting wages. One is the floor wage method which involves the fixing of a determinate amount that would be added to the prevailing statutory minimum wage. The other is the salary ceiling method whereby the wage adjustment is applied to employees receiving a certain denominated salary ceiling. The former method was used in earlier minimum wage laws; the latter is used in R.A. 6727, and its purpose is to minimize wage distortion. (ECOP vs. NWPC, 201 SCRA 759) The law also broadened the concept of minimum wage to approximate the more expansive idea of a living wage. This is indicated in the wage fixing criteria among which are : the cost of living and changes or increases thereto, the needs of workers and their families, and improvements in standards of living (Art. 124 LC, as am). This is more consistent with the Constitutional right of workers to the qualitative living wage (Art. XIII, Sec. 3 Cons); rather than to the merely quantitative minimum wage. Other wage-fixing criteria of the law relate wages to productivityimprovement and gain-sharing measures, industry dispersal to generate employment, and reasonable returns on investment for business expansion and growth. These include, among others: the need to induce industries to invest in the countryside, fair return on capital invested and capacity to pay of employers, effects on employment generation and family incomes, and the equitable distribution of income and wealth along the imperatives of economic and social development (Art. 124 LC, as am.) These are the significant innovations introduced by the Wage Rationalization Act, Rep. Act No. 6727.

2. MECHANICS OF FIXING MINIMUM WAGES. The law created two entities to undertake the function of prescribing minimum wages. These are the National Wages and Productivity Commission (hereafter Commission, for brevity) and the Regional Tripartite Wages and Productivity Boards (hereafter Boards). The Commission is a quasi-judicial agency which also serves as a national consultative and advisory body to the President and

Congress on matters relating to wages, incomes and productivity It formulates policies and prescribes rules and guidelines relative to these matters. It has appellate jurisdiction and administrative supervision over the Boards. The Commission is tripartite in composition with the Labor Secretary and the NEDA Director-General as chairman and vice-chairman respective and two appointive members each from workers and employers sectors, each serving for five years. An executive director completes the Commission.

The tripartie Regional Boards are also quasi-judicial, as well as fact- finding agencies created in all regions. They develop plans and programs relative to wages, incomes and productivity improvement for their respective regions for implementation through the regional offices of the Department of Labor and Employment. These boards determine and fix minimum wage rates applicable in their respective regions and industries therein, and issue the corresponding wage orders, subject to guidelines issued by the Commission.

Each Regional Board is composed of the Regional Directors of Labor and Employment, Trade and Industry, and the NEDA--the former as chairman and the latter two as vice-chairmen --and two appointive members each from workers and employers sectors who will serve for a term of five years. Each Regional Board is assisted by a Secretariat.

3. REGIONAL WAGE ORDERS. Whenever conditions in the region so warrant, the Regional Board shall investigate and study all pertinent facts and, based on the prescribed criteria, proceed to determine whether a Wage Order should be issued. In this regard, the Regional Board will conduct public hearings or consultations, giving notices to employers and employee groups, provincial, city and municipal officials, and other interested parties. Any Wage Order issued by the Board takes effect after fifteen days from its complete publication in at least one newspaper of general circulation in the region.

The wages prescribed by the Regional Boards shall be the standard prevailing minimum wages in each region. These shall include wages varying within industries, provinces or localities if in the judgment of the Regional Board conditions make such local differentiation proper and necessary. Wage Orders, being statutory and mandatory, cannot be waived. (Alpha Investigation & Security Agency vs. NLRC, 272 SCRA 653)

Any party aggrieved by a Wage Order issued by a Regional Board may appeal such order to the Commission within ten calendar days from the publication of such order. It is mandatory for the Commission to decide an appeal within sixty calendar days from the filing thereof.

The filing of the appeal does not stay the Wage Order unless the person appealing files with the Commission an undertaking with a surety or sureties satisfactory to the Commission for the payment to the employees affected by the order of the corresponding increase, in the event such order is affirmed (Art. 123 LC, as am.).

No preliminary or permanent injunction or temporary restraining order may be issued by any court, tribunal or other entity against any proceedings before the Commission or the Regional Boards (Art. 126. LC, as art). No wage order by any Regional Board shall provide for wage rates lower than the statutory minimum wage rates prescribed by Congress (Art. 127 LC, as am.).

4. ROLE OF COLLECTIVE BARGAINING IN WAGE FIXING. In line with its declared policy, the Wage Rationalization Act promotes collective bargaining and negotiation as a primary mode of settling wages as well as other terms and conditions of employment.

Thus, where the application of any prescribed wage increase by virtue of a law or wage order issued by any Regional Board results in distortions of the wage structure within an establishment, the employer and the union shall negotiate to correct the distortions. Any dispute arising from wage distortions shall be resolved through the grievance procedure under their Collective Bargaining Agreement and, if it remains unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten calendar days from the time said dispute was referred to voluntary arbitration.

In one case, a labor union perceived wage distortions in the establishment as a result of a new order. Due to a no- strike clause in the current CBA it decided to stage a slowdown instead

to dramatize its protest. The judicial resolution of the unions reaction held that slowdown is basically a strike, and that the union violated not only the CBA, which is the law between the parties, but also the Wage Rationalization Law, R.A. No. 6727, which prescribes the proper mode to resolve wage distortions, namely through the grievance machinery, and if unsuccessful, through voluntary arbitration. The law rules out strikes as a mode of resolving wage distortions. (flaw at Buklod ng Manggagawa vs. NLRC et al.,198SCRA586)

In cases where there are no collective agreements or recognized labor unions, the employers and workers shall endeavor to correct such distortions. Any dispute arising there from shall be settled through the National Conciliation and Mediation Board and, if it remains unresolved after ten calendar days of conciliation, it shall be referred to the arbitration branch of the NLRC. It shall be mandatory for the NLRC to conduct continuous hearings and decide the dispute within twenty calendar days from the time said dispute is submitted for compulsory arbitration.

The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of any increase in prescribed wage .ates pursuant to the provisions of law or a Wage Order (Art. 124 LC, as The law defines wage distortion as a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skill, length of service, or other logical base of differentiation (Idem) The law also grants initial wage increases ranging from P15-P25 per day for various types of employees to apply upon its effectively. Should these increases result in distortions of the wage structure within an establishment and lead to a dispute therein, such dispute shall first be settled voluntarily between the parties, and in the event of a deadlock, the dispute shall be finally resolved through compulsory arbitration by the regional branches of the NLRC having jurisdiction over the workplace (Art. 127 LC, as am).

5. APPLICABILITY OF THE LAW. The Wage Rationalization Act applies to all workers and employees in the private sector, whether

agricultural, non-agricultural including workers and employees in private educational institutions. All workers paid by result, including those who are paid on piecework, takay, pakyao, or task basis shall receive not less than the prescribed wage rates per eight-hour work a day, or proportion thereof for working less than eight hours.

All recognized learner ship and apprenticeship agreements shall be considered automatically modified insofar as their wage clauses are concerned to reflect the prescribed wage rates (Art. 124LC, as am.).

In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the said contractors, and the contract shall be deemed amended accordingly. In the event, however, that the principal or client fails to pay the prescribed wage rates, the contractor shall be jointly and severally liable with his principal or client (Sec. 6, R.A. 6727). On this point, the Supreme Court has ruled that wage increases need not be paid directly by the principal but are to be reimbursed after payment by the contractor since there is no privacy of contract between the principal and the contractors workers. (Eagle Security Agency vs. NLRC, 173 SCRA 479)

If salary increases result from the implementation of wage orders over and above the agreed salary scales contracted for in a CBA, the employer should point any provision of the law or of the CBA itself to the effect that the benefits provided by the former encompass those provided by the latter, otherwise the benefits derived from either the law or the CBA would be treated as distinct and separate from each other. (Meycauayan College vs. Drilon, 185 SCRA 50; University of the East vs. MOL, 152 SCRA 676) The Court cautioned that crediting wage increases as compliance with mandated increase is the exception rather than the rule, for the general rule is that such increases are over and above any increase that may be granted by law or a wage order (Mindanao Terminal & Brokerage Services Inc. vs. Roldan-Confesor, 272 SCRA 161)

6. LEGAL EXEMPTIONS. The Wage Rationalization Act exempts from its provisions household or domestic helpers and persons employed in the personal service of another, including family drivers.

Retail or service establishments regularly employing not more than ten workers may be exempted from the provisions of the law upon application and as determined by the appropriate Regional Board in accordance with applicable rules and regulations, When such an application is filed, action on any complaint for alleged non-compliance with the law will be deferred, pending resolution by the Board of said application. In the event that applications for exemptions are not granted, employees shall receive the appraise compensation due them as provided by the law, plus interest of one percent per month retroactive to the effectively of the law.

Exemptions from R.A. 6727 require application with and as determined by the appropriate Regional Board in accordance with rules and regulations issued by the Commission. Non-complain with this pension will not qualify for exemption. (C. Plans Commercial et. a]. vs. NLRC, Feb. 11, 1999)

If expressly provided for and agreed upon in the CBA, all increases in the daily basic wage rates granted by employers three months before the effectively of the Act shall be credited as compliance with the increases in the prescribed wage rates, provided that where such increases are less man the prescribed rates, the employer shall pay the difference. These do not include anniversary wage increases, merit increases and those resulting from the regularization or promotion of employees.

7. PENALTIES FOR VIOLATION. Any person, corporation, trust, firm. Partnership, association or entity which refuses or fails to pay any of me presence increases or adjustments in the wage rates made in accordance with the law shall be punished by a fine not exceeding P25,000 and/or imprisonment of not less than one year nor more than two years, provided that any person convicted under the law shall not be entitled to the benefits provided for under the Probation Law.

If the violation is committed by a corporation, trust or firm, partnership, association or any other entity, the penalty of imprisonment shall be imposed on the entitys responsible officers, including but not limited to, the President, Vice-President, Chief Executive Officer, General Manager, Managing Director or Partner.



1. WORKING WOMEN. The Labor Code carries the following provisions concerning working women:

a) Prohibiting nigh work within certain hours--The prohibited hours which apply to all women regardless of age, with or without compensation are: in industrial understandings, between 10:00 PM. and 6:00 A.M. of the following day; in commercial undertakings other than agricultural, between midnight and 6:OOA. M. of the following day; or in any agricultural undertaking at night time unless she is given a rest period of not less than nine consecutive hours (Art. 130, LC).

Exceptions to this rule are: in cases of actual or impending emergencies to prevent loss of life or property or in cases of force majeure or imminent danger to public safety, in case of urgent work on machineries, equipment or installations to avoid serious loss to the employer, where work is necessary to prevent serious loss of perishable goods; where the woman employee holds a managerial or technical position or is engaged to provide health and welfare service; where the nature of the work requires the manual skills and dexterity of women workers; where they are immediate members of the family operating the establishment; and other analogous cases exempted by the Labor Secretary in appropriate regulations (of Art. 131, LC). b) Requiring facilities for women--The law requires the Secretary of Labor to establish standards to ensure the safety and health of women employees, such as seats when appropriate, separate toilet rooms and a dressing room for women, a nursery and appropriate minimum age and other standards for retirement or termination in special occupations (cf. Art. 132 LC). c) Requiring free family planning services and incentives-- Establishments required to maintain a clinic or infirmary shall provide for family planning services to their employees (Art. 134LC)d) Prohibiting

discrimination on account of sex--Equal remuneration shall be paid to both the men and women for work of equal value (Art. 135 LC). This has been relegated into a crime by R.A. 6725 (cf. infra). e) Outlawing stipulation against marriage--It renders unlawful such stipulation as a condition of employment or as cause for resignation or termination, or actually to dismiss, dischaie, discriminate, or otherwise prejudice a woman employee merely by reason of her marriage (Art.. 136 LC). f) Identifying prohibited acts of an employer--The Code makes it unlawful for an employer: to deny legal benefits or to discharge a woman employee to prevent her from enjoying them; to discharge her on account of pregnancy; or while on leave or in confinement due to her pregnancy; or to discharge or refuse her admission upon returning to work for fear that she may again be pregnant (Art. 137 LC.

2. EMPLOYMENT STATUS OF CERTAIN WOMEN WORKERS. Art 138 of the Labor Code provides: Any woman who is permitted or suffered to work, with or without compensation, in any night club, cocktail lounge, massage clinic, bar or similar establishment, under the effective control or supervision of the employer for a substantial period of time as determined by the Secretary of Labor, shall be considered as an employee of such establishment for .purposes of labor and social legislation.

This article justifies the employment status of women working in the types of establishment mentioned. Given this legal premise, it becomes superfluous to determine their status according to the standard tests to prove employer-employee relationship. The only relevant factor is whether such women are under the effective control or supervision of their employer for a substantial period of time as determined by the Secretary of Labor. In the affirmative, they would be entitled to employment and welfare benefits under labor and social laws.

3. OTHER IMPLEMENTING LAWS REGARDING WOMEN. The declared Constitutional policy protecting working women (Art. XIII, SEC. 14) has prompted the enactment of laws implementing the policy.

On May 12, 1991, Rep. Mt 6725 was approved amending the anti- discrimination provision (Art. 135) of the Labor Code. This new law strengthens the prohibition against discrimination of women workers on account of sex. Under this law, it is unlawful for any employer: to discriminate against a woman employee regarding teens and conditions of employment due to her sex; to pay a lower compensation, including wages or other forms of compensation and fringe benefits, to a woman worker as against a male employee for work of equal value; or to favor a male employee over a female employee regarding promotion, training opportunities, and study and scholarship grants on account of sex.

This law characterizes these acts as criminal in nature, which are penalized by a fine of P 1,000 to P 10,000 or imprisonment of not less than three months or more than three years, or both.

Another implementing law, much broader in scope, is R.A. 7192 called the Women in Development and Nation Building Act. This law covers business, property and other relations to give substance to the Constitutional provision of such facilities and opportunities that will enhance their welfare and enable them to realize their full potential in the service of the nation. (Art. XIII, Sec. 14 Const.).

