1 LABOR LAW (Notes)

Labor Law I Labor Standards

Preliminary Considerations
Article 1. Name of Decree. This Decree shall be known as the "Labor Code of the Philippines".
Article 2. Date of effectivity. This Code shall take effect six (6) months after its promulgation.
The Labor Code has gathered in one volume some 60 pieces of law which were in force when the codification began
in 1968, such as the Eight-hour Labor Law, the Minimum Wage Law, and the Termination Pay Law.
The preliminary title of the Labor Code gives an overview of the objectives of Philippine labor laws, the most
important of which is the advancement of social justice. Social justice is the humanization of laws and the
equalization of social and economic forces by the state so that justice in its rational and objectively secular
conception may at least be approximated, according to Justice Laurel.
The labor code is subdivided into a preliminary title and seven booksPre-Employment; Human Resources
Development; Conditions of Employment; Health, Safety and Social Welfare Benefits; Labor Relations; Post
Employment; Transitory and Final Provision.
Labor standards law sets out the minimum terms, conditions and benefits of employment that employers must
provide and comply with and to which employees are entitled as a matter of legal right. Examples of Labor
standards law tackle wages, work hours, safety and health of employees, and employment benefits among others.
Meanwhile, labor relations law defines the status, rights and duties, as well as the institutional mechanisms, that
govern the individual and collective interactions between employers, employees and their representatives.
President Marcos signed the Labor Law into law on May 1, 1974 but its effectivity was deferred six months after
(the promulgation) on Nov. 1, 1974. This was to make room for amendments.
What is labor?
- Its the exertion by human beings of physical or mental efforts, or both, towards the production of goods
and services.
What is the purpose of labor legislation?
- Labor legislation is an exercise of police power. The purpose of labor legislation is to regulate the relations
between employers and employees respecting the terms and conditions of employment, either by providing
for certain standards or for a legal framework within which better terms and conditions of work could be
negotiated through CB. It is intended to correct the injustices inherent in employment relationships.
Distinguished from social legislation?
- Social legislation is a broad term and may include not only laws that give social security protection, but
also those that help the worker secure housing and basic necessities. All labor laws are social legislation,
but not all social legislation is labor law.
Article 3. Declaration of basic policy. The State shall afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers.
The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just
and humane conditions of work.
Article 4. Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of
this Code, including its implementing rules and regulations, shall be resolved in favor of labor.
Section 3, Article XVIII of the Constitution:
The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to
security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and
2 LABOR LAW (Notes)

decision-making processes affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share
in the fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and
growth.
Article 1702 of the Civil Code: In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.
Under the Civil Code, contracts of labor are explicitly subject to the police power of the state because they are not
ordinary contracts but are impressed with public interest. Inasmuch as in this particular instance the contract in
question would have been deemed in violation of pertinent labor laws, the provisions of said laws would prevail
over the terms of the contract, and private respondent would still be entitled to overtime pay. [PAL Employees
Savings And Loan Assn., Inc. vs. NLRC, 1996] While the terms and conditions of a CBA constitute the law
between the parties, it is not however, an ordinary contract to which is applied the principles of law governing
ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code of the
Philippines which governs the relations between labor and capital, is not merely contractual in nature but impressed
with public interest, thus, it must yield to the common good. As such, it must be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended to serve. [Cirtek Employees
Labor Union-FFW v Cirtek Electronics, 2010]
What is compassionate justice?
- It is disregarding rigid rules and giving due weight to all equities of the case.
Whats the concept of liberal approach in interpreting the Labor Code and its IRR?
- The workers welfare should be the paramount consideration in the constitutional mandate to afford full
protection to labor. It underscores the policy of social justice to accommodate the interests of the working
class on the humane justification that those who have less in life shall have more in law.
What are the reasons for affording greater protection to employees?
- There is greater supply than demand for labor; and need for employment by labor comes from vital and
desperate necessity.
Cebu Royal Plant vs. Deputy Minister of Labor Petitioner company dismissed Ramon Pilones from work
due to pulmonary tuberculosis minimal. Pilones claimed that he was already tenured. And according to
the Labor Code: Where the employee suffers from a disease and his continued employment is prohibited
by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his
employment unless there is a certification by a competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his
former position immediately upon the restoration of his normal health. Pilones was employed in February
1968, and his probation period ended in November of the same year.
Was Pilones validly dismissed? NO. Pilones was already tenured. Thus, the employer should have
complied with the requirement of certification by a competent public health authority. Record showed that
Pilones was merely examined by a company physician and was dismissed on the basis thereof.
Maribago Bluewater beach resort Inc vs Dual Withal, the law, in protecting the rights of the laborers,
authorizes neither oppression nor self-destruction of the employer. While the Constitution is committed to
the policy of social justice and the protection of the working class, it should not be supposed that every
labor dispute will be automatically decided in favor of labor. The management also has its own rights, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those
with less privileges in life, the Supreme Court has inclined more often than not toward the worker and
upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to
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the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts
and applicable law and doctrine.
PLDT vs NLRC Marilyn Abucay was dismissed from PLDT for having demanded and received money
from PLDT customers in consideration of her expediting their phone applications. The NLRC upheld
Abucays dismissal but nevertheless awarded her separation pay for her, considering her long years of
service. The Solicitor General cited cases wherein employees, who were terminated for cause, were still
given back wages or separation pay.
Was Abucay entitled to separation pay? NO. The Supreme Court ruled in this case that where the employee
is validly dismissed for causes other than serious misconduct or those reflecting his moral character, hes
entitled to separation pay.
Article 5. Rules and regulations. The Department of Labor and other government agencies charged with the
administration and enforcement of this Code or any of its parts shall promulgate the necessary implementing rules
and regulations. Such rules and regulations shall become effective fifteen (15) days after announcement of their
adoption in newspapers of general circulation.
Administrative rules and regulations must not contravene, amend, restrict or enlarge the scope of the laws they seek
to implement, in view of the Principle of Separation of Powers.
Vir-Jen Shipping and Marine Services Inc vs NLRC Private respondents were seamen employed by
petitioner company. En route to Australia, which was an ITF-controlled port, private respondents
demanded for a salary increase. Petitioner later on dismissed the private respondents. The private
respondents, however, were able to get a favorable decision from the NLRC. One of the issues raised by
petitioner was that the respondent NLRC had no more jurisdiction to entertain private respondents' appeal
because the NSB decision became final and executory for failure of said respondents to serve on he
petitioner a copy of their "APPEAL AND MEMORANDUM OF APPEAL" within the ten (10) day
reglementary period for appeal and even after the expiration of said period. The seamen contended that the
10-day period pertained to working days and not calendar days. The Court said: Since the Labor Code
expressly states only 10 days, it refers to calendar days. The Minister of Labor cannot change the rules.
Insular Bank of Asia and America Employees Union vs. Inciong Petitioners asked for holiday pays from
respondent bank as provided for under the Labor Code. But such provision was amended and the Minister
of Labor also interpreted the provision to exclude monthly paid workers. The Secretary vehemently argues
that the intent and spirit of the holiday pay law, as expressed by the Secretary of Labor in the case of
Chartered Bank Employees Association v. The Chartered Bank (NLRC Case No. RB- 1789-75, March 24,
1976), is to correct the disadvantages inherent in the daily compensation system of employment holiday
pay is primarily intended to benefit the daily paid workers whose employment and income are
circumscribed by the principle of "no work, no pay." This argument may sound meritorious; but, until the
provisions of the Labor Code on holiday pay is amended by another law, monthly paid employees are
definitely included in the benefits of regular holiday pay. As earlier stated, the presumption is always in
favor of law, negatively put, the Labor Code is always strictly construed against management.
Article 6. Applicability. All rights and benefits granted to workers under this Code shall, except as may otherwise
be provided herein, apply alike to all workers, whether agricultural or non-agricultural.

Employer-Employee Relationship
It is important to remember, not every person working for another is an employee for the purpose of applying the
provisions of the Labor Code
Fourt types of work arrangments:
1.) Employer-employee
2.) Job contracting with an individual
3.) Job contracting with an enterprise
4.) Illegitimate (labor-only) contracting
Discuss the four elements of an employer-employee relationship
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a) Selection and engagement of the employee

