Chapter Three

LABOR STANDARDS
TOPICS PER SYLLABUS

A. Hours of work
1. Coverage/Exclusions (Art. 82, Labor Code)
2. Normal hours of work
a) Compressed work week
3. Meal break
4. Waiting time
5. Overtime work, overtime pay
6. Night work (R.A. No. 10151) , Night shift differential
7. Part-time work
8. Contract for piece work (see Civil Code)

A.
HOURS OF WORK

1.
COVERAGE/EXCLUSIONS
(ArtIcle 82, Labor Code)
1. PROVISIONS ON WORKING CONDITIONS.
The provisions on working conditions in the Labor Code are as follows.
Article 83 - Normal hours of work;
Article 84 - Hours worked;
Article 85 - Meal periods;
Article 86 - Night shift differential;
Article 87 - Overtime work;
Article 88 - Undertime not offset by overtime;
Article 89 - Emergency overtime work;
Article 90 - Computation of additional compensation;
Article 91 - Right to weekly rest period;
Article 92 - When employer may require work on a rest day;
Article 93 - Compensation for rest day, Sunday or holiday work;
Article 94 - Right to holiday pay;
Article 95 - Right to service incentive leave; and
Article 96 - Service charges.
2. COVERAGE.
Employees in all establishments, whether operated for profit or not, are covered by the law on labor
standards.
3. EXCLUSIONS.
The following are excluded from the coverage of the law on labor standards:
a. Government employees;
b. Managerial employees;
c. Other officers or members of a managerial staff;
d. Domestic servants and persons in the personal service of another;
e. Workers paid by results;
 f. Non-agricultural field personnel; and
g. Members of the family of the employer.
2.
NORMAL HOURS OF WORK