More germane to the work situation is Rep. Act no. 7877, known as the Anti-Sexual Harassment Act of 1995. This law provides that in a work- related or employment environment, sexual harassment is committed when any sexual favor is made as a condition in the hiring or in the employment, re-employment or continued employment of an individual, or in granting 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; or when such acts would impair the employees rights and privileges under existing labor laws, or would result in an intimidating, hostile or offensive environment for the employee.

The law prescribes certain duties for employers to prevent or deter the commission of acts of sexual harassment, and to provide the procedures for the resolution, settlement or prosecution of such acts.

Liability for sexual harassment devolves not only bn the person

committing it, but also on those who direct, induce or cooperate in its commission. The penalty imposed is imprisonment of not less than one month nor more than six months, or a fine of not less than P 10,000 nor more than P 20,000, or both.

This law also applies to the educational or training environment.

4. EMPLOYMENT OF MINORS. The Labor Code prohibits the employment of any child below 15 years of age, except when the child works under the sole responsibility of its parents or guardian in any non- hazardous undertaking where the work will not interfere with his or her schooling. In such cases, the children shall not be considered as employees of their employer or their parents or guardians (Art. 139 C, Rule XI, Sec. 2 OR). However, R.A. 7610 (approved June 17,1992) allows children below 15 years to be employed under certain conditions.

Any person of either sex, between 15 and 18 years of age, may be employed in any non-hazardous work, and for such periods of the day as determined by the Secretary of Labor in appropriate regulations. No employer shall discriminate against such person in regard to terms and conditions of employment on account of age. A non-hazardous work or undertaking means any work or activity in which the employee is not exposed to any risk which constitutes an imminent danger to his safety and health. The Secretary of Labor shall from time to time publish a list of hazardous work and activities in which a person 18 years of age and below cannot be employed (Rule XI, Sec. 3 OR).

This rule applies to all employers whether operating for profit or not, including educational, religious, and charitable institutions, except to the Government and to government-owned or controlled corporations and to employers of household helpers and persons in their personal service insofar as such workers are considered (Rule XI, Sec. 2 OR).

5. HOUSEHELPERS OR DOMESTIC SERVANTS. The term house helper or domestic servant refers to any person, where a1e or female, who renders services in the employers home which are usually necessary or desirable for the maintenance and enjoyment thereof, and includes ministering to the personal comfort and convenience of the members of the employers household,

including services of family drivers (Art. 141 LC).

The children and relatives of a house helper who live under the employers roof, and who share the accommodations provided for the house helpers by the employer are not deemed house helpers if they are not otherwise engaged as such and are not required to perform any substantial household work. The relationship of house helper and employer is established by a contract for household service which initially shall not last for more than two years. However, such contract may be renewed from year to year (Rule XIII, Sec. 4 OR). A domestic helper with a two-year contract who is dismissed in two months is entitled to the compensation for the rest of the contract. (Ems Manpower & Placement Services vs. NLRC, July 24, 1997)

6. RIGHTS OF HOUSEHELPERS. The Labor Code and its implementing rules provide certain tights for house helpers and domestic servants.

No house helper may be assigned to work in a commercial, industrial, or agricultural enterprise at a wage or salary rate lower than provided for agricultural and non-agricultural workers.

If the house helper is under the age of 18, the employer shall give him or her an opportunity for at least elementary education. The cost of such education shall be part of the house helper's compensation, unless there is a stipulation to the contrary.

A house helper has the right to just and humane treatment without any physical violence, and to be furnished free of charge suitable and sanitary living quarters, as well as adequate food and medical attendance.

If the period for household service is fixed, the house helper has a right against termination before the expiration of the term, except for a just cause. If unjustly dismissed, the house helper is entitled to be paid the compensation already earned plus that for 15 days by way of indemnity. However a house helper when leaves without justifiable reason forfeits any due and unpaid salary not exceeding

15 days.

If the duration of the household service is not fixed either by stipulation or by the nature of the service, the employer or the house helper may give notice to end, the relationship five days before the intended termination.

Upon severance of the relationship, the house helper may demand from the employer a written statement of the nature and duration of the service, and his or her efficiency and conduct as house helper.

In case of death of the house helper, the employer shall bear the funeral expenses commensurate to the standards of life of the deceased. Unless so desired by the house helper or his or her guardian with court approval, the transfer or use of the body of a deceased house helper for purposes other than burial is prohibited (cf. Arts. 145-151 LC. Rule XII, Book III Sec. 10-17 OR)

7. EMPLOYER OF HOME WORKERS. The term Homeworkers refers to workers who perform in or about their homes any processing of goods or materials in whole or in part which have been furnished directly or indirectly by an employer or contractor, and thereafter to be returned to the latter. The term does not include those situated within the premises or compound of an employer or contractor, where work performed therein is under the active or personal supervision by or for the latter Estimated to number about eight million, mostly involved in handicraft or cottage industries, home workers have long been regarded as the informal labor sector as they are not covered by security of tenure, health or pension benefits. They are generally paid on piece-work basis; and are therefore covered by the Wage Rationalization Act (R.A. 6727) and are entitled to the 13th-Month Pay provided by PD 851.

Pursuant to the Labor Code, the Secretary of Labor has issued regulations to ensure the minimum terms arid conditions of employment applicable to industrial home workers. The employer is required to pay the home worker or the contractor or sub-contractor for the work performed immediately upon receipt of the finished goods or articles. Where payment is made to a

contractor or subcontractor, the home worker shall be paid within one week after the contractor or subcontractor has collected the goods or articles from the home worker (Re XIII, Book III Sees.. 3 & 4 0R).

No deductions shall be made from the home worker's earnings for the value of materials lost, destroyed, soiled or otherwise damaged unless the following conditions are met: a) the home worker concerned is clearly shown to be responsible for the loss or damage: b) the employee is given reasonable opportunity to show cause why deductions should not be made; c) the amount of such deduction is fair and reasonable, and shall not exceed the actual loss or damage; and d) the deduction is made at such rate that the amount deducted does not exceed 20 percent of the homeworkers earnings in a week (Rule XIII, Sec. 5 OR). This is to ensure observance of the homeworkers right to due process.

Payment of work to the homeworker is subject to certain conditions. The employer may require the homeworker to redo a work which has been improperly executed without having to pay the stipulated rate more than once. Also, the employer, contractor or sub-contractor need not pay the homeworker for reasons attributed to the fault of the homeworker (Rule XIII, Sec. 6 OR).

In cases of disagreement between the parties on matters regarding payment, deductions or conditions, either of them may refer the case to the proper Regional Office which shall decide the case within ten days from receipt thereof. Its decision shall be final and unappeasable (Rule XIII, Book III Sec. 7 OR). Whenever an employer contracts with a contractor in this regard, the employer should, provide in such contract that the employees or home workers of the contractor and the latters subcontractor shall be paid in accordance with these regulations. In the event that such contractor or sub-contractor fails to pay the wages or earnings of his employees or homeworker's, such employer shall be jointly and severally liable with the contractor or sub-contractor to the workers of the' latter, to the extent that the work is performed under such contract, in the same manner as if the employees or home workers were directly engaged by the employer (Rule XIII, Sec. 8 OR).



1. MEDICAL AND DENTAL SERVICES. An employer is not a dispenser of medical care nor a health insurer, but conformably to the policy of protection to labor, he is required by law to extend the following medical and dental services to his employees:

a) To keep in his establishment such first aid medicines and equipment as the nature and conditions of work may require, and to take steps for the training of a sufficient number of employees in first-aid treatment (Art 156 LC). b) To furnish his employees with free medical and dental attendance and facilities as prescribed in the Labor Code (Art 157 LC); and c) To provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency (Art. 161 LC).

Regarding the duty to furnish free medical and dental services (b, supra), the Code sets the following standards: The services of a full-time registered nurse when the number of employees exceeds fifty, but not more than 200, except in non-hazardous workplaces, in which case the services of a graduate first-aide shall be provided where no registered nurse is available. When the number of workers is from 10 to 50, the employer shall provide a graduate first-aider who may be one of the workers, and who has immediate access to the first-aid materials to be kept in the establishment.

Where the number of workers in the workplace exceeds 200, but is not more than 300, the services of a full-time registered nurse, a

part-time physician and a part-time dentist, as well as an emergency clinic shall be provided, regardless of the nature of the undertaking therein. The physician and dentist referred to shall stay in the premises for at least two hours a day. Where the establishment has more than one work shift a day, the required two-hour stay shall be devoted to the work shift with the biggest number of workers, moreover the physician and dentist concerned shall be subject to call at anytime during the other work shifts to attend to emergency cases.

Where the number of workers in a hazardous workplace exceeds 300, the employer shall provide the services of a full-time nurse, a full-time physician, a full-time dentist, a dental clinic and an infirmary or emergency hospital with a capacity of one bed for every 100 workers. The physician and dentist shall stay in the premises of the workplace at least eight hours a day. Where there are more than one work shifts in a day, the same time as above applies to the physicians and dentists assignment of stay and subject to call. Where the undertaking is non-hazardous in nature, the employer may engage the services of a part-tine physician and a part-dine dentist with the same responsibilities stated in the preceding paragraph.

In all workplaces with more than one work shifts in a day, the employer shall, in addition to these requirements, provide the services of a full-time first-aider for each work shift.

The requirements of an emergency hospital or dental clinic will not apply where there is a hospital or dental clinic not more than five kilometers away in urban areas or 25 minutes away by motor vehicle in rural areas, and the employer has facilities readily available for transporting a worker in case of emergency. In such case, the employer shall enter into a written contract with the hospital or dental clinic for the use thereof in the treatment of workers in case of emergency (of Book IV, Rule I, Secs, 4-6 OR).

The physician engaged by the employer pursuant to this requirement shall, in addition to his stated duties, develop and implement a comprehensive occupational health program for the benefit of the employees (Art. 159LC).

2. OCCUPATIONAL HEALTH AND SAFETY. The Labor Code tasks the Secretary of Labor to set and enforce, by appropriate orders, mandatory occupational safety and health standards to eliminate or reduce occupational safety and health

hazards in all workplaces and institute new, and update existing, programs to ensure safe and healthful working conditions in all places of employment. These orders are found in Book IV, Rule II of the Omnibus Rules, and in the Occupational Health and Safety Code issued by the Bureau of Labor Standards. These health and safety rules apply to all establishments, workplaces, and other undertakings, including agricultural enterprises, whether for profit or not, and wherever they may be located.

The principal duties of employers in this respect are: to keep the workplace free from work hazards likely to cause physical harm to workers or damage to property, and to give the Secretary or his duly authorized representative access to his premises and records at any time when work is being undertaken to determine compliance with these rules. Every establishment shall be inspected at least once a year for this purpose, but special inspection visits may be conducted when called for.

The general duties prescribed for workers are to cooperate with the employer in carrying out health and safety rules, reporting any work hazard to his supervisors or to the Regional Office; to make proper use of all safeguards and safety devices furnished for his protection and that of others, and to follow all instructions of the employer in this regard.

Other persons, including builders and contractors, who visit, build, innovate or install devices in workplaces shall also comply with these rules and all regulations made by the employer in compliance therewith and with subsequent issuances of the Secretary of Labor.



1. THE RIGHT TO SECURITY OF TENURE. Under previous laws, an employer could terminate the services of an employee with or without just cause by merely giving the employee his one-month pay (mesada), as required by Art. 302 of the Code of Commerce, or by giving him a similar minimum period of notice under the Termination

Pay Law (R.A. 1052). In this situation, a workers employment, as well as the livelihood of his family, was subject to the mercy of the employed. Under present laws, the concept of employment termination is contacted and radically changed. This is due to the Constitutional guarantee of security of tenure and the implementing provisions of the Labor Code and relevant jurisprudence.

Security of tenure is both a Constitutional (Art.III, Sec. I; XIII, Sec. 3) and a statutory (Book VI LC) right. This right may be stated generally thus: In cases of regular employment, the employer shall not terminate the services of an employee except for just or authorized cause as provided by law, and after due process. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, and to his full back wages, inclusive of allowances and to his benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement (of, Art. 279 LC, as am by Sec. 34, R.A. 6715). As a general rule then, for a termination or dismissal to be lawful, it should be either for a just cause or authorized cause as prescribed by law, and after observance of the employees right to due process. An unjust or illegal dismissal will entail the stated consequences.

2. APPLICATION OF THE RIGHT; REGULAR EMPLOYMENT. The full protection of the right to security of tenure applies to regular employment (Art. 279 LC). Regardless of the written or oral agreements of the parties, an employment is deemed regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer (Art. 280 LC). There are two exceptions to this rule, namely:

a) Project employees---Where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee. (Cosmos Bottling Co. vs. NLRC, March 29, 1996) But members of a work pool from which a construction company draws its project employees are non-project employees if considered employees of the construction firm while in the work pool. (Uy vs. NLRC, 261 SCRA 505). The tenure of project employees is generally contentious with the project or undertaking for which

they are hired. Project in the realm of business and industry refers to a particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and separate and identifiable as such, from the undertakings of the company. It could also refer to a particular job or undertaking that is not within the regular business of the company, but such job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. In both cases, such job or undertaking begins and ends at determined or determinable the (ALU-TUCP vs. NLRC, 234 SCRA 678).

The principal test for determining whether an employee is a project employee and not a regular employee is whether he was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time he was engaged for that project. (Palomares vs. NLRC, 277 SCRA 439) The end or completion of a project effectively terminates the employment of the project employees.

