2016 Labor Pre Week - Dean Ada Abad

2016 LABOR LAW BAR REVIEW HAND-OUTS
FOR 2016 JOINT LYCEUM-ADAMSON BAR OPERATIONS

THE ABAD NOTES (COMPLETED 03 OCT 2016)
HAND-OUTS FOR
2016 LABOR BAR EXAMS
PRE-WEEK USE
From the notes of Dean Ada D. Abad and additional
2015 Cases/Bar Answers of Dean Antonio H. Abad, Jr.
For 2016 Bar Examinations: 1st Sunday PM, 06 November 2016

Including 2015 Bar questions, pertinent SC 2012-May 2015
and Bar Chairman SC Justice Presbiterio Velasco cases in Labor Law. 1
A. GENERAL PRINCIPLS AND CONCEPTS
1. CONSTITUTIONAL AND STATUTORY BASIS OF LABOR LAW AND SOCIAL

LEGISLATION
1.1 Promotion of human dignity (Art 2, sec 2)

1.2 Freedom from poverty (Art 2, sec 9)
1.3 Principle of distributive justice (Art. 2, sec 9)
1.4 Freedom of Initiative and Self-reliance (Art. 12, sec. 2)
1.5 Right to due process
1.6 Right to equal protection of the law
1.7 Right to self-organization
1.8 Right against involuntary servitude
1.9 Right against imprisonment for debt
Contrary to the concept of laissez faire, which is an economic theory that government
should NOT interfere in business affairs, the peculiarity in Philippine labor law is that the
State is mandated to balance the conflicting yet intimately intertwined interests2 between
management to its profit, as against the employees right to self-organization and
security of tenure, through the exercise of its police power, as well as the application of
the social justice and protection to labor clauses in the Constitution.
Hence, under the PRINCIPLE OF INCORPORATION, the minimum labor standards and
benefits in Labor Code are considered inherent in every employer-employee relationship
even absent a written employment contract.
2. DISTINCTION BETWEEN LABOR LAW AND SOCIAL LEGISLATION
LABOR LAW SOCIAL LEGISLATION

Affects directly actual employment, e.g., Governs effects of employment, e.g.,
wages compensation for death
Meets the daily needs of workers Involves long range benefits
Paid by the employer Paid by government agencies
1
With special thanks to our Ablelaw OJTs from Lyceum Paolo Ricasio, Ana Minelle Laxamana, Rizel
Sabanal-Adlawan, Hanna Almario and Gil Camaymayan, FEUs Atty. Janeth Habana and Ablelaw
researcher Rigel Villacarlos for the digests of the J. Velasco cases and 2015 latest cases.
2
Cebu Institute of Technology vs. Ople, 156 SCRA 620 (1987). Ponente: J. Irene Cortes.
1
3. MEMORIZE ARTICLE 3, LABOR CODE: DECLARATION OF POLICY

(Mnemonic: APE-SC-SJ)
ART. 3. Declaration of basic policy. - The State shall Afford Protection to labor, promote
full Employment, ensure equal work opportunities regardless of sex, race or creed and
regulate the relations between workers and employers. The State shall assure the rights of
workers to Self-organization, Collective bargaining, Security of tenure, and Just and
humane conditions of work.
4. Principle of Social and Distributive Justice: Balancing of interests in case

workers and managements rights collide. -- The policy of social justice is not
intended to countenance wrongdoing simply because it is committed by the underprivileged.
At best it may mitigate the penalty but it certainly will not condone the offense. Compassion
for the poor is an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social justice cannot be permitted to be [a] refuge
of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives
blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy of
it, like the workers who have tainted the cause of labor with the blemishes of their own
character. (Tirazona vs. Phil. Eds Techno-Service (PET INC.), G.R. No. 169712, 20 January 2009).
5. HOW TO BALANCE CONFLICTING INTERESTS IN PROBLEM SOLVING:

REMEMBER THE BASIC PRINCIPLES OF LABOR LAW
MANAGEMENT VS. LABOR
Capital Work
Profit Equitable share in the profits
Management prerogatives Workers rights

- hiring, employee - minimum standards
classification, - constitutional rights
- control of working methods security of tenure, unionize
- right to make rules and and to collective bargaining,
regulations strike
STATE
Police power/social justice
Interpretation in favor of labor
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6. GENERAL RULES TO REMEMBER FOR

THE BALANCING OF INTEREST IN
ANSWERING PROBLEM SOLVING QUESTIONS
6.1. Existence of Employer-Employee relationship
6.1.1 Four tests to determine the existence of an employer-employee relationship
(MEMORY AID: SOUTH WEST DISASTER CONTROL)

a. Selection and hiring;
b. payment of Wages;
c. power of Dismissal;
d. Control test.
Of these four tests however, the most important test is the element of
control, which has been defined as [MEMORIZE THIS] one where the
employer has reserved the right to control not only the work to be
achieved, but the manner and method by which such work is to be
achieved.. (LVN Pictures vs. LVN Musicians Guild, 1 SCRA 132).
Important VELASCO cases on the power of control

Navarette vs. Manila Intl Frieght Forwarders, G.R. No. 200580, 11 Feb
2015. -- Where all the four tests are not present, or where not exercised by
a single entity, the determinative factor for establishing empoyer-employee
relationship is the control test.
Raul Locsin et. al. vs PLDT, G.R. No. 185251, 02 October 2009. --
Locsin and Tomaquin were security guards of SSCP, a security agency,
who were assigned to PLDT as principal. When the security service
agreement between PLDT and SSCP ended, Locsin and Tomaquin were
allowed to continue working for one more year; their wages were still
however paid by SSCP. Thereafter, they were eventually terminated, for
which reason, Locsin and Tomaquin filed this illegal termination case plus
monetary claims.
Question: Did the complainants become employees of PLDT when their

services were extended for a period of one year AFTER the termination of
the SSCP Contract? Note: SSCP contract not renewed but SSCP still
continued paying the complainants.
SC Decision: Locsin and Tomaquin are employees of PLDT.
While respondent and SSCP no longer had any legal relationship with the
termination of the Agreement, petitioners remained at their post securing the
premises of respondent while receiving their salaries, allegedly from SSCP.
Clearly, such a situation makes no sense, and the denials proffered by
respondent do not shed any light to the situation. It is but reasonable to
conclude that, with the behest and, presumably, directive of
respondent, petitioners continued with their services. Evidently, such
are indicia of control that respondent exercised over petitioners. With
the conclusion that respondent directed petitioners to remain at their posts
and continue with their duties, it is clear that respondent exercised the power
of control over them; thus, the existence of an employer-employee
relationship.
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2015 BAR EXAMINATION QUESTION (V)
Ador is a student working on his master's degree in horticulture. To make

ends meet, he takes on jobs to come up with flower arrangements for
friends. His neighbor, Nico, is about to get married to Lucia and needs a
floral arranger. Ador offers his services and Nico agrees. They shake hands
on it, agreeing that Nico will pay Ador P20,000.00 for his services but that
Ador will take care of everything. As Ador sets about to decorate the venue,
Nico changes all of Ador's plans and ends up designing the arrangements
himself with Ador simply executing Nico's instructions.
(a) Is there an employer-employee relationship between Nico and Ador?

(4%)
(b) Will Nico need to register Ador with the Social Security System (SSS)?
(2%)
ANSWER:
A. Yes. By changing Adors plans and designing the arrangements himself

with Ador merely executing his instructions, Nico exercised control over
Ador in the manner by which he (Ador) will work.
B. No. Casual employees are not subject to the compulsory coverage of the
SSS by express provision of law. (Section 8 (-5) (3), RA1161, as
amended.) The relationship between Nico and Ador is one of casual
employment. This is so because employment is not permanent nor
periodically regular, but occasional or by chance, and not in the usual
course of the employers business. (Joco v. Aguilar, 55 OG 1946, cited in
Philippine Law Dictionary by Moreno, 2nd Ed.)
ALTERNATIVE ANSWER:
A. YES. Ador is a worker paid on task basis; hence, there is employer-

employee relationship between him and Nico. When the latter assumed
the control of both result and manner of performance from Ador, all
vestiges of independent contractorship disappeared. What replaced it
was employer- employee relationship.
B. Ador is a purely casual employee; hence, Nico need not report him for
SSS coverage.
DISTINGUISH BETWEEN RULES THAT FIX METHODOLOGY

VS. RULES THAT ARE MERE GUIDELINES.
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EXAMPLE: INSURANCE AGENTS; TWO CASES:
Insurance agents are not employees of the insurance companies, in the

absence of evidence that rules or regulations were promulgated or issued
which effectively controlled or restricted the agents choice of methods or
the methods themselves of selling insurance. (Insular Life Assurance Co.,
Ltd., vs. NLRC and Melecio Basiao, G.R. 84484, 15 November 1989, 179 SCRA
459).
But this is not to say that ALL insurance agents are NOT
employees of the insurance company.
As the Supreme Court clarified in the case of Tongko vs.

Manufacturers' Life Insurance Company (Phils.) Inc. (G.R. No.
167622, 29 June 2010, En Banc; VELASCO PONENTE), the Insular
Life ruling above was tempered with the qualification that had there
been evidence that the company promulgated rules or regulations that
effectively controlled or restricted an insurance agent's choice of
methods or the methods themselves in selling insurance, an
employer-employee relationship would have existed. In other words,
the Court in Insular in no way definitively held that insurance agents
are not employees of insurance companies, but rather made the same
on a case-to-case basis.
6.1.2 Existence of an employer-employee relationship is a condition sine

qua non for the application of labor laws.
There must be a REASONABLE CAUSAL CONNECTION between the parties

and the claim.
Under this rule, if there is a reasonable causal connection between the claim
asserted and the employer-employee relations, then the case is within the
jurisdiction of our labor courts. In the absence of such nexus, it is the regular
courts that have jurisdiction.
GOOD EXAMPLE: Indophil Textile Mills Vs. Adviento, G.R. No. 171212, 04
August 2014
Facts: Adviento was hired as Civil Engineer (for maintenance of facilities) of

Indophil, whose primary business is the manufacture of textiles. Adviento
developed a chronic allergy on account of the textile dust. He was eventually
dismissed from employment, for which reason he filed two cases against the
company, viz: (a) NLRC for illegal termination; and (b) Regional Trial Court for
damages arising from gross negligence and failure of company to provide a
safe, workable and healthy environment. Company sought to dismiss the RTC
case on account of litis pendencia and lack of jurisdiction, considering that the
claim arises from an employer-employee relationship.
Question: Whether or not RTC has jurisdiction?
Answer: YES. No reasonable causal connection between claim and employer-

employee relationship.
Although Adviento contracted the occupational disease during his employment

with the company, there is no reasonable causal connection between the claim
asserted and the employer-employee relations. As such, the case does not fall
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within the jurisdiction of the labor courts; but rather with the regular courts that
have jurisdiction. While the maintenance of a safe and healthy workplace may
be a subject of a labor case, note that the cause of action is one for torts/quasi-
delict and that relief prayed for is the payment for damages arising from alleged
gross negligence on the part of the company to provide a safe, healthy and
workable environment for its employees.
Important VELASCO case on jurisdiction to determine er-ee

relationship; Peoples Broadcasting Service [Bombo Radio Phils. Inc.]
vs. The Secretary of Labor, etc., G.R. No. 179652, 06 March 2012 En Banc.
-- In the exercise of the DOLEs visitorial and enforcement power, the Labor
Secretary or the latters authorized representative shall have the power to
determine the existence of an employer-employee relationship to the exclusion
of the NLRC. The determination of the existence of an employer-employee
relationship by the DOLE must be respected. The expanded visitorial and
enforcement power of the DOLE granted by RA 7730 would be rendered
nugatory if the alleged employer could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the matter to the NLRC.
The Court issued the declaration that at least a prima facie showing of the
absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence,
and it is the DOLE that will weigh it, to see if the same does successfully refute
the existence of an employer-employee relationship.
6.2. Burden of proof is always upon employer to show validity of its exercise
of management prerogatives, especially as regards termination of
employment.
NOTE: HOWEVER COMPLAINANT EMPLOYEE INITIALLY HAS THE

BURDEN OF PROVING THAT HE IS AN EMPLOYEE OF THE
COMPANY. (Danilo Bitoy Javier vs. CA, G.R. No. 192558, 15 February
2012)
In sum, the rule of thumb remains: the onus probandi falls on petitioner
(EMPLOYEE) to establish or substantiate such claim by the requisite
quantum of evidence. Whoever claims entitlement to the benefits
provided by law should establish his or her right thereto x x x. Sadly,
Javier failed to adduce substantial evidence as basis for the grant of
relief. In this case, the LA and the CA both concluded that Javier failed to
establish his employment with Fly Ace. By way of evidence on this point,
all that Javier presented were his self-serving statements purportedly
showing his activities as an employee of Fly Ace. Clearly, Javier failed to
pass the substantiality requirement to support his claim. Hence, the
Court sees no reason to depart from the findings of the CA. (Danilo
Bitoy Javier vs. CA, ibid.)
6.3. There must exist SUBSTANTIAL EVIDENCE to prove valid exercise of

management prerogatives, viz., just or authorized cause of termination.
Proof beyond reasonable doubt not required in administrative cases.
QUESTION: Are sworn statements of relatives and friends of respondent

attesting to the existence of an extra-marital affair considered sufficient
evidence to prove immorality, as a just cause for termination?
ANSWER: YES. The employers evidence consists of sworn statements

of either relatives or friends of Thelma and respondent. They either had
direct personal knowledge of the illicit relationship or revealed
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circumstances indicating the existence of such relationship. (Alilem Credit

Cooperative vs. Bandiola, G.R. No. 173489, 25 February 2013)
Note: Failure of employer to submit documents which are presumed to

be in its possession, inspite of an Order to do so, implies that the
presentation of said documents is prejudicial to its case. (De Guzman vs.
NLRC, 540 SCRA 210 [Dec. 2007]).
6.4 In cases of ambiguity, interpretation shall be made in favor of

labor. -- Where the contract of employment, being a contract of adhesion, is
ambiguous, any ambiguity therein should be construed strictly against the
party who prepared it. (Price vs. Innodata Phils., 567 SCRA 122 [2008])
General Rule:
Art. 223, Labor Code is given liberal interpretation in line with the desired
objective of resolving controversies on the merits, to achieve substantial
justice. (Aujero vs. Philcomsat, G.R. No. 193484, 18 January 2012.)
Exception:
When the Labor Arbiters Decision became final, the petitioner attained a
vested right to said judgment. They had the right to rely fully on the
immutability of said Decision.
In Sofio vs. Valenzuela (666 SCRA 55 [2012]), it was amply stressed that:
The Court will not override the finality and immutability of a judgment
based on the negligence of a partys counsel in timely taking all the
proper recourses from the judgment to justify an override, the counsels
negligence must only be gross but also be shown to have deprived the
party the right to due process. (Building Care Corporation, etc. vs.
Myrna Macaraeg, G.R. No. 198357, 10 December 2012.)
CASES ON INTERPRETATION OF LABOR CONTRACTS:
IMPORTANT J. VELASCO CASE: Land Bank of the Phils vs. Naval, G.R. No.
195687, 07 April 2015. -- Where the law is clear, then there is no need for
interpretation. It is only in cases of doubt or ambiguity that there is a favorable
interpretation slanted towards labor. The law remains valid, notwithstanding the non-
publication of its Implementing Rules.
Facts: In this case, LBP officers and staff were previously receiving Cost of Living
Allowances and Bank Equity pay monthly, the amount of which depended on their
respective ranking since 1979. Ten years later in 1989, Rep. Act 6758 (Salary
Standardization Law) was promulgated, which integrated all allowances for govt
employees into their basic salary. The Department of Budget thereafter issued its
DBM-CCC No. 10 (Implementing Rules on the Salary Standardization Act), which was
later on ruled to be invalid by the Supreme Court in the caes of De Jesus vs. COA,
because of lack of publication. DBM later on published the same DBM CCC No. 10 a
year after.
Immediately after the De Jesus case ruling came out, the LBP officers and staff
demanded for the payment of their allowances which had been integrated into the
basic salary. It is their position that by the nullification of DBM-CCC No. 10 which
expressly named the COLA and BEP as integrated into the basic salary, LBPs
integration of the COLA and the BEP is likewise invalid. In other words, respondents
equate the nullification of the implementing rules with the nullification of the very law
which orders the integration of these allowances into the basic salary.
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Question: Are the LBP officers and staff entitled to the payment of their allowances?
Will the integration into the salary constitute a diminution of their benefits?
Answer: NO, the LBP officers and staff are NOT entitled to the payment of the
allowances, as the Salary Standardization Law which ordered the integration thereof
continues to be valid.
We hold that Rep. Act No. 6758 (Salary Standardization Law) can be implemented
notwithstanding our ruling in De Jesus vs. Commission on Audit. While it is true that in
said case, this Court declared the nullity of DBM-CCC No. 10, yet there is nothing in
our decision thereon suggesting or intimating the suspension of the effectivity of Rep.
Act No. 6758 pending the publication in the Official Gazette of DBM-CCC No. 10.
The nullity of DBM-CCC No. 10 Implementing Rules, will not affect the validity of
R.A. No. 6758. It is a cardinal rule in statutory construction that statutory provisions
control the rules and regulations which may be issued pursuant thereto. Such rules
and regulations must be consistent with and must not defeat the purpose of the
statute. The validity of R.A. No. 6758 should not be made to depend on the
validity of its implementing rules.
What is more significant is that respondents and intervenors have not

questioned the fact of integration. Similarly, the appellate court found there was in
fact an integration of the subject allowances to the basic pay of the employees of
LBP, albeit supposedly insufficient. The observation of the appellate court regarding
the resulting amount notwithstanding, the actual integration of these allowances to
the basic salary of the respondents and the intervenors defeats the allegation
of a total deprivation and/or withholding of these allowances. As such, to order
the payment of the COLA and the BEP on top of what has already been paid by
LBPthe basic pay with the COLA and the BEP incorporatedwill constitute a
prohibited double compensation.
2014 CASE: National Union Of Workers In Hotel Restaurant And Allied

Industries (NUWHRAIN) - Philippine Plaza Chapter Vs. Philippines Plaza Inc.,
G.R. No. 177524, 23 July 2014. The Union anchors its claim for unpaid services
charges on Sections 68 and 69 of the CBA, in relation with Article 96 of the Labor
Code. Section 68 states that the sale of food, beverage, transportation, laundry and
rooms are subject to service charge at the rate of ten percent (10%). Excepted from
the coverage of the 10% service charge are the so-called negotiated contracts and
special rates.
Issue: Can the Union validly claim proportionate share of service charges from
non-sales (example: free benefits from hotel and credit cards; and similar
arrangements)?
Answer: NO. Hotel does not have any obligation to the Union, inasmuch as their
claims arises from non-sale transactions like Westin Gold Cards Revenue and
Maxi Media Barter to be negotiated contracts or contracts under special rates, and
the entries Business Promotions and Gift Certificates as contracts that did not
involve a sale of food, beverage, etc.
A collective bargaining agreement, as used in Article 252 (now Article 262), the Labor
Code, is a contract executed at the request of either the employer or the employees
exclusive bargaining representative with respect to wages, hours of work and all other
terms and conditions of employment, including proposals for adjusting any grievances
or questions under such agreement. Jurisprudence settles that a CBA is the law
between the contracting parties who are obliged under the law to comply with its
provisions. Thus, if the terms of the CBA are plain, clear and leave no doubt on
the intention of the contracting parties, the literal meaning of its stipulations, as
they appear on the face of the contract, shall prevail. Only when the words used
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are ambiguous and doubtful or leading to several interpretations of the parties

agreement that a resort to interpretation and construction is called for.
CASE3. BPI vs. BPI Employees Union Metro Manila, G.R. No. 175678 [22
August 2012]:
Issue: In a CBA which provides for multipurpose loans which may be availed of by
the employees, is the imposition of a NO NEGATIVE DATA BANK (No NDB) policy
after CBA is signed and executed, violative of the CBA obligation?
Position of the Union and Voluntary Arbitrator: The imposition of No NDB is a

new condition for the implementation and availment of loans and in contravention of
CBA provision.
Position of BPI: No NDB policy is not violative of the CBA, but is a valid and
reasonable requirement consistent with sound banking practice. It is meant to
inculcate among both officers and employees the need for responsibility and
discipline, especially in an industry where trust is paramount.
SUPREME COURT DECISION: YES, it is violative of CBA. For the Union.
A CBA refers to the negotiated contract between the Union and the Employer
regarding terms and conditions of work. As in all other contracts,, there must be clear
indications that the parties reached a meeting of the minds, as the CBA is considered
the law between the parties. The CBA in this case contains no provision on the No
Negative Data Bank policy as a prerequisite for the entitlement of the benefits it set
forth for the employees. IN fact, a close reading of the CBA would show that the terms
and conditions contained therein relative to the availment of the loans are plain and
clear, thus all they need is thus all they need is the proper implementation in order to
reach their objective.
The CA was therefore correct when it ruled that, although the Bank is authorized to
issue rules and regulations pertinent to the availment and administration of loans
under the CBA, the additional rules and regulations must NOT impose new conditions
which are not contemplated in the CBA and should be within the realm of
reasonableness. The No NDB policy is a new condition which is NEVER
contemplated in the CBA and at some points, unreasonable to the employees
because it provides that before an employee or his/her spouse can avail of the loan
benefits under the CBA, the said employee or his/her spouse must not be listed in the
Negative Data Bank, or if previously listed therein, must obtain clearance of at least
one (1) year or six months, s the case may be, prior to a loan application. If the Bank
intended to include the No NDB policy in the CBA, it should have presented
such proposal to the union during negotiations. To include such policy after the
effectivity of the CBA is deceptive and goes beyond the original agreement
between the parties.
CASE4 ON FUNERAL AND BEREAVEMENT AID FOR DEATH OF LEGAL

DEPENDENTS: (Philippine Journalist Inc. vs.Journal Employees Union, G.R.
No. 192601, 26 June 2013)
ISSUE: In the availment of funeral and bereavement aid under the CBA, may the
Company interpret legal dependent in accordance with the SSS definition of
beneficiary and hence, refuse payment of the benefit?
Married employee sought payment of funeral/bereavement aid under CBA when one
of his parents died. Company denied the claim, based on its interpretation that a
married employees legal dependent is limited only to legitimate spouse and minor
children; while the legal dependents of a single employee are the parents and
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siblings 18 yrs old and below, in accordance with SSS definitions. CBA provision
states:
SECTION 4. Funeral/ Bereavement Aid. The COMPANY agrees to grant a

funeral/bereavement aid in the following instances:
a. Death of a regular employee in line of duty P50,000
b. Death of a regular employee not in line of duty P40,000
c. Death of legal dependent of a regular employee P15,000.
SUPREME COURT DECISION: NO, the Company cannot do so.
Citing statutory definitions, the Supreme Court concluded that the civil status of the
employee as either married or single is not the controlling consideration in order that a
person may qualify as the employees legal dependent. What is rather decidedly
controlling is the fact that the spouse, child, or parent is actually dependent for
support upon the employee. The Court defined a dependent as "one who derives his
or her main support from another. Meaning, relying on, or subject to, someone else
for support; not able to exist or sustain oneself, or to perform anything without the will,
power, or aid of someone else."
The coverage of the term legal dependent as used in a stipulation in a collective

bargaining agreement (CBA) granting funeral or bereavement benefit to a regular
employee for the death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous social legislations
have set. This is because the terms of such social legislations are deemed
incorporated in or adopted by the CBA.
Considering that existing laws always form part of any contract, and are deemed
incorporated in each and every contract, the definition of legal dependents under the
aforecited social legislations applies herein in the absence of a contrary or different
definition mutually intended and adopted by the parties in the CBA.
Accordingly, the concurrence of a legitimate spouse does not disqualify a child or a

parent of the employee from being a legal dependent, provided substantial evidence
is adduced to prove the actual dependency of the child or parent on the support of the
employee.
CASE5 EN CONTRA: Mitsubishi Motors Phils. Salaried Employees Union

(MMPSEU) vs. Mitsubishi Motors Phils Corp., G.R. No. 175773, 17 June 2013.
ISSUE: In a CBA which provides for reimbursement of hospitalization benefits to

dependents, is the employer company under obligation to reimburse employee if the
dependents hospital expenses had already been covered by another Health
Maintenance Organization (HMO) provider?
Position of Voluntary Arbitrator: CBA has no express provision barring claims for
hospitalization expenses already paid by other insurers. Hence, the covered
employees can recover from both.
Position of Court of Appeals and Company: The CA did not agree with Voluntary
Arbitrator, saying that the conditions set forth in the CBA implied an intention of the
parties to limit MMPCs liability only to the extent of the expenses actually incurred by
their dependents which excludes the amounts shouldered by other health insurance
companies.
SUPREME COURT DECISION: NO, Mitsubishi Company is under NO

OBLIGATION to reimburse employee for hospital expenses of dependents
which had already been covered by another HMO.
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We agree with the CA. The condition that payment should be direct to the hospital
and doctor implies that MMPC is only liable to pay medical expenses actually
shouldered by the employees dependents. It follows that MMPCs liability is limited,
that is, it does not include the amounts paid by other health insurance providers. This
condition is obviously intended to thwart not only fraudulent claims but also double
claims for the same loss of the dependents of covered employees.
It is well to note at this point that the CBA constitutes a contract between the parties
and as such, it should be strictly construed for the purpose of limiting the amount of
the employers liability. The terms of the subject provision are clear and provide no
room for any other interpretation. As there is no ambiguity, the terms must be taken in
their plain, ordinary and popular sense.
Consequently, MMPSEU cannot rely on the rule that a contract of insurance is to be

liberally construed in favor of the insured. Neither can it rely on the theory that any
doubt must be resolved in favor of labor.
6.5 In the imposition of penalty, whether suspension or termination, the

same must be commensurate to the offense committed. (Sagales v.
Rustans Commercial Corporation (G.R. No. 166554, 27 November 2008)
2012 CASE: Negros Slashers vs. Alvin Teng, G.R. No. 187122, 22 Feb
2012
Facts: Basketball player Alvin Teng had a below-par performance during

Game Number 4 of Championship Round for which he was pulled out from
the game, and then he untied his shoelaces and donned his practice
jersey. In Game Number 5, he did not play.
Case for Negros Slashers: (a) basketball organization is a "team-based"

enterprise and that a harmonious working relationship among team players
is essential to the success of the organization; (b) Teng "abandoned"
them during a crucial Game Number 5 in the MBA championship round.
Supreme Court: We find that the penalty of dismissal handed out against
Teng was indeed too harsh. As an employee of the Negros Slashers, Teng
was expected to report for work regularly. Missing a team game is indeed
a punishable offense. Untying of shoelaces when the game is not yet
finished is also irresponsible and unprofessional. However, we agree with
the Labor Arbiter that such isolated foolishness of an employee does
not justify the extreme penalty of dismissal from service. Petitioners
could have opted to impose a fine or suspension on Teng for his
unacceptable conduct.
6.6 But management prerogatives are likewise to be equally protected when

circumstances show the validity of the exercise.
MEMORIZE ELEMENTS: Valid exercise of management prerogatives
The free will of the management to conduct its own affairs to achieve its purpose
cannot be denied, PROVIDED THAT THE SAME IS EXERCISED:
IN GOOD FAITH (BONA-FIDE IN CHARACTER),

FOR THE ADVANCEMENT OF THE EMPLOYERS INTEREST;
AND
NOT TO CIRCUMVENT THE RIGHTS OF THE EMPLOYEES.
(Capitol Medical Center vs. Meriz; San Miguel Brewery and Union
Carbide cases).
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6.7 Paradigm shift towards mutual cooperation - It is high time that employer and
employee cease to view each other as adversaries and instead recognize that there is
a symbiotic relationship, wherein they must rely on each other to ensure the success
of the business. (Toyota Motor Phils. Workers vs. NLRC, 537 SCRA 171)
B. EMPLOYER-EMPLOYEE RELATIONSHIP
Vis--vis Issues of Jurisdiction
1. ADAS COMMENT AS REGARDS JURISDICTION IN CASE OF ESSAY

QUESTION: In determining the nature of the case, check the principal relief
sought by the complainant. That is the main factor that determines jurisdiction.
2. EMPLOYEE BENEFIT: IS IT A LABOR DISPUTE OR A CIVIL DISPUTE?
SMART Communications vs. Astorga, G.R. 148132, 28 Jan 2008. -- An employers

demand for the payment of the market value of the car, or in the alternative, the
surrender of a car, is not a labor dispute but a civil one. Hence, this demand properly
falls within the jurisdiction of the civil courts. No reasonable causal connection
between the claim to the issue of an employer-employee relationship.
Contra: Car Loan Agreement with Forfeiture clause in case of resignation.
Grandteq Industrial Steel Products vs. Edna Margallo, G.R. No. 181393, 28 July
2009. In a termination case, the claim by employee for reimbursement of car loan
payments under car loan agreement with employer was dismissed by Labor Arbiter,
finding that the contract stipulation should be strictly followed as the law between the
parties. On appeal, NLRC/CA and Supreme Court all reversed the Labor Arbiters
decision, and declared the forfeiture provision of the car loan agreement as null and
void.
Although not strictly a labor contract, a car loan agreement herein involves a
benefit extended by the employers, Grandteq and Gonzeles, to their employee
Margallo. It should benefit, and not unduly unburden Margallo. The court cannot, in
any way, uphold a car loan agreement that threatens the employee with the forfeiture
of all the car loan payments he/she had previously made, plus loss of the possession
of the car, should the employee wish to resign; otherwise, said agreement can then be
used by employer as an instrument to either hold said employee hostage to the job or
punish him/her for resigning.
3. CORPORATE OFFICER OR ORDINARY EMPLOYEE?
Sub-issue: IS THE TERMINATION OF A HIGHER MANAGEMENT OFFICER

ASST. VICE-PRESIDENT EXECUTIVE VICE-PRESIDENT, OR SIMPLY VICE-
PRESIDENT A LABOR CASE OR A CORPORATE CASE?
If the complainant is named as a corporate officer per Articles and/or by-laws, then the
removal of the person is an intra-corporate controversy and within the jurisdiction of the
ordinary courts. If not, then the person is an ordinary employee who may only be
terminated for just or authorized cause, and after due process compliance.
12
Notes:
1. Who are corporate officers?
Corporation Code, Section 25. Corporate officers, quorum. - Immediately after

their election, the directors of a corporation must formally organize by the election of
a president, who shall be a director, a treasurer who may or may not be a director,
a secretary who shall be a resident and citizen of the Philippines, and such other
officers as may be provided for in the by-laws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act as president and
secretary or as president and treasurer at the same time.
2. How are corporate offices created? Corporate offices are created in two (2)
distinct ways:
(a) by virtue of the Charter or the By-laws of the Corporation; or
(b) by resolution of the Board of Directors duly empowered under the by-laws to
create additional offices as may be necessary under the circumstances. (WPP
Communications vs. Galera, G.R. No. 169207 and Galera vs. WPP Communications,
G.R. No. 169239, 25 March 2010)
3. General Rule: Under Corporation Code, the following are corporate officers:
President, Treasurer and Corporate Secretary
Exceptions to the above general rule are as follows:

When the articles or by-laws provide for officers other than those positions
specifically mentioned in the Corporation, Articles and By-laws.
When the Board of Directors, duly empowered and authorized to create such
additional corporate offices in the articles or by-laws, create said additional
corporate offices by board resolution. Note further that the by-laws must itself
have been amended to include such corporate office.
Thus:
Marc II Marketing, Inc. v. Joson, G.R.. G.R. No. 171993, 12 December 2011 [662
SCRA 35). The Supreme Court held that an enabling clause in a corporation/s by-
laws empowering its Board of Directors to create additional officers, even with the
subsequently passage of a board resolution of that effect, cannot make such
position a corporate office. The Board of Directors has no power to create other
corporate offices without first amending the corporate by-laws so as to include
therein the newly created corporate office. To allow the creation of a corporate
officer position by a simple inclusion in the corporate by-laws of an enabling clause
empowering the board of directors to do so can result in the circumvention of that
constitutionally well-protected right of every employee to security of tenure.
Matling Industrial and Commercial Corp., et al. vs. Ricardo R. Coros, G.R. No.
157802, 13 October 2010. -- It is not the nature of the services performed, but
on the manner of creation of the office that distinguishes corporate officers
who may be ousted from office at will and ordinary corporate employees who
may only be terminated for just cause. Under Section 25 of the Corporation
Code, a position must be expressly mentioned in the By-Laws in order to be
considered as a corporate office. Thus, the creation of an office pursuant to a By-
Law provision giving a president the power to create an office does not qualify as a
By-Law position. In the present case, the position of Vice President for Finance and
Administration which respondent held was merely created by Matlings President
pursuant to the companys By-Laws. It is not a corporate office or By-Law position,
and therefore, respondent was not a corporate officer who could be ousted from
office at will.
13
2014-2015 CASES:
Raul C. Cosare vs. Broadcom Asia, Inc. and Dante Arevalo, G.R. No. 201298,
05 February 2014. -- Two circumstances which must concur for an a person to be
considered a corporate officer, as against an ordinary employee or officer, namely;
(1) the creation of the position is under the corporations charter or by-laws; and (2)
the election of the officer is by the directors of stockholder. It is only when the
officer claiming to have been illegally dismissed is classified as such
corporate officer that the issue is deemed an intra-corporate dispute which
falls within the jurisdiction of the trial courts.
The mere fact that Cosare was a stockholder of Broadcom at the time of the cases
filing did not necessarily make the action an intra corporate controversy. [N]ot all
conflicts between the stockholders and the corporation are classified as intra
corporate. There are other facts to consider in determining whether the dispute
involves corporate matters as to consider them as intracorporate
controversies.42 Time and again, the Court has ruled that in determining the
existence of an intracorporate dispute, the status or relationship of the
parties and the nature of the question that is the subject of the controversy must be
taken into account.43 Considering that the pending dispute particularly relates to
Cosares rights and obligations as a regular officer of Broadcom, instead of as a
stockholder of the corporation, the controversy cannot be deemed intracorporate.
This is consistent with the controversy test explained by the Court in Reyes v.
Hon. RTC, Br. 142,44 to wit:ch
anRoblesvirtualLawlibrary
Under the nature of the controversy test, the incidents of that

relationship must also be considered for the purpose of ascertaining
whether the controversy itself is intracorporate. The controversy
must not only be rooted in the existence of an intracorporate
relationship, but must as well pertain to the enforcement of the
parties correlative rights and obligations under the Corporation Code
and the internal and intracorporate regulatory rules of the
corporation. If the relationship and its incidents are merely incidental
to the controversy or if there will still be conflict even if the
relationship does not exist, then no intracorporate controversy
exists.45 (Citation omitted)chanroblesvirtualawlibrary
Essencia Q. Manarpiis vs. Texan Philippines, Inc., et al., G.R. No. 197011,
28 January 2015. -- On solidary liability of corporate officers. In labor cases, the
SC has held corporate directors and officers solidarily liable with the corporation for
the termination of employment of employees done with malice or bad faith.
The Coffee Bean and Tea Leaf Philippines, Inc. vs. Rolly P. Arenas, G.R. No.
208908, 11 March 2015. -- An officer of the company may not be held liable for the
corporations labor obligations unless he acted with evident malice and/or bad faith
in dismissing an employee
4. RECAPITUATION ON CASES REGARDING JURISDICTION:
In determining the nature of the case, check the principal relief sought by
the complainant. That is the main factor that determines jurisdiction.
In the Smart case, the case filed was one of replevin, and hence, jurisdiction lies with
the regular courts. In the Margallo case, the principal case was one of illegal
14
termination with claim for reimbursement as well as damages, and hence, properly falls
within the jurisdiction of the Labor Arbiter. Same also with the Indophil case, which
was a case for damages arising from alleged negligence on the part of the company to
provide a safe, healthy and workable environment for its employees. As such,
jurisdiction properly lies with the regular courts.
As regards termination of an employee who is a corporate officer, or vice-versa: It is

only when the dismissed employee is actually classified as a corporate officer, that the
issue may be considered an intra-corporate dispute and hence, cognizable by the
regular courts and NOT the labor courts.
CASE RELIEF JURISDICTION
SMART VS. REPLEVIN; RETURN OF THE REGIONAL TRIAL

ASTORGA CAR OF THE MANAGER COURT
GRANDTEQ VS. ILLEGAL TERMINATION WITH LABOR ARBITER
MARGALLO PRAYER FOR
REIMBURSEMENT OF
DOWNPAYMENT FOR CAR
INDOTEXTILE DAMAGES FOR COMPANYS REGIONAL TRIAL
VS. ADVIENTO FAILURE TO PROVIDE SAFE COURT
AND HEALTHY WORKING
ENVIRONMENT
MATLING VS. TERMINATION OF VP FOR LABOR ARBITER
COROS FINANCE AND
ADMINISTRATION, WHICH
POSITION IS NOT IN
ARTICLES OR BY-LAWS
COSARE VS TERMINATION OF ASST VICE- LABOR ARBITER
BROADCOM PRESIDENT FOR SALES, WHO
WAS ALSO A STOCKHOLDER.
AVP-SALES NOT A CORP
OFFICER
C. MANAGEMENT PREROGATIVES:
1. GENERAL PRINCIPLE: Management is free to regulate, according to its discretion and
judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay-off of workers,
and discipline, dismissal and recall of workers. Julies Bakeshop vs. Arnaiz, 666 SCRA
1010 [2012]; see also: Reyes-Rayal vs. Philippine Luen Thai Holdings, 676 SCRA 183
[2012].
2. MEMORIZE ELEMENTS: Valid exercise of management prerogatives
The free will of the management to conduct its own affairs to achieve its purpose cannot
be denied, PROVIDED THAT THE SAME IS EXERCISED:
IN GOOD FAITH (BONA-FIDE IN CHARACTER),

FOR THE ADVANCEMENT OF THE EMPLOYERS INTEREST; AND
NOT TO CIRCUMVENT THE RIGHTS OF THE EMPLOYEES. (Capitol
Medical Center vs. Meriz; San Miguel Brewery and Union Carbide cases).
15
3. 2013-2015 CASES:
3.1 RULES ON TRANSFER: It is the prerogative of management to transfer an

employee where he can be most useful to the company; Insubordination if not
followed.
Jurisprudential guidelines in the transfer of employees: [outside coverage

but principles good to remember for the Bar Exam] ICT Marketing Services,
Inc., etc. vs. Mariphil L. Sales, G.R. No. 202090, 09 September 2015.
i. Transfer is a movement from one position to another of equivalent rank, level or

salary without break in the service or a lateral movement from one position to
another of equivalent rank or salary;
ii. The employer has the inherent right to transfer or reassign an employee for
legitimate business purposes;
iii. A transfer becomes unlawful where it is motivated by discrimination or bad faith or
is affected as a form of punishment or is a demotion without sufficient cause;
iv. The employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee.
Question: May an employee refuse to comply with transfer order of

Management by raising this as a grievance issue? Manila Pavillion vs. Henry
Delada, GR 189947, 25 January 2012, CJ Sereno
Supreme Court: NO!!! The refusal to obey a valid transfer order constitutes willful
disobedience of a lawful order of an employer. Employees may object to, negotiate
and seek redress against employers for rules or orders that they regard as unjust or
illegal. However, until and unless these rules or orders are declared illegal or improper
by competent authority, the employees ignore or disobey them at their peril. In fact,
Delada cannot hide under the legal cloak of
he grievance machinery of the CBA or the voluntary arbitration proceedings to disobey
a valid order of transfer from the management of the hotel. While it is true that
Deladas transfer to Seasons is the subject of the grievance machinery in
accordance with the provisions of their CBA, Delada is expected to comply first
with the said lawful directive while awaiting the results of the decision in the
grievance proceedings.
2014 BAR QUESTION:
Lionel, an American citizen whose parents migrated to the U.S. from the Philippines,
was hired by JP Morgan in New York as a call center specialist. Hearing about the
phenomenal growth of the call center industry in his parents native land, Lionel sought
and was granted a transfer as a call center manager for JP Morgans operations in
Taguig City. Lionels employment contract did not specify a period for his stay in the
Philippines. After three years of working in the Philippines, Lionel was advised that he
was being recalled to New York and being promoted to the position of director of
international call center operations. However, because of certain "family reasons,"
Lionel advised the company of his preference to stay in the Philippines. He was
dismissed by the company. Lionel now seeks your legal advice on: (6%)
(A) whether he has a cause of action
(B) whether he can file a case in the Philippines
(C) what are his chances of winning
16
ANSWER:
(A) For illegal dismissal, Lionel has no cause of action because J.P. Morgan has the
right to transfer an employee to another office in the exercise of management
prerogative of sound business judgment and in accordance with pre-determined and
established company policy and practice, particularly so when no illicit, improper or
underhanded purpose can be ascribed to the company. (Philippine Industrial Security
Agency Corp. vs. Dapiton, 320 SCRA 124 [1999].)
(B) Yes, he can file a case in the Philippines because JP Morgan is doing business in
the Philippines.
(C) His chances of winning is NIL because the objection to the transfer was grounded
solely on personal family reasons that will be caused to him by virtue of the transfer.
(OSS Security vs. NLRC, 325 SCRA 157 [2000]; Phil. Industrial Security Agency Corp.
vs. Dapiton, ibid.)
3.2 G.J.T. Rebuilders Machine Shop et al. vs. Ricardo Ambos et. al., G.R. No. 174184,
28 January 2015. GJT Rebuilders is a single proprietorship engaged in steel works
and metal fabrications which employed Ambos as machinist. A fire partially destroyed
the building where GJTs leased machine shop premises was located, for which
reason the owner of the building notified them to vacate the premises to avoid any
unforeseen accidents that may arise due to the damage. Eventually, G.J.T.
Rebuilders left its rented space and closed the machine shop on December 15,
1997. It then filed an Affidavit of Closure before the Department of Labor and
Employment on Febru s before the Mandaluyong City Treasurers Office on February
25, 1998.ary 16, 1998 and a sworn application to retire its business operation. The
employees were not paid separation pay, on account of alleged closure due to serious
business losses and financial reverses.
Issue: WON complainants are entitled to separation pay despite closure on alleged
serious business losses.
Answer: Yes. Although the employer may close its business as an exercise of
management prerogative that courts cannot interfere with, it failed to sufficiently prove
its alleged serious business losses. Thus, it must pay respondents their separation pay
equivalent to one-month pay or at least one-half-month pay for every year of service,
whichever is higher.
3.3 Mirant Philippines vs. Joselito A. Caro, G.R. No. 181490, 23 April 2014. Mirant
Phils conducted a drug test where Caro was randomly chosen among its employees
who would be tested for illegal drug use. Caro and the selected employees duly
received an Intracompany Correspondence that the random drug testing was to be
conducted after lunch on the same day. However at 11:30 a.m. of the same day, Caro
received an emergency phone call from his wifes colleague who informed him that a
bombing incident occurred near his wifes work station in Tel Aviv, Israel where his
wife was then working as a caregiver. Caro thereafter informed the company that he
will go to the Israeli Embassy first to attend to his wifes concerns, and that he will
submit to a drug test the following day at his own expense. On account of his alleged
refusal to submit to a random drug test, the company terminated his services. During
admin investigation however, the Company secured evidence that: (a) there was no
such bombing; and (b) Caro did not go to the Israeli Embassy on the day of the drug
test.
Issue: Whether or not the failure to subject himself to a drug test may be considered
as willful refusal to comply with the reasonable orders of the company?
17
Decision: NO. Caro was illegally dismissed.
While the adoption and enforcement by petitioner corporation of its Anti-Drugs Policy is
recognized as a valid exercise of its management prerogative as an employer, such
exercise is not absolute and unbridled. In the exercise of its management prerogative,
an employer must therefore ensure that the policies, rules and regulations on work-
related activities of the employees must always be fair and reasonable and the
corresponding penalties, when prescribed, commensurate to the offense involved and
to the degree of the infraction.47 The Anti-Drugs Policy of Mirant fell short of these
requirements.
(a) The policy was not clear on what constitutes "unjustified refusal" when the subject
drug policy prescribed that an employees "unjustified refusal" to submit to a random
drug test shall be punishable by the penalty of termination for the first offense. To be
sure, the term "unjustified refusal" could not possibly cover all forms of "refusal" as the
employees resistance, to be punishable by termination, must be "unjustified." To the
mind of the Court, it is on this area where petitioner corporation had fallen short of
making it clear to its employees as well as to management as to what types of acts
would fall under the purview of "unjustified refusal."
(b) The penalty of termination is too harsh under the circumstances, considering that in
the ten-year employment of Caro, this is his first offense.
3.4 Royal Plant Workers Union vs. Coca-Cola Bottlers Phils., G.R. 198783, 15 April
2013.
QUESTION: Is the decision of Coca-Cola Bottlers to take out the chairs of employees
in an assembly line in exchange for additional periods of rest/breaks, a valid exercise
of management prerogatives, or is it a diminution of benefit which cannot be withdrawn
without employees consent?
UNIONS POSITION: The use of chairs by the operators had been a company practice
for 34 years, and cannot be withdrawn without consent of affected employees. Having
chairs are favourable to the assembly line operators who get tired and exhausted; the
frequency of the break period is not advantageous to the operators because it cannot
compensate for the time they are made to stand throughout their working time.
MANAGEMENT POSITION: The directive to take out the chairs is in line with the I
Operate, I Maintain, I Clean program of petitioner for bottling operators, wherein every
bottling operator is given the responsibility to keep the machinery and equipment
assigned to him clean and safe, and to constantly move about in the performance of
their duties and responsibilities. The removal of the chairs was implemented so that
the bottling operators will avoid sleeping, and thus, prevent injuries to their persons.
ANSWER: For Management. Valid exercise of management prerogatives. The

decision to remove the chairs was done with good intentions as Company wanted to
avoid instances of operators sleeping on the job while in the performance of their
duties and responsibilities and because of the fact that the chairs were not necessary
considering that the operators constantly move about while working. In short, the
removal of the chairs was designed to increase work efficiency. Hence, companys
exercise of its management prerogative was made in good faith without doing any
harm to the workers rights.
The rights of the Union under any labor law were not violated. There is no law that
requires employers to provide chairs for bottling operators. The CA correctly ruled that
the Labor Code, specifically Article 132 thereof, only requires employers to provide
seats for women. No similar requirement is mandated for men or male workers. It must
be stressed that all concerned bottling operators in this case are men.
18
The Union should also not complain too much about standing and moving about for
one and one-half (1 ) hours because studies show that sitting in workplaces for a
long time is hazardous to ones health. The report of VicHealth, Australia,12 disclosed
that prolonged workplace sitting is an emerging public health and occupational health
issue with serious implications for the health of our working population. Importantly,
prolonged sitting is a risk factor for poor health and early death, even among those
who meet, or exceed, national activity guidelines.
3.5 NOT ASKED IN 2013, 2014 AND 2015 BAR, BUT STILL TIMELY NOW BECAUSE
OF PREVIOUS ELECTIONS): Management may validly impose a prohibition
against elective office as an exercise of its prerogatives.
Ymbong vs. ABS-CBN, G.R. 184885, 07 March 2012. Company policy to the effect
that any employee who wishes to run for public office, must resign. On the other hand,
if anyone wishes to campaign for a political person or party, he/she must file for a
leave of absence. Manager misinterpreted the company policy and made his own,
viz., any person who wishes to run for public office, must file for a leave of absence.
Ymbong filed candidacy to public office and filed leave of absence, in consonance with
Managers erroneous interpretation. ABS-CBN refused to allow him to return to work
(Ymbong lost elections), as it considered him resigned.
ISSUES: WON ABS-CBN bound by erroneous interpretation of manager? WON

ABS-CBN may validly impose this policy, in contravention of Ymbongs political right to
seek public office?
DECISION: For ABS-CBN. ABS-CBN not bound by the erroneous interpretation of

the manager, considering that the latter went beyond his authority in modifying a
directive from the head office. In any event, ABS-CBN validly justified the
implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it
maintains its objectivity and credibility and freeing itself from any appearance of
impartiality so that the confidence of the viewing and listening public in it will not be in
any way eroded. ABS-CBN strongly believes that it is to the best interest of the
company to continuously remain apolitical. While it encourages and supports its
employees to have greater political awareness and for them to exercise their right to
suffrage, the company, however, prefers to remain politically independent and
unattached to any political individual or entity. (POSSIBLE BAR QUESTION: What if
employer is NOT a company involved in public information? Depends if company may
validly justify the same in relation to work.)
3.6 CONTRACTING OUT OF SERVICES. (See also discussion on Valid job-contracting vs.
Labor-only contracting on SECTION F, PAGE __ HEREUNDER.)
GENERAL RULE: Management may contact out services in the exercise of its
anagement prerogatives.
Doctrinal case: Asian Alcohol Corporation vs. NLRC, 305 SCRA 416, at 435-436
[1999], cf. Serrano vs. NLRC, G.R. No. 117040 [27 Jan 2000]). The Supreme Court
has held in a number of cases that an employer's good faith in implementing a
redundancy program is NOT necessarily destroyed by the availment of the services of
an independent contractor, to replace the services of the terminated employees. The
reduction of employees in a company made necessary by the introduction
of the services of an independent contractor is justified when the latter is
undertaken in order to effectuate more economic and efficient methods of
production. Burden of proof is thus on the complaining employees to show proof that
the management acted in a malicious or arbitrary manner in engaging the services of
an independent contractor to do a specific activity. Absent such proof, the Supreme
19
Court has no basis to interfere with the bona fide decision of management to effect a
more economic and efficient methods of production.
MERALCO vs. Quisumbing, 22 Feb 2000 -- The added requirement of consultation

imposed by the Secretary of Labor in cases of contracting out for six months or more
was rejected by the Supreme Court.
Suffice it to say that the employer is allowed to contract out services for six
months or more. However, a line must be drawn between management
prerogatives regarding business operations per se, and those which affect the
rights of the employees. In treating the latter, the employer should see to it that
its employees are at least properly informed of its decision or modes of action in
order to attain harmonious labor-mgmt relationship.
Management cannot be denied the faculty of promoting efficiency and attaining

economy by a study of what units are essential for its operations. It has the
ultimate determination whether services should be performed by its personnel or
contracted out to outside agencies.
While there should be mutual consultation, eventually deference is to be paid to

what management decides. Contracting out of services is an exercise of
business judgment or management prerogative; Absent proof that management
acted maliciously or arbitrarily, the Court will not interfere in the exercise of such
judgment by the employer.
2014 BAR QUESTION:
Luisa Court is a popular chain of motels. It employs over 30 chambermaids who, among
others, help clean and maintain the rooms. These chambermaids are part of the union
rank-and-file employees which has an existing collective bargaining agreement (CBA) with
the company. While the CBA was in force, Luisa Court decided to abolish the position of
chambermaids and outsource the cleaning of the rooms to Malinis Janitorial Services, a
bona fide independent contractor which has invested in substantial equipment and
sufficient manpower. The chambermaids filed a case of illegal dismissal against Luisa
Court. In response, the company argued that the decision to outsource resulted from the
new managements directive to streamline operations and save on costs. If you were the
Labor Arbiter assigned to the case, how would you decide? (4%)
ANSWER:
The abolition of position of Chambermaids and outsourcing the same to a bona fide
contractor in order to streamline operations and save on costs is a valid exercise of
management prerogative. As such, it does not preclude Luisa Court from availing itself of
the services of agency-hired employees to replace the Chambermaids who were union
members. Absent proof that Luisa Court acted in a malicious or arbitrary manner in
engaging the services of Malinis Janitorial Services, the bona fide decision of the company
to effect more economic and efficient operation of its business, should not be interfered
with by the courts. (Asian Alcohol Corporation v. NLRC, 305 SCRA 416 [1999].)
E. KINDS OF EMPLOYMENT
1. REGULAR EMPLOYEES those who are hired for activities which are
necessary or desirable in the usual trade or business of the employer.
2014-2015 CASES:
1.1 Romeo Basau, et al., vs. Coca-Cola Bottlers Philippines, G.R. No.
174365-66, 04 February 2015. -- Route helpers are regular employees; their
20
nature of work are necessary and desirable in the usual trade or business of
the employer; hence, entitled to security of tenure.
1.2 Hacienda Leddy, et al. vs. Paquito Villegas, G.R. No. 179654, 22
September 2014. A perusal of the records show that Villegas was employed
in the hacienda while the same was still managed by Gamboas father until the
latters death in 1993, which fact is undisputed as the same was even
admitted by the former in his earlier pleadings. While refuting that Villegas was
a regular employee, Gamboa did not categorically deny that Villegas was
indeed employed in the hacienda albeit merely as a casual employee doing
odd jobs and paid on a piece-rate basis. Villegas length of service for more
than twenty (20) years is an indication of the regularity of his employment.
Even assuming that he was doing odd jobs around the farm, such long period
of doing odd jobs is indicative that the same is necessary and desirable to
Gamboas trade or business. Owing to the length of service alone, Villegas
became a regular employee, by operation of law, one year after he was
employed.
1.3 ABS-CBN CASES:
(a) ON-CAMERA TALENT IS AN INDEPENDENT CONTRACTOR:
Jose Sonza vs. ABS-CBN, G.R. 138051, 10 June 2004. Relationship of

a big name talent (Jay Sonza) and a television-radio broadcasting company
is one of an independent contracting arrangement. ABS-CBN engaged
SONZAs services specifically to co-host the "Mel & Jay" programs. ABS-
CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines,
appeared on television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings. ABS-CBN could
not dictate the contents of SONZAs script. However, the Agreement
prohibited SONZA from criticizing in his shows ABS-CBN or its interests.
The clear implication is that SONZA had a free hand on what to say or
discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work.33 ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the right
to modify the program format and airtime schedule "for more effective
programming." ABS-CBNs sole concern was the quality of the shows and
their standing in the ratings. Clearly, ABS-CBN did not exercise control over
the means and methods of performance of SONZAs work.
(b) OFF-CAMERA TALENTS ARE EMPLOYEES.
Farley Fulache et al vs. ABS-CBN, G.R. No. 183810, 21 January 2010..