1. NORMAL HOURS OF WORK PER DAY.

The total number of working hours shall not exceed eight (8) hours daily. This eight (8) hour
period is called the normal hours of work. Any work in excess of eight (8) hours is
considered overtime work.
2. EXCEPTIONS:
a. Reduction of 8-hour working day by employer.
The employer, in the lawful exercise of its prerogative, is not prohibited from reducing the
eight-hour normal working time per day provided that no corresponding reduction is made on the
employee’s wage or salary equivalent to an eight-hour work day. In instances where the number of hours
required by the nature of work is less than eight hours, such number of hours should be regarded as the
employee’s full working day.
b. Broken hours.
The normal eight (8) working hours mandated by law do not always mean continuous and
uninterrupted eight (8) hours of work. As may be required by peculiar circumstances of employment, it
may mean broken hours of say, four hours in the morning and four hours in the evening or a variation
thereof, provided that the total of eight (8) hours is accomplished within one “work day” as this term is
understood in law. Hence, even if the 4-hour work is done in the evening as in the example above, it
should not be considered overtime work since the eight-hour period has not yet been exceeded.
c. Staggered working time.
Staggered working time is a valid scheme which may be resorted to by employers. As a matter of
precedence, Memorandum Circular No. 81 was issued by the Office of the President on December 14, 2004
which implemented the Staggered Working Time in the Executive Department in relation to the other branches
of government and the private sector in Metro Manila during the Christmas Season from December 15, 2004
to January 6, 2005. According to this issuance, the “Staggered Working Time” is meant to improve the
delivery of goods and services.
d. Work in different shifts.
In establishments where work is in different shifts, work done by the employee beyond his
eight-hour shift is considered overtime work which should be compensated accordingly. For example,
if there are three (3) eight-hour shifts in a “work day,” say, the first shift is from 6:00 a.m. to 2:00 p.m.
;second shift from 2:00 p.m. to 10:00 p.m. ; and the third shift from 10:00 p.m. to 6:00 a.m. of the
following day, the employee whose regular eight-hour work is in the first shift (6:00 a.m. to 2:00 p.m. )
, once required to work in the second or third shift, should be given additional compensation for such
work done beyond his regular working hours which legally is considered overtime work.
e. Reduction of workdays on account of losses.
Workdays may be reduced in situations where the reduction in the number of regular working
days is resorted to by the employer to prevent serious losses due to causes beyond his control, such as
when there is a substantial slump in the demand for his goods or services or when there is lack of raw
materials.1
f. Flexible work schedule under R.A. No. 8972.
Under R.A. No. 8972, otherwise known as “The Solo Parents’ Welfare Act of 2000,” solo parents
are allowed to work on a flexible schedule, thus:
“Sec. 6. Flexible Work Schedule. - The employer shall provide for a flexible working
schedule for solo parents: Provided, That the same shall not affect individual and company
productivity: Provided, further, That any employer may request exemption from the above
requirements from the DOLE on certain meritorious grounds.” 2 The phrase “flexible work
schedule” is defined in the same law as the right granted to a solo parent employee to vary his/her
arrival and departure time without affecting the core work hours as defined by the employer.3
g. Work interruptions due to brownouts.
 The following are the effects of work interruption due to brownouts:4
1. Brown-outs of short duration but not exceeding twenty (20) minutes shall be treated as
worked or compensable hours whether used productively by the employees or not.
2. Brown-outs running for more than twenty (20) minutes may not be treated as hours worked
provided any of the following conditions are present:
a. The employees can leave their workplace or go elsewhere whether within or without
the work premises; or
b. The employees can use the time effectively for their own interest.
3. In each case, the employer may extend the working hours of his employees outside the
regular schedules to compensate for the loss of productive man-hours without being liable
for overtime pay.
4. Industrial enterprises with one or two workshifts may adopt any of the workshifts
prescribed for enterprises with three (3) workshifts to prevent serious loss or damage to
materials, machineries or equipment that may result in case of power interruptions.5
5. The days when work was not required and no work could be done because of shutdown due
to electrical power interruptions, lack of raw materials and repair of machines, are not
deemed hours worked.6
(a)
COMPRESSED WORK WEEK
1. DEFINITION UNDER DEPARTMENT ADVISORY NO. 2, SERIES OF 2009.
The Labor Code provides that the normal work hours per day shall be eight (8) hours. Work
may be performed beyond eight hours a day provided the employee is paid for the overtime work. On
the other hand, the normal number of workdays per week shall be six (6) days, or a total of forty-eight
(48) hours based on the normal workday of eight (8) hours. This is without prejudice to firms whose
normal workweek is five (5) days, or a total of forty (40) hours based on the normal workday of eight
(8) hours.7
“Compressed Workweek” or “CWW” refers to a situation where the normal workweek is
reduced to less than six (6) days but the total number of work-hours of 48 hours per week remains. The
normal workday is increased to more than eight (8) hours but not to exceed twelve (12) hours, without
corresponding overtime premium.8 This concept can be adjusted accordingly in cases where the normal
workweek of the firm is five (5) days.9
2. CWW, A KIND OF FLEXIBLE WORK ARRANGEMENT.
CWW is a kind of flexible work arrangement which is considered as better alternative to 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.10
“Flexible work arrangements” refer to alternative arrangements or schedules other than the
traditional or standard work hours, workdays and workweek. The effectivity and implementation of
any of the flexible work arrangements should be temporary in nature.11
3. OTHER FORMS OF FLEXIBLE WORK ARRANGEMENTS.
Other than the CWW, the following are flexible work arrangements which may be considered,
among others:
1. “Reduction of Workdays” refers to one where the normal workdays per week are reduced
but should not last for more than six (6) months.
2. “Rotation of Workers” refers to one where the employees are rotated or alternately
provided work within the workweek.
3. “Forced Leave” refers to one where the employees are requires to go on leave for several
days or weeks utilizing their leave credits, if there are any.
4. “Broken-time schedule” refers to one where the work schedule is not continuous but the
work-hours within the day or week remain.
5. “Flexi-holidays schedule” refers to one where the employees agree to avail of the holidays
at some other days provided there is no diminution of existing benefits as a result of such
arrangement.12
 Under these flexible work arrangements, the employers and the employees are encouraged to
explore alternative schemes under any agreement and company policy or practice in order to cushion
and mitigate the effect of the loss of income of the employees.13
4. CONDITIONS.
DOLE shall recognize CWW schemes adopted in accordance with the following:
1. The CWW scheme is undertaken as a result of an express and voluntary agreement of
majority of the covered employees or their duly authorized representatives. This agreement may be
expressed through collective bargaining or other legitimate workplace mechanisms of participation such as
labor-management councils, employee assemblies or referenda.
2. In firms using substances, chemicals and processes or operating under conditions where there
are airborne contaminants, human carcinogens or noise prolonged exposure to which may pose hazards to
the employees’ health and safety, there must be a certification from an accredited health and safety
organization or practitioner or from the firm’s safety committee that work beyond eight (8) hours is within the
threshold limits or tolerable levels of exposure, as set in the Occupational Safety and Health Standards
(OSHS) .
3. The employer shall notify the DOLE, through its Regional Office having jurisdiction over
the workplace, of the adoption of the CWW scheme. The notice should be made in DOLE CWW
Report Form. 14
5. EFFECTS.
A CWW scheme which complies with the foregoing conditions shall have the following
effects:
1. Unless there is a more favorable practice existing in the firm, work beyond eight (8) hours will
not be compensable by overtime premium provided the total number of hours worked per day shall
not exceed twelve (12) hours. In any case, any work performedbeyond twelve (12) hours a day or forty-eight
(48) hours a week shall be subject to overtime pay.
2. Consistent with Article 8515 of the Labor Code, employees under a CWW scheme are
entitled to meal periods of not less than sixty (60) minutes. Nothing, however, shall impair the right of
employees to rest days as well as to holiday pay, rest day pay or leaves in accordance with law or applicable
CBA or company practice.
3. Adoption of the CWW scheme shall in no case result in diminution of existing
benefits. Reversion to the normal eight-hour workday shall not constitute a diminution of
benefits. The reversion shall be considered a legitimate exercise of management prerogative provided
that the employer shall give the employees prior notice of such reversion within a reasonable period of
time.16
A case in point is Bisig Manggagawa sa Tryco v. NLRC,17 where private respondent Tryco
and the petitioners signed separate Memorand[a] of Agreement (MOA) , providing for a compressed
workweek schedule to be implemented in the company effective May 20, 1996. The MOA was entered
into pursuant to DOLEDepartment Order (D.O. ) No. 21, Series of 1990 enunciating the Guidelines on
the Implementation of Compressed Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m. , from
Monday to Friday, shall be considered as the regular working hours, and no overtime pay shall be due
and payable to the employee for work rendered during those hours. The MOA specifically stated that
the employee waives the right to claim overtime pay for work rendered after 5:00 p.m. until 6:12 p.m.
from Monday to Friday considering that the compressed workweek schedule is adopted in lieu of the
regular workweek schedule which also consists of forty-six (46) hours. However, should an employee
be permitted or required to work beyond 6:12 p.m. , such employee shall be entitled to overtime pay.
Tryco informed the Bureau of Working Conditions (BWC) of the Department of Labor and
Employment of the implementation of the said compressed workweek in the company.