After termination of the project, an employer may wind up operations only to complete the project. In such a case the remaining employees do not necessarily lose their status as project employees. However, if the employees services are extended long after the supposed project was completed, the employees aze removed from the scope of project employees and shall be considered regular employees. (Mila et al. vs. NLRC and NSC, Jan. 14, 1998) In one case, a termination letter was deemed an express admission by the employer that his employees were not project employees. (PNCC vs. NLRC, 215 SCRA 204) In case of dismissal, however, a project employee must be duly furnished a written notice of his impending dismissal, and must be given the opportunity to dispute the legality of his removal. (Archbuild Masters & Construction, Inc. vs. NLRC, 251 SCRA 483) Project employees are entitled to separation pay if the project they are working on has not been completed when their services are terminated. (de Ocampo, Jr vs. NLRC, 186 SCRA 360) Workers hired for a definite project have the status of temporary workers, but where they are retained beyond the completion date, and are assigned other jobs they acquire a regular and permanent status, and may no longer be dismissed without cause (Pepsi Cola vs. NLU, 81 Phil. 348; Abe vs. Foster Wheeler, 110 Phil. 198, 205). The proviso that any employee has rendered at least one year of service shall be considered a regular employee (Art. 280 LC) is not applicable to project employees. (Fernandez vs. NLRC, 230 SCRA 460; ALU-TUCP vs. NLRC, 235 SCRA 63) But if such an employee is given successive

contracts of employment where he continued to do same kind of work, it is clearly manifest that his tasks were usually necessary or desirable in the usual business or trade of the employer. There can be no escape from the conclusion that he is a regular employee of the employer (Caramol vs. NLRC, 225 SCRA 552)

Upon completion of the project or any phase thereof in which they are employed, project employees are not entitled to termination pay. The employer is not required to obtain a clearance from the Secretary of Labor in connection with such termination. What is required of the employer is a report to the nearest public employment office for statistical purposes. (Salazarvs.NLRC,April 17,1996) Failure of the employer to report to the nearest public employment office the termination of workers every time a project is completed paves that its employees are not project employees, but regular employees. (Phil. National Construction Corp. vs. NLRC, 174 SCRA 191)

This status is not determined by the number of hours of work but by the nature of the work and by the length of time one has been in that particular job. The primary standard is the reasonable connection between the particular activity performed by the employee in relation to the usual business portrayed of the employed If the employee has been performing the job for at least one year even if the performance is not continuous or only intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability, of the activity to the business. (International Pharmaceuticals Inc. vs. NLRC Ct al. March 9, 1998) The identity of regular employment is thus determined by the nature of the work concerned and the length of service of the employee, not by the mode or even the reason for hiring him. (Prudential Bank & Trust Co. vs. C.T. Reyes, Feb. 20, 2001)

b) Seasonal employees---Where the work or service to be performed is seasonal in character, the employment is deemed to last only for the duration of the season. However, seasonal employees who are consistently rehired after every season are considered merely on leaves of absence with pay. Their employment relationship is not severed but only suspended. As such, they are considered in regular employment. (Manila Hotel vs. CIR, 9 SCRA 184) Private school teachers who are rehired successively for three years acquire regular employment status provided they teach full-time and their service is satisfactory. But part-time faculty members cannot acquire permanence in employment under the Manual of

Regulations for Private Schools in relation to the Labor Code. (University of Santo Tomas vs. NLRC, 182 SCKA 371)

3. SAME; CASUAL EMPLOYMENT. The Code classifies as casual an employment that is not covered in the definition of regular employment. This means that employment is casual if the employee is engaged to perform activities which are not usually necessary or desirable in the usual business or trade of the employer. Nevertheless, it provides that any employee who has rendered at least one year of service, whether continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed, and his employment shall continue while such activity actually exists (Art. 280 LC). Hence, one who assists a regular employee in maintenance jobs is a regular employee after one year of service. His duties are deemed necessary or desirable in the trade or business of the employer. It is of no moment that he was told his employment was casual or that he was paid through cash vouchers. (de Leon vs. NLRC and La Tondea, 176 SCRA615)

It has been held that, in keeping with the intent and spirit of the law, the status of regular employment attaches to the casual worker on the day immediately after the end of his fIrst year of service. (Kimberly Independent Labor Union, et. al. vs. Drilon, 185 SCRA 190) Thus, the High Court had occasion to state that there are in effect two kinds of regular employees, namely (1) those who are engaged to perform activities which are usually necessary and desirable in the usual business or trade of the employee and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. (Aurora Land Projects Corp. vs. NLRC, 266 SCRA48) At any rate, it is to be noted that under the terms of the law, regular status is accorded only in a relative sense, viz. with respect to the activity in which he is employed, and that the corresponding tenure is qualified by the condition that emp loyment shall continue while such activity actually exists. The implication is that if the activity on which employment is based should cease for some valid reason, the employment would likewise cease.

4. SAME: PROBATIONARY EMPLOYMENT. This is employment subject to a probationary period which should not exceed six months. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known to him at the time of his

engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee (cf. Art. 281 LC).

Probationary employment cannot be implied. If there is no statement in the employment contract as to probationary status, and no statement of requirements to be complied with, these do not justify the conclusion that the worker concerned is a probationary employee. (A.M, Oreta & Co. vs. NLRC, 176 SCRA 218) While the probationary employees enjoy security of tenure, such protection extends only during the probationary period. Once the period expires, the Constitutional protection can no longer be invoked. (Escudero vs. Office of the President, 172 SCRA 783) Probationary employees who are unjustly dismissed during the probationary period are entitled to reinstatement and payment of full back wages and other benefits and privileges under Art, 179 of the Labor Code, as amended by R.A. No. 6715, which took effect on March 21,1989. During the probationary period an employee can be dismissed for cause and for failure to meet reasonable standards made known to him upon his employment. These may be done even before the end of the probationary period, and the employer will not be liable to pay wages for the unexpired portion of said period. (International Catholic Migration Commission vs. NLRC and Galang, 169 SCRA 606) In this regard, the employer must present sufficient evidence to substantiate the cause of the probationary employees dismissal and cite particular instances to show the latters poor performance. Euro - Linea Phil. vs. NLRC, 156 SCRA 78) The probationary period shall not exceed six months, and a probationary employee who is allowed to work after the probationary period is considered a regular employee and is entitled to security of tenure. He cannot be dismissed without legal ground. (Cebu Royal Plant vs. Dep. Minister, 153 SCRA 38) In an early case, it was held that the parties may lawfully stipulate an extension of the probationary period, by way of exception to the statutory prescription. This applies in the absence of any indication that the extension is a mere stratagem of the employer to avoid the legal consequences of a probationary period satisfactorily completed. (Mariwasa vs. Leogardo, 169 SCRA465) This is subject to the written consent of the employee in order to give him a chance to improve his performance and to qualify for regular employment. (Mariwasa Mfg. Inc. vs. Leogardo, 169 SCRA 465) However, in two later case the Court interpreted Art. 281 more strictly, ruling that a system of double probation (the first, an on-the-job training) is a transparent scheme to circumvent the plain mandate of the law, and make it easier for the employer to dismiss its employees even after they had passed probation. (Holiday Inn Manila vs. NLRC, 226 SCRA 419; Central Negros Electric Cooperative vs. NLRC, 236 SCRA 108)

Jurisprudence also offers instances that provide exceptions to the rule on the probationary period. Thus, it has been held that private school teachers acquire regular employment status in three years, provided they teach full time and their service is satisfactory (UST vs. NLRC, supra) In a case reported in Vol. 130 SCRA, a probationary period of 18 months for sales representatives hired by a company engaged in advertisements in the Yellow Pages of a telephone directory was deemed reasonable considering that the publication of ads are only made a year after the sale has been made. (Buiser et. al. vs. Leogardo)

To safeguard the Constitutional right of probationary employees to security of tenure, the Supreme Court has set various limitations on the power of an employer to terminate a probationary employment contract, namely: (1) It must be exercised in accordance with the specific requirements of the contract. If a particular time is prescribed, the termination must be done within such time. Should the contract require a written notice, then such form should be used. (2) The dissatisfaction of the employer must be real and in good faith, not feigned so as to circumvent the contract or the law. (3) There must be no unlawful discrimination in the dismissal. (Manila Hotel Corp. vs. NLRC, 141 SCRA 164; Lopez vs. Javier, 252 SCRA 68).

5. SAME: CONTRACTUAL EMPLOYMENT. An employment wherein the employee is hired by agreement for a definite term is a contractual employment. In this case, the employee is deemed a regular worker for the duration of his contract, subject to two conditions: a) where the activities for which he is engaged are usually necessary or desirable to the course of the employee's business; b) he has been on the job for an aggregate period of at least one year This rule will not apply if the services rendered are not integral aspects of the essential operations of the employer. (Kimberly Independent Labor Union vs. Dolan 185 SCRA 190) This type of employment evidently offers marginal security for the worker. But a contract for employment with a fixed period is not necessarily unlawful. (Pakistan Intl. Airlines Corp. vs. Ople, 190 SCRA 90) A stipulation providing for term employment is valid where the period was agreed upon knowingly and voluntarily by the parties without force, duress or improper pressure exerted on the employee, and where such stipulations were not designed to circumvent the laws on security of tenure. Brent School vs. Zamora, 181 SCRA 702) On the other hand, where it is apparent that periods have been imposed to

preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals and good order. (Cielo vs. NLRC, 193 SCRA 410) Good faith and voluntariness are crucial determinants of the validity of such stipulation.

A fixed-period employment is not totally prohibited since the law recognizes an employment that, by its very nature, is of limited duration, and the fixed term of that employment was known to the employee at the time of his engagement. (Brent School et al vs. Zamora, 181 SCRA 702) This practice is however legally questionable if done in a more or less continuous basis with the objective of avoiding regularization as it in effect circumvents the law on security of tenure of the workers. Thus the Supreme Court struck down as invalid a 5-month contract involving workers who were performing activities usually necessary or desirable to the business of the company. The practice of hiring workers on uniformly fixe d contract basis of 5 months, only to replace them upon the expiration of their contracts with other workers on the same employment duration, was imposed precisely to circumvent the constitutional guarantee on security of tenure and, therefore, contrary to public policy. To uphold the contractual arrangement between the employer and the workers would in effect permit the former to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis, thereby violating the employees security of tenure in their jobs. (Pure Foods Corp. vs. NLRC et al, 283 SCRA 133)

If an unjustified dismissal violates security of tenure under a contract of employment which provides that the contract term shall be for a period of 12 months, the employee should be paid his salary for the unexpired portion of his contract of employment. (A.M. Oreta vs. NLRC, 176 SCRA 218) The same rule applies to overseas contract workers under similar circumstances. (Miguel vs. NLRC, 162 SCRA 441) Thus, an overseas contract worker is entitled to his salary corresponding to the unserved weeks of his employment contract which was terminated by the employer despite his willingness to work out the balance of his term. (Ditan vs. POEA, 191 SCRA 823)

6. MANAGEMENT PREROGATIVES. By way of counterbalance to the employees right to security of tenure are the rights recognized by law as inherent in the management of business enterprises. The owner of a business enterprise is given

considerable leeway in managing his business based on the principle of managerial control of business flowing from ownership of property aid the rationale of business enterprise which is maximization of profit. These rights, collectively called management prerogatives, comprise the owners freedom to administer the affairs of his business enterprise in his quest for profits. Thus the Supreme Court stated that except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, lay-off of workers and the discipline, dismissal and recall of work. (San Miguel Brewery Sales Force Union vs. Ople, 170 SCRA 25) But an employers prerogative and power to discipline and terminate employees services may not be exercised in an arbitrary or despotic manner as to erode and render meaningless the Constitutional guarantees of security of tenure and due process. (Hongkong & Shanghai Banking Corp. vs. NLRC, 260 SCRA 49) In a recent case, the Supreme Court cautioned that having the right should not be confused with the manner in which that right is exercised. The employer must show that a transfer or reassignment of an employee is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to prove these, the employees transfer shall be tantamount to constructive dismissal. (Blue Dairy Corp. et al vs. NLRC et al, Sept. 14, 1999)

On the matter of closure or suspension of operations, the High Court noted that the determination to cease or suspend operations is a management prerogative that the State usually does not interfert with, as no business can be required to continue operating at a loss simply to maintain the workers in employment. Such an act would be tantamount to a taking of property with t due proc ss of law, which the employer has a right to resist. (San Pedro Hospital of Digos, Inc. vs. SOLE, 263 SCRA 98)

To be more specific, management prerogatives cover the following aspects of business:

A. Operation of the business, including ----transfer or relocation of the plant

----introduction of new machines or processes (even if resulting in lay-offs) ----transformation of the company (e;g. meigers, spin-offs) ----suspension of operations ----sale or other disposition of the business ----total closure, if in good faith

B. Personnel actions, such as ----hiring of personnel and imposing reasonable conditions therefore ----determining size of the work force ----transfers or assignments of employees ----disciplining employees ----terminating employees for cause

All the above are subject to the condition that the requirements of law, public policy, morals, good customs and good faith are complied with. The rationale for this policy is that an employees right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogatives. (Homeowners Savings & Loan Assn. vs. NLRC, 262 SCRA 406)

7. REQUIREMENTS FOR LAWFUL DISMISSAL: A JUST CAUSE. As indicated (cf. Sec. 1, supra), there are two basic requirements for a lawful dismissal a just cause or authorized cause as prescribed by law, and observance of due process. The former comprises the substantive requirement, and the latter constitutes the procedural requirement for a valid dismissal. The Labor Code, in Art. 283, enumerates the Just causes for termination, which are here outlined and explained seriatim:

a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work. The justification for this cause is that while the law protects the rights of workers, it does not authorize the oppression or self-destruction of the employer. (San Miguel Brewery vs. National Labor Union, 97 Phil. 378) Serious misconduct is the transgression of some established and definite rule of action, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment (Alma Cosep vs. NLRC et a], June 16, 1998) It must be grave and not trivial or unimportant, and must be in connection with the employees work to constitute just cause for dismissal. (Samson vs. NLRC et a], April 12, 2000) Hence, uttering obscene and offensive words during an employees party as a reaction to managements decision in the case of another employee, while evincing improper conduct, does not constitute serious misconduct to warrant the employees dismissal. (Samson vs. NLRC et a], supra) In another situation, the act of a company nurse in throwing a stapler and uttering abusive language at a plant manager in retaliation to the sexual harassment and provocation caused on her by the manager over the years is not serious misconduct that is a ground for dismissal, because it does not relate to the performance of the employees duties as would show her unfit to continue working for her employer. (Phil. Aeolus Automotive United Corp. vs. NLRC et a], April 28, 2000) Willful disobedience of an employers lawful orders, as ajust cause for dismissal, entails the concurrence of at least two requisites, viz: the employees assailed conduct must have been wi1lful or intentional the willfulness being characterized by a wrongful and perverse attitude inconsistent with proper subordination; and the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge. (Gld City Integrated Port Services vs. NLRC, 189 SCRA 811; San Miguel Corp. vs. Ubaldo; 218 SCRA 293; Manebo vs. NLRC, 229 SCRA 240) In addition, the workers misconduct must show that he has become unfit to continue working for the employer. (Molato vs. NLRC, 266 SCRA 42)