Complainants were drivers, cameramen, editors, teleprompter and VTR
man who sought inclusion in the appropriate bargaining unit of the rank-
and-file employees and availment of CBA benefits. ABS-CBN denied
employment relationship, on the ground that they were off-camera talents
in the nature of independent contractors. Pending the regularization case
filed before the NLRC, ABS-CBN dismissed the drivers for their refusal to
sign up employment contracts with service contractor ABLE services.
Supreme Court affirmed CA and Labor tribunals findings, re: existence of
employer-employee relationship and hence, to be considered as regular
employees who may be included in the CBA availments.
21
(c) Nelson Begino, et al., vs. ABS-CBN , etc., G.R. No. 199166, 20 April
2015. -- The Court finds that, notwithstanding the nomenclature of their
Talent Contracts and/or Project Assignment Forms and the terms and
conditions embodied therein, petitioners are regular employees of ABS-
CBN. As cameraman/editors and reporters, petitioners were performing
functions necessary and essential to ABS-CBNs business of broadcasting
television and radio content. It matters little that petitioners services were
engaged for specified periods for TV Patrol Bicol and that they were paid
according to the budget allocated therefor. Respondents repeated rehiring
of petitioners for its long-running news program positively indicates that the
latter were ABS-CBNs regular employees.
2. PROBATIONARY EMPLOYEES those who are hired generally for regular

positions but are placed on a probationary status for a period of 6 months (as a
general rule). May become regular once he has qualified as such in accordance
with reasonable standards made known to him at the time of hiring. They are
considered regular if they are allowed to work beyond the probationary period.
2.1 2012-2014 CASES ON PROBATIONARY EMPLOYEES:
Universidad de Sta. Isabel vs. Sambajon, G.R. Nos. 196280 & 196286, 02
April 2014 . It is the Manual of Regulations for Private Schools, and not the
Labor Code, that determines whether or not a faculty member in an educational
institution has attained regular or permanent status.
Abbot Laboratories, Philippines, et al., vs. Pearlie Ann Alcaraz, G.R. No.
192571, 22 April 2014. En Banc. - If a probationary employee was apprised of
the performance standards for his regularization, his failure to perform the
duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employees non-regularization.
The determination of adequate performance is not in all cases, measurable
by quantitative specification. It also hinges on the qualitative assessment of the
employees work; by its nature, this largely rests on the reasonable exercise of
the employers management prerogative.
In the ultimate analysis, the communication of performance standards should

be perceived within the context of the nature of the probationary employees
duties and responsibilities. The performance standard contemplated by law
should not, in all cases, be contained in a specialized system of feedbacks or
evaluation. In fact, even if a system of such kind is employed and the
procedures for its implementation are NOT followed, once an employer
determines that the probationary employee fails to meet the standards required
for his regularization, the former is not precluded from dismissing the latter. The
rule is that when a valid cause for termination exists, the procedural infirmity
attending the termination only warrants the payment of nominal damages.
(Agabon vs. NLRC & Jaka vs. Pacot.)
Canadian Opportunities Unlimited, Inc. vs. Bart Q. Dalangin, Jr., G.R. No.
172223, 06 February 2012, where Supreme Court found that probationary
employee was validly dismissed after one month of employment for reasons of
obstinacy and utter disregard of company policies, propensity to take prolonged
and extended lunch breaks, shows no interest in familiarizing oneself with the
policies and objectives, lack of concern for the companys interest in refusing to
attend company seminars intended to familiarize company employees with
Management objectives and enhancement of company interest and
objectives, lack of enthusiasm toward work, and lack of interest in fostering
relationship with his co-employees.
22
QUESTION: May a probationary lineman validly claim that being a

subordinate, he cannot be considered a conspirator in the commission of
pilferage committed by his superior? Manila Electric Company vs. Jan Carlo
Gala, G.R. No. 191288. 07 March 2012.
Facts: Complainant Gala insists that he cannot be sanctioned for the theft of
company property on May 25, 2006. He maintains that:
He had no direct participation in the incident
He was not aware that an illegal activity was going on as he was at some
distance from the trucks when the alleged theft was being committed.
He did not call the attention of the foremen because he was a mere
lineman and he was focused on what he was doing at the time.
Supreme Court: Gala misses the point. He forgets that as a probationary

employee, his overall job performance and his behavior were being monitored
and measured in accordance with the standards (i.e., the terms and conditions)
laid down in his probationary employment agreement, viz.
non-violation of the Company Code on Employee Discipline, Safety
Code, rules and regulations and existing policies.
to observe at all times the highest degree of transparency, selflessness
and integrity in the performance of his duties and responsibilities, free
from any form of conflict or contradicting with his own personal interest.
2.2 TERMINATION OF EMPLOYEES ON PROBATIONARY STATUS,

GUIDING PRINCIPLES:
2.2.1 Burden of proof upon employer to show that the employee failed to
qualify as a regular employee in accordance with reasonable standards
made known to him at the time of engagement.
2.2.2 While the probationary employee is required to be appraised of the standards

against which his performance shall be assessed, there is however no need
to inform the probationary employee that he has to follow company rules
and regulations such requirement strains credulity. (Philippine Daily
Inquirer vs. Magtibay, 528 SCRA 355 [2007]).
2.2.3 Ruling on Probationary employment on fixed-term contract; expiration

of contract NO LONGER valid ground. (Colegio del Santissimo Rosario
vs. Rojo, G.R. No. 170388, 03 September 2013, reiterating Yolanda
Mercado vs. AMA Computer College-Paranaque 618 SCRA 218 [2010].)
Situation: High School teacher on probationary status with fixed term

contracts who was able to complete three consecutive years of service.
Teacher no longer rehired on the ground that with the expiration of the
contract to teach, the employment contract would no longer be renewed.
Issue: May the probationary teacher be validly dismissed for expiration

of the contract to teach?
Answer: NO! Termination of a probationary employee must be for his/her

failure to comply with the reasonable standards for regular employment
made known at the time of the engagement, and NOT simply because the
probationary period has expired.
SC rationale: The fixed-term character of employment essentially refers to

the period agreed upon between the employer and the employee;
employment exists only for the duration of the term and ends on its own
when the term expires. In a sense, employment on probationary status also
23
refers to a period because of the technical meaning "probation" carries in

Philippine labor law a maximum period of six months, or in the academe, a
period of three years for those engaged in teaching jobs. Their similarity
ends there, however, because of the overriding meaning that being "on
probation" connotes, i.e., a process of testing and observing the
character or abilities of a person who is new to a role or job.
However, for teachers on probationary employment, in which case a

fixed term contract is not specifically used for the fixed term it offers, it
is incumbent upon the school to have not only set reasonable
standards to be followed by said teachers in determining qualification
for regular employment, the same must have also been communicated
to the teachers at the start of the probationary period, or at the very
least, at the start of the period when they were to be applied. These
terms, in addition to those expressly provided by the Labor Code, would
serve as the just cause for the termination of the probationary contract. The
specific details of this finding of just cause must be communicated to the
affected teachers as a matter of due process.42 Corollarily, should the
teachers not have been apprised of such reasonable standards at the time
specified above, they shall be deemed regular employees.
Yolanda Mercado, et al. vs. AMA Computer College Paraaque City,

Inc. 618 SCRA 218 [2010].- The Supreme Court stated that nothing is
illegitimate in defining the school-teacher on fixed term basis. HOWEVER,
the school should not forget that its system of fixed-term contract is a
system that operates during the probationary period and for this
reason is subject to the terms of Article 281 of the Labor Code. Unless
this reconciliation is made, the requirements of this Article on probationary
status would be fully negated as the school may freely choose not to renew
contracts simply because their terms have expired.
Given the clear constitutional and statutory intents, the Supreme Court
concluded that in a situation where the probationary status overlaps with a
fixed-term contract not specifically used for the fixed term it offers, Article
281 should assume primacy and the fixed-period character of the
contract must give way.
NOTE1: In this instance therefore, the School illegally dismissed the

teachers because it simply refused to renew the employment contract.
Because the teachers were under a probationary period, it was incumbent
upon the School to have evaluated said teachers, and to have informed
them of their failure to qualify as regular employees in accordance with
standards made known to them at the time of hiring.
NOTE2: To highlight what the Supreme Court meant by a fixed-term

contract specifically used for the fixed term it offers, a replacement teacher,
for example, may be contracted for a period of one year to temporarily take
the place of a permanent teacher on a one-year study leave. The expiration
of the replacement teachers contracted term, under the circumstances,
leads to no probationary status implications as she was never employed on
probationary basis; her employment is for a specific purpose with particular
focus on the term and with every intent to end her teaching relationship with
the school upon expiration of this term. (Mercado, et al. vs. AMA Computer
College Paraaque City, Inc. 618 SCRA 218 [2010]. Emphasis supplied.)
3. TERM EMPLOYEES those who are hired for a specific period, the arrival of the
date specified in the contract of which automatically terminates the employer-
24
employee relationship. (Brent School vs. NLRC, 181 SCRA 702 [1989], reiterated in
AMA Computer Paranaque vs. Austria, 538 SCRA 438 [November 2007]).
3.1 A contract of employment for a definite period terminates by its own terms at the
end of such period
3.2 The decisive determinant in term employment should not be the activities that
the employee is called upon to perform, but the day certain agreed upon by
the parties for the commencement and the termination of their
employment relation.
3.3 Criteria for fixed term employment contracts so that the same will not
circumvent security of tenure:
A. The fixed period of employment was KNOWINGLY AND VOLUNTARILY

AGREED UPON by the parties, without any force, duress or improper
pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent; AND
B. It satisfactorily appears that the employer and employee DEALT WITH

EACH OTHER ON MORE OR LESS EQUAL TERMS with no moral
dominance whatever being exercised by the former on the latter.(PNOC vs.
NLRC [G.R. No. 97747, 31 March 1993] and Brent School vs. NRLC, 181
SCRA 702]
3.4 QUESTION: Whether or not fishing boat crew individually hired on a por
viaje basis with contracts per trip are term employees or regular
employees? Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No.
181974, 01 February 2012
Answer: REGULAR EMPLOYEES, where it was established that the term

contracts were used to circumvent security of tenure.
Textually, the provision that: NA ako ay sumasang-ayon na maglingkod at

gumawa ng mga gawain sang-ayon sa patakarang por viaje na magmumula
sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng
lantsa sa Navotas, Metro Manila is for a fixed period of employment.
In the context, however, of the facts that: (1) the respondents were doing tasks
necessarily to Lynvils fishing business with positions ranging from captain of
the vessel to bodegero; (2) after the end of a trip, they will again be hired for
another trip with new contracts; and (3) this arrangement continued for more
than ten years, the clear intention is to go around the security of
tenure of the respondents as regular employees. And respondents are
so by the express provisions of the second paragraph of Article 280, thus: xxx
Provided, That any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
N.B. ADAS CRITIQUE: Do not agree with the reasoning made by the
Supreme Court, viz., application of the collatilla in Par 2 of Article 280, Labor
Code. Following the doctrinal case of Mercado vs. NLRC, said collatilla should
only apply to casual employees, and not to the classification of project or
seasonal employees in first paragraph. If at all, argument that the term
contract was not entered into by the parties on equal footing, would be
more appropriate.
25
2014 BAR QUESTION:
Lucy was one of approximately 500 call center agents at Hambergis, Inc. She was
hired as a contractual employee four years ago. Her contracts would be for a
duration of five (5) months at a time, usually after a one month interval. Her re-hiring
was contingent on her performance for the immediately preceding contract. Six (6)
months after the expiration of her last contract, Lucy went to Hambergis personnel
department to inquire why she was not yet being recalled to work. She was told that
her performance during her last contract was "below average." Lucy seeks your legal
advice about her chances of getting her job back. What will your advice be? (4%)
ANSWER:
Lucy is to be considered a regular employee, and is entitled to security of tenure.
The facts of the case will readily show that Lucy had served Hambergis for an
aggregate period of more than one year. The repetitive hiring of Lucy for the same
position as a call center agent, is indicative of the necessity or desirability of the
activities for which she was hired. Even assuming that she was hired as a casual,
having rendered at least one (1) year of service, whether such service be
continuous or broken, shall be considered a regular employee with respect to the
activity for which he is employed, and his employment shall continue while such
activity exists.
Moreover, hiring Lucy as a contractual employee for a duration of five (5) months at
a time, after interval of one (1) month, was designed by Hambergis to preclude
tenurial security. As such it showed be struck down as being contrary to law, good
customs, public order and public policy. (Magsalin, et al. vs. NOWM, G.R. No.
148492, 09 May 2003.)
In view of the following, my advice to Lucy is to file a case for illegal dismissal with a
prayer for reinstatement without loss of seniority rights, payment of backwages plus
interests thereon, damages and attorneys fees.
2015 BAR QUESTION: (VII)
Don Don is hired as a contractual employee of CALLHELP, a call center. His

contract is expressly for a term of 4 months. Don Don is hired for 3 straight contracts
of 4 months each but at 2-week intervals between contracts. After the third contract
ended, Don Don is told that he will no longer be given another contract because of
"poor performance." Don Don files a suit for "regularization" and for illegal dismissal,
claiming that he is a regular employee of CALLHELP and that he was dismissed
without cause. You are the Labor Arbiter. How would you decide the case? (4%)
ANSWER:
I will decide the case in favor of Don Don.
While the Supreme Court in Brent School vs. Zamora upheld the validity of fixed-
term employment, it has done so, however with a stern admonition that where from
the circumstances it is apparent that the period has been imposed to preclude the
acquisition of tenurial security by the employee, then it should be struck down as
being contrary to law, morals, good customs, public order and public policy.
In the present case, Don Don was hired for 3 straight contracts of 4 months each
but at 2-week intervals between contracts, short of the normal six-month
probationary period of employment. The circumstances clearly show the ill intent of
26
CALLHELP to preclude Don Don from acquiring tenurial security. The obvious
circumvention of the law should not be countenanced.
ALTERNATIVE ANSWER:
As Labor Arbiter, I will decide the case by applying the Contract of Adhesion rule.
Given the nature of Don Dons work , which is usually necessary and desirable to the
usual trade of HELPCALL, as well as the short intervals between his fixed-term
contracts, there is no doubt that periods were resorted to for purposes of
circumventing the law on tenure. Therefore, since it was the company that prepared
the three contracts, with Don Dons participation being limited to affixing his signature
thereto only, the 4-month periods must be taken against it. Having attained tenure,
therefore, Don Don cannot be dismissed for poor performance because said ground
is neither a just nor authorized cause.
4. PROJECT EMPLOYEES The principal test for determining whether particular

employees are properly characterized as "project employees" as distinguished from
"regular employees" is whether or not the project employees were assigned to carry
out a "specific project or undertaking," the duration and scope of which were
specified at the time the employees were engaged for that project.
4.1 The length of service or the re-hiring of construction workers on a

project-to-project basis does not confer upon them regular employment
status, since their re-hiring is only a natural consequence of the fact that
experienced construction workers are preferred. Employees who are hired
for carrying out a separate job, distinct from the other undertakings of the
company, the scope and duration of which has been determined and made
known to the employees at the time of the employment, are properly treated as
project employees and their services may be lawfully terminated upon the
completion of a project. Should the terms of their employment fail to comply
with this standard, they cannot be considered project employees. (Hanjin
Heavy Industries vs. Ibanez et., al., G.R. 170181, 26 June 2008.)
4.2 Indicators of Project Employment is found in Section 2.2(e) and (f) of

DOLE Department Order No. 19, Series of 1993, entitled Guidelines
Governing the Employment of Workers in the Construction Industry, to
wit:
2.2 Indicators of project employment. - Either one or more of the following
circumstances, among others, may be considered as indicators that an employee is a
project employee.
(a) The duration of the specific/identified undertaking for which the

worker is engaged is reasonably determinable.
(b) Such duration, as well as the specific work/service to be performed,
is defined in an employment agreement and is made clear to the
employee at the time of hiring.
(c) The work/service performed by the employee is in connection with the
particular project/undertaking for which he is engaged.
(d) The employee, while not employed and awaiting engagement, is free
to offer his services to any other employer.
(e) The termination of his employment in the particular
project/undertaking is reported to the Department of Labor and
Employment (DOLE) Regional Office having jurisdiction over the
workplace within 30 days following the date of his separation from
work, using the prescribed form on employees'
terminations/dismissals/suspensions.
(f) An undertaking in the employment contract by the employer to pay
completion bonus to the project employee as practiced by most
construction companies.
27
4.3 Purely Project employees are those employed in connection with a

particular construction project.
Effect:
(a) not entitled to separation pay if terminated as a result of the completion of
the project or any phase thereof in which they are hired;
(b) no prior clearance for termination is necessary, but termination must be
reported to DOLE;
(c) however, if the project or phase lasts for more than one (1) year, he may not
be terminated prior to completion of project or phase without previous
written clearance from DOLE.
4.4 Employees from Labor Pool -- those employed by a construction company

without reference to any particular project. May be further classified into
probationary and regular.
Effect:
(a) right to organize and to collectively bargain, or join rank-and-file union of the
construction company may not be curtailed;
(b) completion of project or phase will not sever employer-employee
relationship, as they are to be considered employees for an indefinite term.
4.5 Report of termination of project employers compulsory. Failure to file

termination reports, particularly on the cessation of petitioners employment,
was an indication that the petitioner was not a project employee but a regular
employee. Goma vs. Pamplona Plantation, Inc., 557 SCRA 124 (2007)
4.6 2012-2015 CASES ON PROJECT EMPLOYMENT:
Ma. Charito C. Gadia, et al. vs. Sykes Asia, Inc. et al., G.R. No. 209499, 28
January 2015. - Requisites for an employee to be considered project-based
BPO employee: (a) the employee was assigned to carry out a specific project
or undertaking; and (b) the duration and scope of which were specified at the
time they were engaged for such project.
In this case, Sykes BPO informed the petitioner of their employment status at
the time of their engagement, as evidenced by their employment contracts
which provided that they were hired in connection with the Alltel Project, and
that their positions were project-based and as such is co-terminus to the
project. To the mind of the Court, this caveat sufficiently apprised petitioners
that their security of tenure with Sykes would only last as long as the Alltel
Project was subsisting. In other words, when the Alltel Project was terminated,
petitioners no longer had any project to work on, and hence, Sykes may validly
terminate them from employment.
Sykes duly submitted an Establishment Employment Report and an

Establishment Termination Report to the DOLE Makati Field Office regarding
the cessation of the Alltel Project and the list of employees affected thereby.
Case law deems such submission as an indication that the employment was
indeed project-based.
.
Omni Hauling Services, Inc., et al vs. Bernardo Bon, et al., G.R. No.
199388, 03 September 2014. - Project Employee vs. Regular Employee.
A project employee is assigned to a project which begins and ends at

determined or determinable times (Goma v. Pamplona Plantation,
Incorporated, 579 Phil. 402, 412 [2008]). Unlike regular employees who may
only be dismissed for just and/or authorized causes under the Labor Code, the
28
services of employees who are hired as project employees may be lawfully

terminated at the completion of the project. (GMA Network, Inc. v. Pabriga,
G.R. No. 176419, November 27, 2013, 710 SCRA 690,703).
According to jurisprudence, the principal test for determining whether particular

employees are properly characterized as project employees as distinguished
from regular employees, is whether or not the employees were assigned to
carry out a specific project or undertaking, the duration (and scope) of which
were specified at the time they were engaged for that project. In order to
safeguard the rights of workers against the arbitrary use of the word project to
prevent employees from attaining a regular status, employers claiming that
their workers are project employees should not only prove that the
duration and scope of the employment was specified at the time they
were engaged, but also that there was indeed a project.
In this case, records are bereft of any evidence to show that respondents were
made to sign employment contracts explicitly stating that they were going to be
hired as project employees, with the period of their employment to be co-
terminus with the original period of Omnis service contract with the Quezon
City government. Neither is petitioners allegation that respondents were duly
apprised of the project-based nature of their employment supported by any
other evidentiary proof. Thus, the logical conclusion is that respondents were
not clearly and knowingly informed of their employment.
MacArthur Malicdem and Hermenigildo Flores vs. Marulas Industrial

Corporation, et al., G.R. No. 204406, 26 February 2014. -- Malicdem and
Flores were hired as extruder operators (operate the machines that produces
the sacks) for a period of one (1) year under a Project Employment Contract
which stipulates a probationary period of six (6) months from its
commencement, wherein they would be reclassified as project employees with
respect to the remaining period of the effectivity of the contract. Every year
thereafter, they would sign a Resignation/Quitclaim in favor of Marulas a day
after their contracts ended, then sign another contract for another year, and so
on. Malicdem and Flores are regular employees for the following reasons:
a. An employee who is allowed to work after a probationary period shall be
considered a regular employee. (Article 281, Labor Code.)
b. A project or work pool employee, who has been continuously, as opposed
to intermittently, rehired by the same employer for the same tasks or
nature of tasks; and whose task are vital, necessary and indispensable to
the usual trade or business of the employer, must be deemed a regular
employee. (Maraguimot, Jr. v. NLRC, 248 Phil. 580 [1998].)
c. There is no actual project; hence, Marulas cannot invoke the
exception in Art. 280 of the Labor Code.
Roy Pasos vs. PNCC, G.R. No. 192394, 03 July 2013. While Pasos was
unquestionably hired as a project employee for three months at the start of his
engagement with PNCC, his employment thereafter was extended without
subsequent contract or appointment that specified a particular duration for the
extension. As such, he was then to be considered a regular employee of PNCC.
His status as a regular employee was NOT affected by the fact that he was
assigned to several other projects thereafter, and that there were intervals in
between said project, because he enjoys security of tenure. The termination by
PNCC of Pasos employment by reason of contract expiration or project
completion at this point therefore, is illegal because these are not the grounds for
the dismissal of a regular employee.
Wilfredo Aro, Ronilo Tirol, et al. vs. NLRC, Fourth Division, et al., G.R. No.
174792. 07 March 2012.-- The length of service or the re-hiring of
construction workers on a project-to-project basis does not confer upon
29
them regular employment status, since their re-hiring is only a natural

consequence of the fact that experienced construction workers are
preferred. Employees who are hired for carrying out a separate job, distinct from
the other undertakings of the company, the scope and duration of which has
been determined and made known to the employees at the time of the
employment, are properly treated as project employees and their services may
be lawfully terminated upon the completion of a project. Should the terms of their
employment fail to comply with this standard, they cannot be considered project
employees.
CONTRA: D.M. Consunji vs. Estelito Jamin, G.R. No. 192514, 18 April 2012.
-- We agree with the CA. In Liganza v. RBL Shipyard Corporation where this
Court held that [a]ssuming, without granting[,] that [the] petitioner was initially
hired for specific projects or undertakings, the repeated re-hiring and continuing
need for his services for over eight (8) years have undeniably made him a regular
employee. We find the Liganza ruling squarely applicable to this case,
considering that for almost 31 years, DMCI had repeatedly, continuously and
successively engaged Jamins services since he was hired on December 17,
1968 or for a total of 38 times as shown by the schedule of projects submitted
by DMCI to the labor arbiter[ and three more projects or engagements added by
Jamin, which he claimed DMCI intentionally did not include in its schedule so as
to make it appear that there were wide gaps in his engagements. Xxx While the
contracts indeed show that Jamin had been engaged as a project employee,
there was an almost unbroken string of Jamins rehiring from December 17, 1968
up to the termination of his employment on March 20, 1999. With our ruling that
Jamin had been a regular employee, the issue of whether DMCI submitted
termination of employment reports, pursuant to Policy Instructions No. 20
(Undated[46]), as superseded by DOLE Department Order No. 19 (series of
1993), has become academic. To set the records straight, DMCI indeed
submitted reports to the DOLE but as pointed out by Jamin, the
submissions started only in 1992.[48] DMCI explained that it submitted the
earlier reports (1982), but it lost and never recovered the reports. It
reconstituted the lost reports and submitted them to the DOLE in October 1992;
thus, the dates appearing in the reports.
5. SEASONAL EMPLOYEES -- those hired for work or services which is seasonal

in nature, and the employment is for the duration of the season.
IMPORTANT NOTE ON EMERGING TREND OF SUPREME COURT

CASES CIRCA 2013-2015: REGULAR SEASONAL WORKERS. --
Where the seasonal employees had been hired repeatedly and continuously to
perform the same tasks or activities for several seasons or even after the cessation
of the season, this length of time may likewise serve as badge of regular
employment. In fact, even though denominated as seasonal workers, if these
workers are called to work from time to time and are only temporarily laid off during
the offseason, the law does not consider them separated from the service during
the off-season period. The law simply considers these seasonal workers on leave
until re-employed.
CASE 1: Gapayao vs. Fulo and SSS, G.R. No. 193493, 13 June 2013 (Sereno,
C.J.) -- Farm workers are considered seasonal employees so long as there is a
reasonable causal connection between nature of employers business and that
work should have been rendered for more than one continuous or accumulated
year
Jaime Fulo died due to 1st degree burns from electrocution while doing repairs at
the residence of Gapayao. Due to his alleged compassion, the latter extended
financial help to the heirs of Jaime Fulo. The deceased wife of Jaime then
30
executed a document waiving her right and desisting from filing of criminal and/or
civil action/s against Gapayao.
Deceaseds wife then went to the SSS in order to claim her husbands death
benefits. It was however discovered that deceased was not a registered member of
the SSS. After proper investigation, the SSC found an existence of employer-
employee relationship between Jaime Fulo and Gapayao. It ordered the payment
of deceaseds death benefits, the remittance of employers contributions to the
SSS plus penalties for late payment of such remittances. Gapayao then appealed
the case to the Court of Appeals, but the latter affirmed the decision of the SSC
.
Gapayaos position: Gapayao insists that the deceased was not his employee,
but that of another person. Gapayao contends that he is merely the landlord of the
farm which Jaime Fulo tilled. And that it was Gapayaos tenant, Amado Gacelo
who was Fulos employer. Her likewise contends that the deceased was really a
freelance worker
Issue: Was there an employer-employee relationship between Jaime Fulo

and Gapayao? Yes.
Decision: YES, Fulo was Gapayaos employee.
Farm workers generally fall under the definition of seasonal employees. We

have consistently held that seasonal employees may be considered as regular
employees. Regular seasonal employees are those called to work from time
to time. The nature of their relationship with the employer is such that during
the off season, they are temporarily laid off; but reemployed during the
summer season or when their services may be needed. They are in regular
employment because of the nature of their job, and not because of the length of
time they have worked.
A reading of the records reveals that the deceased was indeed a farm worker who
was in the regular employ of petitioner. From year to year, starting January 1983
up until his death, the deceased had been working on petitioners land by
harvesting abaca and coconut, processing copra, and clearing weeds. His
employment was continuous in the sense that it was done for more than one
harvesting season. Moreover, no amount of reasoning could detract from the fact
that these tasks were necessary or desirable in the usual business of petitioner.
The other tasks allegedly done by the deceased outside his usual farm work only
bolster the existence of an employer-employee relationship. As found by the SSC,
the deceased was a construction worker in the building and a helper in the bakery,
grocery, hardware, and piggery all owned by petitioner. This fact only proves that
even during the off season, the deceased was still in the employ of petitioner.
CASE2: Universal Robina Sugar Milling Corporation and Rene Cabati, G.R.
No. 186439. 15 January 2014. J Brion.
Facts: The complainants hired as employees of URSUMCO, on various dates

(between February 1988 and April 1996) and on different capacities,8 i.e., drivers,
crane operators, bucket hookers, welders,mechanics, laboratory attendants and
aides, steel workers, laborers, carpenters and masons, among others. At the start
of their respective engagements, the complainants signed contracts of employment
for a period of one (1) month or for a given season. URSUMCO repeatedly hired
the complainants to perform the same duties and, for every engagement, required
the latter to sign new employment contracts for the same duration of one month or
a given season.
31
Complainants filed for regularization plus entitlement to CBA benefits. Labor Arbiter
dismissed the complaints and ruled that they were project or seasonal employees.
On appeal, NLRC reversed the Labor Arbiter and ruled that the complainants were
regular employees entitled to the monetary benefits under the CBA. On petition for
review on certiorari, CA ruled that complainants were regular albeit seasonal --
employees, but deleted the monetary CBA benefits because the CBA benefits are
for regular workers only.
Issue: Whether or not complainants are regular workers or seasonal workers?

Are they entitled to CBA benefits accorded the regular employees?
Answer: Complainants are REGULAR SEASONAL WORKER

Complainants are NOT entitled to CBA benefits which are for regular workers only.
The respondents are neither project, seasonal nor fixed-term employees, but
regular seasonal workers of URSUMCO.xxx THEIR SEASONAL WORK,
HOWEVER, DOES NOT DETRACT FROM CONSIDERING THEM IN REGULAR
EMPLOYMENT since in a litany of cases, this Court has already settled that
seasonal workers who are called to work from time to time and are
temporarily laid off during the off-season are not separated from the service
in said period, but are merely considered on leave until re-employment
Be this as it may, REGULAR SEASONAL EMPLOYEES, LIKE THE

RESPONDENTS IN THIS CASE, SHOULD NOT BE CONFUSED WITH THE
REGULAR EMPLOYEES OF THE SUGAR MILL such as the administrative or
office personnel who perform their tasks for the entire year regardless of the
season. The NLRC, therefore, gravely erred when it declared the respondents
regular employees of URSUMCO without qualification and that they were
entitled to the benefits granted, under the CBA, to URSUMCOS regular
employees.
CASE 3: Hacienda Cataywa, et al. vs. Rosario Lorezo, G.R. No. 179640, 18
March 2015. -- The existence of an employer-employee relationship may be
proved by any competent and relevant evidence. It may entirely be testimonial.
(Martinez vs. NLRC, et al. 339 Phil. 176 [1997].) If only documentary evidence is
required, no scheming employer would be brought before the bar justice. (Vinoya
vs. NLRC, et al., 381 Phil. 460 [2000].)
Farm workers generally are seasonal workers. Seasonal employees may become
regular employees when they are called to work from time to time. They acquire
regular employment because of the nature of their work, not because of the length
of time they have worked. However, seasonal workers who work only for one
season, cannot become regular employees. (Hacienda Fatima vs. NFSW, 444 Phil.
587[2003].)
Respondent performed hacienda work, such as planting sugarcane point,

fertilizing, weeding, replanting dead sugarcane fields and routine miscellaneous
hacienda work. Thus, he is considered a regular seasonal worker. Since cultivation
of sugarcane is only for six months, he cannot be considered a regular employee
during the months when there is no cultivation.
6. CASUAL EMPLOYEES those who are hired to perform work or service which
is merely incidental to the business of the employer. Any casual employee who
has rendered at least one (1) year of service, whether it be continuous or broken,
shall be considered a regular employee with respect to the activity for which he is
employed, and his employment shall continue while such activity exists.
32
2014 BAR QUESTION:
Don Luis, a widower, lived alone in a house with a large garden. One day, he
noticed that the plants in his garden needed trimming. He remembered that Lando,
a 17-year old out-of-school youth, had contacted him in church the other day
looking for work. He contacted Lando who immediately attended to Don Luiss
garden a nd finished the job in three days. (4%)
(A) Is there an employer-employee relationship between Don Luis and Lando?
(B) Does Don Luis need to register Lando with the Social Security System (SSS)?
ANSWER:
(A) Yes, casual employment.
(B) No, Landos employment is purely casual as it is not for the purpose of the
occupation or business of the employer Don Luis. (Sec. 8 [J] [3], RA 1161, as
amended.)
EMPLOYEE CLASSIFICATION AS TO RANK

7. MANAGERIAL EMPLOYEES those vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall employees. (Art. 212, par. m, Labor Code)
7.1 CONFIDENTIAL EMPLOYEES: Doctrine of necessary implication and/or

confidential employee rule reiterated.
Confidential employees are those who: (1) assist or act in a confidential

capacity, (2) to persons who formulate, determine, and effectuate
management policies in the field of labor relations. The two criteria are
cumulative, and both must be met if an employee is to be considered a
confidential employee e.g., the confidential relationship must exist
between the employee and his supervisor, and the supervisor must handle
the prescribed responsibilities relating to labor relations. The exclusion from
bargaining units of the employees who, in the normal course of their duties,
become aware of management policies relating to labor relations is a
principal objective sought to be accomplished by the confidential employee
rule. Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery vs. Asia
Brewery, G.R. No. 162025, 03 August 2010.; See also: San Miguel Corporation
Supervisors and Exempt Employees Union vs. Laguesma, 277 SCRA 370 [1997].
8. SUPERVISORY EMPLOYEES those who, in the interest of management,

effectively recommend such managerial actions if the exercise of such authority is
not merely routinary or clerical in nature, but requires use of independent
judgment. (Art. 212, par. N, Labor Code). Note: Supervisory employees form part
of the managerial staff, which are not covered by the rules on hours of work, viz.,
night shift differentials, overtime pay, etc. (See Art. 82, Labor Code cf. Art. 212
[m]).
9. RANK-AND-FILE EMPLOYEES - All other employees not falling within the

definition of managerial or supervisory employees, are considered rank-and-file
employees for purposes of Book V of the Labor Code.
33
FRAMEWORK:
General rule: Employment is deemed regular
Exception: Probationary Seasonal

Term Casual
Project
Exception to exception:
Probationary employees allowed to work after probn. period
Casual workers rendering service for more than one year
Term employee allowed to work after term has expired/ended
Project employee allowed to work after project without any contract; or project
employee allowed to work project after project but no termination reports.
F. INDEPENDENT CONTRACTORSHIP ARRANGEMENTS

VS. LABOR ONLY CONTRACTING
Employees of an independent contractor are not your employees
Fuji Television Network, Inc. vs. Arlene S. Espiritu G.R. No. 204944-45, 03 December
2014 citing DOLE D.O. 18-A [2011], sec. 5 (b); Sonza vs. ABS-CBN, supra, see page __
hereof. -- There are different kinds of independent contractors: those engaged in legitimate
job contracting, and those who have unique skills and talents that set them apart from
ordinary employees. Since no employer-employee exist between independent
contractors and their principals, their contracts are governed by the Civil Code
provisions on contracts and other applicable laws.
ADAS NOTE: In the above 2014 case of Fuji Television Network vs. Arlene Espiritu, the
Supreme Court made an exhaustive distinction between Independent Contractor vs.
Fixed-term employment and/or regular employment. The main factor that distinguishes
independent contracting from fixed-term or regular employment is that of CONTROL.
Where the alleged employer has no actual control over the conduct of the work of the
complainant, then there is no employer-employee relationship. However, if control over
the conduct of work can be established, then this is one of fixed-term or regular
employment depending on the circumstances of the case..
34
F.1 VALID INDEPENDENT CONTRACTING

OR SUB-CONTRACTING ARRANGEMENTS
Article 106, LB; IRR S8R8B3;
ELEMENTS: (MEMORY AID: I ARM FREE CAPITAL TEMWORK R&B)

There is a job-contracting permissible by law where the contractor/agency
carries on an INDEPENDENT business and undertakes the contract work on
his ACCOUNT, RESPONSIBILITY, using his own
under his own
MANNER AND METHODS, FREE from the control of the principal in all
matters connected with the performance of work excepting the results
thereof.
He has his own CAPITAL in the form of TOOLS, EQUIPMENT,

MACHINERY, WORK PREMISES, and that the agreement between the
contractor and principal assures the formers employees of ALL RIGHTS
AND BENEFITS under the law.
F.2 ELEMENTS OF LABOR-ONLY CONTRACTING PROHIBITED

UNDER THE LAW -- Philippine Airlines vs. Ligan, 548 SCRA 181 (2008).
There is labor-only contracting where the contractor or sub-contractor merely

recruits, supplies or places workers to perform a job, work or service for a principal.
TWO WAYS OF PROVING LABOR-ONLY CONTRACTING:

(Memory Aid: No Cap Direct OR No Control)
For labor-only to exist, Sec. 5 of Department Order No. 18-02 requires any two of
the elements to be present, viz.:
The contractor or sub-contractor DOES NOT HAVE

SUBSTANTIAL CAPITAL or investment to actually perform the
job, work or service under its own account and responsibility; and the
employees recruited, supplied or placed by such contractors are
performing activities which are DIRECTLY RELATED to the main
business of the principal;
OR
The CONTRACTOR has NO CONTROL over the conduct of the work to be

done by his employees.
To emphasize, a finding that a job contractor is a labor-only contractor is equivalent

to declaring that there is an employer-employee relationship between the company
and the employees of the labor-only contractor.(Industrial Timer Corp., vs. NLRC,
169 SCRA 341). This is because the labor-only contractor is considered as a mere
agent of the EMPLOYER and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the
principal employer. (Alviado et. al. vs. Procter & Gamble, and Promm Gemm, G.R.
No. 160506, 09 March 2010).
35
F.3 EFFECT OF LABOR-ONLY CONTRACTING AND VALID JOB

CONTRACTING AGREEMENTS -- San Miguel Corp. vs. MAERC
Integrated Systems, 405 SCRA 579 [10 July 2003]
If labor only contracting: ILLEGAL. The employer is deemed the

DIRECT employer and is made liable to the employees of the contractor for a
more comprehensive purpose (wages, monetary claims, and all other benefits
in the Labor Code such as SSS/Medicare/Pag-Ibig). The labor-only contractor
is deemed merely an agent.
If job-contracting: LEGAL. The employer is considered an INDIRECT

EMPLOYER, and is made solidarily liable with the contractor to the employees
of the latter for a more limited purpose, viz.: payment of unpaid wages and
other monetary claims, including 13th month pay, service incentive leave pay.
(New Golden Builders case)
IMPORTANT J. VELASCO CASES:
Marian B. Navarette vs. Manila International Freight Forwarders, Inc./MIFFI

Logistics Company, Inc., Mr. Harada, and MBI Millennium Experts, Inc., G.R.
No. 200580, 11 February 2015 (Velasco) A finding that a contractor is engaged
in labor-only contracting is then equivalent to declaring that there exists an
employer-employee relationship between the supposed principal and the employee
of the purported contractor. It also results in the following:
(1) the subcontractor will be treated as the agent of the principal whose acts and
representations bind the latter;
(2) the principal, being the employer, will be responsible to the employees for all
their entitlements and benets under labor laws; and
(3) the principal and the subcontractor will be solidarily treated as the employer.
On the contrary, in this case, there is already a previous Supreme Court ruling in a
similar case (Manlangit) finding that MBI is a legitimate job contractor. Under the
doctrine of conclusiveness of judgment, the Supreme Courts ruling on the issue
of the legitimacy of MBIs contract with respondents, must not be disturbed.
Consequently, complainant Navarette is MBI's employee and not of MIFF.
W.M. Manufacturing, Inc. vs. Richard R. Dalag and Golden Rock Manpower
Services, G.R. No. 209418, 07 December 2015 (Velasco). -- WMM and Golden
Rock engaged in labor-only contracting.
36
The essential element in labor-only contracting is that the contractor merely

recruits, supplies or places workers to perform a job, work or service for a
principal. However, the presence of this element is not enough and must, in fact,
be accompanied by any one of the confirmatory elements to be considered a
labor-only contractor within the contemplation of Section 5 of DO 18-02, being the
applicable issuance at the time Dalag complained of his alleged illegal dismissal.
As to the presence of the confirmatory elements, attention is drawn to (1) Golden

Rocks lack of substantial capital, coupled with the necessity and desirability of the
job Dalag performed in WMM; and (2) Golden Rocks lack of control over the
employees it supplied WMM.
The Certificate of Registration only gives rise to the disputable presumption that
Golden Rock is an independent contractor with substantial capital as reflected in
its financial documents. However, the basis for determining the substantiality of a
companys capital rests not only thereon but also on the tools and equipment it
owns in relation to the job, work or service it provides.
Moreover, WMM exercised control over the employees supplied by Golden

Rock. The right to control refers to the right to determine not only the end to be
achieved, but also the manner and means to be used in reaching that end. (E.g.
Dalag was supervised by WMMs employees; furnishing Dalag with no less than 7
memos directing, him to explain his work infractions; conducting an investigation
to determine Dalags culpability.)
2015 BAR EXAMINATION QUESTION: (VIII)
Star Crafts is a lantern maker based in Pampanga. It supplies Christmas lanterns

to stores in Luzon, Metro Manila, and parts of Visayas, with the months of August
to November being the busiest months. Its factory employs a workforce of 2,000
workers who make different lanterns daily for the whole year. Because of
increased demand, Star Crafts entered into a contractual arrangement with
People Plus, a service contractor, to supply the former with I 00 workers for only 4
months, August to November, at a rate different from what they pay their regular
employees. The contract with People Plus stipulates that all equipment and raw
materials will be supplied by Star Crafts with the express condition that the
workers cannot take any of the designs home and must complete their tasks
within the premises of Star Crafts.
Is there an employer-employee relationship between Star Crafts and the 100

workers from People Plus? Explain. (4%)
Answer:
Yes, there is an employer-employee relationship between Star Crafts and the 100
workers from People Plus. This is so because People Plus is engaged in labor-
only contracting inasmuch as it appears NOT to have any capital in the form of
tools, equipment machineries and work premises. Moreover, it does NOT have
any control over its own employees, the control being exercised by Star Crafts.
Labor-only contracting is illegal and, in this case, the principal Star Craft is
deemed the direct employer of the 100 workers, while People Plus is deemed
merely an agent. (Adas note: Memo aid No CAP + DIRECT or No
CONTROL. In both tests, Star Crafts fall within the elements of labor-only
contracting under Dept Order No 18 and 18-A).
37
F.4 SALIENT FEATURES OF DEPARTMENT ORDER NO. 18-02,

SERIES 2002.
MANDATORY REGISTRATION OF INDEPENDENT CONTRACTORS (D.O.
18, S11) - Establishment of a registration system to govern contracting
arrangements. Registration of the contractors and sub-contractors shall be
necessary for purposes of establishing an effective labor market information
and monitoring. Failure to register shall give rise to a presumption that
contractor is engaged in LABOR ONLY CONTRACTING
REQUIREMENTS FOR REGISTRATION (per DOLE Application Form)
Name and business address of contractor

Names and addresses of the officers of the contractor
Nature of the contractors business, and the industry where the contractor
seeks to operate
Number of regular workers; list of clients, if any; number of personnel
assigned to each client and the services provided to the client
Description of the phases of the contract, and number of employees
covered in each phase, when appropriate
Copy of audited financial statements (companies/partnership/cooperative or
union), or ITR (sole proprietorship)
Certified copy of the certificate of registration of firm or business name from
the Securities and Exchange Commission, Department of Trade and
Industry, Cooperative Development Authority or from the DOLE
Certified copy of the license or business permit issued by the local
government unit or units where the contractor or subcontractor operates.
The application shall be verified, and shall contain an undertaking that the
contractor or sub-contractor shall abide by all applicable labor laws and
regulations
OTHER OBLIGATIONS OF INDEPENDENT CONTRACTOR:
Duty to produce copy of the contract between the principal and the
contractor, if required during regular inspection; also, the contractor of
employment of the contractual employee
Annual reporting of the registered contractors not later than 15th of January
of every year. Report shall include: (a) list of contracts entered with
principal during the subject reporting period; (b) number of workers covered
by each contract with principal; and sworn undertaking that the
mandatory government-imposed benefits (SSS, HDMF, Philhealth, ECC
and withholding taxes) due the contractual employees have been made
during the subject reporting period.
EFFECT OF NON-COMPLIANCE DELISTING OF CONTRACTORS. (Adas

opinion: Logically therefore, and in conjunction with Supreme Court decisions,
there arises a prima facie (rebuttable) presumption that there being no
certification, the contractor is a labor-only contractor).
F.5 NEW REQUIREMENTS UNDER DEPT. ORDER NO. 18-A,

SERIES 2011 (14 NOV 2011).
NOTE: Dept Order No. 18-A is NOT applicable to BPO or knowledge-based

outsourcing and construction industry, per DOLE Dept Order No. 1 s 2012.
38
1. Declaration of the Independent Contractors net financial contracting

capacity (NFCC) to be incorporated in the service contract (sec 3 [g])
CURRENT ASSETS LESS CURRENT LIABILITIES X K [CONTRACT
DURATION] EQUIVALENT, MINUS VALUE OF ALL OUTSTANDING, ON-
GOING OR STARTING PROJECTS
where K = 10, if contract is one year or less;

= 15, for more than one (1) year up to two (2) years;
= 20, for more than two (2) years
2. Substantial capital of at least Three Million Pesos (P3,000,000.00) in case of

corporations, partnerships, cooperatives or single proprietorship (sec 13[l])
3. Registration fee of Twenty Five Thousand Pesos (P25,000.00) plus renewal

fee of Twenty Five Thousand Pesos (P25,000.00) every three years (sections
19 and 21)
F.6 THE NEGATIVE LIST: WHAT CANNOT BE VALIDLY SUB-

CONTRACTED OUT? (Dept. Order No. 18-02 as amended by Dept
Order No. 18-A, series of 2011)
1. Contracting out of a job, work or service when not done in good faith and not
justified by the exigencies of the business and the same results in the
termination of regular employees and reduction of work hours or reduction or
splitting of the bargaining unit
2. Contracting out to a Cabo.
Under the cabo system, (a) the union is the independent contractor that
engages the services of its members who are seconded to the principal; (b)
the charges against the principal are made by the Union; and the workers
are paid on union payroll without intervention of the principal.
3. Taking undue advantage of the economic situation or lack of bargaining

strength of the contractual employee, or undermining his security of tenure or
basic rights, or circumventing the provisions of regular employment, in any of
the following instances:
i) In addition to his assigned functions, requiring the contractual employee

to perform functions which are currently being performed 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 including minimum wages and social or welfare benefits;
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 for which substantially different skills are required and this is
made known to the employee at the time of engagement.
4. Contracting out of a job, work or service through an IN-HOUSE AGENCY
39
5. Contracting out of a job, work or service directly related to the business or

operation of the principal by reason of a strike or lockout whether actual or
imminent.
6. Contracting out of a job, work or service being performed by union members

when such will interfere with, restrain or coerce employees in the exercise of
their rights to self-organization as provided in Art. 248 (c) of the Labor Code,
as amended.
NEW PROHIBITIONS TO THE ORIGINAL NEGATIVE LIST PROVIDED

UNDER DEPT ORDER 18-A SERIES OF 2011 (SECTION 7):
7. REPEATED HIRING OF EMPOYEES UNDER AN EMPLOYMENT

CONTRACT of short duration or under a service agreement of short duration
with the same or different contractors, which circumvents the Labor Code
provisions on security of tenure
8. Requiring employees under a sub-contracting arrangement to sign a contract

fixing the period of employment to a term SHORTER THAN THE TERM OF
THE SERVICE AGREEMENT, except when the contract is divisible into
phases xxx and this is made known to the employee
9. Refusal to provide a copy of the Service Agreement and employment

contracts between the contractor and employees, to the principals certified
bargaining agent.
10. Engaging or maintaining by the principal of subcontracted employees IN

EXCESS OF THOSE PROVIDED FOR IN APPLICABLE COLLECTIVE
BARGAINING AGREEMENTS OR SET BY THE INDUSTRY TRIPARTITE
COUNCIL (ITC)
F.7 SYNTHESIS AND CLARIFICATION OF DOCTRINES

ON JOB-CONTRACTING PER 2013-2015 CASES
7.1 Job contracting is a trilateral work arrangement arising out of two
different contracts:
a) Contract between Principal and the Agency: CIVIL CONTRACT

b) Contract between Agency and its employees: LABOR CONTRACT
But note
There should be NO CONTROL between Principal and Agency or

Principal and employees of the agency; otherwise, an employer-employee
relationship is established in either case.
7.2 Contracting out is valid as an exercise of management prerogative for as

long as it complies with the limits and standards provided by the Labor
Code. [COCA-COLA BOTTLERS VS. DELA CRUZ ET AL, G.R. No. 184977, 07 December
2009 (BRION, J)], -- Essentially, there must be proof of capitalization, and of
control over his employees on the part of the independent contractor. The law
allows contracting and subcontracting involving services but closely
regulates these activities for the protection of workers. Thus, an employer
can contract out part of its operations, provided it complies with the limits and
standards provided in the Code and in its implementing rules. xxx In strictly
laymans terms, a manufacturer can sell its products on its own, or allow
contractors, independently operating on their own, to sell and distribute
these products in a manner that does not violate the regulations. From
40
the terms of the above-quoted D.O. 18-02, the legitimate job contractor must
have the capitalization and equipment to undertake the sale and distribution of
the manufacturers products, and must do it on its own using its own means
and selling methods.xxx
Temic Automotive Phils. Vs. Temic Automotive Phils Inc. Employees

Union FFW, G.R. No. 186965, 23 December 2009. Company is engaged
in the manufacture of electronic brake systems and comfort body electronics
for automotive vehicles. Union members are regular rank-and-file employees
working in warehouse receiving section, raw materials, and finished goods
section. Management however contracts out forwarding, packing, loading of
raw materials and finished goods to independent contractors. Issue raised on
validity of contracting out of said jobs, to the detriment of the regular workers.
Supreme Court ruled in favor of management, where it is shown that it is done
in good faith, for the furtherance of the valid interests of the company and not
for the circumvention of the rights of its employees.
7.3 IMPORTANT CASE: The right of management to outsource parts of its

operations is within the purview of management prerogative, but said
right may limited by law, CBA provisions or the general principles of fair
play and justice. Goya Inc. vs. Goya Employees Union FFW, G.R. No.
170054 21 January 2013.
Question: May the Company however validly engage an independent

contractor for such purpose, despite an explicit provision in the CBA limiting the
companys free exercise of management prerogative pertaining to the hiring of
contractual employees.
Short Answer: NO, it may not. The CBA is the law between the parties, and
having agreed to the provision, management also agreed to limit its exercise of
its prerogatives to this extent
SC Rationale: The company kept on harping that both the VA and the CA
conceded that its engagement of contractual workers from PESO was a valid
exercise of management prerogative. It is confused. To emphasize, declaring
that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise
thereof. What the VA and the CA correctly ruled was that the Companys
act of contracting out/outsourcing is within the purview of management
prerogative. Both did not say, however, that such act is a valid exercise
thereof. Obviously, this is due to the recognition that the CBA provisions
agreed upon by the Company and the Union delimit the free exercise of
management prerogative pertaining to the hiring of contractual
employees. Indeed, the VA opined that the right of the management to
outsource parts of its operations is not totally eliminated but is merely limited by
the CBA, while the CA held that [t]his management prerogative of contracting
out services, however, is not without limitation. x x x [These] categories of
employees particularly with respect to casual employees [serve] as limitation to
[the Companys] prerogative to outsource parts of its operations especially
when hiring contractual employees.
7.4 The law and its implementing rules recognize that management may
rightfully exercise its prerogatives in determining what activities may be
contracted out, REGARDLESS OF WHETHER SUCH ACTIVITY IS
PERIPHERAL OR CORE IN NATURE. (Alviado et. al. vs. Procter & Gamble,
and Promm Gemm, G.R. No. 160506, 09 March 2010, Del Castillo, J).
41
7.5 HOWEVER, PRELIMINARY PRESUMPTION IS THAT CONTRACTOR IS

LABOR-ONLY CONTRACTING UNLESS such contractor overcomes the
burden of proving that it has substantial capital, investment, tools and the like.
IMPT 2014 CASE: Fuji Television Network, Inc. vs. Arlene S. Espiritu G.R.
No. 204944-45, 03 December 2014 - The employer has the burden of proof to
show that the person concerned is an independent contractor rather than a
regular employee.
Garden of Memories Park and Life Plan vs. NLRC 2nd Division, GR 160278,
08 Feb 2012, 665 SCRA 293 citing 7K Corporation vs. NLRC, GR 148490, 22 Nov
2006, 507 SCRA 509, 523. -- In the present case, although Garden of Memories
is not the contractor, it has the burden of proving that Requizo has sufficient
capita or investment since it is claiming the supposed status of REquino as
independent contractor. Garden of Memories failed to adduce evidence
purporting to show that Requizo had sufficient capitaliizatin. Neither did it show
that she invested in the form of tools, equipment, machineries, work premises
and other materials which are necessary in the completion of the service
contract.
NOTE: A cooperative may likewise engage in sub-contracting arrangements

but it must comply with the requirements for an independent contractor. The
fact that it was a duly registered cooperative does not preclude the possibility
that it was engaged in labor-only contracting as confirmed by the findings of the
Regional Director. (Norkis Trading Corporation vs. Buenavista et al., GR
No. 182018, 10 October 2012).
7.6 WHETHER DOLE CERTIFICATION THAT ONE IS A

LEGITIMATE JOB-CONTRACTOR, IS SUFFICIENT TO
PROVE STATUS AS JOB CONTRACTOR.
General Rule: The DOLE certification simply gives rise to a
presumption that the contractor is a legitimate one. It does NOT
prohibit the Supreme Court, in the exercise of its plenary judicial powers of
review, to determine sufficiency of evidence other than the certification, in ruling
that one is, or is not, an independent contractor. Thus --
In the absence of evidence to the contrary presented by the complainants,

then the Supreme Court had ruled that in the case of RAMY GALLEGO VS.
BAYER PHILS. G.R. No. 179807, 31 July 2009, Carpio-Morales, J that (T)he
DOLE certificate having been issued by a public officer, it carries with it the
presumption that it was issued in the regular performance of official duty.
Petitioners bare assertions fail to rebut this presumption. Further, since the
DOLE is the agency primarily responsible for regulating the business of
independent job contractors, the Court can presume, in the absence of
evidence to the contrary, that it had thoroughly evaluated the requirements
submitted by PRODUCT IMAGE before issuing the Certificate of Registration.
In this case, the Supreme Court found Product Image to be an independent
contractor as it had shown proof of substantial capitalization and control over the
employees.
Exception: COCA COLA BOTTLERS VS. RICKY DELA CRUZ, ET AL. (G.R.
No. 184977, 07 December 2009) and COCA COLA BOTTLERS VS. AGITO
ET AL (G.R. 179546, 13 Feb 2009, J. Chico-Nazario),
However, apart and separate from the existence of said DOLE certification,
and especially in instances where there are contradictory findings between the
42
Court of Appeals and the NLRC/Labor Arbiter, the Supreme Court may consider
other factors in the determination of whether or not a contractor complies with
the requisite elements of a legitimate sub-contracting as enumerated in the
Labor Code and the Dept. Order No. 18-02. In these cases, the Supreme Court
reviewed the records and found that the so-called independent contractors
had no substantial capitalization and investment, and that the workers
supplied by it were performing activities which were necessary and desirable in
the usual trade or business of the employer.
2014 BAR QUESTION:
Linis Manpower, Inc. (LMI) had provided janitorial services to the Philippine
Overseas Employment Administration (POEA) since March 2009. Its service
contract was renewed every three months. However, in the bidding held in June
2012, LMI was disqualified and excluded. In 2013, six janitors of LMI formerly
assigned at POEA filed a complaint for underpayment of wages. Both LMI and
POEA were impleaded as respondents. Should POEA, a government agency
subject to budgetary appropriations from Congress, be held liable solidarily with
LMI for the payment of salary differentials due to the complainant? Cite the legal
basis of your answer. (4%)
ANSWER: Yes, POEA may still be held liable. DOLE Order No. 14, Series of
2001, on Solidary Liability, provides as follows: Government agencies or
instrumentalities engaging security services from private security agencies shall
likewise observe compliance with all labor laws xxx Moreover, Article 106 of the
Labor Code provides that in the event the contractor fails to pay the wages of his
employees the principal shall be jointly and severally liable with the contractor.
7.7 IMPORTANT J. VELASCO CASE: Fonterra Brands Phils. Vs.

Largado and Estrellado, G.R. No. 205300, 18 March 2015
QUESTION: Whether or not fixed-term employees who were repeatedly hired

by a contractor, but had resigned and transferred to another contractor to work
with the same principal, may claim regular employment status and illegal
dismissal?
43
ANSWER: NO. They cannot claim to be regular employees of the principal.

As correctly held by the Labor Arbiter and the NLRC, the termination of
respondents employment with Zytron was brought about by the cessation of
their contracts with the latter. We give credence to the Labor Arbiters
conclusion that respondents were the ones who refused to renew their contracts
with Zytron, and the NLRCs finding that they themselves acquiesced to their
transfer to A.C. Sicat.
By refusing to renew their contracts with Zytron, respondents effectively

resigned from the latter. Resignation is the voluntary act of employees who are
compelled by personal reasons to dissociate themselves from their employment,
done with the intention of relinquishing an office, accompanied by the act of
abandonment.
Here, it is obvious that respondents were no longer interested in continuing their

employment with Zytron. Their voluntary refusal to renew their contracts was
brought about by their desire to continue their assignment in Fonterra which
could not happen in view of the conclusion of Zytrons contract with Fonterra.
Hence, to be able to continue with their assignment, they applied for work with
A.C. Sicat with the hope that they will be able to continue rendering services as
TMRs at Fonterra since A.C. Sicat is Fonterras new manpower supplier.
G. SPECIFIC ISSUES ON LABOR STANDARDS
1. WAGES.
1.1 Article 97 (f) Labor Code, definition: 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 the
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. Fair and reasonable value
shall not include any profit to the employer or to any person affiliated with the
employer.
1.2. EMPLOYEES NOT COVERED BY PROVISIONS ON WAGES:
farm tenancy / leasehold;

domestic service (household or domestic helpers);
persons working in their respective homes in needle work or in any cottage
industry duly registered in accordance with law;
Barangay micro business enterprise (BMBE) under RA 9178, the BMBE Law.
BMBE any business entity or enterprise engaged in the production,
processing, or manufacturing of products or commodities, including agro-
processing, trading and services, whose total assets including those arising
from loans but exclusive of the land on which the particular business entitys
office, plant and equipment are situated, shall not be more than P3M.
1.3 Wages; facilities and supplements. SLL International Cables Specialist and
Sonny L. Lagon v. NLRC, Roldan Lopez, et al., G.R. No. 172161, 02 March 2011. --
Respondent employees alleged underpayment of their wages. Petitioner employer
claimed that the cost of food and lodging provided by petitioner to the respondent
employees should be included in the computation of the wages received by
44
respondents. The Court makes a distinction between facilities and

supplements.
Supplements constitute extra remuneration or special privileges or benefits given

to or received by the laborers over and above their ordinary earnings or wages.
Facilities, on the other hand, are items of expense necessary for the laborers and
his familys existence and subsistence so that by express provision of law, they
form part of the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would spend and pay for
them just the same.
In short, the benefit or privilege given to the employee which constitutes an

extra remuneration above and over his basic or ordinary earning or wage is
supplement; and when said benefit or privilege is part of the laborers basic
wages, it is a facility. The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose for which it is
given. In the case at bench, the items provided were given freely by petitioner
employer for the purpose of maintaining the efficiency and health of its workers
while they were working at their respective projects. Thus, the Court is of the view
that the food and lodging, or the electricity and water allegedly consumed by
respondents in this case were not facilities but supplements which should not be
included in the computation of wages received by respondent employees.
2014 CASE: Our Haus Realty ss. Alexander Parian, et. al., G.R. No. 204651,
06 August 2014. The requirements of law for the deductibility of facility from the
wages of employees are as follows:
a. proof must be shown that such facilities are customarily

furnished by the trade;
b. the provision of deductible facilities must be voluntarily
accepted in writing by the employee; and
c. The facilities must be charged at fair and reasonable value
(Mabeza vs. NLRC, 338 Phil. 386 [1997])
Badges to show that a facility is customarily furnished by the trade:
a. The existence of a company policy or guideline showing that

provisions for a facility were designated as part of the
employees salaries. (SLL International Cables Specialist v.
NLRC, supra., 644 SCRA 411.)
b. The existence of an industry-wide practice of furnishing the
benefits in question among enterprises engaged in the same
line of business.
NOTE1: Even if a benefit is customarily provided by the trade, it must still pass
the purpose test set by jurisprudence. Under this test, if a benefit or privilege
granted to the employee is clearly for the employers convenience, it will not be
considered as a facility but a supplement. Here, careful consideration is given to
the nature of the employers business in relation to the work performed by the
employee. This test is used to address inequitable situations wherein employers
consider a benefit deductible from the wages even if the factual circumstances
show that it clearly redounds to the employers greater advantage.
NOTE2: The distinction lies not so much in the kind of benefit or item (food,
lodging, bonus or sick leave) given, but in the purpose for which it is given. If the
purpose is primarily for the employees gain, then the benefit is a facility; if it is
mainly for the employers advantage, then it is a supplement.
45
NOTE3: In the ultimate analysis, the purpose test seeks to prevent a

circumvention of the minimum wage law.
1.4 PAYMENT OF WAGES
Wages shall be paid in cash, legal tender at or near the place of work
Payment may be made through a bank upon written petition of majority of the
workers in establishments with 25 or more employees and within one kilometer
radius to a bank
Payment shall be made directly to the employees
Wages shall be given not less than once every two (2) weeks or twice within a
month at intervals not exceeding 16 days
2014 CASE: Hacienda Leddy, et al. vs. Paquito Villegas, G.R. No. 179654, 22
September 2014. -- Payment on a piece-rate basis does not negate regular
employment. Payment by the piece is just a method of compensation and does not
define the essence of the relation. (Lambo vs. NLRC, 375 Phil. 855 [1999]).
1.5 SOME GOVERNING RULES:
FAIR AND REASONABLE VALUE shall not include any profit to the employer,
or to any person affiliated with the employer.
NO WORK NO PAY PRINCIPLE. -- If there is no work performed by the

employee, there can be no wage or pay unless the laborer was able, willing, and
ready to work but was prevented by management or was illegally locked out,
suspended or dismissed. But where the failure of employees to work was not due
to the employers fault, the burden of economic loss suffered by the employers
should not be shifted to the employer. Each party must bear his own loss.
EQUAL PAY FOR EQUAL WORK. -- Employees who work with substantially
equal qualifications, skill, effort and responsibility, under similar conditions should
be paid similar salaries (International School Alliance of Educators vs.
Quisumbing, GR No.128845, June 1, 2000).
CIVIL CODE PROVISIONS:
Art. 1705. The laborers wages shall be paid in legal currency.
Art. 1706. Withholding of the wages, except for a debt due, shall not be made by
the employer.
Art. 1707. The laborers wages shall be a lien on the goods manufactured or the
work done.
Art. 1708. The laborers wages shall not be subject to execution or attachment
except for debts incurred for food, shelter, clothing, and medical attendance.
Art. 1709. The employer shall neither seize nor retain any tool or other articles
belonging to the laborer.
Art. 110, Labor Code. Workers preference in case of bankruptcy. In the

event of bankruptcy or liquidation of an employers business, his workers shall
enjoy first preference as regards their wages and other monetary claims, any
provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and other
creditors may be paid.
46
IMPORTANT J. VELASCO CASE: Associated Labor Union Divine Word

University Employees Union vs. Court of Appeals and Divine Word
University, G.R. No. 156882, 31 October 2008. -- reiterating principles of
workers preference in case of bankruptcy.
.
Bankruptcy proceedings must first be instituted for Article 110 to apply. --
The application of Article 110 of the Labor Code is contingent upon the institution
of bankruptcy or insolvency proceedings against the employer. Hence,
preferential right given to workers under Art. 110 may be invoked only during
bankruptcy or insolvency proceedings against the employer. (Development Bank of
the Philippines vs. Secretary of Labor, 179 SCRA 630 [1989]).
What Article 110 of the Labor Code establishes is not a lien, but a preference of
credit in favor of employees. Unlike a lien, a preference of credit does not create
a charge upon any particular property of the debtor. This simply means that
during bankruptcy or insolvency proceedings against the properties of the
employer, the employees have the advantage of having their unpaid wages
satisfied ahead of certain claims which may be proved therein. (DBP vs. Secretary,
ibid.; See also DBP vs. NLRC, 222 SCRA 264 [1993]; DBP vs. NLRC, 229 SCRA 350
[1994]; Hautea vs. NLRC, 230 SCRA 119 [1994]).
2015 BAR EXAM QUESTION: (III)

Benito is the owner of an eponymous clothing brand that is a top seller. He
employs a number of male and female models who wear Benito's clothes in
promotional shoots and videos. His deal with the models is that Benito will pay
them with 3 sets of free clothes per week. Is this arrangement allowed? (2%)
Answer:
No, the arrangement is not allowed. Under Article 102 of the Labor Code, wages
of an employee are to be paid only in legal tender, even when expressly
requested by the employee. Hence, no lawful deal in this regard can be entered
into by and between Benito and his models.
Alternative answer:
No. The models are Benitos employees. As such, their services require
compensation in legal tender (Art. 102, Labor Code). The three sets of clothes,
regardless of value, are in kind; hence, the formers compensation is not in the
form prescribed by law.
1.6 WAGE AND WAGE-RELATED BENEFITS
Minimum wages must always be complied with. -- Wage Order No.