b) The payment of wages
c) The power of dismissal
d) The employers power to control the employee with respect not only to the results but also too the means
and methods by which the work is to be accomplished. The contro test is the most important element.
Viana vs Al-Lagadan and Piga A member of a fishing sailboat Magkapatid disappeared as a result of a
collision with a U.S. Navy ship. Thus, his parents filed a complaint against petitioner, the owner of the ship, to
claim compensation. But the latter contended that Al-Lagadan was not his employee but an industrial partner.
The Supreme Court enunciated for the first time, the four-fold test. But it wasnt applied, because facts are
wanting to support a conclusion.
Meteoro vs Creative Creatures Inc Petitioners were artists working for respondent. They filed a complaint
against respondent, asking for night shift differential pay, overtime pay, holiday pay, 13th month pay, etc.
Respondent, however, claimed that petitioners were contractual workers. To resolve the issue raised by
respondent, that is, the existence of an employer-employee relationship, there is need to examine evidentiary
matters. The following elements constitute the reliable yardstick to determine such relationship: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employees conduct.[26] There is no hard and fast rule designed to establish the aforesaid
elements. Any competent and relevant evidence to prove the relationship may be admitted. Identification cards,
cash vouchers, social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status.[27] These pieces of evidence are readily
available, as they are in the possession of either the employee or the employer; and they may easily be looked
into by the labor inspector (in the course of inspection) when confronted with the question of the existence or
absence of an employer-employee relationship. But the Court dismissed the petition for lack of evidence.
Whats the importance of determining whether an employer-employee relationship exists?
- The Court said in Brotherhood Labor Unity Movement of the Philippines vs Zamora: The question of
whether an employer-employee relationship exists in a certain situation continues to bedevil the courts.
Some businessmen try to avoid the bringing about of an employer-employee relationship in their
enterprises because that judicial relation spawns obligations connected with workmen's compensation,
social security, medicare, minimum wage, termination pay, and unionism. Thus, in order to afford laborers
protection and rights to which they are entitled to, the existence of employer-employee relationship must be
determined.
Brotherhood Labor Unity Movement of the Philippines vs Zamora Petitioners were kargodors of seven years
for San Miguel Corporation. One day a shutdown of the glass plant occurred, thus they were temporarily unable
to work. But after repairs were made, respondent company barred the petitioners from reporting back to work.
Thus, petitioners filed a complaint against SMC for illegal dismissal. But SMC claimed that there was no
existing employer-employee relationship between them and the petitioner, adding that petitioners were under an
independent contractor. Was there an employer-employee relationship? YES. Petitioners were kargodors of
seven years for San Miguel Corporation. One day aIn determining the existence of an employer-employee
relationship, the elements that are generally considered are the following: (a) the selection and engagement of
the employee; (b) the payment of wages [even if piece basis]; (c) the power of dismissal; and (d) the employer's
power to control the employee with respect to the means and methods by which the work is to be accomplished.
It. is the called "control test" that is the most important element. The existence of an independent contractor
relationship is generally established by the following criteria: "whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control and supervision of the
work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers;
the control of the premises; the duty to supply the premises tools, appliances, materials and labor; and the mode,
manner and terms of payment"shutdown of the glass plant occurred, thus they were temporarily unable to work.
But after repairs were made, respondent company barred the petitioners from reporting back to work. Thus,
petitioners filed a complaint against SMC for illegal dismissal. But SMC claimed that there was no existing
employer-employee relationship between them and the petitioner, adding that petitioners were under an
independent contractor
Statutory Definitions of Employer and Employee
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"Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an
employee and shall include the government and all its branches, subdivisions and instrumentalities, all government-
owned or controlled corporations and institutions, as well as non-profit private institutions, or organizations. (Article
97)
"Employee" includes any individual employed by an employer. (Article 97)
"Employer" means any person, natural or juridical, employing the services of the employee. (Article 173)
"Employee" means any person compulsorily covered by the GSIS under Commonwealth Act Numbered One
hundred eighty-six, as amended, including the members of the Armed Forces of the Philippines, and any person
employed as casual, emergency, temporary, substitute or contractual, or any person compulsorily covered by the
SSS under Republic Act Numbered Eleven hundred sixty-one, as amended. (Article 173)
"Employer" includes any person acting in the interest of an employer, directly or indirectly. The term shall not
include any labor organization or any of its officers or agents except when acting as employer. (Article 218)
"Employee" includes any person in the employ of an employer. The term shall not be limited to the employees of a
particular employer, unless the Code so explicitly states. It shall include any individual whose work has ceased as a
result of or in connection with any current labor dispute or because of any unfair labor practice if he has not obtained
any other substantially equivalent and regular employment. (Article 218)
*First Element: Selection and Engagement of the Employee
Slection may be done directly, or through a private recruitment and placement agency. A written contract is not
required for the creation and enforceability of an employment relationship. And, an employment relationship may
still exist even if the contract explicitly provides otherwise. In other words, an employer cannot repudiate or deny
the existence of an employment relationship by means of a written contract.
Sevilla vs. CA Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the
Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila
for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily
liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch
office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World
Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina
Sevilla and 3% was to be withheld by the Tourist World Service, Inc. On November 24, 1961 the Tourist
World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service
considered closing down its office. On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated counterclaim of Segundina Noguera and the
new complaint of appellant Lina Sevilla were jointly heard following which the court ordered both cases
dismiss for lack of merit. In her appeal, Lina Sevilla claims that a joint bussiness venture was entered into
by and between her and appellee TWS with offices at the Ermita branch office and that she was not an
employee of the TWS to the end that her relationship with TWS was one of a joint business venture
appellant made declarations.
Was Sevilla an employee of Tourist World Service? NO. As found by the Appellate Court, '[w]hen the
branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist
World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. Under these
circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the
means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities. It is
further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then,
who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her
booking successes. The fact that Sevilla had been designated 'branch manager" does not make her, ergo,
Tourist World's employee. As we said, employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
Phil Global Communications, Inc. Vs. De Vera Petitioner and respondent entered into a retainer contract
whereby De Vera would be the companys retained doctor. Later on, petitioner decided that it didnt
6 LABOR LAW (Notes)

anymore need the services of respondent, thus opting to terminate the contract, to which respondent filed a
case of illegal dismissal against petitioner. Was De Vera an employee? No. It was clear that he was a
retained doctor and not employee, evident of their agreement. Also, the company had no control over De
Vera, which is one of the four-fold test of determining the existence of an employer-employee relationship.
The appellate courts premise that regular employees are those who perform activities which are desirable
and necessary for the business of the employer is not determinative in this case. For, we take it that any
agreement may provide that one party shall render services for and in behalf of another, no matter how
necessary for the latters business, even without being hired as an employee. This set-up is precisely true in
the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the
Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an
employment relationship. As it is, the provision merely distinguishes between two (2) kinds of employees,
i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship
is in dispute.
*Second Element: Payment of Wages
"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair
and reasonable value, as determined by the Secretary of Labor and Employment, 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. (Article 97)
Jardin vs NLRC Petitioners were taxi drivers for private respondent company, Philjama. They earn wages
through the boundary system but their employers deduct P30 daily from their salary supposedly for the
washing of the taxi units. Believing the deduction to be illegal, petitioners formed a labor union, which
became the basis for the employers dismissing them. Thus, petitioners filed a complaint of illegal
dismissal. The question is: Whether or not taxi drivers are considered, employees, considering they earn
money through the boundary system. YES. The fact that the taxi drivers do not get a fixed salary does not
mean that they dont have a wage. After all, among the four elements of an employer-employee
relationship, the control test is the most important. Petitioners are employees of the employer company
perform acts which are necessary in the usual business or trade of employer. That they dont receive fixed
wages is not sufficient to wihdraw the erelationship between them from that of employer and employee.
Chavez vs NLRC Petitioner was a truck driver for respondent company, Supreme Packaging, Inc. He is
paid on a per trip basis from Mariveles to Metro Manila. One day, he asked for benefits of a regular
employee but it was futile and later on he was dismissed, thus his complaint for illegal dismissal.
Respondent company claimed that Chavez was not an employee, evident of a contract of service. The issue
is: Whether or not the fact Chavez is an employee, given that he earns his salary on a per trip basis. YES.
The fact that Chavez was paid on a per trip basis isnt important because such was only a method in
computing his compensation and not a basis for determining the existence of an employer-employee
relationship. Further, all the elements of the existence of an employer-employee relationship are attendant.
Tan vs Lagrama Respondent Lagrama was a painter, making ad billboards and murals for movies shown
at the Empress, Supreme and Crown Theaters. One day, petitioner Tan summoned Lagrama and alleged
that he urinated in his work station, which became the basis of his dismissal. Thus, Lagrama filed a
complaint of illegal dismissal. Whether or not Lagrama was an employee, given that he worked for Tan on
a fixed piece-work basis. Yes. Cite Article 97(f) of Labor Code). That Lagrama worked on a fixed ppiece-
work basis is unimportant. Payment by result is a method of compensation and does not determine the
existence of an employer-employee relationship. Whats interesting in this case was the fact that the only
basis of the Supreme Court in holding that the element of control was present is the fact that Tan required
Lagrama to perform work in a certain spot and to observe proper hygiene. In the case at bar, albeit
petitioner Tan claims that private respondent Lagrama was an independent contractor and never his
employee, the evidence shows that the latter performed his work as painter under the supervision and
control of petitioner. Lagrama worked in a designated work area inside the Crown Theater of petitioner, for
the use of which petitioner prescribed rules. The rules included the observance of cleanliness and hygiene
and a prohibition against urinating in the work area and any place other than the toilet or the rest rooms.[9]
7 LABOR LAW (Notes)

Petitioners control over Lagramas work extended not only to the use of the work area, but also to the
result of Lagramas work, and the manner and means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the
materials used for the paintings, because he admitted that he paid Lagrama only for the latters services.
*Third Element: Power of Dismissal
"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, wheth
Chavez vs NLRC The respondents power to dismiss the petitioner was inherent in the fact that they
engaged the services of the petitioner as truck driver. They exercised this power by terminating the
petitioners services albeit in the guise of severance of contractual relation due allegedly to the latters
breach of his contractual obligation.
Tan vs Lagrama By stating that he had the right to fire Lagrama, petitioner in effect acknowledged
Lagrama to be his employee. For the right to hire and fire is another important element of the employer-
employee relationship.[13] Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report
for work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was
indeed an employee of petitioner. For only an employee can nurture such an expectancy, the frustration of
which, unless satisfactorily explained, can bring about some disciplinary action on the part of the employer.
*Fourth Element: The Right of Control The Most Important Element
Insular Life Assurance Co vs NLRC With regard to the element of control, there must be a distinction between
rules merely serving as guidelines toward the achievement of mutually desired result without dictating the means
and methods to be employed; and those that control or bind the party hired to use of such means. Unlike the latter,
the former does not establish an Employer-Employee relationship. In this case, it was held that respondent was
merely following rules that served as guidelines toward the achievement of mutually desired result.
Not every rule that the company may prescribe gives rise to the existence of an Employer-Employee relationship
Tongko vs Manulife There are built-in elements of control specific to an insurance agency not amounting
to an Employer-Employee relationship governed by the Labor Code. The Insurance Code provides specific
parameters in the way an agent negotiates for the sale of the companys insurance products, his collection
activities and his delivery of the insurance contract or policy. Under the Civil Code, an agent is a person
who binds himself to do something in behalf of another, with the consent or authority of the latter. Also,
Article 1887 of the Civil Code provides that in the execution of the agency, the agent shall act in
accordance with the instructions of the principal. In this case, the instructions that Manulife gave Tongko
were among the directives that the principal may impose on the agent to achieve the assigned task.
Sonza vs ABS-CBN Jay Sonza isnt an employee of ABS-CBN. Sonzas circumstances were actually
indicative that he was more of an independent contractor. ABS-CBN neither supervised nor controlled how
Sonza utilized his skills and talent in his shows. Sonzas circumstances were actually indicative that he was
more of an independent contractor. ABS-CBN neither supervised nor controlled how Sonza utilized his
skills and talent in his shows.
As to his argument that ABS CBN had the right not to air his shows, which indicate power of control, it
was held that ABS-CBNs power not to air Jays show is a necessary consequence of their contractual
relations, not necessarily a form of control.
Dumpit-Murillo vs CA Unlike in Sonza in Sonza vs. ABS-CBN, Thelma was acting under the control of
ABC with regard to the means and methods of her work. Thelmas contract also indicated that she was an
employee, because it was clear that ABC had control over the work of petitioner (required participation in
live remote coverages, assignment of other work such as writing, research and camera work, required
presence at the studios at the time designated by ABC, etc.). Also, ABC had the power to dismiss her. And
respondents argument that the contract was characterized by a valid fixed-period is employment was
untenable. Fixed-term employments are not considered valid where, from the circumstances, it is apparent
that they were imposed to preclude acquisition of tenurial security by the employee.
Bernate vs PBA Was Bernate, a referee, an employee of PBA? NO. His contract was in the nature of a
retainer. Bernate only followed rules that serve as guidelines in order to maintain the integrity of the
8 LABOR LAW (Notes)