In upholding the validity of the compressed workweek, it was noted that Department Order
No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive
from the adoption of a compressed workweek scheme, thus:
“The compressed workweek scheme was originally conceived for establishments wishing
to save on energy costs, promote greater work efficiency and lower the rate of employee
absenteeism, among others. Workers favor the scheme considering that it would mean savings
on the increasing cost of transportation fares for at least one (1) day a week; savings on meal
and snack expenses; longer weekends, or an additional 52 off-days a year, that can be
devoted to rest, leisure, family responsibilities, studies and other personal matters, and that it
will spare them for at least another day in a week from certain inconveniences that are the
normal incidents of employment, such as commuting to and from the workplace, travel time
 spent, exposure to dust and motor vehicle fumes, dressing up for work, etc. Thus, under this
scheme, the generally observed workweek of six (6) days is shortened to five (5) days but
prolonging the working hours from Monday to Friday without the employer being obliged for
pay overtime premium compensation for work performed in excess of eight (8) hours on
weekdays, in exchange for the benefits above-cited that will accrue to the employees.”
In declaring the compressed workweek arrangement in the 2007 case of Linton Commercial
Co. , Inc. v. Hellera,18 as unjustified and illegal and in holding that petitioners are guilty of illegal
reduction of work hours, the Supreme Court found specious the petitioners attempt to justify their
action by alleging that the company was suffering from financial losses owing to the Asian currency
crisis. Petitioners’ claim of financial losses was not supported by evidence. A close examination of
petitioners’ financial reports for 1997-1998 shows that while the company suffered a loss
ofP3,645,422.00 in 1997, it retained a considerable amount of earnings and operating income. Clearly
then, while Linton suffered from losses for that year, there remained enough earnings to sufficiently
sustain its operations. In business, sustained operations in the black is the ideal but being in the red is
a cruel reality. However, a year of financial losses would not warrant the immolation of the welfare of
the employees which in this case was done through a reduced workweek that resulted in an unsettling
diminution of the periodic pay for a protracted period. Permitting reduction of work and pay at the
slightest indication of losses would be contrary to the State’s policy to afford protection to labor and
provide full employment. All taken into account, the compressed workweek arrangement was
unjustified and illegal. Thus, petitioners committed illegal reduction of work hours.”
3.
MEAL BREAK
(Article 85, Labor Code)
1. GENERAL RULE ON MEAL PERIOD.
As a general rule, every employer is required to give his employees, regardless of sex, not less
than one (1) hour (or 60 minutes) time-off for regular meals.19
Being time-off, it is not compensable hours worked. In this case, the employee is free to do
anything he wants, except to work. If he is required, however, to work while eating, he should be
compensated therefor.
2. SHORTENING OF MEAL TIME TO NOT LESS THAN 20 MINUTES, WHEN
COMPENSABLE.
In the following cases, 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 for not less than sixteen (16) hours a day;
c. In cases of actual or impending emergencies or when there is urgent work to be
performed on machineries, equipment or installations to avoid serious losses which the
employer would otherwise suffer; and
d. Where the work is necessary to prevent serious loss of perishable goods.20
3. SHORTENING OF MEAL TIME TO NOT LESS THAN 20 MINUTES, WHEN NOT
COMPENSABLE.
The law allows a situation where the employees themselves request for the shortening of meal
period to not less than twenty (20) minutes (say, thirty minutes, or from 12:00 to 12:30 p.m. instead of
12:00 to 1:00 p.m. ) for the purpose of allowing them to leave work earlier than the lapse of the eight
(8) hours required by law (say, 4:30 p.m. instead of 5:00 p.m. ) . This shortened period, however, shall
not be considered compensable working time provided the following conditions are complied with:
a. The employees voluntarily agree in writing to a shortened meal period of thirty (30)
minutes and are willing to waive the overtime pay for such shortened meal period;
b. There should be no diminution in the benefits of the employees which they receive prior
to the effectivity of the shortened meal period;
c. The work of the employees does not involve strenuous physical exertion and they are
provided with adequate coffee breaks in themorning and afternoon;
 d. The value of the benefits derived by the employees from the proposed work arrangement
is equal to or commensurate with the compensation due them for the shortened meal
period as well as the overtime pay for 30 minutes as determined by the employees
concerned;
e. The overtime pay of the employees will become due and demandable if ever they are
permitted or made to work beyond 4:30 p.m. ; and
f. The effectivity of the proposed working time arrangement shall be for a temporary
duration as determined by the DOLE Secretary.21
4. SHORTENING OF MEAL TIME TO LESS THAN 20 MINUTES, EFFECT.
The law does not allow that meal time be shortened to less than twenty (20) minutes. If so
reduced, the same shall no longer be considered as meal time but merely as rest period or coffee
break and, therefore, becomes compensable working time.22
5. CHANGING FROM 30-MINUTE PAID “ON CALL” LUNCH BREAK TO 1 HOUR MEAL
TIME WITHOUT PAY, EFFECT.
The case of Sime Darby Pilipinas, Inc. v. NLRC,23 is illustrative of this point. Prior to the
present controversy, all company factory workers in Marikina including members of private respondent union
worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid “on call” lunch break. Petitioner, by way of a
memorandum, changed the meal time schedule from 30 minutes to one (1) hour without pay. Since private
respondent union felt affected adversely by the change in the work schedule and discontinuance of the
30-minute paid “on call” lunch break, it filed on behalf of its members a complaint with the Labor
Arbiter for unfair labor practice, discrimination and evasion of liability. In declaring the change in the work
schedule as valid, the Supreme Court held:
“(The petitioner) rationalizes that while the old work schedule included a 30-minute
paid lunch break, the employees could be called upon to do jobs during that period as they
were „on call. ‟ Even if denominated as lunch break, this period could very well be considered
as working time because the factory employees were required to work if necessary and were
paid accordingly for working. With the new work schedule, the employees are now given a one-
hour lunch break without any interruption from their employer. For a full one-hour undisturbed
lunch break, the employees can freely and effectively use this hour not only for eating but also
for their rest and comfort which are conducive to more efficiency and better performance in their
work. Since the employees are no longer required to work during this one-hour lunch break,
there is no more need for them to be compensated for this period. We agree with the Labor
Arbiter that the new work schedule fully complies with the daily work period of eight (8) hours
without violating the Labor Code. Besides, the new schedule applies to all employees in the
factory similarly situated whether they are union members or not.”
6. MEAL TIME INVOLVING SEVERAL SHIFTS.
In a company where work is continuous for several shifts, the mealtime breaks should be
counted as working time for purposes of overtime compensation. Consequently, the workers who are
required to work in two (2) full successive shifts should be paid for sixteen (16) hours and not fourteen
(14) , the two hours for rest or mealtime breaks being included as compensable working time. The idle
time that an employee may spend for resting wherein he may leave the work area should not be
counted as working time only when the work is not continuous.24
4.
WAITING TIME
(Article 84, Labor Code)
1. COMPENSABLE HOURS WORKED.
The following shall be considered as compensable hours worked:
a. All time during which an employee is required to be on duty or to be at the employer’s
premises or to be at a prescribed workplace; and
b. All time during which an employee is suffered or permitted to work.25
2. SOME PRINCIPLES IN DETERMINING HOURS WORKED.
The following general principles shall govern in determining whether the time spent by an
employee is considered hours worked:
 a. All hours are hours worked which the employee is required to give to 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 workplace in order that his rest period shall
not be counted, it being enough that he stops working, rests completely and leaves his
workplace to go elsewhere, whether within or outside the premises of his workplace;
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.26
It bears emphasizing that the employer retains the management prerogative, whenever
exigencies of the service so require, to change the working hours of its employees.27
Moreover, the age-old rule which governs the relationship between labor and capital or
management and employee of a “fair day’s wage for a fair day’s labor,” remains the basic factor in
determining the employees’ wages and backwages.28
3. WAITING TIME.
a. When waiting time is compensable.
Waiting time spent by an employee shall be considered as working time if waiting is an
integral part of his work or the employee is required or engaged by the employer to wait.29
In Arica v. NLRC,30 it was ruled that the 30-minute assembly time practiced by the
employees of the company cannot be considered “waiting time” and should not therefore be
compensable.
Although it is clear that employers must compensate employees for time actually spent
working, questions arise as to whether the minimum wage and overtime provisions also apply to time spent
waiting to perform productive work. Under the regulations, whether waiting time is time worked depends on
the particular circumstances.
Time spent waiting for work is compensable if it is spent “primarily for the benefit of the employer
and [its] business. ” Conversely, if the time is spent primarily for the benefit of the employee, the time is not
compensable. In determining whether waiting time constitutes hours worked, the amount of control the
employer has over the employee during the waiting time, and whether the employee can effectively use
that time for his own purposes is material.
b. On Duty.
Waiting time while on duty is included in compensable time, especially when it is
unpredictable, or is of such short duration that the employees cannot use the time effectively for their own
purposes. In those instances, the employees are to be compensated whether their work is on or off the
employer's premises, even if the employees spend the time engaging in such amusements as playing