NCR-19 for Metro Manila effective 04 April 2015.
SECTOR/ BASIC COLA NEW NEW NEW MINIMUM
INDUSTRY WAGE INTEGRA BASIC COLA WAGE RATES
TION WAGE
Non-agricultural (Incl
hospitals with 100 bed P466.00 P15.00 P481.00 P10.00 P491.00
capacity or less)
Agriculture (plantation 429.00 15.00 444.00 10.00 454.00
and non-plantation
Retail/Service
establishmts employing 429.00 15.00 444.00 10.00 454.00
15 persons or less
Manufacturing
establishments regularly 429.00 15.00 444.00 10.00 454.00
employing less than 10
workers
47
IMPORTANT J. VELASCO CASE ON MINIMUM WAGE APPLICATION:

Nasipit Integrated Arrastre vs. NAsipit Employees Labor Union ALU-
TUCP, G.R. No. 162411, 30 June 2008. As explicitly stated in the
Minimum Wage Order itself, only employees who are receiving salaries
below the prescribed minimum wage, are entitled to the wage increase
granted under the Wage Order. This is without prejudice to any wage
distortion adjustment that may be had as regards other employees that may
be affected as a consequence of the application thereof. Inasmuch as the
Union employees are already receiving wages higher than that prescribed
by the Wage Order, there can be no argument that the company is NOT
obliged to grant them any wage increase..
Hours of work: Hours of work shall include: (a) all time during which an
employee is required to be on duty or to be at the prescribed workplace,
and (b) all time during which an employee is suffered or permitted to work.
The normal working hours shall be no more than eight (8) hours a day.
Meal and rest period: meal break of less than one (1) hour and short rest
periods shall be considered compensable working time
Holiday pay. -- The employee is entitled to the payment of his regular daily
basic wage (100%) during said holidays, even if the worker did not report
for work on said days; PROVIDED THAT HE WAS PRESENT OR WAS
ON LEAVE OF ABSENCE WITH PAY ON THE WORK DAY
IMMEDIATELY PRECEDING THE HOLIDAY. If the employee was
suffered to work during the said holidays, they will be entitled to payment of
holiday premium of 200% of his basic wage (100% of basic wage PLUS
100%).
2014 CASES:
Ariel L. David, doing business under the name and style Yiels Hog
Dealer vs. John G. Macasio, G.R. No. 195466, 02 July 2014. -- General
Rule: Employees on task or pakyaw basis are entitled to holiday pay and
SIL pay; unless they qualify as field personnel.
Conrado A. Lim vs. HMR Philippines, Inc., et al, G.R. No. 201483, 04
August 2014. Will illegally dismissed employee be entitled to payment of
holiday pay in the computation of backwages? Answer: It depends whether
the monthly salary of the employee is inclusive or exclusive of holiday pay
as shown by divisors used by the company in the computation of overtime
pay and employees absences. To illustrate, if all nonworking days are paid,
the divisor of the monthly salary to obtain daily rate should be 365. If
nonworking days are not paid, the divisor is 251, which is a result of
subtracting all Saturdays, Sundays, and the ten legal holidays. Hence, if the
petitioners base pay does not yet include holiday pay, then it must be
added to his monetary award. (ADAs NOTES: If the divisor is 261, then
the ten (10) legal holidays are already included in the monthly salary. In
this case, the dismissed employee is no longer entitled to payment of
holiday pay as it is already considered paid.)
Premium pay for work within 8 hours on a:

1. Special or rest day: plus 30% of basic daily rate (BDR)
2. Rest day falling on a special day: plus 50% of BDR
3. Rest day falling on a regular holiday: plus 30% of 200% of BDR
48
Overtime pay for work in excess of 8 hours on:

1. Ordinary days: plus 25% of the basic hourly rate
2. Special days, rest days and holidays: plus 30% of the regular hourly
rate on said days
Overtime is NOT a benefit; rather it is simply compensation for services

rendered AFTER the eight hours of work. The requirement of rendering
additional service differentiates overtime pay from benefits such as thirteenth
month pay or yearly merit increase. BENEFITS DO NOT REQUIRE ANY
ADDITIONAL SERVICE FROM THEIR BENEFICIARIES. Thus, overtime
pay does not fall within the definition of benefits under Article 100 of the
Labor Code. (San Miguel Corporation vs. Numeriano Layoc, Jr., et al. G.R.
No. 149640, 19 October 2007.)
2015 BAR EXAM QUESTION: (II)
LKG Garments Inc. makes baby clothes for export. As part of its measures to
meet its orders, LKG requires its employees to work beyond eight (8) hours
everyday, from Monday to Saturday. It pays its employees an additional 35%
of their regular hourly wage for work rendered in excess of eight (8) hours per
day. Because of additional orders, LKG now requires two (2) shifts of workers
with both shifts working beyond eight (8) hours but only up to a maximum of
four (4) hours. Carding is an employee who used to render up to six (6) hours
of overtime work before the change in schedule. He complains that the
change adversely affected him because now he can only earn up to a
maximum of four (4) hours' worth of overtime pay. Does Carding have a
cause of action against the company? (4%)
Answer: No, Carding has no cause of action.
There is no diminution of benefits. Overtime pay is simply additional

compensation for work done beyond the eight-hour work day. In the exercise
of its management prerogatives, and absent proof that the decision to create
two shifts was done in circumvention of the employeess rights, management
may change schedule of its employees. (Manila Jockey Club Employees
Union vs Manila Jockey Club, GR 16770, 07 March 2001)
Alternative answer: No, Carding has no cause of action.
Rendition of overtime is a decision within the valid exercise of management

prerogatives. LKG has the right to determine whether or not the same is
intended to be permanent and regular, not contingent nor temporary, and
given only to remedy a situation which can change anytime. (Philippine
National Bank v. Philippine National Bank Employees Association (PEMA),
115 SCRA 507 [1982]).
Nightshift differential pay: plus 10% of the basic/regular rate for work
between 10PM 6AM (For further discussions under Republic Act No
10151, Repealing the Nightshift Prohibition on Women, see page 61).
Service incentive leave: 5 days with pay per year of service

.
Service charges: 85% for distribution to rank-and-file employees; 15% for
losses, breakages, or distribution to managerial employees (applicable only in
establishments collecting service charges)
2014 CASE: National Union of Workers In Hotel Restaurant And Allied

Industries (NUWHRAIN), Philippine Plaza Chapter Vs. Philippines Plaza
Inc., G.R. No. 177524, 23 July 2014. The Union anchors its claim for
49
unpaid services charges on Sections 68 and 69 of the CBA, in relation with

Article 96 of the Labor Code. Section 68 states that the sale of food,
beverage, transportation, laundry and rooms are subject to service charge at
the rate of ten percent (10%). Excepted from the coverage of the 10%
service charge are the so-called negotiated contracts and special rates.
Supreme Court decision: Hotel does not have any obligation to the Union,
inasmuch as their claims arises from non-sale transactions like Westin
Gold Cards Revenue and Maxi Media Barter to be negotiated contracts or
contracts under special rates, and the entries Business Promotions and
Gift Certificates as contracts that did not involve a sale of food, beverage,
etc.
1.7 GENERAL RULE: WAGE DEDUCTIONS ARE NOT ALLOWED
EXCEPTIONS:
ALLOWABLE DEDUCTIONS WITHOUT EMPLOYEES CONSENT:
a. SSS, Philhealth and PAG-IBIG contributions;

b. Withholding taxes on income
c. Where the employer is authorized by law or regulations issued by the
Secretary of Labor;
d. Agency fees, where the employee who is not a member of the exclusive
bargaining agent but a member of the appropriate bargaining unit, may be
assessed a reasonable fee for benefits received under a CBA.
ALLOWABLE DEDUCTIONS WITH THE EMPLOYEES CONSENT:
a. Reasonable value of meals and other facilities;

b. Payment of union dues, which may or may not be under an automatic
charging-off arrangement
c. Debt payments to the employer or third persons with employees explicit
written consent
d. Workers insurance acquired by the employer with employees consent;
2015 CASE: Emer Milan, et al. vs. NLRC, et al., G.R. No. 202961, February
04, 2015. -- An employer can withhold terminal pay and benefits pending the
employees return of its properties.
An employer is allowed to withhold terminal pay and benefits pending the

employees return of its properties. The return of the propertys possession
became an obligation or liability on the part of the employees when the
employer-employee relationship ceased. The NLRC has jurisdiction to
determine, preliminarily, the parties right over a property, when it is necessary to
determine an issue related to rights or claims arising from an employer-employee
relationship.
1.8 NON-DIMINUTION OF BENEFITS, EXPLAINED:
Art. 100, Labor Code. Prohibition against elimination or

diminution of benefits. Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee
benefits being enjoyed at the time of promulgation of this Code.
GENERAL RULE: Benefits being given to employees shall not be taken

back or reduced unilaterally by the employer because the benefit has become
part of the employment contract, written or unwritten
50
EXCEPTIONS:
1. If the employee also consents to the deduction.
2. If the deduction is made to correct an error.
EXCEPTION TO THE EXCEPTION:

If the error is left uncorrected for a reasonable period of time, it ripens into a
company policy and employees can demand for it as a matter of right.
Requisites for voluntary employer practice such that the same cannot
be unilaterally withdrawn anymore: (a) It should have been practiced over
a long period of time; and (b) It must be shown to have been consistent and
deliberate. (Sevilla Trading Company vs. Semana, 428 SCRA 239 [2004], citing
Globe Mackay Cable and Radio Corp. vs. NLRC, 163 SCRA 71 [1988].
As to length of time required to ripen into a corporate policy: The

Supreme Court has not laid down any specific rule requiring a specific
minimum number of years. Rather, the test of long practice has been
enunciated thus: where the company agreed to continue giving a benefit
knowing fully well that said employees are not covered by the law requiring
payment of said. (Oceanic Pharmacal Employees Union (FFW) vs. Inciong, 94
SCRA 270 [1979]). Hence, the Supreme Court has ruled in specific cases as
follows:
a. Davao Fruits Corporation vs. Associated Labor Unions (225 SCRA 562
[1993]): six (6) years.
b. Davao Integrated Port Stevedoring Services vs. Abarquez (220 SCRA 197
[1983]): three (3) years and nine (9) months
c. Sevilla Trading Company vs. Semana, (428 SCRA 239 [2004]: two (2)
years.
IMPORTANT 2013 CASE: Vergara vs. Coca Cola Bottlers, G.R. No. 176985,
01 April 2013
Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines, Inc.

from May 1968 until he retired on January 31, 2002 as a District Sales
Supervisor (DSS). As stipulated in respondents existing Retirement Plan Rules
and Regulations at the time, the Annual Performance Incentive Pay of DSSs
shall be considered in the computation of retirement benefits, as follows: Basic
Monthly Salary + Monthly Average Performance Incentive (which is the total
performance incentive earned during the year immediately preceding 12
months) No. of Years in Service.
Claiming his entitlement to an additional Php 474, 600 as Sales Management

Incentives (SMI) and to the amount of Php 496, 016 which respondent allegedly
deducted illegally, representing the unpaid accounts of two dealers within his
jurisdiction, petitioner filed a complaint before the NLRC for Full Retirement
Benefits, Merit Increase, Commission/Incentives, Length of Service, Actual,
Moral and Exemplary Damages, and Attorneys Fees.
Question1: Whether or not the exclusion of Sales Management Incentives in the

computation of retirement benefits is a diminution of Vergaras benefits.
Answer1: NO. SMI could not be included in computation, there being no

evidence that the inclusion thereof into the retirement pay has ripened into a
corporate policy.
General rule: Employees have a vested right over existing benefits voluntarily
granted to them by their employer. Thus, any benefit and supplement being
51
enjoyed by the employees cannot be reduced, diminished, discontinued or

eliminated by the employer.
Elements for diminution of benefits:

(1) the grant or benefit is founded on a policy or has ripened into a practice over
a long period of time;
(2) the practice is consistent and deliberate;
(3) the practice is not due to error in the construction or application of a doubtful
or difficult question of law; and
(4) the diminution or discontinuance is done unilaterally by the employer.
Question2: When can a policy be considered to have ripened into a regular

company practice?
Answer2: The employee must prove by substantial evidence that the giving of
the benefit is done over a long period of time, and that it has been made
consistently and deliberately. Jurisprudence has not laid down any hard-and-fast
rule as to the length of time that company practice should have been exercised in
order to constitute voluntary employer practice. The common denominator in
previously decided cases appears to be the regularity and deliberateness of the
grant of benefits over a significant period of time. It requires an indubitable
showing that the employer agreed to continue giving the benefit knowing well that
the employees are not covered by any provision of the law or agreement
requiring payment thereof. In sum, the benefit must be characterized by
regularity, voluntary and deliberate intent of the employer to grant the benefit
over a considerable period of time.
IMPORTANT 2013 CASE: TSpic Corporation vs. TSpic Employees Union-

FFW, G.R. No. 163419, 13 February 2008. No diminution of wages where the
deduction is to correct an error, and such was done within a reasonable time.
Company and Union entered into a CBA with increases in wages. During the
first year of the effectivity of the CBA, the Regional Wage Board issued a Wage
Order prescribing increases in minimum wages. Company thereafter complied
with said Wage Order and increased wages of the probationary employees. Said
probationary employees received additional wage increase when they became
regular. With the second wave of increase, nine employees who were senior to
the recently regularized employees, received less wages. After three months
from the second wave, the company HRD notified the complainant employees
that due to an error in the automated payroll system, deductions will be made on
their monthly salary as they had been previously overpaid. The Union protested
as the deduction is a diminution of the salaries.
Question: Is there diminution of salaries and benefits in this case?
Answer: NO. No vested right accrued to the additional salary inasmuch as the
payment was made erroneously, and more so as the company sought to correct
the error as soon as it learned about it.
2014 BAR QUESTION:
Lolong Law Firm (LLF), which employs around 50 lawyers and 100 regular staff,
suffered losses for the first time in its history. The management informed its
employees that it could no longer afford to provide them free lunch.
Consequently, it announced that a nominal fee would henceforth be charged.
Was LLF justified in withdrawing this benefit which it had unilaterally been
providing to its employees? (1%)
52
(A) Yes, because it is suffering losses for the first time.
(B) Yes, because this is a management prerogative which is not due to any legal
or contractual obligation.
(C) No, because this amounts to a diminution of benefits which is prohibited by

the Labor Code.
(D) No, because it is a fringe benefit that has already ripened into a demandable
right.
2. THIRTEENTH MONTH PAY

2.1 How much: 1/12th of the basic salary of an employee within a calendar
year.
2.2 COVERAGE
All employers are required to pay all their rank-and-file employees a 13th month
pay not later than December 24 of every year.
Such employees are entitled to the benefit regardless of their designation or

employment status and irrespective of the method by which their wages are paid,
provided that they have worked for at least 1 month during a calendar year;
2.3 EXCLUSIONS or EXEMPTIONS FROM COVERAGE
1. Government and any of its political subdivisions, including GOCCs.
Exception: Corporations operating essentially as private subsidiaries of the

Government;
2. Employers already paying their employees 13th month pay or more in a calendar
year or its equivalent at the time of issuance of PD 851;
Its equivalent includes Christmas bonus, mid-year bonus, cash

bonuses and other payments amounting to not less than 1/12 of the
basic salary but shall not include cash and stock dividends, COLA and
all other allowances regularly enjoyed by the employees as well as
non-monetary benefits.
3. Employers of household helpers and persons in the personal service of another in

relation to such workers;
4. Distressed employers:
a. currently incurring substantial losses or
b. in the case of non-profit institutions and organizations, where their income,
whether from donations, contributions, grants and other earnings from any
source, has consistently declined by more than forty (40%) percent of their
normal income for the last two (2) years, subject to the provision of Section 7
of this issuance;
5. Employers of those who are paid on commission, boundary, or task basis, and
those who are paid a fixed amount for performance of a specific work,
irrespective of the time consumed in the performance thereof.
53
Exception: Where the workers are paid on a piece-rate basis, in which case the
employer shall grant the required 13th month pay to such workers.
Piece Rate employees who are paid a standard amount for

every piece or unit of work produced that is more or less regularly
replicated, without regard to the time spent in producing the same.
3. BONUS
3.1 Nature of a bonus: a prerogative, not an obligation. -- The matter of giving a
bonus over and above the workers lawful salaries and allowances is entirely
dependent on the financial capability of the employer to give it. (Traders Royal
Bank vs. NLRC, 189 SCRA 274 [1990]).
EXCEPTION: When demandable under a contract.
2012-2014 CASES:
a) Mega Magazine Publications, vs. Margaret Defensor, G.R. No. 162021,16

June 2014. -- Grant of bonus, rule and exception.
The grant of a bonus or special incentive, being a management prerogative, is

not a demandable and enforceable obligation, except when the bonus or special
incentive is made part of the wage, salary or compensation of the employee,
(Protacio v. Laya Mananghaya & Co., G.R. No. 168654, [March 25, 2009, 582
SCRA 417, 429]) or is promised by the employer and expressly agreed upon by
the parties (Lepanto Ceramics, Inc. v. Lepanto Ceramics Employees
Association, G.R. No. 180866,[ March 2, 2010, 614 SCRA 63, 71]). By its very
definition, bonus is a gratuity or act of liberality of the giver, and cannot be
considered part of an employees wages if it is paid only when profits are
realized or a certain amount of productivity is achieved. If the desired goal of
production or actual work is not accomplished, the bonus does not accrue.
Due to the nature of the bonus or special incentive being a gratuity or act of
liberality on the part of the giver, the respondent could not validly insist on the
schedule proposed in her memorandum of April 5, 1999 considering that the
grant of the bonus or special incentive remained a management prerogative.
However, the Court agrees with the CAs ruling that the petitioners had already
exercised the management prerogative to grant the bonus or special incentive.
At no instance did Yap flatly refuse or reject the respondents request for
commissions and the bonus or incentive. This is plain from the fact that Yap
even bargained with the respondent on the schedule of the rates and the
revenues on which the bonus or incentive would be pegged. What remained
contested was only the schedule of the rates and the revenues.
b) Eastern Telecom Phils. Vs. Eastern Telecom Employees Union, GR 185665,

08 Feb 2012. Company has an existing collective bargaining agreement with
the Union, including a Side Agreement to the effect that 14th, 15th and 16th
month bonuses (other than 13th month pay) are granted." Company plan to
defer payment of the 14th, 15th and 16th month bonuses due to alleged
continuing deterioration of companys financial position.
ISSUE: Is Company bound to pay for the bonuses as per CBA?
ANSWER: YES! A reading of the provision in the agreement reveals that the
same provides for the giving of 14th, 15th and 16th month bonuses without
qualification. The wording of the provision does not allow any other
interpretation. There were no conditions specified in the CBA Side Agreements
54
for the grant of the benefits, contrary to the claim of ETPI that the same is
justified only when there are profits earned by the company. Terse and clear,
the said provision does not state that the subject bonuses shall be made to
depend on the ETPIs financial standing or that their payment was contingent
upon the realization of profits. Neither does it state that if the company derives
no profits, no bonuses are to be given to the employees. In fine, the payment of
these bonuses was not related to the profitability of business operations.
3.2 Mid-year bonus and Christmas bonus are equivalents of 13th month pay.
(Producers Bank vs. NLRC, 355 SCRA 489 [2001]).
However, benefits in the form of food or free electricity are not proper substitutes
for the 13th month pay. So, also, year-end rewards for loyalty and service cannot
be considered in lieu of 13th month pay. (Framanlis vs. Minister of Labor, 171
SCRA 87 [1989]).
3.3 Are commissions included in computing 13th month pay?
a. If the commission form part of the employees basic salary, then this will
likewise be included in the computation of 13th month pay. (Philippine
Duplicators, Inc. vs. NLRC, 241 SCRA 380 [1995]).
b) If the commissions were in the nature of profit-sharing bonuses (productivity

bonuses), then these do not form part of the basic salary and should not
included in the computation of the 13th month pay. (Boie-Takeda Chemicals,
Inc. vs. Dela Serna 228 SCRA 329 [1993]).
2014 CASE: Philippine Spring Water Resources Inc., vs. CA and Juvenstein
B. Mahilum, G.R. No. 205278, 11 June 2014. -- Petitioner Philippine Spring Water
Resources, Inc. (PSWRI) was engaged in the business of manufacturing, selling and
distributing bottled mineral water. It hired Mahilum as Vice-President for Sales and
Marketing for the Bulacan-South Luzon Area, for a monthly salary of 15,000.00 plus
0.25% commission on every cash on delivery and another 0.25% on new accounts
from July to August, 2004.
It is well-established in jurisprudence that the determination of whether or not a

commission forms part of the basic salary depends upon the circumstances or
conditions for its payment.
In Phil Duplicators, Inc. v. NLRC,21 the Court held that commissions earned by
salesmen form part of their basic salary. The salesmens commissions, comprising a
predetermined percentage of the selling price of the goods sold by each salesman,
were properly included in the term basic salary for purposes of computing the 13th
month pay. The salesmens commissions are not overtime payments, nor profit-
sharing payments nor any other fringe benefit, but a portion of the salary structure
which represents an automatic increment to the monetary value initially assigned to
each unit of work rendered by a salesman.
On the other hand, in Boie-Takeda Chemicals, Inc. v. De la Serna,22 the so-called

commissions paid to or received by medical representatives were excluded from the
term basic salary because these were paid to the medical representatives and rank-
and-file employees as productivity bonuses, which were generally tied to the
productivity, or capacity for revenue production, of a corporation and such bonuses
closely resemble profit-sharing payments and had no clear direct or necessary
relation to the amount of work actually done by each individual employee.
In Mahilums case, the case of Phil. Duplicator which ruled that commission is part of
basic pay, cannot be automatically applied without considering his position as Vice-
President for sales and marketing of the PSWRIs Bulacan-South Luzon Area. This
factor constrains the Court to hold that Mahilums 0.25% commission based on
55
the monthly sales and 0.25% commission for cash payments must be taken to
come in the nature of overriding commission, not sales commission. The latter
cannot be properly included in the basic salary as it must be earned by actual
market transactions attributable to the claimant. Curiously, Mahilum did not
comment on the petitioners objection to the award. Not being a salesman who directly
effected any sale of a product, the commission embodied in the agreement partook of
the nature of profit-sharing business based on quota. In fine, the alleged commissions
were profit-sharing payments and had no clear, direct or necessary relation to the
amount of work he actually performed.
FOR SAID REASON, MAHILUMS BACKWAGES MUST BE PEGGED AT HIS

BASIC SALARY, EXCLUDING THE COMMISSIONS MENTIONED BY THE NLRC,
TO BE COMPUTED FROM THE TIME OF HIS DISMISSAL UP TO THE FINALITY
OF THIS DECISION. Nonetheless, the award of backwages shall earn legal interest
at the rate of six percent (6%) per annum in accordance with prevailing
jurisprudence.23
2015 BAR EXAM QUESTION: (IV)
Far East Bank (FEB) is one of the leading banks in the country. Its compensation and
bonus packages are top of the industry. For the last 6 years, FEB had been providing
the following bonuses across-the-board to all its employees:
(a) 13th month pay;
(b) 14th to 18th month pay;
(c) Christmas basket worth P6,000;
(d) Gift check worth P4,000; and
(e) Productivity-based incentive ranging from a 20% to 40%
increase in gross monthly salary for all employees who would
receive an evaluation of "Excellent" for 3 straight quarters in the
same year.
Because of its poor performance over-all, FEB decided to cut back on the bonuses this
year and limited itself to the following:
(a) 13th month pay;
(b) 14th month pay;
(c) Christmas basket worth P4,000; and
(d) Gift check worth P2,000
Katrina, an employee of FEB, who had gotten a rating of "Excellent" for the last 3
quarters was looking forward to the bonuses plus the productivity incentive bonus. After
learning that FEB had modified the bonus scheme, she objected. Is Katrina's objection
justified? Explain. (3%)
Answer: Katrina was correct. Having enjoyed the across-the-board bonuses for six
years, Katrinas right to them has been vested already. Hence, none of them can be
withheld or reduced without violating the Principle of Non-Diminution of Benefits.
Benefits can be reduced when the company is in the red, i.e., its losses are substantial
and duly established with financial statements duly certified to by an independent
external auditor. In the problem, the company is in the black only because it has not
proven its alleged losses to be substantial losses in accordance with law. Permitting
reduction of pay at the slightest indication of losses is contrary to the policy of the State
to afford full protection to labor and promote full employment (Linton Commercial Co. v.
Hellera, et al., 23 Feb. 2012 ). As to the withheld productivity-based bonuses, the basis
of payment is not the company's performance but Katrinas. Therefore, Katrina is
deemed to have earned them because of her excellent performance ratings for three
quarters. On this basis, they cannot be withheld without violating Art. 116 of the Labor
Code because they are wage-type.
56
Alternative answer: No, Katrinas objection is not justified. The grant of a bonus or
special incentives, being a management prerogative, is not demandable and enforceable
obligation, except when the bonus or special incentive is made part of the wage, salary
or compensation of the employee. (Protacio vs. Laga Mananghaya and Co., G.R. No.
168654, March 25, 2009, 582 SCRA 417, 429). FEB cannot be forced to distribute
bonuses when it can no longer afford to pay. To hold otherwise would be to penalize an
employer for its past generosity. (Producers Bank of the Philippines vs. NLRC, 355
SCRA 489 [2001]).
4. HOURS OF WORK.
4.1 Hours of worked shall include: (a) all time during which an employee is required to
be on duty or to be at the prescribed workplace, and (b) all time during which an
employee is suffered or permitted to work. (Art. 84, Labor Code; See also Rada
vs. NLRC, 205 SCRA 69 [1992].)
4.2 Rest period of short duration during working hours shall be counted as hours
worked. (Art. 84, Labor Code.) Example: coffee break of 15 minutes; meal period
of less than one hour, e.g., 30 minutes.
4.3 Exemptions. (See Art. 82, Labor Code.) . -- The following employees are not
covered by the Labor Code provisions on hours of work:
a) Government employees;
b) Managerial employees (International Pharmaceuticals, Inc. vs. NLRC, 287 SCRA
213 [1998].);
c) Field Personnel;
d) Members of the employer who are dependent upon him for support;
e) Domestic helpers and persons in the personal service of another;
f) Workers who are paid by results, e.g., piece workers. (Red V Coconut
Products, Ltd. vs. CIR, 17 SCRA 553 [1966], citing Lara vs. del Rosario, 94 Phil. 780)
(Note: Reason is that workers who are paid by the result are compensated on the
basis of the work completed, and NOT in respect of the time spent working on it).
5. EMPLOYMENT OF HOUSEHELPERS VS. HOMEWORKERS

(See also KASAMBAHAY LAW)
5.1 Domestic helper or househelpers or domestic servant defined. -- shall

refer to any person, whether male or female, who renders services in and about
the employers home and which services are usually necessary or desirable for
the maintenance and enjoyment thereof, and ministers exclusively to the
personal comfort and enjoyment of the employers family.
Such definition covers family drivers, domestic servants, laundry women,

yayas, gardeners, houseboys and other similar househelps. (Apex Mining
Company, Inc. vs. NLRC, 196 SCRA 251 [1991]). NOTE DISCREPANCY BETWEEN
LAW AND IMPLEMENTING RULES WHICH EXCLUDED THE DRIVERS FROM
COVERAGE.
If the househelp or laundrywomen is suffered to work in staffhouses of a

company to attend to the needs of the companys guest and other persons
availing of said facilities, then they are NOT household helpers as defined by
law but employees of the company. (Apex Mining Company, Inc. vs. NLRC, ibid.)
BENEFITS ACCORDED TO HOUSE-HELPERS (Book III, Title 3, Chapter

III, LC)
1. Not to be assigned to non-household work;
57
2. Reasonable compensation (minimum cash wage);

3. Lodging, food and medical attendance;
4. If under 18 years, an opportunity for elementary education (cost of which
shall be part of househelpers compensation);
5. Contract for household service shall not exceed 2 years (renewable from
year to year);
6. Just and humane treatment;
7. Right not to be required to work for more than 10 hrs. a day (if the
househelper agrees to work overtime and there is additional
compensation, the same is permissible);
8. Right to 4 days vacation each month with pay (if the helper does not ask
for the vacation, the number of vacation days cannot be accumulated, he
is only entitled only to its monetary equivalent);
9. Funeral expenses must be paid by the employer if the house-helper has
no relatives with sufficient means in the place where the head of the
family lives;
10. Termination only for just cause;
11. Indemnity for unjust termination of service;
12. Employment certification as to nature and duration of service and
efficiency and conduct of the house-helper.
5.2 Homeworker, defined.-- one who performs in or about his home any
processing of goods or materials, in whole or in part, which have been
furnished directly or indirectly, by an employer and thereafter to be
returned to the latter. (Book III, Rule XIV, Section 1 of the Omnibus Rules
Implementing the Labor Code.)
HOUSEHELPERS HOME WORKERS
Minister to the personal needs and Performs in or about his own home any
comfort of his employer in the latters processing or fabrication of goods or
home materials, in whole or in part, which have
been furnished directly or indirectly, by an
employer and sold thereafter to the latter.
RIGHTS and BENEFITS ACCORDED TO HOMEWORKERS (Department Order

No. 5, replacing Rule XIV of the Rules Implementing Book III of the Labor Code):
1) Formation and registration of labor organization of industrial homeworkers.
2) It also makes explicit the employers duty to pay and remit SSS, Philhealth and
ECC premiums.
3) Prohibitions for Homework

explosives, fireworks and articles of like character;
drugs and poisons;
other articles, the processing of which requires exposure to toxic
substance.
5.3 REPUBLIC ACT NO. 10361 OTHERWISE KNOWN AS THE BATAS

KASAMBAHAY. Effective 18 January 2013. Implementing Rules
effective on 04 June 2013 (by Atty. Enz Palmares)
For quite a time, the welfare of our poor household helpers has been overlooked
and neglected not only by the government but by our society, as well. It is for this
reason that this Representation filed Senate Bill No. 860, with the ardent purpose
of protecting the rights and interests of this massive, yet invisible everyday army
and unsung heroes of the Philippine economy. Sen. Jinggoy Estrada
58
5.3.1 Applicable to the following personnel whether under a live-in or live-

out arrangements, to wit:
a) General househelp;
b) Yaya;
c) Cook;
d) Gardener;
e) Laundry person; or
f) Any person who REGULARLY performs domestic work in one
household on an occupational basis.
5.3.2 NOT applicable to the following personnel:
a) Service providers;
b) Family drivers; (Adas note: Family drivers were NOT exempted under
the law but only in the Implementing Rules. This may thus be subject to
question. FOR POSSIBLE BAR PROBLEM.)
c) Children under foster family arrangements; and
d) Any other person who performs work occasionally or sporadically and
not on an occupational basis.
5.3.3 EMPLOYMENT CONTRACT - an employment contract must be duly

executed by the employer and the Kasambahay in a language or dialect
known to both parties. A copy said contract shall be furnished to the
Punong Barangay of the barangay where the employer lives. The
employment contract must contain the following pertinent details, to wit:
a) Duties and responsibilities of the Kasambahay, including the

responsibility to render satisfactory service at all times;
b) Period of employment;
c) Compensation;
d) Authorized deductions;
e) Hours of work and proportionate additional payment;
f) Rest days and allowable leaves;
g) Board, lodging and medical attention;
h) Agreements on deployment expenses, if any;
i) Loan agreement, if any;
j) Termination of employment; and
k) Any other lawful condition agreed upon by both parties.
5.3.4 RIGHTS OF KASAMBAHAY
a. MINIMUM WAGE - A minimum wage of Two Thousand Five Hundred

Pesos (P2,500.00) per month shall be paid to a Kasambahay employed
in the National Capital Region (minimum wage of P2,000.00 for those
employed in cities and first class municipalities outside NCR, and
P1,500.00 for those employed in other municipalities), which must be
paid in cash at least once a month.
b. DAILY AND WEEKLY REST PERIODS - The Batas Kasambahay

ensures that a Kasambahay must have an aggregate daily rest period
of eight (8) hours per day, and at least twenty four (24) consecutive
hours of rest in a week. The employer and Kasambahay may further
agree to the following:
1) Scheduled weekly rest day of the Kasambahay, wherein the latters

preference must be respected if the same is based on religious
grounds;
2) Offsetting a day of absence with a particular rest day; or
59
3) Accumulating rest days not exceeding five (5) days.
c. SERVICE INCENTIVE LEAVE -- A Kasambahay who has rendered at

least one (1) year of service shall be entitled to a service incentive leave
of at least five (5) days with pay. Unused service incentive leave shall
not be carried over to succeeding years and are not convertible to cash.
d. THIRTEENTH (13th) MONTH PAY -- The Kasambahay who has

rendered at least one month service shall be entitled to a thirteenth
month pay of at least one-twelfth (1/12) of his total basic salary. The
13th month pay shall be paid to the Kasambahay not later than 24
December of every year or upon his/her separation from employment.
e. MANDATORY GOVERNMENT CONTRIBUTIONS (SSS,

PHILHEALTH, PAG-IBIG) - The Batas Kasambahay dictates upon the
employers their obligation to register every Kasambahay in their employ
to the SSS, PhilHealth and Pag-ibig: provided, that the Kasambahay
concerned has rendered at least one (1) month of service to the
employer. The mandatory premium payments or contributions shall be
borne solely by the employer. However, if the Kasambahay is
receiving a monthly wage of at least Five Thousand Pesos
(P5,000.00), the latter shall pay the proportionate share in the
premium payments or contributions in the SSS, PhilHealth and
Pag-ibig.
5.3.5 2014 BAR EXAMINATION QUESTION:
Linda was employed by Sectarian University (SU) to cook for the

members of a religious order who teach and live inside the campus. While
performing her assigned task, Linda accidentally burned herself. Because
of the extent of her injuries, she went on medical leave. Meanwhile, SU
engaged a replacement cook. Linda filed a complaint for illegal dismissal,
but her employer SU contended that Linda was not a regular employee
but a domestic househelp. Decide. (4%) (Note: This has been asked
previously in the 2007 Bar examinations.)
ANSWER: SU is guilty of illegal dismissal.
A domestic househelp is employed in the employers home to minister

exclusively to the personal comfort and enjoyment of the employers
family. The criteria are the personal comfort and enjoyment of the family
of the employer in the home of said employer.
Such is not the case of Linda. The work performed by Linda in the
Sectarian University could not be categorized as mere domestic work as
a cook for the members of a religious order who teach and live inside the
campus. Lindas work is essential and important to the operation and
religious function of SU. In such a case, Linda is an employee of SU in its
teaching business and Linda is thus entitled to the privileges of a regular
employee. (APEX Mining Company, Inc., vs. NLRC, 196 SCRA 251 [1991];
Barcenas vs. NLRC, 187 SCRA 498 [1990]).
6. EMPLOYMENT OF MINORS: (cf Sec. 12, R.A. 7610, as amended by

R.A. 9231).
Article 139. Minimum employable age. --

(a) No child below fifteen (15) years of age shall be employed, except
60
when he works directly under the sole responsibility of his parents or

guardian, and his employment does not in any way interfere with his
schooling.
(b) Any person between fifteen (15) and eighteen (18) years of age may
be employed for such number of hours and such periods of the day as
determined by the Secretary of Labor in appropriate regulations.
(c) The foregoing provisions shall in no case allow the employment of a
person below eighteen (18) years of age in an undertaking which is
hazardous or deleterious in nature as determined by the Secretary of
Labor.
Article 140. Prohibition against child discrimination..-- No employer

shall discriminate against any person in respect to terms and conditions
of employment on account of his age.
6.1 GENERAL RULE: Employment of any child below fifteen (15) years of age is
prohibited
Note1: Any person between 15 and 18 may be employed in any non-

hazardous work.
Note2: Any person above 18 NO PROHIBITION.
EXCEPT:
1. When he works directly under the sole responsibility of his parents or guardian,
and his employment does not in any way interfere with his schooling. The
following conditions must be met:
The employment does not endanger the childs life, safety, health and morals;
The employment does not impair the childs normal development;
The employer parent or legal guardian provides the child with the primary
and/or secondary education prescribed by the Department of Education
2. Where the childs employment or participation in public entertainment or

information through cinema, theater, radio or TV is essential provided that:
The employment does not involve ads or commercials promoting ALCOHOLIC

BEVERAGES, INTOXICATING DRINKS, TOBACCO AND ITS BY-PRODUCTS
OR EXHIBITING VIOLENCE;
There is a written contract approved by the DOLE; and
the following requirements are strictly complied with:
employer shall ensure protection, health, morals, and normal
development of the child;
employer shall institute measures to prevent childs exploitation /
discrimination taking into account the system and level of
remuneration, duration, and arrangement of working time;
employer shall formulate and implement a continuing program for
training and skills acquisition of the child, subject to approval and
supervision of competent authorities. (as amended by Rep. Act No.
9231)
6.2 NOTE: In the above-exceptional cases where any such child may be employed, the
employer shall first secure, before engaging such child, a work permit from the
Department of Labor and Employment which shall ensure observance of the above
requirements. (Rep. Act. No. 9231).
61
ON HAZARDOUS WORK. -- Any person between fifteen (15) and eighteen (18) years
of age may be employed for NON-HAZARDOUS WORK for such number of hours and
such periods of the day as determined by the Secretary of Labor in appropriate
regulations. No such prohibition if eighteen (18) years old and above.
PROHIBITION AGAINST CHILD DISCRIMINATION. -- No employer shall discriminate

against any person in respect to terms and conditions of employment on account of his
age.
6.3 Comparisons: (Rep. Act No. 9231)
A child below 15 Allowed to work for not more than 20 hours a week.
Provided, the work shall not be more than 4 hours
in a day.
Shall not be allowed to work between 8pm and 6am
of the following day.
A child above 15 Shall not be allowed to work for more than 8 hours
years of age but a day, and in no case beyond 40 hours a week.
below 18 Shall not be allowed to work between 10 pm and
6am the following day
6.4 2015 BAR EXAMINATION QUESTION (V):
Soledad, a widowed school teacher, takes under her wing one of her students, Kiko,
13 years old, who was abandoned by his parents and has to do odd jobs in order to
study. She allows Kiko to live in her house, provides him with clean clothes, food, and
a daily allowance of 200 pesos. In exchange, Kiko does routine housework, consisting
of cleaning the house and doing errands for Soledad. One day, a representative of
the DOLE and the DSWD came to Soledad's house and charged her with violating
the law that prohibits work by minors. Soledad objects and offers as a defense that
she was not requiring Kiko to work as the chores were not hazardous. Further, she
did not give him chores regularly but only intermittently as the need may arise. Is
Soledad's defense meritorious? (4%)
Answer: NO. Soledads defense is not meritorious.
Article 139 of the Labor Code provides that no child below fifteen (15) years of age
shall be employed, except when he works under the sole responsibility of his parents
or guardian, and his employment does not in any way interfere with his schooling.
She is neither Kikos parent or guardian.
However, Article 107 of the Code Rules of Book III, Rule XII, Sections 2 and 3, and
PD 603 on Working Children, provides that Children below sixteen (16) years of age
may be employed to perform light work which is not harmful to their safety, health or
normal development and which is not prejudicial to their studies. As a good
Samaritan, this provision should exculpate her from liability. The Php 200.00 daily
allowance Soledad gives Kiko may even allow the latter to study and grow to become
a worthy member of society.
Alternative Answer: No. Soledads defense is not meritorious because the work
rendered by Kiko at her house is in the form of physical exertion requiring
compensation. Hence, it is an employment which no person can contract with a minor
below 15 years of age (Art. 137, Labor Code). Her defense that his occasional work
did not expose him to hazardous conditions cannot take the place of the defense
allowed by law, viz., the employer is either parent or guardian. She is neither.
Therefore, her defense must fail.
62
7. APPRENTICESHIP AND LEARNER
7.1 Apprenticeship is the practical on-the-job training as supplemented by related

theoretical instruction (Art. 58 (a), LC).
7.2 Learners are persons hired as trainees in semi-skilled and other industrial
occupations which are non-apprenticeable and may be learned through practical
training on the job in a relatively short period of time which shall not exceed three
months.
APPRENTICESHIP LEARNERSHIP
NATURE highly-technical semi-skill; non-apprenticeable
PERIOD SIX (6) months THREE (3) months
COMITMT TO At option of learner

HIRE At option of employer
WAGES Must always be paid; 75% of

May be paid or not; if minimum
DOLE paid, 75% of minimum
Approval No, DOLE approval not required;
Yes, DOLE approval is inspection only.
essential
DEDUCTION for None.
Expenses Yes, expenses for
training deductible
from income tax
7.3 CASE ON VALIDITY OF APPRENTICESHIP
Atlanta Industries, Inc. and/or Robert Chan vs. Aprilito R. Sebolino, et

al., G.R. 187320, 26 January 2011. -- Apprenticeship agreement NOT valid
where complainants were hired as employees first before execution of
apprenticeship. The respondent employees were already rendering service to
the company when they were made to undergo apprenticeship. The
respondent were regular employees because they occupied positions such as
machine operator, scaleman and extruder operator tasks that are usually
necessary and desirable in petitioner employers usual business or trade as
manufacturer of plastic building materials. These tasks and their nature
characterized the respondents as regular employees under Article 280 of the Labor
Code. Thus, when they were dismissed without just or authorized cause, without
notice, and without the opportunity to be heard, their dismissal was illegal under
the law.
The apprenticeship agreements did not indicate the trade or occupation in which
the apprentice would be trained; neither was the apprenticeship program approved
by the Technical Education and Skills Development Authority (TESDA). These
were defective as they were executed in violation of the law and the rules.
Moreover, with the expiration of the first agreement and the retention of the
employees, the employer, to all intents and purposes, recognized the completion of
their training and their acquisition of a regular employee status. To foist upon them
the second apprenticeship agreement for a second skill which was not even
63
mentioned in the agreement itself, is a violation of the Labor Codes implementing

rules and is an act manifestly unfair to the employees.
8. ON EMPLOYEE BENEFITS; BEREAVEMENT LEAVE.

CASE: Philippine Journalist Inc. vs.Journal Employees Union, G.R. No. 192601, 26
June 2013, supra. on interpretation in favor of employees; legal dependent
defined.
The coverage of the term legal dependent as used in a stipulation in a collective

bargaining agreement (CBA) granting funeral or bereavement benefit to a regular
employee for the death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous social legislations
have set. This is because the terms of such social legislations are deemed
incorporated in or adopted by the CBA.
Considering that existing laws always form part of any contract, and are deemed
incorporated in each and every contract, the definition of legal dependents under the
aforecited social legislations applies herein in the absence of a contrary or different
definition mutually intended and adopted by the parties in the CBA. Accordingly, the
concurrence of a legitimate spouse does not disqualify a child or a parent of the
employee from being a legal dependent, provided substantial evidence is adduced
to prove the actual dependency of the child or parent on the support of the
employee.
2015 LABOR BAR QUESTION: (IX)
Din Din is a single mother with one child. She is employed as a sales executive at a
prominent supermarket. She and her child live in Quezon City and her residence and
workplace are a 15-minute drive apart. One day, Din Din is informed by her boss that
she is being promoted to a managerial position but she is now being transferred to the
Visayas. Din Din does not want to uproot her family and refuses the offer. Her boss is so
humiliated by Din Din's refusal of the offer that she gives Din Din successive
unsatisfactory evaluations that result in Din Din being removed from the supermarket.
Din Din approaches you, as counsel, for legal advice. What would you advise her? (4%)
Answer:
An employee cannot be promoted without his consent. A promotion that results in the
transfer of the employee that aims to lure the employee away from his present position
cannot be done without his consent. (PT & T vs. CA, G.R. No. 152057, 29 Sept. 2003.)
There is no law that compels a person to accept a promotion. Hence, the exercise by
Din Din of her right to refuse should not be a cause for her Boss humiliation. For one
thing, the transfer would uproot her family. For another, the transfer is unreasonable,
inconvenient and prejudicial to her and her child. The vindictive actuation of her Boss in
giving her successive unsatisfactory evaluation is inconsistent with his prior offer of
promotion. Her boss acted in bad faith, insensibility and disdain; inflicted as a form of
punishment for her. Hence, it can thereforebe said that there is no just cause in the
removal of Din Din from the supermarket.
2015 LABOR BAR QUESTION: (XIII)
Luisa is an unwed mother with 3 children from different fathers. In 2004, she became a
member of the Social Security System (SSS). That same year, she suffered a
miscarriage of a baby out of wedlock from the father of her third child. She wants to
claim maternity benefits under the SSS Act. Is she entitled to claim? (3%)
64
Answer: Maternity leave benefit applies to all female employees whether married or
unmarried. She is entitled to the maternity benefit provided she has given the required
notification to the SSS thru her employer, and her employer must have paid at least 3
monthly contribution to the SSS within the 12-month period immediately before the date
of the miscarriage; otherwise, she would not be entitled to said benefit.
9. DISABLED WORKERS
9.1 Equal opportunity for employment.

No disabled person shall be denied access to opportunities for suitable
employment. [R.A. 7277, Sec. 5: Magna Carta for Disabled Persons]
Qualified disabled employees shall be subject to the same terms and

conditions of employment and the same compensation, privileges, benefits,
fringe benefits, incentives or allowances as a qualified able-bodied person.
A worker is not necessarily considered as a handicapped worker if he is

capable, as an able-bodied worker, to function suitably in relation to the work
to which he was hired. (i.e. one-legged transcriptionist)
9.2 Incentives for employment of disabled workers (Sec. 2, RA 7277).
1. Private entities that employ disabled persons who meet the required skills or
qualifications either as regular employee, apprentice or learner, shall be
entitled to an additional deduction from their gross income, equivalent to 25%
of the total amount paid as salaries and wages to disabled persons; Provided,
that the following are complied with:
a. Presentation of proof certified by DOLE that disabled persons are under
their employ; and
b. Disabled employee is accredited with DOLE and DOH as to his
disability, skills and qualifications.
2. Private entities that improve or modify their physical facilities to provide

reasonable accommodation for disabled persons shall also be entitled to an
additional deduction from their taxable income, equivalent to 50% of the direct
costs of the improvements or modifications. This does not apply to
improvements required under B.P. Blg. 344.
3. REPUBLIC ACT NO. 10151 ENTITLED AN ACT ALLOWING THE EMPLOYMENT

OF NIGHT WORKERS, THEREBY REPEALING ARTICLES 130 AND 131 OF
PRESIDENTIAL DECREE NUMBER FOUR HUNDRED FORTY-TWO, AS
AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES
The general rule before was that women were prohibited from working the nightshift
between the hours of 10:00 p.m. and 6:00 a.m. of the following day, whether with or
without compensation. This prohibition has now been repealed by Republic Act No.
10151.
The new law applies to all workers who shall be employed or permitted or suffered to
work at night, with the exception of the following:
(a) pregnant women or nursing mothers, subject to certain conditions; and
(b) those workers employed in agriculture, stock raising, fishing, maritime transport
and inland navigation.
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As defined, a night worker means any employed person whose work requires
performance of a substantial number of hours of night work which exceeds a specified
limit. The parameters and limits have yet to be fixed by the Department of Labor
which is presently working on the Implementing Rules.
Some salient features of this new law are as follows:
3.1 As regards women night workers, the law provides that women who are pregnant
or nursing their children for a period of at least sixteen (16) weeks before or after
childbirth, are to be allowed alternative to night work, such as: (a) transfer to day
work where this is possible; (b) the provision of social security benefits; or (c)
an extension of maternity leave.
During the periods referred to above, a woman night worker shall NOT be
dismissed or given notice of dismissal, EXCEPT for just or authorized
causes provided for in this Code that are not connected with pregnancy,
childbirth and childcare responsibilities.
During these instances, the women night worker shall not lose the benefits
regarding her status, seniority and access to promotion which may attach to
her regular night work position. These measures shall not have the effect
of REDUCING the protection and benefits connected with maternity leave
under existing laws.
Pregnant women and nursing mothers may be allowed to work at night only if
a competent physician, other than the company physician, shall certify their
fitness to render night work, and specify, in the case of pregnant employees,
the period of the pregnancy that they can safely work.
3.2 Rights of the Night Workers:
Right to health assessement. -- At their request, workers shall have the right to
undergo a health assessment without charge and to receive advice on how to
reduce or avoid health problems associated with their work on the following
instances:
(a) Before taking up an assignment as a night worker:
(b) At regular intervals during such an assignment: and
(c) If they experience health problems during such an assignment which are
not caused by factors other than the performance of night work.
With the exception of a finding of unfitness for night work, the findings of such
assessments shall not be transmitted to others without the workers' consent
and shall not be used to their detriment.
Right to safe and healthful working conditions
Right to compel employer to provide the following mandatory facilities:

(a) Suitable first aid facilities
(b) Adequate or reasonable facilities such as sleeping or resting quarters in the
establishment
(c) Adequate transportation from the work premises to the nearest point of
their residence subject to the exceptions and guidelines to be provided by
the DOLE
Right to transfer to similar job. -- Night workers who are certified as unfit for
night work, due to health reasons, shall be transferred, whenever practicable,
to a similar job for which they are unfit to work. If such transfer to a similar job is
not practicable, these workers shall be granted the same benefits as other
66
workers who are unable to work, or to secure employment during such period.
A night worker certified as temporarily unfit for night work shall be given the
same protection against dismissal as other workers who are prevented from
working for reasons of health"
Right to social services. -- Appropriate social services shall be provided for

night workers and, where necessary, for the workers performing night work."
3.3 Consultation on Night Work Schedules. - Before introducing work schedules

requiring the services of night workers, the EMPLOYER shall CONSULT the
workers' representatives/labor organizations concerned on the details of such
schedules and the forms of organization of night work that are best adapted to the
establishment and its personnel, as well as on the occupational health measures
and social services which are required. In establishments employing night
workers, consultation shall take place regularly.
3.4 AS AMENDED BY DOLE Department Order No. 119-12 [24 January 2012]
Implementing Rules of RA 10151
GENERAL RULE:
There should always be facilities for transportation and/or sleeping/resting
quarters for the night workers.
EXCEPTIONS:
When there is already an existing company policy or CBA providing for an
equivalent or superior benefit i.e. there is already transportation allowance;
Start or end of work rendered does not fall between 12mn to 5am;
Where the workplace is located in an area that is accessible twenty four (24)
hours to public transportation; and
Insufficient number or night workers to warrant the necessity for
sleeping/resting facilities.
4. REPUBLIC ACT 9710 ENTITLED THE MAGNA CARTA OF WOMEN. (By Atty.
Suzy Selleza)
Recognizing the economic, political, and sociocultural realities affecting womens

current condition, Republic Act No. 9710, otherwise known as the Magna Carta of
Women was enacted along with its Implementing Rules effective on 15 September
2009 and 10 July 2010, respectively.
The promulgation of this law affirms the role of women in nation building, and
recognizes the substantive equality of women and men. As such, measures have been
made to promote empowerment of women, pursue equal opportunities for women and
men, ensure equal access to resources and to development results and outcome, and
eliminate discrimination and inequality in the economic, political, social and cultural life
of women and men.
4.1. Discrimination defined:
any gender-based distinction, exclusion, or restriction which has the effect or

purpose of impairing or nullifying the recognition, enjoyment, or exercise by
women, irrespective of their marital status, on a basis of equality of men and
women, of human rights and fundamental freedoms in the political, economic,
social, cultural, civil or any other field;
any act or omission, including by law, policy, administrative measure, or practice,

that directly or indirectly excludes or restricts women in the recognition and
67
promotion of their rights and their access to and enjoyment of opportunities,

benefits, or privileges;
a measure or practice of general application that fails to provide for mechanisms to

offset or address sex or gender-based disadvantages or limitations of women, as a
result of which women are denied or restricted in the recognition and protection of
their rights and in their access to and enjoyment of opportunities, benefits, or
privileges; or women, more than men are shown to have suffered the greater
adverse effects of those measures or practices; and
discrimination compounded by or intersecting with other grounds, status, or

condition, such as ethnicity, age, poverty, or religion. (Section 4 [B])
4.2. Some pertinent benefits and protection granted:
Protection from all forms of violence, including those committed by the

State. -- This includes the incremental increase in the recruitment and training of
women in government services that cater to women victims of gender-related
offenses. It also ensures mandatory training on human rights and gender sensitivity
to all government personnel involved in the protection and defense of women
against gender-based violence, and mandates local government units to establish
a Violence Against Women Desk in every barangay to address violence against
women cases; (Section 12)
Equal access and elimination of discrimination against women in education,

scholarships and training. This includes revising educational materials and
curricula to remove gender stereotypes and images, and outlawing the expulsion,
non-readmission, prohibiting enrollment and other related discrimination against
women students and faculty due to pregnancy outside of marriage; (Section 16)
ADA: POSSIBLE QUESTION FOR LABOR OR POLITICAL LAW

(NOT ASKED IN 2012, 2013 2014 BAR): NOW WITH A NEW
JANUARY 2015 CASE. -- Termination of pregnant employee in
catholic schools. Position of school re: academic freedom and
religious nature of catholic schools to impose higher standards of
morality vs. strict implementation of Magna Carta of Women.
CHERYLL LEUS VS ST. SCHOLASTICA WESTGROVE, G.R. No.

187226, 28 Jan 2015
Facts: Cheryll Santos Leus (petitioner) was hired by St. Scholastica's

College Westgrove (SSCW), a Catholic educational institution, as a
non-teaching personnel. Cheryll engaged in pre-marital sexual
relations, got pregnant out of wedlock, married the father of her child,
and was dismissed by SSCW, in that order.
Issue: Whether or not Leus may be validly dismissed for pregnancy

out of wedlock, on account of immorality.
Supreme Court decision: Illegal dismissal.
In resolving the foregoing question, the Court will assess the matter
from a strictly neutral and secular point of view the relationship
between SSCW as employer and the petitioner as an employee, the
causes provided for by law in the termination of such relationship, and
the evidence on record.
68
The ground cited for the petitioners dismissal, i.e., pre-marital sexual
relations and, consequently, pregnancy out of wedlock, will be
assessed as to whether the same constitutes a valid ground for
dismissal pursuant to Section 94(e) of the 1992 MRPS [and the Labor
Code].
As stated above, when the law refers to morality, it

necessarily pertains to PUBLIC AND SECULAR MORALITY,
and not religious morality. Thus, the proscription against
disgraceful or immoral conduct under Section 94(e) of the 1992
MRPS, which is made as a cause for dismissal, must necessarily refer
to public and secular morality.
Accordingly, in order for a conduct to be considered as disgraceful or

immoral, it must be detrimental (or dangerous) to those conditions
upon which depend the existence and progress of human society and
not because the conduct is proscribed by the beliefs of one religion or
the other.
As the Court held in Radam, there is no law which penalizes an

unmarried mother by reason of her sexual conduct or proscribes
the consensual sexual activity between two unmarried persons;
that neither does such situation contravene any fundamental state
policy enshrined in the Constitution.
Admittedly, the petitioner is employed in an educational institution

where the teachings and doctrines of the Catholic Church, including
that on pre-marital sexual relations, is strictly upheld and taught to the
students. That her indiscretion, which resulted in her pregnancy out of
wedlock, is anathema to the doctrines of the Catholic Church.
However, viewed against the prevailing norms of conduct, the

petitioners conduct cannot be considered as disgraceful or
immoral; such conduct is not denounced by public and secular
morality. It may be an unusual arrangement, but it certainly is not
disgraceful or immoral within the contemplation of the law.
To stress, pre-marital sexual relations between two consenting

adults who have no impediment to marry each other, and,
consequently, conceiving a child out of wedlock, gauged from a
purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of the 1992
MRPS."
Non-discrimination in employment in the field of military, police and other

similar services.
GYNECOLOGICAL Leave benefits of two (2) months with full pay based on
gross monthly compensation, for women employees who undergo surgery
caused by gynecological disorders, provided that they have rendered continuous
aggregate employment service of at least six (6) months for the last twelve (12)
months; (Section 21)
AS AMENDED BY DOLE Department Order No. 112-A [22 May 2012]

providing for the guidelines on the Implementation of the leave benefit for
Women Employees in the private sector. -- Ada
69
DOLE inserted a new provision under Section 4, which provides: The special
leave benefit. The two (2) months special leave benefit is the maximum period of
leave with pay that a woman may avail of under RA 9710. For purposes of
determining the period of leave with pay that will be allowed to a woman
employee, the certification of a competent physician as required period for
recuperation shall be controlling.
Additionally, Section 6 of the DO 112-A also provides as follows: Frequency of

availment. A woman employee can avail of the special leave benefit for every
instance of surgery due to gynecological disorder for a maximum total period of two
(2) months per year.
EFFECT: The total recovery period for a woman employee is limited to two
months per year regardless of the frequency of surgical operations that a
female employee might undergo.
4.3. Notes: In addition to the two-month gynecological leave, please take note that
the woman employee may, in certain cases, avail of additional leaves, to wit:
4.3.1 Battered Woman Leave under Republic Act No. 9262, ANTI-VIOLENCE
AGAINST WOMEN AND CHILDREN:
Allows the victim of violence, which may be physical, sexual, or

psychological, to apply for the issuance of a protection order that will shield
her from further violence and provide her related reliefs.
SECTION 43. Entitlement to Leave. Victims under this Act shall be

entitled to take a paid leave of absence up to ten (10) days in addition to
other paid leaves under the Labor Code and Civil Service Rules and
Regulations, extendible when the necessity arises as specified in the
protection order.
Any employer who shall prejudice the right of the person under this section
shall be penalized in accordance with the provisions of the Labor Code and
Civil Service Rules and Regulations. Likewise, an employer who shall
prejudice any person for assisting a co-employee who is a victim under this
Act shall likewise be liable for discrimination.
Conditions for entitlement
The victim must be an employee. If she is such, she is entitled to a paid

leave of up to 10 days in addition to other paid leaves under the Labor
Code, other laws and company policies
The employee has to submit a certification from the Punong Barangay
or Kagawad or prosecutor or Clerk of Court that an action under RA
9262 has been filed and is pending.
4.3.2 Solo Parent Leave under Republic Act No. 8972, SOLO PARENTS
WELFARE ACT OF 2000:
SECTION 8. Parental Leave. In addition to leave privileges under

existing laws, parental leave of not more than seven (7) working days
every year shall be granted to any solo parent employee who has rendered
service of at least one (1) year.
70
10. EMPLOYEE BENEFITS; RETIREMENT.