professional basketball league. Once in the playing court, the referees exercise their independent judgment
based on the rules of the game. They are the only, absolute, and final authority on the playing court.
Furthermore, referees are required to report for work only when PBA games are scheduled, and the only
deductions from the fees received by the referees are withholding taxes. Foreign jurisprudence was also
applied here as it was ruled that a referee is an independent contractor, whose special skills and
independent judgment are required specifically for such position and cannot possibly be controlled by the
hiring party. Therefore, Bernate was not an employee of PBA.
Orozco vs CA It was again emphasized that the main determinant with regard to the element of control
as an indication of the existence of an Employer-Employee relationship is whether the rules set by the
employer are meant to control not just the results of the work but also the means and method to be used by
the hired party in order to achieve such results. The factors (deadlines, editing, topic, article length, etc.)
enumerated by Orozco are inherent conditions in running a newspaper. In other words, the so-called control
as to time, space, and discipline are dictated by the very nature of the newspaper business itself. That PDI
may choose not to publish Orozcos column couldnt be the control contemplated in the control test as it
is but logical that one who commissions another to do a piece of work should have the right to accept or
reject the product. Its important to consider the control exercised over how the work itself is done, not just
its end result. Where a person who works for another performs his job more or less at his own pleasure, in
the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to
the end result of his efforts and not the amount thereof, no employer-employee relationship exists.
Consulta vs CA Consultas position, the Managing Associate, only received suggestion from Pamana on
how to go about their recruitment and sales activities. They could adopt the suggestions but such were not
binding on them. They could adopt other methods that deemed more effective. And, Pamana paid Consulta
not for labor she performed but only for the results of her work. Without results, Consultas labor was her
own burden and loss.
Brotherhood Labor Unity Movement of the Philippines, et al vs Zamora The Supreme Court said:
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the means and
manner of performing the same is practically nil. For, how many ways are there to load and unload bottles
and wooden shells? The mere concern of both respondent SMC and the alleged contractor is that the job of
having the bottles and wooden shells brought to and from the warehouse be done. More evident and
pronounced is respondent company's RIGHT TO CONTROL in the discipline of petitioners. Documentary
evidence presented by the petitioners establish respondent SMC's right to impose disciplinary measures for
violations or infractions of its rules and regulations as well as its right to recommend transfers and
dismissals of the piece workers. The inter-office memoranda submitted in evidence prove the company's
control over the petitioners. That respondent SMC has the power to recommend penalties or dismissal of
the piece workers, even as to Abner Bungay who is alleged by SMC to be a representative of the alleged
labor contractor, is the strongest indication of respondent company's right of control over the petitioners as
ssdirect employer.
Such pronouncement indicates that the control test requires only the existence of the right to control the
manner of doing the work not necessarily the actual exercise thereof.
Air Material Wing Savins and Loan Association vs NLRC Private Respondent Atty. Salas was hired by
petitioner Air Material as a notarial and legal counsel. The appointment was fixed at 3 years but may be
renewed. After six years, Air Material informed Salas that it would no longer renew his contract. Thus,
Salas sued Air Material.
Was Salas an employee of Air Material? YES. Air Material was deemed to have exercised its power of
control over Salas by defining his duties and functions as its legal counsel. Salas was tasked by Air
Material to act on all legal matters pertinent to his office; seek remedies to effect collection of overdue
accounts of members; and to defend by all means all suit against its interest. Citing Hydro Resources
Contractors Corp vs. Pagalilauan, the Court said that a lawyer may be an employee of a private corporation
or even of the government. Lawyers are usually hired as an in-house counsel or through an outside law firm
on a retainer basis. The former are considered employees unlike the latter. In this case, Salas was hired as
an in-house counsel. Therefore, he was an employee of Air Material.
9 LABOR LAW (Notes)

Chavez vs NLRC Petitioner Chavez was a truck driver for respondent company, Supreme Packaging, Inc.
He was paid on a per trip basis from Mariveles to Metro Manila. One day, he asked for benefits of a regular
employee but was denied of them. He filed a complaint for regularization with the NLRC but before the
case could be heard, Supreme Packaging terminated his services. Thus, Chavez sued Supreme Packaging
Was Chavez an employee? Yup. Supreme Packagings right of control was manifested by the following
attendant circumstances: 1.) The company provided the truck driven by Chavez; 2.) There was an express
instruction that the truck shall be used exclusively to deliver the companys goods; 3.) The company
directed the petitioner, after completion of each delivery, to park the truck in specified places only in
Manila and Bataan; 4.) It was the company that determined when and where the petitioner would perform
his task by issuing him gate passes and routing slips.
Tan vs Lagrama According to the Supreme Court, Lagrama performed his work as painter under the
supervision and control of petitioner. Lagrama worked in a designated work area inside the Crown Theater
of petitioner, for the use of which petitioner prescribed rules. The rules included the observance of
cleanliness and hygiene and a prohibition against urinating in the work area and any place other than the
toilet or the rest rooms. Petitioners control over Lagramas work extended not only to the use of the work
area, but also to the result of Lagramas work, and the manner and means by which the work was to be
accomplished. Also, it was petitioner who supplied Lagramas painting equipment and other needs for his
work.
Cosmopolitan Funeral Homes Inc vs Maalat Respondent Noli Maalat was hired by Cormopolitan Funeral
Homes (Cosmopolitan) as a supervisor to handle the solicitation of mortuary arrangements, sales and
collections. He was paid on a commission basis of the amounts actually collected and remitted. Under their
agreement, Maalat was prohibited from engaging in part-time embalming business outside of the company.
Incurring absences without leave was likewise subject to disciplinary action. Later on, Cosmopolitan
terminated the services Maalat due to the latters alleged irregularities. Thus, Maalat sued Cosmopolitan for
illegal dismissal.
Was he an employee? YES. It appeared that Cosmopolitan imposed rules that indicated the existence of an
Employer-Employee relationship: 1. He was not allowed to engage in other embalming businesses 2. He
was not allowed to go AWOL 3. He must always be on the job or at least most of the time 4. He was not
allowed to issue his own receipts, now was he allowed to directly deduct his commission as truly
independent salesmen practice 5. He was not allowed to negotiate and make contract with customers
outside the office and signing of such should be made immediately before the deceased is placed in the
caskert. Thus, the control test has been satisfied.
Vallum Security Services vs NLRC Petitioners Vallum and Baguio Leisure Corporation (or Hyatt Bagiuo)
entered into a contract whereby Vallum would provide Hyatt Bagiuo the services of security guards, who
were the respondents in the case. Two years later, Hyatt Baguio terminated the services of the security
guards. Thus, the guards filed a complaint against petitioners for illegal dismissal. Petitioners argued that
Vallum was an independent contractor to which the security guards directly worked for.
Whether or not the security guards were employees of Hyatt Baguio? YES. It appeared that it was Hyatt
Baguio who selected among Vallums pool of security guards whom it wished to hire. Hyatt Baguio also
directly paid the guards their wages. In fact the pay slips bored Hyatts logo. Hyatt Baguio also exercised
control over the activities of the guards: 1. The assignments of particular security guards was subject to the
approval of Hyatt Baguio's Chief Security Officer 2. promotions of the security guards from casual to
regular employees were approved or ratified by the Chief Security Officer of Hyatt Baguio; 3. Hyatt
Baguio's Chief Security Officer decided who among the various security guards should be an duty or on
call, as well as who, in cases of disciplinary matters, should be suspended or dismissed 4. the petitioners
themselves admitted that Hyatt Baguio, through its Chief Security Officer, awarded citations to individual
security guards for meritorious services. Furthermore, it was held that Vallum was not an independent
contractor but was a labor-only contractor which the Labor Code prohibits.
Religious of the Virgin Mary vs NLRC Private respondent Colegio de San Pascual Baylon (Colegio)
operated two high school departments (Boys and Girls) in Bulacan. The College, represented by the Bishop
of Malolos, entered into an agreement with petitioner Religious of the Virgin Mary (RVM) whereby the
latter would run, administer and operate the Colleges girls department for a term of 10 years. But before
10 LABOR LAW (Notes)

the expiration of the contract term, the Bishop pre-terminated the agreement resulting in the petitioner
moving out of the school premises. But the teachers hired by petitioner continued to render services and
were subsequently not paid their salaries. Thus, the teachers filed a complaint for unpaid salaries against
the College.
Who shall be liable for the salaries of the teachers? The College. The Agreement indicated that RVM
entered into the contract not as an independent contractor but as a manager or administrator of the school.
While it was true that RVM had the the authority to employ teachers needed by the school, impose and
collect tuition pees, and pay the expenses of operations, control and supervision over the schools
operations remained in the hands of the Dioces of Malolos, owner of the College. Meanwhile, theres no
merit in respondents claim that RVM exercised actual and effective control since the designation of the
parish priest as director was a mere formality, as he did perform functions which are purely ministerial
and figurative in nature.[19] Time and again we have held that the control test only requires the
existence of the right to control the manner of doing the work not necessarily the actual exercise of the
power by him, which he can delegate.[20] Indeed, although the letters of appointment were signed by the
principal/representative of petitioner, they bore the name/letterhead of CDSPB and clearly indicated therein
that the employees were hired as teachers/personnel by CDSPB, and not by RVM. Moreover, CDSPB itself
admits that its name not petitioners appears in the employees payroll ledger cards.
Leonardo vs CA Petitioners were hired by Batangas Telephone Company (BALTEL) that operated
telephone service in Balatas, Bulacan. Baltel and Digitel entered into a management contract whereby
Digitel was to provide personnel, consultancy and technical expertise in the operation of BALTELs
telephone service in Balagtas. Later on, Baltel incurred serious losses rendering it financially incapable to
continue its operations. Thus, Baltel assigned to Digitel its buildings and other improvements on a parcel of
land in Balagtas where Baltel used to conduct its operations. Such assignment was in partial payment of
Baltels obligation to Digitel. And soon after, petitioners employment ceased. Thus, they sued respondents
for unpaid salaries and other quitclaims. They claimed that Baltel was absorbed into Digitel
Whether or not petitioners were employees of Digitel. NO! First, there was no proof that Baltel was
absorbed by Digitel as the latter did not buy the former, though it had the option to do so. In this case,
DIGITEL undoubtedly has the power of control. However, DIGITELs exercise of the power of control
necessarily flows from the exercise of its responsibilities under the management contract which includes
providing for personnel, consultancy and technical expertise in the management, administration, and
operation of the telephone system. Thus, the control test has no application in this case. The Court notes
that DIGITEL did not hire petitioners. BALTEL had already employed petitioners when BALTEL entered
into the management contract with DIGITEL. We also agree with the Court of Appeals that the fact that
DIGITEL uses its payslips does not necessarily imply that DIGITEL pays petitioners salaries. As pointed
out by the Court of Appeals, DIGITEL introduced its own financial and accounting systems to BALTEL
and it included the use of DIGITELs payslips for accounting purposes. The management contract provides
that BALTEL shall reimburse DIGITEL for all expenses incurred in the performance of its services and
this includes reimbursement of whatever amount DIGITEL paid or advanced to BALTELs employees.