Except as provided for or limited by special laws, an employer Is free to regulate, according to his discretion and judgment, all aspects oi employment. Employers may make reasonable rules and regulations for the government of their employees, and when employees with knowledge of an established rule enter the service, the rule becomes a part of the contract of employment. It is also generally recognized that company policies and regulations, unless shown to be grossly oppressive or contrary to law, are generally

valid and binding, and must be complied with. (Lagatic vs. NLRC, Jan. 28, 1998)

Deliberate disregard or disobedience of rules and defiance of management authority by the employee cannot be countenanced, until and unless the rules or orders imposed by the emp1oyer are declared to be illegal and improper by competent authority. (GTE Corp. vs. Sanchez, 197 SCRA 452) But reasonable opposition to management orders is not a cause for termination. (General Bank vs. Court of Appeals, 135 SCRA 569) Repeated violation of company rules may be considered willful disobedience, provided the rules are in writing and made known to the employees. (San Miguel Corporation vs. Ubaldo, 218 SCRA 293) Insubordination of an employee is not always punishable with dismissal. There must be a reasonable proportionality between the act of insubordination and the penalty imposed therefor. (Gold City Integrated Port Services vs. NLRC, supra) As ruled in a recent case, to be lawful the cause for termination must be a serious and grave malfeasance to justify the deprivation of a means of livclihood. (Hongkong & Shanghai Banking Corp. vs. NLRC, 260 SCRA 49)

Refusal of an employee to be transferred to a new assignment unless a bigger salary increase is given constitutes insubordination, and is a just cause for termination. (Castillo vs. CW, 39 SCRA 77) But if the transfer is tantamount to removal due to the hardships involved therein, it is not a just cause. (Sta. Maria vs. Lopez, 37 SCRA 637; Garcia vs. Lejano, 109 Phil. 116) And where atransferis a promotion, its refusal is not a just cause for termination because a promotion is in the nature of a reward, which a person has the right to refuse. (Dosch vs. NLRC and Northwest Airlines, 123 SCRA 296) Intoxication which interferes with employment is deemed serious misconduct. As a rule, immorality per se does not justify dismissal of an employee, unless it is prejudicial or detrimental to the employers interest. (Stanford Microsystem vs. NLRC, 157 SCRA 410)

b) Gross and habitual neglect by the employee of his duties. This cause includes gross and habitual inefficiency, negligence and carelessness. It is derived from the right of the employer to select and engage his employees. Gross negligence has been defined as the want of any slight care (Caunan vs. Cia. General de Tabacos, 56 Phil. 547) or the utter disregard of consequences. (Marinduque Iron Mines vs. WCC, 99 Phil. 485) Where an

employee shows lack of ordinary diligence and care in repeated instances, this constitutes a just cause for his dismissal. In a recent case it was held that repeated absences by an employee despite warnings and suspensions were not only a violation of company rules, but also constituted gross and habitual neglect of duties, which is a just cause for dismissal. It is the totality, not the compartmentalization of company infractions consistently committed which justifies the penalty of dismissal. (Manila Electric Co. vs. NLRC and Cortez, 263 SCRA 531) This was qualified in a later case in which the Court ruled that where an employee has been penalized with suspension in some of the infractions imputed to him, he cannot again be penalized for those misconduct. (Pepsi Cola Distributors of the Phil. Inc. vs. NLRC, 272 SCRA 267) In a more recent case, the Court held that in order to constitute a just cause for the employees dismissal, the neglect of duties must not only be gross, but also habitual. Thus the single or isolated act of negligence does not constitute ajust cause for the dismissal of the employee. (National Bookstore, Inc. vs. Court of Appeals, Feb. 27, 2002)

c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative. This includes such acts as competing with the employer, making clandestine profits, accepting bribes, as well as other acts that result in loss of trust and confidence on the part of the employer. There is no question that fraud committed by an employee against his employer is a just cause for dismissal but loss of trust (and confidence) of the employer in his employee requires further elaboration. It has been held that the basic premise for loss of confidence as a just cause for dismissal is that the employee concerned holds a position of trust and confidence, otherwise it is not a valid ground. (Quezon Electric Corp. vs. NLRC, 172 SCRA 88) In addition, the act complained of must be work-related and shows that the employee is unfit to work for his employer. (Aris Phil. Inc. vs. NLRC, 238 SCRA 59) A position of trust and confidence has been defined as one where a person is entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employers property. (Panday vs. NLRC, 209 SCRA 122) In another case, the observation was made that interpretation of the term trust and confidence should be restricted to managerial employees. (Marina Port Services vs. NLRC, 193 SCRA 420) This seems to be the later trend.

Thus in a recent case the Court made the observation that loss of confidence should ideally apply only to cases involving employees

occupying positions of trust and confidence or to those situations where the employee is routinely charged with care and custody of the employers money or property. To the first class belong manageable employees, and to the second class belong cashiers, auditors, property custodians, etc. or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property. (Mabeza vs. NLRC, 271 SCRA 670) In a more recent case, the Court upheld the dismissal of a shift supervisor on the ground of breach of trust and confidence for tampering highly sensitive equipment in an oil terminal thereby exposing the entire terminal complex and the adjacent communities to the danger of a major disaster that may be caused by oil tank explosion and conflagration. (Deles Jr. vs. NLRC et al, March 1, 2000)

However, there are decisions that have considered this cause asset applies to rank-and-file, as well as to managerial employees, leading to a distinction between the two. As a general rule, employers are allowed a wider latitude of discretion in terminating managerial personnel or those of similar rank performing functions which by their nature require the employers full trust and confidence, than in the case of ordinary rank and file employees. Thus the rule has been laid that in rank-and-file employees, loss of trust and confidence requires proof of involvement in the events in question, and that mere uncorroborated assertions and accusations of the employer will not suffice. (Midtown Ramada vs. NUWHRAIN, 159 SCRA 212) By way of example, a salesman-collector was deemed to hold a fiduciary position. Although loss of trust and confidence constitutes a valid cause for termination, it must nonetheless rest on solid grounds that reasonably evince an actual breach thereof by an employee. The act upon which the loss of trust Is predicated must be related to the performance of the duties of th employee such as would thereby show him to be Indeed unfit to continue working for the employer. (San Antonio vs. NLRC, 250 SCRA 359). This requirement was reiterated in several cases where the High Court held that in order t constitute a just cause for dismissal, the act complained of must be work related and shows that the employee concerned is uiifit to continue to work for the employer. (Sulpicio Lines, Inc. vs. GuIde, Feb. 22, 2002) Ordinary breach of trust will not. suffice; It must be willful, I. e. done intentionally, knowingly and purposely without justifiable cause, as distinguished from an act done carelessly, heedlessly or inadvertently. (Atlas Consolidated Mining & Dev. Corp. vs. NLRC, May 21, 1998) This ground must be founded on facts established by the employer who must clearly and convincingly prove by substantial evidence the facts and incidents upon which loss of confidence in

the employee may fairly be made to rest; otherwise, the dismissal will be rendered illegal. (Equitable Banking Corp. vs. NLRC, 273 SCRA 352) The ground may even be an omission so long as it is willful and unjustified. Hence the Court has ruled that going on a prolonged unauthorized leave gives credence to an employers claim that It has already lost its trust and confidence in the employee, (Belaunzaran vs. NLRC, 265 SCRA 800) The burden of proof lies on an employer to first convincingly establish valid bases for that loss of trust and confidence. (Mapalo vs. NLRC, 233 SCRA 266)

But with respect to managerial employees proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, or if the employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is responsible for the misconduct, and that the nature of his participation therein renders him unworthy of the trust and confidence demanded by his position. (Sajona vs. NLRC, 183 SCRA 667; City trust Finance Corp. vs. NLRC, 157 SCRA 87; Tabacalera Lisuraice Cotp. vs. NLRC, 151 SCRA 667; Ricker vs. Cple, 155 SCRA 85; Villadolid vs. Inciong, 121 SCRA 205; Reynolds Phils., Inc. vs. Eslava, 137 SCRA 259) Here, the mere existence of a basis for believing that the employee has breached the trust of his employer is sufficient, and does not require proof beyond reasonable doubt. (Kwikway Engineering Works vs. NLRC, 195 SCRA 536) The guidelines set by the Supreme Court for the correct use of loss of confidence. as a valid cause for termination are: a) loss of confidence should not be simulated; b) it should not be used as a subterfuge for causes which are improper, illegal, or unjustified; c) it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and d) it must be genuine, not a mere afterthought to justify earlier action taken in bad faith. (China City Restaurant vs. NLRC, 217 SCRA 443; Lawrence vs. NLRC, 205 SCRA 737) To restate, loss of confidence as a ground for dismissal should not be simulated nor used as a subterfuge. It may not be asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith. (General Bank vs. Court of Appeals, supra)

A further condition enunciated by the Supreme Court for breach of trust as a va1d cause for dismissal is that the breach is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and

not on the employers arbitrariness, whims, caprices or suspicion; otherwise, the employee would remain eternally at the mercy of the employer. It should be genuine and not simulated. This ground has never been intended to afford an occasion for abuse because of its subjective nature. (Austria vs. NLRC, Aug. 16, 1999)

A new aspect of this cause is sexual harassment, which has been cited as a just and valid cause for termination of a managerial employee who should be bound by more exacting work ethics, by perpetrating this crime against a subordinate he provides a justifiable ground for dismissal for lack of trust and confidence. (Villarama vs. NLRC, 236 SCRA 280) Delay on the subordinates part in initiating the complaint does not reduce the significance of the case. (Libres vs. NLRC, May 28, 1999)

Where dismissal for loss of confidence is based on suspected theft of company property on the part of the employee, it remains a valid cause for dismissal even if the employee is subsequently acquitted. (Dole Phil. vs. NLRC, 123 SCRA 673) or his case is dropped by the fiscal for insufficient evidence. The employee concerned cannot successfully seek reinstatement. Conviction in a criminal case is not indispensable to warrant dismissal in these cases. The fact that the complaint is dropped by the fiscal is not binding on a labor tabular. It is sufficient that the employer have a basis for believing that the employee breached the trust and confidence reposed in him (Sea-Land vs. NLRC, 136 SCRA 544) The subsequent court acquittal of a dismissed employee clees not mean he should be reinstated, because the evader for his dismissal has beei found sufilcient even if the same is inadequate to sustain conviction in a criminal case. (Rainosan vs. Jardine CMG Life Ins. Co., Feb. 22, 2000)

Theft is not a basis for loss of confidence, nor is it adjust cause for dismissal if the property involved is of negligible value, and the worker concerned is a long-service employee. (PAL vs. PALEA, 104 Phil. 1058; Stanford Microsystems vs. NLRC, supra)

d) Commission of a crime or offense by the employee against the person of his employer organize immediate member of his family or his duly authorized representative. This cause deals with crimes or offenses against the person of the employer, his immediate family members or his representatives, and not against his property which is covered by

the preceding cause. To constitute a ground for dismissal, conviction is not needed; it is enough that such offense was committed (Gatmaitan vs. Manila Railroad Co., 21 SCRA 171)

e) Other causes analogous to the foregoing. This basket provision cures any number of possible causes determined to be justifiable grounds for dismissal.

One of the more common causes invoked is that of abandonment of theJurisprudence on this point has established the nile that for abandonment to arise, there must be a consonance of the intention that the employee has no more desire to work and a positive act indicating that intention. (Dagupan Bus Co. vs. NLRC, 191 SCRA 328) Hence mere absence of the employee does not constitute abandonment; it must be accompanied by overt acts pointing to the fact that the employee simply does not want to work an>oce. (Asphalt & Cement Payers, Inc. vs. Leogardo, 162 SCRA 541) Two elements must concur for a valid abandonment, viz: (1) the failure to report to work or absence without valid or justifiable reason, and (2) a clear intention to sever the emp1oy- employee relationship, with the second element as the more determinative factor being manifested by some overt acts. It is clear that in abandonment, severance of employment is initiated by the employees neglect of duty, an act solely attributable to him. (Thndline Employees Assn. vs. NLRC et al., 272 SCRA 350) A worker who joins a strike cannot be said to have abandoned his job, for he is precisely trying to assert or improve the terms and conditions of his employment. (BLTB vs. NLRC, 212 SCRA 792) In addition, prompt contest by the employee of the dismissal negates this cause as it is illogical for an employee to dispute dismissal from a job he has abandoned (Sarmiento vs. Tuico, 162 SCRA 676) In a recent case, an employee contesting hs dismissal for abandonment was upheld despite his having been absent from work for eight months! (Nazal and C.B. Nazal Trading vs. NLRC et al., 274 SCRA 350)

Other grounds held to be analogous causes for dismissal are imprisonment of the employee, instigating a labor unrest by the employee such that his continuance in service is inimical to the employers interest (Engineering Equipment, Inc. vs. NLRC, 133 SCRA

752), unless committed by a long-service employee wherein an equitable judgment may rest not only scandium radiomen, but also scandium caritatem (Sarnpang vs. Inciong, 137 SCRA 56), and fighting with a supervisor. Old age is not a just cause for dismissal. But dismissal of a school teacher for unreasonable behavior and unpleasant deportment in dealing with people in the course of employment is justified because the said grounds are deemed to be within the scope of other analogous causes among the just causes enumerated in the Labor Code (Cathedral School of Technology vs. NLRC, 214 SCRA 551)

Immorality, per Se, is not listed as a just cause for termination, unless the employment concerned requires a certain standard of conddct. Thus, two private school teachers, both married, were dismissed due to their illicit relationship known by their fellow teachers and school officials. Their dismissal was deemed to be for a just cause, because the parties violated Sec. 94 of the Manual of Regulations for Private Schools on disgraceful or immoral conduct (DECS Order No. 2, Series of 1992). Furthermore, as the High Court noted, teachers must abide by a standard of personal conduct which not only bans the commission of immoral acts, but also prohibits behavior creating a suspicion of immorality because of the harmful impression it might have on the students. (Santos Jr. vs. NLRC, Hagonoy Institute Inc. et al, March 6, 1998)

8. SAME: AUTHORIZED CAUSES. Authorized causes for domination are basically management prerogatives derived from ownership of property and the rationale of business enterprise which is the maximization of profits. The State recognizes these prerogatives, but regulates them in the exercise of its paramount police power (Manila Trading & Supply Co. vs. PLU, 71 SCRA 124) Hence, while all these are valid causes for termination of employment, they are subject to legal requirements regarding procedure, e.g. one-months written notice on the workers and the DOLE, separation pay, and others.