10.1 RETIREMENT AGE
GENERAL RULE: R.A. 7641

a. OPTIONAL at 60 years with minimum 5 years of service
b. MANDATORY at 65 years, no service requirement
EXCEPTION:
Where the company provides for a Retirement Plan with earlier retirement age,
then the companys Retirement Plan will apply
10.2 RETIREMENT BENEFITS
GENERAL RULE: R.A. 7641

month for every year of service (expanded concept per Sec 1, RA 7641)
Expanded concept: 22.5 days (basis: Capitol Wireless vs. Confesor)

15 days + 5 days service incentive leave + 2.5 days prorated 13th month pay
EXCEPTION:
Where the company provides for a Retirement Plan with better benefits, then the
companys Retirement Plan will apply
10.3 CASES:
a) Question: Is an employee who was terminated for authorized causes

(redundancy), also entitled to avail of early retirement benefits?
Otherwise stated, may an employee be paid both retirement and
separation pay benefits?
Answer: YES, as a general rule. Exception: When there is an explicit

provision in the company rules prohibiting the availment of both .
Goodyear vs. Marina Angus, G.R. No. 185499, 14 November 2014. --

Employees are legally entitled to recover both separation pay and
retirement benefits in the absence of a specific prohibition in the Retirement
Plan or CBA. In such an instance where both the company rules or CBA and
the retirement plan are silent, an employee is not barred from claiming his
early retirement benefits, even if he/she had already received his
retrenchment pay, and has executed a Quitclaim to that effect. This must be
so because he is legally entitled thereto as a general rule.
It is worthy to mention at this point that retirement benefits

and separation pay are not mutually exclusive.
Retirement benefits are a form of reward for an employee's

loyalty and service to an employer and are earned under
existing laws, CBAs, employment contracts and company
policies.
On the other hand, separation pay is that amount which an

employee receives at the time of his severance from
employment, designed to provide the employee with the
wherewithal during the period that he is looking for another
employment and is recoverable only in instances enumerated
under Articles 283 and 284 of the Labor Code or in illegal
71
dismissal cases when reinstatement is not feasible. (citing

Aquino v. National Labor Relations Commission,G.R. No.
87653, February 11, 1992, 206 SCRA 118, 123-125. See also:
Batangas Laguna Tayabas Bus Company v. Court of Appeals,
163 Phil. 494 [1976]; and University of the East v. Hon. Minister
of Labor, 236 Phil. 724 [1987])
See also: Difference between separation pay arising from termination

of employment and retirement.
General Milling Corporation vs. Viajar, G.R. No. 181738, 30 January

2013, Citing Quevedo vs. Benguet Electric Cooperative, Inc., 599 SCRA
438 [2009]. -- While termination of employment and retirement from service
are common modes of ending employment, they are mutually exclusive, with
varying judicial bases and resulting benefits. Retirement from the service is
contractual (i.e. based on the bilateral agreement of the employer and
employee), while termination of employment is statutory (i.e. governed by
the Labor Code and other related laws as to its grounds, benefits and
procedure. The benefits resulting from termination vary, depending on the
cause. For retirement, Article 287 of the Labor Code gives leeway to the
parties to stipulate above a floor of benefits.
b. DIFFERENCE BETWEEN VOLUNTARY AND INVOLUNTARY

RETIREMENT.
Voluntary retirement cuts employment ties leaving no residual employer

liability; involuntary retirement amounts to a discharge, rendering the
employer liable for termination without cause. The employees intent is the
focal point of analysis. In determining such intent, the fairness of the
process governing the retirement decision, the payment of stipulated
benefits, and the absence of badges of intimidation or coercion are relevant
parameters. (ibid.)
2015 CASE: Zenaida Paz vs. Northern Tobacco Redrying Co., Inc., et
al., G.R. No. 199554, 18 February 2015. -- If optional retirement is
involuntary, the employee shall be deemed to be illegally dismissed.
c. RESIGNATIONS vs. TERMINATION vs STRAINED RELATIONS vs

RETIREMENT
2013 CASE: IN TERMINATION OF EMPLOYMENT BY THE EMPLOYEE

VIA RESIGNATION. -- The intent to relinquish must concur with the
overt act of relinquishment. (Mendoza vs. HMS Credit Corp., et. al., G.R. No.
187232, 17 April 2013; citing San Miguel Properties vs. Gucaban, 654 SCRA 18
[2011])
2013 CASE: DIFFERENCE BETWEEN TERMINATION OF

EMPLOYMENT AND RETIREMENT. -- While termination of employment
and retirement from service are common modes of ending employment, they
are mutually exclusive, with varying judicial bases and resulting benefits
from the service is contractual (i.e. based on the bilateral agreement of the
employer and employee), while termination of employment is statutory (i.e.
governed by the Labor Code and other related laws as to its grounds,
benefits and procedure). The benefits resulting from termination vary,
depending on the cause. For retirement, Article 287 of the Labor Code gives
leeway to the parties to stipulate above or floor benefits. (General Milling
Corporation vs. Viajar, G.R. No. 181783, 30 January 2013; Citing Quevedo
vs. Benguet Electric Cooperative, Inc., 599 SCRA 438 [2009])
72
RESIGNATION It is the voluntary act of employees who are compelled by

reasons to disassociate themselves from their employment. It must be done
with intention of relinquishing the office, accompanied by the act of
abandonment. Where evidence reveals otherwise, then illegal dismissal.
STRAINED RELATIONS Where reinstatement is no longer desirable or

viable in view of strained relations between the parties, then separation pay
is an acceptable alterative to reinstatement. Computation: one month for
every year of service, computed from date of hiring until finality of the
Decision finding for illegal termination.
d. Early retirement is the option of the EMPLOYEE. Eastern Shipping Lines,

Inc. vs. Ferrer D. Antonio, G.R. No. 171587, 13 October 2009. The age of
retirement is primarily determined by the existing agreement or employment
contract. In the absence of such agreement, the retirement age shall be
fixed by law. Under the aforecited law, the mandated compulsory retirement
age is set at 65 years, while the minimum age for optional retirement is
set at 60 years. Under Paragraph B of the retirement plan, a shipboard
employee, upon his written request, may retire from service if he has
reached the eligibility age of 60 years. In this case, the option to retire lies
with the employee. Records show that respondent was only 41 years old
when he applied for optional retirement, which was 19 years short of the
required eligibility age. Thus, he cannot claim optional retirement benefits as
a matter of right.
e. IMPORTANT CASE: MAY RETIREMENT FUND FOR THE EMPLOYEES

BE APPLIED TO OUTSTANDING LOANS OF THE COMPANY?
Metrobank vs. Board of Trustees of Riverside Mills Provident and
Retirement Fund, GR No. 17695, 08 Sept 2010. --
Answer: NO. Employees trusts or benefits plans are intended to provide

economic assistance to employees upon occurrence of old age, retirement,
death, sickness or disability. Here, while the Plan provides for a reversion of
the Fund to the employer RMC, this cannot be done until all the liabilities of
the Plan have been paid. And when RMC ceased operations in 1984, the
Fund became liable not only for the benefits of the qualified retirees at the
time of the RMC closure, but also of those who were separated from work as
a consequence of the closure, per the Retirment Plan itself.
f. IMPORTANT CASE: MAY THE EMPLOYER DEDUCT COST OF TRAINING

FROM THE RETIREMENT BENEFITS OF THE EMPLOYEE? Bibiano C.
Elegir vs. Philippine Airlines, Inc. G.R. No. 181995, 16 July 2012.
ANSWER: YES! By carrying over the same stipulation in the present CBA,
both PAL and ALPAP recognized that the companys effort in sending pilots
for training abroad is an investment which necessarily expects a reasonable
return in the form of service for a period of at least three (3) years. This
stipulation had been repeatedly adopted by the parties in the succeeding
renewals of their CBA, thus validating the impression that it is a reasonable
and acceptable term to both PAL and ALPAP. Consequently, the petitioner
cannot conveniently disregard this stipulation by simply raising the absence
of a contract expressly requiring the pilot to remain within PALs employ
within a period of 3 years after he has been sent on training. The supposed
absence of contract being raised by the petitioner cannot stand as the
CBA clearly covered the petitioners obligation to render service to PAL
within 3 years to enable it to recoup the costs of its investment. Further,
to allow the petitioner to leave the company before it has fulfilled the
reasonable expectation of service on his part will amount to unjust
enrichment.
73
H. THE RIGHT TO UNIONIZE AND THE

APPROPRIATE BARGAINING UNIT
(PLEASE SEE CHART A)
1. Existence of ER-EE relationship is essential for the determination of whether or not one
may exercise right of self-organization for purposes of collective bargaining
2. Who may unionize for purposes of collective bargaining negotiations?
2.1 General Rule: Any employee may be eligible to join and be a member of a labor
union, beginning on his first day of service, whether employed for a definite period
or not. (Article 277 [c], Labor Code; See also: UST Faculty Union vs. Bitonio)
2.2 Exceptions: Who may NOT unionize
2.2.1 Managerial employees (Art. 245, Labor Code.)

N.B.: Supervisory employees may unionize and form labor organizations of
their own, but may not join rank-and-file union.
Q: Can a supervisory union affiliate with a Federation with rank-and-

file unions?
A: Yes. Article 245 has now been amended by Congress under Rep. Act
No. 9481 to read as follows:
ART. 245. Ineligibility of Managerial Employees to Join any

Labor Organization; Right of Supervisory Employees. -
Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible
for membership in the collective bargaining unit of the rank-and-
file employees but may join, assist or form separate collective
bargaining units and/or legitimate labor organizations of their
own. The rank and file union and the supervisors union
operating within the same establishment may join the same
federation or national union.
2.2.2 Confidential employees -- Confidential employees are those who: (1)

assist or act in a confidential capacity, (2) to persons who formulate,
determine, and effectuate management policies in the field of labor
relations. The two criteria are cumulative, and both must be met if an
employee is to be considered a confidential employee e.g., the
confidential relationship must exist between the employee and his
supervisor, and the supervisor must handle the prescribed responsibilities
relating to labor relations. The exclusion from bargaining units of the
employees who, in the normal course of their duties, become aware of
management policies relating to labor relations is a principal objective
sought to be accomplished by the confidential employee rule. (Tunay na
Pagkakaisa ng Manggagawa sa Asia Brewery vs. Asia Brewery, G.R. No. 162025,
03 August 2010)
Article 245 of the Labor Code does not directly prohibit confidential
employees from engaging in union activities. However, under the
doctrine of necessary implication, the disqualification of
managerial employees equally applies to confidential employees. The
confidential-employee rule justifies exclusion of confidential employees
because in the normal course of their duties they become aware of
management policies relating to labor relations. It must be stressed,
however, that when the employee does NOT have access to
74
confidential labor relations information, there is no legal prohibition

against confidential employees from forming, assisting, or joining a
union. (Sugbuanon Rural Bank, v. Laguesma, [G.R. No. 116194. February 2,
2000)
2.2.3 Government Employees, including GOCCs WITH original charter
2.2.4 Employees who are members of a cooperative; Rationale: A

cooperative is different from an ordinary business concern, inasmuch as its
owners are likewise the ones who run and operate the business
themselves. Hence, incongruous situation where the owners will just
bargain with themselves or their co-workers (who are also co-owners).
However, this will not apply insofar as it involves employees of the
cooperative WHO ARE NOT owners or members thereof.
SSS VS. ASIAPRO COOPERATIVE: While members of a cooperative

cannot form unions and bargain with themselves, they are to be considered
as employees with respect to SSS coverage because the Cooperative acts
as an independent contractor vis--vis principal clients they secure.
2.2.5 Employees of International Organizations or Specialized

Agencies which are registered with the United Nations and
which enjoys diplomatic immunity. (International Catholic Migration
Commission vs. Calleja; and Kapisanan ng Manggagawa at TAC sa IRRI,
etc. vs. Secretary of Labor.)
2.2.6 Aliens with valid working permits (Department Order No. 9 [1997],
Rule II, Sec. 2)
2014 BAR MCQ QUESTION:
Which of the following groups does not enjoy the right to self-organization? (1%)
(A) those who work in a non-profit charitable institution

(B) those who are paid on a piece-rate basis
(C) those who work in a corporation with less than 10 employees
(D) those who work as legal secretaries
3. SALIENT FEATURES OF REPUBLIC ACT NO. 9481: AN ACT

STRENGTHENING THE WORKERS' CONSTITUTIONAL RIGHT
TO SELF-ORGANIZATION, AMENDING FOR THESE PURPOSE
PRES. DECREE 442, OTHERWISE KNOWN AS THE LABOR
CODE
3.1 Modified previous Supreme Court rulings prohibiting supervisors
unions from joining with the same federation as the rank and file.
New law now explicity ALLOWS for the commingling of the two.
Section 8 of new law provides: Article 245 of the Labor Code is hereby amended
to read as follows --
ART. 245. Ineligibility of Managerial Employees to Join any Labor Organization;

Right of Supervisory Employees. - Managerial employees are not eligible to join,
75
assist or form any labor organization. Supervisory employees shall not be eligible
for membership in the collective bargaining unit of the rank-and-file employees
but may join, assist or form separate collective bargaining units and/or legitimate
labor organizations of their own. The rank and file union and the supervisors
union operating within the same establishment may join the same
federation or national union.
3.2 REQUIREMENTS FOR REGISTRATION
3.2.1 Independent Union or Federations/National Unions will acquire

legal personality upon issuance of certificate of registration
ART. 234. Requirements of Registration. - A federation, national union or

industry or trade union center or an independent union shall acquire legal
personality and shall be entitled to the rights and privileges granted by law
to legitimate labor organizations upon issuance of the certificate of
registration based on the following requirements:
(a) Fifty pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the
labor organization, the minutes of the organizational meetings and the
list of the workers who participated in such meetings;
(c) In case the applicant is an independent union, the names of all its
members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or more years,
copies of its annual financial reports; and
(e) Four copies of the constitution and by-laws of the applicant union,
minutes of its adoption or ratification, and the list of the members who
participated in it.
3.2.2 Local or a of Chapter Federations/National Unions will acquire legal

personality only for the purpose of filing a petition for certificate of
registration upon issuance of the CHARTER CERTIFICATE by the
registered Federation/National Union. The Chapter/Local shall be entitled
to all other rights appurtenant thereto ONLY upon submission of the
following other documents.
ART. 234-A. Chartering and Creation of a Local Chapter. - A duly

registered federation or national union may directly create a local chapter
by issuing a charter certificate indicating the establishment of the local
chapter. The chapter shall acquire legal personality only for purposes
of filing a petition for certification election from the date it was issued
a charter certificate. The chapter shall be entitled to all other rights and
privileges of a legitimate labor organization only upon the submission of
the following documents in addition to its charter certificate:
(a) The names of the chapters officers, their addresses, and the principal
office of the chapter; and
(b) The chapters constitution and by-laws: Provided, That where the
chapters constitution and by-laws are the same as that of the
federation or the national union, this fact shall be indicated accordingly.
The additional supporting requirements shall be certified under oath by the

secretary or treasurer of the chapter and attested by its president.
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ADAS NOTES: For purposes of filing a petition for certification election,

the charter certificate is already sufficient to vest the local chapter with
legal personality. In short, once a charter certificate is issued by the
Federation, the LLO may already file a petition for CE. However, the local
chapter/union will not be considered to have legal personality for purposes
of other rights and privileges (e.g., to bargain, to enter into contracts, etc.)
UNLESS the other documents (a) and (b) as adverted above are
SUBMITTED to the DOLE Regional Office or Bureau of Labor Relations,
and a certificate of registration having been issued thereafter.
3.3 Failure to comply with reportorial requirements shall no longer be a

ground for cancellation of union registration, but shall subject errant
officers/members to penalty.
ART. 242-A. Reportorial Requirements. - The following are documents

required to be submitted to the Bureau by the legitimate labor
organization concerned:
(a) Its constitution and by-laws, or amendments thereto, the minutes of

ratification, and the list of members who took part in the ratification of the
constitution and by-laws within thirty (30) days from adoption or
ratification of the constitution and by-law or amendments thereto;
(b) Its list of officers, minutes of the election of officers, and list of voters
within thirty (30) days from election;
(c) Its annual financial report within thirty (30) days after the close of
every fiscal year; and
(d) Its list of members at least once a year or whenever required by the
Bureau.
Failure to comply with the above requirements shall not be a ground for
cancellation of union registration but shall subject the erring officers or
members to suspension, expulsion from membership, or any appropriate
penalty.
3.4 There are now FEWER grounds for cancellation of union registration.
Under the new law, there are ONLY THREE GROUNDS allowed,
whereas the old law provides for at least seventeen (17) different
grounds for cancellation. Republic Act No. 9481 amended ART. 239
of the Labor Code on grounds for cancellation of union registration,
as follows:
ART. 239. Grounds for cancellation of union registration. - The following

may constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the

adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, and the list of members who took part in
the ratification;
(b) Misrepresentation, false statements or fraud in connection with the

election of officers, minutes of the election of officers, and the list of voters;
(c) Voluntary dissolution by the members. (new mode)
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3.5 WHAT CAN NO LONGER BE RECOGNIZED AS GROUNDS FOR

CANCELLATION OF UNION REGISTRATION?
a) VIOLATIONS UNDER ARTICLE 239 OF THE LABOR CODE CAN

NO LONGER BE A GROUND FOR CANCELLATION OF UNION
REGISTRATION. These are:
1. Failure to submit consti, by-laws and ratification docs within 30 days

from adoption or ratification
2. Failure to submit annual financial report to Bureau; misrepresentation,
false entries or fraud in preparation of financial statements
3. Acting as Labor-only contractor (Cabo)
4. Entering into a CBA with sub-minimum provisions
5. Asking/Accepting attorneys fees or negotiation fees from employers
6. Checking-off without signed individual written authorizations
7. Failure to submit list of members yearly
b) VIOLATIONS UNDER ARTICLE 241 REFERRING TO RIGHTS AND

CONDITIONS OF UNION MEMBERSHIP [EVEN WITH SIGNATURE
REQUIREMENTS CONSTITUTING 30% OF UNION MEMBERSHIP], CAN
NO LONGER BE A GROUND FOR CANCELLATION OF UNION
REGISTRATION. These are:
1. Right to financial statements

2. Right to freely elect their officers, or determine questions on major union
policy, by secret ballot
3. No labor organization shall knowingly admit as member any individual
who belongs to a subversive organization;
4. Right against collection of fees without due authority;
5. Right to transparency in union finances
6. No special assessments will be made without authorization by writtten
resolution of majority of members in a general membership meeting
called for such purpose
7. No check-off of special assessment or negotiation fees or attys fees
without individual written authorization duly signed by employee
ADAS NOTES: Implication of above is that the Union must still be allowed to
exist, notwithstanding violations. If at all, Union members and concerned parties
are not without any remedy, inasmuch as they may file the necessary
administrative cases against the union officers (Art. 242-A, Labor Code). Note
further: Nothing in law which prohibits filing criminal and civil cases in the regular
courts, whenever applicable.
3.6 THE INCLUSION OF UNION MEMBERS OF EMPLOYEES OUTSIDE

THE BARGAINING UNIT NO LONGER A GROUND FOR
CANCELLATION OF UNION REGISTRATION. NOTE THAT THIS IS
CONTARY TO THE IMPLICATION IN PREVIOUS SUPREME COURT
DECISIONS IN TOYOTA MOTOR AND TAGAYTAY HIGHLANDS
CASES.
Republic Act No. 9481, Sec. 9. -- A new provision, Article 245-A is inserted into
the Labor Code to read as follows:
ART. 245-A. Effect of Inclusion as Members of Employees Outside

the Bargaining Unit. - The inclusion as union members of employees
outside the bargaining unit shall not be a ground for the cancellation
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of the registration of the union. Said employees are automatically

deemed removed from the list of membership of said union.
3.7 REQUIREMENTS FOR VOLUNTARY CANCELLATION OF UNION

REGISTRATION 2/3 VOTE OF GENERAL MEMBERSHIP
ART. 239-A. Voluntary Cancellation of Registration. - The registration of

a legitimate labor organization may be cancelled by the organization
itself. Provided, That at LEAST TWO-THIRDS of its general
membership votes, in a meeting duly called for that purpose to dissolve
the organization: Provided, further, That an application to cancel
registration is thereafter submitted by the board of the organization,
attested to by the president thereof.
3.8 EXPLICIT PROVISION THAT EMPLOYER IS SIMPLY A BY-STANDER

AND CAN NO LONGER OPPOSE OR PARTICIPATE IN THE
CERTIFICATION PROCEEDINGS.
ART. 258-A. Employer as Bystander. - In all cases, whether the petition

for certification election is filed by an employer or a legitimate labor
organization, the employer shall not be considered a party thereto with a
concomitant right to oppose a petition for certification election. The
employers participation in such proceedings shall be limited to: (1)
being notified or informed of petitions of such nature; and (2)
submitting the list of employees during the pre-election conference
should the Med-Arbiter act favorably on the petition
IMPORTANT 2014 CASE: Heritage Hotel Manila Vs. Secretary Of Labor and
Heritage Hotel - NUHWRAIN, G.R. No. 176317, 23 July 2014. reiteration of
principle that unions legitimacy cannot be attacked collaterally in a petition for
certification election (Tagaytay Highlands case), and the Union shall continue to
exercise and/or enjoy rights until a unions registration is revoked.
Question: May a petition for the cancellation of union registration based on

mixed membership of supervisors and managers in a labor union, and the non-
submission of reportorial requirements to the DOLE justify the suspension of the
proceedings for the certification elections or even the denial of the petition for the
certification election?
Answer: NO. Petition for certification election should be granted, as a unions

legitimacy cannot be questioned collaterally. Thus, the Supreme Court stated:
Basic in the realm of labor union rights is that the certification

election is the sole concern of the workers, and the employer is
deemed an intruder as far as the certification election is
concerned. Thus, the petitioner lacked the legal personality to
assail the proceedings for the certification election, and should
stand aside as a mere bystander who could not oppose the
petition, or even appeal the Med-Arbiters orders relative to the
conduct of the certification election. The petitioners meddling in
the conduct of the certification election among its employees
unduly gave rise to the suspicion that it intended to establish a
company union. For that reason, the challenges it posed against
the certification election proceedings were rightly denied.
Under the long established rule, too, the filing of the petition
for the cancellation of NUWHRAIN-HHMSCs registration
should not bar the conduct of the certification election. In
79
that respect, only a final order for the cancellation of the

registration would have prevented NUWHRAIN-HHMSC from
continuing to enjoy all the rights conferred on it as a
legitimate labor union, including the right to the petition for
the certification election. This rule is now enshrined in Article
238-A of the Labor Code, as amended by Republic Act No. 9481,
which reads:
Article 238-A. Effect of a Petition for Cancellation of

Registration. A petition for cancellation of union
registration shall not suspend the proceedings for
certification election nor shall it prevent the filing of a
petition for certification election.The allegation of
mixed membership does not result in the illegitimacy
of the registered labor union unless the same was
done through misrepresentation, false statement or
fraud according to Article 239 of the Labor Code
Based on the records herein, however, the petitioner failed in that

respect. To recall, it raised the issue of the mixed membership in
its comment on the list of members submitted by NUWHRAIN-
HHMSC, and in its protest. In the comment, it merely identified the
positions that were either confidential or managerial, but did not
present any supporting evidence to prove or explain the
identification. In the protest, it only enumerated the positions that
were allegedly confidential and managerial , and identified two
employees that belonged to the rank-and-file, but did not offer any
description to show that the positions belonged to different
employee groups. Xxx. In that regard, mere allegations sans
substance would not be enough, most especially because the
constitutional right of workers to self-organization would be
compromised.
4. WHAT ARE THE RIGHTS APPURTENANT TO UNIONIZATION?
The creation of a Union is NOT an act of disloyalty to the employer

right to use all LAWFUL means of communicating with employees, and to persuade
them to join
union may impose obligations upon its members, viz., payment of union dues
right to expel members who commit acts inimical to the interests of the union
right to be certified as exclusive bargaining agent
right to make union security arrangements
5. 2011-2015 CASES:
5.1 IMPORTANT: Takata (Philippines) vs. Bureau of Labor Relations and
Samahang Lakas Manggagawa Ng Takata (Salamat), G.R. No. 196276, 04
June 2014. --
Issue: Must there be an attendance of at least 20% of the total membership in the
appropriate bargaining unit during the organizational meeting; otherwise, ground
for cancellation on account of fraud or misrepresentation?
Answer: NO! For fraud and misrepresentation to be grounds for cancellation of

union registration under Art. 239 of the Labor Code, the nature of the fraud and
misrepresentation must be grave and compelling enough to vitiate the consent of a
80
majority of union members. There is nothing in the Labor Code that requires
presence of at least 20% of the total membership in the appropriate bargaining unit
during the organizational meeting. What is required for registration of a union as a
legitimate labor organization is that there must be at members totaling at least
twenty percent of all of the employees in the appropriate bargaining unit at the time
of the application. Thus:
Petitioner's charge that respondent committed misrepresentation

and fraud in securing its certificate of registration is a serious
charge and must be carefully evaluated. Allegations thereof
should be compounded with supporting circumstances and
evidence. We find no evidence on record to support petitioner's
accusation.
Petitioner's allegation of misrepresentation and fraud is based on

its claim that during the organizational meeting on May 1, 2009,
only 68 member-employees attended, while respondent claimed
that it has 119 members as shown in the document denominated
as Pangalan ng mga Kasapi ng Unyon. As such, Union
misrepresented on the 20% requirement of the law as to its
membership.
It does not appear in Article 234 (b) of the Labor Code that the
attendees in the organizational meeting must comprise 20% of the
employees in the bargaining unit. In fact, even the Implementing
Rules and Regulations of the Labor Code does not so provide. It
is only under Article 234 (c) that requires the names of all its
members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate.
Clearly, the 20% minimum requirement pertains to the
employees membership in the union (Ada: at the time of the
application, per SC Heritage case below) and not to the list of
workers who participated in the organizational meeting.
Indeed, Article 234 (b) and (c) provide for separate requirements,
which must be submitted for the union's registration, and which
respondent did submit. Here, the total number of employees in the
bargaining unit was 396, and 20% of which was about 79.
Respondent submitted a document entitled Pangalan ng Mga
Kasapi ng Unyon showing the names of 119 employees as union
members, thus respondent sufficiently complied even beyond the
20% minimum membership requirement. Respondent also
submitted the attendance sheet of the organizational meeting
which contained the names and signatures of the 68 union
members who attended the meeting.
5.2 The Heritage Hotel Manila, acting through its owner, Grand Plaza Hotel, Corp.
vs. National Union of Workers in the Hotel, Restaurant and Allied Industries-
Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC), G.R. No.
178296, 12 January 2011.
Question: Is a registered union required to submit financial statements

and/or keep membership representing 20% of the appropriate bargaining unit
throughout its lifetime, or risk cancellation of its registration?
ANSWER: NO. The constitutionally guaranteed freedom of association and right

of workers to self-organization outweighs respondents noncompliance with the
statutory requirements to maintain its status as a legitimate labor organization.
81
The amendment introduced by RA 9481 sought to strengthen the workers right to

self-organization and enhance the Philippines compliance with its international
obligations as embodied in the International Labour Organization (ILO) Convention
No. 87, which provides that workers and employers organizations shall not be
liable to be dissolved or suspended by administrative authority. Reason behind
this is that the cancellation of union registration by the BLR would give rise to the
loss of legal personality of the union or loss of advantages necessary for it to carry
out its activities.
In this case, it is undisputed that appellee failed to submit its annual financial
reports and list of individual members in accordance with Article 239 of the Labor
Code. However, the existence of this ground should not necessarily lead to
the cancellation of union registration. At any rate, the Court in this case took
note of the fact that on 19 May 2000, appellee had submitted its financial statement
for the years 1996-1999. With this submission, appellee has substantially complied
with its duty to submit its financial report for the said period.
.
There is also nothing essentially mysterious or irregular about the fact that only 127
members ratified the unions constitution and by-laws when 128 signed the
attendance sheet. It cannot be assumed that all those who attended approved of
the constitution and by-laws. Any member had the right to hold out and refrain from
ratifying those documents or to simply ignore the process. AT ANY RATE, THE
LABOR CODE AND ITS IMPLEMENTING RULES DO NOT REQUIRE THAT
THE NUMBER OF MEMBERS APPEARING ON THE DOCUMENTS IN
QUESTION SHOULD COMPLETELY DOVETAIL. For as long as the
documents and signatures are shown to be genuine and regular and the
constitution and by-laws democratically ratified, the union is deemed to have
complied with registration requirements.
See also similar case of Mariwasa Siam Ceramics vs. Secretary of Labor et al.,
GR No. 183317, 21 Dec 2009., where a substantial number of members allegedly
recanted their membership in the union and this was made a ground for
cancellation of union registration. We cannot give full credence to these affidavits
which were executed under suspicious circumstances, and which contain
allegations unsupported by evidence. At best, these affidavits are self-serving.
They possess no probative value. Nevertheless, even assuming the veracity of
said affidavits, the legitimacy of the respondent Union as a labor organization must
be affirmed. While it is true that withdrawal of support may be considered as
resignation from the union, THE FACT REMAINS THAT AT THE TIME OF THE
UNIONS APPLICATION FOR REGISTRATION, THE AFFIANTS WERE
MEMBERS OF THE UNION AND COMPRISED MORE THAN THE REQUIRED
20% MEMBERSHIP FOR PURPOSES OF REGISTRATION AS A UNION. ART.
234 MERELY REQUIRES A MINIMUM OF 20% MEMBERSHIP DURING
APPLICATION FOR UNION REGISTRATION. IT DOES NOT MANDATE THAT A
UNION MUST MAINTAIN THE 20% MINIMUM MEMBERSHIP REQUIREMENT
ALL THROUGHOUT ITS EXISTENCE.
I. APPROPRIATE BARGAINING UNIT
1. Bargaining unit, defined. - A "bargaining unit" has been defined as a group of

employees of a given employer, comprised of all or less than all of the entire body of
employees, which the collective interest of all the employees, consistent with equity to
the employer, indicate to be the best suited to serve the reciprocal rights and duties of
the parties under the collective bargaining provisions of the law. (Golden Farms vs.
Calleja, supra.)
82
2. Rationale: The law encourages employee participation in policy and decision making,
while promoting collective bargaining. Hence, it provides for election of a legitimate
labor organization that will exclusively represent the employees for purposes of
collective bargaining with employer, for improved terms and conditions of work.
3. Are employees precluded from raising grievances in the absence of a

labor organization certified as an exclusive bargaining representative?
No. The law likewise promotes the creation of a Labor Management Council (LMC)
which may exist in companies without a union, or may even co-exist with a union.
Jurisdiction pertains to grievances which arise from interpretation or implementation of
CBA, or of company personnel policies. In fact, Article 255 of the Labor Code provides
that any individual employee or group of employees have the right, at any time, to
present their grievances to the employer.
4. What is a proper bargaining unit?
A proper bargaining unit may be said to be a group of employees of a given employer,

comprised of all or less than all of the entire body of employees, which the collective
interest of all of the employees indicate to be best suited to serve the reciprocal rights
and duties of the parties under the Collective bargaining provisions of the law. (Golden
Farms vs. Calleja, supra.) It is that group of jobs that serves as the election
constituency in the enterprise.
5. Determination of the appropriate bargaining unit. --- The fundamental factors in

determining the appropriate collective bargaining unit are enumerated in the case of San
Miguel vs. Laguesma, 236 SCRA 595:
(a) GLOBE DOCTRINE - the will of the employees;
(b) COMMUNITY OF INTERESTS RULE - which takes into consideration the affinity
and unity of employees interests, such as substantial similarity of work and duties,
or similarity of compensation and working conditions;
(c) Prior bargaining history; and
(d) Similarity of employment status,
6. General Rule: community or mutuality of interests.
The most efficacious bargaining unit is one which is comprised of workers enjoying
community of interests. This is so because the basic test of a bargaining units
acceptability is whether it will best assure to all employees concerned of the exercise of
their collective bargaining rights.
Factors to be considered: (a) similarity in scale and manner of determining

earnings; (b) similarity in employment benefits, hours of work, other terms and
conditions of employment; (c) similarity in kind of work performed; (d) similarity in
qualifications, skills, training of employees; (e) frequency of contact or interchange
between employees; (f) geographic proximity; (g) continuity or integration of production
processes; (h) common supervision and determination of collective bargaining; etc.
83
J. CERTIFICATION ELECTION (FRAMEWORK)
1. Definition and nature of certification election
1.1 Definition: It is the process of determining the sole and exclusive bargaining agent
of the employees in an appropriate bargaining unit for purposes of collective
bargaining. (Sec. [n], Rule I, Book V, Implementing Rules.)
1.2 Nature of certification election: A certification election is not a litigation but

merely an investigation of a non-adversarial fact-finding character in which the
Bureau of Labor Relations plays the part of a disinterested investigator seeking
merely to ascertain the desires of the employees as to the matter of their
representation. (Airline Pilots Assn. Of the Philippines vs. CIR, 76 SCRA 274.)
2. Role of Employer during certification elections
General Rule: The employer is not a party in a certification election, which activity is the
sole concern of the workers. It is improper for the employer to be present at all during
the proceedings, even as an observer, let alone sit and participate therein thru a
representative.
Thus, Republic Act No. 9481 explicitly mandates that the employer is to be a
BYSTANDER in the certification election proceedings. Hence:
Art. 258-A, LC. -- In all cases, whether the petition for certification
election is filed by an employer or a legitimate labor organization, the
employer shall not be considered a party thereto with a concomitant right
to oppose a petition for certification election. The employers
participation in such proceedings shall be limited to: (1) being
notified or informed of petitions of such nature; and (2)
submitting the list of employees during the pre-election
conference should the Med-Arbiter act favorably on the
petition
Exception: Where the employer has to file a petition for certification election pursuant
to Art. 258 of the Labor Code because it was requested to bargain collectively. Even
then, it becomes a neutral bystander.
3. Other kinds of recognition of employee representation

excluding certification elections
3.1 Direct certification - not allowed
Certification of an exclusive bargaining agent without need of election behing held

for the purpose no longer allowed and has been discontinued under Article 257 of
the Labor Code. This amendment affirms the superiority of the certification
election over direct certification (Adas notes: Rationale for this is to prevent
possible abuse thereof by employers, by certifying company union. See: Central
Negros Electric Coop. vs. Sec. of Labor, 201 SCRA 584)
3.2 Voluntary recognition - This is allowed only if there is no other legitimate labor
organization operating within the bargaining Unit.
84
WHO HAS POWER TO RECOGNIZE?

EMPLOYER may voluntarily recognize representation status of union
ELEMENTS FOR VOLUNTARY RECOGNITION

Unorganized establishment
There is ONLY ONE legitimate labor organization operating within the
bargaining unit
If both elements are present, the employer MAY OPT to voluntarily recognize the
union.
3.3 Consent election (Aligre vs. De Mesa, 237 SCRA 647)
Consent election is an agreed one, the purpose merely being to determine the issue
of majority representation of all of the workers in the appropriate bargaining unit.
Dept. Order No. 40, Rule 8, Section 10. Consent Election; Agreement. In
case the contending unions agree to a consent election, the Med-Arbiter shall
not issue a formal order calling for the conduct of certification election, but
shall enter the fact of the agreement in the minutes of the hearing. The
minutes of the hearing shall be signed by the parties and attested to by the Med-
Arbiter. The Med-Arbiter shall, immediately thereafter, forward the records of the
petition to the Regional Director or his/her authorized representative for the
determination of the Election Officer by the contending unions through raffle. The
first pre-election conference shall be scheduled within ten (10) days from the date of
entry of agreement to conduct consent election.
Section 23. Effects of consent election. Where a petition for certification

election had been filed, and upon the intercession of the Med-Arbiter, the parties
agree to hold a consent election, the results thereof shall constitute a bar to the
holding of a certification election for one (1) year from the holding of such consent
election. Where an appeal has been filed from the results of the consent election,
the running of the one-year period shall be suspended until the decision on appeal
has become final and executory.
Where no petition for certification election was filed but the parties themselves
agreed to hold a consent election with the intercession of the Regional Office, the
results thereof shall constitute a bar to another petition for certification election.
4. CERTIFICATION ELECTION AND PROCEDURE

Art. 256-257, LC; BR R5 S1-9, IRR; Dept. Order No. 9 s1-9, Dept. Order No.
40-03 Rule VIII s1-25. (PLEASE SEE CHART B)
4.1 Two-fold objectives of certification election:
a) To determine the appropriate bargaining unit; and

b) To ascertain the majority representation of the bargaining
representative, if the employees desire to be represented at all by
anyone.
4.2 Who may and where to file petition for CE

B5 R5 S1-2, IRR; Dept Order No. 40-03, R8, secs 1-25
Who may file: General rule - any legitimate labor organization

Exception Employer, if requested to bargain collectively
and the majority status of the labor
organization is questionable
85
Where to file: Mediation-Arbitration Branch, through the Regional Office

which has jurisdiction over the principal office of the employer. Officer who
will hear the petition is called the Med-Arbiter.
Form: If filed by legitimate labor organization, petition must be in writing

and under oath, and must contain the following:
(a) name of petitioning union, address and affiliation, if any;

(b) name, address and nature of business of employer
(c) description of appropriate bargaining unit, not including the supervisory
employees
(d) approximate number of employees in the alleged bargaining unit
(e) names and addresses of othe rlegitimae labor orgns in the bargaining
unit, if any
(f) signature of 25% of all employees of the bargaining unit, where the
establishment is organized
(g) other relevant facts
If filed by ER in accordance with Article 259

(a) name, address and nature of busienss
(b) name, address of legitimate labor orgs in bargaining unit
(c) approx. number of employees in bargaining unit
(d) description of bargaining unit
(e) other relevant facts
PROCEDURE IN FILING OF PETITION FOR CERTIFICATION

ELECTION, Dept. Order No. 40-03, Rule 8, secs. 5-25
(a) Raffle of the case. Upon the filing of the petition, the Regional Director or
any of his/her authorized representative shall allow the party filing the petition
to personally determine the Med-Arbiter assigned to the case by means of a
raffle. Where there is only one Med-Arbiter in the region, the raffle shall be
dispensed with and the petition shall be assigned to him/her.
(b) Notice of preliminary conference. Immediately after the raffle of the case
or receipt of the petition, the same shall be transmitted to the Med-Arbiter,
who shall in the same instance prepare and serve upon the petitioning party a
notice for preliminary conference. The first preliminary conference shall
be scheduled within ten (10) days from receipt of the petition.
Within three (3) days from receipt of the petition, the Med-Arbiter shall cause
the service of notice for preliminary conference upon the employer and
incumbent bargaining agent in the subject bargaining unit directing them to
appear before him/her on a date, time and place specified. A copy of the
notice of preliminary conference and petition for certification election shall be
posted in at least two conspicuous places in the establishment.
[c] Preliminary Conference; Hearing. The Med-Arbiter shall conduct a

preliminary conference and hearing within ten (10) days from receipt of the
petition to determine the following:
o the bargaining unit to be represented;

o contending labor unions;
o possibility of a consent election;
o existence of any of the bars to certification election under Section 3 of
this Rule; and
o such other matters as may be relevant for the final disposition of the
case.
86
(d) Number of Hearings; Pleadings. If the contending unions fail to agree to

a consent election during the preliminary conference, the Med-Arbiter may
conduct as many hearings as he/she may deem necessary, but in no case
shall the conduct thereof exceed fifteen (15) days from the date of the
scheduled preliminary conference/hearing, after which time the petition shall
be considered submitted for decision. The Med-Arbiter shall have control of
the proceedings. Postponements or continuances shall be discouraged.
(e) Order/Decision on the petition. Within ten (10) days from the date of the
last hearing, the Med-Arbiter shall issue a formal order granting the petition or
a decision denying the same. In organized establishments, however, no
order or decision shall be issued by the Med-Arbiter during the freedom
period.
The order granting the conduct of a certification election shall state the
following:
o the name of the employer or establishment;

o the description of the bargaining unit;
o a statement that none of the grounds for dismissal enumerated in the
succeeding paragraph exists;
o the names of contending labor unions which shall appear as follows:
petitioner union/s in the order in which their petitions were filed, forced
intervenor, and no union; and
o a directive upon the employer and the contending union(s) to submit
within ten (10) days from receipt of the order, the certified list of
employees in the bargaining unit, or where necessary, the payrolls
covering the members of the bargaining unit for the last three (3) months
prior to the issuance of the order.
(f) Denial of the petition; Grounds. The Med-Arbiter may dismiss the petition
on any of the following grounds:
o the PETITIONER UNION IS NOT LISTED in the Departments registry of

legitimate labor unions or that ITS LEGAL PERSONALITY HAS BEEN
REVOKED OR CANCELLED WITH FINALITY in accordance with Rule
XIV of these Rules;
o CONTRACT BAR RULE: the petition was filed before or after the
freedom period of a duly registered collective bargaining agreement;
provided that the sixty-day period based on the original collective
bargaining agreement shall not be affected by any amendment, extension
or renewal of the collective bargaining agreement; (for more detailed
discussion, see notes below, page 91)
o ONE YEAR BAR RULE: the petition was filed within one (1) year from
entry of voluntary recognition or a valid certification, consent or run-off
election and no appeal on the results of the certification, consent or run-
off election is pending; (see notes below)
o DEADLOCK BAR RULE: a duly certified union has commenced and

sustained negotiations with the employer in accordance with Article 250
of the Labor Code within the one-year period referred to in Section 14.c of
this Rule, or there exists a bargaining deadlock which had been submitted
to conciliation or arbitration or had become the subject of a valid notice of
strike or lockout to which an incumbent or certified bargaining agent is a
party; (see notes below)
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o in case of an organized establishment, FAILURE TO SUBMIT THE

TWENTY-FIVE PERCENT (25%) support requirement for the filing of the
petition for certification election.
(g) Release of Order/Decision within ten (10) days from the last hearing,
The Med-Arbiter shall release his/her order or decision granting or denying
the petition personally to the parties on an agreed date and time.
(h) Appeal. The order granting the conduct of a certification election in an

unorganized establishment shall not be subject to appeal. Any issue arising
therefrom may be raised by means of protest on the conduct and results of
the certification election.
The order granting the conduct of a certification election in an organized

establishment and the decision dismissing or denying the petition, whether in
an organized or unorganized establishment, may be appealed to the Office of
the Secretary within ten (10) days from receipt thereof.
The appeal shall be verified under oath and shall consist of a memorandum
of appeal, specifically stating the grounds relied upon by the appellant with
the supporting arguments and evidence.
Where to file appeal. The memorandum of appeal shall be filed in the

Regional Office where the petition originated, copy furnished the contending
unions and the employer, as the case may be. Within twenty-four (24) hours
from receipt of the appeal, the Regional Director shall cause the transmittal
thereof together with the entire records of the case to the Office of the
Secretary.
Finality of Order/Decision. Where no appeal is filed within the ten-day

period, the Med-Arbiter shall enter the finality of the order/decision in the
records of the case and cause the transmittal of the records of the petition to
the Regional Director.
Period to Reply. A reply to the appeal may be filed by any party to the
petition within ten (10) days from receipt of the memorandum of appeal. The
reply shall be filed directly with the Office of the Secretary.
(g) Decision of the Secretary. The Secretary shall have fifteen (15) days from
receipt of the entire records of the petition within which to decide the appeal.
The filing of the memorandum of appeal from the order or decision of the
Med-Arbiter stays the holding of any certification election.
The decision of the Secretary shall become final and executory after ten (10)
days from receipt thereof by the parties. No motion for reconsideration of the
decision shall be entertained.
4.3 When to file petition for CE

4.3.1 If unorganized establishment (B5 R5 S3-6, IRR)
Petition for certification election may be filed at any time by a

legitimate labor organization
Note that the 25% signature requirement is not applicable. Why?

Literal interpration of law in favor of labor. The Labor Code merely
provides that it may be filed by any legitimate labor organization.
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4.3.2 If organized establishment (with existing majority union)
a) No duly registered CBA Petition for certification election may be

filed at any time
b) With duly registered CBA - DO 9, Rule XI, S3
1) Contract bar rule - only during freedom period

(Art. 232, LC; B5 R5 S4, IRR; see previous notes)
Note1: If a CBA has been duly registered in accordance with

Article 231, a petition for CE or motion for intervention can only be
entertained within 60 days prior to the expiry date of the CBA
(freedom period).
Note2: The operative phrase here is DULY REGISTERED

CBA. Hence, if CBA has been executed, but parties did not
register the CBA with the Department of Labor (Bureau of Labor
Relations), then contract bar rule will not apply. A petition for
certification election may still prosper in this instance.
2) One year bar rule; also known as certification year bar rule (B5
R5 S3, IRR; see previous notes)
No certification election may be held within one (1) year from the
date of the issuance of a final certification election result.
Note1: This presupposes that the employees of the appropriate

bargaining unit did not want to be represented by any union, or that
having elected a majority union as exclusive bargaining
representative, the latter is given one (1) year within which to
negotiate with the employer.
Note2: Where the one year period known as the certification

year during which the certified union is required to negotiate with
the employer and the filing of a petition for CE is prohibited has
expired and the majority union fails to bring the employer to the
bargaining table, the minority union may file petition for CE.
(Kaisahan ng Manggagawa vs. Trajano, 201 SCRA 453)
3) Deadlock bar rule (B5 R5 S3, IRR; see previous notes)
Neither may a representation question be entertained if, before the

filing of a petition for certification election, a CBA deadlock to which
an incumbent or certified bargaining agent is a party, had been
submitted for conciliation or arbitration, or had become the subject
of a Neither may a representation question be entertained if, before
the filing of a petition for certification election, a CBA deadlock to
which an incumbent or certified bargaining agent is a party, had
been submitted for conciliation or arbitration, or had become the
subject of a valid notice of strike/lock-out.
4.4 IN ANY EVENT, REGISTRATION OF UNION CANNOT BE ATTACKED

COLLATERALLY DURING THE CERTIFICATION ELECTION
PROCEEDINGS
Dept. Order No. 40, Rule 8, sec. 15. Prohibited grounds for the
denial/suspension of the petition. All issues pertaining to the existence of
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employer-employee relationship, eligibility or mixture in union membership raised

before the Med-Arbiter during the hearing(s) and in the pleadings shall be resolved
in the same order or decision granting or denying the petition for certification
election. Any question pertaining to the validity of petitioning unions
certificate of registration or its legal personality as a labor organization,
validity of registration and execution of collective bargaining agreements
shall be heard and resolved by the Regional Director in an independent
petition for cancellation of its registration AND NOT BY THE MED-ARBITER
IN THE PETITION FOR CERTIFICATION ELECTION, unless the petitioning union
is not found in the Departments roster of legitimate labor organizations or an
existing collective bargaining agreement is unregistered with the Department.
LABOR ORGANIZATION; COLLATERAL ATTACK ON LEGAL

PERSONALITY IS PROHIBITED.
Holy Child Catholic School vs. Patricia Sto. Tomas G.R. No. 179146, 23 July
2013. (see also: Heritage Hotel vs. Secretary of Labor and NUWHRAIN,
July 2014 supra).
Question: May a petition for certification election be dismissed on the ground

that the labor organizations membership allegedly consists of supervisory and
rank-and file employees?
Answer: No. The concepts of a union and of a legitimate labor organization are
different from, but related to, the concept of a bargaining unit.
In case of alleged inclusion of disqualified employees in a union, the proper

procedure for an employer like petitioner is to directly file a petition for
cancellation of the unions certificate of registration due to misrepresentation,
false statement or fraud under the circumstances enumerated in Article 239 of
the Labor Code, as amended. To reiterate, private respondent, having been
validly issued a certificate of registration, should be considered as having
acquired juridical personality which may not be attacked collaterally.
Indeed, the purpose of a certification election is precisely to ascertain the

majority of the employees choice of an appropriate bargaining unit to be or not
to be represented by a labor organization and, if in the affirmative case, by which
one.
IMPORTANT J. VELASCO CASE: Eagle Ridge Golf and Country Club vs.
Court of Appeals and Eagle Ridge Union, G.R. No. 178989, 18 March 2010.
Substantial compliance of the requirements for ratification of the union
constitution and bylaws; will not deter holding of the certification elections
Facts: Union filed a petition for certification election; company opposed on

account of alleged misrepresentation and fraud in the ratification of the
constitution and by-laws viz., (a) there were 30 members alleged in the
application when there were only 26 members in the organizational meeting; and
(b) one of the signatures for the ratification was allegedly forged.
SC decision: A scrutiny of the records fails to show any misrepresentation,

false statement, or fraud committed by EREU to merit cancellation of its
registration. Hence, petition for certification election must be granted.
The Union submitted the required documents attesting to the facts of the
organizational meeting on December 6, 2005, the election of its officers, and the
adoption of the Unions constitution and by-laws. It had a total of 30 employees
when it applied on December 19, 2005 for registration. The Union thereby
complied with the mandatory minimum 20% membership requirement under
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Art. 234(c). Of note is the undisputed number of 112 rank-and-file employees in

Eagle Ridge, as shown in the Sworn Statement of the Union president and
secretary and confirmed by Eagle Ridge in its petition for cancellation.
The Union has sufficiently explained the discrepancy between the number of
those who attended the organizational meeting showing 26 employees and the
list of union members showing 30. The difference is due to the additional four
members admitted two days after the organizational meeting as attested to by
their duly accomplished Union Membership forms. Consequently, the total
number of union members, as of December 8, 2005, was 30, which was truthfully
indicated in its application for registration on December 19, 2005.
The fact that six union members, indeed, expressed the desire to withdraw their
membership through their affidavits of retraction will not cause the
cancellation of registration on the ground of violation of Art. 234(c) of the Labor
Code requiring the mandatory minimum 20% membership of rank-and-file
employees in the employees union. Twenty percent (20%) of 112 rank-and-file
employees in Eagle Ridge would require a union membership of at least 22
employees (112 x 205 = 22.4).
When the EREU filed its application for registration on December 19, 2005,
there were clearly 30 union members. Thus, when the certificate of
registration was granted, there is no dispute that the Union complied with
the mandatory 20% membership requirement. With the withdrawal of six
union members, there is still compliance with the mandatory membership
requirement under Art. 234(c), for the remaining 24 union members constitute
more than the 20% membership requirement of 22 employees.
Adas comment: Note that this case was originally filed before the promulgation
of Republic Act No. 9481, and as such, the employer was then allowed to oppose
any application for registration as a legitimate labor organization, or the filing of
the petition for certification election. With the present prohibition, employers can
no longer file any opposition in this ground. Note further the prevailing ruling of
the Supreme Court that the registration of the union cannot be collaterally
attacked in a petition for certification election.
CERTIFICATION ELECTION; PENDENCY OF A PETITION FOR

CANCELLATION OF UNION REGISTRATION DOES NOT PRECLUDE
COLLECTIVE BARGAINING.
Legend International Resorts Limited v. Kilusang Manggagawa ng

Legenda, G.R. No. 169754, 23 February 2011. -- Respondent union filed a
petition for certification election. Petitioner moved to dismiss the petition for
certification election alleging the pendency of a petition for cancellation of the
unions registration. The DOLE Secretary ruled in favor of the legitimacy of the
respondent as a labor organization and ordered the immediate conduct of a
certification election.
Pending appeal in the Court of Appeals, the petition for cancellation was granted
and became final and executory. Petitioner argued that the cancellation of the
unions certificate of registration should retroact to the time of its issuance. Thus,
it claimed that the unions petition for certification election and its demand to
enter into collective bargaining agreement with the petitioner should be
dismissed due to respondents lack of legal personality.
The Court ruled that the pendency of a petition for cancellation of union
registration does not preclude collective bargaining, and that an order to hold a
certification election is proper despite the pendency of the petition for
cancellation of the unions registration because at the time the respondent
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union filed its petition, it still had the legal personality to perform such act
absent an order cancelling its registration.
4.5 THE INCLUSION OF UNION MEMBERS OF EMPLOYEES OUTSIDE THE

BARGAINING UNIT NO LONGER A GROUND FOR CANCELLATION OF
UNION REGISTRATION
Republic Act No. 9481, Sec. 9. A new provision, Article 245-A is inserted into
the Labor Code to read as follows:
ART. 245-A. Effect of Inclusion as Members of Employees Outside the

Bargaining Unit. - The inclusion as union members of employees outside
the bargaining unit shall not be a ground for the cancellation of the
registration of the union. Said employees are automatically deemed removed
from the list of membership of said union.
5. REQUIREMENTS FOR VALID CERTIFICATION ELECTION

(Dept. Order No.9, Section 12, Rule XIII; Dept Order No. 40-03 Rule 9)
REMEMBER: DOUBLE MAJORITY RULE
5.1 TO FIND OUT IF THERE IS A VALID ELECTION: To have a valid election, a

majority of all eligible voters in the appropriate bargaining unit must have CAST
their votes (FIRST MAJORITY RULE -- JUST COUNT HOW MANY VOTED).
5.2 TO FIND OUT WHO WON THE ELECTIONS: The Union obtaining a majority of
ALL VALID VOTES cast shall be certified as sole and exclusive bargaining
representative of the workers in the appropriate bargaining unit. (SECOND
MAJORITY RULE JUST COUNT IF THERE IS A UNION THAT GARNERED A
MAJORITY OF THE VALID VOTES CAST)
5.3 Note for computation of eligible voters: base number is not limited to the members
of the union, but shall include both union and non-union members, as long as
they are part of the bargaining unit.
Example1: 100 members in the appropriate bargaining unit

Election results: Union A 40 No Union - 2
Union B 5 Illegal/stray votes: 10
Q1: Is there a valid election? Yes. 57 members (requirement: 51 members only)
cast their votes
Q2: Who won? Union A. Out of 47 valid votes, Union A won majority thereof (47
divided by 2 = 23.5 + 1 = 24.5)
Example2: 100 members in the appropriate bargaining unit

Election results: Union A 40 No Union - 2
Union B 5 Illegal/stray votes: 0
Q1: Is there a valid election? No valid election. Only 47 voted. A majority of the
members of the appropriate bargaining unit did not vote.
Q2: Remedy: Re-run or repeat the certification election.
5.4 RUN-OFF ELECTION, REQUISITES (Dept. Order No. 9, Rule XIII):
a) There is a valid election (FIRST MAJORITY RULE COMPLIED).

b) Between three or more choices
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c) No choice receiving a majority of the valid votes cast (SECOND MAJORITY

RULE NOT COMPLIED);
d) The total number of votes for all contending unions is at least 50% of the
number of votes cast
e) Between the two labor unions receiving the two highest number of votes.
Example: 100 members in the appropriate bargaining unit. All members

cast their votes.
Election results: Union A 24 Union C - 10
Union B 15 No Union - 5
Total number of votes: 54 valid votes, with the rest declared illegal or stray
(abstentions are not valid votes either).
Q1: Is the election valid? Yes, because everyone voted.

Q2: Who won? None of the three unions won, because not one received a
majority of the valid votes cast. (Majority is 28 votes)
Q3: Is run-off election a remedy here? No. The total number of votes for all
contending unions is LESS than 50% of ALL of the number of votes cast
(Unions A, B and C garnered 49 votes, or at least one vote short of the
requirement).
Remedy: Re-election or repeat election (or re-run election, per Pascual)
6. IMPORTANT CASE: NUHWRAIN MANILA PAVILLION VS. MANILA PAVILLION

HOTEL, G.R. No. 181531, 31 July 2009 citing Airtime Specialist vs. Calleja NOT
ASKED IN 2011 2012 2013 OR 2014 BAR.
Issue: May the probationary employees be allowed to vote in the certification

elections, in the light of a CBA provision explicitly excluding them in the vote?
Answer: YES. The provision in the CBA disqualifying probationary employees from
voting cannot override the Constitutionally-protected right of workers to self-organization,
as well as the provisions of the Labor Code and its Implementing Rules on certification
elections and jurisprudence thereon. A law is read into, and forms part of, a contract.
Provisions in a contract are valid only if they are not contrary to law, morals, good
customs, public order or public policy.
In a certification election, all rank and file employees in the appropriate

bargaining unit, whether probationary or permanent are entitled to vote.
This principle is clearly stated in Art. 255 of the Labor Code which states
that the "labor organization designated or selected by the majority of the
employees in an appropriate bargaining unit shall be the exclusive
representative of the employees in such unit for purposes of collective
bargaining." Collective bargaining covers all aspects of the employment
relation and the resultant CBA negotiated by the certified union binds all
employees in the bargaining unit. Hence, all rank and file employees,
probationary or permanent, have a substantial interest in the selection of
the bargaining representative. The Code makes no distinction as to their
employment status as basis for eligibility in supporting the petition for
certification election. The law refers to "all" the employees in the
bargaining unit. All they need to be eligible to support the petition is to
belong to the "bargaining unit."
2014 BAR QUESTION:
Liwayway Glass had 600 rank-and-file employees. Three rival unions A, B, and C
participated in the certification elections ordered by the Med-Arbiter. 500 employees voted.
The unions obtained the following votes: A-200; B-150; C-50; 90 employees voted "no
93
union"; and 10 were segregated votes. Out of the segregated votes, four (4) were cast by
probationary employees and six (6) were cast by dismissed employees whose respective
cases are still on appeal. (10%)
(A) Should the votes of the probationary and dismissed employees be counted in the total
votes cast for the purpose of determining the winning labor union?
(B) Was there a valid election?
(C) Should Union A be declared the winner?
(D) Suppose the election is declared invalid, which of the contending unions should
represent the rank-and-file employees?
(E) Suppose that in the election, the unions obtained the following votes: A-250; B-150; C-
50; 40 voted "no union"; and 10 were segregated votes. Should Union A be certified as
the bargaining representative?
ANSWER:
(A) Yes. Under Article 256 of the Labor Code, all employees in the appropriate bargaining
unit cannot be denied the right to vote in the certification election. Probationary
employees are entitled to vote. (NUWHRAIN Manila Pavilion Chapter vs. Secretary of
Labor, G.R. No. 181531, 31 July 2009.) Dismissed employees whose cases are still
pending are qualified to vote. (Yokohama Tire Philippines Inc., vs. Yokohama
Employees Union, G.R. No. 159553, 10 December 2004; 539 SCRA 556 [2007].)
(B) Yes. To have a valid election, majority of all eligible voters must have cast their votes.
500 employees voted out of 600 rank-and-files employees. This is more than the
majority of 301 out of the 600 eligible voters.
(C) No, because Union A did not get the majority of the valid votes cast. There were 500
valid votes cast, majority of which is 251. Union A got only 200 votes.
(D) None of them can be declared to represent the rank-and-file employees because none
obtained a majority of the valid votes cast.
(E) No. With only 250 votes, Union A still failed to get the majority of the valid votes cast.
There were 500 eligible voters, the majority of which is 251. However, since the
segregated votes will materially affect the result of the certification election, the same
will have to be resolved and counted. In the event Union A will be able to obtain at least
one (1) vote from the segregated votes, Union A will now have 251 votes, enough for it
to be certified as the sole and exclusive bargaining agent of the rank-and-file
employees.
K. INTER-UNION AND INTRA-UNION DISPUTES

(DOLE Dept. Order No. 40-03, series of 2003)
1. WHAT ARE INTER OR INTRA-UNION DISPUTES: (sec 1&2)
(a) cancellation of registration of a labor organization filed by its members or

by another labor organization;
(b) conduct of election of union and workers association officers/nullification
of election of union and workers association officers;
(c) audit/accounts examination of union or workers association funds;
(d) deregistration of collective bargaining agreements;
(e) validity/invalidity of union affiliation or disaffiliation;
94
(f) validity/invalidity of acceptance/non-acceptance for union membership;

(g) validity/invalidity of impeachment/expulsion of union and workers
association officers and members;
(h) validity/invalidity of voluntary recognition;
(i) opposition to application for union and CBA registration;
(j) violations of or disagreements over any provision in a union or workers
association constitution and by-laws;
(k) disagreements over chartering or registration of labor organizations and
collective bargaining agreements;
(l) violations of the rights and conditions of union or workers association
membership;
(m) violations of the rights of legitimate labor organizations, except
interpretation of collective bargaining agreements;
(n) such other disputes or conflicts involving the rights to self-organization,
union membership and collective bargaining
(1) between and among legitimate labor organizations;
(2) between and among members of a union or workers association.
Other related labor relations disputes shall include any conflict between a labor union
and the employer or any individual, entity or group that is not a labor organization or
workers association. This includes: (1) cancellation of registration of unions and
workers associations; and (2) a petition for interpleader.
2. WHAT ARE THE EFFECTS OF PENDENCY OF INTER/INTRA-UNION DISPUTE?

(Sec 3)
PARTIES TO REMAIN STATUS QUO ANTE. -- The rights, relationships and

obligations of the parties litigants against each other and other parties-in-interest
prior to the institution of the petition shall continue to remain during the
pendency of the petition and until the date of finality of the decision rendered
therein. Thereafter, the rights, relationships and obligations of the parties litigants
against each other and other parties-in-interest shall be governed by the decision so
ordered.
INTER/INTRA-UNION DISPUTE SHALL NOT BE CONSIDERED PREJUDICIAL

QUESTION. -- The filing or pendency of any inter/intra-union dispute and other
related labor relations dispute is not a prejudicial question to any petition for
certification election and shall not be a ground for the dismissal of a petition for
certification election or suspension of proceedings for certification election.
3. WHO MAY FILE INTER OR INTRA-UNION DISPUTE (Sec 4):
Any legitimate labor organization or member(s) thereof specially concerned may file
a complaint or petition involving disputes or issues enumerated in (a) to (n) of
Section 1.
Any party-in-interest may file a complaint or petition involving disputes or issues
regarding cancellation of registration of unions and workers associations; and/or a
petition for interpleader
Where the issue involves the entire membership of the labor organization, the
complaint or petition shall be supported by at least thirty percent (30%) of its
members.
4. WHERE TO FILE INTER/INTRA-UNION DISPUTES.
4.1 With Regional Office that issued the certificate of registration or certificate of
creation of chartered local, for the following complaints --
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Complaints or petitions involving labor unions with independent registrations,

chartered locals, workers associations, its officers or members
Petitions for cancellation of registration of labor unions with independent
registration, chartered locals and workers association shall be resolved by the
Regional Director. He/She may appoint a Hearing Officer from the Labor
Relations Division.
petitions for deregistration of collective bargaining agreements
Other inter/intra-union disputes and related labor relations disputes shall be
heard and resolved by the Med-Arbiter in the Regional Office.
4.2 With Bureau of Labor Relations, for the following complaints --
Complaints or petitioners involving federations, national or industry unions, trade

union centers and their chartered locals, affiliates or member organizations, its
officers or member organizations. (Note, if filed with the Regional Office, the
complaint/petition shall stil be heard and resolved by the Bureau).
When two or more petitions involving the same parties and the same causes of action
are filed, the same shall be automatically consolidated.
5. IMPORTANT 2012 CASE: INTRA-UNION DISPUTES. --. De la Salle University vs.