Two-Tiered Test
Francisco vs NLRC Angelina Francisco was assigned by Kasei Corporation into several positions such
as: Accountant, Liaison Officer to the City of Makati; Corporate Secretary; and Acting Manager. As Acting
Manager, she was charged with handling recruitment of employees as well as to represent the company in
all dealings with government agencies, especially with the BIR, SSS, etc. She performed the work of
Acting Manager for five years but later she was replaced by Liza R. Fuentes as Manager. Then, Kasei
Corporation reduced her salary and was not paid her mid-year bonus allegedly because the company was
not earning well. She made repeated follow-ups with the company cashier but she was advised that the
company was not earning well. Ultimately, she did not report for work and filed an action for constructive
dismissal before the labor arbiter.
Was Francisco and employee of the Corporation? Yes. Given the complexity of Franciscos situation in the
company as he had held so many positions, the so-called control test is not sufficient to give a complete
picture of the relationship between the parties. There are instances when, aside from the employers power
11 LABOR LAW (Notes)

to control the employee with respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some
other capacity. Thus, the better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employers power to control the employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic realities of the activity of the relationship.
Applying the control test, there could be no doubt that petitioner was an employee because she was under
the direct control and supervision of the corporations Technical Consultant. And she reported for work
regularly performing functions necessary and desirable for the proper operation of the corporation.
The proper standard of economic dependence is whether the worker is dependent on the alleged employer
for his continued employment in that line of business. In the United States, the touchstone of economic
reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is
dependency. By analogy, the benchmark of economic reality in analyzing possible employment
relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his
employer.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal, receiving
check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation made a report to the SSS signed by
Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen
signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the
on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between
petitioner and respondent corporation.

Contracting
Article 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by
him.
Article 107. Indirect employer. The provisions of the immediately preceding article shall likewise apply to any
person, partnership, association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
Article 108. Posting of bond. An employer or indirect employer may require the contractor or subcontractor to
furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the
employees should the contractor or subcontractor, as the case may be, fail to pay the same.
12 LABOR LAW (Notes)

Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of
this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered
as direct employers.
DOLE Department Order 18-A, Series of 2011
Section 2. Coverage. These Rules shall apply to all parties of contracting and subcontracting arrangements
where employer-employee relationships exist. It shall also apply to cooperatives engaging in contracting or
subcontracting arrangements.
Contractors and subcontractors referred to in these Rules are proibited from engaging in recruitment and
placement activities as defined in Article 13 (b) of the Labor Code, whether local or overseas employment.
Section 3. Definition of terms. The following terms as used in these Rules shall mean:
xxxxxxx
(c) Contracting or Subcontracting refers to an arrangement whereby a principal agrees to put out or
farm out with a contractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be performed or
completed within ou outisde the premises of the principal.
(d) Contractor refers to any person or entity, including a cooperative, engaged in a legitimate contracting
or subcontracting arrangement providing either services, skilled workers, temporary workers, or a
combination of services to a principal under a Service Agreement.
(e) Contractors employee includes one employed by a contractor to perform or complete a job, work, or
service pursuant to a Service Agreement with a principal.
It shall also refer to regular employees of the contractor whose functions are not dependent on the
performance or completion of a specific job, work or service within a definite period of time, i.e.
administrative staff.
(h) Principal refers to any employer, whether a person or entity, including government agencies and
government-owned and controlled-corporations, who/which puts out or frams out a job, service or work to
a contractor.
(i) Right to control refers to the right reserved to the persons for whom the services of the contractual
workers are performed, to determine not only the end to be achieved, but also the manner and means to be
used in reaching that end.
(j) Service Agreement refers to the contract between the principal and contractor containing the terms
and conditions governing the performance or completion of a specific jon, work or service being farmed
out for a definite or predetermined period.
(k) Solidary liability refers to the liability of the principal, pursuant to the provisions of Article 109 of the
Labor Code, as direct employer together with the contractor for any violation of any provision of the Labor
Code
It also refers to the liability of the principal, in the same manner and extent that he/she is liabile to his/her
direct employees, to the extent of the work performed under the contract when the contractor fails to pay
the wages of his/her employees, as provided in Article 106 of the Labor Code, as amended.
(l) Substantial capital refers to paid-up capital stocks/shares of at least P3 million in the case of
corporations, partnerships and cooperatives; in the case of single proprietorship, a net worth of at least P3
million.
(m) Trilateral Relationship refers to the relationship in a contracting or subcontracting arrangement
where there is a contract for a specific job, work or service between the principal and the contractor, and a
contract of employment between the contractor and its workers. There are three (3) parties involved in
these arrangments: the principal who decides to farm out a job, work or service to a contractor; the
13 LABOR LAW (Notes)

contractor who has the capacity to indpendently undertake the performance of the job, work or service; and
the contractual workers engaged by the contractor to accomplish the job, work or service.
Section 4. Legitimate or subcontracting. Contracting or subcontracting shall be legitimate if ALL the
following circumstances concur:
(a) The contractor must be registered in accordance with these Rules and carries a distinct and
independent business and undertakes to perform the job, work or service on its own responsibility,
according to its own manner and method, and free from control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof;
(b) The contractor has substantial capital and/or investment; and
(c) The Service Agreement ensures compliance with all the rights and benefits under Labor Laws.
Section 5. Trilateral relationship in contracting arrangements; Solidary liability. In legitimate
contracting or subcontracting arrangement there exists:
(a) An employer-employee relationshsip between the contractor and the employees it engaged to
perform the specific job, work or service being contracted; and
(b) A contractual relationship between the principal and the contractor as governed by the provisions
of the Civil Code.
In the event of any violation of any provision of the Labor Code, including the failure to pay
wages, there exists a solidary liability on the part of the principal and the contractor for purposes
of enforcing the provisions of the Labor Code and other social legislation, to the extent of the
work performed under the employment contract.
However, the principal shall be deemed the direct employer of the contractors employee in cases
where there is a finding by a competent authority of labor-only contracting, or commission of
prohibited activities as provided in Section 7, or a violation of either Sections 8 or 9 hereof.
Section 6. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor only contracting shall refer to an arrangement where:
(a) The contractor does not have substantial capital OR investments in the form of tools, equipment,
machineries, work premises, among others, and the employees recruited and placed are
performing activities which are usually necessary or desirable to the operation of the company, or
directly related to the main business of the principal within a definite or predetermined period,
regardless of whether such job, work or service is to be performed within or outide the premises of
the principal; or
(b) The contractor does not exercise the right to control over the performance of the work of the
employee
Section 7. Other Prohibitions. Notwithstanding Section 6 of these Rules, the following are hereby
declared prohibited for being contrary to law or public policy:
A. Contracting out of jobs, works or services when not done in good faith and not justified by the
exigencies of the business such as the following: (too many to mention lelz and I cant copy and
past from the pdf)
Section 8. Rights of contractors employees. All contractors employees, whether deployed or assigned as
reliever, seasonal, week-ender, temporary, r promo jobbers, shall be entitled to all the rights and privileges
as provided for in the Labor Code, as amended, to include the following:
(a) Safe and healthful working conditions;
(b) Labor standards such as but not limited to service incentive leave, rest days, overtime pay, holiday
pay, 13th month pay, and separation pay as may be provided in the Service Agreement or under the
Labor Code;
(c) Retirement benefits under the SSS or retirement plans of the contractor, if there is any;
(d) Social security and welfare benefits
(e) Self-organization, collective bargaining and peaceful concerted activities; and
(f) Security of tenure
14 LABOR LAW (Notes)

Section 11. Security of tenure of contractors employees. It is understood that all contractors employees
enjoy security of tenure regardless of whether the contract of employment is co-terminus with the service
agreement, or for a specific job, work or service, or phrase thereof.
Section 14. Mandatory Registration and Registry of Legitimate Contractors. Consistent with the
authroity of the Secretary of Labor and Employment to restrict or prohibit the contracting out of labor to
protect the rights of workers, it shall be mandatory for all persons or entities, including cooperatives, acting
as contractors, to register with the Regional Office of the Department of Labor and Employment (DOLE)
where it principally operates.
Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.
Accordingly, the registration system governing contracting arrangements and implemented by the Regional
Offices of the DOLE is hereby established, with the Bureau of Working Conditions (BWC) as the central
registry.
Section 27. Effects of finding of labor-only contracting and/or violation of Sections 7, 8 or 9 of the
Rules. A finding by competent authority of labor-only contracting shall render the principal jointly and
severally liable with the contractor to the latters employees, in the same manner and extent that the
principal is liable to employees directly hired by him/her, as provided in Article 106 of the Labor Code, as
amended.
A finding of commission of any of the prohibited activities in Section 7, or violation of either Sections 8 or
9 hereof, shall render the principal the direct employer of the employees of the contractor or subcontractor,
pursuant to Article 109 of the Labor Code, as amended.
Section 4 requires a contractor to be registered in order to be considered engaged in legitimate contracting. If a
contractor is not registered, would that mean that the contractor is engaged in labor-only contracting, which is
prohibited by law? Not necessarily. Purusant to Section 14, failure to register merely gives rise the presumption that
the contractor is engaged in labor-only contracting.
Whats the consequence if theres a finding that a contractor is engaged in labor-only contracting? According to
Section 27, the principal shall be jointly and solidarily/severally liable with the contractor to the latters employees
in the same manner as provided in Article 106 of the Labor Code.
Re: Solidary Liability of Principal and Contractor
- In legitimate job contracting, the principal employer becomes jointly and severally liable with the job
contractors ONLY for the payment of the employees wages whenever the contractor fails to pay the same.
- But in labor-only contracting, wherein the contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the labor-only contractor as if such employees
had been directly employed by the principal, the principal employer becomes solidarily liable with the
labor-only contractor for all the rightful claims and benefits of the employees under the Labor Code. (San
Miguesl Corporation vs Maerc Integrated Services, 2003)
Mandaue Galleon Trade Inc vs Andales First, respondents work as weavers, grinders, sanders and
finishers is directly related to MGTI's principal business of rattan furniture manufacturing. Where the
employees are tasked to undertake activities usually desirable or necessary in the usual business of the
employer, the contractor is considered as a labor-only contractor and such employees are considered as
regular employees of the employer. Second, MGTI was unable to present any proof that its contractors had
substantial capital. There was no evidence pertaining to the contractors' capitalization; nor to their
investment in tools, equipment or implements actually used in the performance or completion of the job,
work, or service that they were contracted to render. The law casts the burden on the contractor to prove
that it has substantial capital, investment, tools, etc. Employees, on the other hand, need not prove that the
contractor does not have substantial capital, investment, and tools to engage in job-contracting.
Baguio vs NLRC In ruling that the principal (a company engaged in flour and feeds manufacturing) and
the contractor are solidarily liable for the latters unpaid employees, the Court applied Article 107 (Indirect
Employers) of the Labor Code. There is "job contracting" where (1) the contractor carries on an
independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal
15 LABOR LAW (Notes)