cards, watching television or reading. Examples in American jurisprudence where employees were found to
be engaged in compensable waiting time include:
• Assembly line workers who experienced idle time of 45 minutes or less due to delays in
delivery and mechanical failures;
• A well pumper who resided on the employer's premises and who was required to be on
duty at least eight hours per day, seven days per week to pump wells and repair machinery
when needed;
• Restaurant employees who were required by their employer to report to work at a certain
time even though they could not punch in until enough customers were present to make
work available;
• Truck washers who were idle while waiting for the arrival of the next truck;
• Truck drivers carrying the mail who had periodic layovers lasting two hours or less due to
loading or unloading problems;
• Oil well casing crews who had to wait for casings after they set up their equipment;
• Truck drivers and helpers who were required by their employer to wait on premises for
assignments; and
 • Employees who experienced occasional idle time caused by machinery breakdowns.
c. Off Duty
Based on U.S. jurisprudence, periods during which an employee is completely relieved from duty
and which are long enough to enable him to use the time effectively for his own purposes are not hours worked.
Whether the time off is truly sufficient to enable employees to effectively use the time for their own purposes
is a factual issue dependent upon the circumstances.
Circumstances considered by the courts include the duration of the time off and any other facts
which may place restrictions on the employees. Examples of cases where courts have found that employers
are justified in denying compensation for idle time include:
• A telephone dispatcher who only had to answer a small number of telephone calls for non-
emergency ambulance care each night and who was allowed to pursue her own personal,
social and business activities during the evening hours;
• Employees who were required to live on the employer's premises during their off-shift
hours, but who were free during their off duty time to sleep, eat, watch television, exercise,
play ping pong or cards, read and engage in other personal amusements; and
• Truck drivers responsible for picking up and delivering the mail who were free to attend to
personal matters and occupy their time as they desired during the waiting time between
scheduled runs.
4. IDLE TIME.
A close variance of “waiting time” is “idle time” during which an otherwise off-duty
employee remains available to be called to work may or may not be compensable, depending upon the
situation. As a general rule, the issue of compensability depends on whether the time is spent
primarily for the employer’s benefit as opposed to the employee’s. The answer usually turns upon the
extent to which employee is able to and does use the time effectively for personal purposes.
An evaluation of all the relevant facts become necessary to determine compensability. The
following, among others, should be considered:
a. The employer requires the employee to remain on the employer’s premises;
b. The employer requires the employee to wait at home for calls or messages or confines the
employee to a highly-restricted geographical area;
c. The employee receives numerous or frequent work assignments during the on-call period;
d. The employee must respond within a short timeframe under the circumstances (especially if
the employee must travel somewhere to do the work) ;
e. Requires the employee to be on-call frequently, never relieves the employee from on-call
status, does not permit the employee to exchange calls or call periods with another worker,
or does not allow the employee to turn down at least some calls; and
f. There is an agreement or understanding covering the arrangement.
Some combination of the foregoing factors is present when idle on-call time is found to be
compensable work.
5. COMMUTING TIME AND TRAVEL TIME.
a. Travel from home to work.
An employee who travels from home before his regular workday and returns to his home at the end
of the workday is engaged in ordinaryhome-to-work travel which is a normal incident of employment
and therefore not considered as hours worked. This is true whether he works at a fixed location or at
different jobsites.
But while normal travel from home to work is not working time, if an employee receives an
emergency call outside of his regular working hours and is required to travel to his regular place of
business or some other work site, all of the time spent in such travel is considered working time.
b. Travel that is all in the day‟ s work.
Time spent by an employee in travel as part of his principal activity, such as travel from
jobsite to jobsite during the workday, must be counted as hours worked. Where an employee is
required to report at a meeting place to receive instructions or to perform other work there, or to pick
up and carry tools, the travel from the designated place to the workplace is part of the day’s work and
must be counted as hours worked regardless of contract, custom or practice. If an employee normally
finishes his work on the premises at 5:00 p.m. and is sent to another job which he finished at 8:00 p.m.
and is required to return to his employer’s premises arriving at 9:00 p.m. , all of the time is working
time. However, if the employee goes home instead of returning to his employer’s premises, the travel
after 8:00 p.m. is work-to-home (home-to-work) travel and is not hours worked.
 c. Travel away from home.
Travel that keeps the employee away from home overnight is travel away from home. Travel
away from home is clearly working time when it cuts across the employee’s workday. The employee is
simply substituting travel for other duties. The time is not only hours worked on regular working days
during normal working hours but also during the corresponding hours on non-working days. Thus, if an
employee regularly works from 9:00 a.m. to 5:00 p.m. from Monday through Friday, the travel time
during these hours is working time. Regular meal period is not counted. As an enforcement policy, the
Department of Labor and Employment does not consider as working time the time spent in travel away
from home outside of regular working hours as a passenger on an airplane, train, boat, bus or
automobile.
Any work which an employee is required to perform while travelling must be counted as
hours worked. An employee who drives a truck, bus, automobile, boat or airplane or an employee who
is required to ride therein as an assistant or helper, is working while riding, except during bona-
fidemeal periods or when he is permitted to sleep in adequate facilities furnished by the employer.
5.
OVERTIME WORK, OVERTIME PAY
(Article 87, Labor Code)
1. OVERTIME WORK.
a. Some principles on overtime work.
1. Work rendered after normal eight (8) hours of work is called “overtime work.”
2. In computing overtime work, "regular wage" or "basic salary" means "cash" wage
only without deduction for facilities provided by the employer.
3. "Premium pay" means the additional compensation required by law for work performed
within eight (8) hours on non-working days, such as regular holidays, special holidays and
rest days.
4. "Overtime pay" means the additional compensation for work performed beyond eight (8)
hours.
5. Illustrations on how overtime is computed:
a. For overtime work performed on an ordinary day, the overtime pay is plus 25%
of the basic hourly rate .
b. For overtime work performed on a rest day or on a special day, the overtime
pay is plus 30% of the basic hourly rate which includes 30% additional
compensation as provided in Article 93 [a] of the Labor Code.
c. For overtime work performed on a rest day which falls on a special day, the
overtime pay is plus 30% of the basic hourly rate which includes 50% additional
compensation as provided in Article 93 [c] of the Labor Code .
d. For overtime work performed on a regular holiday, the overtime pay is plus
30% of the basic hourly rate which includes 100% additional compensation as
provided in Article 94 [b] of the Labor Code .
e. For overtime work performed on a rest day which falls on a regular holiday,
the overtime pay is plus 30% of the basic hourly rate which includes 160%
additional compensation.
2. PREMIUM PAY VS. OVERTIME PAY.
“Premium pay” refers to the additional compensation required by law for work performed
within eight (8) hours on non-working days, such as rest days and regular and special holidays.31
“Overtime pay” refers to the additional compensation for work performed beyond eight (8)
hours a day. Every employee who is entitled to premium pay is likewise entitled to the benefit of
overtime pay.32
3. BUILT-IN OVERTIME PAY.
In case the employment contract stipulates that the compensation includes built-in overtime
pay and the same is duly approved by the Director of the Bureau of Employment Services (now Bureau
of Local Employment) , the non-payment by the employer of any overtime pay for overtime work is
justified and valid.33
 In PAL Employees Savings and Loan Association, Inc. [PESALA] v. NLRC,34 where the
period of normal working hours per day was increased to twelve (12) hours, it was held that the
employer remains liable for whatever deficiency in the amount for overtime work in excess of the first eight (8)
hours, after recomputation shows such deficiency.
4. VALIDITY OF CBA PROVISION ON OVERTIME WORK.
Generally, the premium pay for work performed on the employee’s rest days or regular and
special holidays is included as part of the regular rate of the employee in the computation of overtime
pay for any overtime work rendered on said days, especially if the employer pays only the minimum
overtime rates prescribed by law. The employees and employer, however, may stipulate in their CBA
the payment of overtime rates higher than those provided by law. Such agreement may be considered
valid only if the stipulated overtime pay rates will yield to the employees not less than the minimum
prescribed by law.35
5. EMERGENCY OVERTIME WORK (ARTICLE 89, LABOR CODE) .
a. General rule.
The general rule remains that no employee may be compelled to render overtime work against
his will.
b. Exceptions when employee may be compelled to render overtime work:
1. When the country is at war or when any other national or local emergency has been
declared by the National Assembly or the Chief Executive;
2. When overtime work is necessary to prevent loss of life or property or in case of
imminent danger to public safety due to actual or impending emergency in the locality
caused by serious accident, fire, floods, typhoons, earthquake, epidemic or other disasters
or calamities;
3. When there is urgent work to be performed on machines, installations or equipment, or in
order to avoid serious loss or damage to the employer or some other causes of similar
nature;
4. When the work is necessary to prevent loss or damage to perishable goods;
5. When the completion or continuation of work started before the 8 hour is necessary to
th