A liberal doctrine advanced on this point is that if the termination is due to an authorized cause, like retrenchment, it is not subject to discretionary review by the labor arbiter or the NLRC so long as violation of the law or arbitrary and malicious action is not shown. (Wiltshire File Co. vs. NLRC and Ong. 193 SCRA 665) Corollary to this, dismissals for authorized causes do not have to observe the due process requirement of other types of dismissals, only the procedural requirements of the Labor Code.

However, other decisions have evolved a new set of criteria that has virtually dissipated the former doctrine. These will be discussed under each specific cause.

The Labor Code provides the following authorized causes for termination:

a) Reduction of personnel due to the installation of labor-saving devices This is a management prerogative to ensure efficiency in the operation of the enterprise. Thus, it has been held that when there is need to reduce the work, management has the right to choose whom to layoff, depending on the work still requited to be done, and the qualities of the workers to be retainable (Almoite vs. Pacific Architects & Engineers, 142 SCRA 623) Nevertheless, there must be fair and reasonable atria, such as less prefened employment status efficiency ra11rg and seniait (Asiawoild Publishing House vs. Ople, 152 SCRA 219) In any event, the law requires the employer to pay the workers affected thereby to a separation pay equivalent to one months pay, or at least one-half months pay for every year of service, whichever is higher (Art. 284 LC as am. by BP 130).

b) Reduction of personnel due to redundancy. Redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. (Almodiel vs. NLRC, 223 SCRA 341) Hence, a position becomes redundant if it is superfluous. This may be the outcome of a number of factors such as over hiring, decreased volume of business, reorganization, dropping of a product line or service previously undertaken by the enterprise. To these situations, the employer has no obligation to keep in his payroll more employees than are necessary for the operation of his business. However, the employer is similarly required to pay his affected workers at least one months pay or one-half months pa for every year of service, whichever is higher, and to serve a notice on the workers and the Labor Department at least one month before the inended date of the termination (Alt 283 LC).

c) Retrenchment to prevent losses. Retrenchment is a mnagement prerogative, a means to

protect and preserve the employers viability and ensure his survival, subject to faithful compliance by him with the rules laid down by law and jurisprudence. (Central Azucarera de la Carlotavs. NLRC, 251 SCRA 589) 130th redundancy and retrenchment are economic grounds for dismissing mployee, but with this differece. Redundancy exists when the services of an emploee are n excess of what is required by an enterprise. Retrenchment is resorted to primarily avoid or minimize business losses. Hence, an employers purported redundancy program, while denominated as such, is more precisely termed retrenchment because it is primarily intended to prevent serious business losses. (A G & P United Rank and File Assn. vs. NLRC, 265 SCRA 159 Precisely because reveses in a business ventue are expected, the law recognizes the same as a vaid cause for terminating an employment (Art. 283-a, LC), and in many instances the Supreme Court has affirmed the right of an employer to lay off or dismiss employees because of losses in the operation of its business, lack of work and considerable reduction in the volume of business. (Columbia Development Corp. vs. MOLE, 146 SCRA 421) It is necessary that business reverses or losses be serious, actual and real. The burden of establishing the truth as to these losses or reverses falls upon the employer. (San Pedro Hospital of Digos, Inc. vs. SOLE, 263 SCRA 98)

Business reverses or losses are considered valid causes for terminating employment, but the alleged losses must be supported by adequate proof (Camara Shoes vs. Kapisanan ng mga Manggagawa, 173 SCRA 192), and the other requirements (supra) observed. Hence, retrenchment is no reason for mass dismissals if the company is not losing money. (Phil. Bank & Trust Co. vs. PBTC Employees Union, 69 SCRA 10; Duay vs. CIR, 122 SCRA 834) And where it is shown that the closure is motivated not by a desire to prevent further losses, but to discourage the workers from organizing themselves into a union for more effective negotiations with management, the State is bound to intervene. (San Pedro Hospital of Digos, Inc. vs. SOLE, supra) Retrenchment strikes at the very core ot a workers employment, and the burden clearly falls upon the employer to prove economic or business losses with appropriate supporting evidence. (Balbalec vs. NLRC, 251 SCRA 398; Fuentes vs. NLRC, 266 SCRA 24) The employer bears the burden to prove his allegation of economic or business reverses with clear and convincing evidence, it being in the nature

of an affirmative defense. (Revidad vs. NLRC, 248 SCRA 356) The reason for requiring this quantum of proof is readily apparent; any less exacting standard of proof would render too easy the abuse of this ground for termination of the services of em ployces. (Central Azucarera de la Carlota vs. NLRC, supra)

In dismissals for retrenchment to prevent losses, there must be an application for reduction of employees or written notice to the DOLE. This one-month notice requirement is mandatory. (United Federation of Workers vs. NLRC, 221 SCRA 267). This requirement of notice is to enable the proper authorities to ascertain whether the closure of the business is being done in good faith, and not merely a pretext for evading compliance with just obligations of employers to employees. (Revidad vs. NLRC, supra) In another case on this point the Court required, aside from the written notice, that the employer observe fair and reasonable standards to effect retrenchment, and that he institute cost-reduction measures in other areas of production before undertaking retrenchment as a last resort. (RCPI vs. NLRC, 210 SCRA222) A later case was even more specific. On the need to prove losses, the Court required a showing that a) the expected losses be substantial, not minimal; b) the losses anticipated must be reasonably imminent as can be perceived objectively and in good faith; c) retrenchment must be reasonably necessary and likely to effectively prevent the expected losses, and that other measures prior or parallel to retrenchment have been taken, e.g. cost- reduction programs, improving efficiencies, cutting marketing and advertising costs, etc. and (d) the alleged losses incurred, as well as the imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. (Lopez Sugar Corp. vs. FFW, 189 SCRA 179; Balasbas vs. NLRC, 212 SCRA 803) In fine, aside from sufficient proof of substantial losses, there must be a reasonable necessity for such a drastic steO. This reasonable necessity requirement was further explained by the Court in a recent decision where it held that retrenchment is only a measure of last resort when other less drastic means have been tried and found to be inadequate--such as cost reduction, faster collection on certain accounts, and reducing investments in raw materials-- to avoid serious financial and economic problems. (Somerville Stainless Steel Corp. vs. NLRC,. March 11, 1998) This means that not every loss incurred or expected to be incurred by a company will justify retrenchment. It is justified only when all other less drastic means have been tried and found insufficient. (Guerrero vs. NLRC, 261 SCRA 301) So it was held that sliding incomes are not necessarily losses, much less serious business losses within the meaning of the law. (San Miguel Jeepney Service vs. NLRC, 265 SCRA 35) As the Court has noted, business losses must be proved, for they can be feigned.(Phil. School of Business Administration vs. NLRC,

223 SCRA 305) But retrenchment does not require that more junior or non-technical employees be terminated first. (Tierra International Construction vs. NLRC, 211 SCRA 73)

Retrenchment or lay off, may be total or partial. Total retrenchment means cessation of operations of the establishment or undertaking. Partial retrenchment means the cessation of only part of a companys operations or a reduction of work days. It may also be permanent or temporary. Permanent retrenchment means closure of business due to grave financial losses. Temporary retrenchment means the bona fide suspension of work for not over six months.

Generally, retrenchment as an authorized cause for termination refers to total and permanent retrenchment. Partial retrenchment is allowed by the Bureau of Working Conditions, DOLE, subject to its conditions. Temporary retrenchment is covered by Art. 286, LC. When a lay off is temporary, the employment status of a worker is not deemed terminated, but merely suspended. A case reported in Vol. 268, SCRA, held that the bona fide suspension of a business or undertaking for a period not exceeding six months does not terminate employment. (de la Cruz vs. NLRC)

And where the employer, on the pretext of retrenching, lays off an employee with a promise to re-hire him when economic conditions improve, but refuses to do so, the employer may be guilty of illegal dismissal if he does not present any evidence of retrenchment. He may also be liable for moral damages depending on the manner of dismissal. (Precision Electronics vs. NLRC, 178 SCRA 667) Anent this last respect, while retrenchment, or any other valid cause, gives an employer the right to dismiss an employee, this should not be confusedly with tile manner m which such right is exercised. If the manner runs counter to the requirement prescribed by law, the dismissal would be held illegal.

Terminations due to retrenchment entail actual dismissals, not mere forced leaves. A forced leave due to economic conditions is deemed a management prerogative, in the absence of a showing that it was for the purpose of defeating or circumventing the rights of employees (Phil. Graphic Arts. vs. NLRC, 166 SCRA 118)

d) Closure of establishment or cessation of operations. This cause is qualified by the condition, unless the closing is for the purpose of circumventing the

provisions of this Title (Art. 283 LC). This may or may not be caused by business reverses. Abolition of a department or section of an employers establishment for economic reasons is a managerial prerogative (Dangan vs. NLRC, 127 SCRA 706) Closure or cessation of an establishment not due to serious business losses includes the complete cessation of operations or only part of a companys activities. (Coca Cola Bottlers Phil. vs. NLRC, 194 SCRA 592) An employer may close or cease his business operations even if not suffering business losses or financial reverses if done in good faith and for causes beyond his control, provided he pays his employees their termination pay. (Catatista vs. NLRC, 247 SCRA 46) In cases of closure or cessation of operations of establishments or undertakings not due to serious business losses or financial reverses, the workers affected thereby shall be entitled to separation pay (Art. 283 LC as am. by BP 130). The implication is that closures or cessation of operations due to serious business losses or reverses do not entail the obligation of paying separation pay to the workers adversely affected thereby. On this point, the Supreme Court made an early pronouncement that based on social justice and equity, employees should be awarded separation pay although the closure of the establishment is due to serious business losses or reverses .(Banco Filipino vs. NLRC, 188 SCRA 700; Intl. Hardware Inc. vs. NLRC, 176 SCRA 256) However the Court appears to have abandoned this ruling in several later decisions holding that Art. 283, LC does not obligate an employer to pay separation benefits when the closure is due to serious business losses.(Mindanao Terminal & Brokerage Service Inc. vs. MOLE, 238 SCRA 84; North Davao Mining Corp. vs. NLRC, 254 SCRA 721)

e) Disease. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health, as well as to the health of his coemployees. In occupational diseases there should be a certification by a competent health authority that the disease is of such a nature or stage that it cannot be cured within six months with proper medical treatment.(Cebu Royal Plant vs. Deputy Minister, 153 SCRA 38) The employee, in this case, will be paid separation pay equivalent to at least one months pay or to one -half months pay for every year of service, whichever is greatet A fraction of at least six months is considered as one whole year (Art. 284). A

dismissal based only on the recommendation of company doctors and without proof that the sickness cannot be cured within a period of six months even with proper medical treatment is illegal. (Cathay Pacific Airways vs., NLRC et al. Aug. 2, 2001) Dismissals for any of these authorized causes are valid provided two further legal requirements are met, namely:

1) A written notice on the worker and on the Department of Labor and Employment at least one month before the intended date of termination. This requirement is mandatory. The purpose of such previous notice is to give the worker some time to prepare for the eventual loss of his job, and the DOLE the opportunity to ascertain the verity of the alleged authorized cause of termination. The employer cannot substitute the required prior written notice with payment of 30 days salary, for this is a right to which a worker is legally entitled. (Serrano vs. NLRC et al May 4, 2000)

2) Separation pay to the workers affected. This pay shall-be equivalent to one -months pay or at least one half months pay for every year of service, whichever is higher In case of retrenchment to prevent losses, and in cases of closures or cessation of operations of establishments or undertakings not due to serious business losses or financial reverses, the separation pay shall be equivalent to one-months pay or at least one-half months pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year (Art. 283 LC as am. by BP 130). Terminations for disease follow this last requirement Art. 285 LC), but require no written notice.

9. JUST CAUSES AND AUTHORIZED CAUSES COMPARED. Just causes and authorized causes are both valid grounds for terminating employment. Theoretically, they differ in certain points, such as:

a) Separation Pay. The Labor Code does not provide for separation pay in dismissals for just causes, but it so provides in termination for authorized causes.

b) Procedural Due Process. Dismissals for just cause have to comply with procedural requirements to ensure the employees right to due process. If for authorized cause, the employer only has to comply with the requirements prescribed in the Labor Code (Art. 283 LC) and jurisprudence in point.