in all matters connected with the performance of the work except as to the results thereof; and (2) the
contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business. It may be that LUPO
subsequently ran out of capital and was unable to satisfy the award to petitioners. That was an after-the-fact
development, however, and does not detract from his status as an independent contractor. Thus, GMC
qualified as an indirect employer as it entered into a contract with an independent contractor for the
construction of a building which was not directly related to GMCs business of flour and feeds
manufacturing.
So basically, what the Supreme Court said in this case was that Article 106 solely applies to labor-only
contracting. The Court said: Since the construction of an annex building inside the company plant has no
relation whatsoever with the employers business of flour and feeds manufacturing, labor-only
contracting does not exist. Article 106 is thus inapplicable.
But Justice Padilla dissented. He maintained that labor-only contracting is not the sole coverage of Article
106, because paragraph 2 of Article 106 pertains to situations where a legitimate contractor was not able to
pay his employees, and thus rendering the principal and contractor solidarily liable. It is paragraphs 2 of
Article 106 that is applicable in the case, he said. Article 107 should be understood as to referring only to a
person, corporation, etc. who is not an employer.
Coca-Cola Bottlers Philippines Inc vs Agito (2009) In this case, the Court adopted Justice Padillas
dissent in Baguio vs NLRC. The Court said that Article 106 recognizes two possible relations among the
parties: (1) the permitted legitimate job contract, or (2) the prohibited labor-only contracting.
Although Interserve had an authorized capital stock amounting to P2 million, only P625,000 was paid up as
of 2001. But respondents were hired as salesmen and leadman for petitioner. The Court could not, under
such ambiguous circumstances, make a reasonable determination if Interserve had substantial capital or
investment to undertake the job it was contracting with petitioner. Intraserve did not even say the nature of
the work it performs.
DOLE Philippine Inc vs Esteva If the capital is the fruit of labor only contracting, it cannot be used as a
basis of the contractors substantial capital.
Neri vs NLRC (1993) Two janitors, petitioners in this case, of Building Care Corporation sued
respondents for regularization and unpaid wages. Petitioners claimed that Building Care Corporation were
engaged in labor-only contracting as it failed to show that it invested in the form of tools, equipment,
machineries, work premices and other materials necessary in the conduct of its business.
Was Building Care engaged in labor-only contracting? NO. Respondent BCC need not prove that it made
investments in the form of tools, equipment, machineries, work premises, among others, because it has
established that it has sufficient capitalization. It is well-settled that there is "labor-only" contracting where:
(a) the person supplying workers to an employer does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others; and, (b) the workers recruited and placed
by such person are performing activities which are directly related to the principal business of the
employer. The law does not require both substantial capital and investment in the form of tools, equipment,
machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the
contractor to prove that he has both capital and the requisite investment, then the conjunction "and" should
have been used. Note also that Building Care carried on an independent business and performed its contract
according to its own manner and method, free from control and supervision of its principal in all matters
except as to the results thereof.
SMC vs Maerc Integrated Services Inc (2003) It was not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises, etc., to be considered an
independent contractor. Another factor that must be considered is whether the contractor was carrying on
an independent business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control and supervision of
the workers; the power of the employer with respect to the hiring, firing and payment of the workers of the
contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor;
and the mode, manner and terms of payment. Moreover, while MAERCs investments in the form of
buildings, tools and equipment amounted to more than P4 Million, we cannot disregard the fact that it was
16 LABOR LAW (Notes)

the SMC which required MAERC to undertake such investments under the understanding that the business
relationship between petitioner and MAERC would be on a long term basis. Nor do we believe MAERC to
have an independent business. Not only was it set up to specifically meet the pressing needs of SMC which
was then having labor problems in its segregation division, none of its workers was also ever assigned to
any other establishment, thus convincing us that it was created solely to service the needs of SMC.
Naturally, with the severance of relationship between MAERC and SMC followed MAERCs cessation of
operations, the loss of jobs for the whole MAERC workforce and the resulting actions instituted by the
workers.
In this case, it appeared that San Miguesl (principal) merely created Maerc (contractor) for its own
convenience.
On this point, we agree with petitioner as distinctions must be made. In legitimate job contracting, the law
creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid
their wages.[34] The principal employer becomes jointly and severally liable with the job contractor only
for the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the
principal employer is not responsible for any claim made by the employees.
On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as
if such employees had been directly employed by the principal employer. The principal employer therefore
becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.
Asian Alcohol Corp vs NLRC (1999) The owners of Asian Alcohol were driven by mounting business
losses thus they sold their majority rights to Prior Holdings Inc, who then implemented cost-cutting plans.
Such plans resulted in a number of employees separation. The six (6) private respondents are among those
union members whose positions were abolished due to redundancy. Private respondents Carias, Martinez,
and Sendon were water pump tenders; Amacio was a machine shop mechanic; Verayo was a briquetting
plant operator while Tormo was a plant helper under him. They were all assigned at the Repair and
Maintenance Section of the Pulupandan plant. They sued Asian Alcohol for illegal dismissals. Petitioner
claimed that they were dismissed just so Asian Alcohol could hire contractors which it actually did.
In any event, we have held that an employers good faith in implementing a redundancy program is not
necessarily destroyed by availment of the services of an independent contractor to replace the services of
the terminated employees. We have previously ruled that the reduction of the number of workers 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.[51] In
the case at bar, private respondent failed to proffer any proof that the management acted in a malicious or
arbitrary manner in engaging the services of an independent contractor to operate the Laura wells. Absent
such proof, the Court has no basis to interfere with the bona fide decision of management to effect more
economic and efficient methods of production.
17 LABOR LAW (Notes)

CONDITIONS OF EMPLOYMENT
General Coverage
Article 82. Coverage. The provisions of this Title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to government employees, managerial employees, field personnel, members of the
family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of
another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations. As
used herein, "managerial employees" refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff. "Field personnel" shall refer to non-agricultural employees who regularly perform
their duties away from the principal place of business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.

Rule I Rule II Rule III Rule IV Rule V Rule VI

Hours of Work Nightshift Weekly Rest Holidays with Service Service
Pay Incentive Charges
Differential Periods
Leaves
Government Exempted Exempted Exempted Exempted Exempted
Employee
Managerial Exempted Exempted Exempted Exempted Exempted
Employee
Field Personnel Exempted Exempted* Exempted Exempted* Exempted*
Domestic Exempted Exempted Exempted Exempted Exempted
Personnel
Workers Paid Exempted Covered** Exempted Covered Covered**
by Result (unless theyre (Provided that (unless theyre
also classified as the holiday pay also classified as
field personnel) shall not be less field personnel)
than his average
daily earnings for
the last 7 actual
working days
preceding the
regular holiday.
In no case shall
the holiday pay
be less than the
applicable
nimimum wage
rate provided by
law)

* - Field personnel and other employees whose time and performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof.
** - So how would you know if a worker paid by result is also classified as field personnel? Elements (not so sure):
a.) If they are workers paid by result (whether or not their output rates are in accordance with the standards
prescribed under Sec. 8, Rule VII, Book Three, or where such rates have been fixed by the Secretary)
b.) If their time and performance is unsupervised by the employer.
18 LABOR LAW (Notes)

Management Prerogative
Management is free to regulate, according to its own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place, and manner of work, processes to be followed, supervision
of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and disciplining,
dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be
exercised in good faith and with due regard to the rights of labor. (Royal Plant Workers Union vs CocaCola
Bottlers Philippines Inc, 2013)
Government workers
Section 2 (a), Rule I, Book III:
Government employees whether employed by the National Government or any of its political subdivision,
including those employed in government-owned and/or controlled corporations;
LRTA vs Venus (2006) A GOCC with an original charter is excluded from the coverage of the labor code.
Managerial employees
Section 2 (b), Rule I, Book III
Managerial employees, if they meet all of the following conditions:
(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or sub-division thereof.
(2) They customarily and regularly direct the work of two or more employees therein.
(3) They have the authority to hire or fire employees of lower rank; or their suggestions and
recommendations as to hiring and firing and as to the promotion or any other change of status of
other employees, are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies
of their employer;
(2) Customarily and regularly exercise discretion and independent judgment; and
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof;
or (ii) execute under general supervision work along specialized or technical lines requiring
special training, experience, or knowledge; or (iii) execute, under general supervision, special
assignments and tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a work week to activities
which are not directly and closely related to the performance of the work described in paragraphs
(1), (2) and (3) above.
Aricle 218 (m) of the Labor Code:
"Managerial employee" is one who is vested with the powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book.
National Sugar Refineries Corp vs NLRC (1993) There are two definitions of Managerial employees and officers
of members of a managerial staffone in Rule 1, Book III of the IRR and the other in Article 218 of the Code. For
purposes of determining entitlement of benefits, it should be Article 82 amplified by Section 2, Rule 1, Book III of
the Codes IRR (see table above) that should be applied. Aritlce 218 pertains to labor relations.
Clientlogic Philippines Inc vs Castro (2011) The test of supervisory or managerial status depends on whether
a person possesses authority to act in the interest of his employer and whether such authority is not merely routinary
19 LABOR LAW (Notes)