De la Salle University Employees Association (DLSUEA-NAFTEU), G.R. No.
169254. 23 August 2012.
QUESTION: In cases where there are two contending factions of officers in an inter-
union dispute (of the majority union), may the employer unilaterally refuse to remit union
dues to on the pretext that there is an on-going intra-union dispute between the two
factions? Is the non-remittance of union dues constitutive of ULP as an interference in
internal affairs of the Union?
ANSWER: UNIVERSITY CANNOT REFUSE TO REMIT AND IS GUILTY OF ULP.

[T]he University [is] guilty of refusal to bargain amounting to an unfair labor
practice under Article 248(g) of the Labor Code. The University is bound to
comply with its obligations under the CBA, including the remittance of union
dues. In unilaterally refusing to do so, it has committed ULP, as such an act
constituted an intentional avoidance of a duty imposed by law. The issue of union
leadership is distinct and separate from the duty to bargain. In fact, BLR Director
Cacdac clarified that there was no void in [respondents] leadership. For this reason, we
are constrained to apply the law of the case doctrine in light of the finality of our July 20,
2005 and September 21, 2005 resolutions in G.R. No. 168477. In other words, our
previous affirmance of the Court of Appeals finding that petitioner erred in
suspending collective bargaining negotiations with the union and in placing the union
funds in escrow considering that the intra-union dispute between the Aliazas and Baez
factions was not a justification therefor is binding herein.
6. IMPORTANT CASE: MAY THE UNION COMPROMISE THE INDIVIDUAL MONEY

CLAIMS OF THE WORKERS? (Dusit Hotel Nikko vs. National Union of Workers in
Hotel Restaurant and Allied Industries (Nuwhrain), 09 August 2005)
First, even if a clear majority of the union members agreed to a settlement with the
employer, the Union has no authority to compromise the individual claims of the
members who did not consent to the settlement. Rule 138, Sec 23 of the Rules of Court
requires a special authority before an attorney may compromise his clients litigation.
The authority to compromise cannot lightly be presumed and shold be duly established
by evidence.
96
In this case, the minority union members did not authorize the Union to compromise their
individual claims. Absent a showing of the Unions special authority to compromise
(SPA) the individual claims of private respondents for reinstatement and backwages,
there is no valid waiver of the aforesaid rights.
ARE THE DISSENTING MINORITY UNION MEMBERS BOUND BY THE MAJORITY

DECISION APPROVING A COMPROMISE AGREEMENT?
No. Money claims due to laborers cannot be the object of settlement or compromise
effected by the Union or counsel, WITHOUT THE SPECIFIC INDIVIDUAL CONSENT
OF EACH LABORER CONCERNED. The beneficiaries are the individual complainants
themselves. The Union to which they belong can only assist them but cannot decide for
them.
For a waiver thereof to be legally effective, the individual consent or ratification of the
workers or employees involved must be show. Neither the officers nor the majority of
the Union had any authority to waive the accrued rights pertaining to the dissenting
minority members, even under a Collective Bargaining Agreement which provided for a
Union shop.
L. COLLECTIVE BARGAINING: NEGOTATIONS

AND AGREEMENT (PLEASE SEE CHART/DIAGRAM C)
1. COLLECTIVE BARGAINING DEFINED:
Collective bargaining which is defined as negotiations towards a collective

agreement, is one of the democratic frameworks under the New Labor Code, designed
to stabilize the relation between labor and management, and to create a climate of
sound and stable industrial peace. It is a mutual responsibility of the employer and
the union, and is characterized as a legal obligation.
Labor Code, Article 252. Meaning of duty to bargain collectively. --

The duty to bargain collectively means the performance of a mutual
obligation to meet and convene promptly and expeditiously in
good faith for the purpose of negotiating an agreement with respect
to wages, hours of work and all other terms and conditions of
employment including proposals for adjusting any grievance or
question arising under such agreement and executing a contract
incorporating such agreements if requested by either party, but such
duty does not compel any party to agree to a proposal or to make any
concession. (Underscoring supplied.)
Labor Code. Art. 254. Duty to bargain collectively when there

exists a collective bargaining agreement. When there is a
collective bargaining agreement, the duty to bargain collectively shall
also mean that neither party shall terminate or modify the agreement
at least sixty (60) days prior to its expiration date. It shall be the duty
of both parties to keep the status quo and to continue in full force and
effect the terms and conditions of the existing agreement during the
60-day period and/or until a new agreement is reached by the
parties.
2. GENERAL PRINCIPLES IN BARGAINING:
2.1 Standard of conduct: GOOD FAITH IN BARGAINING.
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ADAS NOTES: This implies earnest efforts exerted by the parties toward a
reasonable compromise or agreement acceptable to both parties. Contrast this
with the following concepts:
a) surface bargaining, which has been defined as "going through

the motions of negotiating" without any legal intent to reach an
agreement.
Note that the Supreme Court has even noted that the resolution of surface
bargaining allegations never presents an easy issue. The determination of
whether a party has engaged in unlawful surface bargaining is usually a difficult
one because it involves, at bottom, a question of the intent of the party in
question, and usually such intent can only be inferred from the totality of the
challenged partys conduct both at and away from the bargaining table. It
involves the question of whether an employers conduct demonstrates an
unwillingness to bargain in good faith or is merely hard bargaining. Standard
Chartered Bank Employees Union (NUBE) vs. Secretary Nieves Confesor and
Standard Chartered Bank, GR No. 11497, 16 June 2004.
b) individual bargaining. It is an unfair labor practice for an employer

operating under a collective bargaining agreement to negotiate or to attempt to
negotiate with his employees individually in connection with changes in the
agreement. And the basis of the prohibition regarding individual bargaining with
the strikers is that although the union is on strike, the employer is still under
obligation to bargain with the union as the employees' bargaining representative.
(Insular Life Assurance Co., Ltd., Employees-NATO vs. Insular Life Ass. Co. Ltd.,
76 SCRA 50 citing Melo Photo Supply Corporation vs. National Labor Relations Board,
321 U.S. 332).
c) IMPORTANT 2014 CASE: Tabangao Shell Refinery Employees Association

vs. Pilipinas Shell Petroleum Corporation, G.R. No. 170007, 07 April 2014.
Question: Is a lump-sum amount in lieu of wage increases during CBA

negotiations tantamount to bargaining in bad faith?
Answer: NO! The duty to bargain does not compel any party to accept a
proposal, or make any concession, as recognized by Article 252 of the Labor
Code, as amended. The laws invite and contemplate a collective bargaining
contract, but they do not compel one. The duty to bargain does not include the
obligation to reach an agreement. Thus, the Companys insistence on a
bargaining position to the point of stalemate does not establish bad faith. The
Companys offer[,] a lump sum of Php88,000 per year, for each covered
employee in lieu of a wage increase cannot, by itself, be taken as an act of
bargaining in bad faith. The minutes of the meetings of the parties, show that
they both exerted their best efforts, to try to resolve the issues at hand. Many of
the proposed improvements or changes, were either resolved, or deferred for
further discussion. It is only on the matter of the wage increase, that serious
debates were registered. However, the totality of conduct of the Company as far
as their bargaining stance with the Union is concerned, does not show that it was
bargaining in bad faith.
2.2 DUTY TO BARGAIN collectively does NOT compel any party to agree to any
proposal nor to make any concession by virtue thereof (Article 253, Labor
Code), nor are the parties obliged to reach an agreement. (Union of Filipro
Employees vs. Nestle Philippines, G.R. Nos. 158930-31, 03 March 2008).
Employer is not under obligation to bargain unless the Union shall have been
certified as the exclusive bargaining agent in a certification election duly called
98
for such purpose, and that the latter shall have forwarded to the employer its
bargaining demands.
When there is a collective bargaining agreement, the duty to bargain collectively

shall also mean that neither party shall terminate or modify such agreement
during its lifetime, EXCEPT during the freedom period of at least sixty (60) days
prior to the expiration day (freedom period).
Note AUTOMATIC RENEWAL CLAUSE as regards expired CBA. Under this

clause, the terms and conditions of the existing CBA shall continue to be in full
force and effect during the sixty-day freedom period (Union of Filipro Ees. vs. NLRC,
192 SCRA 414), or until a new CBA is reached. Thus, despite the lapse of the
effectivity of the old CBA, the law considers the same as continuing in full force
and effect until a new CBA is negotiated and entered into. (Lopez Sugar
Corporation vs. FFW, G.R. Nos. 75700-01, 30 Aug. 1990).
Mandatory provisions which must be included in the negotiations; otherwise, the

CBA will not be registered: (a) no strike-no lockout clause; (b) grievance
machinery. Note further that minimum standards must likewise be complied with;
otherwise, the DOLE will not allow its registration.
2.3 Disclosure of information (e.g., Financial Statements). In collective bargaining,

and upon request, the parties shall make available such up-to-date financial
information on the economic situation of the undertaking, which is normally
submitted to relevant government agencies, as is material and necessary for
meaningful negotiations. Where the disclosure of some of this information could be
prejudicial to the undertaking, its communication may be made condition upon a
commitment that it would be regarded as confidential to the extent required. The
information to be made available may be agreed upon between the parties to
collective bargaining.
3. TWO KINDS OF BARGAINING:
3.1 SINGLE ENTERPRISE BARGAINING. One where any voluntarily recognized or

certified labor union may demand negotiations with its employer for terms and
conditions of work covering employees in the bargaining unit concerned.
3.2 MULTIPLE EMPLOYER BARGAINING. One where a legitimate labor union(s)

and employers may agree in writing to come together for the purpose of collective
bargaining, provided:
(a) only legitimate labor unions who are incumbent exclusive bargaining
agents may participate and negotiate in multi-employer bargaining;
(b) only employers with counterpart legitimate labor unions who are
incumbent bargaining agents may participate and negotiate in multi-
employer bargaining; and
(c) only those legitimate labor unions who pertain to employer units who
consent to multi-employer bargaining may participate in multi-
employer bargaining.
4. UNION SECURITY CLAUSES. -- applied to and comprehends "closed shop," "union

shop," "maintenance of membership," or any other form of agreement which imposes
upon employees the obligation to acquire or retain union membership as a condition
affecting employment. (PICOP Resources, Inc. (PRI) vs. Anacleto L. Taneca et. al., G.R. No.
160828, 09 August 2010).
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4.1 General rule on coverage of union security clause:
All employees in the bargaining unit covered by a Union Shop Clause in their
CBA with management are subject to its terms.
Exception: However, under law and jurisprudence, the following kinds of

employees are exempted from its coverage, namely:
a) employees who at the time the union shop agreement takes effect are bona
fide members of a religious organization which prohibits its members from
joining labor unions on religious grounds (Elizalde Rope Workers case);
b) employees already in the service and already members of a union other than
the majority at the time the union shop agreement took effect (Art. 248 [e]);
c) confidential employees who are excluded from the rank and file bargaining
unit; and
d) employees excluded from the union shop by express terms of the agreement.
(Bank of the Philippine Islands vs. BPI Employees Union - Davao Chapter -
Federation of Unions in BPI Unibank, G.R. No. 164301, 10 August 2010; En Banc.).
4.2 Kinds of union security clauses:
o Closed Shop. A form of union security whereby only union members can
be hired and the workers must remain union members as a condition of
continued employment. (Juat vs. Court of Industrial Relations, 122 Phil. 794,
cited in Philippine Law Dictionary by Moreno, 2nd Edition.) It is one where no
person may be employed in any or certain agreed departments of the
enterprise unless he or she is, becomes, and, for the duration of the
agreement, remains a member in good standing of a union entirely comprised
of or of which the employees in interest are a part. (PICOP Resources, Inc.
(PRI) vs. Anacleto L. Taneca et. al., G.R. No. 160828, 09 August 2010).
o Union Shop. There is union shop where an employer may hire new
employees, but once they become regular employees, they are required to
join the union within a certain period as a condition for their continued
employment. (PICOP Resources, Inc. (PRI) vs. Anacleto L. Taneca et. al.,
G.R. No. 160828, 09 August 2010).
o Modified Union Shop Agreement. -- A union shop agreement with a

provision exempting certain employee groups from its operation, such as old
employees already with the company at a designated date, key personnel,
persons with religious scruples in joining labor unions. (Ibid.)
o Maintenance of membership shop. -- There is maintenance of membership

shop when employees, who are union members as of the effective date of the
agreement, or who thereafter become members, must maintain union
membership as a condition for continued employment until they are promoted
or transferred out of the bargaining unit, or the agreement is terminated.
(PICOP Resources, Inc. (PRI) vs. Anacleto L. Taneca et. al., G.R. No.
160828, 09 August 2010; see also: Bank of Philippine Islands vs. BPI
Employees Union Davao Chapter Federation of Unions in BPI Unibank,
G.R, No. 164301, 10 August 2010, En Banc.)
o Open shop -- An arrangement on recruitment whereby an employer may hire

any employee, union member or not, but the new employee must join the
union within a specified time and remain a member in good standing.
(LABSTAT Updates of the Department of Labor and Employment, Vol. 1 No.
12, August 1997).
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o Agency shop -- An arrangement whereby non-members of the contracting

union must pay the union a sum equal to union dues known as agency fees
for the benefits they received as a consequence of the bargaining
negotiations effected through the efforts of the union. (LABSTAT Updates of
the Department of Labor and Employment, Vol. 1 No. 12, August 1997).
IMPORTANT J. VELASCO CASE: Alabang Country Club vs. NLRC and

Alabang Country Club Independent Employees Union, G.R. No. 170287, 14
February 2008 Reiterating previous decisions on elements for a valid
termination on account of union security clauses. -- In terminating the
employment of an employee by enforcing the union security clause, the employer
needs only to determine and prove that: (1) the union security clause is
applicable; (2) the union is requesting for the enforcement of the union security
provision in the CBA; and (3) there is sufficient evidence to support the unions
decision to expel the employee from the union. These requisites constitute just
cause for terminating an employee based on the CBAs union security provision.
The employees were validly terminated in conformity with Union security clause,
after management duly confirmed that there was basis for their union expulsion
viz., malversation of union funds.
5. ULP IN COLLECTIVE BARGAINING:

a. Bargaining in bad faith.
Individual bargaining see previous notes
Surface bargaining see previous notes.
b. Refusal to bargain. -- The employer, by its refusal to bargain, is guilty of

violating the duty to bargain collectively in good faith. Hence, the Unions draft
CBA proposal may unilaterally be imposed upon the employer as the
collective bargaining agreement to govern their relationship. (Divine World vs.
Secretary of Labor, 213 SCRA 759 [1992].)
c. Gross violation of CBA provisions.
6. 2010-2015 CASES:
6.1 Philippine Electric Corporation (Philec) vs. CA, G.R. No. 168612, 10
December 2014. -- nature of collective bargaining agreements; training allowance
increases.
Facts: Lipio and Ignacio were rank-and-file workers, who were selected for
possible promotion to supervisory positions. In accordance with company policy,
they were required to go on training with payment of a training allowance, and if
performance evaluation was satisfactory, then they will be promoted.
While undergoing training, the Company and Union renegotiated and executed a
new CBA, providing for increased training allowance among others. Union
thereafter requested that the Company increase the training allowance of Lipio and
Ignacio to conform with the CBA provisions. Management refused, arguing that
increased training allowance was not applicable to Lipio and Ignacio, having been
selected PRIOR to the execution of the new CBA, and that they were to be
considered as supervisory employees already.
Due to management refusal, Union alleged ULP for malicious refusal to comply
with CBA provisions and raised it as a grievance, then on to voluntary arbitration.
Voluntary arbitrator ruled in favor of the Union.
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Issue: WON management refusal is tantamount to ULP? WON Lipio and Ignacio
are to be considered supervisory employees as to render the CBA provision on
training allowance for rank-and-file employees inapplicable to them?
Decision: For union.
1. A collective bargaining agreement is a contract executed upon the request of

either the employer or the exclusive bargaining representative of the
employees incorporating the agreement reached after negotiations with respect
to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under
such agreement.
2. SC affirmed Voluntary Arbitrators ruling that the refusal by management of

the Unions demand for payment of training allowance is not malicious
or flagrant refusal as to be considered as ULP. However, the schedule of
training allowance stated in the memoranda served on Lipio and Ignacio, Sr.
did not conform to the new collective bargaining agreement. The increased
training allowance should apply to Lipio and Ignacio
3. Lipio and Ignacio are NOT to be considered supervisory employees. At the

time that they were selected for training, Lipio and Ignacio were
admittedly rank-and-file employees and as such, entitled to the payment
of the increased training allowances under the new CBA. Thus, it is clear
that training is a condition precedent for promotion. Selection for training does
not mean automatic transfer OUT of the bargaining unit of the rank-and-file.
6.2 2014 CASE: Gross violation of CBA. University Of Santo Tomas Faculty
Union vs. University Of Santo Tomas, G.R. No. 203957, 30 July 2014.
Union filed a case against University for ULP, on account of alleged gross
violation of CBA, for alleged refusal by the University to pay accrued and
cumulated hospitalization and medical benefits for specified years.
The Supreme Court ruled that instant complaint involves an issue of

underpayment of hospital and medical benefits fund under a Collective
Bargaining Agreement and not unfair labor practices. As such, the case
should have been forwarded to the grievance machinery and Voluntary
Arbitration, as both Labor Arbiter and NLRC had no jurisdiction over the same.
However, despite the lack of jurisdiction, the SC ruled on the issues presented,
in cognizance of the fact that a remand to the voluntary arbitration stage will give
rise to the possibility that this case will still reach this Court through the parties
appeals. Furthermore, it does not serve the cause of justice if We allow this case
to go unresolved for an inordinate amount of time.
As regards the substantive issue on unpaid hospital and medical benefits, the
Union claims that USTs contributions should have been cumulative, with the
amount appropriated for each year carried over to the succeeding years and is
chargeable to the tuition fee increment. University argues that Unions claims are
not supported by the economic provisions of the 1996-2001 CBA and the 1999
Memorandum of Agreement reproduced above.
We wholly agree with USTs interpretation of the economic provisions of the

1996-2001 CBA, the 1999 Memorandum of Agreement, and the 2001-2006 and
2006-2011 CBAs, as well as its remittances to the fund for the covered periods.
UST faithfully followed the clear provisions of these agreements.
The 1996-2001 CBA established the fund, with an initial remittance of P2, 000,
000.00 for school year 1996-1997. UST bound itself to augment the fund by
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contributing P1,000,000.00 per year for school years 1997-1998 and 1998-1999.
The 1999 Memorandum of Agreement merely stated that UST will deposit
P4,000,000.00 to the fund. Express mention of the carryover is found only in
Section 1, Article XX of the 2001-2006 CBA: "It is understood that the amount
appropriated for each year is carried over to the succeeding years xx x." The
1996-2001 CBA does not have this carry-over provision.
Note that the Union never questioned this alleged failure to carry over the alleged
hospital and medical fund remittance during the lifetime of the 1996-2001 CBA,
the 1999 Memorandum of Agreement, and the 2001-2006 CBA. It was only late
2006 that the Union raised this issue. Supreme Court said that while it
recognizes Article 1702 of the Civil Code, which provides that "[i]n case of doubt,
all labor legislation and all labor contracts shall be construed in favor of the safety
and decent living for the labourer; this Court is also well aware that when the
provisions of the CBA are clear and unambiguous, the literal meaning of the
stipulations shall govern. In the present case, the CBA provisions pertaining to
the fund are clear and should be interpreted according to their literal meaning.
6.3 IMPT 2014 ULP CASE NOT ASKED IN 2014 BAR: WHERE THE EMPLOYER
HAS ORCHESTRATED ACTIVITIES TO SUBVERT CERTIFICATION
ELECTIONS. (T & H Shopfitters Corporation/ Gin Queen Corporation et. al.
vs. T & H Shopfitters Corporation/Gin Queen Workers Union, et. al., G.R. No.
191714, 26 February 2014, J. Mendoza).
The various questioned acts of petitioners show interference in the right to self-
organization by the employees, namely: 1) sponsoring a field trip to Zambales for
its employees, to the exclusion of union members, before the scheduled
certification election; 2) the active campaign by the sales officer of petitioners
against the union prevailing as a bargaining agent during the field trip; 3) escorting
its employees after the field trip to the polling center; 4) the continuous hiring of
subcontractors performing respondents functions; 5) assigning union members to
the Cabangan site to work as grass cutters; and 6) the enforcement of work on a
rotational basis for union members.
Indubitably, the various acts of petitioners, taken together, reasonably support an

inference that, indeed, such were all orchestrated to restrict respondents free
exercise of their right to self-organization. The Court is of the considered view that
petitioners undisputed actions prior and immediately before the scheduled
certification election, while seemingly innocuous, unduly meddled in the affairs of
its employees in selecting their exclusive bargaining representative.
6.4 IMPORTANT: IS SUSPENSION OF CBA NEGOTIATION AN UNFAIR LABOR

PRACTICE? (Manila Mining Corp. Employees Association, et al. vs.. Manila Mining corp,
et al., G.R. Nos. 178222-23, 29 September 2010)
Answer: NO. Article 2523 of the Labor Code defines the phrase duty to bargain
collectively. For a charge of unfair labor practice to prosper, it must be shown that
the employer was motivated by ill-will, bad faith or fraud, or was oppressive to
labor. The employer must have acted in a manner contrary to morals, good
customs, or public policy causing social humiliation, wounded feelings or grave
anxiety. In this case, it cannot be said that MMC deliberately avoided the
negotiation. It merely sought a suspension and even expressed its
willingness to negotiate once the mining operations resume. There was valid
reliance on the suspension of mining operations for the suspension of the
CBA negotiation. The Union failed to prove bad faith.
3
Renumbered as Article 262, Labor Code.
103
6.5 QUESTION: MAY THE PARTIES AGREE TO EXTEND THE EXCLUSIVE

BARGAINING STATUS BEYOND FIVE YEAR PERIOD? -- FVC Labor Union-
Philippine Transport and General Workers Organization (FVCLU-PTGWO) Vs. Sama-
samang Nagkakaisang Manggagawa sa FVC-Solidarity of Independebt and General Labor
Organization (SANAMA-FVC-SIGLO), G.R. No. 176249, November 27, 2009.
ANSWER: NO. While the parties may agree to extend the CBAs original five-
year term together with all other CBA provisions, any such amendment or term
in excess of five years will not carry with it a change in the unions exclusive
collective bargaining status.
By express provision of the above-quoted Article 253-A, the exclusive bargaining

status cannot go beyond five years and the representation status is a legal
matter not for the workplace parties (management and union) to agree upon.
In other words, despite an agreement for a CBA with a life of more than five years,
either as an original provision or by amendment, the bargaining unions exclusive
bargaining status is effective only for five years and can be challenged within sixty
(60) days prior to the expiration of the CBAs first five years.
In the present case, the CBA was originally signed for a period of five years, XXX
with a provision for the renegotiation of the CBAs other provisions at the end of the
3rd year of the five-year CBA term. Thus, prior to expiration on January 30, 2001
the workplace parties sat down for renegotiation but instead of confining
themselves to the economic and non-economic CBA provisions, also extended the
life of the CBA for another four months, i.e., from the original expiry date on
January 30, 2003 to May 30, 2003.
The negotiated extension of the CBA term has no legal effect on the FVCLU-
PTGWOs exclusive bargaining representation status which remained
effective only for five years ending on the original expiry date of January 30,
2003. Thus, sixty days prior to this date, or starting December 2, 2002, SANAMA-
SIGLO could properly file a petition for certification election. Its petition, filed on
January 21, 2003 or nine (9) days before the expiration of the CBA and of FVCLU-
PTGWOs exclusive bargaining status, was seasonably filed.
2015 LABOR BAR QUESTION: (XVII)
The Collective Bargaining Agreement (CBA) between Libra Films and its union,
Libra Films Employees' Union (LFEU), contains the following standard clauses:
1. Maintenance of membership;
2. Check off for union dues and agency fees; and
3. No strike, no lock-out.
While Libra Films and LFEU are in re-negotiations for an extension of the CBA,
LFEU discovers that some of its members have resigned from the union, citing
their constitutional right to organize (which includes the right NOT to organize).
LFEU demands that Libra Films institute administrative proceedings to terminate
those union members who resigned in violation of the CBA' s maintenance of
membership clause. Libra Films refuses, citing its obligation to remain a neutral
party. As a result, LFEU declares a strike and after filing a notice of strike and
taking a strike vote, goes on strike. The union claims that Libra Films grossly
violated the terms of the CBA and engaged in unfair labor practice.
(a) Are LFEU's claims correct? Explain. (4%)

(b) Distinguish between a "closed shop" clause and a "maintenance of
membership" clause. (2%)
(c) Distinguish between "union dues" and "agency fees." (2%)
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Answer:
(a) LFEUs claims are not correct. Violation of the terms of the CBA, except those
which are gross in character, shall no longer be treated as an unfair practice
but as a grievance under the Collective Bargaining Agreement. (Labor Code;
Silva v. NLRC, 274 SCRA 159 [1997]). Violations of the provisions of the CBA
are gross in character when there is a flagrant and/or malicious refusal to
comply with the economic provisions thereof. (Article 261, Labor Code.) What
appears to be violated in this case is the security clause of the CBA on
maintenance of membership, which is not an economic provision.
(b) Closed shop is a form of union security whereby only union members can be
hired and the workers must remain union members as a condition of continued
employment. (Juat vs. CIR, 122 Phil. 794.) Whereas, Maintenance of
Membership is one where the employees, who are union members as of the
effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition of continued employment until they
are promoted or transferred out of the bargaining unit or the agreement is
terminated. (BPI vs. BPI Employees Union-Davao Chapter-Federation of
Unions, G.R. No. 164301, 10 August 2010.)
(c) Union dues is a levy of fees upon Union members by express provision of the
(a) union constitution or (b) union by-laws or (c) resolution of a majority of the
membership present at a meeting called for the purpose. On the other hand,
Agency fees are a levy upon non-union members who are part of the
bargaining unit who partook of the benefits of the CBA.
M. STRIKES, PICKETING AND LOCK-OUTS

(PLEASE SEE GRAPHS E2 AND E-3)
1. Who may declare a strike or lock-out? (B5,R13, S2, IRR)
General Rule: Any certified or duly recognized bargaining representative may declare a
strike in cases of bargaining deadlocks or ULP.
Exception: In the absence of a certfied or duly recognized bargaining representative,

any legitimate labor organization may declare a strike, BUT ONLY ON THE GROUND
OF ULP.
2. Requisites of a valid strike: (a) Must have a lawful purpose; (b) conducted
through lawful means; and (c) must be in compliance with the procedural
requirements under the Labor Code
2.1 Lawful purpose

The Labor Code allows only two (2) kinds of strike/lockout:
(a) Economic strike - is intended to force wage and other concessions from the
employer which is not required by law to grant. Usually, the consequence of
a deadlock in collective bargaining negotiations; and
(b) ULP strike - is called against the unfair labor practices of the employer,
usually for the purpose of making him desist from further committing such
practices.
105
Note 1 - Examples of ULP under Articles 248-249, LC: (1) interference,

restraint or coercion of the employees in their exercise of right to self-
organization; (2) yellow-dog contracts, e.g., stipulation requiring employee
not to join unions, or for employee to withdraw from union as condition for
continued employment; (3) refusal to collectively bargain; (4) economic
inducement and/or discrimination in regard to wages, hours of work, in
order to encourage/discourage union membership; (5) contracting out of
services/functions being performed by union members, where such will
interfere in the exercise of right to self-org., among others.
IMPORTANT J. VELASCO CASE: UST FACULTY UNION VS. UST

AND FR. ROLANDO DELA GOZA, G.R. No. 180892, 07 April 2009.
Burden of proof is upon the entity alleging bad faith and ULP.
UST Employees Union had two factions: one group led by former
President Marino, and the other group by President Gamilla. It appears
that the second group was elected during a faculty convocation, which
was allegedly called for at the behest of the University. University
thereafter negotiated with the new leadership under President Gamilla.
Marinos group filed a ULP case against the University, alleging that: (1)
Atty. Domingo Legaspi, the legal counsel for the UST, conducted a faculty
meeting in his office, supplying derogatory information about the Mario
Group; (2) respondents provided the Gamilla Group with the facilities and
forum to conduct elections, in the guise of a convocation; and (3)
respondents transacted business with the Gamilla Group such as the
processing of educational and hospital benefits, deducting USTFU dues
from the faculty members without turning over the dues to the Mario
Group, and entering into a CBA with them.
Question: Is UST guilty of ULP?
Answer: NO. Burden of proof is upon Marino Group to establish unfair

labor practice, that by the acts alleged to have been committed by the
University, the Unions rights to self-organization have been trampled.
The Memorandum issued by the Secretary General of UST does not

support a claim that UST organized the convocation in connivance with
the Gamilla Group. In no way can the contents of this memorandum be
interpreted to mean that faculty members were required to attend the
convocation. Not one coercive term was used in the memorandum to
show that the faculty club members were compelled to attend such
convocation. And the phrase we are allowing them to hold a
convocation negates any idea that the UST would participate in the
proceedings. Lastly, the University could not be faulted for negotiating
with the Gamilla Group. In the instant case, until our Decision in G.R. No.
131235 that the Gamilla Group was not validly elected into office, there
was no reason to believe that the members of the Gamilla Group were
not the validly elected officers and directors of USTFU.
Note 2 - All other forms of strikes, viz.: lightning strike, sit-down strike;
sympathetic strike, slowdown strike; wildcat strike; intermittent strike, are
all prohibited for lack of valid purpose or failure to comply with procedural
requirements (discussion below).
Note 3 - An economic strike may be converted into a ULP strike, when

the employer unjustifiably dismisses the officers of the union during a
strike due to deadlock in collective bargaining negotiations.
106
Note 4 - What are non-strikeable issues? Article 263 (b); Dept. Order
No. 9, Rule 12, Sec. 2
(a) Violations of CBA which are not gross in character shall be resolved
via the Grievance Machinery;
(b) Inter-union or intra-union disputes;
(c) Labor standards cases such as wage orders (Guidelines governing
Labor Relations [19 Oct. 1987] issued by Sec. Drilon; See: Appendix
Y of Fozs Labor Code; See also: Article 261, LC)
(d) Those issues which had already been brought to voluntary or
compulsory arbitration
Note 5 - Is a violation of the CBA a case for ULP? It depends. Check

Article 261, LC; See also: Dept. Order No. 9, Rule 22, Sec. 1.
The voluntary arbitrator or panel xxx shall have

original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or
implementation of the CBA, and those arising from the
interpretation of company personnel policies xxx.
Accordingly, VIOLATIONS OF THE CBA, EXCEPT

THOSE WHICH ARE GROSS IN CHARACTER, SHALL NO
LONGER BE TREATED AS ULP AND SHALL BE
RESOLVED AS GRIEVANCES UNDER THE CBA. For
purposes of this Article, gross violations of the CBA
shall mean flagrant and/or malicious refusal to comply
with the economic provisions of the CBA.
2.2 Lawful means

2.2.1 Article 264 (b) and (e), Labor Code; as amended Dept. Order No. 9,
Rule 22, Sec. 12, pars. 1 and 2
(b) No person shall obstruct, impede or interfere with by force, violence,

coercion, threats or intimidation any peaceful picketing by employees
during any labor controversy, or in the exercise of the right of self-
orgn., or collective bargaining, or shall aid or abet such destruction or
interference. No employer shall use or employ any person to commit
such acts, nor shall any person be employed for such purpose
(prohibition against strike-breakers was added under Dept. Order No.
9).
(e) No person engaged in picketing shall commit any act of violence,

coercion or intimidation, or obstruct the free ingress to and egress
from the employers premises for lawful purposes, or to obstruct
public thoroughfares.
2.2.2 Guidelines on Removal of Illegal Blockades at Factory Gates, DOLE

Memo dated 22 October 1987
16. Picketing as part of the freedome of expression during strikes

shall be respected, provided that it is peaceful. Shanties and structures
set-up to effectively block lawful ingress to, and egress from, company
premises for legal purposes and the free passage to public thoroughfares
may be summarily demolished in accordance with law.
107
2.2.3 Guidelines for Conduct of PNP/AFP Personnel during Strikes, Lock-

outs and other Labor disputes, DOLE Memo dated 22 October 1987
1. Obstructions on places and thoroughfares devoted to public

use, such as the streets, sidewalks, alleys and the like are NUISANCES
PER SE. As such, they may be removed summarily by the local
government authorities, through their respective law enforcement
authorities, and they may act independently of the DOLE even if said
obstructions are placed as a result of or in connection with a pending
labor strike.
2. However, obstructions on points of ingress/egress within

private properties during a labor dispute, although likewise prohibited by
law, cannot be summarily demolished by law enforcement authorites.
Instead, these obstructions or barricades may be removed only in
accordance with the proper orders issued by the DOLE Office of the
Secretary, or the NLRC, with proper coordination between the said labor
officials and the police authorites to ensure that no undue harm is
inflicted upon any person or property.
2.2.4 What are the consequences if any of the prohibited activities as

mentioned above are committed during the conduct of the strike? The
otherwise valid strike may be converted into an illegal one
Association of Independent Unions in the Philippines (AIUP) vs. NLRC,

March 25, 1999. -- To be valid, a strike must be pursued within legal
bounds. The right to strike as a means for the attainment of social justice is
never meant to oppress or destroy the employer. The law provides limits for
its exercise. Among such limits are the prohibited activities under Article
264 of the Labor Code, particularly paragraph (e), which states that no
person engaged in picketing shall:
a. commit any act of violence, coercion, or intimidation or

b. obstruct the free ingress to or egress from the employers premises for
lawful purposes or
c. obstruct public thoroughfares.
Even if the strike is valid because its objective or purpose is lawful, the
strike may still be declared invalid where the means employed are
illegal.
2.2.5 What are the liabilities of the workers who participated in the
commission of the prohibited activities as mentioned above are
committed during the conduct of the strike? Loss of employment status
Union officers may lose employment status if:
(a) he knowingly participates in an illegal strike, viz.: non-

compliance with purpose and process; OR
(b) he knowingly participates in the commission of illegal activities,
whether the strike is legal or illegal
Union members may lose employment status only if he knowingly

commits an illegal act.
Note1: If the existence of force is pervasive and widespread,

consistently and deliberately resorted to as a matter of union policy,
108
responsibility is collective (meaning that all the union officers will be held
liable even if did not personally commit the same). Otherwise,
responsibility is only individual. (Almira vs. BF Goodrich, 58 SCRA
1290)
Note2: In order to hold the labor organization liable for the unlawful
acts of the individual officers, agents or members, there must be proof of
actual authorization or ratification of such acts after actual knowledge
thereof. Thus, where a union, through its officers, not only had
knowledge of the acts of violence committed by some of its strikers, but
either participated or ratified the same, the strike was held to be illegal
and the dismissal of ALL active participants therein was justified. (Phil.
Marine Officers Guild vs. Compania Maritima, 22 SCRA 1113).
2.2.6 IMPORTANT 2013 CASE: SIT-DOWN STRIKE. Example of a strike

without lawful purpose and unlawful means; when the union is not
the exclusive bargaining agent. -- Malayang Manggagawa ng
Stayfast, Inc. vs. NLRC, G.R. No. 155306, 28 August 2013,
FACTS: Two unions, Malayang Manggagawa and Nagkakaisang Lakas

ng Manggagawa sa Stayfast, sought to be the exclusive bargaining agent
of Stayfast Philippines, Inc. Petitioner Malayang Manggagawa lost the
certification election and sought to appeal the decision but was later on
dismissed. Meanwhile, the majority union Nagkakaisang Lakas ng
Manggagawa demanded to collectively bargain with the respondent
company but the company refused. Majority Union Nagkaisang Lakas
went on strike but was later on restrained. Thereafter, petitioner Malayang
Manggagawa filed its own notice of strike in the NCMB. The respondent
company opposed the notice of strike contending that the petitioner is a
minority union. The parties were able to make concessions during the
conciliation proceedings and the notice of strike was later on withdrawn.
However, on 21 July 1997, the petitioners members staged a sit down

strike to dramatize their demand for a fair and equal treatment as
respondent company allegedly continued to discriminate against them.
The respondent company issued a memorandum to all participants of the
sit down strike requiring them to explain why they should not be
terminated. None of the members complied with the company directive,
so they were all terminated by the respondent company. Consequently,
the petitioner staged a strike and filed a complaint for unfair labor
practice, union busting and illegal lockout.
ISSUE: Whether or not there is an illegal strike?
HELD: YES. The labor courts a quo all unanimously ruled that there
were no sufficient proof of respondent companys alleged discriminatory
acts, viz. that respondent company and its General Manager committed
unfair labor practice or that the termination of the employment of
petitioners officers and members was a case of union busting. On the
other hand, the sit down strike made by the petitioners officers
and members was in violation of respondent companys rules, and
petitioners officers and members ignored the opportunity given by
the respondent company for them to explain their misconduct,
which resulted in the termination of their employment. In sum, there
are abundance of reasons, both procedural and substantive, which are all
fatal to petitioners cause. The instant petition for certiorari suffers from an
acute scarcity of legal and factual support.
109
2.2.7 IMPORTANT CASE. Liability of company who fails to

immediately reinstate the union member for participating in an
illegal strike; extent of backwages. C. Alcantara and Sons vs
Court of Appeals and Nagkahiusang Mamumuo Sa Alsons-SPFL,
G.R. No. 155109, 14 March 2012.
The Labor Arbiter found the strike illegal and sustained the dismissal of
the Union officers but ordered the reinstatement of the striking Union
members for lack of evidence showing that they committed illegal acts
during the illegal strike. On appeal, NLRC reversed Labor Arbiter and
ruled that union members may also be terminated. CA and SC sustained
NLRC decision.
Question: Are the striking union members who were initially ordered
reinstated by the Labor Arbiter but later on, found to have been legally
terminated by the NLRC, entitled to backwages from the time of the LA
decision until the NLRC reversal?
Answer: YES. Pursuant to Article 223 of the Labor Code and well-
established jurisprudence, the decision of the LA reinstating a
dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, pending
appeal.
It is obligatory on the part of the employer to reinstate and pay the wages
of the dismissed employee during the period of appeal until reversal by
the higher court. If the employer fails to exercise the option of re-admitting
the employee to work or to reinstate him in the payroll, the employer must
pay the employees salaries during the period between the LAs order of
reinstatement pending appeal and the resolution of the higher court
overturning that of the LA.
In this case, CASI is liable to pay the striking Union members their
accrued wages for four months and nine days, which is the period
from the notice of the LAs order of reinstatement until the reversal
thereof by the NLRC.
2.3 Compliance with procedural requirements of the Labor

Code
Apart and separate from the lawful purposes and lawful means in the conduct of
a valid strike, the third requisite is compliance with the procedural requirements
of law. Thus:
2.3.1 Notice of strike or lockout - must be filed prior to the intended date of
strike, taking into consideration the cooling off period
Cooling off period (Art. 263, LC; B5 R8 S3, IRR)

If bargaining deadlocks 30 days
If ULP 15 days
If ULP on the ground of union busting: Union may take action
immediately, but note that a strike vote must have been
conducted and results submitted to DOLE (Art. 263 [b]; Dept
Order No. 9, Rule 22, Secs. 3 and 7)
110
2.3.2 Conciliation proceedings NCMB to immediately call parties involved

to a conference within period of 48 hours from receipt of notice, using the
fastest means possible (telephone, telegraph or messenger)
Note1: Parties obliged to meet promptly and expeditiously in good

faith, as part of their duty to bargain collectively which covers proceedings
before the NCMB. If employer refuses to attend conference, may be charged
with ULP. (Dept. Order No. 9, R22, S6 [2]).
Note2: During the conciliation and mediation proceedings before the

NCMB, parties are supposed to refrain from doing any act which will exacerbate
the proceedings re: maintenance of status quo.
2.3.3 Strike vote approved by a majority of the TOTAL UNION

MEMBERSHIP in the bargaining unit (hence: only members of the
majority union may vote), via secret ballot, in a meeting or referenda
specially called for the purpose
Lock-out vote - approved by a majority of the Board of Directors of the

employer company, by secret ballot in a meeting called for such
purpose.
2.3.4 Seven Day Strike ban (Dept. Order No. 9. R22, S7[e]) - after the strike
vote is taken, it is required that the union must file the result of the strike
vote with the NCMB at least 7 days prior to the intended date of strike.
Note: Both cooling off period and 7-day strike ban must be complied
with and is mandatory. Otherwise, illegal strike. (National Federation of
Sugar Workers vs. Ovejera, 114 SCRA 354)
3. Assumption of Jurisdiction by the Secretary of Labor or

Certification of the Labor Dispute to the National Labor
Relations Commission for Compulsory Arbitration. (Article
264[g], Labor Code; Please see CHART/DIAGRAM E)
3.1 The Secretary of Labor is not precluded from assuming jurisdiction over a
labor dispute in a vital industry even if there is no notice of strike or a formal
complaint. He need not wait for a notice of strike or a formal complaint about
a strike already in progress before he could exercise the powers given to him
by law to avoid the strikes, picketing or lockouts contemplated in the grant of
power. (Saulog Transit vs. Lazaro, 128 SCRA 591.)
111
3.2 Secretary of Labor has discretion to assume jurisdiction or to certify to the

NLRC on the ground that the labor dispute is one "adversely affecting the
national interest", and said exercise of discretion cannot be questioned.
(FEATI University vs. Bautista, 18 SCRA 1191)
3.3 Nature and Effect of Assumption and Certification
a) Assumption and certification orders are executory in character and are

strictly to be complied with by the parties even during the pendency of
any petition questioning their validity.
b) It automatically results in a return-to-work of all striking workers (if one

has already taken place), or enjoins the taking place of a strike (Union of
Filipro Employees vs. Nestle Philippines, Inc., 192 SCRA 396.)
c) While termination by reason of an illegal strike requires hearing,

replacement by reason of violation of a return-to-work order does not.
(Free Telephone Workers Union vs. PLDT, 113 SCRA 663, 678.)
3.4 Effect of Defiance of Assumption or Certification Orders.
"A Strike that is undertaken despite the issuance by the Secretary of Labor of
an assumption or certification order becomes a prohibited activity and thus
illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as
amended (Zamboanga Wood Products, Inc. vs. NLRC, G.R. 82088, October
13, 1989; 178 SCRA 482). The Union, officers and members, as a
result, are deemed to have lost their employment status for
having knowingly participated in an illegal act." (Union of Filipino
Employees vs. Nestle Philippines, Inc. [192 SCRA 396])
3.5 2015 LABOR BAR EXAM QUESTION: (XVI)
The Alliance of Independent Labor Unions (AILU) is a legitimate labor

federation which represents a majority of the appropriate bargaining unit at the
Lumens Brewery (LB). While negotiations were ongoing for a renewal of the
collective bargaining agreement (CBA), LB handed down a decision in a
disciplinary case that was pending which resulted in the termination of the
AILU's treasurer and two other members for cause. AILU protested the
decision, claiming that LB acted in bad faith and asked that LB reconsider. LB
refused to reconsider. AILU then walked out of the negotiation and declared a
strike without a notice of strike or a strike vote. AILU members locked in the LB
management panel by barricading the doors and possible exits (including
windows and fire escapes). LB requested the DOLE to assume jurisdiction over
the dispute and to certify it for compulsory arbitration.
The Secretary of Labor declined to assume jurisdiction, finding that the dispute
was not one that involved national interest. LB then proceeds to terminate all of
the members of the bargaining agent on the ground that it was unlawful to: (1)
barricade the management panel in the building, and (2) participate in an illegal
strike.
(a) Was AILU justified in declaring a strike without a strike vote and a notice of
strike? Why or why not? (3%)
(b) Was the Secretary of Labor correct in declining to assume jurisdiction over
the dispute? (2%)
(c) Was LB justified in terminating all those who were members of AILU on the
two grounds cited? (3%)
112
Answer:
(a) No, AILU is not justified. Article 263 (b), Labor Code, provides that in cases
of dismissal of Union officers which may constitute union busting where the
existence of the union is threatened, the 15-day cooling-off period shall not
apply and the union may take immediate action. However, the strike vote
and rhe seven-day strike ban must still be complied with. (Book V, Rule
XIII, Section 3, IRR.) Moreover, AILU used unlawful means in the pursuit of
its objectives by locking and barricading the management panel.
(b) Yes, the Secretary of Labor acted within the law. This is so because Article
263 (g) of the Labor Code, provides that when in his opinion there exist a
labor dispute etc., what is important is the opinion of the Secretary of Labor;
and in this case, it is his opinion that the dispute was not one that involved
national interest. Such an opinion cannot be questioned. (FEATI University
v. Bautista, 18 SCRA 1191 [1996]).
(c) No, LB was not justified. LB cannot just terminate all the members of the
bargaining unit on the ground that it was unlawful to barricade the
management panel and to participate in an illegal strike. In so doing, it was
necessary for LB to make a distinction between union officers and ordinary
union members. LB must adduce substantial evidence that the union
officers knowingly participated in an illegal strike; and that the union
members knowingly participated in the commission of illegal acts during the
strike. That is the way to make them liable for the illegal strike, for which
they may be declared to have lost their employment status.
4. "No Strike No Lockout" Clause in the CBA.

No Strike-No Lockout clause in the CBA applies only to economic strikes; it does
not apply to ULP strikes. Hence, if the strike is founded on an unfair labor practice
of the employer, a strike declared by the union cannot be considered a violation of
the no-strike clause. (Master Iron Labor Union vs. NLRC, 219 SCRA 47.)
5. 2010-2015 CASES
5.1 2015 CASE: Club Filipino, Inc., et al. vs. Benjamin Bautista, et al., G.R. No.
168406, 04 January 2015. -- The law requires knowledge of the illegality of the
strike on the part of the union officer before he can be dismissed; when second
motion for reconsideration may be allowed; illegal dismissal case is not res
judicata to illegal strike case.
a. The law requires knowledge of the illegality of the strike as a condition sine
qua non before a union officer can be dismissed for participating in an illegal
strike.
b. As a general rule, the filing of a second Motion for Reconsideration is

prohibited. (Rule 52, Section 2 of the Rules of Court.) It is only allowed under
extraordinary persuasive reasons and only upon express leave first
obtained. (McBurnie v. Ganzon, 707 SCRA 646 [2013], En Banc.) The grant
of leave to file a second motion will not toll the reglamentary period for the
decision to become final and executory after 15 days. It only means that the
Entry of Judgment issued may be lifted should the second motion be granted.
c. The decision on the illegal dismissal case cannot be considered res judicata
on the illegal strike case. The element of identity of cause of action is absent.
113
5.2 VERY IMPORTANT 2014 CASE: Florencio Libongcogon et al vs. Phimco

Industries, G.R. No. 203332, 18 June 2014.
PHIMCO and its Union PILA had a bargaining deadlock, which resulted into a
strike. PHIMCO dismissed the strikers for alleged illegal acts committed during
the conduct of the strike, e.g., blocking points of ingress to, and egress out of, the
company. Union filed a complaint for illegal dismissal and ULP against the
company, while company filed a petition to declare the strike illegal.
While the cases were still pending, PILA found that seven other employees
(Libongcogon etc) were inadvertently not included in the case (CASE1) and thus,
filed another case for illegal dismissal (CASE2). Libongcogon et al eventually won
CASE2 all the way up to the Supreme Court and, upon remand to the Labor Arbiter
who originally handled the case, moved for the computation of backwages.
Company now alleges that the Supreme Court decision on the illegal termination
case (CASE2) notwithstanding, the backwages can no longer be awarded on
account of a supervening event. Said supervening event is a Supreme Court
decision on CASE1, finding the strike to be illegal, and that all strikers therein,
including Libongcogon, were validly terminated.
Union argues for immutability of final judgment in CASE2, and hence, backwages
must be awarded.
ISSUE: Who is correct the Union or the Company?
SC Decision: For the Company. As petitioners themselves acknowledge, the

doctrine of immutability of final judgments admits of certain exceptions. One of
such exceptions is the existence of a supervening cause or event, which renders
the enforcement of a final and executory decision unjust and inequitable. In this
particular case, a supervening event transpired, which must be considered in the
execution of (CASE2) in order not to create an injustice to or an inequitable
treatment of workers who, like petitioners, participated in a strike were this Court
found the commission of illegal acts by the strikers, among them the petitioners
(Libongcogon etc). As the CA pointed out in its amended decision, the evidence in
the illegal strike case (CASE1) clearly identified Libongcogon etc as among the
union members who, in concert with the other identified union members, blocked
the ingress and egress of the company, through a human blockade, and the
mounting of physical obstructions at he main gate. The Supreme Court noted that
the Court of Appeals validly nullified its final and executory decision on the ground
that there was a supervening cause.
5.3 IMPORTANT CASE; CONTRA TO EXISTING DECISIONS ON DEFIANCE OF

RETURN TO WORK ORDER. Solidbank vs. Gamier et al, GR 159460, 15 Nov
2010; Solidbank vs. Solidbank Union et al., GR 159461, 15 Nov 2010. A
strike that is undertaken despite the issuance by the Secretary of Labor of an
assumption order and/or certification is a prohibited activity and thus illegal. Xxx
There is no dispute that when respondent Union officers and members conducted
their mass action, the proceedings before the Secretary of Labor were still pending
as both parties filed Motions for reconsideration of the SOLE Order. Clearly,
respondents knowingly violated the aforesaid provision by holding a strike in the
guise of a mass demonstration simultaneous with concerted work
abandonment/boycott.
114
ADAS NOTES:
General rule: Both union officers and members who defy the Secretarys
assumption and return to work order may summarily be dismissed, because this is
a patent defiance of the lawful orders of government. (Union of Filipino Employees vs.
Nestle Philippines, Inc. [192 SCRA 396]; Allied Banking Corporation vs. NLRC, 258 SCRA
724; and Telefunken Semiconductors Employees Union-FFW vs. Court of Appeals,348
SCRA 565 [2000]). However, in this particular Solidbank case, the Supreme
Court though Justice Villarama made a distinction, paraphrased succinctly
as follows:
Notwithstanding illegality of the strike, we cannot sanction

petitioners act of indiscriminately terminating the services of
individual respondents who admitted joining the mass actions and
who have refused to comply with the offer of the management to
report back to work. The liabilities of individual respondents must
be determined under Article 264 (a) Labor Code, thus: (a) Union
officers who participated in the illegal strike may be considered to
have lost their employment status; BUT (b) a worker who merely
participated in the illegal strike may NOT be terminated from
employment if he did NOT commit any illegal act during the
strike. Xxx There is no evidence that the ordinary union member
had actually committed illegal acts during the strike.
DEAN TONY AND ADA ABAD position: Article 264 was misapplied, as said
provision applies only to illegal strikes, and NOT to instances where there is a
DEFIANCE of a Return-to-work Order as in the instant case. This is simply
contradictory to all previous rulings, which we believe are better and more
appropriate.
5.4 Jurisdiction; Secretary of Labor. -- Cirtek Employees Labor Union-Federation

of Free Workers vs. Electronics, Inc., G.R. No. 190515, 15 November 2010.
Question: May the Secretary of Labor give an award higher than what was
agreed upon by the management and labor union, when he assumes
jurisdiction over the labor dispute?
Answer: YES. The Secretary of Labor exercises plenary discretionary powers

under the concept of police power in a CBA deadlock. As such, he is not limited
to considering the MOA as basis in computing the wage increases.
In the exercise of his power to assume jurisdiction over a labor dispute under Art.
263 (g) [11] of the Labor Code, it is well-settled that the Secretary of Labor may
resolve ALL ISSUES involved in the controversy including the award of wage
increases and benefits. In the instant case, the fact that the award was higher
than that which was purportedly agreed upon in the MOA between
management and the labor union is of no moment because the Secretary, in
resolving the CBA deadlock, is not limited to considering the MOA as basis
in computing the wage increases. He could, as he did, consider the financial
documents submitted by respondent as well as the parties bargaining history and
respondents financial outlook and improvements as stated in its website.
IMPORTANT MODIFICATION in 2013 CASE: Asia Brewery vs. Tunay na

Pagkakaisa ng mga Manggagawa sa Asia (TPMA), G.R. No. 171594, 16
September 2013.
However, in deciding wage increases subject matter of the labor dispute, the
Secretary of Labor must NOT commit grave abuse of discretion. In cases of
115
compulsory arbitration before the Secretary of Labor pursuant to Article 263(g) of

the Labor Code, the financial statements of the employer must be properly
audited by an external and independent auditor in order to be admissible in
evidence for purposes of determining the proper wage award.
The Secretary of Labor gravely abused her discretion when she used
the middle ground approach and relied on the unaudited financial
statements. Said unaudited financial statements are self-serving and
inadmissible, and may have resulted in a wage award that is based on an
inaccurate and biased picture of petitioner corporations capacity to pay. Moreso,
she violated her own Order dated 19 December 2003, which instructed the
petitioner company to submit its complete audited financial report.
5.5 Dismissal on account of illegal strike. -- Danilo Escario, et al vs. National

Labor Relations Commission, G.R. No. 160302, 27 September 2010.
Question: Are ordinary workers who were reinstated due to dismissal for
their participation in an illegal strike, entitled to payment of backwages?
Answer: NO. Conformably with the long honored principle of a fair day's wage for
a fair day's labor, employees dismissed for joining an illegal strike are not entitled
to backwages FOR THE PERIOD OF THE STRIKE even if they are reinstated by
virtue of their being merely members of the striking union who did not commit any
illegal act during the strike.
By its use of the phrase unjustly dismissed, Article 279 refers to a dismissal that
is unjustly done, that is, the employer dismisses the employee without observing
due process, either substantive or procedural. Substantive due process requires
the attendance of any of the just or authorized causes for terminating an
employee as provided under Articles 278, 283 or 284 of the Labor Code; while
procedural due process demands compliance with the twin-notice requirement.
5.6 IMPORTANT CASES ON DISMISSAL; UNFAIR LABOR PRACTICE; LIABILITY

OF CORPORATE OFFICERS; MORAL AND EXEMPLARY DAMAGES. (Park
Hotel, et al. vs. Manolo Soriano, et al. G.R. No. 171118. September 10, 2012). -
QUESTION: May employees who have gone on mass leaves without prior
authorization be presumed to have conducted an illegal strike?
ANSWER: NO. It is undeniable that going on leave or absenting ones self from
work for personal reasons when they have leave benefits available is an
employees right. The contention of Biomedica that the enjoyment of said leaves is
in reality an illegal strike does not hold water in the absence of strong controverting
proof to overturn the presumption that a person is innocent of x x x wrong. Thus,
the individual leaves of absence taken by the petitioners are not such
absences that can be regarded as an illegal mass action.
Here, the five (5) petitioners were absent on November 7, 2006. The records are
bereft of any evidence to establish how many workers are employed in Biomedica.
There is no evidence on record that 5 employees constitute a substantial number
of employees of Biomedica. And, as earlier stated, it is incumbent upon Biomedica
to prove that petitioners were dismissed for just causes, this includes the duty to
prove that the leave was large-scale in character and unauthorized. This,
Biomedica failed to prove. Having failed to show that there was a mass leave, the
Court concludes that there were only individual availment of their leaves by
petitioners and they cannot be held guilty of any wrongdoing, much less 37 RULES
116
OF COURT, Rule 131(a). anything to justify their dismissal from employment. On

this ground alone, the petition must be granted.
Petitioners did not go on strike
Granting for the sake of argument that the absence of the 5 petitioners on
November 7, 2006 is considered a mass leave, still, their actions cannot be
considered a strike.
Art. 212(o) of the Labor Code defines a strike as any temporary stoppage of
work by the concerted action of employees as a result of any industrial or labor
dispute. Concerted is defined as mutually contrived or planned or performed
in unison.38
In the case at bar, the 5 petitioners went on leave for various reasons. Petitioners
were in different places on November 7, 2006 to attend to their personal needs or
affairs. They did not go to the company premises to petition Biomedica for their
grievance. To demonstrate their good faith in availing their leaves, petitions
reported for work and were at the company premises in the afternoon after they
received text messages asking them to do so. This shows that there was NO intent
to go on strike. Unfortunately, they were barred from entering the premises and
were told to look for new jobs.
Surely the absence of petitioners in the morning of November 7, 2006 cannot in

any way be construed as a concerted action, as their absences are presumed to
be for valid causes, in good faith, and in the exercise of their right to avail
themselves of CBA or company benefits. Moreover, Biomedica did not prove that
the individual absences can be considered as temporary stoppage of work.
Biomedicas allegation that the mass leave paralyzed the company operation on
that day has remained unproved.
2014 BAR QUESTION:
As a result of a bargaining deadlock between Lazo Corporation and Lazo Employees

Union, the latter staged a strike. During the strike, several employees committed illegal
acts. Eventually, its members informed the company of their intention to return to work.
(6%)
(A) Can Lazo Corporation refuse to admit the strikers?
(B) Assuming the company admits the strikers, can it later on dismiss those employees
who committed illegal acts?
(C) If due to prolonged strike, Lazo Corporation hired replacements, can it refuse to
admit the replaced strikers?
ANSWER:
(A) No; otherwise, Lazo Corporation can be held guilty of illegal lockout. This is
assuming that the Unions offer to return to work is unconditional; otherwise, if
conditional, the company can refuse to admit the strikers.
(B) No. When Lazo Corporation acceded to the peaceful settlement by agreeing to admit
all strikers who had not returned to work, it waives the issue of the illegality of the
strike (Reformist Union of R.B. Liner, Inc. vs. NLRC, 266 SCRA 713 [1997]); unless
Lazo Corporation did so without prejudice to whatever legal action it may take
against those who committed illegal acts. (Bagong Pagkakaisa ng Manggagawa na
Triumph International vs. Secretary of DOLE, G.R. No. 167401, 05 July 2010.)
117
(C) No. As a general rule, replacements take their employment as conditional, i.e.,
subject to the rights of strikers to return to work. However, since this is an economic
strike, the strikers are entitled to reinstatement only in case Lazo Corporation has not
yet hired permanent replacements. (Consolidated Labor Association vs. Marsman &
Co., II SCRA 589.)
N. LAW ON TERMINATION
BASIC PRINCIPLES IN DISCIPLINARY CASES
1. Code of Conduct vs. security of tenure

Balancing of interests in disciplinary cases
1.1 Labors interests
A workers right to labor is recognized by the Constitution as a property right.

As such, an employee cannot be deprived of his work without just cause or
due process.
1.2 Managements interests
On the other hand, the employer is allowed, in the exercise of its

management prerogatives, to promulgate rules and regulations, and to
enforce/implement them for the efficient operations of the business.
Moreover, the law also recognizes the right of the employer to expect from its
workers not only good performance, adequate work and diligence, but also
good conduct and loyalty.
1.3 Balancing of interests:
Hocheng Philippines Corporation vs. Antonio M. Farrales, G.R. No.