prevent serious obstruction or prejudice to the business or operations of the employer; and
6. When overtime work is necessary to avail of favorable weather or environmental
conditions where performance or quality of work is dependent thereon.
c. May an employee validly refuse to render overtime work under any of the afore-said
circumstances?
No, an employee cannot validly refuse to render overtime work if any of the afore-mentioned
circumstances is present. When an employee refuses to render emergency overtime work under any of the
foregoing conditions, he may be dismissed on the ground of insubordination or willful disobedience of the
lawful order of the employer.
6. UNDERTIME NOT OFFSET BY OVERTIME (ARTICLE 88, LABOR CODE) .
The following rules shall apply:
1. Undertime work on any particular day shall not be offset by overtime on any other day.
2. 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 by law such as
overtime pay or night shift differential pay.
7. WAIVER OF OVERTIME PAY.
The right to claim overtime pay is not subject to a waiver. Such right is governed by law and
not merely by the agreement of the parties.36
While rights may be waived, the same must not be contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right recognized by law.37
But if the waiver is done in exchange for and in consideration of certain valuable privileges,
among them that of being given tips when doing overtime work, there being no proof that the value of
said privileges did not compensate for such work, such waiver may be considered valid.38
6.
 NIGHT WORK (R.A. NO. 10151),
NIGHT SHIFT DIFFERENTIAL (ARTICLE 86, LABOR CODE)
1. R.A. NO. 10151 [JUNE 21, 2011].
a. Significance of the law.
R.A. No. 1015139 has repealed Article 130 [Nightwork Prohibition] and Article
131 [Exceptions] of the Labor Code and accordingly renumbered the same articles. Additionally, it has
inserted a new Chapter V of Title III of Book III of the Labor Code entitled “Employment of Night
Workers” which addresses the issue on nightwork of all employees, including women workers. Chapter V
covers newly renumbered Articles 154 up to 161 of the Labor Code.
b. Coverage of the law.
The law on nightwork applies not only to women but to all persons, who shall be employed
or permitted or suffered to work at night, exceptthose employed in agriculture, stock raising, fishing,
maritime transport and inland navigation, during a period of not less than seven (7) consecutive
hours, including the interval from midnight to five o'clock in the morning, to be determined by the
DOLE Secretary, after consulting the workers’ representatives/labor organizations and employers.40
c. Night worker, meaning.
"Night worker" means any employed person whose work covers the period from 10 o'clock
in the evening to 6 o'clock the following morning provided that the worker performs no less than
seven (7) consecutive hours of work. 41
d. 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; or
(c) If they experience health problems during such an assignment.
With the exception of a finding of unfitness for night work, the findings of such assessments
shall be confidential and shall not be used to their detriment, subject, however, to applicable company
policies.42
e. Mandatory facilities.
Mandatory facilities shall be made available for workers performing night work which include the
following:
(a) Suitable first-aid and emergency facilities as provided for under Rule 1960
(Occupational Health Services) of the Occupational Safety and Health Standards (OSHS)
;
(b) Lactation station in required companies pursuant to R.A. No. 10028 (The Expanded
Breastfeeding Promotion Act of 2009) ;
(c) Separate toilet facilities for men and women;
(d) Facility for eating with potable drinking water; and
(e) Facilities for transportation and/or properly ventilated temporary sleeping or resting
quarters, separate for male and female workers, shall be provided except where any
of the following circumstances is present:
i. Where there is an existing company guideline, practice or policy, CBA or any similar
agreement between management and workers providing for an equivalent or
superior benefit; or
ii. Where the start or end of the night work does not fall within 12 midnight to 5
o'clock in the morning; or
iii. Where the workplace is located in an area that is accessible twenty-four (24) hours
to public transportation;
iv. Where the number of employees does not exceed a specified number as may be
provided for by the DOLE Secretary in subsequent issuances.43
f. Transfer due to unfitness of work for health reasons.
Night workers who are certified by competent physician, as unfit to render night work,
due to health reasons, shall be transferred to a job for which they are fit to work whenever
practicable. The transfer of the employee must be to a similar or equivalent position and in good
faith.
 If such transfer is not practicable or the workers are unable to render night work for a
continuous period of not less than six (6) months upon the certification of a competent public
health authority, these workers shall be granted the same company benefits as other workers who are
unable to work due to illness.
A night worker certified as temporarily unfit for night work for a period of less than six
(6) months shall be given the same protection against dismissal or notice of dismissal as other workers
who are prevented from working for health reasons.44
g. Women night workers, alternative measures to night work for pregnant and nursing
employees.
Employers shall ensure that measures shall be undertaken to provide an alternative to night work
for pregnant and nursing employees who would otherwise be called upon to perform such work. Such
measures may include the transfer to day work, where it is possible, as well as the provision of social
security benefits or an extension of maternity leave.
(a) Transfer to day work. - As far as practicable, pregnant or nursing employees shall be
assigned to day work, before and after childbirth for a period of at least sixteen (16) weeks which shall be
divided between the time before and after childbirth.
Medical certificate issued by competent physician (i.e. , Obstetrician/Gynecologist,
Pediatrician, etc.) is necessary for the grant of:
i. additional periods of assignment to day work during pregnancy or after childbirth other than
the period mentioned in the foregoing paragraph, provided that the length of additional
period should not be more than four (4) weeks or for a longer period as may be agreed
upon by the employer and the worker;
ii. extension of maternity leave; and
iii. clearance to render night work.
(b) Provision of social security benefits. - Social security benefits, such as paid maternity leave
shall be provided to women workers in accordance with the provisions of R.A. No. 8282 (Social Security Act
of 1997) and other existing company policy or CBA.
(c) Extension of maternity leave. - Where transfer to day work is not possible, a woman
employee may be allowed to extend, as recommended by a competent physician, her maternity leave
without pay or using earned leave credits of the worker, if any.45
h. Non-diminution of maternity leave benefits under existing laws. -
The law and its rules shall not be construed to authorize diminution or reduction of the
protection and benefits connected with maternity leave under existing law.46
i. Protection against dismissal and loss of benefits attached to employment status,
seniority and access to promotion.
Where no alternative work can be provided to a woman employee who is not in a position to render
night work, she shall be allowed to go on leave or on extended maternity leave, using her earned leave credits.
A woman employee shall not be dismissed for reasons of pregnancy, childbirth and
childcare responsibilities. She shall not lose the benefits regarding her employment status, seniority,
and access to promotion which may attach to her regular night work position.47
j. Compensation.
The compensation for night workers in the form of working time, pay or similar benefits shall
recognize the exceptional nature of night work.48
Consequently, such compensation shall include, but not be limited to, working time, pay and
benefits under the Labor Code, as amended and under existing laws, such as service incentive leave,
rest day, night differential pay, 13 month pay, and other benefits as provided for by law, company
th