or clerical in nature, but requires the use of independent judgment. It can also be inferred from this case that title or
position is not the best indicator of whether a person is a magagerial employee or not.
M+W Zander Philippines Inc vs Enriquez (2009) One requisite for dismissal on the ground of loss of trust and
confident is that the employee concerned must be holding a position of trust and confidence, two classes of which
are: managerial employee and fiduciary rank-and-file employees. Sec. 2c, Rule 1, Book III of the Labor Code IRR
provides what managerial employees are (refer to table above). So was Enriquez a managerial employee? His duties
include the following: (1) to take charge of the management of administrative personnel assigned to the head office
in so far as administrative functions are concerned; (2) to take charge of the over-all secuirity for the company; to
take charge of the implementation of company rules; and (3) to take charge of the maintenance of company
property, among others. It appeared that Enriquezs position as an Administration Manager may thus be properly
considered as a managerial position, being a head of administrative assistants of other divisions, and because of the
performance of work directly related to management policies and company rules. But another requiste for dismissal
due to loss of trust and confidence is that there must be an act to justify such loss. And here, the petitioner failed to
prove its allegation against Enriquez.
Penaranda vs BPC (2006) Penaranda was a member of the managerial staff. His duties include the following
among others: (1) to supply the required and continuous steam to all consuming units at minimum cost; (2) to
supervise, check and monitor manpower workmanship as well as operation of boiler and accessories; (3) to evaluate
performance of machinery and manpower; (4) to train new employees for effective and safety while working; and
(5) to recommend personnel actions such as promotion or disciplinary action. Penaradas duties conformed to the
definition of a managerial staff. Managerial employees and members of the managerial staff are exempted from the
provisions of the Labor Code on labor standards.
Dela Cruz vs NLRC (1988) As patron of the ship, Dela Cruz was tasked to complete charge and command of the
vessel and perfrom the responsibilities and duties of a ship captain and thus considered a managerial employee.
Association of Marine Officers and Seamen of Reyes and Lim Co vs Laguesma (1994) The positions involved here
were managerial because the job descriptions disclosed that the major patrons duties include taking complete
charge and command of the ship and perfroming responsibilities and duties of a ship captain; the minor patron also
commanded the vessel, particularly in navigating waterways; the chief mate performed the functions of an executive
officer next-in-command to the captain; and the chief marine engineer took over-all charge of the operation of the
ships mechanical and electrical equipment.
Domestic servants
Section 2 (d), Rule I, Book III:
Domestic servants and persons in the personal service of another if they perform such services in the
employer's home which are usually necessary or desirable for the maintenance and enjoyment thereof, or
minister to the personal comfort, convenience, or safety of the employer as well as the members of his
employer's household.
Section 4 (d), Article I of RA 10361:
Domestic worker or Kasambahay refers to any person engaged in domestic work within an employment
relationship such as, but not limited to, the following: general househelp, nursemaid or yaya, cook,
gardener, or laundry person, but shall exclude any person who performs domestic work only occasionally
or sporadically and not on an occupational basis.
The term shall not include children who are under foster family arrangement, and are provided access to
education and given an allowance incidental to education, i.e. baon, transportation, school projects and
school activities.
Apex Mining Company Inc vs NLRC (1991) Domestic workers are supposed to be working at the employers
home. If the employer brought such worker to his workplace, then that supposed domestic worker would be
considered an employee of the employers company.
20 LABOR LAW (Notes)

Workers who are paid by results

Section 2 (e), Rule I, Book III:
Workers who are paid by results, including those who are paid on piece-work, takay, pakiao or task
basis, and other non-time work if their output rates are in accordance with the standards prescribed under
Sec. 8, Rule VII, Book Three of these regulations, or where such rates have been fixed by the Secretary of
Labor and Employment in accordance with the aforesaid Section.
Labor Congress of the Philippines vs NLRC (1998) Although the employees in this case were paid by results, they
were regular employees of the Company as an employer-employee relationship existed. While the Labor Codes IRR
exclude certain employees, such as those who were paid by results, petitioners did not fall within this group, because
not only did petitioners labor under the control of the Company, they also toiled throught the year with the fulfillment
of their quota as supposed basis for compensaition. As regards to over time pay, Section 2e, Rule I, Book III of the
IRR provides that workers who are paid by results, if their output rates are in accordance with the standards prescribed
under Sec. 8, Rule VII, Book III, or where such rates have been fixed by the Secretary of Labor in accordance with
the aforesaid secion are not entitled to receive overtime pay. But in this case, private respondents did not adhere to the
standards provided under Sec. 8 nor with the rates prescribed by the Secretary. Thus, they were entitled to overtime
pay.
Lambo vs NLRC (1999) It was true that the petitioners were paid on a piece-work basis. However, there are two
categories of employees paid by results:
a.) Those whose time and performance are supervised by the employer. Here, theres an element of control over
the manner as to how the work is to be performed.
b.) Those whose time and performance are unspervised. Here, the employers control is limited merely to the
result of the work.
Petitioners fell within the first category, establishing an employer-employee relationship. And thus, they were entitled
to overtime pay, holiday pay and 13th month pay.
Auto Bus Transport Systems Inc vs Bautista (2005) Under the Sec. 1(d), Rule V, Book III of the Labor Codes IRR,
Field personnel and other employees whose time and performance is unsupervised by the employer including those
who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof are exempted from service incentive
leaves. But the phrase whose time and performance is unsupervised by the employer must be read in relation not
only to other employees but also to field personnel. The same is true with respect to the phrase those who are
engaged on task or contract basis, purely commission basis. The definition of field personnel is not merely
concerned with the location where the employee regularly performs but also with the fact that such performance is
unsupervised by the employer. Bus companies usually assign inspectors in buses to check the tickets and conductors
report. The bus drivers must also be at specific places and time as they generally observe prompt departure and arrival
from their point of origin to the point of destination. Based on the foregoing, it can be inferred that Bautista was not a
field personnel but a regular employee who performed task usually necessary and desirable to the usual trade of
petitioners business.
Field personnel
Section 2 (e), Rule I, Book III:
Non-agricultural field personnel if they regularly perform their duties away from the principal or branch
office or place of business of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty.
Section 1 (e), Rule II, Book III:
Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those who are paid
a fixed amount for performing work irrespective of the time consumed in the performance thereof.
San Miguel Brewery Inc vs Democratic Labor Organization (1963) San Miguels sales personnel followed a
planned route in such a way that their work may be completed in less than 8 hours, but theyre free to exceed 8
hours. They were paid monthly wages plus sales commission. The Court said: The benefits could not be given to the
21 LABOR LAW (Notes)

employee if he is paid on a piece-work or commission basis, regardless of the time employed. The reason for this is
that his earnings in the form of commission basis would allow him to earn more if he worked harder. In other words,
in lieu of overtime pay, he ordinarily receives commissions as extra compensation. It should also be considered that
the subject employees also receive monthly compensation.
Union of Filipro Employees vs Vivar (1992) The dispute hinged on the interpretation of the phrase, whose actual
hours of work in the field cannot be determined with reasonable certainty. The subject employees usually report to
the office and start their field work at 8:00 am and return at 4 or 4:40 pm. Thus, they argued that their working hours
can be determined with reasonable certainty. Issue: Whether or not Nestles field personnel were entitled to holiday
pay. Held: NO. The Labor Codes IRR says: Field personnel and other employees whose time and performance is
unsupervised by the employer. The phrase whose time and performance is unsupervised merely interpretted the
phrase whose actual hours of work in the field cannot be determined with reasonable certainty. Such did not add
another element, contrary to the petitioners argument. In this case, the company had no way of determining whether
or not these sales personnel, even if they reported to the office before 8 am and come back at 4:40 pm really spent
the hours in between in actual field work.

Normal Hours of Work

Article 83. Normal hours of work. The normal hours of work of any employee shall not exceed eight (8) hours a
day.
Health personnel in cities and municipalities with a population of at least one million (1,000,000) or in hospitals and
clinics with a bed capacity of at least one hundred (100) shall hold regular office hours for eight (8) hours a day, for
five (5) days a week, exclusive of time for meals, except where the exigencies of the service require that such personnel
work for six (6) days or forty-eight (48) hours, in which case, they shall be entitled to an additional compensation of
at least thirty percent (30%) of their regular wage for work on the sixth day. For purposes of this Article, "health
personnel" shall include resident physicians, nurses, nutritionists, dietitians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.
The determination of what time should work begin is management prerogative.
What is the rationale of the Eight-Hour rule?
- The Eight-Hour Law was designt not only to safeguard the health and welfare of the laborer or employee
but in a way to minimize unemployment by forcing employers, in cases where more than 8-hour operation
is necessary, to utilize different shifts of laborers or employees working only for eight hours each. (Manila
Terminal Co Inc vs CIR, 1952)
- Also, to give adequate time to lead richer and more fruitful activities (e.g. family bonding, recreational
activities, etc.)
- Classic 8/8/8 principle 8 hours for work, 8 hours for sleep, 8 hours for leisure
Section 5, Rule I-A, Book III:
For purposes of this Rule a "day" shall mean a work day of twenty-four (24) consecutive hours beginning at
the same time each calendar year. A "week" shall mean the work of 168 consecutive hours, or seven
consecutive 24-hour work days, beginning at the same hour and on the same calendar day each calendar
week.
It is understood that the usual calendar day is not the same as work day under Section 5, Rule I-A, Book III.
Likewise, workday is also different from working hours or hours worked.
For example: My regular working hours is 8 am to 5 pm from Monday to Friday. My work day starts from Monday
8am and ends at 8 am of the following day, Tuesday. As soon as the clock hits 8 am onTuesday, thats another work
day.
It is important to be familiar with the work day for purposes of determining overtime pay, most especially in cases
where work schedules that have gaps in between working hours.
Sime Darby Pilipinas Inc vs NLRC (1998) Private respondent in this case was the employee association of
petitioner Sime Darby engaged in the manufacture of automotive tires, tubes and other products. The employees
worked for eight hours, which included a 30-minute paid on call lunch break, meaning that even though theyre at
22 LABOR LAW (Notes)