211497, 18 March 2015; Labor law policy on termination of employment. -
- Article 4 of the Labor Code mandates that all doubts in the implementation
and interpretation of the provisions thereof shall be resolved in favor of labor.
Consistent with the States avowed policy to afford protection to labor,
particularly in relation to the workers security of tenure, the Court held that to
be lawful, the cause for termination must be serious and grave malfeasance to
justify the deprivation of a means livelihood. This is merely in keeping with the
spirit of our Constitution and laws which lean over backwards in favor of the
working class, and mandate that every doubt must be resolved in their favor.
Moreover, the penalty imposed on the erring of the employee ought to be
proportionate to the offense, taking into account its nature and surrounding
circumstances.
MANAGEMENT VS. LABOR
Management prerogatives Security of tenure
Right to discipline employee in Right to continuous

accordance with rules and employment until
regulations termination for just or
authorized cause
STATE
Police power/social justice
Interpretation in favor of labor
118
Adas Notes: Thus, in the context of the balancing of interests relative to the
conduct of human relationships and work performance within the business,
certain parameters will have to be observed:
a) Burden of proof is upon the employer to show just cause for the
imposition of a penalty upon the employee.
HOWEVER, employee must first prove the fact of dismissal.
2014 CASE: Dionarto Q. Noblejas v. Italian Maritime Academy

Phils., Inc., et al. G.R. No. 207888, 09 June 2014. -- In illegal dismissal
cases, employee must prove by competent evidence the fact of
dismissal. Fair evidentiary rule dictates that before employers are
burdened to prove that they did not commit illegal dismissal, it is
incumbent upon the employee to first establish by substantial
evidence the fact of his or her dismissal. It is an age-old rule that the
one who alleges a fact has the burden of proving it and the proof should
be clear, positive and convincing. Mere allegation is not evidence. Let it
be underscored that the fact of dismissal must be established by positive
and overt acts of an employer indicating the intention to dismiss. Here,
there is no sufficient proof showing that Noblejas was actually laid off
from work. In any event, his filing of a complaint for illegal dismissal,
irrespective of whether reinstatement or separation pay was prayed for,
could not by itself be the sole consideration in determining whether he
has been illegally dismissed. All circumstances surrounding the alleged
termination should also be taken into account.
b) There must exist substantial evidence to prove just or authorized

cause of termination. Proof beyond reasonable doubt not required
in administrative cases.
Note1: Failure of employer to submit documents which are presumed to

be in its possession, inspite of an Order to do so, implies that the
presentation of said documents is prejudicial to its case. (De Guzman
vs. NLRC, 540 SCRA 210 [Dec. 2007]).
Note2: IMPORTANT CASE ON SUBSTANTIAL EVIDENCE. (Alilem Credit

Cooperative vs. Bandiola, G.R. No. 173489, 25 February 2013.)
Question: Whether or not sworn statements of relatives and friends of

respondent attesting to the existence of an extra-marital affair is
sufficient to prove immorality, as a just cause for termination?
Answer: YES. The employers evidence consists of sworn statements

of either relatives or friends of Thelma and respondent. They either had
direct personal knowledge of the illicit relationship or revealed
circumstances indicating the existence of such relationship.
While respondents act of engaging in extra--marital affairs may be

considered personal to him and does not directly affect the performance
of his assigned task as bookkeeper, aside from the fact that the act was
specifically provided for by petitioners Personnel Policy as one of the
grounds for termination of employment, said act raised concerns to
petitioner as the Board received numerous complaints and petitions from
the cooperative members themselves asking for the removal of
respondent because of his immoral conduct.
c) In the imposition of penalty, whether suspension or termination, the

same must be commensurate to the offense committed.
119
2012 CASE: Negros Slashers vs. Alvin Teng, G.R. No. 187122, 22 Feb
2012. See page 7 hereof.)
d) Thus: for valid termination, there must both be JUST CAUSE AND
DUE PROCESS. (exception: Agabon ruling, see Section 4 hereunder)
2. GROUNDS FOR TERMINATION
2.1 JUST CAUSES FOR TERMINATION (Art. 282, LC)
2.1.2 SERIOUS MISCONDUCT

Colegio de San Juan de Letran Calamba vs. Tardeo G.R. No.
190303, 09 July 2014. serious misconduct, definition and
elements; see below.
Defined as improper or wrong conduct, a transgression of a

definite rule of action, a forbidden act or dereliction of duty which
is willful in character and implies wrongful intent, and not mere
error in judgment.
Elements of serious misconduct:

1. Must be serious, of grave and aggravated character, and not
merely trivial or unimportant
2. Must be related to the performance of the employees
duties; and
3. must show that he has become unfit to continue
working for the employer.
2012-2015 CASES ON SERIOUS MISCONDUCT
a) Roque B. Benitez, et al., vs. Santa Fe Moving and Relocation

Services, et al., G.R. No. 208163, 20 April 2015. -- Serious misconduct
wherein employee went up the stage and confronted the Managing
Director with verbal abuse (putang na mo VK, gago ka!) during the
Companys Christmas party. He even attempted to throw a beer bottle at
said Managing Director but was restrained by other employees. This
caused grave embarrassment for the audience who witnessed the
incident, including company officials, employees, their families, as wells
as company clients and guests. Benitezs offense constituted a serious
misconduct as defined by law. His display of insolent and disrespectful
behavior, in utter disregard of the time and place of its occurrence, had
very much to do with his work.
(ADAS NOTE: The Supreme Court further noted that this case is not
parallel to the 2007 case of Samson v. NLRC, where there was illegal
termination. In that case, the employee made the abusive utterances
[Sabihin mo kay EDT, bullshit yan! -- while making a dirty finger] in an informal
office Christmas party. The Samson case was not considered serious
misconduct, because the officer referred to was not in the party, and that
the utterances were not actually directed to EDTs person. Moreover,
Samson was inebriated at that time.)
b) St. Lukes Medical Center vs. Ma. Theresa Sanchez, G.R. No. 212054,
11 March 2015; on dishonesty viz., theft of medical supplies.
120
Question: Whether or not employee may validly set up as a defense that

there was no real intention to bring out unused hospital supplies left by
patients (syringe, micropore, cotton balls, gloves, etc), to avoid
termination?
Answer: NO. Sanchez was validly dismissed by SLMC for

dishonesty, i.e., theft, pilferage of hospital or co-employee property, x x x
or its attempt in any form or manner from the hospital, co-employees,
doctors, visitors, [and] customers (external and internal) with termination
from employment. Such act is obviously connected with Sanchezs work,
who, as a staff nurse, is tasked with the proper stewardship of medical
supplies. Significantly, records show that Sanchez made a categorical
admission in her handwritten letter i.e., [k]ahit alam kong bawal ay
nagawa kong [makapag-uwi] ng gamit that despite her knowledge of its
express prohibition under the SLMC Code of Discipline, she still
knowingly brought out the subject medical items with her.
It is apt to clarify that SLMC cannot be faulted in construing the taking of

the questioned items as an act of dishonesty (particularly, as theft,
pilferage, or its attempt in any form or manner) considering that the intent
to gain may be reasonably presumed from the furtive taking of useful
property appertaining to another. Finally, the Court finds it
inconsequential that SLMC has not suffered any actual damage. While
damage aggravates the charge, its absence does not mitigate nor negate
the employees liability. Neither is SLMCs non-filing of the appropriate
criminal charges relevant to this analysis.
c) IMPORTANT DOCTRINAL 2015 CASE: Cheryll Santos Leus vs. St.

Scholasticas College Westgrave, et al., G.R. No. 187226, 28 January
2015. - Pregnancy out of wedlock between two consenting adults with no
impediment to marry each other, is not necessarily disgraceful or immoral
under Sec. 94 (e) of the 1992 MRPS. (See previous notes on page 18).
d) IMPORTANT DOCTRINAL 2014 CASE: Northwest Airlines vs.

Concepcion Del Rosario, GR. 157633, 10 September 2014. New
clarification of the definition of FIGHTING within company premises. Two
flight stewardesses verbally argued over a wine bottle opener, while
passengers were boarding the flight. They were both off-loaded as a
result.
Question: Whether or not a verbal altercation between two employees

falls within the purview of the infraction fighting as to merit termination?
Supreme Court: NO. Fighting to be interpreted strictly, and must be

more than more than just an exchange of words that usually succeeded
the provocation by either party, to merit termination.
Rationale: In several rulings where the meaning of fight was decisive, the
Court has observed that the term fight was considered to be different
from the term argument. In People v. Asto, for instance, the Court
characterized fight as not just a merely verbal tussle but a physical
combat between two opposing parties. Similarly, in Pilares, Sr. v.
People,14 a fight was held to be more than just an exchange of words
that usually succeeded the provocation by either party. Based on the
foregoing, the incident involving Del Rosario and Gamboa could not be
justly considered as akin to the fight contemplated by Northwest. In the
eyes of the NLRC, Del Rosario and Gamboa were arguing but not
fighting. Moreover, even assuming arguendo that the incident was
121
the kind of fight prohibited by Northwest's Rules of Conduct, the

same could not be considered as of such seriousness as to warrant
Del Rosario's dismissal from the service. The gravity of the fight,
which was not more than a verbal argument between them, was not
enough to tarnish or diminish Northwest's public image.
e) Colegio de San Juan de Letran vs. Isidra Dela Rosa-Meris, G.R. No.
178837, 01 September 2014. -- Tampering of school records/altering
grades constitute serious misconduct punishable with termination under
the Labor Code and under the Manual of Regulations for Private Schools.
f) CONTRA.: WHEN NOT SERIOUS MISCONDUCT OR SERIOUS

DISHONESTY Light Rail Transit vs. Salvana, G.R. No. 192074, 10
June 2015 [Leonen]. In this instance, falsification of a document
cannot be classified as serious dishonesty meriting termination since the
information which was falsified had no direct relation to her employment,.
Whether or not she was suffering from hypertension is a matter that has
NO relatioin to the functions of her office.
f) IMPORTANT CASE NOT ASKED IN 2013 2014 and 2015 BAR:

Samahan Ng Manggagawa Sa Hyatt-NUHWRAIN Vs. Magsalin, GR
No. 164939, 06 June 2011
Question: May a company validly terminate an employee under a

provision in the employee handbook which states committing
offenses penalized with three suspensions within a twelve-month
period?
Answer: Yes, in this case where a union officer was found guilty of
several infractions during negotiations stand-off. The company
terminated the union officer on the basis of a specific provision in their
employees handbook, which provided that an employee may be
terminated for the commission of offenses meriting three suspensions
within a twelve-month period. The Supreme Court ruled that a
series of irregularities, when put together, may constitute
serious misconduct and hence, a just cause for termination.
(See also: Mapili vs. Phil Rabbit Bus Lines, 27 July 2011)
However, while Voluntary Arbitrator Magsalin found valid ground for

termination, he awarded the employee P100,000.00 for and as financial
assistance. Supreme Court overruled VA Magsalin and deleted financial
assistance, noting that if there is just cause for termination, then the
employee is not entitled to the said award. Thus:
The policy of social justice is not intended to

countenance wrongdoing simply because it is
committed by the underprivileged. At best, it may
mitigate the penalty but it certainly will not condone it.
Social justice cannot be permitted to be a refuge of
scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those
who invoke social justice may do so only if their hands
are clean, and their motives blameless, and not simply
because they happen to be poor. xxx Samahan ng
Manggagawa sa Hyatt-NUHWRAIN ibid., citing PLDT
vs. NLRC, No. L-80609, 23 Aug 1998.
122
2015 LABOR BAR EXAM QUESTION: (XI)
Rico has a temper and, in his work as Division Manager of Matatag

Insurance, frequently loses his temper with his staff. One day, he physically
assaults his staff member by slapping him. The staff member sues him for
physical injuries. Matatag Insurance decides to terminate Rico, after notice
and hearing, on the ground of loss of trust and confidence. Rico claims that
he is entitled to the presumption of innocence because he has not yet been
convicted. Comment on Matatag's action in relation to Rico's argument. (4%)
Answer: Matatag may still validly terminate Rico because Ricos argument is
not valid. The quantum of evidence required for crime and administrative
offense are different: criminal prosecutions require proof beyond reasonable
doubt; whereas, administrative investigations only require substantial
evidence, or that kind of evidence that a reasonable mind can accept to
support a conclusion. Hence, the criminal case and the administrative case
can proceed independently of each other. The acquittal in the criminal case
will not necessarily mean the dismissal of the administrative complaint.
2.1.2 GROSS INSUBORDINATION

Elements:
1. employees assailed conduct must be willful or intentional;
2. willfulness characterized by wrongful or perverse attitude;
3. the order violated must be reasonable, lawful and made known to
the employee; and
4. the order must pertain to the duties which the employee has been
engaged to discharge. (The Coffee Bean and Tea Leaf Philippines,
Inc. vs. Rolly P. Arenas G.R. No. 208908, 11 March 2015)
2012-2015 SC CASES ON GROSS INSUBORDINATION:
a) St. Lukes Medical Center vs. Maria Theresa V. Sanchez, G.R. No.
212054, 11 March 2015. - Violation of Company Rules as Wilfull
Disobedience; see discussion above, page 104)
b) The Coffee Bean and Tea Leaf Philippines, Inc. vs. Rolly P. Arenas,
G.R. No. 208908, 11 March 2015. -- Willful disobedience Company
official cannot be held liable for the dismissal of an employee unless he
acted with malice or bad faith.
c) Joel N. Montallana vs. La Consolacion College Manila, et al., G.R. No.

208890, 08 December 2014. - What is willfulness in willful
disobedience?
In order for willful disobedience under Art. 296 (a) [formerly Article 282 (a)
of the Labor Code] to be properly invoked as a just cause for dismissal,
the conduct must be willful or intentional, willfulness being characterized
by a wrongful and perverse mental attitude. (Nissan Motors Phil., Inc. vs.
Angelo, G.R. No. 164181, 14 September 2011, 657 SCRA 520.) Moreover,
willfulness was described as attended by a wrongful and perverse
mental attitude rendering the employees act inconsistent with proper
subordination. (Dongon v. Rapid Movers and Forewarders Co., Inc. G.R. No.
163431, 28 August 2013, 704 SCRA 56)
123
d) IMPORTANT: NOT ASKED IN PREVIOUS BARS. - ePacific Global

Contact Center vs. Cabansay, 538 SCRA 498 [23 Nov. 2007].
QUESTION: MAY A MANAGER BE TERMINATED FOR GROSS

INSUBORDINATION IF THE COMPLAINED ACT WAS WITHIN
MANAGERS DISCRETIONARY POWER?
Answer: Yes. Although a managerial employee is clothed with discretion

to determine what was in the best of the company, said managerial
discretion is not without limits. Its parameters were contained the
moment the discretion was exercised, and then opposed by the
immediate superior/officer for being against the policies and welfare of the
company. Hence, any action in pursuit of the discretion thus opposed
had ceased to be discretionary and could be considered as willful
disobedience.
See also CONTRA: Prudential Bank vs. Antonio Mauricio et al., GR

183350, 18 Jan 2012.
QUESTION: MAY A MANAGER BE TERMINATED FOR LOSS OF

TRUST AND CONFIDENCE FOR AN ACT WITHIN HIS
DISCRETIONARY POWERS?
Prudential Bank terminated Manager Mauricio for allegedly repeatedly

allowing the withdrawals of dollar check transactions by a valued
customer prior to clearing without sufficient balance or funding, and in the
course of time after due audit, caused the loss of approx US $775,000.00.
Managers defense: This was within his discretionary powers. Is
this a valid termination for loss of trust and confidence?
ANSWER: NO. The Supreme Court ruled that on the basis of evidence,
it appears that the managers act in allowing the immediate withdrawal by
the valued customers is well within his functions as branch manager. A
person occupying such position exercises a certain degree of discretion
with respect to accommodations to valued clients. No evidence that
Manager was prompted by any malicious motive in approving the
encashment or to have abused the discretion he was clothed with, absent
some semblance of parameters. Note that Manager reported all the
transactions to the Head Office; if such a transaction was irregular or
prohibited, the Head Office of Prudential should have immediately called
the managers attention to the same. Instead, Prudential continued to
credit the account of the clients for the value of the returned checks.
ADAS NOTES: Aside from the grounds used in the termination of the
two managers, another difference between this case and that of ePacific
Global is that the Manager in Prudential Bank had exercised discretionary
powers and was not prohibited nor questioned in doing so until much later
after the audit findings. In ePacific Global, the Managers superior had
already prohibited her from proceeding with the presentation, and she
insisted on continuing the same.
2.1.3 GROSS AND HABITUAL NEGLECT OF DUTIES
a) gross negligence: connotes want of care in the performance of ones

duties, or absence of even slight care or diligence as to amount to a
reckless disregards of the safety of the person or property
124
2014 CASE: Dr. Phylis C. Rio vs. Colegio De Sta. Rosa Makati,
G.R. No. 189629, 06 Aug 2014. - Gross inefficiency and
incompetence, and negligence in the keeping of school or student
records, or tampering with or falsification of records.
As we already held, gross inefficiency is closely related to gross

neglect because both involve specific acts of omission resulting in
damage to another (Lim v. NLRC, 328 Phil., 843,858 [1996]). Gross neglect
of duty or gross negligence refers to negligence characterized by the
want of even slight care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully and intentionally,
with a conscious indifference to consequences insofar as other
persons may be affected (Brucal v. Hon. Desierto, 501 Phil. 453,465-466
[2005]).
As borne by the records, petitioners actions fall within the purview of

the above-definitions. Petitioner failed to diligently perform her duties.
It was unrefuted that: (1) there were dates when a medical
examination was supposed to have been conducted and yet the dates
fell on weekends; (2) failure to conduct medical examination on all
students for two (2) to five (5) consecutive years; (3) lack of medical
records on all students; and (4) students having medical records prior
to their enrollment.
b) habitual neglect: implies repeated failure to perform ones duties

over a period of time
c) willful neglect of duties: imply bad faith on the part of the employee
in failing to perform his job, to the detriment of the employer and the
latters business
d) Totality of infractions ruling: where the employee has been found

to have repeatedly incurred several suspensions or warnings on
account of violations of company rules and regulations, the law
warrants their dismissal as it is akin to habitual delinquency. It is the
totality, not the compartmentalization of company infractions that the
employee had consistently committed, which justified the penalty of
dismissal. (Meralco vs. NLRC, 263 SCRA 531 [24 Oct 1996]).
2012 CASE ON TOTALITY OF INFRACTIONS:
Mansion Printing Center and Clement Cheng vs Diosdado Bitara,

Jr. , G.R. No. 168120, 15 January 2012. -- The totality of infractions
or the number of violations committed during the period of
employment shall be considered in determining the penalty to be
imposed upon an erring employee. The offenses committed by him
should not be taken singly and separately but in their totality. Fitness
for continued employment cannot be compartmentalized into tight little
cubicles of aspects of character, conduct, and ability separate and
independent of each other.
In the present case, petitioners have repeatedly called the attention of

respondent concerning his habitual tardiness. The Memorandum
dated 23 June 1999 of petitioner Cheng required him to explain his
tardiness. Also in connection with a similar infraction, respondent
even wrote petitioner Cheng a letter dated 29 November 1999 where
he admitted that his tardiness has affected the delivery schedules of
the company, offered an apology, and undertook to henceforth report
125
for duty on time. Despite this undertaking, he continued to either

absent himself from work or report late during the first quarter of 2000
e) Absences: Habitual absenteeism and excessive tardiness are forms

of neglect of duty on the part of the employee and constitute just and
sufficient cause for termination.
f) Abandonment of work: the deliberate and unjustified refusal of an

employee to resume his employment. It is a form of neglect of duty,
and hence, a just cause for termination by the employer.
For a valid finding of abandonment, two factors must be present:: (a)

the failure to report for work or absence without valid or justifiable
reason; and (b) a clear intention to sever the employer-employee
relationship, with the second as the more determinative factor which is
manifested by overt acts from which it may be deduced that employee
has no more intention to work. The intent to discontinue the
employment must be shown by clear proof that it was deliberate and
unjustified.
2013-2015 SC CASES ON ABANDONMENT:
Vicente C. Tatel vs. JLFP Investigation Security Agency, Inc., et

al., G.R. No. 206942, 25 Feb 2015; see also: Essencia Q.
Manarpiis vs. Texan Philippines, Inc., et al. G.R. No. 197011, 28
Jan 2015. -- . The filing by an employee of a complaint for illegal
dismissal with a prayer for reinstatement is proof enough of his desire
to return to work; thus, negating the employers charge of
abandonment. An employee who takes steps to protest his dismissal
cannot logically be said to have abandoned his work.
.
Stanley Fine Furniture, et al. vs. Victor T. Gallano, et al. G.R.
190486, 26 Nov 2014. -- To terminate the employment of workers
simply because they asserted their legal rights is illegal. It
violates their right to security of tenure and should not be tolerated.
To prove abandonment, two elements must concur: a) Failure to
report for work or absence without valid or justifiable reason; and b)
A clear intention to sever the employer-employee relationship.
Absence must be accompanied by overt acts unerringly pointing to
the fact that the employee simply does not want to work anymore. The
filing of a complaint for illegal dismissal negates the allegation of
abandonment.
Concrete Solutions vs. Cabusas, G.R. No. 177812, 19 June 2013. -

Settled is the rule that mere absence or failure to report for work is not
tantamount to abandonment of work. Even the failure to report for
work after a notice to return to work has been served does not
necessarily constitute abandonment. In fact, when respondent
received petitioners' telegram stating that he was absent without
official leave and to notify CSI as soon as possible, he went to
petitioners premises but was refused entry for reason that he was
AWOL.
There is no showing of respondent's intent to sever the employer-

employee relationship. It is also notable that when respondent was
refused entry to petitioners' premises and the letter of former's
counsel was refused acceptance by the latter, there is already
126
constructive dismissal which led respondent to seek recourse by filing

an illegal dismissal case against petitioners.
Because Cabusas was a project employee, he could not be reinstated

because the project was already completed. However, since he was
terminated PRIOR to the completion of the project, he is entitled to be
paid salaries for the unexpired portion from time of illegal termination
to the date of the completion of the project.
MZR Industries vs. Colambot, G.R. No. 179001, 28 August 2013. --

In this case, the company issued a notice of suspension to the
employee, with directive to report to work on a given date. Company
claims that it never heard from employee until company received a
subpoena from the NLRC because employee had already filed a case
for illegal dismissal. Employee on the other hand claims constructive
termination, as he was allegedly made to choose between resigning
or termination.
Issues: Whether there was illegal dismissal? Whether there was

abandonment?
Decision: There was no illegal dismissal; however, there was no

abandonment either.
1. There was no illegal dismissal; documentary evidence reveals that

the employee was merely suspended with a directive to return to
work. However, employee could not be considered to have
abandoned his work because mere absence is not enough to
amount to abandonment, as in fact, he filed a case a few days
after he was supposed to have reported back to work.
2. REMEDY: These circumstances, taken together, the lack of

evidence of dismissal and the lack of intent on the part of the
respondent to abandon his work, the remedy is reinstatement
but without backwages. However, considering that
reinstatement is no longer applicable due to the strained
relationship between the parties and that Colambot already found
another employment, each party must bear his or her own loss,
thus, placing them on equal footing
2014 BAR QUESTION:
Luisa was hired as a secretary by the Asian Development Bank (ADB)

in Manila. Luisas first boss was a Japanese national whom she got
along with. But after two years, the latter was replaced by an arrogant
Indian national who did not believe her work output was in accordance
with international standards. One day, Luisa submitted a draft report
filled with typographical errors to her boss. The latter scolded her, but
Luisa verbally fought back. The Indian boss decided to terminate her
services right then and there. Luisa filed a case for illegal dismissal with
the Labor Arbiter claiming arbitrariness and denial of due process. If you
were the Labor Arbiter, how would you decide the case? (4%)
ANSWER:
I will decide the case in favor of Luisa, that she was illegally dismissed
without just cause or due process.
127
For one, the dismissal was arbitrary because it was whimsical in that it
was based on the Indians belief that Luisas output was not in
accordance with international standards without informing her priorily
what these standards are. For another, when Luisa verbally fought
back, the same cannot be considered as a serious misconduct that
would merit termination because it can be denominated as trivial as an
employee can be expected to answer when scolded. Moreover, the
typographical errors cannot be used as basis for her termination as
constituting neglect of duty because neglect of duties as a ground for
termination must not only be gross but also habitual. And finally, when
her Indian boss terminated her right then and there, the same is violate
of due process, depriving Luisa to the twin requirements of notice and
hearing.
2.1.4 FRAUD OR WILLFUL BREACH OF TRUST
a) Fraud: the deliberate and false representation of fact, despite knowledge

of its falsehood, in order to induce another who relied upon it and benefit
therefrom.
b) Elements of willful breach of trust leading to loss of trust and

confidence: (1) the breach must be willful and not ordinary breach
[hence, done knowingly and intentionally]; (2) employee holds a position
of trust and confidence; (3) must be in relation to the work performed; and
(4) there must exist substantial evidence, and should not be based on
mere surmises, speculations and conjectures.
c) IMPORTANT CASE: TWO CLASSES OF POSITIONS OF TRUST.

Abelardo Abel vs. Philex Mining Corporation, G.R. No. 178976, 31 July
2009.
The first class consists of managerial employees. They are defined as

those vested with the powers or prerogatives to lay down management
policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees or effectively recommend such managerial actions.
The second class consists of cashiers, auditors, property

custodians, etc.. They are defined as those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of
money or property.
As a general rule, employers are allowed a wide latitude of discretion in

terminating the employment of managerial personnel or those who, while
not of similar rank, perform functions which by their nature require the
employers full trust and confidence. Higher standards expected of
management vis ordinary rank-and-file.
d) Examples of Position of Trust, Non-Managerial
1. Coca Cola Route Salesman. - A route salesman falls under the

second class of position holding trust, inasmuch as he regularly
handled significant amounts of money and property in the normal and
routine exercise of his functions. There was a high degree of trust and
confidence reposed on him so that when this confidence was
breached, the employer was justified in taking the appropriate
disciplinary action. Moreover, the court ruled that Hormillosas act of
tampering sales invoices and issuing one with non-accredited store
could not have been performed without intent and knowledge on his
128
part; hence the breach of trust was willful. (Hormillosa vs. Coca Cola,
G.R. No. 198699, 09 September 2013).
2. Dining attendant.-- As may be readily gleaned from the records,

Episcope was employed by Philippine Plaza Hotel as a service
attendant in its Caf Plaza. In this regard, she was tasked to attend to
dining guests, handle their bills and receive their payments for
transmittal to the cashier. It is also apparent that whenever discount
cards are presented, she maintained the responsibility to take them to
the cashier for the application of discounts. Being therefore involved in
the handling of company funds, Episcope is undeniably considered an
employee occupying a position of trust and confidence and as such,
was expected to act with utmost honesty and fidelity. In the instant
case, it is clear that Episcope was remiss in her duty to carefully
account for the money she received from the cafe's guests.
(Philippine Plaza Holdings vs. Episcope, G.R. No. 192826, 27 Feb
2013.)
e) Examples of those not considered positions of trust and

confidence. --
Inventory comptroller or clerk. An inventory clerk who is not routinely

charged with the care and custody of Century Irons money or property is
not occupying a position of trust and confidence. As such, he could not be
held responsible for the shortages of gas cylinders and therefore, he
cannot be terminated on the ground of loss and trust and confidence.
(Century Iron Works Inc. vs. Baas, G.R. 184116, 19 June 2013.)
2012-2015 SC CASES ON FRAUD/LOSS OF TRUST:
1. IMPORTANT J. PRESBITERIO VELASCO CASE: Wesleyan University

Philippines v Nowella Reyes, G.R. No. 208321, 30 July 2014
Facts: Reyes was a highly confidential employee who handled significant

amounts of money as University Treasurer and that the irregularities
attributed to her in the performance of her duties justify her dismissal on
the basis of loss of trust and confidence. University placed her on
extended suspension of 60-days, for which reason she claimed to have
been constructively dismissed.
Issue: Whether or not she was validly dismissed
Decision: YES. In termination on account of loss of trust and confidence,

the the first requisite is that the employee concerned must be one holding
a position of trust and confidence, thus, one who is either: (1) a
managerial employee; or (2) a fiduciary rank-and-file employee, who, in
the normal exercise of his or her functions, regularly handles significant
amounts of money or property of the employer. The second requisite is
that the loss of confidence must be based on a willful breach of trust and
founded on clearly established facts. An employer cannot be compelled to
retain an employee who is guilty of acts inimical to the interests of the
employer. A company has the right to dismiss its employees if only as a
measure of self-protection. Respondent was not an ordinary rank-and-file
employee as she was no less the Treasurer who was in charge of the
coffers of the University. It would be oppressive to require petitioner to
retain in their management an officer who has admitted to knowingly and
intentionally committing acts which jeopardized its finances and who was
untrustworthy in the handling and custody of University funds.
129
2. Unilever vs. Ma. Ruby Rivera, G.R. No. 201701, 03 June 2013, where
Unilevers internal auditor conducted a random audit and found out that
there were fictitious billings and fabricated receipts supposedly from
Ventureslink amounting to P11,200,000.00. It was also discovered that
some funds were diverted from the original intended projects. Upon
further verification, Ventureslink reported that the fund deviations were
upon the instruction of Rivera. The employee admitted the fund diversion
but explained that such actions were mere resourceful utilization of
budget because of the difficulty of procuring funds from the head office.
Supreme Court decision: In this case, Rivera was dismissed from work
because she intentionally circumvented a strict company policy,
manipulated another entity to carry out her instructions without the
companys knowledge and approval, and directed the diversion of funds,
which she even admitted doing under the guise of shortening the
laborious process of securing funds for promotional activities from the
head office. These transgressions were serious offenses that warranted
her dismissal from employment and proved that her termination from work
was for a just cause. Hence, she is not entitled to a separation pay.
3. When NOT breach of trust and confidence; duties of employee.
James Ben L. Jerusalem v. Keppel Monte Bank, et al., G.R. No.

169564. April 6, 2011. -- Petitioner was employed as Assistant Vice-
President in respondent bank. His employment was terminated on the
ground of willful breach of trust and confidence for endorsing VISA card
applicants who later turned out to be impostors resulting in financial
losses to respondent bank. The Supreme Court held that petitioner was
illegally dismissed because the act of betrayal of trust, if any, must have
been committed by the employee in connection with the performance of
his function or position. The court found that the element of work-
connection was not present in this case since petitioner was
assigned under the Jewelry department, and therefore had nothing
to do with the approval of VISA Cards, which was under a different
department altogether.
4. QUESTION: MAY LENGTH OF SERVICE BE USED TO MITIGATE

PENALTY OF DISMISSAL FOR A FIRST TIME-OFFENDER OF AN
INFRACTION INVOLVING LOSS OF TRUST AND CONFIDENCE?
(Reynaldo Moya vs. First Solid Rubber, G.R. No. 184011, 18
September 2013)
ANSWER: NO. Where the infraction involves dishonesty and

pilferage, length of service is immaterial.
The general rule is that an employee terminated for just causes is not
entitled to separation pay except on grounds of equity and social justice.
Where the dismissal is based on willful breach by the employee of the
trust reposed in him by the employer, the supervisory employee Moya is
outside the protective mantle of the principle of social justice as his act of
concealing the truth from the company4 is a clear disloyalty to the
company which has long employed him. The defense of the infraction
being his first offense, and that he had no willful intention to conceal the
truth or cover up the mistake of his employee, is unavailing. His length
of service should be taken against him. Length of service is not a
4
Failure to report five tires damaged as a result of undercuring brought about by negligence of another employee.
130
bargaining chip that can simply be stacked against the employer. If

an employer has treated his employee well, has accorded him fairness
and adequate compensation as determined by law, it is only fair to expect
a long-time employee to return such fairness with at least some respect
and honesty.
To be sure, length of service is taken into consideration in imposing the

penalty to be meted an erring employee. However, the case at bar
involves dishonesty and pilferage by petitioner which resulted in
respondents loss of confidence in him. Unlike other just causes for
dismissal, trust in an employee, once lost is difficult, if not
impossible, to regain. The infraction that she committed, vis--vis her
long years of service with the company, reflects a regrettable lack of
loyalty which ought to have been strengthened, rather than betrayed.
(Bago vs. NLRC, Standard Insurance Co. Inc., G.R. No. 17000, 04 April
2007).
5. IMPORTANT CASES ON TERMINATION OF MANAGERS
5.1 IMPORTANT J. VELASCO CASE: Marilou Genuino vs. NLRC and

Citibank, G.R. No. 142732-33, 04 December 2007. While Citibank
miserably did not comply with due process in failing to identify with
particularity the irregular transations involving Global Pacific and
Citibank, as well as bank clients, the Supreme Court found that she
was validly terminated for just cause, for loss of trust and confidence
reposed upon her. As Asst Vice President of Citibanks Treasury
Department, Genuino was tasked to solicit investments and to create
peso/dollar deposits in relation thereto. She cannot feign ignorance
of bank policies, and the concomitant duty on her part to protect both
the Bank and its clients interests. As was found by the Supreme
Court, Genuino did not even dissuade the depositors from
withdrawing their monies from Citibank, and was even instrumental in
the transfer of money to a competing bank, using client companies in
the transfer..
5.2 MAY A BANK VALIDLY TERMINATE AN ASSISTANT BANK

MANAGER FOR LOSS OF TRUST AND CONFIDENCE ARISING
FROM GROSS NEGLIGENCE? (De Leon Cruz vs. BPI, G.R. No.
173357, 13 February 2013).
After 13 years of continuous service, BPI terminated the Assistant

Bank Manager on grounds of gross negligence and breach of trust,
for her failure to verify genuineness of a forged Letter of Instructions
allegedly issued by three depositors, resulting in illegal and spurious
withdrawals on their respective bank accounts.
In that regard, petitioner was remiss in the performance of her duty to

approve the pre-termination of certificates of deposits by legitimate
depositors or their duly-authorized representatives, resulting in
prejudice to the bank, which reimbursed the monetary loss suffered
by the affected clients. Hence, respondent was justified in dismissing
petitioner on the ground of breach of trust. As long as there is some
basis for such loss of confidence, such as when the employer has
reasonable ground to believe that the employee concerned is
responsible for the purported misconduct, and the nature of her
participation therein renders her unworthy of the trust and confidence
demanded of his position, a managerial employee may be
dismissed.
131
5.3 MANAGER WHO ALLEGES THAT HE IS MEDICALLY UNFIT TO

RETURN TO WORK AS YET, HAS TO PROVE THE SAME BY
COMPETENT EVIDENCE. FAILURE TO DO SO MAY LEAD TO
HIS VALID TERMINATION. (Wuerth Philippines. Vs Ynson, G.R.
No. 175932, 15 Feb 2012).
Respondent alleged in his letters dated July 21, 2003 and August 12,
2003 that he is not capable of returning to work, because he is still
undergoing medications and therapy. However, apart from the
clearance of respondent's doctors allowing him to return to work, he
has failed to provide competent proof that he was actually
undergoing therapy and medications. It is puzzling why despite
respondent's submission that he was still undergoing treatment in
July and August 2003, he failed to submit official receipts showing
the medical expenses incurred and physicians professional fees
paid by reason of such treatment. This casts serious doubt on the
true condition of the respondent during the prolonged period he was
absent from work and investigations, and as to whether he is still
suffering from any form of illness from July to August 2003.
Being the National Sales Manager, respondent should have

reported back to work or attended the investigations conducted by
petitioner immediately upon being permitted to work by his doctors,
knowing that his position remained vacant for a considerable length
of time. During his absence, nobody was performing the duties of
NSM, which included, among others, supervising and monitoring of
respondent's sales area which is vital to the companys orderly
operation and viability. He did not even show any sincere effort to
return to work. Since there is no more hindrance for him to return to
work and attend the investigations set by petitioner, respondent's
failure to do so was without any valid or justifiable
reason. Respondent's conduct shows his indifference and utter
disregard of his work and his employer's interest, and displays his
clear, deliberate, and gross dereliction of duties.
5.4 MANAGER VALIDLY TERMINATED ON ACCOUNT OF LOSS OF

TRUST AND CONFIDENCE ARISING FROM HUGE BUSINESS
LOSSES. MANAGER WAS GROSSLY NEGLIGENT IN ALLOWING
2,130 PCS OF CHICKEN JOY REJECTS TO BE KEPT INSIDE
FREEZER WITH OTHER PRODUCTS, CAUSING FOOD
CONTAMINATION AND THREAT TO FOOD SAFETY. (Cecilia
Manese vs. Jollibee Foods, G.R. No. 17-454, 11 October 2012.)
6. QUESTION: MAY AN EMPLOYEE BE DISMISSED FOR FRAUD IF THE

COMPANY DID NOT SUFFER FROM IT?
Answer: YES. In the case of Panuncillo vs. CAP, G.R. No. 161305, 09
February 2007 (Carpio-Morales), the employee caused the double sale of
her own childs CAP educational plan to different customers. Employee
argued that she cannot be terminated for loss of trust and confidence,
because CAP was not itself defrauded or been damaged by her actuations
relative to the multiple sale of her childs educational plan to customers.
The Supreme Court ruled that she may still be terminated for loss of trust
and confidence, because deliberate disregard or disobedience of rules by
the employees cannot be countenanced. The lack of resulting damage
was unimportant. Xxx. Damage aggravates the charge but its absence
does not mitigate nor negate the employees liability.
132
7. QUESTION: MAY AN EMPLOYEE BE DISMISSED FOR FRAUD

AND/OR DISHONESTY, EVEN IF HE DID NOT PERSONALLY
BENEFIT FROM IT?
Answer: YES. Pecuniary gain is not a necessary element for

terminations due to loss of trust and confidence. Even the return of
misappropriated funds will not negate valid dismissal for breach of
trust. This Court has held that misappropriation of company funds,
although the shortages had been fully restored, is a valid ground to
terminate the services of an employee of the company for loss of trust
and confidence. (Santos vs. San Miguel Corp., 254 SCRA 673 [1996]).
In the case of Dela Cruz V. Coca-Cola Bottlers (31 July 2009), an

employee was involved in a motor vehicle accident while driving Coca-
Cola vehicle without authorization. He was hospitalized in San Fernando,
La Union, where he was observed to have been under the influence of
alcohol. This was evidenced by a medical certificate and police report
secured by Coca-cola. Two friends of the employee (one was a
supervisor) secured a police report and medical certificate omitting any
reference to employee being drunk, for which they were charged with
DISHONESTY. After due process, they were dismissed and they
thereafter questioned the termination on the ground that: (a) they did not
occupy positions of trust and confidence; and (b) they did not benefit from
the fraud. The Supreme Court ruled that the supervisor and friend were
VALIDLY TERMINATED. By obtaining an altered police report and
medical certificate, petitioners deliberately attempted to cover up the fact
that Sales was under the influence of liquor at the time of accident. In so
doing, they committed acts inimical to company interest work-related
wilful breach of trust and confidence.
2.1.5 COMMISSION OF CRIME BY EMPLOYEE AGAINST

EMPLOYER
Torreda vs. Toshiba Info Equipment Phils. 515 SCRA 133 [Feb 2007]). --
This will also include false accusation by the employee of his immediate
superior of a crime such as robbery, as such is tantamount to serious
misconduct
Concepcion vs. Minex Import Corporation, etc., G.R. No. 153569, 24

January 2012, En Banc).-- Conviction of an employee in a criminal case is
not indispensable to warrant his dismissal by his employer (Mercury Drug
Corp. vs. NLRC, 177 SCRA 580 [1989], and the fact that a criminal
complaint against the employees has been dropped by the city fiscal is
not binding and conclusive upon a labor tribunal. (See also: Starlight
Plastic Industrial Corporation vs. NLRC, 171 SCRA 315 [1989].)
2.1.6 OTHER ANALOGOUS CAUSES
INCOMPETENCE
IMPORTANT 2014 CASE: International School Manila vs.

International School Alliance Of Educators (ISAE), G.R. No. 167286,
05 February 2014. -- Complainant taught Spanish classes for 12 years,
and took a one year break. Upon return to school, there was only one
class of Spanish available so she agreed to teach Filipino subjects. For
three consecutive years, her performance evaluation ranged from poor,
133
to needs improvement, to mixed (poor and needs improvement),

respectively. Thirty evaluations over three years were made on the
teacher, showing unsatisfactory performance. As such, School
terminated her services.
Ruling: In all cases involving termination of employment, the burden of

proving the existence of the just causes rests upon the employer. What
can be gathered from a thorough review of the records of this case is that
the inadequacies of the respondent as a teacher did not stem from a
reckless disregard of the welfare of her students or of the issues raised by
the School regarding her teaching. Far from being tainted with bad faith,
respondents failings appeared to have resulted from her lack of
necessary skills, in-depth knowledge, and expertise to teach the Filipino
language at the standards required of her by the School. The Court finds
that the petitioners had sufficiently proved the charge of gross
inefficiency, which warranted the dismissal of Santos from the School. -
2014 CASE: Dr. Phylis C. Rio vs. Colegio De Sta. Rosa Makati, G.R.
No. 189629, 06 Aug 2014. - Gross inefficiency and incompetence, and
negligence in the keeping of school or student records, or tampering with
or falsification of records. (See discussion on page 107).
IMMORALITY -
This has been defined as such conduct which conflicts with generally or
traditionally held moral principles. It is akin to the phrase moral
turpitude, the term implying something immoral in itself, regardless of
whether it is punishable by law or not.
IMPORTANT JANUARY 2015 CASE; CHERYLL LEUS VS ST.

SCHOLASTICA WESTGROVE, G.R. No. 187226, 28 Jan 2015 --
Termination of pregnant employee in Catholic schools. Position of school
re: academic freedom and religious nature of catholic schools to impose
higher standards of morality vs. strict implementation of Magna Carta of
Women. Supreme Court will decide in the light of secular morality, and
not religious morality. (See discussion of case on page 18).
Toledo vs. Toledo, 544 SCRA 27 [06 February 2008]; case on

common live-in relationships. The Court has previously defined
immoral conduct as that conduct which is willful, flagrant or shameless,
and which shows a moral indifference to the opinion of the good and
respectable members of the community. In disbarment cases however,
this Court has ruled that the mere fact of sexual relations between two
unmarried adults is not sufficient to warrant administrative sanction for
such illicit behavior. Whether a lawyers sexual congress with a woman
not his wife or without benefit of marriage should be characterized as
grossly immoral conduct will depend on the surrounding circumstances.
The Supreme Court further ruled that intimacy between a man and a
woman who are not married, where both suffer from no impediment to
marry, voluntarily carried on and devoid of any deceit on the part of the
respondent, is neither so corrupt as to constitute a criminal act nor so
unprincipled as to warrant disbarment or disciplinary against a member of
the Bar. As such, the Court cannot conclude that this act of
cohabiting with a woman and betting children by her without benefit
of marriage falls within the category of grossly immoral conduct.
134
CONSTRUCTIVE DISMISSAL
IMPORTANT J. PRESBITERIO VELASCO CASE ON SECURITY

GUARDS ON FLOATING STATUS: Exocet Security and Allied
Services Corporation and/or Ma. Teresa Marcelo vs Armando D.
Serrano, G.R. No. 198538; 29 September 2014
The floating status or temporary off-detail of security guards

employed by private security agencies is a form of temporary
retrenchment or lay-off. Temporary off-detail or the period of time
security guards are made to wait until they are transferred or
assigned to a new post or client does not constitute constructive
dismissal as their assignments primarily depend on the contracts
entered into by the security agencies with third parties. Off-
detailing is not equivalent to dismissal, so long as such status
does not continue beyond a reasonable time; when such a floating
status lasts for more than six months, the employee may be
considered to have been constructively dismissed.
The concept of off-detail has been defined as that period of time when
security guards are in between assignments or when they are made to
wait after being relieved from a previous post until they are transferred to
a new one. It takes place when the security agencys clients decide not to
renew their contracts with the agency, resulting in a situation where the
available posts under its existing contracts are less than the number of
guards in its roster. It also happens in instances where contracts for
security services stipulate that the client may request the agency for the
replacement of the guards assigned to it, even for want of cause, such
that the replaced security guard may be placed on temporary off-detail if
there are no available posts under the agencys existing contracts.
As the circumstance is generally outside the control of the security

agency or the employer, the Court has ruled that when a security guard is
placed on a floating status, he or she does not receive any salary or
financial benefit provided by law.
The placement of the employee on a floating status should not last for
more than six months. After six months, the employee should be recalled
for work, or for a new assignment; otherwise, he is deemed terminated.
To validly terminate a security guard for lack of service assignment for a

continuous period of six months under Secs. 6.5 and 9.3 of DO 14-01, the
security agency must comply with the provisions of Article 289 (previously
Art. 283) of the Labor Code, which mandates that a written notice should
be served on the employee on temporary off-detail or floating status and
to the DOLE one (1) month before the intended date of termination.
In every case, the Court has declared that the burden of proving that
there are no posts available to which the security guard may be assigned
rests on the employer.
If after the period of 6 months, the security agency/employer cannot

provide work or give assignment to the reserved security guard, the latter
can be dismissed from service and shall be entitled to separation pay
(viz., month for every year of service, but not less than 1 month pay).
Security guards on reserved status who accept employment in other
security agencies or employers before the end of the above six- month
period may not be given separation pay.
135
An employee has the right to security of tenure, but this does not give him
such a vested right in his position as would deprive the company of its
prerogative to change his assignment or transfer him where his service,
as security guard, will be most beneficial to the client.
Girly G. Ico vs. Systems Technology Institute, Inc., G.R. No. 185100,
09 July 2014. -- Transfer as illegal constructive dismissal. When another
employee is soon after appointed to a position which the employer claims
to have been abolished, while the employee who had to vacate the same
is transferred against her will to a position which does not exist in the
corporate structure, there is evidently a case of illegal constructive
dismissal. In cases of a transfer of an employee, the rule is settled that
the employer is charged with the burden of proving that its conduct and
action are for valid and legitimate grounds such as genuine business
necessity and that the transfer is not unreasonable, inconvenient or
prejudicial to the employee. If the employer cannot overcome this burden
of proof, the employees transfer shall be tantamount to constructive
dismissal. (citing Morales vs. Harbour Centre Port Terminal, Inc., G.R. No.
174208, January 25, 2012; 664 SCRA 110.)
McMer Corporation, Inc., et al. vs. NLRC, et al. G.R. No. 193421; 04
June 2014 - Constructive dismissal, Re: hostile and unreasonable
working conditions. The test of constructive dismissal is whether a
reasonable person in the employees position would have felt compelled
to give up his position under the circumstances. Based on the factual
consideration in the instant case, we hold that the hostile and
unreasonable working conditions of petitioner justified the finding of the
Labor Arbiter and the NLRC that petitioner was constructively dismissed.
(Aguilar vs. Burger Machine Holdings Corporation, 536 Phil. [2006]; underlining
supplied.) In fact, the employee who is constructively dismissed may be
allowed to keep on coming to work. (CRC Agricultural Trading vs. NLRC,
G.R. No. 177664, 23 December 2009; 609 SCRA 138.)
Emeritus Security and Maintenance Systems, Inc. vs. Dailig, G.R.

No. 204761, 02 April 2014. -- A floating status of a security guard for
more than 6 months constitutes constructive dismissal. The temporary
inactivity or floating status of security guards should continue only for 6
months. Otherwise, the security agency concerned could be liable for
constructive dismissal. The failure of petitioner to give respondent a work
assignment beyond the reasonable six-month period makes it liable for
constructive dismissal. (citing Nationwide Security and Allied Services, Inc. v.
Valderama, GR No 186614, 23 February 2011). Article 279 of the Labor
Code mandates the reinstatement of an illegally dismissed employee.
Thus, reinstatement is the general rule, while an award of separation pay
is the exception.
Gan vs. Galderma Phils. G.R. No. 177167, 17 January 2013. --

Constructive dismissal is defined as quitting or cessation of work
because continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution of pay and other
benefits. It exists if an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on the part of the
employee that it could foreclose any choice by him except to forego
his continued employment. There is involuntary resignation due to the
harsh, hostile, and unfavorable conditions set by the employer. The test
of constructive dismissal is whether a reasonable person in the
employee's position would have felt compelled to give up his
employment/position under the circumstances.
136
On the other hand, resignation is the voluntary act of an employee who

is in a situation where one believes that personal reasons cannot be
sacrificed in favor of the exigency of the service, and one has no other
choice but to dissociate oneself from employment. It is a formal
pronouncement or relinquishment of an office, with the intention of
relinquishing the office accompanied by the act of relinquishment. As the
intent to relinquish must concur with the overt act of relinquishment, the
acts of the employee before and after the alleged resignation must be
considered in determining whether he or she, in fact, intended to sever
his or her employment.
Burden of proof upon the employee who resigned, to prove

that it was NOT voluntary but forced upon him. Since Gan
submitted a resignation letter, it is incumbent upon him to prove with
clear, positive, and convincing evidence that his resignation was not
voluntary but was actually a case of constructive dismissal; that it is a
product of coercion or intimidation. He has to prove his allegations with
particularity. What the records of this case reveal is that Gan deliberately
wrote and filed a resignation letter that is couched in a clear, concise, and
categorical language. Its content confirmed his unmistakable intent to
resign. He was a managerial employee holding a responsible position and
receiving more than the mandated minimum wage. At the time he
resigned, he had more than a decade of experience in sales and
marketing with expertise in product management. Indeed, it would be
absurd to assume that he did not understand the full import of the words
he used in his resignation letter and the consequences of executing the
same.
PREVENTIVE SUSPENSION:
Preventive suspension is a disciplinary measure for the protection of the

companys property pending investigation of any alleged malfeasances or
misfeasance committed by the employee. While the Omnibus Rules limits
the period of preventive suspension to thirty (30) days, such time frame
pertains only to one offense by the employee. For an offense, it cannot
go beyond 30 days.
IMPORTANT J, VELASCO CASE: Smart Communications, Inc. , Mr.

Napoleon L. Nazareno, and Mr. Ricky P. Isla and Mr. Ricky P. Isla,
vs. Jose Leni Z. Solidum, G.R. No. 197763, 07 December 2015
Question: May a second preventive suspension be imposed on the

employee, on account of additional charges found against him?
Answer: YES. If the employee is charged with another offense, then the
employer is entitled to impose a preventive suspension not to exceed 30
days specifically for the new infraction. Indeed, a fresh preventive
suspension can be imposed for a separate or distinct offense. Thus,
an employer is well within its rights to preventively suspend an employee
for other wrongdoings that may be later discovered while the first
investigation is ongoing.
Smart was able to uncover other wrongdoings committed by Solidum

during the investigation for the initial charges against him. These newly
discovered transgressions would, thus, require an additional period to
investigate.
137
As earlier pointed out, the transactions covered by the 30-day preventive

suspension are different from that covered by the 20-day preventive
suspension. The latter suspension is not an "extension" and,
consequently, it is a miscue to award Solidum the payment of back
salaries and benefits corresponding to the 20-day preventive suspension
of Solidum.
2015 LABOR BAR QUESTION: (X)
Karina Santos is a famous news anchor appearing nightly in the country's

most watched newscast. She is surprised, after one newscast, to receive a
notice of hearing before the station's Vice-President for Human Resources
and calls the VP immediately to ask what was wrong. Karina is told over
the phone that one of her crew filed a complaint against her for verbal
abuse and that management is duty-bound to investigate and give her a
chance to air her side. Karina objects and denies that she had ever
verbally assaulted her crew. The VP then informed her that pending the
investigation she will be placed on a 30-day preventive suspension without
pay and that she will not be allowed to appear in the newscast during this
time. Is the preventive suspension of Karina valid? Discuss the reasons for
your answer. (4%)
Answer: No, the preventive suspension of Karina is not valid. The

employer may place an employee under preventive suspension if his/her
continued employment would pose a serious and imminent threat to the
life or property of the employer or of his/her co-employees. In this case,
these requirements are not present and hence, there appears to be no
sufficient basis to justify Karinas preventive suspension.
Alternative answer: Yes, the preventive suspension of Karina is justified

where Karinas continued employment poses serious and imminent threat
to the life or property of the employer or of Karinas co-workers.
Considering that the crew member had filed a case for verbal abuse
against Karina, it may be imposed so that the crew member may be
protected from further verbal abuse in the light of the impending
administrative investigation of Karina.
RESIGNATION
Voluntary resignation is defined as the act of an employee, who finds

himself in a situation in which he belies that personal reasons cannot be
sacrificed in favor of the exigency of the service; thus, he has no other
choice but to disassociate himself from his employment. (Alfaro vs. Court of
Appeals, 363 SCRA 799 [2001]).
General rule: An employee who voluntarily resigns is not entitled to

separation pay.
Exception: Unless stipulated in an employment contract or CBA or

sanctioned by established employer practice or policy.
(CJC Trading, Inc. vs. NLRC, 246 SCRA 724 [1995]; Alfaro vs.
Court of Appeals, 363 SCRA 799 [2001]).
2014 CASE: Chiang Kai Shek College v. Rosalinda M. Torres, G.R.

No. 189456, 02 April 2014 on voluntary resignation. -- Respondent
Torres was a grade school teacher at Chiang Kai Shek College. She was
terminated after being found guilty of leaking a copy of a quiz given to
138
Grade 5 students. To save face, respondent then requested the school

that she be suspended instead, and then allowed to finish the school
year. She promised in exchange that she will voluntarily resign thereafter.
School agreed, but after the school year ended, Torres filed an illegal
termination case with the NLRC, alleging constructive dismissal. The
Supreme Court decided in favor of the School, and noted that academic
dishonesty is the worst offense a teacher can make because teachers
caught committing academic dishonesty lose their credibility as educators
and cease to be role models for their students. The leaking and selling of
test questions is classified as a grave offense punishable by termination.
In imposing a lower penalty, the school should not be punished for being
compassionate and granting respondents request for a lower penalty.
TERMINATION DUE TO UNION SECURITY CLAUSE:
1. For valid termination on this ground, the following must be

proven by the employer --
a) the union security clause is applicable;

b) the union is requesting for the enforcement of the union
security provision in the CBA; and
c) there is sufficient evidence to support the Unions decision
to expel the employee from the union or company.
(Inguillo vs. First Philippines Scales, Inc., 588 SCRA 471 [2009];
See also: PICOP Resources, Inc. (PRI) vs. Anacleto Taneca et.
al, G.R. No. 160828, 09 August 2010).
2. May a union member be terminated from employment by the

company upon demand by the incumbent union pursuant to a
union security clause for "acts of disloyalty" for having signed
an authorization letter to file a petition for certification
election in favor of a rival union during the freedom
period while the CBA is still subsisting? (PICOP Resources, Inc. vs.
Tanega, et al., G.R. No. 160828, 09 August 2010).
Answer: NO. The mere signing of the authorization in support of the

Petition for Certification Election of FFW on March 19, 20 and 21, or
before the "freedom period," is not sufficient ground to terminate the
employment of respondents inasmuch as the petition itself was
actually filed during the freedom period.
Nothing in the records would show that respondents failed to maintain

their membership in good standing in the Union. Respondents did not
resign or withdraw their membership from the Union to which they
belong. Respondents continued to pay their union dues and never
joined the FFW.
Significantly, petitioner's act of dismissing respondents stemmed from

the latter's act of signing an authorization letter to file a petition for
certification election as they signed it outside the freedom period.
However, we are constrained to believe that an "authorization letter to
file a petition for certification election" is different from an actual
"Petition for Certification Election." Likewise, as per records, it was
clear that the actual Petition for Certification Election of FFW was filed
only on May 18, 2000. Thus, it was within the ambit of the freedom
period which commenced from March 21, 2000 until May 21, 2000.
Strictly speaking, what is prohibited is the filing of a petition for
certification election outside the 60-day freedom period. This is not
139
the situation in this case. If at all, the signing of the authorization to file
a certification election was merely preparatory to the filing of the
petition for certification election, or an exercise of respondents right to
self-organization
3. AUTHORIZED CAUSES FOR TERMINATION

(Art. 283-284, LC) Memory aid: DIRe2C
DISEASE 1 MO PAY OR MONTH

FOR EVERY YEAR OF
SERVICE
INSTALLATION OF LABOR 1FORMO PAY OR 1 MONTH
EVERY YEAR OF
SAVING DEVICES
SERVICE
RETRENCHMENT 1 MO PAY OR MONTH
FOR EVERY YEAR OF
SERVICE
REDUNDANCY 1 MO PAY OR 1 MONTH
FOR EVERY YEAR OF
SERVICE
CLOSURE NOT DUE TO 1FOR MO PAY OR MONTH
EVERY YEAR OF
SERIOUS BUSINESS LOSSES
SERVICE
3.1 DISEASE (separation pay of 1/2 month pay for every year of
service)
Employee must be suffering from a disease, and continued

employment is prohibited by law and/or is prejudicial to his health
and/or that of his co-employees;
Disease cannot cannot be cured within a period of six (6) months, and
said fact is certified by a competent public health authority
If curable, then employer cannot terminate but may ask employee to
take a leave; immediately upon restoration of normal health, employer
must reinstate employee to former position.
IMPORTANT NOTE: EMPLOYER MUST FURNISH EMPLOYEE TWO

(2) WRITTEN NOTICES ON TERMINATIONS DUE TO DISEASE
Marlo A. Deoferio v. Intel Technology Philippines, Inc.. And/Or Mike

Wentling, G.R. No. 202996, 18 June 2014. -- The Labor Code and its
IRR are silent on the procedural due process required in terminations
due to disease. Despite the seeming gap in the law, Section 2, Rule
1, Book VI of the IRR expressly states that the employee should be
afforded procedural due process in ALL CASES OF DISMISSALS. Al
In Sy v. Court of Appeals (446 Phil. 404 [2003]) and Manly Express, Inc.
v. Payong, Jr., (510 Phil. 818 [2005]), the Court finally pronounced the
rule that the employer must furnish the employee two written
notices in terminations due to disease, namely: (1) the notice to
apprise the employee of the ground for which his dismissal is sought;
and (2) the notice informing the employee of his dismissal, to be issued
after the employee has been given reasonable opportunity to answer
140
and to be heard on his defense. These rulings reinforce the State policy
of protecting the workers from being terminated without cause and
without affording them the opportunity to explain their side of the
controversy.
3.2 INSTALLATION OF LABOR SAVING DEVICES (sepn pay: 1

mo/yr of service)
Example: computerization of accounting and payroll system;

mechanization of assembly line, etc.
Presumption is that the employer does not have any serious business
losses, as to afford the purchase of labor-saving devices.
3.3 RETRENCHMENT (Sepn. Pay: 1/2 month pay for every year of
service)
Retrenchment is the termination of employment by the employer through

no fault of the employees, and is usually resorted to by the employer
primarily to avoid or minimize economic or business reverses during
periods of business recession, industrial depression, seasonal
fluctuations, re-organization or automation of the company operations.5
Where the employer suffers serious and actual business losses,
management has the final say as to whether it will continue to risk its
capital or not.6 However, the employer bears the burden to prove his
allegation of business losses.7
Elements for valid retrenchment:
Under Article 283 of the Labor Code, in conjunction with Section 2, Rule
XXIII of the Implementing Rules of the Labor Code, the following
elements must be strictly complied with in order that the retrenchment
may be considered as valid:
a) The losses expected should be substantial and not merely de

minimis in extent. --
b) The substantial losses apprehended must be reasonably imminent;
c) The retrenchment must be reasonable necessary and likely to
effectively prevent the expected losses; and
d) The alleged losses, if already incurred and the expected imminent
losses sought to be forestalled, must be proved by sufficient and
convincing evidence.8
This means that retrenchment must be reasonably necessary and is likely

to prevent business losses which, if already incurred, must be
substantial, serious, actual and real, OR if only expected , are
reasonably imminent as perceived objectively and in good faith by the
employer.
In addition, the employer should have taken other measures prior or

parallel to retrenchment to forestall losses, e.g., cut other costs. Thus,
the Supreme Court has ruled that the retrenchment undertaken by a
company to be invalid where it was shown that the company likewise
continued to dispense fat executive bonuses to its officers.
5
See: Sebuguero vs. NLRC, 248 SCRA 533 [1995].
6
San Pedro Hospital of Digos, Inc. vs. Secretary of Labor, 263 SCRA 98 [1996].
7
Guerrero vs. NLRC, 261 SCRA 301 [1996]
8
San Miguel Jeepney Services vs. NLRC, 265 SCRA 35 [1996]
141
2012-2015 SC CASES ON RETRENCHMENT
IMPORTANT LEONARDO-DE CASTRO 2012 CASE ON

RETRENCHMENT. Mindanao Terminal and Brokerage Service,
Inc. vs. Nagkahiusang Mamumuo sa Minterbo Southern
Philippines Federation of Labor, et al., G.R. No. 174300, 05 Dec
2012. -- The NLRC and the Court of Appeals found that the union
members/employees were not given work for more than six months
have elapsed. In Sebuguero vs NLRC, the Court noted that there is
no specific provision of law which treats of a temporary retrenchment
or layoff and provides for the requisites in effecting it or a period or
duration therefor. These employees cannot forever be temporarily
laid-off. To remedy this situation or fill the hiatus, Article 286 may be
applied but only by analogy to set a specific period that employees
may remain temporarily laid-off or in floating status. Six months is the
period set by law that the operation of a business or undertaking may
he suspended thereby suspending the employment of the employees
concerned. The temporary lay-off wherein the employees likewise
cease to work should also not last longer than six months. After six
months, the employees should either be recalled to work or
permanently retrenched following the requirements of the law,
and that failing to comply with this would be tantamount to
dismissing the employees and the employer would thus be liable
for such dismissal. Layoff is essentially retrenchment and under
Article 283 of the Labor Code, a retrenched employee is entitled to
separation pay equivalent to one (1) month salary or one-half (12)
month salary per year of service, whichever is higher.
Crispin B. Lopez vs. Irvine Construction Corp., et al.,G.R. No.