policy or CBA.49
k. Social Services.
Appropriate social services shall be provided for night workers and, where necessary, for
workers performing night work.50
l. Night Work Schedules.
The employer shall at its own initiative, consult the recognized workers' representatives or
union in the establishment on the details of the night work 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 and
appropriate changes of work schedule shall be agreed upon before it is implemented.51
2. NIGHT SHIFT DIFFERENTIAL.
a. How reckoned.
Night shift differential is equivalent to 10% of employee's regular wage for each hour of work
performed between 10:00 p.m. and 6:00 a.m. of the following day.
b. Night shift differential vs. overtime pay.
When the work of an employee falls at night time, the receipt of overtime pay shall not
preclude the right to receive night differential pay. The reason is the payment of the night differential pay is
for the work done during the night; while the payment of the overtime pay is for work in excess of the regular
eight (8) working hours.
c. Computation of Night Shift Differential Pay:
1. Where night shift (10 p.m. to 6 a.m. ) work is regular work.
a. On an ordinary day: Plus 10% of the basic hourly rate or a total of 110% of the
basic hourly rate.
b. On a rest day, special day or regular holiday: Plus 10% of the regular hourly rate
on a rest day, special day or regular holiday or a total of 110% of the regular hourly
rate.
2. Where night shift (10 p.m. to 6 a.m. ) work is overtime work.
a. On an ordinary day: Plus 10% of the overtime hourly rate on an ordinary day or a
total of 110% of the overtime hourly rate on an ordinary day.
b. On a rest day or special day or regular holiday: Plus 10% of the overtime hourly
rate on a rest day or special day or regular holiday.
3. For overtime work in the night shift. Since overtime work is not usually eight (8)
hours, the compensation for overtime night shift work is also computed on the basis of
the hourly rate.
a. On an ordinary day. Plus 10% of 125% of basic hourly rate or a total of 110% of 125% of
basic hourly rate.
b. On a rest day or special day or regular holiday. Plus 10% of 130% of regular
hourly rate on said days or a total of 110% of 130% of the applicable regular hourly
rate.