These theories have been modified by subsequent jurisprudence. On the first difference, (a) the observation that one dismissed for a just cause is not entitled to separation pay has been held to allow an exception based on equity considerations and on the Constitutional provisions of social justice and protection to labor. The current rule is that separation pay is allowed in cases where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his/her moral character Hence, separation pay may be awarded in dismissals for loss of confidence due to incompatibility, for absenteeism due to a sick child, or for inefficiency for failing to meet sales quotas, and the like. But where the ground is habitual intoxication, or an offense involving moral turpitude like theft or illicit sex, the employer will not be required to give the employee separation pay. (Phil. Long Distance Telephone Co. vs. NLRC, 164 SCRA 671; Osias Academy vs. Dept of Labor, 172 SCRA 468) And in the absence of any dishonesty or moral turpitude on the part of a managerial employee, his dismissal will entitle him to financial assistance as a measure of social justice. (Pepsico vs. NLRC and Lapid, 177 SCRA 308)

An earlier doctrine essayed in a number of cases was that employees validly terminated are entitled to separation pay on the ground of social and compassionate justice. (Firestone Tire & Rubber Co. vs. Lariosa, 148, SCRA 187, Soco vs. Mercantile Corp., 148 SCRA 526, Filipro vs. NLRC, 145 SCRA 123; Metro Drug Corp. vs. NLRC, 143 SCRA 132; Engineering Equipment, Inc. vs. NLRC, 133 SCRA 752; New Frontier Mines, Inc. vs. NLRC, 129 SCRA 502; San Miguel Corp. vs. Dep. Mm. 145 SCRA 196) But this doctrine was categorically abandoned in the landmark case of Phil. Long Distance Telephone Co. vs. NLRC (supra) which declared that Henceforth, separation pay shall be allowed as a measure of social justice only in those instances where

the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character Otherwise, the employer may not be required to give the dismissed employee separation pay or financial assistance, or whatever name it is called, on the ground of social justice. Subsequent decisions abided by this pronouncement. (Phil. National Construction Corp. vs. NLRC, 170 SCRA 207; Eastern Paper Mills vs. NLRC, 170 SCRA 597; Osias Academy vs. NLRC, supra: Cosmopolitan Funeral Homes vs. Maalat et al., 187 SCRA 108) And in the later case of Cathedral School of Technology vs. NLRC (supra) the Court reiterated this ruling, noting that it finds support in Sec. 7, Book VI of the Omnibus Rules, which states in pertinent part. . .The separation from work of an employee for a just cause does not entitle him to the termination pay provided in the Code, without prejudice, however, to whatever rights, benefits and privileges he may have under the applicable individual Collective Bargaining Agreement with the employer or voluntary employer policy or practice.

The second theory, (b) appears to be simplistic, but when contested, the substantive due process involved can get complicated, particularly in regard to evidentiary requirements. 10. DUE PROCESS. In brief, due process in dismissal cases entails compliance with the twin requirements of due notice and hearing. The procedure conforming to these requirements may be outlined as follows:

a) The employer shall furnish the worker a written notice containing a statement of the cause (s) for dismissal. b) The worker is given ample opportunity to be heard and to defend himself with the assistance of a representative, if he so desires. c) The decision is made by the employer without prejudice to the right of the worker to contest the validity or legality of the dismissal by filing a complaint with the arbitration division of the regional office of the NLRC. At this point, the burden of proof to justify the dismissal rests on the employer

These guidelines require two written notices of dismissal before termination can be legally effected: notice of particular acts constituting the cause (s) of dismissal and the notice of decision

to dismiss, citing reasons therefore. (NASECO VS. NLRC, 168 SCRA 122) These requirements must he observed. This procedure is mandatory, in the absence of which any judgment reached by management is void and inexistent. Consultations and conferences may not be valid substitute for actual observance of notice and hearing. (Pepsi Cola Bottling Co. vs. NLRC, 210 SCRA 277) Neither can audit take the place of the twin requirements of due process. (MGG Marine Services Inc. vs. NLRC, 259 SCRA 664) A verbal outburst in nissing an employee cannot take the place of the written notices. (Puerto Azul Beach Hotel vs. Sisayan., 195 SCRA 126)

The right to due process entails, the twin requirements of notice and heating. Notice refers to the right of a person to be informed of the charges against him; hearing means the right of such person to be heard to defend his case personally or with the help of a representative. In this regard, it is not denial of the right to be heard, but denial of the opportunity to be heard that constitutes violation of due process. There is no such violation where the employee was given not only the opportunity to be heard which he forfeited in the proceedings before the labor arbiter, but also me right to be heard, which he actually exercised through his various representations on appeal before the NLRC. (Almoite vs. Pacific Architects & Engineers, 142 SCRA623; Azul vs. Castro Bartolome, 133 SCRA271) Noris there a violation if the observance of due process was aborted by the employee himself. (Engineering Equipment, Inc. vs. NLRC, supra) Hence, there is no denial of due process where the employee was duly represented by counsel and given sufficient opportunity to be heard, and was able to present his evidence; nor where the employees failure to be heard was due to postponements granted to him or due to his repeated failure to appear at the hearings. Moreover, whatever defects were committed on an alleged denial of due process is deemed cured by the filing of an appeal or motion for reconsideration. Marquez vs. Secretary of Labor, 171 SCRA 338; Magi3sang vs. Ople, 63 SCRA 508) In sum, what due process abhors is not lack of previous notice, but the absolute lack of the opportunity to be heard. (Artex Development Co., Inc. vs. NLRC, 187 SCRA 611) The requirement of a hearing is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. (Pono vs. NLRC, 275 SCRA 611) Where the employee was given ample opportunity to be heard which he ignored and remained silent, termination is justified if the employer has shown sufficient cause to dismiss him, which does not have to be supported by proof beyond reasonable doubt. (Maranaw Hotel & Resoit Corp. vs. NLRC et al, 244 SCRA 375) A formal or trial-type hearing is not at all times and in all instances essential. (Navarro III vs. Damaso, 246

SCRA 260) As applied to administrative proceedings, a hearing means an opportunity to seek reconsideration of the action or ruling complained of. (Vallende vs. NLRC, 248 SCRA 662) The hearing requirement is not to be considered a mere technicality, but one of substance to which every employee is entitled in order to assure at all times that the employers prerogative to dismiss or lay off was not abused or exercised in an arbitrary manner Any procedural short-cut that effectively allows an employer to assume the roles of both accuser and judge at the same time should not be countenanced. (San Antonio vs. NLRC, 250 SCRA 359)

Upon being charged for dismissal, the employee has the right to be heard and to defend himself personally and/or with the assistance of a representative. Every opportunity and assistance must be accorded to the employee by management to enable him to prepare adequately for his defense, including legal representation. (Pono vs. NLRC, supra) Denial of the employees right to counsel would render the dismissal illegal because the right to counsel is a basic requirement of substantive due process, and must be observed for it is a Constitutional right. (Salaw vs. NLRC, 202 SCRA 7) The employer has the authority to decide on the question of dismissal. The decision is however without prejudice to the employees right to contest its validity or legality by means of a complaint for illegal dismissal filed with the labor arbiters office in the appropriate Regional Office of the NLRC.

11. BURDEN OF PROOF. In termination cases, the burden of proof rests upon the employer to show that the dismissal was for adjust cause, Failure to do so would necessarily mean the dismissal was not justified. (Polymedie Gen. Hospital vs. NLRC, 134 SCRA 420; Manggagawa ng Komunikasyon sa Pilipinas vs. NLRC, 194 SCRA 573; Gesulgon vs. NLRC, 219 SC RA 56fl In administrative proceedings, such as illegal dismissal cases, the wrongdoing of the party concerned need not be shown by proof beyond reasonable doubt required by criminal law, nor even by preponderance of evidence needed in civil actions. What suffices is substantial evidence to support the dismissal. The Supreme Court has defined the term in this way: Substantial evidence is more than mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. (Ang Tibay vs. CIR, 69 Phil. 635; Megascope General Services vs. NLRC, 274 SCRA 147) The substantial evidence rule does not authorize a finding to be made just as long as there is an evidence to support it. It does

not excuse administrative agencies from considering contrary evidence which fairly detracts from the evidence supporting a finding. (Samahang Manggagawa sa Bandolino vs. NLRC, 275 SCRA 633)

This quantum of proof is not to be underesfimahd , as well illustrated in several cases. Thus it has been held that evidence presented before the NLRC must at least have a modicum of admissibility for it to be given some probative value. (Uichico vs. NLRC, 273 SCRA 35) A charge of misappropriation should be supported by documentary evidence such as collection reports, invoices, denomination slips, cash count sheets and individual deposit slips. A ships logbook presented as evidence should be authenticated, and not merely reported as to its contents. (Willem Maritime Services vs. NLRC, 263 SCRA 174) An employers reliance on a telefax transmission was deemed woefully inadequate in meeting the refund quantum of proof which is substantial evidence whose function is one of quality, not quantity. (Pacific Maritime Services vs. Ranay, 275 SCRA 717) Business losses as a cause for retrenchment should be supported with financial statements by independent auditors to show imminent substantial losses, and whether such losses increased or decreased, as well as cost reduction measures instituted before understanding retrenchment. (Banana Growers Collective vs. NLRC, July 31, 1997)

Where the employee offsets a facie case made out by the employer for a lawful dismissal, the balance of evidence moves to equipoise. But equipoise is not enough. The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause. (Dizon vs. NLRC, 180 SCRA 52)

Doubtful evidence, such as hearsay, cannot deprive a worker of his right to security of tenure. (Macilos vs. NLRC, March 4, 1996) And where the employee failed to establish his claim before the labor arbiter because access to the evidence needed for that purpose was under the absolute control of the employer, this is deemed to constitute a denial of due process. (Independent Sagay - Escalante Planters vs. NLRC, 207 SCRA 218) Corollary to this, non-submission of documents or records in the control of the employer raises the presumption that such records, if produced, would be adverse to the employed (Coca - Cola Bottlers Phil. vs. NLRC, 180 SCRA 195) All these are deemed elements of due process that are indispensable in every case.

12. EXCEPTIONAL CASES. The general rule that a valid dismissal is one for just or authorized cause and after observance of due process bears some exceptions in jurisprudence. Thus it has been held that despite the existence of a valid cause for dismissal, it should not be imposed as it is too severe a penalty if the worker has been employed for a long time in the service of the employee and it is his first offense (Meralco vs. NLRC and Signo, 175 SCRA 277) However, this rule is not all-encompassing. Considerations of first offense and length of service are overshadowed by the seriousness of the offense. Thus, it was held that an employee with 27 years of service may be lawfully dismissed for his first offense if done in blatant disobedience to a lawful order of his employer, and his offense shows lack of concern or responsibility towards his employers interest. In this case, a crew member violated an order not to leave the ship, and disconnected the ships steering cable so that the vessel could not leave port without him. As to whether an offense is minor or serious will have to be determined according to the peculiar facts of each case. (Villeno vs. NLRC, 251 SCRA 494) If it is not the employees first offense, reinstatement is not warranted on the ground of equity based on length of service. (CCBPI vs. NLRC, 172 SCRA 751) In a recent case, the dismissal of a worker with 32 years of service was upheld upon proof that he defrauded his employer m anomalous transactions of company equipment. (Bianan vs. NLRC, Feb. 1998) But first offense and length of service are factors considered in the application of social and compassionate justice to the dismissed employee. (Aparente vs. NLRC, April 27, 2000) Long service ernployees dismissed for just cause have been afforded some equitable relief in the form of separation pay equivalent to one months salary for every year of service. (Soco vs. Mercantile Corp. of Davao, 148 SCRA 526; Tanala vs. NLRC. 252 SCRA 314)

By way of exception also, non-observance of the due process requirement will not necessarily render a dismissal defective. Where the employee concerned appears to be of a violent temper, troublesome and defiant of superiors, and is dismissed for cause but without due process, his dismissal will be upheld, but the employer will be liable to indemnify the employee for its breach of legal procedure; the measure of damages will depend on the facts of the case, and on the gravity of the omission by the employer. (Wenphil vs. NLRC, 170 SCRA69; Meralcovs. NLRC and Mores, 178 SCRA 198) The rationale given for this ruling is that troublesome and violent employees should not be rewarded with reemployment and backwages. This may only encourage them to do even worse, and render a

mockery of the rules of discipline that employees are required to observe. In these cases, the dismissals should be maintained, and such employees would have no right to return to their former employment.

While the twin requirements of notice and hearing are indispensable for a valid dismissal, failure to observe these requirements does not necessarily operate to invalidate or nullify the dismissal for a just and valid cause. A distinction should be made between the legality of the act of dismissal and the legality of the manner by which the act of dismissal was performed. The first refers to the substantive requirement of valid cause, the second involves the observance of the procedural requirement of due process. It is now settled that where the dismissal of an employee is proven to be for a just and valid cause, but he is not accorded his right to procedural due process, the dismissal shall be upheld, but the employer must be sanctioned for non-compliance with the requirements of due process. The sanction, which is in the nature of indemnification or penalty, depends on the facts of each case and the gravity of the omission by the employee and ranges from P 1,000 to P l0,000.(Falguera vs. Linsangan, 251 SCRA 364)

It is an indemnity, not separation pay, that is imposed on the employer for failure to observe the procedural requirements of notice and hearing. (Grepalife Assurance Corp. vs. NLRC, 187 SCRA 694)

13. RELIEFS IN ILLEGAL DISMISSAL CASES. The amended legal provision on this point states: x x x an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement (Art. 279 LC as am. by R.A. 6715). Jurisprudence has added the relief's of separation pay, moral damages and attorneys fees in proper cases.

An employee whose dismissal is found to be illegal is considered not having left his office so that he is entitled to all the rights and privileges that accrue to him by virtue of the position that he held. The backwaters to be awarded should not be diminished or reduced by earnings derived by the employee elsewhere during the term of his illegal dismissal. (Buhain vs. CA and Swift Foods, Inc.,

July 2, 2002)

An employee who is reinstated assumes the position he had occupied prior to his dismissal and is, as an ordinary rule, entitled only to his last salary in that position. (Groier International vs. Amansec, 177 SCRA 196) The order to reinstate an employee to his former position or to a substantially equivalent position is a positive mandate of the law with which strict compliance is required. (Citytrust Banking Corp. vs. NLRC, 258 SCRA 621)

Separation pay is granted where reinstatement is not in the best interests of the parties, as where their relations are so strained that reinstatement poses a risk to the employer or his interests, or to co-employees (Century textile Mills vs. NLRC, 161 SCRA 528), or where the employee has become antagonistic with the employer due to loss of confidence, although found to be wrong. (Commercial Motors Corp. vs. NLRC, 192 SCRA 191) If the relationship between employer and employee has been unduly strained by reason of their respective imputations of bad faith to each other, it would be prudent not to order reinstatement. This is particularly true in cases where the illegally dismissed employee holds a managerial or key position where he can only work effectively if he enjoys the full trust and confidence of top management. (Hilario vs. NLRC, 252 SCRA 555) But mere lapse of time (6 years) does not warrant a presumption that a strained relationship has supervened between an illegally dismissed employee and management .(Palmeria vs. NLRC, 236 SCRA 57) In a 1998 case (Mercury Drug Corp. vs. NLRC and Quijano), the Court took occasion to comment: The doctrine of strained relations should be strictly applied Every labor dispute almost always results in strained relations, and the phrase cannot be given an over-arching interpretation, otherwise an unjustly dismissed employee can never be reinstated.