207253, 20 August 2014.; Retrenchment; temporary lay-off;
constructive dismissal. -- It is defined as the severance of
employment, through no fault of and without prejudice to the
employee, resorted to by management during the periods of business
recession, industrial depression, or seasonal fluctuations, or during
lulls caused by lack of orders, shortage of materials, conversion of the
plant to a new production program or the introduction of new methods
or more efficient machinery, or of automation. Elsewise, stated, lay-off
is an act of the employer of dismissing employees because of losses
in the operation, lack of work, and considerable reduction on the
volume of its business, a right recognized and affirmed by the Court.
However, a lay-off would be tantamount to a dismissal only if it is
permanent. When a lay-off is only temporary, the employment
status of the employee is not deemed terminated, but merely
suspended.
Temporary lay-off: Pursuant to Article 286 of the Labor Code, the

suspension of the operation of business or undertaking in a temporary
lay-off situation must not exceed six (6) months. Within the six-month
period, the employee should either be recalled or permanently
retrenched. Otherwise, the employee would be deemed to have been
dismissed, and the employer held liable therefore. In invoking Article
286 of the Labor Code, the paramount consideration should be the
dire exigency of the business of the employer that compels it to
put some of its employees temporarily out of work This means
that the employer should be able to prove that it is faced with a clear
and compelling economic reason which reasonably forces it to
temporarily shut down its business operations or a particular
142
undertaking, incidentally resulting to the temporary lay-off of its

employees. Absent any dire exigency justifying failure to give the
employee further assignment, the only logical conclusion is that he
has been constructively dismissed.
G.J.T. Rebuilders Machine Shop, et al. vs. Ricardo Ambos, et al.,

G.R. No. 174186, 28 Jan 2015; Proving serious business
reverses. -- To prove serious business losses, employer must
present in evidence financial statements showing the net losses
suffered by the business within a sufficient period of time. Generally, it
cannot be based on a single financial statement showing losses.
Absent this proof, employers closing their business must pay the
dismissed employees separation pay equivalent to one-month pay or
at least one-half-month pay for every year of service, whichever is
higher. Should employer fail to comply with Article 283 of the Labor
Code on the notice requirement, employer must also pay the
dismissed employees nominal damages.
Virgilio Anabe vs. AsiaKonstruct, G.R. No. 183233, 23 December

2009; financial statements as proof of serious business losses. --
Anabe was a radio technician operator who was retrenched on
account of alleged serious business reversal. Labor Arbiter for
complainant, on account of failure of company to prove serious
business losses. On appeal to NLRC, company submitted financial
statement, and as such, NLRC reversed the Labor Arbiters ruling. .
Supreme Court ruling as to financial statement. While NLRC

may receive evidence on appeal, note that the burden of proof is upon
the employer. Company inexplicably submitted financial statements
TWO YEARS after the case was filed and pending, and ONLY AFTER
it had received the adverse decision of the Labor Arbiter. The delay in
the submission of the evidence should be clearly explained and
should adequately prove the employers allegations of the cause of
termination. In this case, Asiakonstruct proferred no explanation
behind the belated submission. Moreover, the financial statements
covering period 1998-2000 was prepared only in 2001 which begs
the question of how the management knew at such date of the
companys huge losses to justify Anabes retrenchment in 1999.
Lastly, SEC certification that no financial statements were submitted
for the period 1998-2000, and 2003-2005, thereby lending credence
to Anabe;s theory that the financial statements submitted on appeal
may have been fabricated. Indeed, AsiaKonstruct could have easily
submitted its financial statements during the pendency of the
proceedings at the arbitral level.
3.4 REDUNDANCY (Sepn pay: 1 mo/yr of service)
Redundancy is akin to retrenchment and is another authorized cause for

the termination of employees under Article 283 of the Labor Code,
through no fault of the latter. Under this circumstance, the employer
may thus validly terminate the employee because he has no legal
obligation to keep in his payroll more employees than are necessary
for the economical operation of the business.9
Redundancy exists where the services of an employee are in excess of

what is reasonably demanded by the actual requirements of the business
operations. Succinctly stated otherwise, a position may be declared
9
Wiltshire File Co. Inc. vs. NLRC, G.R. No. 82249 [07 February 1991].
143
redundant and the employee terminated where his position has become
superfluous or is a duplication of work, viz., caused by overhiring of
workers, decreased volume of business, dropping of a particular product
line or service activity.
IMPORTANT LEONARDO-DE CASTRO CASE on redundancy. Nelson

A. Culili v. Eastern Telecommunications Philippines, Inc., et al. G.R.
No. 165381, 09 February 2011. -- Respondent-company, due to
business troubles and losses, implemented a Right-Sizing Program which
entailed a company-wide reorganization involving the transfer, merger,
absorption or abolition of certain departments of the company. As a
result, respondent-company terminated the services of petitioner on
account of redundancy. Petitioner filed a complaint against respondent-
company and its officers for illegal dismissal, unfair labor practice, and
money claims.
The Court ruled that petitioner was validly dismissed. The Court has been
consistent in holding that the determination of whether or not an
employees services are still needed or sustainable properly
belongs to the employer. Provided there is no violation of law or a
showing that the employer was prompted by an arbitrary or malicious act,
the soundness or wisdom of this exercise of business judgment is not
subject to the discretionary review of the Labor Arbiter and the NLRC.
However, an employer cannot simply declare that it has become

overmanned and dismiss its employees without producing adequate
proof to sustain its claim of redundancy. Among the requisites of a
valid redundancy program are: (1) the good faith of the employer in
abolishing the redundant position; and (2) fair and reasonable criteria in
ascertaining what positions are to be declared redundant, such as but not
limited to: preferred status, efficiency, and seniority. The Court also held
that the following evidence may be proffered to substantiate redundancy:
adoption of a new staffing pattern, feasibility studies/ proposal on the
viability of the newly created positions, job description and the approval
by the management of the restructuring.
However, it failed to provide the Department of Labor and

Employment with a written notice regarding petitioners termination.
The notice of termination was also not properly served on the
petitioner. Further, a reading of the notice shows that respondent-
company failed to properly inform the petitioner of the grounds for his
termination. While employers have the right to terminate employees it
can no longer sustain, our laws also recognize the employees right to be
properly informed of the impending termination of his
employment. Though the failure of respondent-company to comply
with the notice requirements under the Labor Code did not affect the
validity of the dismissal, petitioner is however entitled to nominal
damages in addition to his separation pay.
3.5 CESSATION OR CLOSURE OF EMPLOYERS BUSINESS (1/2

month pay for every year of service)
An employer is not prevented from exercising its prerogatives to close

shop so long as it is done in good faith to advance its interests, and not
for the purpose of defeating or circumventing the rights of the employees.
(Angeles vs. Polytex Design, 536 SCRA 159 [Oct 2007]).
144
Where the closure of business was done in bad faith, viz., no actual sale
transpired, then there is no closure or cessation of business that can
serve as an authorized cause for the dismissal of respondents. In this
case, there was no change of ownership and continuously operated
under the same name, franchises and routes and under the same
circumstances as before the alleged sale. (Peafrancia Tours and Travel
Transport, Inc. vs. Joselito P. Sarmiento and Ricardo S. Catimbang, G.R. No.
178397, 20 October 2010).
IMPORTANT CASE ON GUIDELINES IN CLOSURE OF

BUSINESS:
The Supreme Court made the following summary of principles and

guidelines in the case of Manila Polo Club Employees Union (MPCEU-
FUR-TUCP) vs. Manila Polo Club, G.R. No. 172846, 24 July 2013, as
follows:
1. Closure or cessation of operations of establishment or

undertaking may either be partial or total.
2. Closure or cessation of operations of establishment or

undertaking may or may not be due to serious business losses
or financial reverses. However, in both instances, proof must be
shown that: (1) it was done in good faith to advance the
employer's interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid
agreement; and (2) a written notice on the affected employees
and the DOLE is served at least one month before the intended
date of termination of employment.
3. The employer can lawfully close shop even if not due to serious
business losses or financial reverses but separation pay, which
is equivalent to at least one month pay as provided for by
Article 283 of the Labor Code, as amended, must be given to
all the affected employees.
4. If the closure or cessation of operations of establishment or

undertaking is due to serious business losses or financial
reverses, the employer must prove such allegation in order to
avoid the payment of separation pay. Otherwise, the affected
employees are entitled to separation pay.
5. The burden of proving compliance with all the above-stated falls

upon the employer.
Guided by the foregoing, the Court shall refuse to dwell on the issue of
whether respondent was in sound financial condition when it resolved to
stop the operations of its F & B Department. As stated, an employer can
lawfully close shop anytime even if not due to serious business losses or
financial reverses. Furthermore, the issue would entail an inquiry into the
factual veracity of the evidence presented by the parties, the
determination of which is not Our statutory function. Indeed, petitioner is
asking Us to sift through the evidence on record and pass upon whether
respondent had, in truth and in fact, suffered from serious business
losses or financial reverses.
145
2012-2015 SC CASES ON CLOSURE
Navotas Shipyard Corporation Vs. Innocencio Montallana et.al.,

G.R. No. 190053, 2014. -- Closure due to serious business reverses:
the right of employees to procedural due process; otherwise, nominal
damages
DOCTRINE: In case of closure or cessation of operation of

establishments or undertaking due to serious business losses or
financial reverses, a company is NOT legally bound to give the
employees separation pay. But the right of employees to procedural
due process should always be complied with. Failure to comply with
any legal requirements shall be valid reason for the Court to render the
company liable for nominal damages, the amount of which is left to the
Courts sound discretion.
The company failed to comply with the legal requirement of providing

individual written notices of the companys temporary shutdown or of
its closure. Such failure does not invalidate the termination but it does
make them liable for nominal damages for violation of the right of the
employees to procedural due process. The amount is address to the
sound discretion of the court. (NOTE: Agabon vs. NLRC, Jaka Food
Processing Corp. vs. Pacot and Industrial Timber Corp. vs. Ababon).
2014 CASE: Benson Industries Employees Union-ALU-TUCP et al

vs. Benson Industries, G.R. No. 200746, 06 August 2014. Closure
due to serious business reverses, no separation pay; unless otherwise
provided for by contract (CBA).
Question: May the Benson company refuse payment of Separation

pay per CBA, in the light of serious business reverses?
Answer: NO. Even if Company experienced serious business

reverses, it has agreed to pay separation pay in the CBA. It is
therefore bound by its contractual obligation.
While serious business losses generally exempt the employer from

paying separation benefits, it must be pointed that the exemption only
pertains to the obligation of the employer under Article 297 of the
Labor Code. This is because of the laws express parameter that
mandates payment of separation benefits in case of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses. To reiterate, an
employer which closes shop due to serious business losses is
exempt from paying separation benefits under Article 297 of the
Labor Code for the reason that the said provision explicitly
requires the same only when the closure is not due to serious
business losses; conversely, the obligation is maintained when
the employers closure is not due to serious business losses. For
a similar exemption to obtain against a contract, such as a CBA, the
tenor of the parties agreement ought to be similar to the laws tenor.
When the obligation to pay separation benefits, however, is not

sourced from law (particularly, Article297 of the Labor Code), but from
contract, such as an existing collective bargaining agreement between
the employer and its employees, an examination of the latters
146
provisions becomes necessary in order to determine the governing

parameters for the said obligation.
In this case, the Whereas clauses of the MOA indicate that

BENSON KNEW OF ITS DISTRESSED FINANCIAL CONDITION AS
EARLY AS THE PREVIOUS CBA. It even admits in its Comment
that it was saddled with bank loans as early as 1997 and unable
to service its loan obligations. The above distressed financial
condition notwithstanding, Benson still executed the CBA with
the Union and as such, will be bound by it.
Thus, when the parties, however, agree to deviate therefrom, and

unqualifiedly covenant the payment of separation benefits irrespective
of the employers financial position, then the obligatory force of that
contract prevails and its terms should be carried out to its full effect.
Verily, it is fundamental that obligations arising from contracts have
the force of law between the contracting parties and thus should be
complied with in good faith; and parties are bound by the stipulations,
clauses, terms and conditions they have agreed to, the only limitation
being that these stipulations, clauses, terms and conditions are not
contrary to law, morals, public order or public policy. Hence, if the
terms of a CBA are clear and there is no doubt as to the intention of
the contracting parties, the literal meaning of its stipulations shall
prevail.
2014 CASE: Eric Godfrey Stanley Livesey vs. Binswanger

Philippines, Inc., G.R No. 177493, 19 March 2014. -- Where closure
is done in bad faith; doctrine of piercing veil of corporate fiction
used. Where a new corporation is formed and used for a non-
legitimate purpose (viz., evasion of a just and due obligation of the old
corporation to pay its employee Livesey his monetary entitlements
under a compromise agreement), then the wrongful intent should not
be condoned. The new corporation should be held liable for the closed
corporations unfulfilled obligations to the latters employee Livesey.
It has long been settled that the law vests a corporation with a
personality distinct and separate from its stockholders or members. In
the same vein, a corporation, by legal fiction and convenience, is an
entity shielded by a protective mantle and imbued by law with a
character alien to the persons comprising it. Nonetheless, the shield
is not at all times impenetrable and cannot be extended to a point
beyond its reason and policy. Circumstances might deny a claim
for corporate personality, under the doctrine of piercing the veil
of corporate fiction.
In the present case, we see an indubitable link between CBBs closure

and Binswangers incorporation. CBB ceased to exist only in name; it
reemerged in the person of Binswanger for an urgent purpose to
avoid payment by CBB of the last two installments of its monetary
obligation to Livesey, as well as its other financial liabilities. Freed of
CBBs liabilities, especially that owing to Livesey, Binswanger can
continue, as it did continue, CBBs real estate brokerage business.
2013 CASE: SKM Arts vs. Bauca, G.R. No. 171272,17 November
2013. -- temporary suspension of operations (Art. 286, Labor Code).
The bona fide suspension of operations of a business or undertaking

for a period not exceeding six (6) months or the fulfillment by
employee of military or civic duty shall not terminate employment.
147
Employer may validly suspend operations for a period not exceeding

6 months, as in this case, where a fire caused the total destruction of
the company premises and company incurred in damage amouting to
P22 Million. Employees are on no-work, no-pay during this 6-month
period. However, at the end of the said 6-month period, the employer
is obliged to recall employees back to work. Failing such, the
employees are deemed to been constructively dismissed, for which
reason they are thus entitled to payment of separation pay in
accordance with law.
IMPORTANT CASE: What is the effect of corporate rehabilitation

upon monetary claims. Philippine Airlines, Inc. vs. Reynaldo V.
Paz, G.R. No. 192924, 26 Nov 2014. -- In the light of the fact that
PALs failure to comply with the reinstatement order was justified by
the exigencies of corporate rehabilitation, the respondent may no
longer claim salaries which he should have received during the period
that the LA decision ordering his reinstatement is still pending appeal
until it was overturned by the NLRC. Thus, the CA committed a
reversible error in recognizing the respondents right to collect
reinstatement salaries albeit suspending its execution while PAL is
still under corporate rehabilitation.
2015 LABOR BAR QUESTION: (XII)
Blank Garments, Inc. (BLANK), a clothing manufacturer, employs more

than 200 employees in its manufacturing business. Because of its high
overhead, BLANK decided to sell its manufacturing business to Bleach
Garments, Inc. (BLEACH) lock, stock and barrel which included goodwill,
equipment, and personnel. After taking on BLANK's business, BLEACH
reduces the workforce by not hiring half the workers specifically the ones
with seniority. BLANK and BLEACH are still discerned to be sister
companies with identical incorporators. The laid-off employees sue both
BLANK and BLEACH for unlawful termination.
(a) How would you decide this case? (4%)
(b) What is the "successor employer" doctrine? (2%)
Answer:
(a) I will decide the case by using the doctrine of piercing the corporate
veil, and uphold the employees. I will adduce evidence to show that
BLEACH is merely an alter ego of BLANK; that the former is merely a
farce since it is merely an alter ego or business conduit of the latter.
Considering that BLANK and BLEACH are sister companies with identical
incorporators, it can be said that latter is so organized and controlled and
its merely an instrumentally, agency, conduit or adjunct of the former.
(Sarona vs. NLRC, G.R. No. 185280, 18 January 2012.)
(b) The successor employer doctrine is one where the transferee or

acquirer of an enterprises assumes the latters obligations and liabilities in
case the transferee or acquiror: 1) Expressly assumes such obligations
and liabilities; or 2) Where the transaction between the parties is clothed
or colored with bad faith. (Sundowner Development Corp. vs. Drilon, 180
SCRA 141 [1989]). Otherwise, the general rule is that the successor is
not bound to recognize the predecessors bargaining agent nor is it liable
under previous contracts, which are in personam. (E. Razon, Inc. vs.
Secretary of Labor, G.R. No. 85867, May 13, 1993)
148
5. PROCEDURE FOR TERMINATION:

5.1 GENERAL RULE:
The twin requirements of NOTICE and HEARING are the essential

elements of due process in termination cases, which cannot be
dispensed with without violating the constitutional right to due process
IMPORTANT J. VELASCO CASE: NOTICE REQUIREMENT, MUST

SUBSTANTIATE INFRACTION, GENERAL NARRATIVE NOT
SUFFICIENT. King of Kings Transport vs. Mamac, 526 SCRA116 (29
Jun 2008. --
(a) Employee must be given FIVE (5) CALENDAR DAYS within which to
explain, as reasonable opportunity within which the employee may
adequately study and prepare for his defense, seek legal counsel or
union representation, gather evidence and look for witnesses to testify in
his behalf.
(b) In order to intelligently prepare the employees for their explanation

and defenses, the notice should contain a detailed narration of the
facts & circumstances that will serve as the basis for the charge against
the employee a general description of the change will not suffice.
EXCEPTION: If no due process but with just cause, then Agabon

ruling to apply.
The denial of the fundamental right to due process being apparent, the
dismissal order in disregard of that right is void for lack of jurisdiction. The
cardinal precept is that where there is a violation of basic constitutional
rights, courts are ousted from their jurisdiction. The violation of a partys
right to due process raises a serious jurisdictional issue which cannot be
glossed over or disregarded at all. It is well settled that a decision
rendered without due process is void ab initio and may be attacked
at any time directly or collaterally be means of a separate action, or
by resisting such decision in any action or proceeding where is it
invoked. (Salva vs. Valle, G.R. No. 193773, 02 April 2013; En Banc,
citations omitted.)
5.2 ILLEGALITY OF THE ACT OF DISMISSAL - DISMISSAL

WITHOUT JUST CAUSE:
Remedies under the Labor Code:
1. Reinstatement to his former position without loss of seniority rights.

If no longer available nor any equivalent position, then separation
pay to be given in lieu or reinstatement computed 1 month pay for
every year of service.
2. Payment of FULL backwages corresponding to the period from his

illegal dismissal up to actual reinstatement.
3. Damages plus attorneys fees.
149
5.3 ILLEGALITY IN THE MANNER OF DISMISSAL - DISMISSAL

WITHOUT DUE PROCESS: (WENPHIL, SERRANO AND
AGABON RULING)
In any event, NO REINSTATEMENT. However, as regards penalty for

non-compliance with due process requirements, the newest Supreme
Court ruling circa November 2004 is that the employer shall be sanctioned
with penalty of P30,000.00 in accordance with the Agabon vs. NLRC case,
which now affirms the Wenphil doctrine and abandoning the Serrano
ruling.
Agabon vs. NLRC ruling, G.R. No. 158693, 11/17/2004 (for terminations
occurring after 17 November 2004) The Supreme Court has apparently
abandoned the Serrano ruling and reverted to the Wenphil ruling, insofar
as it ruled that in cases where there was substantial evidence proving just
cause BUT that due process was not followed, the termination will be
UPHELD (considered valid and effective) but the employee will be
penalized the amount of P30,000.00-50,000.00 (see discussion on
difference below).
The Supreme Court stated that it would not be right to order either
reinstatement of the dismissed employee or the payment of backwages to
the employee. But for failing to comply with the procedure prescribed by
law in terminating the services of the employee, the employer should be
made liable for the payment of separation pay.
Difference in separation pay.-- (Jaka Food Processing v. Pacot, G.R.

No. 151378; 28 March 2005)
If the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to
be imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the employee.
Hence: P30,000.00 nominal damages for non-compliance with
due process, because employee has committed an infraction
On the other hand, if the dismissal is based on an authorized cause

under Article 283 but the employer failed to comply with the notice
requirement, the sanction should be stiffer because the dismissal
process was initiated by the employers exercise of his management
prerogative. Hence, P50,000.00 nominal damages for non-
compliance with due process, because employee did not commit
anything wrong but that the termination was due to an exercise
of management prerogatives.
Should employee seek damages on this account, may file with regular
court. [Governed exclusively by the Civil Code. (Shoemart vs. NLRC,
supra.)]
2014 CASES ON DISMISSALS FOR JUST CAUSE BUT WITHOUT

DUE PROCESS
Libcap Marketing Corp., et al, v. Lanny Jean B. Baquial, G.R. No.

192011, 30 June 2014. -- Valid cause for dismissal but no due process
(prejudged guilty of embezzlement as amount deducted each payday
even prior to investigation).
150
The CA, the NLRC and the Labor Arbiter are correct in concluding that
respondent was denied due process, but their reasons for arriving at
such conclusion are erroneous. What they seem to have overlooked is
that respondents case has been pre-judged even prior to the start of the
investigation on July 28, 2003. By pre-judging respondents case,
petitioners clearly violated her right to due process from the very
beginning, and from then on it could not be expected that she would
obtain a fair resolution of her case. In a democratic system, the infliction
of punishment before trial is fundamentally abhorred. What petitioners
did was clearly illegal and improper.
The only issue that remains to be tackled is the correctness of the award
of nominal damages. Petitioners claim that respondent is not entitled to
financial assistance given that she is guilty of theft or embezzlement.
The law and jurisprudence, on the other hand, allow the award of
nominal damages in favor of an employee in a case where a valid
cause for dismissal exists but the employer fails to observe due
process in dismissing the employee. Financial assistance is granted
as a measure of equity or social justice, and is in the nature or takes the
place of severance compensation.
Nancy S. Montinola vs. Philippine Airlines, G.R. No. 198656, 08

September 2014. - llegally suspended employees, similar to illegally
dismissed employees, are entitled to moral damages when their
suspension is attended with mental anguish, fright, serious anxiety,
besmirched reputation, and wounded feelings (Article 2217, Civil Code);
exemplary damages when the suspension is effected in a wanton,
oppressive or malevolent manner; and attorneys fees when the
employee is compelled to litigate and incur expenses to protect his
interest (Article 2208, Civil Code).
6. ON NOTICE AND HEARING

Dept. Order No. 10, Article V; IRR B5 R14 S1-11
6.1 TWO NOTICES REQUIRED:
1ST NOTICE: NOTICE OF APPRAISAL, which is a written notice

served on the employee specifying the ground or grounds of
termination, and giving the employee reasonable opportunity within
which to explain his side
The first notice should contain a detailed narration of facts and

circumstances that will serve as basis for the charge against the
employee. A general description of the charge will not suffice. The
notice should specifically mention which company rules, if any, are
violated. (King of Kings Transport vs. Mamac, 526 SCRA 116 [29
June 2007]), and that the employer seeks dismissal for the act or
omission charged against the employee; otherwise; the notice does
not comply with the rules. (Magro Placement vs. Hernandez, 526
SCRA 408 [04 July 2007])
QUESTION: HOW SPECIFIC SHOULD THE SHOW

CAUSE/CHARGE SHEET (PLEASE EXPLAIN MEMO) BE?
Answer: It should be specific enough to allow the employee to be

informed of the charges against her.
151
Hence, in the case of Unilever vs. Ma. Ruby Rivera (ibid., G.R.
201701, 03 June 2013) where the Supreme Court found that there
were valid grounds to terminate her from employment, the Court still
awarded nominal damages to the employee for failure of the employer
Unilever to comply with the procedural requirements of due process.
Thus:
In this case, Unilever was not direct and specific in its

first notice to Rivera. The words it used were couched
in general terms and were in noway informative of the
charges against her that may result in her dismissal
from employment. Evidently, there was a violation of
her right to statutory due process warranting the
payment of indemnity in the form of nominal damages.
QUESTION: Is the employer required to inform the employee in

the appraisal/charge sheet that he may be terminated for the
infraction?
ANSWER: NO. Contrary to Esguerras allegation, the law does not

require that an intention to terminate ones employment should be
included in the first notice. It is enough that employees are properly
apprised of the charges brought against them so they can properly
prepare their defenses; it is only during the second notice that
the intention to terminate ones employment should be
explicitly stated. Dolores T. Esguerra vs. Valle Verde Country
Club et. al., G.R. No. 173012, 13 June 2012
ON REASONABLE OPPORTUNITY: This means every kind of

assistance that management must accord to the employees to enable
them to prepare adequately for their defense. This should be construed
as a period of FIVE (5) CALENDAR DAYS from receipt of notice to give
the employees an opportunity to study the accusation against them,
consult a union official or lawyer, gather data and evidence, and decide
on the defenses they will raise against the complaint. (King of Kings
Transport, ibid.)
2ND NOTICE: NOTICE OF TERMINATION, which is a written notice of

termination served upon the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to
justify his termination.
6.2 HEARING:
The existence of a formal trial-type hearing, ALTHOUGH PREFERRED, is

NOT absolutely necessary to satisfy an employees right to be heard.
(Esguerra vs. Valle Verde Country Club, 672 SCRA 177 [2012]). --
a hearing or a conference during which the employee concerned, with

the assistance of counsel if he so desires, is given the opportunity to
respond to the charge, to present his evidence, or to rebut the
evidence presented against him.
note that a formal hearing (as in the manner of regular courts) is not
required; only substantial evidence is necessary.
152
There is no necessity for a formal hearing where an employee admits

responsibility for the alleged misconduct. It is sufficient that she be
informed of the findings of management and the basis of its decision
to dismiss her.
6.3 Right to counsel on the part of the employee is this mandatory and
indispensable as part of due process?
NO. In the case of Lopez vs. Alturas Group, 11 April 2011, the Supreme
Court ruled that the right to counsel and the assistance of one in
investigations involving termination cases is neither indispensable nor
mandatory, except when the employee himself requests for one or that he
manifests that he wants a formal hearing on the charges against him.
7. BURDEN OF PROOF RESTS UPON THE EMPLOYER
The employer must show that the dismissal of the employee is for just cause.
Failure to do so means that the dismissal is not justified and the employee is
entitled to reinstatement. In fact, as early as the case of Century Textile Mills vs.
NLRC [G.R. No. 77859, 25 May 1988], a finding of the employees participation
in the criminal conspiracy cannot be made to rest solely on the unilateral
declaration of one who is himself a confirmed co-conspirator. The co-
conspirators confession must be corroborated by other competent and
convincing evidence.
8. ON REINSTATEMENT:
Reinstatement means the admission of an employee back to work prevailing

prior to his dismissal; restoration to a state or position from which one had
been removed or separated, which presupposes that there shall be no
demotion in rank and/or diminution of salary, benefits and other privileges; if
the position previously occupied no longer exists, the restoration shall be to a
substantially equivalent position in terms of salary, benefits and other
privileges (Banares vs. Tabaco Transport [Velasco case see below] citing
Pfizer, Inc. vs. Velasco, G.R. No. 177467, March 9, 2011).
Where the former position is no longer available, the employee must be

reinstated to an equivalent position.
Where the reinstatement is no longer viable in view of the strained relations

between the employer and employee, or if the employee decides not to be
reinstated, the employer shall pay him separation pay in lieu of reinstatement
IMPORTANT J. VELASCO CASE ON REINSTATEMENT: Banares vs.

Tabaco Womens Transport Service Cooperative, G.R. No. 197353, 01
April 2013. Where the reinstatement of the employee (as general manager
of TAWTRASCO) was not a real, bona fide reinstatement in the context of the
Labor Code and pertinent decisional law, then the employee is entitled to
backwages from the time that he was allegedly reinstated to the finality of
the decision PLUS separation pay in view of strained relations and damages.
Facts: General Manager had already previously won his illegal termination
case with the Labor Arbiter when TWTSC did not appeal case to the NLRC
anymore. Company agreed to pay backwages but due to strained
relationship, offered to pay General Manager separation. General Manager
153
rejected the offer, and in a Compromise Agreement, both parties agreed to

reinstatement and payment of backwages in installment. Upon reinstatement
however, General Manager was required to report to Virac Catanduanes field
office, purportedly to fix its flagging operations and management problems.
General Manager went ahead despite his misgivings, and gave a written
report making recommendations for rehabitiliation and improvemet of Virac
terminal facilities and operations PLUS request for monthly allowance of
P1,700 for lodging and food for the duration of the stay in Virac. Company
approved rehabilitation plan but denied monthly allowance. General Manager
was given only an allocation of P3,000.00 subject to liquidation. Upon
inspection by a company officer and a Board Director in Virac, it was found
out that General Manager was no longer reporting for work. Company asked
General Manager to explain; and General Manager raised his various
grievances that his reinstatement to the position was NOT bona fide but
artificial, fake, fictitious and a sham kind of return to work order. I regret to
say it so on the following grounds: x x x (4) The place of work x x x was
completely devoid of any office materials and equipments needed in the
nature of my work. To put in details there was no office table and chairs, no
filing cabinets for safekeeping of important documents, no ball-pens, no bond
papers etc. x x x [T]here is nothing at all in said place of work for me to say
that there was really an office of the General Manager.
Questions: Was there a proper and genuine reinstatement of petitioner to his

former position of General Manager of TAWTRASCO without loss of seniority
rights and privileges? Was the petitioners refusal to report in the Virac
terminal constitutive of abandonment?
Answer: NO for both issues . The reinstatement of petitioner as general

manager of TAWTRASCO, was not a real, bona fide reinstatement in the
context of the Labor Code and pertinent decisional law. As such, Petitioners
refusal, during the period material, to report for work at the Virac terminal
does not, without more, translate to abandonment.
Ratio Decidendi:
The shabby and unfair treatment accorded him or her by the management of
TAWTRASCO was made apparent when TAWTRASCO veritably directed
petitioner to work under terms and conditions prejudicial to him, the most
hurtful cut being that he was required to work without a decent office partly
performing a checkers job. And this embarrassing work arrangement is what
doubtless triggered the refusal to work, which under the premises appears
very much justified. TAWTRASCO admitted petitioner back to work under
terms and conditions adversely dissimilar to those prevailing before his illegal
dismissal, which conditions entailed a demotion in rank and diminution of
perks and standard privileges.
Where reinstatement is no longer viable as an option, separation pay

equivalent to one (1) month salary for every year of service should be
awarded as an alternative. In lieu of reinstatement, petitioner is entitled to
separation pay equivalent to one (1) month salary for every year of service
reckoned from the time he commenced his employment with TAWTRASCO
until finality of this Decision. In addition, petitioner is entitled to backwages
and other emoluments due him from the time he did not report for work until
the finality of this Decision. Said backwages and emoluments shall earn 12%
interest from finality of this Decision until fully paid. The payment of legal
interest becomes a necessary consequence of the finality of the Courts
Decision, because, reckoned from that time, the said decision becomes a
judgment for money which shall earn interest at the rate of 12% per annum.
154
NATURE OF THE ORDER OF THE LABOR ARBITER ON

REINSTATEMENT. --
The reinstatement order of the Labor Arbiter is immediately executory even

pending appeal. (Article 223 (3), Labor Code; cf Pioneer Texturizing vs.
NLRC (280 SCRA 806 [1997]).
Hence, it is the obligation of the employer to immediately admit the employee

back to work or reinstate him in the payroll at his option. Otherwise, the
employer will be held liable for backwages from the date of notice of the order
(International Container Terminal Services, Inc. vs. NLRC, 360 Phil. 527
[1998]), up to the date of employees actual or payroll reinstatement. Thus, it
was held in Garcia vs. Philippine Airlines, Inc. (531 SCRA 574 [2007]), that
failure on the part of the employer to exercise the options in the alternative,
the employer must pay the employees salaries.
ADAS NOTE: Situation: Labor Arbiter dismisses complaint and rules that
dismissal is valid, but NLRC reverses on appeal and rules that there is illegal
termination, with reinstatement and backwages. Note that in this instance,
THE NLRC ORDER OF REINSTATEMENT IS NOT IMMEDIATELY EXECUTORY .
The employer need not immediately reinstate the employee, who must first
file a Motion for Execution.
WHERE THE ORDER OF REINSTATEMENT BY THE LABOR ARBITER IS

REVERSED ON APPEAL. --
Even if the order of reinstatement of the Labor Arbiter is reversed on appeal,

it is obligatory on the part of the employer to reinstate and pay the wages of
the dismissed employee during the period of appeal until reversal by the
higher court.
On the other hand, if the employee has been reinstated during the appeal
period and such reinstatement order is reversed with finality, the employee is
not required to reimburse whatever salary he received for he is entitled to
such, more so if he actually rendered services during the period. (Roquero
vs. Philippine Airlines, Inc., 401 SCRA 424 [2003], cited in Garcia vs. PAL,
G.R. No. 164856, 20 January 2009; En Banc).
Exception:
After the Labor Arbiters decision is reversed by a higher tribunal, the

employee may be barred from collecting the accrued wages, if it is shown
that the delay in enforcing the reinstatement pending appeal was without fault
on the part of the employer. (Garcia vs. Phlippine Airlines, G.R. No. 164856,
20 January 2009; En Banc).
The test is two-fold: (1) there must be actual delay or the fact that the order of
reinstatement pending appeal was not executed prior to its reversal; and (2)
the delay (or non-execution) must not be due to the employers unjustified act
or omission. (ibid.)
2015 CASE: Smart Communications, Inc., et al. vs. Jose Leni Z.

Solidum, G.R. No. 204646, 15 April 2015. -- In illegal dismissal cases, if the
LA ordered reinstatement, and the employer failed to reinstate the employer
either actually or in the payroll, and the NLRC on appeal reversed the
decision of the LA, the employee is entitled to the accrued salaries and other
benefits from the date of the LAs decision up to the date the NLRC decision
becomes final and executory.
155
9. LIABILITY OF CORPORATE OFFICERS IS JOINT, UNLESS THERE IS

AN EXPRESS PRONOUNCEMENT OF SOLIDARY LIABILITY
General Rule 1: Director or corporate officer is not personally liable for the
debts of the corporation. Presumption of good faith prevails.
Exception: When director or corporate officer is found to be in bad faith in the

discharge of the duties and responsibilities.
2014-2015 SC CASES ON LIABILITY OF CORPORATE OFFICIALS
Essencia Q. Manarpiis vs. Texan Philippines, Inc., et al. G.R. No. 197011,
28 January 2015. -- In labor cases, the SC has held corporate directors and
officers solidarily liable with the corporation for the termination of employment
of employees if done with malice or bad faith.
Ma. Consolacion M. Nahas, doing business as Personnel Employment

And Technical Recruitment Agency vs. Juanita L. Olarte, G.R. No.
169247, 02 June 2014. -- Under Section 64 of the Omnibus Rules and
Regulations Implementing the Migrant Workers and Overseas Filipinos Act
of1995 (RA 8024), the liability of the principal/employer and the recruitment
placement agency on any and all claims under this Rule shall be joint and
solidary. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership
for the aforesaid claims and damages. Hence, Petra Agency/Royal Dream
International Services/Consolacion "Marla" Nahas were held jointly and
severally ordered to pay complainant Olarte her unpaid salaries.
Carmen Dy-Dumalasa Vs. Domingo Sabado S. Fernandez, et. al., G.R.

No. 178760 [23 July 2009]. -- Thus, in order to hold a a director personally
liable for debts of the corporation, and thus pierce the veil of corporate fiction,
the bad faith or wrongdoing of the director must be established clearly and
convincingly. Bad faith is never presumed. Bad faith does not connote bad
judgment or negligence. Bad faith imports a dishonest purpose. Bad faith
means breach of a known duty through some ill motive or interest. Bad faith
partakes of the nature of fraud. Ineluctably, absent a clear and convincing
showing of the bad faith in effecting the closure of HELIOS that can be
individually attributed to petitioner as an officer thereof, and without the
pronouncement in the Decision that she is being held solidarily liable,
petitioner is only jointly liable.
General Rule 2: If there is a finding of bad faith, then corporate officer to be held
jointly liable with the company for the damages.
Exception: When Decision explicitly pronounces solidary liability.
In labor cases, the corporate directors and officers are solidarily liable with the
corporation for the termination of employment of employees done with malice or
in bad faith. Indeed, moral damages are recoverable when the dismissal of an
employee is attended by bad faith or fraud or constitutes an act oppressive to
labor, or is done in a manner contrary to good morals, good customs or public
policy. The term bad faith contemplates a state of mind affirmatively operating
with furtive design or with some motive of self-interest or will or for ulterior
purpose. -- Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No.
181974, 01 February 2012
156
The Supreme Court reiterated its ruling in Industrial Management Intl.

Development Corp v. NLRC (G.R. No. 101723, May 11, 2000), and Carag vs.
NLRC (G.R. No. 147590, April 2, 2007) that as an elementary principle of
procedure, the resolution of the court in a given issue as embodied in the
dispositive part of a decision or order is the controlling factor as to settlement of
rights of the parties. In the instant case, notwithstanding the finding of bad faith
on the part of the management, the dispositive portion of the Labor Arbtiers
Decision did not expressly mention the solidary liability of the officers and Board
members, including petitioner. As such, solidary obligation cannot lightly be
inferred. There is a solidary liability only when the obligation expressly so states,
when the law so provides or when the nature of the obligation so requires.
(Carmen Dy-Dumalasa case, ibid.)
10. ON BACKWAGES
10.1 FULL BACKWAGES For termination effected after effectivity of

RA 6715
FULL backwages to be computed from the time of termination to the

time of actual reinstatement.
With the passage of RA 6715 which took effect on 21 March 1989,

Article 2709 of the Labor Code was thus amended to include payment of
full backwages. The Mercury drug rule which limited the award of
backwages of illegally dismissed workers to three (3) years without
deduction or qualification, is no longer applicable. (Ferrer vs. NLRC)
10.2 BASIS FOR COMPUTING BACKWAGES: The workers are to be

paid their backwages fixed as of the time of the dismissal, i.e., unqualified
by any wage increases or other benefits that may have been received by
their co-workers. Awards including salary differentials are not allowed.
(Central Azucarrera de Tarlac vs. Sampang)
10.3 QUESTION: CAN YOU DEDUCT SALARIES EARNED BY EMPLOYEE

FROM ANOTHER EMPLOYER DURING THE PENDENCY OF THE
CASE?
ANSWER: NO. Backwages to be awarded to an illegally dismissed

employee should not, as a general rule, be diminished or reduced by the
earnings derived by him elsewhere during the period of illegal dismissal.
(Bustamante vs. NLRC)
10.4 2014-2015 SC CASES ON COMPUTATION OF WAGES/BACKWAGES:
Metroguards Security Agency Corporation etc., vs. Alberto N.

Hilongo, G.R. No. 215630, 09 March 2015. -- Separation and back
wages must be computed up to that point of the finality of the
decision.
It is settled that the computation of the monetary awards due to the

illegally dismissed employee must continue to run until the final
termination of the case on appeal. The recomputation of the monetary
awards is a necessary consequence that flows from the nature of the
illegal dismissal. Hence, separation pay and backwages must be
computed up to that point of the finality of the decision to the account
for the time the illegally dismissed employee should have been paid
his salary and benefit entitlements.
157
Concepcion A. Villena vs. Batangas II Electric Cooperative, Inc.

et al., G.R. No. 205735, 04 Feb 2015. -- A decision which calls for
the payment of other benefits should include in the computation all
the fringe benefits that the dismissed employee are entitled to receive
at the time.
Monachito R. Ampeloquio vs. Jaka Distribution, Inc., G.R. NO.

196936, 02 July 2014; Scope of wages reinstatement without loss of
seniority rights and other privileges.
The issue in this case is the scope viz-a-viz wages reinstatement

without loss of seniority rights and other privileges. Seniority rights
refer to the creditable years of service in the employment record of the
illegally dismissed employee as if he or she never ceased working
for the employer. In other words, the employees years of service
is deemed continuous and never interrupted. Such is likewise the
rationale for reinstatements twin relief of full backwages. (Labor
Code, Article 279.)
10.5 IMPORTANT CASE CLARIFYING FULL BACKWAGES: Nacar vs.

Gallery Frames, G.R. No. 189871, 13 August 2013
Labor Arbiter ruled for illegal termination, and ordered payment of

backwages and separation pay. Gallery Frames appealed all the way to
Supreme Court, which affirmed the decision of the Labor Arbiter. Upon
finality of decision, complainant Nacar moved for recomputation of
backwages up to the finality of SC judgment. Labor Arbiter refused,
stating that the computation of backwages is only up to the time of the
Labor Arbiters decision because Nacar did NOT appeal and hence, as to
Nacar, the decision has become final and executory.
Question: Did the Labor Arbiter err in not recomputing backwages all the
way to finality of SC decision?
Answer: YES, Labor Arbiters position is very incorrect.
By the nature of an illegal dismissal case, the reliefs continue to add up

until full satisfaction, as expressed under Article 279 of the Labor Code.
The recomputation of the consequences of illegal dismissal upon
execution of the decision does not constitute an alteration or amendment
of the final decision being implemented. The illegal dismissal ruling
stands; only the computation of monetary consequences of this dismissal
is affected, and this is not a violation of the principle of immutability of
final judgments.
There are two parts of a decision when it comes to illegal dismissal cases
(referring to cases where the dismissed employee wins, or loses but wins
on appeal). The first part is the ruling that the employee was illegally
dismissed. This is immediately final even if the employer appeals but
will be reversed if employer wins on appeal. The second part is the ruling
on the award of backwages and/or separation pay. For backwages, it will
be computed from the date of illegal dismissal until the date of the
decision of the Labor Arbiter. But if the employer appeals, then the end
date shall be extended until the day when the appellate courts
decision shall become final.
That the amount respondents shall now pay has greatly increased is a
consequence that it cannot avoid as it is the risk that it ran when it
158
continued to seek recourses against the Labor Arbiters decision. Article

279 provides for the consequences of illegal dismissal in no uncertain
terms, qualified only by jurisprudence in its interpretation of when
separation pay in lieu of reinstatement is allowed. When that happens,
the finality of the illegal dismissal decision becomes the reckoning point
instead of the reinstatement that the law decrees. In allowing separation
pay, the final decision effectively declares that the employment
relationship ended so that separation pay and backwages are to be
computed up to that point.
11. ATTORNEYS FEES, TWO CONCEPTS: (Tangga-an vs. Phil. Transmarin Carriers,
Inc., et. al., G.R. No. 180636, 13 March 2013.)
a) Ordinary concept
An attorneys fee is the reasonable compensation paid to a lawyer by his

client for the legal services the former renders; compensation is paid for the
cost and/or results of legal services per agreement or as may be assessed.
b) Extra-ordinary concept
Attorneys fees are deemed indemnity for damages ordered by the court to
be paid by the losing party to the winning party.
In Article 2208 of the Civil Code on actions for recovery of wages, it is

payable not to the lawyer but to the client, unless there is an agreement
between them to the contrary.
Article III of the Labor Code is an exception to the declared policy of strict
construction in the award of attorneys fees. Although an express finding of
facts and law is still necessary to prove the merit of the award, there need
not be any showing that the employer acted maliciously or in bad faith when
it withhold the wages.
Hence, as a result of illegal dismissal, wages are withheld without valid and
legal basis. Consequently, complainant is entitled to an award of attorneys
fees in his favor.
2013 CASE: Czarina Malvar s. Krafts Foods Phils, G.R. No. 183952, 09
September 2013.
QUESTION: MAY THE COMPLAINANTS LAWYER (JUSTICE

BELLOSILLO), WHO HAD ACCEPTED THE CASE ON CONTINGENCY
BASIS BUT WAS TERMINATED PRIOR TO THE SETTLEMENT OF THE
CASE, MAY STILL CLAIM ATTORNEYS FEES?
Case for lawyer: It was certain that the compromise agreement was
authoried by respondents to evade a possible loss of P182 Million or more as a
result of the labor litigation. As counsel, he did everything legally possible to
serve and protet her interest.
Case for client: No such intention to defraud intervenor of his professional

fees. However, the law firm had already ceased after a partner resigned and
another partner was appointed to a government position.
Supreme Court: For lawyer (Ret. Justice Bellosillo). Intervenor lawyer is still
entitled to recover from the Petitioner the full compensation he deserves as
159
stipulated in the contract. Note that all the elements for full recovery of the
Intervenors compensation are present:
Contract between intervenor lawyer and client was reduced in writing

Intervenor was dismissed without justifiable cause, and at that stage of
proceedings where there is NOTHING left to be done but to await the
Decision or Resolution of the case.
It is basic that an attorney is entitled to have and receive a just and reasonable
compensation for services performed at the special instance and request of his
client. The attorney who had acted in good faith and honesty in representing
and serving the interests of the client should be reasonably compensated for
his service.
M. RECRUITMENT AND PLACEMENT

1. DISTINCTION BETWEEN LICENSE AND AUTHORITY:
LICENSE means a document issued by the Department of Labor, authorizing a

person or entity to operate a private employment agency.
AUTHORITY means a document issued by the Department of Labor, authorizing a

person or association to engage in recruitment and placement activities as a private
recruitment entity.
2. DISTINCTION BETWEEN PRIVATE EMPLOYMENT AGENCY VS. PRIVATE

RECRUITMENT AGENCY VS. SHIPPING OR MANNING AGENCY
PRIVATE EMPLOYMENT AGENCY: Refers to any person or entity engaged in the

recruitment and placement of workers FOR A FEE, which is charged directly or
indirectly, from the workers, or employers, or both.
A licensed employment agency may charge and collect fees for

employment assistance if the worker has obtained employment
through the agency's efforts.
PRIVATE RECRUITMENT AGENCY: Refers to any person or entity engaged in the

recruitment and placement of workers, locally or overseas, WITHOUT CHARGING
ANY FEE directly or indirectly, from the workers, or employers.
Submission by Private Recruitment agency of a VERIFIED

UNDERTAKING to the POEA that it will assume JOINT AND
SOLIDARY LIABILITY with the employer for all claims and liabilities
which might arise in connection with the implementation of
employment
MANNING OR SHIPPING AGENCY: Refers to any person, partnership or

corporation duly licensed by DOLE to recruit seafarers for vessels plying
international waters and for related maritime activities.
3. TYPES OF ILLEGAL RECRUITMENT
SIMPLE (BY LICENSEE): illegal recruitment committed by a licensee or holder of

authority against one or two persons only if they commit any of the acts enumerated
under Section 6 of Republic Act No. 8042.
160
NON-LICENSEE: committed by a person who has neither a license nor authority.
SYNDICATED: that carried out by a group of three (3) or more persons in conspiracy
or confederation with one another.
LARGE SCALE or qualified: that committed against 3 or more persons, individually

or as a group.
4. ILLEGAL RECRUITMENT AS ECONOMIC SABOTAGE, if any of the qualifying

circumstances exist or when committed:
BY A SYNDICATE If it is carried out by a group of 3 or more persons conspiring

and/or confederating with one another;
IN LARGE SCALE If it is committed against 3 or more persons individually or as a

group.
5. ILLEGAL RECRUITMENT; elements:
Recruitment and placement refers to the 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. When a person or entity, in any manner, offers or promises for a fee
employment to two or more persons, that person or entity shall be deemed engaged in
recruitment and placement.
Article 38(a) of the Labor Code, as amended, specifies that recruitment activities
undertaken by non-licensees or non-holders of authority are deemed illegal and
punishable by law.
And when the illegal recruitment is committed against three or more persons,
individually or as a group, then it is deemed committed in large scale and carries with it
stiffer penalties as the same is deemed a form of economic sabotage.
But to prove illegal recruitment, it must be shown that the accused, without being duly
authorized by law, gave complainants the distinct impression that he had the power or
ability to send them abroad for work, such that the latter were convinced to part with
their money in order to be employed. It is important that there must at least be a
promise or offer of an employment from the person posing as a recruiter, whether
locally or abroad.
IMPORTANT J. VELASCO CASE ON ILLEGAL RECRUITMENT: People of the

Philippines vs. Gloria Bartolome, G.R. No. 129486, 04 July 2008. Reiteration of
elements of illegal recruitment in large scale.
Gloria Bartolome was accused of conspiring with another accused, with grave abuse
of trust and confidence reposed on them, and deliberate intent to defraud, to have
falsely representing themselves to have the capacity to contract, enlist and recruit four
(4) workers for employment in Bahrain abroad, without first obtaining the required
license and/or authority from the Department of Labor and Employment, thereby
resulting damage and prejudice.
Illegal recruitment is committed when two (2) elements concur: First, the offender
does not have the required license or authority to engage in the recruitment and
placement of workers. Second, the offender undertook (1) recruitment and placement
activity defined under Article 13(b) of the Labor Code or (2) any prohibited practice
under Art. 34 of the same code. Illegal recruitment is qualified into large scale, when
three or more persons, individually or as group, are victimized.
161
Art. 13(b) of the Labor Code defines recruitment and placement, as follows: x x x [A]ny
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.
After a circumspect review of the records, the Court is fully convinced as to accused-
appellants guilt of the crime of illegal recruitment in large scale. The first element is
present. Accused-appellant had not shown any license to recruit or engage in
placement activities. As found by the trial court, the POEA no less initiated the filing of
the complaints against accused-appellant, a reality which argues against the existence
of such license or authority.
Accused-appellant cannot plausibly escape liability for her criminal acts by

conveniently pointing to and passing the blame on Capawan as the illegal recruiter.
Like the trial court, we entertain serious doubts on this self-serving and gratuitous
version of accused-appellant. What is more, her denials cannot prevail over the
positive declaration of the prosecution witnesses. It is basic that affirmative testimony
of persons who are eyewitnesses of the events or facts asserted easily overrides
negative testimony
IMPORTANT J. VELASCO CASE ON ILLEGAL RECRUITMENT: People of the

Philippines vs. Rodolfo Gallot, G.R. No. 187730, 29 June 2010. Reiteration of
elements of syndicated illegal recruitment.
Accused-appellant Gallo and eleven others, were charged with syndicated illegal
recruitment and eighteen (18) counts of estafa committed against eighteen
complainants, for having represented themselves to have the capacity to contract,
enlist and transport Filipino workers for employment abroad, in exchange for varying
fees (from P25,000.00 to P100,000.00 each), as placement fees in connection with
their overseas employment, which amounts are in excess of or greater than those
specified in the schedule of allowable fees prescribed by the POEA Board Resolution
No. 02, Series 1998, and without valid reasons and without the fault of the said
complainants failed to actually deploy them and failed to reimburse the expenses
incurred by the said complainants in connection with their documentation and
processing for purposes of their deployment.
Accused-appellant avers that he cannot be held criminally liable for illegal recruitment
because he was neither an officer nor an employee of the recruitment agency.
According to him, even assuming that he was an employee, such cannot warrant his
outright conviction sans evidence that he acted in conspiracy with the officers of the
agency.
We disagree.
To commit syndicated illegal recruitment, three elements must be established: (1) the
offender undertakes either any activity within the meaning of recruitment and
placement defined under Article 13(b), or any of the prohibited practices enumerated
under Art. 34 of the Labor Code; (2) he has no valid license or authority required by
law to enable one to lawfully engage in recruitment and placement of workers, and (3)
the illegal recruitment is committed by a group of three (3) or more persons conspiring
or confederating with one another. When illegal recruitment is committed by a
syndicate or in large scale, i.e., if it is committed against three (3) or more persons
individually or as a group, it is considered an offense involving economic sabotage.
Under Art. 13(b) of the Labor Code, recruitment and placement refers to any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers,
162
and includes referrals, contract services, promising or advertising for employment,

locally or abroad, whether for profit or not.
After a thorough review of the records, we believe that the prosecution was able to
establish the elements of the offense sufficiently. The evidence readily reveals that
MPM Agency was never licensed by the POEA to recruit workers for overseas
employment.
6. Illegal recruitment as distinguished from estafa
A person convicted for illegal recruitment under Labor Code can be convicted for
violation of the Revised Penal Code provisions on estafa provided the elements of the
crime are present.
Estafa under Article 315, par.2 of the RPC is committed by any person who defrauds
another by using fictitious name, or falsely pretends to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by means
of similar deceits executed prior to or simultaneously with the commission of the fraud.
The offended party must have relied on the false pretense, fraudulent act or fraudulent
means of the accused-appellant and as a result thereof, the offended party suffered
damages.
7. Persons criminally liable for the above offenses: [R.A. 10022, Sec.4]
Individuals: principals, accomplices and accessories.
Juridical Persons: the officers having ownership, control, management or direction

of their business that are responsible for the commission of the offense and the
responsible employees/agents thereof shall be liable.
Where illegal recruitment is proved but the elements of large scale or syndicate
are absent, the accused can be convicted only of simple illegal recruitment. (People
v. Sagun, G.R. No. 110554, 19 February 1999)
8. Nature of liability of local recruitment agency vs. foreign principal:
Local Agency is solidarily liable with foreign principal.

Severance of relations between local agent and foreign principal does not affect
liability of local recruiter.
9. IMPORTANT CASE: Bright Maritime Corporation Vs. Fantonial, G.R. No. 165935,
08 February 2012
Contract of Employment was executed by petitioner Bright Maritime Corporation (BMC)

and respondent Ricardo B. Fantonial, which contract was verified and approved by the
Philippine Overseas Employment Administration (POEA) on January 17, 2000. The
employment contract provided that respondent shall be employed as boatswain of the
foreign vessel M/V AUK for one year, with a basic monthly salary of US$450, plus an
allowance of US$220. Respondent was made to undergo a medical examination and
was issued a Medical Certificate dated January 17, 2000, which certificate had the
phrase FIT TO WORK stamped on its lower and upper portion. However, he was
never deployed because the company said he was not fit to work.
Question: Was the contract of employment perfected?
163
Answer: YES. An employment contract, like any other contract, is perfected at the
moment (1) the parties come to agree upon its terms; and (2) concur in the essential
elements thereof: (a) consent of the contracting parties, (b) object certain which is the
subject matter of the contract, and (c) cause of the obligation. The object of the contract
was the rendition of service by respondent on board the vessel for which service he
would be paid the salary agreed upon.
Hence, in this case, the employment contract was perfected on January 15,
2000 when it was signed by the parties, respondent and petitioners, who entered into the
contract in behalf of their principal, Ranger Marine S.A., thereby signifying their consent
to the terms and conditions of employment embodied in the contract, and the contract
was approved by the POEA on January 17, 2000.
However, the employment contract did not commence, since petitioners did not
allow respondent to leave on January 17, 2000 to embark the vessel M/V AUK in
Germany on the ground that he was not yet declared fit to work on the day of departure,
although his Medical Certificate dated January 17, 2000 proved that respondent was fit
to work. Note that petitioners failed to prove with substantial evidence that they had a
valid ground to prevent respondent from leaving on the scheduled date of his
deployment. While the POEA Standard Contract must be recognized and respected,
neither the manning agent nor the employer can simply prevent a seafarer from being
deployed without a valid reason.
Court awarded moral damages in the amount of P30,000.00, plus exemplary damages
and attys fees, as petitioners act was tainted with bad faith, considering that
respondents Medical Certificate stated that he was fit to work on the day of his
scheduled departure, yet he was not allowed to leave allegedly for medical reasons.
10. IMPORTANT CASE: DO THE PROVISIONS OF THE LABOR CODE STILL APPLY
TO FILIPINO OFWS WHO HAVE BEEN DEPLOYED ABROAD AND ARE
RETRENCHED BY THE FOREIGN PRINCIPAL? (International Management
Services vs. Logarta, G.R. No. 163657, 18 April 2012)
Answer: YES. In the case at bar, despite the fact that respondent was employed by
Petrocon as an OFW in Saudi Arabia, still both he and his employer are subject to the
provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that
all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of
Philippine labor and social legislations. Philippine Law recognizes retrenchment as a
valid cause for the dismissal of a migrant or overseas Filipino worker under Article 283 of
the Labor Code. Foreign employer must comply with all requirements for retrenchment,
separation pay and notice requirements. Having failed to comply with procedures (1
month notice), termination is merely procedurally infirm in the light of a valid authorized
cause (decrease in need of services as piping designer in the work project
requirements).
2012-2015 CASES ON MIGRANT WORKERS
IMPORTANT LEONARDO-DE CASTRO CASE ON SIDE AGREEMENTS: Santosa B.