7.
PART-TIME WORK
1. PART-TIME WORK.

The Labor Code does not define part-time work. There is no universally accepted definition
of part-time work or employment. A definition proposed by the International Labor Organization
52
(ILO) describes “part-time work” as “a single, regular or voluntary form of employment with hours
of work substantially shorter than those considered as normal in the establishment. ” A “part-time
worker” is an employed person whose normal hours of work are less than those of comparable full-
time workers.53

Full-time workers affected by partial unemployment, that is by a collective and temporary

reduction in their normal hours of work for economic, technical or structural reasons, are not
considered to be part-time workers.54
 This definition excludes certain forms of employment which although referred to as parttime
work, are in particular, irregular, temporary or intermittent employment, or cases where hours of work
have been temporarily reduced for economic, technical or structural reasons.

Part-time work may take different forms depending on the agreed hours of work in a day,
the days of work in a week or other reference periods. In the Philippines, however, the two most
common and acceptable forms are four (4) hours work per day and weekend work or two (2) full days
per week.55

2. SECURITY OF TENURE.

The same protection afforded to full-time workers with respect to security of tenure should
also be extended to part-time workers. Thus, protection provided under the Labor Code and its
implementing rules and regulations should likewise be applied to said type of workers. If for example,
a part-time employee becomes regular, he cannot be dismissed summarily without just or authorized
cause and without complying with the twin requirements of notice and hearing. Otherwise, he shall
be considered illegally dismissed.56

3. INDICATORS OF REGULAR EMPLOYMENT.

A part-time worker is considered a regular employee under any of the following conditions:

1. The terms of his employment show that he is engaged as regular or permanent employee;

2. The terms of his employment indicate that he is employed for an indefinite period;

3. He has been engaged for a probationary period and has continued in his employment even
after the expiration of the probationary period; or

4. The employee performs activities which are usually necessary or desirable in the usual
business or trade of the employer.

On the other hand, where the employment contract is fixed or for a definite period only as
contemplated by law, part-time employees are likewise entitled to tenurial rights during the entire
period of their fixed employment. In other words, they cannot be separated from work without just
or authorized cause.57
4. PROBATIONARY PERIOD OF PART-TIME EMPLOYEES.