At times, reinstatement is no longer possible, as where the business has been transferred, has ceased to operate, or if it should exceed the needs of an employer in recession. (Pizza Inn. vs. NLRC, 162 SCRA 773) Where reinstatement is barred through no fault of the employer a discretionry award or damages may be given corresponding to the period during which the employee could locate a substantially equivalent employment. In case reinstatement is not possible because the employer hired replacements who had become regular employees, the employer may be ordered to reinstate the employee to a

substantially equivalent position without loss of seniority tights. (Pedroso vs. Castro, 141 SCRA 169; Magtoto vs. NLRC, 140 SCRA58) This is a positive mandate of the law with which strict compliance is required. (Cittrust Banking Corp. vs. NLRC, 258 SCRA 621)

The grant of separation pay does not preclude a grant of back wages, as they are not inconsistent with each other Separation pay is granted in an illegal dismissal case where reinstatement is no longer advisable due to the strained relations between employer and employee. Back wages represent compensation that should have been earned but were not collected because of unjust dismissal. The bases for computing the two are different: the first being usually the length of the employees services (usually one- month pay for every year of service, unless otherwise provided), the second being the actual period when he was unlawfully prevented from working. (Lim and Sweet Lines vs. NLRC, 171 SCRA 328) Neither would acceptance of separation pay stop an employee from questioning his dismissal because he cannot waive his constitutional right to security of tenure. (Araneta University Foundation vs. NLRC, 155 SCRA 301; de Leon vs. NLRC, 100 SCRA 691; Mercury Drug Co. vs. CIR, 56 SCRA 694) Backwages are what an employee has lost in the way of wages due to his dismissal. (Lexal Laboratories vs. National Chemical Industries Workers Union, 25 SCRA 668) Backwages, in general, are granted on grounds of equity for earnings which a worker has lost due to his illegal dismissai(lndophil Acrylic Mfg. Corp. vs. NLRC, 226 SCRA 723) The award of backwages is not private compensation or damages, but is in furtherance and effectuation of the public objectives of the Labor Code. Even though the practical effect is the enrichment of the individual, the awani of backwages is not in redress of a private right, but rather is in the nature of a command upon the employer to make public reparation for his violation of the Labor Code, such as the dismissal of an employee due to the unlawful act of the employer or the latters bad faith. (Impeiial Textile Mills vs. NLRC, 217 SCRA 237) But where the employees dismissal is for a just cause, there is no factual or legal basis to order payment of backwages, otherwise he would be unjustly enriching himself at the expense of the employer. (MGO Marine Services Inc. vs NLRC, 259 SCRA 664) And where it is proven that the employer acted in good faith, he is likewise exempt ftom paying backwages. (Itogon Suyoc Mines vs. NLRC, 117 SCRA528)

The original Code provision on back wages (Art. 280 LC) was basically the same as after its amendment by R.A. 6715. Both

entitled the unjustly dismissed employee to payment of backwages computed from the time his compensation was withheld from him up to the time of his reinstatement. The amendment did include allowances, other benefits or their money equivalent in the term backwages

In the 1974 case of Mer.ury Drug Co. vs. dR (56 SCRA 694), the Supreme Court enunciated the policy of fixing tile amount of back wages to a just and reasonable level without qualification or deduction. The stated purpose was to avoid protracted delay in the award of back wages due to extended hearings in detonating the application of the theory of mitigating damages. In a separate concurring and dissenting opinion, then Justice Claudio Teehankee, while hailing this new principle as a realistic, reasonable and mutually beneficial solution, dissented from the specific award of one year, 11 months and 15 days as arbitrary Justice Teehankee proposed the laying down of some ground rules in implementing a new formula granting a fixed back wages award without further qualification or deduction. He observed that normally the trial and resolution of the appeal should be given preference and terminated within a period of three years (one year for trial and decision in the industrial court and two years for appeal and decision in the Supreme Court). This base figure of three years, without qualification or deduction, was first applied in Feati University Club vs. Feati University, (58 SCRA 395) in 1974, and then in a host of succeeding cases. It has since been known as the Mercury Drug formula.

The first indication of an impending abandonment of the Mercury Drug policy was given in the case of Sea-Land Services Inc. vs. NLRC (190 SCRA 347) where the Supreme Court stated that the amendatory provision of R.A. 6715 regarding back wages took effect only on March 21, 1989, and has no retroactive effect. This was followed by a declaration in Maranaw Hotels and Resorts Corp. vs. Court of Appeals (215 SCRA 501), in which the Court ruled that where the illegal dismissals transpired before the effectively of R.A. 6715 on March 21, 1989, bank wages are limited to three years without deduction or qualification. But where the illegal dismissal was effected after such effectively date, the Mercury Drug formula should no longer be applied. Instead, the employee should be awarded full back wages computed from the time his compensation was withheld from him up to the time of his actual reinstatement. This rule was reiterated in Medina vs. CBS (222 SCRA 707). Hence, an illegally dismissed employee may now be paid his back wages, allowances, and other benefits for the entire period he was out of work. The rule enunciated before the Mercury Drug policy was that the employer may however deduct any amount which the employee may have earned

during his illegal termination, (East Asiatic Co. LTD vs. CIR, 40 SCRA 521) This is known as the Theory of Mitigating Damages, which is based on the principle against unjust enrichment. In a recent case, however, the Court held that back wages shall not be diminished or reduced by the earnings derived by the dismissed employee during the period of his illegal dismissal. It said the underlying reason behind this ruling is that the employee while litigating the illegality of his dismissal must still earn a living to support himself and his family, while full back wages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. (Rutaquio vs. NLRC, Oct. 19, 1999) This rule was reiterated in a subsequent case. (Buhain vs. CA and Swift Foods, supra)

The computation of full backwages and presentation of proof as to income earned elsewhere should be ventilated in the execution proceedings before the Labor Arbiter concordant with Sec. 3 Rule 8 of the NLRC Rules of Procedure. (Ferrer et al. vs. NLRC, 224 SCRA 410)

In computing backwages and separation pay, account must be taken also of transportation and emeiency allowances, vacation, service incentive leaves and sick leaves, and 13th month pay. Interest at six percent per aim urn may be imposed on unpaid wages and separation pay. (Yu vs. NLRC, 224 SCRA 75) Corporate directors and officers may be held solidarily liable with the corporation for the termination of corporate employees done with malice or in bad faith. Where the directors had a direct hand in the illegal dismissal of the employees on the feigned ground of serious business losses, this is indicative of bad faith for which they can be held jointly and severally liable with the corporation for all the money claims of the employees. (Uichico vs. NLRC, 273 SCRA 35) However, a solidity obligation cannot be lightly inferred. There is solidity liability only when the obligation so states, when the law so provides or when the nature of the obligation so requires. Where the arbiters decision does not mention the word solidary, but merely states the names of the respondents liable, it cannot be inferred from the decision that their liability is solidary, and none of them may be compelled to satisfy the judgment in full. (Industrial Management Dev. Corp. vs. NLRC et al, May 11, 2000)

All forms of damages, if proven, are also available to unjustly dismissed employees. Jurisprudence likewise supports the rule that the employer may be

liable for damages if, in terminating the employment, it also committed an anti-social and oppressive abuse of its right to investigate and dismiss its employee, in violation of Art. 1702 of the Civil Code which prohibits oppression by either capital or labor against the other. Thus, in Gochangco Workers Union vs. NLRC (161 SCRA 655) the Court held the employer liable for damages under Art. 2220 of the Civil Code providing for damages for breach of contract where the defendant acted fraudulently or in bad faith, awarding P5,000 each in favor of the terminated workers in the concept of such damages. It also granted to these workers another P5,000 each to answer for exemplary damages under Arts. 2229, 2231 and 2232 of the Civil Code for the employers gross and evident bad faith in refusing to satisfy the workers plainly valid, just and demandable claim. Labor cases may entail the award of damages, including those originating from sanctions imposed by the Civil Code, such as torts, human relations, breach of contract, etc., provided these arise from employer- employee relations. Amendments by R.A. 6715 on Alt 217 of the Code confer on labor arbiters original and exclusive jurisdiction over termination cases and over claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations. This has erased the distinction--to determine jurisdiction--between the right to dismiss and the manner of dismissal. Both are now under the jurisdiction of labor arbiters. This includes claims for moral damages arising from the manner of the dismissal. In. this case, however, the plaintiff has to plead and prove that the manner was oppressive or anti-social, resulting in grave anxiety, social humiliation, besmirched reputation, wounded feelings, etc. entitling him to moral damages. A dismissed employee cannot justify moral damages solely upon the premise that he was fired without just cause. Additional facts must be pleaded and proved to warrant the grant of damages under the Civil Code. When he institutes proceedings before a labor arbiter, he should claim for all said relief, and should not split his causes of action and sue in two forums. This would lead to multiplicity of suits, which is prejudicial to the efficient administration of justice. (Primero vs. ICA, 156 SCRA 435) An action for damages based on tort is applicable if employment relationship exists, although the employer is not engaged in any business or industry. (Martin vs. CA, 205 SCRA 591) Moral damages are recoverable only where the employees dismissal was attended by bad faith, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. A party is entitled to moral damages only where grounds for actual or compensatory damages are established. Without the latter, a claim for moral damages has no leg to stand on. In the absence of a wrongful act or ommission, or of fraud or bad faith,

moral damages cannot be awarded. Mere allegations of entitlement to moral damages would not suffice to justify the award, absent any concrete proof. In the absence of fraud or bad faith on the part of the employer, an award of moral damages is not proper. (Rutaqulo vs.NLRC et a], supra) It is incumbent upon the petitioner to prove there was malice or bad faith on the part of the employer In terminating him. (Suario vs. BPI and NLRC, 176 SCRA 699) In one case, lack of due process was held to justify an award of moral damages, and for having been compelled to litigate, attorneys fees were deemed to be in order. (National Service Corp. vs. NLRC, 168 SCRA 122) Exemplary damages may be awarded only if the dismissal was effected in a wanton, oppressive, or malevolent mannet (Garcia vs. NLRC, 235 SCRA 632; Estiva vs. NLRC, 225 SCRA 169) In actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interests, he is entitled to an award of attorneys fees. (Building Care Corp. vs. NLRC, 268 SCRA 666) This applies as well to household helpers, laborers and skilled workers. (Art. 2208, Civil Code; Rasonable vs. NLRC, 253 SCRA 815, 819) But attorneys fees are not recoverable where there is no sufficient showing of bad faith. (Thmbiga vs. NLRC, 274 SCRA 338) Attorneys fees may be granted where the illegal dismissal entails an unlawful withholding of wages. (Lantion vs. NLRC, 181 SCRA 513) In such case, the culpable party may be assessed attorneys fees equivalent to 10 percent of the amount recovered. (Art. 111 LC cited in Lincoln Gerard vs. NLRC, 187 SCRA 701)

14. RESIGNATIONS AND CONSTRUCTIVE DISMISSALS. An employee who voluntarily resigns is not entitled to separation pay, unless stipulated in an employment contract or a collective bargaining agreement, or sanctioned by established employer practice or policy. ( CJC Trading Inc. vs. NLRC, 246 SCRA 724) A resigned employee who desires to take his job back has to reapply the refit and he shall have the status of a stranger who cannot unilaterally demand an appointment. Resignation, after its acceptance, can no longer be withdrawn without the consent of the employer. (Phil.lbday, Inc. vs. NLRC, 268 SCRA 202) Non-entitlement to separation pay and other termination benefits is subject to additional exceptions, as when the resignation is forced, and when it constitutes constructive dismissal. (Concrete Aggregates

Corp. vs.NLRC, 177 SCRA 337)

Constructive dismissal is a quitting because continued employment is rendered impossible, unreasonable, or unlikely as an offer involving a demotion in rank and diminution in pay. (Phil - Japan Active Carbon Corp. vs. NLRC, 171 SCRA 164) Hence, where a company suffers great financial losses such that it has no choice but to resort to reassignment of its employees to lower positions, or to reduction of working hours and days, eventually resulting in retrenchment, or virtually depriving them of their jobs by gradual diminutive of salaries and benefits, there is constructive dismissal. (Lemery Savings & Loan Bank vs. NLRC, 205 SCRA 492)

The transfer of an employee may amount to constructive dismissal if it results in demotion in rank or diminution in salary, benefits and other predicative of the employee. A transfer that entails greater transportation expenses means that the employee would earn less. For practical purposes, he would suffer a cut in his salary. Unnecessary or inconvenient and prejudicial transfers cannot be justified. Neither may management exercise this prerogative as a pretext for disciplining its employees without due process. (Asis vs. NLRC, 252 SCRA 379) There is constructive dismissal when the reassignment of an employee involves a demotion in rank or a discrimination in pay. (Ledesma vs. NLRC, 246 SCRA47) It has been held that an employee originally assigned as a food technologist in a laboratoty where only highly trusted authorized personnel are allowed access, who is transfernxl to a vegetable processing section where she did menial, not mental, work is an act of clear discrimination, insensibility or disdain by an employer that constitutes constructive dismissal. (Blue Dairy Corp. et a] vs. NLRC et a] Sept 14, 1999)