break, they could still be called for work should the need arise. Sime Darby later on changed work schedule,
removing the 30-minute paid on call lunch break and replacing it with a one-hour break, during which they werent
compensated. The employees argued that the change of schedule constituted unfair labor practice. The Court said
that the changed schedule is valid. Employers have the right to fixe the work schedules of the employees. In this
case, Sime Darby reasoned out that the adjustment sought to improve production. The old work schedule included a
30-minute paid lunch break, during which they could still be called for work. Though labeled as lunch break, this
period could very well be considered as working time
Philippine Graphic Arts Inc vs NLRC (1988) Due to economic circumstances, Philippine Graphic Arts was forced
to require its workers to go on mandatory vacation leave. They were paid while on leave but the pay was charged
against their respective earned leaves. Thus, the Companys employee filed a complaint against it for unfair labor
practice and discrimination. Issue: Whether or not the mandaotry leave imposed by the Company constituted unfair
labor practice and discrimination Held: NO. The employees themselves admitted the existence of the economic
crisis. There was basis for the Companys contentions that the reduction of work schedule was temporary, that it was
taken only after notice and consultations with the workers, that a consensus was reached on how to deal with
deteriorating economic conditions and reduced sales and that the temporary reduction of working days was a more
humane solution instead of reduction of personnel. The decision to resort to forced leaves was, under the
circumstances, a management prerogative.
Linton Commercial Co Inc vs Hellera (2007) Financial losses must be shown before a company can validly opt to
reduce the work hours of its employees. For retrenchment to be valid, the following elements must be present: 1.
The losses incurred are substantial 2. The losses are actual or imminent 3. The retrenchment is reasonably necessary
and is likely to be effective in preventing the expected losses 4. The alleged losses, if already incurred, or the
imminent losses sought to be forestalled, are proven by sufficient and convincing evidence.
In this case, while its true that Linton suffered losses amounting to P3,645,422.00, they still had enough earnings to
sustain its operations. On the other hand, Article 286 regarding suspension applies only when there is a bona fide
suspension of the employers operation of a business or undertaking for a period not exceeding six (6) months. In
this case, records showed that Linton continued its business operations during the effectivity of the compressed
workweek, which spanned more than the maximum period.
Flexible Work Arrangements
DOLE Department Order No. 2, series of 2009 The purpose of this advisory is to assist and guide employers and
employees in the implementation of various flexible work arrangements as one of the coping mechanisms and
remedial measures in times of economic difficulties and national emergencies. Adoption of flexible work
arrangements is considered as a better alternative than the outright termination of the services of the employees or
the total closure of the establishment. Anchored on voluntary basis and conditions mutually acceptable to both the
employer and the employees, it is recognized as beneficial in terms of reduction of business costs and helps in
saving jobs while maintaining competitiveness and productivity in industries.
Flexible work arrangments refer to an alternative arrangements or schedules other than the traditional or standard
work hours, workdays and workweek.
Types of flexible work arrangements:
1. Compressed Workweek refers to one where the normal workweek is reduced to less than six days but the
total number of work-hours of 48 hours per week shall remain. The normal workday is increased to more
than eight hours but not to exceed twelve hours without corresponding overtime premium. The concept can
be adjusted accordingly depending on the normal workweek of the company purusant to the provisions of
Department Advisory No. 02, series of 2004.
2. Reduction of Workdays refers to one where the normal workdays per week are reduced but should not last
for more than six months.
3. Rtation of Workers refers to one where the employees are rotated or alterately provided work within the
workweek.
4. Forced Leave refers to one where the employees are required to go on leave for several days or weeks
utilizing their leave credits if there are any.
5. Broken-time schedule refers to one where the work schedule is not continuous but the work-hours within
the day or week remain.
23 LABOR LAW (Notes)

6. Flexi-holidays schedule refers to one where the employees agree to avail the holidays at some other days
provided there is no diminution of existing benefits as a result of such arrangement.

Compressed Workweek
DOLE Department Order No. 2, series of 2009 This Advisory is to guide employers and workers who may opt to
adopt a mutually acceptable compressed workweek scheme suitable to the requirements of the firm.
This Advisory may be used in all establishments except those in the construction industry, in health services, in
occupations requiring heavy manual labor, or in occupations or workplaces in which workers are exposed to
airborne contaminants, human carcinogens, substances, chemicals or noise that exceed threshold limit values or
tolerance levels for an eight-hour workday as prescribed under existing Occupational Safety and Health Standards.
Objectives of Compressed Workweek Schemes:
1. To promote business competitiveness and productivity, improve efficiency by lower operating costs, and
reduce work-related expenses of employees;
2. To give employers and workers flexibility in fixing hours of work compatible with business requirements
and the employees need for a balanced work life;
3. To ensure the safety and health of the workplace at all times
For purposes of this Advisory, a CWW scheme is an alternative arrangement whereby the normal workweek is
reduced to less than six days but the total number of normal work hours per week shall remain at 48 hours. The
normal workday is increased to more than eight hours without corresponding overtime premium (note: In any case,
any work performed beyond 12 hours a day or 48 hours a week shall be subject to overtime premium). This concept
can be adjusted accordingly in cases where the normal workweek of the firm is five days.
Part-time workers
DOLE Explanatory Bulletin on Part-Time Employment dated Jan. 2, 1996 Part-time employment is a single,
regular or voluntary form of employment within hours of work substantially shorter than those considered as normal
in the establishment.

Hours Worked
Section 3, Rule I, Book III:
The following shall be considered as compensable hours worked:
(a) All time during which an employee is required to be on duty or to be at the employer's
premises or to be at a prescribed work place; and
(b) All time during which an employee is suffered or permitted to work.
Section 4, Rule I, Book III:
Principles in determining hours worked. The following general principles shall govern in determining
whether the time spent by an employee is considered hours worked for purposes of this Rule:
(a) All hours are hours worked which the employee is required to give his employer, regardless of
whether or not such hours are spent in productive labor or involve physical or mental exertion.
(b) An employee need not leave the premises of the work place in order that his rest period shall
not be counted, it being enough that he stops working, may rest completely and may leave his
work place, to go elsewhere, whether within or outside the premises of his work place.
(c) If the work performed was necessary, or it benefited the employer, or the employee could not
abandon his work at the end of his normal working hours because he had no replacement, all time
spent for such work shall be considered as hours worked, if the work was with the knowledge of
his employer or immediate supervisor.
(d) The time during which an employee is inactive by reason of interruptions in his work beyond
his control shall be considered working time either if the imminence of the resumption of work
requires the employee's presence at the place of work or if the interval is too brief to be utilized
effectively and gainfully in the employee's own interest.
24 LABOR LAW (Notes)

Section 5, Rule I, Book III:

Waiting time. (a) Waiting time spent by an employee shall be considered as working time if waiting is
an integral part of his work or the employee is required or engaged by the employer to wait.
(b) An employee who is required to remain on call in the employer's premises or so close thereto that he
cannot use the time effectively and gainfully for his own purpose shall be considered as working while on
call. An employee who is not required to leave word at his home or with company officials where he may
be reached is not working while on call.
Section 6, Rule I, Book III
Lectures, meetings, training programs. Attendance at lectures, meetings, training programs, and other
similar activities shall not be counted as working time if all of the following conditions are met:
(a) Attendance is outside of the employee's regular working hours;
(b) Attendance is in fact voluntary; and
(c) The employee does not perform any productive work during such attendance.
Attendance in CBA Negotiations?
- General Rule, not compensable; Exception: Company policy, CBA stipulations, or if employer agrees
Brownout not exceeding 20 mins?
- Compensable
Attendance in hearings of complaints filed against employer?
- General rule, not compensable; Exception: Company policy, CBA stipulations, or if employer agrees
Attendance in strikes?
- General rule, not compensable; Exception: Company policy, CBA stipulations, or if employer agrees
Luzon Stevedoring Co. vs Luzon Marine Dept. Union (1957) For the purposes of this case, We do not need to set
for seamen a criterion different from that applied to laborers on land, for under the provisions of the above quoted
section, the only thing to be done is to determine the meaning and scope of the term "working place" used therein.
As We understand this term, a laborer need not leave the premises of the factory, shop or boat in order that his
period of rest shall not be counted, it being enough that he "cease to work", may rest completely and leave or may
leave at his will the spot where he actually stays while working, to go somewhere else, whether within or outside the
premises of said factory, shop or boat. If these requisites are complied with, the period of such rest shall not be
counted.
JP Heilbronn Co vs National Labor Union (1953) In a case where an employee absents himself from work due to
a strike or to attend a conference or hearing in case or incident between him and his employer, he might seek
reimbursement of his wages from his union which had declared the strike or filed the case in the industrial court. Or,
in the present case, he might have his absence from his work charged against his vacation leave.

Meal Periods
Section 7, Rule I, Book III:
Meal and Rest Periods. Every employer shall give his employees, regardless of sex, not less than one (1)
hour time-off for regular meals, except in the following cases when a meal period of not less than twenty
(20) minutes may be given by the employer provided that such shorter meal period is credited as
compensable hours worked of the employee:
(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen (16) hours a day;
(c) In case of actual or impending emergencies or there is urgent work to be performed on
machineries, equipment or installations to avoid serious loss which the employer would otherwise
suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods. Rest periods or
25 LABOR LAW (Notes)

coffee breaks running from five (5) to twenty (20) minutes shall be considered as compensable
working time.

Overtime Work
Article 87
Overtime work Work may be performed beyond eight (8) hours a day provided that the employee is paid
for the overtime work, an additional compensation equivalent to his regular wage plus at least twenty-five
percent (25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an
additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least
thirty percent (30%) thereof.

Article 88
Undertime not offset by overtime Undertime work on any particular day shall not be offset by overtime
work on any other day. Permission given to the employee to go on leave on some other day of the week
shall not exempt the employer from paying the additional compensation required in this Chapter.
Article 89 provides the instances where an employer may require his employee to work beyond the regular working
hours subject to overtime premium (see the IRR version).
Article 90
Computation of additional compensation For purposes of computing overtime and other additional
remuneration as required by this Chapter, the "regular wage" of an employee shall include the cash wage
only, without deduction on account of facilities provided by the employer.
Section 8, Rule I, Book III:
Overtime pay. Any employee covered by this Rule who is permitted or required to work beyond eight
(8) hours on ordinary working days shall be paid an additional compensation for the overtime work in the
amount equivalent to his regular wage plus at least twenty-five percent (25%) thereof.

Section 9, Rule I, Book III:

Premium and overtime pay for holiday and rest day work. (a) Except employees referred to under
Section 2 of this Rule, an employee who is permitted or suffered to work on special holidays or on his
designated rest days not falling on regular holidays, shall be paid with an additional compensation as
premium pay of not less than thirty percent (30%) of his regular wage. For work performed in excess of
eight (8) hours on special holidays and rest days not falling on regular holidays, an employee shall be paid
an additional compensation for the overtime work equivalent to his rate for the first eight hours on a special
holiday or rest day plus at least thirty percent (30%) thereof.
(b) Employees of public utility enterprises as well as those employed in non-profit institutions and
organizations shall be entitled to the premium and overtime pay provided herein, unless they are
specifically excluded from the coverage of this Rule as provided in Section 2 hereof.
(c) The payment of additional compensation for work performed on regular holidays shall be governed by
Rule IV, Book Three, of these Rules.