Datuman vs. First Cosmopolitan Manpower and Promotion Services, Inc., G.R.
No. 156029, 14 Nov 2008.
The subsequently executed side agreement of an OFW with her foreign employer,
reducing the salary below the amount approved by the POEA, is void for being contrary
to laws, morals and public policy. The said side agreement cannot supersede the terms
of the standard employment contract approved by the POEA. Consequently, the solidary
liability of respondent with petitioners foreign employer for the money claims continues
although she was forced to sign another contract. It is the terms of the original POEA-
164
approved employment contract that shall govern the relationship of petitioner with the
respondent recruitment agency and the foreign employer.
IMPORTANT DOCTRINAL CASE: OFW & Lex loci contractus; whichever is less
in RA 10022 (as reinstated from RA 8042) is unconstitutional. Sameer Overseas
Placement Agency vs. Joy C. Cabiles, G.R. NO. 170139, 05 Aug 2014; En Banc.
Employees are not stripped of their security of tenure when they move to work in a
different jurisdiction. With respect to the rights of overseas Filipino workers, we follow the
principle of lex loci contractus. The principle of lex loci contractus (the law of the place
where the contract is made) governs in this jurisdiction. There is no question that the
contract of employment in this case was perfected here in the Philippines. Therefore, the
Labor Code, its implementing rules and regulations, and other laws affecting labor apply
in this case. By our laws, overseas Filipino workers (OFWs) may only be terminated for
a just or authorized cause and after compliance with procedural due process
requirements.
On Section 7, RA 10022 re the clause or for three (3) months for every year of the
unexpired term, whichever is less. -- Having been illegally dismissed, she is entitled
to her salary for the unexpired portion of the employment contract that was violated
together with attorneys fees and reimbursement of amounts withheld from her salary.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., (601 Phil.
245 (2009) [Per J. Austria-Martinez, En Banc]), this Court ruled that the clause or for
three (3) months for every year of the unexpired term, whichever is less is
unconstitutional for violating the equal protection clause and substantive due process.
The clause or for three (3) months for every year of the unexpired term, whichever is
less was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No.
10022 in 2010. The law passed incorporates the exact clause already declared as
unconstitutional, without any perceived substantial change in the circumstances.
When a law or a provision of law is null because it is inconsistent with the

Constitution, the nullity cannot be cured by reincorporation or reenactment of the
same or a similar law or provision. A law or provision of law that was already
declared unconstitutional remains as such unless circumstances have so
changed as to warrant a reverse conclusion.
Three (3) requirements that must concur for the complete termination of the
employment contract of seafarers. APQ Ship Management Co., Ltd., et al vs.
Angelito L. Caseas, et al. G.R. No. 197303, 04 June 2014
There are three (3) requirements that must concur for the complete termination of the
employment contract of seafarers:
a) Termination due to expiration or other reasons/ causes;
b) Signing off from the vessels; and
c) Arrival at the point of hire.
The obligations and liabilities of the local agency and its foreign principal do not end
upon the expiration of the contracted period as they were duty bound to repatriate
the seaman to the point of hire to effectively terminate the contract of
employment. The original POEA-approved employment contract subsisted and, thus,
the solidary liability of the agent with the principal continued. Any side agreement of an
overseas contract worker with her foreign employer is void as against public policy. The
said side agreement cannot supersede the POEA-SEC, and the solidary liability subsists
in accordance with section 10 of RA8042.
Note: CONTRA to theory of imputed knowledge, when it can bind the agency vis--vis liability of
principal employer; on liability of recruitment agency (Sunace International Mgmt Services vs.
NLRC, GR No. 161757, 25 January 2006).
165
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to
the principal, employer Xiong, AND NOT THE OTHER WAY AROUND. The knowledge
of the principal-foreign employer cannot, therefore, be imputed to its agent Sunace. There
being no substantial proof that Sunace knew of and consented to be bound under the 2-
year employment contract extension of the domestic helper Divina, it cannot be said to be
privy thereto. As such, it and its owner cannot be held solidarily liable for any of Divinas
claims arising from the 2-year employment extension.
To substitute POEA-certified contract constitutes illegal recruitment. Princess

Joy Placement and General Services vs. Binalla, G.R. No. 197005, 04 June 2014
The POEAcertified contract for all intents and purposes and despite his claim that his
signature on the certified contract was forged was the contract that governed Binallas
employment with Al Adwani as it was the contract that the Philippine government
officially recognized and which formed the basis of his deployment to Saudi Arabia.
Clearly, the four-year contract signed by Binalla was substituted for the POEAcertified
contract. To substitute or alter employment contracts approved and verified by DOLE is
a prohibited practice under Article 34 (i) of the Labor Code. Further, contract substitution
constitutes illegal recruitment under Article 38 (I) of the Code.
On solidary liability of principal and agency; Ma. Consolacion M. Nahas, doing

business under the name and style Personnel Employment and Technical
Recruitment Agency vs. Juanita L. Olarte, G.R. No. 169247, 02 June 2014.
Under Section 64 of the Omnibus Rules and Regulations Implementing the Migrant
Workers and Overseas Filipinos Act of1995 (RA 8024), the liability of the
principal/employer and the recruitment placement agency on any and all claims under
this Rule shall be joint and solidary. If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership for the
aforesaid claims and damages. Hence, Petra Agency/Royal Dream International
Services/Consolacion "Marla" Nahas were held jointly and severally ordered to pay
complainant Olarte her unpaid salaries.
When contract is deemed perfected; Abosta Ship Management vs. Wilhilm M.

Hilario, G.R. No. 195792, 24 Nov 2014. The contract was already perfected on the
date of its execution, which occurred when Abosta and Hilario agreed on the object and
the cause, as well as on the rest of the terms and conditions therein. Naturally,
contemporaneous with the perfection of the employment contract was the birth of certain
rights and obligations, a breach of which may give rise to a cause of action against the
erring party. Also, the POEA Standard Contract must be recognized and respected.
Thus, neither the manning agent nor the employer can simply prevent a seafarer from
being deployed without a valid reason.
Where seafarers contract expired while vessel was still at sea. Antonio E. Unica
vs. Anscor Swire Ship Management Corp., G.R. No. 184318, 12 Feb 2014. -- Unica
under his contract was deployed for a period of nine (9) months from January 29, 2000
to October 25, 2000. When his contract expired, the vessel was still at sea. Hence, he
was repatriated only on November 14, 2000. Unica contends that since he was allowed
to stay in the vessel for another twenty (20) days, there was an implied renewal of his
contract of employment. Thus, when he was repatriated without a valid cause, he was
illegally dismissed.
Issue: Was there an implied renewal of the contract of employment?
Answer: No. Seafarers are contractual employees. Thus, when his contract expired, his
employment is automatically terminated, there being no mutually agreed renewal.
However, he is entitled to be paid his wages after the expiration of his contract
166
until the vessels arrival at a convenient port. Section 19 of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on-Board Ocean Going
Vessels provides as follows:
REPATRIATION. A. If the vessel is outside the Philippines upon the expiration of the
contract, the seafarer shall continue his service on board until the vessels arrival at a
convenient port and/or after arrival of the replacement crew; provided that, in any case,
the continuance of such service shall not exceed three months. The seafarer shall be
entitled to earned wages and benefits as provided in his contract.
2014 BAR QUESTION:
Lina has been working as a steward with a Miami, U.S.A.-based Loyal Cruise Lines for
the past 15 years. She was recruited by a local manning agency, Macapagal Shipping,
and was made to sign a 10-month employment contract every time she left for Miami.
Macapagal Shipping paid for Linas round-trip travel expenses from Manila to Miami.
Because of a food poisoning incident which happened during her last cruise assignment,
Lina was not re-hired. Lina claims she has been illegally terminated and seeks
separation pay. If you were the Labor Arbiter handling the case, how would you decide?
(4%)
ANSWER:
I will dismiss the case. Lina as a seafarer is a contractual employee for a fixed term,
governed by the contract she signed. She cannot be considered a regular employee
despite the fact that she had been continually rehired and his contract renewed for
fifteen (15) years. Her case falls under the exception of Article 280 whose employment
has been fixed for a specific project or undertaking. (Millares, et al. vs. NLRC, 385 SCRA
306 [2002].)
N. COMPENSABILITY OF DISABILITY
(See Chart on POEA PROCEDURE)
1. IMPORTANT J VELASCO CASES ON COMPENSABILITY: Transocean Ship

Management, et al. v. Vedad, G.R. No. 194490-91, 194518 & 194524; 20 March 20,
2013.
Facts: Vedad was a seafarer employed as second engineer by Transocean. Before the
expiry of his 10-month contract, Vedad was, however, repatriated for medical reasons.
On board M/V lnvicta he fell ill and experienced fever, sore throat and pain in his right
ear. He underwent medical examination with the finding of chronic suppurative otitis
media right [CSOM(R)] with acute pharyngitis[, with mild] maxillary sinusitis," for which
he was prescribed antibiotics and ear drops with the recommendation of a follow-up
examination of the CSOM(R). He underwent a follow-up examination on his illness in
Tanjung Priok, Indonesia, and consequently, his eventual repatriation for further
evaluation and treatment. Vedad immediately reported to the company-designated
doctor, Dr. Cruz. The final histopathologic diagnosis reports: "undifferentiated carcinoma
(CANCER), right tonsil; and chronic follicular tonsillitis with actinomycosis, left tonsil."
The company physician issued his assessment and medical certification that Vedad's
cancer was not work-related or work-aggravatedl; he then advised Vedad to undergo
chemotherapy and linear treatment at an estimated cost of PhP 500,000, which
Transocean and General Marine promised to shoulder. Vedad started with the
procedure but could not continue due to the failure of Transocean and General Marine to
provide the necessary amount. This constrained Vedad to file, on July 17, 2006, a
Complaint before the LA for, among others, total permanent disability benefits and
sickness allowance.
167
Labor Arbiter ruled in favor of Vedad and awarded permanent total disability benefits to
Vedad. NLRC REVERSED Labor Arbiters decision, and awarded only sickness
allowance, on the ground that Vedad was NOT able to prove that the illness was work-
related. CA affirmed the NLRC decision but ordered Transocean to reimburse Vedads
medical expenses.
Question: Is Vedad entitled to permanent total disability benefits on account of an

illness while on board ship?
Answer: NO. Supreme Court found no compelling reason to deviate from the factual
findings of the NLRC Decision that Vedad failed to establish that his illness was work-
related. As such, he is NOT entitled to claim total permanent disability benefits.
Ratio decidendi: To be entitled to permanent total disability benefits, it must be

established that the illness was work- related. Tonsil cancer or tonsillar carcinoma is,
indeed, not work-related, as it is not included in the list of occupational diseases.
Moreover, the company physician had even made the same assessment, and as such,
Vedad carried the burden of showing by substantial evidence that his cancer developed
or was aggravated from work-related causes.
It is on this account that Vedad is given the option by the POEA-SEC to seek a second
opinion from his preferred physician. And the law has anticipated the possibility of
divergence in the medical findings and assessments by incorporating a mechanism for
its resolution wherein a third doctor selected by both parties decides the dispute with
finality, as provided by Sec. 20(B)(3) of the POEA-SEC. Vedad, however, failed to seek
a second opinion from a physician of his choice. Since Vedad did not present any proof
of work-relatedness other than his bare allegations, the SC has no option but to declare
that the company-designated doctor's certification is the final determination that must
prevail.
However, the award granted by the NLRC and the CA for payment or reimbursement of
the medical expenses of Vedad relative to the required treatment for his cancer is
proper. In fact, Transocean, et al. acknowledged offering to shoulder these expenses,
and having obliged themselves to shoulder the medical treatment of Vedad, Transocean
must be held answerable to said obligation.
2. OFW Re: work-related illness as listed under Sec. 32-A, POEA-SEC; otherwise, proof
of reasonable causal connection between work and illness.
2.1 For a seamans illness to be compensable; mandatory 3-day rule on post-

employment medical examination. Interorient Maritime Enterprises, Inc., vs.
Victor M. Creer III, G.R. No. 181921, 17 Sept 2014.
For an illness to be compensable, Section 20(B)(6) of the 2000 Amended Standard

Terms and Conditions Governing the Employment of Filipino Seafarers on Board
Ocean-Going Vessels (2000 Amended Standard Terms and Conditions), deemed
incorporated in the POEA Contract, requires the concurrence of two elements: first,
that the illness must be work-related; and second, that the work- related illness must
have existed during the term of the seafarers employment contract (citing: Jebsens
Maritime, Inc. v. Undag, G.R. No. 191491, December 14, 2011, 662 SCRA 670, 677); See also
Pedro Libang, Jr. vs. Indochina Shipmanagement, Inc., et al, G.R. No. 189863, Sept. 17, 2014.)
2.2 Teekay Shipping Philippines, Inc., v. Exequiel O. Jarin, G.R. No. 195598, 25 June
2014. Under the 2000 POEA- Standard Employment Contract (SEC), a work-related
illness is any sickness resulting to disability or death as a result of an occupational
disease listed under Section 32-A with the conditions set therein satisfied.
168
The Court has held, however, that the enumeration in Section 32-A does not preclude
other illnesses/diseases not so listed from being compensable. The POEA-SEC
cannot be presumed to contain all the possible injuries that render a seafarer unfit for
further sea duties (Maersk Filipinas Crewing Inc./Maersk Services Ltd., and/or Mr. Jerome Delos
Angeles v. Mesina, G.R. No. 200837, [June 5, 2013, 697 SCRA 601]). This is in view of Section
20(B)(4) of the POEA-SEC which states that (t)hose illnesses not listed in Section 32
of this Contract are disputably presumed as work-related.
Concomitant with such presumption is the burden placed upon the claimant to present
substantial evidence that his working conditions caused or at least increased the risk
of contracting the disease. It is not sufficient to establish that the seafarers illness
or injury has rendered him permanently or partially disabled; it must also be
shown that there is a causal connection between the seafarers illness or injury
and the work for which he had been contracted.
It is well to note that in resolving disputes on disability benefits, the fundamental

consideration has been that the POEA-SEC was designed primarily for the protection
and benefit of Filipino seamen in the pursuit of their employment onboard ocean-going
vessels. As such, its provisions must be construed and applied fairly, reasonably and
liberally in their favor because only then can its beneficent provisions be fully carried
into effect.
ADAS NOTES:
General rule: If sickness resulting in death or disability is among those listed in POEA-
SEC Sec 32-A, then this is compensable.
Exception: If not listed in POEA SEC Sec 32-A, then sickness is disputably presumed
to be work-related. Burden is upon OFW (or heirs) to prove reasonable causal
connection between work and sickness.
POEA SEC, as well as the laws of the Republic of the Philippines, international
conventions, treaties and covenants where the Philippines is a signatory, are deemed
automatically incorporated into any employment contract entered into by a Filipino OFW.
3. No compensation and benefits are payable for injury, incapacity, disability or death
from OFWs own willful act.
3.1 Wallen Maritime Services, Inc., et. al. vs. Pedrajas, G.R. No. 192993, 11 August
2014 -- The death of a seaman during the term of his employment makes the employer
liable to the formers heirs for death compensation benefits. This rule, however, is not
absolute. The employer may be exempt from liability if it can successfully prove that the
seamans death was caused by an injury directly attributable to his deliberate or willful
act. The burden of proof rests on his employer. Thus, Section 20 (D) of the POEA-SEC
provides:
No compensation and benefits shall be payable in respect of any injury,
incapacity, disability or death of seafarer resulting from his willful or
criminal act or intentional breach of his duties x x x.
3.2 Crewlink vs. Editha Teringterring, G.R. No. 166803, 11 October 2012. -- Where
death was due to willful act of the OFW (who jumped into sea twice) even if arising out of
alleged mental illness (psychotic disorder, viz., mood disorder bipolar type), then this is
NOT compensable. In the instant case, petitioner was able to substantially prove
that Jacinto's death was attributable to his deliberate act of killing himself by
jumping into the sea. Meanwhile, respondent, other than her bare allegation that her
husband was suffering from a mental disorder, no evidence, witness, or any medical
report was given to support her claim of Jacinto's insanity. The record does not even
169
show when the alleged insanity of Jacinto did start. Homesickness and/or family
problems may result to depression, but the same does not necessarily equate to
mental disorder. The issue of insanity is a question of fact; for insanity is a
condition of the mind not susceptible of the usual means of proof.
4. How to establish that disability is compensable; effect of non-disclosure of pre-

existing ailment. Martin K. Ayungo vs. Beamko Shipmanagement Corp., et al. G.R. No.
203161, 26 Feb 2014. -- For disability to be compensable, the seafarer must establish that
there exists a reasonable linkage between the disease suffered by the employee and his
work to lead a rational mind to conclude that his work may have contributed to the
establishment or, at the very least, aggravation of any pre-existing condition he might have
had. (Magsaysay Maritime Services vs. Laurel, G.R. No. 195518, March 20, 2013, 694
SCRA 225.)
In other words, not only must the seafarer establish that his injury or illness rendered him
permanently or partially disabled, it is equally pertinent that he shows a causal connection
between such injury or illness and the work for which he had been contracted. (Magsaysay
Maritime Corp. vs. NLRC, G.R. No. 186180, March 22, 2010, 616 SCRA 362.)
Non-disclosure of a pre-existing ailment, constitute, fraudulent misrepresentation which,

pursuant to Section 20 (E) of the 2000 POEA-SEC, would disqualify a seafarer from
claiming any disability benefits from his employer.
5. Medical expenses, sickness allowance and disability benefits are separate and
distinct from one another. The late Alberto B. Javier, etc., vs. Philippine Transmarine
Carriers, Inc., et al., G.R. no. 204101, 02 July 2014. -- The seafarer is entitled to medical
treatment at cost to the employer apart from disability benefits and sickness allowance. The
medical treatment is provided him until such time he is declared fit or the degree of his
disability has been determined by the company-designated physician.
Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness
allowance equivalent to his basic wage until he is declared fit to work or the degree of his
disability has been assessed by the company-designated physician.
Medical expenses, sickness allowance and disability benefits are separate and distinct from
one another. As a matter of law, the benefit of medical treatment at the employers expense
is separate and distinct from the disability benefits and sickness allowance to which the
seafarer is additionally entitled.
6. Any of these conditions may allow a seafarer to pursue an action for total and
permanent disability benefits. Rommel B. Daraug vs. KGJS Fleet Management
Manila, Inc., et al., G.R. No. 211211, 14 Jan 2015. See also: See also: Veritas Maritime
Corporation, et al. vs. Ramon A. Gepanaga, Jr., G.R. No. 206285, 04 Feb 2015; Alone
Amar P. Tagle vs. Anglo-Eastern Crew Management Phils., Inc., et al., G.R. No.
209302, 09 July 2014
A seafarer may have basis to pursue an action for total and permanent disability benefits
only if any of the following conditions are present:
(a) The company-designated physician failed to issue a declaration as to his fitness

to engage in sea duty or disability even after the lapse of the 120-day period and
there is no indication that further medical treatment would address his temporary
total disability, hence, justify an extension of the period to 240 days;
(b) 240 days had lapsed without any certification issued by the company designated
physician; (Pedro Libang, Jr. vs. Indochina Ship Management , Inc., et al., G.R.
No. 189863, 17 Sept. 2014.)
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(c) The company-designated physician declared that he is fit for sea duty within the
120-day or 240-day period, as the case may be, but his physician of choice and
the doctor chosen under Section 20-B(3) of the POEA-SEC are of a contrary
opinion;
(d) The company-designated physician acknowledged that he is partially

permanently disabled but other doctors who he consulted, on his own and jointly
with his employer, believed that his disability is not only permanent but total as
well;
(e) The company-designated physician recognized that he is totally and permanently

disabled but there is a dispute on the disability grading;
(f) The company-designated physician determined that his medical condition is not
compensable or work-related under the POEA-SEC but his doctor-of-choice and
the third doctor selected under Section 20-B(3) of the POEA-SEC found
otherwise and declared him unfit to work;
(g) The company-designated physician declared him totally and permanently

disabled but the employer refuses to pay him the corresponding benefits; and
(h) The company-designated physician declared him partially and permanently

disabled within the 120-day or 240-day period but he remains incapacitated to
perform his usual sea duties after the lapse of said periods. (C.F. Sharp Crew
Management, Inc. vs. Taok, G.R. No. 193679, July 18, 2012; 677 SCRA 296.)
7. GUIDELINES IN DISABILITY CLAIMS:
The liabilities of the employer when the seafarer suffers work-related injury or illness
during the term of his contract are as follows:
1. The employer shall continue to pay the seafarer his wages during the
time he is on board the vessel;
2. If the injury or illness requires medical and/or dental treatment in a

foreign port, the employer shall be liable for the full cost of such medical,
serious dental, surgical and hospital treatment as well as board and
lodging until the seafarer is declared fit to work or to repatriated.
3. Upon sign-off from the vessel for medical treatment, the seafarer is
entitled to sickness allowance equivalent to his basic wage until he is
declared fit to work or the degree of permanent disability has been
assessed by the company-designated physician but in no case shall this
period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a post-employment

medical examination by a company-designated physician within three
working days upon his return except when he is physically
incapacitated to do so, in which case, a written notice to the agency
within the same period is deemed as compliance. Failure of the
seafarer to comply with the mandatory reporting requirement shall
result in his forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment, a

third doctor may be agreed jointly between the Employer and the
seafarer. The third doctors decision shall be final and binding on
both parties.
171
4. Those illnesses not listed in Section 32 of this Contract are disputably

presumed as work related.
5. Upon sign-off of the seafarer from the vessel for medical treatment, the
employer shall bear the full cost of repatriation in the event the seafarer
is declared (1) fit for repatriation; or (2) fit to work but the employer is
unable to find employment for the seafarer on board his former vessel or
another vessel of the employer despite earnest efforts.
6. In case of permanent total or partial disability of the seafarer caused by

either injury or illness the seafarer shall be compensated in accordance
with the schedule of benefits arising from an illness or disease shall be
governed by the rates and the rules of compensation applicable at the
time the illness or disease was contracted.
8. WHEN NO DECLARATION IS MADE AS TO ILLNESS; PROCEDURE AND EFFECT:

Ricardo A. Dalusong Vs. Eagle Clarc Shipping Philippines, Inc., G.R. No. 204233,
03 Sept 2014
OFW contracts sickness or sustains injury resulting in his disability

Upon sign-off, OFW seafarer is required report within 3 days to designated
company physician for treatment of injury (considered temporary total disability) up
to a period of 120 days.
o OFW is to be paid compensation as he is totally unable to work
o How much compensation: Basic wage
o For how long: From sign-off until he is declared fit to work, or until declaration by
physician of his disability (e.., permanent partial or permanent total disability)
If no declaration is made because OFW requires further medical attention, the
temporary total disability compensation MAY be extended to a period of 240 days,
the compensation extended up to 240 days; subject to the right of the employer to
declare within this period that a permanent partial or total disability already exists.
Alone Amar P. Tagle vs. Anglo-Eastern Crew Management, Phil., Inc., G.R. 209302, 09 July
2014.; see also: See also DSG Shipmanagement Manila, Inc., et al. vs. Joselito B. Pellazar,
G.R. No. 198367, 06 Aug 2014; Fil-Pride Shipping Company, Inc., et al. vs. Edgar A.
Balasta, G.R. No. 193047, 03 March 2014
After 240 days and no declaration is made as to the seafarers medical condition,
then his disability shall be deemed total and permanent. (Dean Tony Abad opinion.)
9. For a seamans illness to be compensable; mandatory 3-day rule on post-

employment medical examination. Interorient Maritime Enterprises, Inc., vs.
Victor M. Creer III, G.R. No. 181921, 17 Sept 2014.
For a seamans claim for disability to prosper, it is mandatory that within three days
from his repatriation, he is examined by a company-designated physician. Non-
compliance with this mandatory requirement results in the forfeiture of the right to claim
for compensation and disability benefits.
SECTION 32-A OCCUPATIONAL DISEASES. -- For an occupational disease and the

resulting disability or death to be compensable, all of the following conditions must be
satisfied:
1. The seafarers work must involve the risks describe herein;

2. The disease was contracted as a result of the seafarers exposure to the
describe[d] risks;
172
3. The disease was contracted within a period of exposure and under such other
factors necessary to contract it;
4. There was no notorious negligence on the part of the seafarer. x x x
In fine, Victor's claim for disability benefits must be denied for failure to comply with the
mandatory three-day rule on post-employment medical examination without any valid or
justifiable reason, and for being non-compensable there being no showing that the
illness existed during the term of his employment contract or that it is work-related.
10. IMPORTANT 2013 CASE ON DISABILITY BENEFITS. Distinction of Supreme

Court rulings on whether independent physicians opinion or company
physicians opinion will be upheld as to work-related disability benefits.
(Nazareno vs. Maersk Filipinas, G.R. No. 168703, 26 February 2013, J. Peralta).
Principle: Giving of disability benefits to Filipino seafarers is in keeping with the

avowed policy of the State to give maximum aid and full protection to labor, holding
that the notion of disability is intimately related to the workers capacity to earn, and
what is compensated is the employees inability to work resulting in the impairment of
his earning capacity. Disability should be understood less on its medical significance
but more on the loss of earning capacity. Further, the Court held that where the
evidence may be reasonably interpreted in two divergent ways, one prejudicial
and the other favorable to the employee, the balance must be titled in favor of
the employee, consistent with the principle of social justice.
General rule in seafarers disability claims: The company-designated physician

initially determines compensability.
However, the seafarer may dispute such an assessment by seasonably exercising his
prerogative to seek a second opinion and consult a doctor of his choice. (Millan vs.
Wallan Maritime Services, Inc. 685 SCRA [2012])
If the independent doctor appointed by the seafarer disagrees with the

findings of the company-designated doctor, a third doctor may be agreed
jointly between the Employer and the seafarer.
The third doctors decision shall be final and binding on both parties
In such instance, the independent doctors evaluations confirming payment for work-
related injuries will be upheld in cases where their findings contradict the diagnosis of
the company-designated physician. PROVIDED, That employee timely questioned the
competence of the company-designated physician by immediately consulting two
independent doctors. (Nazareno vs. Maersk Filipinas, G.R. No. 168703, 26 February
2013, J. Peralta).
When the company-designated physicians opinion vis--vis the contrary

opinion of independent doctors will be upheld by the Supreme Court. Vergara
vs. Hammonia Maritime Services, Inc., G.R. No. 172933, 06 Oct 2008, cited in
Nazareno vs. Maersk Filipinas, G.R. No. 168703, 26 Feb 2013. -- Where it appears
that the seafarer failed to follow the procedure outlined in the Standard Employment
Contract (SEC) he signed, and said seafarer NEVER questioned the company-
designated doctors competence until he filed a petition with the courts. On the
contrary, he accepted the company doctors assessment of his fitness and even
executed a certification to this effect.
11. 2014-2015 CASES
11.1 Dario A. Carcedo, etc. vs. Maine Marine Phil., Inc., et al. G.R. No. 203804,
173
15 April 2015. -- Upon notification that the seafarer disagrees with the company
doctors assessment, the company has the burden of initiating the referral to the
third doctor agreed by the parties.
11.2 Wilhelmsen-Smith Bell Manning / Wilhelmsen Ship Management, Ltd. /

Fausto R. Preysler, Jr., vs. Allan Suarez, G.R. No. 207328, 20 April 2015.
Compensation benefits for seafarer under POEA-SEC; gradings of disability by
company physician; 120-day rule vs. 140 day rule; referral to third doctor by the
parties.
11.3 Nicanor Ceriola vs. NAESS Shipping Phil., Inc., et al. G.R. No. 193101, 20
April 2015. Parameters of work-related illness in resolving seafarers claim for
disability benefits for the employer to be liable.
11.4 Asmara International Placement Agency, Inc. vs. Mary Ann T. Cancel, G.R.
No 616772, 20 April 2015 (Resolution) -- Failure of employment agency to
lend succor to OFW from oppressive conditions of employment
11.5 The Heirs of the late Delfin dela Cruz, etc. vs. Philippines Transmarine
Carriers, Inc., et al., G.R. No. 196357, 20 April 2015. -- Prescriptive period for
filing complaint for disability benefits is three (3) years
12. 2015 LABOR BAR QUESTION: (XV)
Victor was hired by a local manning agency as a seafarer cook on board a luxury
vessel for an eight-month cruise. While on board, Victor complained of chronic
coughing, intermittent fever, and joint pains. He was advised by the ship's doctor to
take complete bed rest but was not given any other medication. His condition persisted
but the degree varied from day to day. At the end of the cruise, Victor went home to
Iloilo and there had himself examined. The examination revealed that he had
tuberculosis.
(a) Victor sued for medical reimbursement, damages and attorney's fees, claiming that
tuberculosis was a compensable illness. Do you agree with Victor? Why or why not?
(2%)
(b) Due to his prolonged illness, Victor was unable to work for more than 120 days.
Will this entitle him to claim total permanent disability benefits? (2%)
Answer:
(a) For a seamans claim for disability to prosper, it is mandatory that within three (3)
days from his repatriation, he is examined by a company-designated physician.
Noncompliance with this mandatory requirement results in the forfeiture of the right to
claim for compensation and disability benefits. Although tuberculosis is an
occupational disease and, therefore, compensable, but because Victor failed to comply
with the above mandatory requirement, his complaint for disability benefits must
perforce be dismissed.
(b) By virtue of the above consideration, Victor has forfeited his entitlements. However,
it must be noted that the passage of 120 days will not automatically mean that the
seafarer is immediately entitled to total permanent disability benefits. It would depend
upon the date of the filing of the complaint. If the maritime complaint was filed prior to 6
October 2008, the 120-day rule applies; if, on the other, the complaint was filed from
06 October 2008 onwards, the 240-day rule applies. (Crystal Shipping vs. Natividad,
510 Phil. 332).
174
N. PROCEDURES AND REMEDIES

(See Charts F and G on jurisdiction and procedure)
1. 2015 CASES:
1.1. Purisimo M. Cabaobas, et al. vs. Pepsi-Cola Products Phil., Inc., G.R. No.
176908, 25 March 2015. -- If the factual circumstances between two cases are
substantially the same, the principle of stare decisis shall apply.
1.2. Smart Communications, Inc., et al. vs. Jose Leni Z. Solidum, G.R. No. 204646, 15
April 2015. -- In illegal dismissal cases, if the LA ordered reinstatement, and the
employer failed to reinstate the employee either actually or in the payroll, and the
NLRC on appeal reversed the decision of the LA, the employee is entitled to the
accrued salaries and other benefits from the date of the LAs decision up to the date
the NLRC decision becomes final and executory.
1.3. Manila Mining Corp., vs. Lowito Amor, et al., G.R. No. 182800, 20 April 2015. --
Motion to reduce bond; effect of dishonored check.
In its motion to reduce bond in the appealed case, the companys provisional bond in
the form of a check was dishonored for payment, thereby rendering the tender
thereof ineffectual. The posting of a bond is indispensable to the perfection of an
appeal in cases involving monetary awards from the decision of the Labor Arbiter.
Since it is the posting of a cash or surety bond which confers jurisdiction upon the
NLRC, non-compliance is fatal and has the effect of rendering the award of the LA final
and executory.
1.4. Litex Glass and Aluminum Supply, et al., vs. Dominador B. Sanchez, G.R. No.
198465, 22 April 2015. - Where separation pay not prayed in the complaint or strained
relation not raised in the proceedings; when granted.
Even if separation pay was not prayed for in the complaint, but if there is enough basis
to conclude that there exist an apparent strained relation between the parties, the
award of separation pay is an equitable disposition.
Even if the issue of strained relation was not raised in the proceedings before the
Labor Arbiter, it was nonetheless discussed and argued by the parties in their
respective pleadings submitted to the NLRC when the case was brought on appeal.
Clearly, there is sufficient basis for the grant of separation pay in lieu of reinstatement.
2. Teekay Shipping vs. Concha, , GR 185463, 22 Feb 2012 -- FOUR YEAR

PRESCRIPTIVE PERIOD FOR TERMINATION CASES.
Ones employment, profession, trade or calling is a property right, within protection of a

constitutional guaranty of due process of law. Clearly then, when one is arbitrarily and
unjustly deprived of his job or means of livelihood, the action instituted to contest the
legality of ones dismissal from employment constitutes, in essence, an action predicated
upon an injury to the rights of the plaintiff, as contemplated under Art. 1146 of the New
Civil Code, which must be brought within FOUR (4) YEARS . Hence this is the reason why
termination cases have a prescriptive period of four (4) years, viz: injury upon rights of
plaintiff under art 1146 of Civil Code
Onofre V. Montero, et al. vs. Times Transportation Co., Inc., et al., G.R. No. 190828,
16 March 2015. -- Article 1155 of the Civil Code on prescription of action is applicable to
labor cases. Hence, the withdrawal of the complaint effectively erased the tolling of the
reglementary period.
175
In the case of Intercontinental Broadcasting Corporation vs. Panganiban (543 Phil. 371
[2007]), the Court held that although the commencement of a civil action stops the
running of the statute of prescription or limitations, its dismissal or voluntary
abandonment by plaintiff leaves the parties in exactly the same position as though no
action had been commenced at all. In like manner, while the filing of the complaint for
illegal dismissal before the LA interrupted the running of the prescriptive period, its
voluntary withdrawal left the petitioners in exactly the same position as though no
complaint had been filed at all. The withdrawal of their complaint effectively erased the
tolling of the reglementary period.
2. IMPORTANT CASE: PEOPLE'S BROADCASTING SERVICE (BOMBO RADYO PHILS.,

INC.), vs. THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT
(G.R. No. 179652, March 6, 2012); Jurisdiction of DOLE on its visitorial power
The determination of the existence of an employer-employee relationship by the DOLE must

be respected. The expanded visitorial and enforcement power of the DOLE granted by
RA 7730 would be rendered nugatory if the alleged employer could, by the simple
expedient of disputing the employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at least a prima facie showing of
the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does successfully refute the existence of an
employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it

takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or it
appears, upon review, that no employer-employee relationship existed in the first place.
TO RECAPITULATE:
a. If a complaint is brought before the DOLE to give effect to the labor standards provisions
of the Labor Code or other labor legislation, and there is a finding by the DOLE that
there is an existing employer-employee relationship, the DOLE exercises jurisdiction to
the exclusion of the NLRC.
b. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is

properly with the NLRC.
c. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement,
the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code,
which provides that the Labor Arbiter has original and exclusive jurisdiction over those
cases involving wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement.
d. If a complaint is filed with the NLRC, and there is still an existing employer-employee
relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE,
however, may still be questioned through a petition for certiorari under Rule 65 of the
Rules of Court.
3. REQUISITES TO PERFECT AN APPEAL FROM LABOR ARBITER TO NLRC.

Sarah Lee Philippines, Inc. vs. Macatlang, et al. etc., G.R. Nos. 180147, 180148, 180149, 180150,
180319 and 180685; 04 June 2014.
The requisites for perfection of appeal as embodied in Article 223, as amended, are:
(1) payment of appeal fees;
176
(2) filing of the memorandum of appeal; and

(3) payment of the required cash or surety bond (equivalent to the monetary award less
damages and attorneys fees)
(4) Requisites 1-3 must be satisfied within ten (10) days from receipt of the decision or order
appealed from.
As a rule, an appeal is perfected only upon the posting of a cash or surety bond. The said
posting within the period provided by law is not merely mandatory but jurisdictional.
CASES ON POSTING OF APPEAL BOND;
3.1 On Motion to Reduce Bond. -- Andi D. Balite, et al. vs. SS Ventures International,
Inc., et al., G.R. No. 195109, 04 Feb 2015; see also: Philippine Touristers, Inc., et
al vs. Mas Transit Workers Union-Anglo KMU, etc., G.R. No. 201237, 03 Sept 2014.
The NLRC New Rules of Procedure only allow the filing of a motion to reduce bond on
two conditions: (1) that there is meritorious ground; and (2) a bond in a reasonable
amount is posted. Compliance with the two conditions stops the running of the period to
perfect an appeal provided that they are complied within the 10-day reglementary
period.
In McBurnie vs. Ganzon (G.R. Nos. 178034 & 178117 & 186984 to 85, 17 Oct. 2013)
it was held that 10% of the monetary award that is subject of the appeal shall
provisionally be deemed the reasonable amount of the bond, in the meantime that the
appellants motion is pending resolution by the Commission.
The appeal bond ought to be reduced in such an amount that the employees would still
be assured of at least substantial compensation, in case a judgment award is affirmed.
On the other hand, management will not be effectively denied of its statutory privilege of
appeal.
3.2 IMPORTANT CASE: Governments exemption from the posting of appeal bond. --
Banahaw Broadcasting Corporation vs. Cayetano Pacana III, et al, G.R. No.
171673, 30 May 2011. -- The Supreme Court, held that as a general rule, the
government and all the attached agencies with no legal personality distinct from the
former are exempt from posting appeal bonds.
An appeal is only a statutory privilege and it may only be exercised in the manner
provided by law. Nevertheless, in certain cases, we had occasion to declare that while
the rule treats the filing of a cash or surety bond in the amount equivalent to the
monetary award in the judgment appealed from, as a jurisdictional requirement to
perfect an appeal, the bond requirement on appeals involving monetary awards is
sometimes given a liberal interpretation in line with the desired objective of resolving
controversies on the merits.
The rationale for the appeal bond is to protect the presumptive judgment creditor
against the insolvency of the presumptive judgment debtor. When the State litigates,
it is not required to put up an appeal bond because it is presumed to be always
solvent. This exemption, however, does not, as a general rule, apply to government-
owned and controlled corporations (GOCCs) for the reason that the latter has a
personality distinct from its shareholders. In this case, BBC, though owned by the
government, is a corporation with a personality distinct from the Republic or any of its
agencies or instrumentalities, and therefore do not partake in the latters exemption
from the posting of appeal bonds.
3.3 Substantial compliance with cash bond requirement, where bond posted in
a previously decided case may be applied to the present case . Lepanto
Consolidated Mining Corporation vs. Belio Icao, G.R. No. 196047, 15 January
2014. --
177
Lepanto substantially complied with the appeal bond requirement under the Labor Code
and the NLRC Rules. It filed a Consolidated Motion to release the cash bond it posted
in another case, which had been decided with finality in its favor with a view to applying
the same cash bond to the present case.
The decision is based on the following reasons:

a. The appeal was filed within the 10-day reglementary period;
b. Lepanto has an unencumbered amount of money in the form of cash in the custody
of the NLRC;
c. The amount of the cash bond posted in the other case is more than enough to cover
the appeal bond in the present case; and
d. This ruling remains faithful to the spirit behind the appeal bond requirement which is
to ensure the workers will receive the money awarded in their favor when the
employers appeal eventually fails.
3.4 IMPORTANT CASE: contra; no substantial compliance of bond requirement --

Philux, Inc. vs. NLRC and Patricia Perjes, G.R. No. 151854, 03 Sept 2008.
While the bond requirement on appeals involving monetary awards has been relaxed in
certain cases, this can only be done where there was substantial compliance of the
NLRC Rules of Procedure or where the appellants, at the very least, exhibited
willingness to pay by posting a partial bond or where the failure to comply with the
requirements for perfection of appeal was justified. Here, the negligence and/or
ignorance of the rules of petitioners former counsel is not sufficient justification
for their failure to comply with the posting of the bond within the reglementary
period. Neither can petitioners argue that subsequent but belated posting of the bond
be considered as substantial compliance warranting the relaxation of the rules in the
interest of justice.
4. VERIFICATION AND CERTIFICATION;
4.1 Forum shopping; Failure to state material dates in petition for certiorari; Appeal
from LA to NLRC, requisites; Motion to reduce bond. Sarah Lee Philippines, Inc.
vs. Macatlang, et al. etc.,G.R. Nos. 180147, 180148, 180149, 180150, 180319 and
180685; 04 June 2014. --
The strict requirements of the law may be dispensed with in the interest of justice. In
Acaylar Jr., vs. Harayo (582 Phil. 600 [2008]), it was held that failure to state the
material dates is not fatal to the causes of action provided the date of the receipt of the
Resolution denying the Motor for Reconsideration is alleged in the petition. It may be
said therefore that the failure to state the other material dates may be excused since
said dates are evident in the records (Authors Opinion.) Of course, it goes without
saying that the appeal should be filed within the reglementary period.
4.2 Effect of failure to sign. Emmanuel Babas et al. vs. Lorenzo Shipping Corporation, G.R.
No. 186091, 15 Dec 2010.-- A petition satisfies the formal requirements only with regard
to those who signed the petition, but not the co-petitioners who did not sign nor
authorize the other petitioners to sign it on their behalf. In the case at bar, only seven
(7) of the nine petitioners signed the verification and certification against forum
shopping. Thus, the other petitioners who did not sign cannot be recognized as
petitioners and have no legal standing before the Court. The petition should be
dismissed outright with respect to such non-conforming petitioners.
4.3 Who can sign for the company without need of board resolution. South Cotabato
Communications Corporation and Gauvain J. Benzonan vs. Hon. Patricia A. Sto. Tomas,
et al, G.R. No. 173326, 15 Dec 2010.
178
The following can sign the verification and certification against forum
shopping without need of a board resolution: (1) the Chairperson of the
Board of Directors, (2) the President of a corporation, (3) the General
Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories, the
determination of the sufficiency of the authority was done on a case to case basis. In
the foregoing cases the authority of said corporate representatives to sign the
verification or certificate is justified in their being in a position to verify the truthfulness
and correctness of the allegations in the petition. However, the better procedure is still
to append a board resolution to the complaint or petition to obviate questions regarding
the authority of the signatory of the verification and certification.
4.4 Philtranco Service Enterprises, Inc., et al. vs. Philtranco Workers Union AGLO,
G.R. No. 180962, 26 February 2014. -- Even if a governments office prohibits the filing
of a motion for reconsideration, such motion must still be filed for purposes of the filing of
a petition for certiorari.
5. COMPUTATION OF MONETARY AWARDS
University of Pangasinan, et al. v. Florentino Fernandez, et al., G.R. No. 2111228, 12

November 2014. -- Updating computation of monetary awards is not a violation of the
principle of immutability of final judgment; imposable rate of interest
Updating the computation of awards to include as well backwages and separation pay
corresponding to the period after the rendition of the labor Arbiters decision up to its finality
is not violative of principle of immutability of a final and executor judgment. (see also session
Delights Ice Cream and Fast Foods vs. Court of Appeals, G.R. No. 172149, February 08, 2010; 612
SCRA 10); (Gonzales v. Solid Cement Corporation, G.R. No. 198423, October 23, 2012; 684 SCRA
344.)
While the dispositive portion of the CA decision did not explicitly refer to the 13 th month pay,
its inclusion in the computation approved by the Labor Arbiter is proper. (See also Nacar vs.
Gallery Frames, G.R. No. 189871, August 13, 2013; 703 SCRA 439; Gonzales vs. Solid
Cement, ibid).
Rate of interest at 6% imposable upon the total adjudged monetary award. (Nacar vs.
Gallery Frames, ibid).
6. IMPORTANT CASE ON QUITCLAIMS: GOODRICH VS. ATIVO, 01 FEB 2010.
GENERAL RULE: Courts look with disfavor on quitclaims and releases made by
employees who have been pressured into signing them by unscrupulous employers seeking
to evade legal responsibilities and frustrate just claims fo employees.
EXCEPTION: However, quitclaims will be considered as valid and binding if the employer is
able to prove the following:
Employee executes the quitclaim voluntarily

There is no fraud or deceit on the part of the employer
Consideration for the quitclaim is credible and reasonable
Contract is not contrary to law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law.
179
In this case, employer was able to prove all of the above. The consideration is not grossly
inadequate vis--vis what they should receive in full. The difference in the anounts
expected from those that were received may be considered as a fair and reasonable bargain
on the part of the both parties.
7. Eastern Mediterranean Maritime Ltd., et al. vs. Estanislao Surio, et al. G.R. No. 154213,
August 23, 2012. NLRCs Jurisdiction, Probationary Employees, Security of Tenure
Issue: WHETHER OR NOT THE NLRC HAS JURISDICTION TO REVIEW ON APPEAL

CASES DECIDED BY THE POEA ON MATTERS PERTAINING TO DISCIPLINARY
ACTIONS AGAINST PRIVATE RESPONDENTS.
Answer: NLRC HAS NO JURISDICTION. Petitioners adamant insistence that the NLRC
should have appellate authority over the POEAs decision in the disciplinary action because
their complaint against respondents was filed in 1993 was unwarranted. Although Republic
Act No. 8042, through its Section 10, transferred the original and exclusive jurisdiction to
hear and decide money claims involving overseas Filipino workers from the POEA to the
Labor Arbiters, the law did not remove from the POEA the original and exclusive
jurisdiction to hear and decide all disciplinary action cases and other special cases
administrative in character involving such workers. It is clear to us, therefore, that the
NLRC had no appellate jurisdiction to review the decision of the POEA in disciplinary cases
involving overseas contract workers.The obvious intent of Republic Act No. 8042 was to
have the POEA focus its efforts in resolving all administrative matters affecting overseas
workers.
Section 28. Jurisdiction of the POEA. The POEA shall exercise

original and exclusive jurisdiction to hear and decide: (a) all cases,
which are administrative in character, involving or arising out of
violations or rules and regulations relating to licensing and
registration of recruitment and employment agencies or entities;
and (b) disciplinary action cases and other special cases,
which are administrative in character, involving employers,
principals, contracting partners and Filipino migrant workers.
8. Manuel D. Yngson, Jr., (in his capacity as the Liquidator of ARCAM & Co., Inc.) vs.
Philippine National Bank. G.R. No. 171132, August 15, 2012. Lien on unpaid wages;
As to petitioner's argument on the right of first preference as regards unpaid wages, the
Court has elucidated in the case of Development Bank of the Philippines v. NLRC that a
distinction should be made between a preference of credit and a lien. A preference applies
only to claims which do not attach to specific properties. A lien creates a charge on a
particular property.
The right of first preference as regards unpaid wages recognized by Article 110 of the
Labor Code, does not constitute a lien on the property of the insolvent debtor in favor
of workers. It is but a preference of credit in their favor, a preference in application. It
is a method adopted to determine and specify the order in which credits should be paid in
the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference
in the discharge of the funds of the judgment debtor. Consequently, the right of first
preference for unpaid wages may not be invoked in this case to nullify the foreclosure sales
conducted pursuant to PNB 's right as a secured creditor to enforce its lien on specific
properties of its debtor, ARCAM.
9. Piercing corporate veil; Liability of corporate officers; Moral and exemplary damages;
Park Hotel, et al. vs. Manolo Soriano, et al. G.R. No. 171118. September 10, 2012.
180
To disregard the separate juridical personality of a corporation, the wrongdoing must be

established clearly and convincingly. It cannot be presumed.
In the case at bar, respondents utterly failed to prove by competent evidence that Park Hotel
was a mere instrumentality, agency, conduit or adjunct of Burgos, or that its separate
corporate veil had been used to cover any fraud or illegality committed by Burgos against
the respondents. Accordingly, Park Hotel and Burgos cannot be considered as one and the
same entity, and Park Hotel cannot be held solidary liable with Burgos.
Nonetheless, although the corporate veil between Park Hotel and Burgos cannot be pierced,
it does not necessarily mean that Percy and Harbutt are exempt from liability towards
respondents. Verily, a corporation, being a juridical entity, may act only through its
directors, officers and employees. Obligations incurred by them, while acting as
corporate agents, are not their personal liability but the direct accountability of the
corporation they represent.
However, corporate officers may be deemed solidarily liable with the corporation for
the termination of employees if they acted with malice or bad faith. In the present case,
the lower tribunals unanimously found that Percy and Harbutt, in their capacity as corporate
officers of Burgos, acted maliciously in terminating the services of respondents without any
valid ground and in order to suppress their right to self-organization.
10. IMPORTANT CASE: MAY THE ISSUE OF ABSENCE OF EMPLOYER-EMPLOYEE

RELATIONSHIP BE RAISED FOR THE FIRST TIME ON APPEAL?
ANSWER: NO. The alleged absence of employer-employee relationship cannot be raised

for the first time on appeal. In its Position Paper, petitioner highlighted respondents
complicity and involvement in the alleged fake condemnation of damaged cigarettes as
found by the DFPDC. This, according to petitioner, was a just cause for terminating an
employee.
With the pleadings submitted by petitioner, together with the corresponding pleadings filed
by respondent, the LA and the NLRC declared the dismissal of respondent illegal. These
decisions were premised on the finding that there was an employer-employee relationship.
Nowhere in said pleadings did petitioner deny the existence of said relationship. Rather,
the line of its defense impliedly admitted said relationship. The issue of illegal
dismissal would have been irrelevant had there been no employer-employee
relationship in the first place.
In this case, petitioner insisted that respondent was dismissed from employment for cause
and after the observance of the proper procedure for termination. Consequently, petitioner
cannot now deny that respondent is its employee. While indeed, jurisdiction cannot be
conferred by acts or omission of the parties, petitioners belated denial that it is the
employer of respondent is obviously an afterthought, a devise to defeat the law and evade
its obligations. (Duty Free Phils vs. Tria, G.R. No. 174809, 27 June 2012)
Non-lawyers can appear before the Labor Arbiter if: (1%)
(A) they represent themselves

(B) they are properly authorized to represent their legitimate labor organization or member
thereof
(C) they are duly-accredited members of the legal aid office recognized by the DOJ or IBP
(D) they appear in cases involving an amount of less than Php5,000
181
2014 BAR QUESTION:
Luisito has been working with Lima Land for 20 years. Wanting to work in the public sector,
Luisito applied with and was offered a job at Livecor. Before accepting the offer, he wanted
to consult you whether the payments that he and Lima Land had made to the Social
Security System (SSS) can be transferred or credited to the Government Service Insurance
System (GSIS). What would you advice? (4%)
ANSWER: Yes, the portability of benefits under RA 7699 would allow the transfer of the
payments made by Luisito and Lima Land from SSS to GSIS.
The jurisdiction of the National Labor Relations Commission does not include: (1%)
(A) exclusive appellate jurisdiction over all cases decided by the Labor Arbiter
(B) exclusive appellate jurisdiction over all cases decided by Regional Directors or hearing
officers involving the recovery of wages and other monetary claims and benefits arising
from employer-employee relations where the aggregate money claim of each does not
exceed five thousand pesos (Php5,000)
(C) original jurisdiction to act as a compulsory arbitration body over labor disputes
certified to it by the Regional Directors
(D) power to issue a labor injunction
O. SUPREME COURT CASES

AFFECTING THE SSS/SSC
1. The Social Security System and the Social Security Commissions findings of fact
regarding the existence of an employer-employee relationship for purposes of
coverage under social security laws, are given weight and credence by the
Supreme Court. -- GAPAYAO VS. FULO AND SSS, G.R. NO. 193493, 13 JUNE
2013.
At the outset, it is settled that the Supreme Court is NOT a trier of acts,
and will not weigh evidence all over again. Findings of fact of
administrative agencies and quasi-judicial bodies which have acquired
expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect but also finality when affirmed by the
Court of Appeals. For as long as these findings are supported by
substantial evidence, they must be upheld.
A reading of the records reveals that the deceased was indeed a

farm worker who was in the regular employ of petitioner. From year
to year, starting January 1983 up until his death, the deceased had
been working on petitioners land by harvesting abaca and coconut,
processing copra, and clearing weeds. His employment was
continuous in the sense that it was done for more than one
harvesting season. Moreover, no amount of reasoning could detract
from the fact that these tasks were necessary or desirable in the usual
business of petitioner. Lastly, the private respondent was subject to
the control of the petitioner company. Xxx We do not give credence to
the allegation that the deceased was an independent contractor. Xxx The
right of an employee to be covered by the Social Security Act is premised
on the existenceof an employer-employee relationship that having been
established, the Court rules in favor of private respondent. (Gapayao, ibid.;
Emphasis supplied.)
182
2. IMPORTANT J. PRESBITERIO VELASCO CASE:
Whether biological parents are precluded from being a beneficiary of an adopted

child, when adoptive parent predeceases the adopted child? -- Bartolome vs.
SSS And Scanmar Maritime Services, G.R. No. 192531, 12 Nov 2014.
Answer: NO. Adoptive parents death at the time of the adopteds minority resulted in
the restoration of the biological parents parental authority over the adopted child.
Facts: John Corcol was employed as an electrician by Scanmar Maritime Services on

board vessel Maersk Dansell, and duly enrolled under the governments Employees
Compensation Program (ECP). While onboard ship, steel plates fell upon him causing
his untimely death in 2008. Subsequently, Johns biological mother Bernardina filed a
claim for death benefits as John was still single and childless at the time of his death at
age 25.
SSS and ECC denied claim upon finding that John was legally adopted by Cornelio
Colcol, Bernardinas grandfather, by virtue of a decree of adoption. Even assuming that
Cornelio had predeceased John on October 1987, Bernardina could NOT qualify as
Johns secondary beneficiary because dependent parent referred to under Article 167
(j) of P.D. No. 626 refers to legitimate parent of the covered member, as provided for
by Rule XV, Section 1[ c] [1] of the Amended Rules on Employees Compensation.
Bernardina could not be considered a legitimate parent of John, having given up the
latter for adoption to Mr. Cornelio Colcol.
Issue: May the biological parent Bernardina be considered a lawful beneficiary of the
deceased John Colcol, notwithstanding having given him up for adoption previously?
Decision: YES, biological parent may be a beneficiary in this case. Rule XV, Sec.
1(c)(1) of the Amended Rules on Employees Compensation deviates from the clear
language of Art. 167 (j) of the Labor Code, as amended.
Examining the Amended Rules on Employees Compensation in light of the Labor Code,
as amended, it is at once apparent that the ECC indulged in an unauthorized
administrative legislation. In net effect, the ECC read into Art. 167 of the Code an
interpretation not contemplated by the provision. Xxx Administrative or executive
acts, orders and regulations shall be valid only when they are not contrary to the laws or
the Constitution.
Thus, the word "relatives" is a general term and when used in a statute it embraces not
only collateral relatives but also all the kindred of the person spoken of, unless the
context indicates that it was used in a more restrictive or limited sense which as
already discussed earlier, is not so in the case at bar. (Emphasis supplied)
In the same vein, the term "parents" in the phrase "dependent parents" in the
afore-quoted Article 167 (j) of the Labor Code is used and ought to be taken in its
general sense and cannot be unduly limited to "legitimate parents" as what the
ECC did. The phrase "dependent parents" should, therefore, include all parents,
whether legitimate or illegitimate and whether by nature or by adoption. When the law
does not distinguish, one should not distinguish. Plainly, "dependent parents" are
parents, whether legitimate or illegitimate, biological or by adoption,who are in need of
support or assistance.
183
Moreover, the same Article 167 (j),as couched, clearly shows that Congress did
not intend to limit the phrase "dependent parents" to solely legitimate parents.
3. REITERATION OF PRINCIPLES REGARDING

ENTITLEMENT TO DISABILITY OR DEATH
BENEFITS
3.1 Burden of proof is upon the claimant to establish that the illness (hypertension) is
work-related before he may avail of disability benefits. Employee Gomera has
failed to present competent evidence, such as medical records of physicians
reports to objectively substantiate his claim that there is a reasonable link between
his work and his ailment. His bare allegations do not, by themselves, make his
illness compensable. -- Edilberto Gomera vs. Social Security System, G.R. No.
183264, 26 Jan 2015.
3.2 In order for a beneficiary of an employee to be entitled to death benefits under the
SSS, the cause of death of the employee must be a sickness listed as an
occupation disease by the ECC; or any other illness caused by employment, subject
to proof that the risk of contracting the same is increased by the working conditions.
In this case, Systempic Lupus Erythematosus (SLE) is NOT listed as an
occupational disease, and hence, Estrella has to prove by substantial evidence the
causal relationship between her husbands illness and his working conditions.
Despite having submitted a toxicology report, there is nothing on record proving the
causal relationship between Baylons work as a laboratory technician at the
Chemistry Department of De La Salle University. Having failed that, the claim must
perforce be denied. Estrella D.S. Banez Vs. Social Security System and Dela
Salle University, G.R. No. 189574, 18 July 2014.
2015 LABOR BAR QUESTION: (XIV)
Luis, a PNP officer, was off duty and resting at home when he heard a scuffle
outside his house. He saw two of his neighbors fighting and he rushed out to pacify
them. One of the neighbors shot Luis by mistake, which resulted in Luis's death.
Marian, Luis's widow, filed a claim with the GSIS seeking death benefits. The GSIS
denied the claim on the ground that the death of Luis was not service-related as he
was off duty when the incident happened. Is the GSIS correct? (3%)
Answer: No. The GSIS is not correct because Luis was just off-duty. A
policeman, just like a soldier, is covered by the 24-Hour Duty Rule. He is deemed
on round-the-clock duty unless on official leave, in which case his death outside
performance of official peace-keeping mission will bar death claim. In this case, Luis
was not on official leave and he died in the performance of a peace-keeping
mission. Therefore, his death is compensable.
FOR THE BAR EXAMINEES:

GOOD LUCK AND GOD BLESS YOU ALL!!
ADAMSON FALCONS: SOARING HIGH, DEFYING GRAVITY!
VERITAS ET FORTITUDO. PRO DEO ET PATRIA. ONE LYCEUM FIGHT!!!
ADA D. ABAD, 03 OCTOBER 2016
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2016 LABOR LAW BAR REVIEW HAND-OUTS

FOR 2016 JOINT LYCEUM-ADAMSON BAR OPERATIONS

For 2016 Bar Examinations: 1st Sunday PM, 06 November 2016

A. GENERAL PRINCIPLS AND CONCEPTS

1. CONSTITUTIONAL AND STATUTORY BASIS OF LABOR LAW AND SOCIAL

1.1 Promotion of human dignity (Art 2, sec 2)

2. DISTINCTION BETWEEN LABOR LAW AND SOCIAL LEGISLATION

LABOR LAW SOCIAL LEGISLATION

3. MEMORIZE ARTICLE 3, LABOR CODE: DECLARATION OF POLICY

4. Principle of Social and Distributive Justice: Balancing of interests in case

5. HOW TO BALANCE CONFLICTING INTERESTS IN PROBLEM SOLVING:

MANAGEMENT VS. LABOR

Profit Equitable share in the profits

Management prerogatives Workers rights

6. GENERAL RULES TO REMEMBER FOR

6.1. Existence of Employer-Employee relationship

6.1.1 Four tests to determine the existence of an employer-employee relationship

(MEMORY AID: SOUTH WEST DISASTER CONTROL)

Important VELASCO cases on the power of control

Question: Did the complainants become employees of PLDT when their

SC Decision: Locsin and Tomaquin are employees of PLDT.

2015 BAR EXAMINATION QUESTION (V)

Ador is a student working on his master's degree in horticulture. To make

(a) Is there an employer-employee relationship between Nico and Ador?

A. Yes. By changing Adors plans and designing the arrangements himself

A. YES. Ador is a worker paid on task basis; hence, there is employer-

DISTINGUISH BETWEEN RULES THAT FIX METHODOLOGY

EXAMPLE: INSURANCE AGENTS; TWO CASES:

Insurance agents are not employees of the insurance companies, in the

As the Supreme Court clarified in the case of Tongko vs.

6.1.2 Existence of an employer-employee relationship is a condition sine

There must be a REASONABLE CAUSAL CONNECTION between the parties

Facts: Adviento was hired as Civil Engineer (for maintenance of facilities) of

Question: Whether or not RTC has jurisdiction?

Answer: YES. No reasonable causal connection between claim and employer-

Although Adviento contracted the occupational disease during his employment

Important VELASCO case on jurisdiction to determine er-ee

NOTE: HOWEVER COMPLAINANT EMPLOYEE INITIALLY HAS THE

6.3. There must exist SUBSTANTIAL EVIDENCE to prove valid exercise of

QUESTION: Are sworn statements of relatives and friends of respondent

ANSWER: YES. The employers evidence consists of sworn statements

circumstances indicating the existence of such relationship. (Alilem Credit

Note: Failure of employer to submit documents which are presumed to

6.4 In cases of ambiguity, interpretation shall be made in favor of

CASES ON INTERPRETATION OF LABOR CONTRACTS:

What is more significant is that respondents and intervenors have not

2014 CASE: National Union Of Workers In Hotel Restaurant And Allied

are ambiguous and doubtful or leading to several interpretations of the parties

Position of the Union and Voluntary Arbitrator: The imposition of No NDB is a

SUPREME COURT DECISION: YES, it is violative of CBA. For the Union.

CASE4 ON FUNERAL AND BEREAVEMENT AID FOR DEATH OF LEGAL

SECTION 4. Funeral/ Bereavement Aid. The COMPANY agrees to grant a

SUPREME COURT DECISION: NO, the Company cannot do so.

The coverage of the term legal dependent as used in a stipulation in a collective

Accordingly, the concurrence of a legitimate spouse does not disqualify a child or a

CASE5 EN CONTRA: Mitsubishi Motors Phils. Salaried Employees Union

ISSUE: In a CBA which provides for reimbursement of hospitalization benefits to

SUPREME COURT DECISION: NO, Mitsubishi Company is under NO

Consequently, MMPSEU cannot rely on the rule that a contract of insurance is to be

6.5 In the imposition of penalty, whether suspension or termination, the

Facts: Basketball player Alvin Teng had a below-par performance during

Case for Negros Slashers: (a) basketball organization is a "team-based"

6.6 But management prerogatives are likewise to be equally protected when