Where an employer tenninates an employee, but by circumstance or stratagem makes this appear as a resignation, there is constructive dismissal which entitles the employee to separation benefits. Thus, where a bank directs its employees to submit letters of courtesy resignation, the bank in effect forces upon its employees an act which they themselves should voluntarily do. Resignation, per Se, means voluntary relinquishment of a position or office. Adding the word courtesy does not change the essence of resignation. (Batungbacal vs. Associated Bank and NLRC, 168 SCRA 600) Failure to file a courtesy resignation cannot automatically result in dismissal or inclusion in a retrenchment program. (Araneta Univeai1y Foundation vs. NLRC, 155 SCRA 301)

An employee forced to resign is considered to have been ifie, dismissed. (Guatson Intl Travel & Tours, Inc . vs. NLRC, 230 SCRA 81 In another case, it was held that an alleged compulsory was in effect a dismissal due to violations of the requirements on notice there being no proof of losses, and if done three years prior to the employee retirement age. Under tile circumstances, the employee concerned is entitled to full tackwages,a1lowances and benefits for three years, plus retirement benefits equivalent to gross monthly pay, allowances and other benefits for every year of service up to age 60. (Villeria vs. NLRC and BLTB Co., 193 SCRA 686)

But the imposition of a forced leave due to economic conditions without a showing that it was for the purpose of defeating or circumventing rights of employees is a management prerogative. (Phil. Graphic Arts vs. NLRC, 166 SCRA 118) Neither is there anything illegal with the practice of allowing an employee to resign, instead of being separated for just cause, so as not to smear his employment record. (Sicangco vs. NLRC, 235 SCRA 96) The placing of security guards on floating status (i.e. no work assignment and no wages) exceeding six months constitutes termination of employment. Thus, they are entitled to the corresponding benefits for their separation. (Agro-Commercial Security Services Agency vs. NLRC, 175 SCRA 790) This is because the suspension of operations of a business or undertaking which does not terminate employment should be for a period not exceeding six months (Art. 286 LC). Inactivity of an employee placed on reserve status should continue only for a period of six months, otherwise the employer could be liable for constructive dismissal under Art. 286 of the Labor Code. (Manipon vs. NLRC, 239 SCRA47 1) The temporary layoff wherein employees cease to work should not last longer than six months, after which period they should either be recalled to work or permanently retrenched following the requirements of the law, (Sebuguero vs. NLRC. 248 SCRA 532)

15. PREVENTIVE SUSPENSION. The employer may place the worker concerned under preventive suspension if his continued employment poses a serious and imminent threat to the life or property of the employer or of his co-workers (Rule XIV, Sec. 3 OR). This rule gives the only valid ground for preventive suspension, namely if the continued employment of the worker poses a serious and imminent threat to the life or property of the employer or of his co-workers. If this threat is absent, preventive suspension is improper. Hence, preventive suspension is not proper if the employee i charged with willful disobedience for violation of company rules due to repeated absences and tardiness. (Global Inc. vs. Atienza, 143 SCRA 69) Preventive suspension does not prejudge the employees guilt, but is necessary for the protection of the company, its operations and assets pending investigation of the alleged malfeasance of the employee. (Soriano vs, NLRC, 155 SCRA 124)

Preventive suspension should not last longer than 30 days. The employer shall thereafter reinstate the worker in his former or in a substantially equivalent position, or the employer may extend the period of suspension provided that during the period of extension, he pays the wages and other benefits due to the worker. In such case, the worker shall not be bound to reihiburse the amount paid to him during the extension if the employer decides, after completion of the hearing, to dismiss the worker (Rule XIV, Sec. 4). A preventive suspension going beyond 30 days incurs a p i ,000 fine. (JRS Business Corp. vs. NLRC, 246 SCRA 445) The period of preventive suspension shall be included in computing the time when compensation was withheld from the dismissed employee if his dismissal is found to be illegal. (Buhain vs. CA and Swift Foods, supra)

16. TERMINATION BY THE EMPLOYEE. An employee may terminate his employment with or without just cause. If without just cause, he may do this by serving a written notice to the employer at least one month in advance. The employer upon whom no such notice was served may hold the employee liable for damages. Serving the written notice is required by law, but the practice of requiring an employee to stay or complete the 30-day period prior to the effectively of his resignation becomes discretionary on the part of management as an employee who intends to resign may be allowed a shorter period before his resignation

becomes effective. Non-compliance with the period cannot be used by management as a subterfuge to avoid the payinent of separation pay. (Phimco Industries, Inc. vs. NLRC, 273 SCRA 286)

An employee may put an end to the employer-employee relationship without serving any notice on the employer for any of the following just causes:

a) Serious insult by the employer or his representative on the honor and person of the employee. As the employer has the right to expect and receive from the employee good work, diligetice and good behavior, so also the employee has the right to receive from his employer a just wage and fair treatment. b) Inhuman and unbearable treatment accorded the employee by the employer or his representative. In this case, the employer may even be liable for damages, because underArt. 21 of the Civil Code, any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. c) Commission of a crime or offense by employer or his representative against the person of the employee or any of the immediate members of his family. The employer in this case will also be liable for whatever penalty the Penal Code provides for the crime thus committed. d) Other causes analogous to any of the foregoing (cf . Art. 285 LC). 17. WHEN EMPLOYMENT IS NOT DEEMED TERMINATED. The Labor Code specifies two cases when employment is not deemed terminated viz:

a) the bonafide suspension of the operation of a business or undertaking for a period not exceeding six months; and

b) ful1i1lmnt by the employee of a military or civic duty.

In such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to his work not later than one month from the resumption of operation of his employer or from his relief from military or civic duty (Art. 286L.C).

The law imposes a period of six months within which the employee employee status must resume, otherwise the employee will be deemed constructively dismissed. This is because the employee should not be made to wait interminably or remain in floating status perpetually If the employer has not shown any just cause for dismissal, the employee is entitled to reinstatement, or if this is not possible, to separation pay. (Pulp & Paper, Inc. vs. NLRC, 279 SCRA4O8)

18. SECURITY OF TENURE IN SPECIAL CASES. What happens to employees of a company whose assets are purchased by another company? Do they continue as employees of the transferee? The Supreme Court answered this in a qualified negative when it ruled that a purchaser of the assets of an employer is not a successor employer of the latters employees, unless expressly so assumed. Labor contracts, being in personal, are not enforceable against the transferee of an enterprise. This conclusion, it said, draws its force from the right of an employer to select and engage its employees, which can only be restricted by law through the exercise of police power. No law requires a bona fide purchaser to absorb the employees of a going concern, unless the transaction is colored with bad faith. (Sundowners Development Corp. vs. Drilon et. al., 180 SCRA 14; Robledo vs. NLRC, 238 SCRA 52) By the same token, the right of an employee to reinstatement may not be imposed on an innocent transferee of the business from which the employee was dismissed. (Fernando vs. Angat Labor Union, 5 SCRA 248) Claims for back wages earned from the former employer cannot be filed against the new owner of an enterprise. Nor is the new operator of a business liable for claims for retirement pay of employees. Unless expressly assumed, labor contracts are not enforceable against the transferee of an enterprise. (Robledo vs. NLRC, sura) In such cases, the workers may institute insolvency proceedings against their former employer, where their claims can be asserted against the latters assets. (DBP vs. NLRC, 183 SCRA 328) In case of death of the former employee a testate or intestate proceeding may be brought

before the proper court wherein all his creditors may file their claims which shall be paid proportionately Out of the property left by the deceased. (cf. Art. 110 LC; Martinez vs. NLRC, 272 SCRA 793)

In one case, though, the Court suggested that for purposes of public policy and social justice, the purchasing company must give preference to the qualified separated employees of the selling company. (San Felipe Nen School vs. NLRC, 201 SCRA 473)

Not all termination cases are labor disputes. Security of tenure is a right of labor, hence, cases of illegal dismissal set forth at issue a workers right to labor. Where a case, although involving a dismissal, is premised on a different issue, it falls outside the realm of labor law. For instance, an executive vice-president and stockholder of a corporation is not a mere employee but an integral part of the corporation. His dismissal by the board is not a simple labor problem, but a matter that comes within the area of corporate affairs and management, and is in fact a corporate controversy which is under the jurisdiction of the Securities and Exchange Commission, nc* the labor arbiter. (Fortune Cement Corp. vs.NLRC, 193 SCRA 258) It is the SEC. and not NLRC, which has original and exclusive jurisdiction over cases involving the removal from employment of coiporate officers underP.D. 902-A. (Espinovs. NLRC, 240 SCRA52) In a more recent case the Supreme Court stated categorically that a corporate office?s dismissal Is always a corporate act or an intra-corporate controversy in contemplation of the Corporation Code. (1bang vs. NLRC, 266 SCRA 462)

Security of tenure is more protective of rank-and-ifie employees than of managerial employees. In labor cases involving termination of managerial employees (as defined in Book V of the Labor Code), there are causes valid for terminating such employees other than those applicable to the rank-and-file. Hence, elective corporate officials may lose their jobs because the stockholders or the board of directors, for one reason or another; did not reelect them. Also, those whose powers and functions axe central to the effective operations of the company may be terminated for lack of confidence. In this respect, the mere existence of a basis for believing that the employee has breached the trust of his employer is sufficient cause, and does not require proof beyond reasonable doubt to justify the termination. (Kwikway Engineering Works vs. NLRC, 195 SCRA 536) In one case, the termination of an assistant vice-president due to a bank meiger was held to be proper, such position being managerial. (Yap vs. I, 186 SCRA 664) Moreover, it has been held that reinstatement of erring managers may not be ordered with the same ease and liberality as rank and file employees. (CT Printers, vs.

NLRC, 208 SCRA 321)

This policy is essential to the successful pursuit of enterprise effective management (Policy Instructions No.8, DOLE). Security of tenure is not abridged where the employee had knowledge of the nature of his employment. (Associated Citizens Bank vs. Ople, 103 SCRA 130)

19. RETIREMENT. The matter of employee retirement is governed by Art. 282 of the Labor Code, as amended by R.A.7641. Prior to this amendment, the Labor Code recognized retirement that is provided by a CBA or other applicable employment contract, whereby the Code entitled the employee to receive such retirement benefits as he may have earned under existing laws and the CBA or other agreement (Art. 287 LC). The application of the Code was thus premised on the existence of a retirement plan in the CBA or other employment contract.

Retirement Law, R.A. 7641 has, in addition, provided for retirement pay to qualified private sector employees even in the absence of any retirement plan in the establishment. Hence, this amendatory law treats retirement as (a) Retirement under a CBA or contract, and (b) Retirement in the absence of a retirement plan, which may be optional or compulsory.

The rule in retirement under a plan is basically the same, with the proviso that the employees retirement benefits under a plan shall not be less than those provided by law, and if such benefits are less, the employer shall pay the differ lice. In the case of contributory plans, the employers total contribution shall not be less than the total benefits due the employee had there been no such retirement fund. If the employers contribution is less, he shall pay the deficiency (Rule II, Book VI, OR as am.). Where there is such an agreement, the employees acquire a vested and demandable right to the benefits of such retirement plan, regardless of its non-contributory character. (Nestle Phil. vs. NLRC, 193 SCRA 504)

In retirements without a plan, the law allows: optional retirement, where an employee may retire upon reaching the age of 60 years or

more the has served for at least five years in said establishment, or compulsory retirement, upon reaching the age of 65 years. Upon an employees retirement, whether optional or compulsory, his services may be continued or extended on a case to case basis by agreement.

The law fixes the benefits in retirements without a plan at a retirement pay equivalent to at least one-half month salary for every year of service, a fraction of at least six months considered as one whole year; the cash equivalent of not more than five days of service incentive leave; one-twelfth of the 13th month pay due the employee, and all other benefits that the employer and employee may agree to be included. For covered workers who are paid by results, the basis for computing their half-month salary shall be their average daily salary for the last 12 months reckoned from the date of their retirement, divided by the number of actual working days in that particular period. (Id.) Coverage of the Retirement Law includes all employees in the private sector, regardless of their position, designation, or status, and irrespective of the method by which their wages are paid (Sec. 1, Id.). The only exceptions are: employees covered by the Civil Service Law; domestic helpers and persons in the personal service of another, and employees in retail, service and agricultural establishments or operations regularly employing not more than ten employees.

Violation of any provision of the Retirement Law is declared unlawful and subject to the penal provisions of Art. 288 of the Labor Code.

The Retirement Law was approved on Dec. 9, 1992, and took effect on Jan. 7, 199315 days after its publication. This does not mean however that the right to retirement and to its benefits started from this effectively date. Jurisprudence supports the view that the law has a retroactive effect being curative in nature. Not to give the Retirement Law a retroactive effect would be to ignore the well-settled principle that police power legislation intended to promote public welfare applies to existing contracts. (Allied Investigation Bureau vs, Ople, 91 SCRA 265) A police power measure, being remedial in character, covers existing situations, otherwise It would be self-defeating. (Ongsiako vs. Gamboa, 86 Phil. 50; Gutierrez vs. Cantada, 90 SCRA 1) The Retirement Law: R.A. 7641, is a social legislation that can apply to labor contracts still existing at the time the statute has taken effect, and that its

benefits can be reckoned not only from the date of the laws enactment, but retroactively to the time said employee contracts have started. (Oro Enterprises Inc. vs. NLRC, 238 SCRA 105) In a recent case, the Court specified the circumstances that must concur before the law can be given retroactive effect, namely: (a) the claimant for retirement benefits was still the employee of the employer at the time the statute took effect, and (b) the claimant was in compliance with the requirements for eligibility under such statute. (Phil. Scout Veterans & Investigation Agency vs. NLRC, 271 SCRA 209; Cabcaban vs. NLRC, 277SCRA671) The non-impertinent clause may not be invoked to contest the laws retroactive effect because the constitutional guarantee of non-impairment is limited by the exercise of the police power of the State, in the interest of public health, safety, morals, and general welfare. (Abe vs. Foster Wheeler Corp., 110 Phil. 198; Antamok Mining Co. vs. Cm, 70 Phil. 340)