Section 10, Rule I, Book III:

Compulsory overtime work. In any of the following cases, an employer may require any of his
employees to work beyond eight (8) hours a day, provided that the employee required to render overtime
work is paid the additional compensation required by these regulations:
(a) When the country is at war or when any other national or local emergency has been declared
by Congress or the Chief Executive;
26 LABOR LAW (Notes)

(b) When overtime work is necessary to prevent loss of life or property, or in case of imminent
danger to public safety due to actual or impending emergency in the locality caused by serious
accident, fire, floods, typhoons, earthquake, epidemic or other disaster or calamities;
(c) When there is urgent work to be performed on machines, installations, or equipment, in order
to avoid serious loss or damage to the employer or some other causes of similar nature;
(d) When the work is necessary to prevent loss or damage to perishable goods;
(e) When the completion or continuation of work started before the 8th hour is necessary to
prevent serious obstruction or prejudice to the business or operations of the employer; or
(f) When overtime work is necessary to avail of favorable weather or environmental conditions
where performance or quality of work is dependent thereon. In cases not falling within any of
these enumerated in this Section, no employee may be made to work beyond eight hours a day
against his will.
PESALA vs NLRC (1996) Just because an employee is earning above minimum wage, it doesnt mean that the
overtime pay is already built-in absent any stipulation to that effect.
CALTEX Regular Employees vs Caltex (1995) As to the Unions allegation that Caltex had offset undertime for
overtime work on another day, it was held that overtime work consists of hours worked on a given day in excess of
the applicable work period. Its not enough that the hours worked fall on disagreeable or inconvenient hours. In
order that work may be considered as overtime work, the hours worked must be in excess of and in addition to the 8
hours worked during the prescribed daily work period. In this case, Saturday was not designated as a rest day. It
would seem that some of Caltexs employees did not work the usual Monday to Friday schedule to comple the 40
hours per week. Some might have worked from Tuesday to Saturday or any other simular sircumstances. In such
case, there would be no overtime, because the employees were merely completing their 40 hours. It is different
where supposing an employee had already completed the 40 hours from Monday to Friday and was still required to
work on a Saturday. In such instant case, it is considered overtime work.

Night Shift Differential

Article 86
Night shift differential Every employee shall be paid a night shift differential of not less than ten percent
(10%) of his regular wage for each hour of work performed between ten oclock in the evening and six
oclock in the morning.
Articles 154 to 161
Article 154. Coverage This chapter shall apply to all persons, who shall be employed or permitted or
suffered to work at night, except those employed in agriculture, stock raising, fishing, maritime transport
and inland navigation, during a period of not less than seven (7) consecutive hours, including the interval
from midnight to five oclock in the morning, to be determined by the Secretary of Labor and Employment,
after consulting the workers representatives/labor organizations and employers.
Night worker means any employed person whose work requires performance of a substantial number of
hours of night work which exceeds a specified limit. This limit shall be fixed by the Secretary of Labor
after consulting the workers representatives/labor organizations and employers.
Article 155. Health Assessment, 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:
(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.
Article 156. Mandatory Facilities. Suitable first-aid facilities shall be made available for workers
performing night work, including arrangements where such workers, where necessary, can be taken
27 LABOR LAW (Notes)

immediately to a place for appropriate treatment. The employers are likewise required to provide safe and
healthful working conditions and adequate or reasonable facilities such as sleeping or resting quarters in the
establishment and transportation from the work premises to the nearest point of their residence subject to
exceptions and guidelines to be provided by the DOLE.
Article 157. Transfer. 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 fit to work.
If such transfer to a similar job is not practicable, these workers shall be granted the same benefits as other
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 or notice of dismissal as other workers who are prevented from working for reasons of health.
Article 158. Women Night Workers. Measures shall be taken to ensure that an alternative to night work
is available to women workers who would otherwise be called upon to perform such work:
(a) Before and after childbirth, for a period of at least sixteen (16) weeks, which shall be divided
between the time before and after childbirth;
(b) For additional periods, in respect of which a medical certificate is produced stating that said
additional periods are necessary for the health of the mother or child: (1) During pregnancy; (2)
During a specified time beyond the period, after childbirth is fixed pursuant to subparagraph (a)
above, the length of which shall be determined by the DOLE after consulting the labor
organizations and employers.
During the periods referred to in this article:
(i) A woman worker shall not be dismissed or given notice of dismissal, except for just or
authorised causes provided for in this Code that are not connected with pregnancy, childbirth and
childcare responsibilities.
(ii) A woman worker shall not lose the benefits regarding her status, seniority, and access to
promotion which may attach to her regular night work position.
Pregnant women and nursing mothers may he 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 ease of pregnant employees, the period of the pregnancy that they can safely work.
The measures referred to in this article may include transfer to day work where this is possible, the
provision of social security benefits or an extension of maternity leave.
The provisions of this article shall not have the effect of reducing the protection and benefits
connected with maternity leave under existing laws.
Article 159. Compensation. The compensation for night workers in the form of working time, pay or
similar benefits shall recognize the exceptional nature of night work.
Article 160. Social Services.Appropriate social services shall be provided for night workers and, where
necessary, for workers performing night work.
Article 161. 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.
Sections 2 - 6, Rule II, Book III
Section 2. Night shift differential. An employee shall be paid night shift differential of no less than ten
per cent (10%) of his regular wage for each hour of work performed between ten o'clock in the evening and
six o'clock in the morning.
Section 3. Additional compensation. Where an employee is permitted or suffered to work on the period
covered after his work schedule, he shall be entitled to his regular wage plus at least twenty-five per cent
(25%) and an additional amount of no less than ten per cent (10%) of such overtime rate for each hour or
work performed between 10 p.m. to 6 a.m.
28 LABOR LAW (Notes)

Section 4. Additional compensation on scheduled rest day/special holiday. An employee who is

required or permitted to work on the period covered during rest days and/or special holidays not falling on
regular holidays, shall be paid a compensation equivalent to his regular wage plus at least thirty (30%) per
cent and an additional amount of not less than ten (10%) per cent of such premium pay rate for each hour of
work performed.
Section 5. Additional compensation on regular holidays. For work on the period covered during regular
holidays, an employee shall be entitled to his regular wage during these days plus an additional
compensation of no less than ten (10%) per cent of such premium rate for each hour of work performed.
Section 6. Relation to agreements. Nothing in this Rule shall justify an employer in withdrawing or
reducing any benefits, supplements or payments as provided in existing individual or collective agreements
or employer practice or policy.

Special Rules for Hospital Workers

Sections 2 - 6, Rule II, Book III
Section 1. General statement on coverage. This Rule shall apply to:
(a) All hospitals and clinics, including those with a bed capacity of less than one hundred (100) which are
situated in cities or municipalities with a population of one million or more; and
(b) All hospitals and clinics with a bed capacity of at least one hundred (100), irrespective of the size of the
population of the city or municipality where they may be situated.
Section 2. Hospitals or clinics within the meaning of this Rule. The terms "hospitals" and "clinics" as
used in this Rule shall mean a place devoted primarily to the maintenance and operation of facilities for the
diagnosis, treatment and care of individuals suffering from illness, disease, injury, or deformity, or in need
of obstetrical or other medical and nursing care. Either term shall also be construed as any institution,
building, or place where there are installed beds, or cribs, or bassinets for twenty-four (24) hours use or
longer by patients in the treatment of disease, injuries, deformities, or abnormal physical and mental states,
maternity cases or sanitorial care; or infirmaries, nurseries, dispensaries, and such other similar names by
which they may be designated.
Section 3. Determination of bed capacity and population. (a) For purposes of determining the
applicability of this Rule, the actual bed capacity of the hospital or clinic at the time of such determination
shall be considered, regardless of the actual or bed occupancy. The bed capacity of hospital or clinic as
determined by the Bureau of Medical Services pursuant to Republic Act No. 4226, otherwise known as the
Hospital Licensure Act, shall prima facie be considered as the actual bed capacity of such hospital or clinic.
(b) The size of the population of the city or municipality shall be determined from the latest official census
issued by the Bureau of the Census and Statistics.
Section 4. Personnel covered by this Rule. This Rule applies to all persons employed by any private or
public hospital or clinic mentioned in Section 1 hereof, and shall include, but not limited to, resident
physicians, nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians paramedical
technicians, psychologists, midwives, and attendants.
Section 5. Regular working hours. The regular working hours of any person covered by this Rule shall
not be more than eight (8) hours in any one day nor more than forty (40) hours in any one week. For
purposes of this Rule a "day" shall mean a work day of twenty-four (24) consecutive hours beginning at the
same time each calendar year. A "week" shall mean the work of 168 consecutive hours, or seven
consecutive 24-hour work days, beginning at the same hour and on the same calendar day each calendar
week.
Section 6. Regular working days. The regular working days of covered employees shall not be more
than five days in a work week. The work week may begin at any hour and on any day, including Saturday
or Sunday, designated by the employer. Employers are not precluded from changing the time at which the
work day or work week begins, provided that the change is not intended to evade the requirements of this
Rule.
29 LABOR LAW (Notes)

Section 7. Overtime work. Where the exigencies of the service so require as determined by the
employer, any employee covered by this Rule may be scheduled to work for more than five (5) days or
forty (40) hours a week, provided that the employee is paid for the overtime work an additional
compensation equivalent to his regular wage plus at least thirty percent (30%) thereof, subject to the
provisions of this Book on the payment of additional compensation for work performed on special and
regular holidays and on rest days.
Section 8. Hours worked. In determining the compensable hours of work of hospital and clinic
personnel covered by this Rule, the pertinent provisions of Rule 1 of this Book shall apply.
Section 9. Additional compensation. Hospital and clinic personnel covered by this Rule, with the
exception of those employed by the Government, shall be entitled to an additional compensation for work
performed on regular and special holidays and rest days as provided in this Book. Such employees shall
also be entitled to overtime pay for services rendered in excess of forty hours a week, or in excess of eight
hours a day, whichever will yield the higher additional compensation to the employee in the work week.
SECTION 10. Relation to Rule I. All provisions of Rule I of this Book which are not inconsistent with
this Rule shall be deemed applicable to hospital and clinic personnel.