Using the legal principles enunciated in Article 281 of the Labor Code on probationary
employment vis-à-vis Article 13 of the Civil Code on the proper reckoning of periods, a part-time
employee shall become regular in status after working for such number of hours or days which
equates to or completes a six-month probationary period in the same establishment doing the same
job under the employment contract. Once a part-time employee becomes a regular employee, he is
entitled to security of tenure under the law and he can only be separated for a just or authorized
cause and after due process.58
5. BEING A PART-TIMER IS NOT RELEVANT TO THE ISSUE OF REGULARIZATION.
That an employee worked only on a part-time basis cannot deprive him of his attaining regular
employment. Part-time work does not mean that one is not a regular employee. One’s regularity of
employment is not determined by the number of hours one works but by the nature and by the length of time
one has been in that particular job.
The above principle was used as the basis in declaring respondent Benedicto Faburada as a
regular employee in the case of Perpetual Help Credit Cooperative, Inc. v.
Faburada . 59 Respondent Faburada was a regular part-time Computer programmer/operator in
petitioner cooperative. He had worked with the Cooperative since June 1, 1988 up to December 29,
1989. His work schedule was on Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and every
Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3 ) hours during Sundays.
His monthly salary was P1,000.00 - from June to December 1988; P1,350.00 - from January to June
1989; and P1,500.00 from July to December 1989. His duties, among others, were to enter data into
the computer, compute interests on savings deposits, effect mortuary deductions and dividends on fixed
deposits, maintain the masterlist of the cooperative members, perform various forms for
mimeographing, and perform such other duties as may be assigned to him from time to time.
The same principle was cited in International Pharmaceuticals, Inc. v. NLRC and Dr.
Virginia Camacho Quintia,60 as basis in ruling that private respondent Quintia was a regular
employee despite the fact THAT she was teaching full-time at the Cebu Doctors’ College while
working part-time with petitioner company. This fact does not negate her regular status since it does not
affect the nature of Quintia’s work. Thus, whether one’s employment is regular is not determined by the
number of hours one works, but by the nature of the work and by the length of time one has been in that
particular job.
6. REGULARIZATION FROM REGULAR PART-TIMERS TO REGULAR FULL-TIMERS.
Workers who are hired initially as temporary part-timers may demand that their status be
converted not to regular part-timers but to regular full-timers if the circumstances warrant such
conversion.
In Philippine Airlines, Inc. v. Pascua,61 which involves the issue of regularization of part-
time workers to full-time workers, the Supreme Court ruled that although the respondent-employees were
initially hired as part-time employees for one (1) year, thereafter the over-all circumstances with respect to
the duties assigned to them, number of hours they were permitted to work including overtime, and the
extension of their employment beyond two (2) years can only lead to the conclusion that they should be
declared full-time regular employees. Evidently, there was a continued and repeated necessity for their
services, which puts to naught the contention that respondents, beyond the one-year period, still continued to
be temporary part-time employees. Article 280 of the Labor Code provides that any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be considered a
regular employee with respect to the activity in which he is employed, and his employment shall continue
while such activity actually exists.
7. COURT CAN ORDER REGULARIZATION OF PART-TIMERS; EMPLOYER CANNOT
INVOKE MANAGEMENT PREROGATIVE TO DETERMINE WHEN TO REGULARIZE
OR NOT.
In the same case of Philippine Airlines, petitioner contended that the NLRC encroached upon
its exclusive sphere of managerial decision when it ruled that respondents should be made regular full-
time employees instead of regular part-time employees, and the appellate court thereby erred in
sustaining the NLRC. The Supreme Court, however, declared that this contention does not quite ring
true, much less persuade it. It must be borne in mind that the exercise of management prerogative is not
absolute. While it may be conceded that management is in the best position to know its operational
needs, the exercise of management prerogative cannot be utilized to circumvent the law and public
policy on labor and social justice. That prerogative accorded management could not defeat the very
purpose for which our labor laws exist: to balance the conflicting interests of labor and management,
not to tilt the scale in favor of one over the other, but to guarantee that labor and management stand on
equal footing when bargaining in good faith with each other. By its very nature, encompassing as it
could be, management prerogative must be exercised always with the principle of fair play at heart and
justice in mind. Hence, having been borne out by the record and the evidence presented that
respondent-employees’ status deserves to be converted from part-time to regular full-time, the NLRC’s
findings were affirmed by the High Court. Thus, not without sufficient and substantial reasons, the
claim of management prerogative by petitioner ought to be struck down for being contrary to law and
policy, fair play and good faith.
8. RIGHT OF PART-TIME WORKERS TO SERVICE INCENTIVE LEAVE.
 In an Advisory Opinion issued by the Bureau of Working Conditions of the Department of
Labor and Employment, it was pronounced that part-time workers are entitled to the full benefit of the
yearly five (5) days service incentive leave with pay. The reason is that the provision of Article 95 of
the Labor Code and its implementing rules, speak of the number of months in a year for entitlement to
said benefit. Resultantly, part-time employees are also entitled to the full service incentive leave benefit
and not on a pro-rata basis.62
In the case of Cebu Institute of Technology v. Ople,63 the school contends that the teachers
it hired on contractual basis are not entitled to service incentive leave since the nature of their work is
similar to “those who are engaged on task or contract basis” under the Rules to Implement the Labor
Code.64 The High Court, in debunking this claim, ruled that such quoted phrase should be related to
the term “field personnel” following the rule of ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow. Clearly, the teachers cannot be deemed
doing field 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.65
9. RULES ON PART-TIME TEACHERS.
a. Part-time teachers cannot acquire permanent tenure.
As held in University of Santo Tomas v. NLRC,66 and Saint Mary‟ s University v. CA,67 a
part-time member of the faculty cannot acquire permanent employment status under the Manual of
Regulations for Private Schools, in relation to the Labor Code. Only when one has served as a full-time
teacher can he acquire permanent or regular status.68
In said University of Sto. Tomas case, it was ruled that for a private school teacher to acquire
permanent status in employment, the following requisites must concur: (1) the teacher is a full-time
teacher; (2) the teacher must have rendered three (3) consecutive years of service; and (3) such service
must have been satisfactory.69
b. Part-time employment cannot be credited to acquire permanent tenure.
The petitioner in Lacuesta v. Ateneo de Manila University,70 was a part-time lecturer before
she was appointed as a full-time instructor on probation. As a part-time lecturer, her employment as
such had ended when her contract expired. Thus, the three (3) semesters she served as part-time
lecturer could not be credited to her in computing the number of years she has served to qualify her for
permanent status. Petitioner posits that after completing the three-year probation with an above-average
performance, she already acquired permanent status. It was held, however, that completing the
probation period does not automatically qualify her to become a permanent employee of the
university. Petitioner could only qualify to become a permanent employee upon fulfilling the
reasonable standards for permanent employment as faculty member. Consistent with academic
freedom and constitutional autonomy, an institution of higher learning has the prerogative to provide
standards for its teachers and determine whether these standards have been met. At the end of the
probationary period, the decision to rehire an employee on probation belongs to the university alone as
the employer.71
c. Part-time teachers enjoy security of tenure only during the effectivity of the part-time
employment contract.
Part-time teachers enjoy security of tenure during the effectivity of the part-time
employment. The school could not lawfully terminate a part-timer before the end of the agreed period
without just cause. But once the period, semester, or term ends, there is no obligation on the part of
the school to renew the contract of employment for the next period, semester, or term.72
8.
CONTRACT FOR PIECE WORK
(SEE CIVIL CODE)
1. SYLLABUS REQUIREMENT.
The syllabus specifically refers to the provisions of the Civil Code on Contract for a Piece Work.
The Civil Code has a complete Section 3, Chapter 3 (Work and Labor) , Title VIII (LEASE) devoted to
“Contract for a Piece of Work” covering Articles 1713 to 1731.
2. CONTRACT FOR PIECE WORK UNDER THE CIVIL CODE.
 a. Nature.
By the contract for a piece of work, the contractor binds himself to execute a piece of work for
the employer, in consideration of a certain price or compensation. The contractor may either employ
only his labor or skill, or also furnish the material.73
b. Pertinent provisions:
The following are the relevant Civil Code provisions:
“Art. 1714. If the contractor agrees to produce the work from material furnished by him, he
shall deliver the thing produced to the employer and transfer dominion over the thing. This
contract shall be governed by the following articles as well as by the pertinent provisions
on warranty of title and against hidden defects and the payment of price in a contract of sale.
“Art. 1715. The contractor shall execute the work in such a manner that it has the
qualities agreed upon and has no defects which destroy or lessen its value or fitness for its
ordinary or stipulated use. Should the work be not of such quality, the employer may require that
the contractor remove the defect or execute another work. If the contractor fails or refuses to
comply with this obligation, the employer may have the defect removed or another work executed,
at the contractor's cost.
“Art. 1716. An agreement waiving or limiting the contractor's liability for any defect in the work
is void if the contractor acted fraudulently.
“Art. 1717. If the contractor bound himself to furnish the material, he shall suffer the loss if the
work should be destroyed before its delivery, save when there has been delay in receiving it.
“Art. 1718. The contractor who has undertaken to put only his work or skill, cannot claim any
compensation if the work should be destroyed before its delivery, unless there has been delay in
receiving it, or if the destruction was caused by the poor quality of the material, provided this
fact was communicated in due time to the owner. If the material is lost through a fortuitous event,
the contract is extinguished.
“Art. 1719. Acceptance of the work by the employer relieves the contractor of liability for any
defect in the work, unless:
(1) The defect is hidden and the employer is not, by his special knowledge, expected to
recognize the same; or
(2) The employer expressly reserves his rights against the contractor by reason of the
defect.
“Art. 1720. The price or compensation shall be paid at the time and place of delivery of the
work, unless there is a stipulation to the contrary. If the work is to be delivered partially, the price or
compensation for each part having been fixed, the sum shall be paid at the time and place of
delivery, in the absence if stipulation.
“Art. 1721. If, in the execution of the work, an act of the employer is required, and he incurs
in delay or fails to perform the act, the contractor is entitled to a reasonable compensation.
“The amount of the compensation is computed, on the one hand, by the duration of the delay
and the amount of the compensation stipulated, and on the other hand, by what the contractor
has saved in expenses by reason of the delay or is able to earn by a different employment of his
time and industry.
“Art. 1722. If the work cannot be completed on account of a defect in the material
furnished by the employer, or because of orders from the employer, without any fault on the
part of the contractor, the latter has a right to an equitable part of the compensation
proportionally to the work done, and reimbursement for proper expenses made.
“Art. 1723. The engineer or architect who drew up the plans and specifications for a
building is liable for damages if within fifteen years from the completion of the structure, the
same should collapse by reason of a defect in those plans and specifications, or due to the
defects in the ground. The contractor is likewise responsible for the damages if the edifice
falls, within the same period, on account of defects in the construction or the use of materials
of inferior quality furnished by him, or due to any violation of the terms of the contract. If the
engineer or architect supervises the construction, he shall be solidarily liable with the
contractor.
 “Acceptance of the building, after completion, does not imply waiver of any of the cause of
action by reason of any defect mentioned in the preceding paragraph.
“The action must be brought within ten years following the collapse of the building.
“Art. 1724. The contractor who undertakes to build a structure or any other work for a
stipulated price, in conformity with plans and specifications agreed upon with the land-owner, can
neither withdraw from the contract nor demand an increase in the price on account of the higher
cost of labor or materials, save when there has been a change in the plans and specifications,
provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by
both parties.
“Art. 1725. The owner may withdraw at will from the construction of the work, although it may
have been commenced, indemnifying the contractor for all the latter's expenses, work, and the
usefulness which the owner may obtain therefrom, and damages.
“Art. 1726. When a piece of work has been entrusted to a person by reason of his
personal qualifications, the contract is rescinded upon his death.
“In this case the proprietor shall pay the heirs of the contractor in proportion to the price
agreed upon, the value of the part of the work done, and of the materials prepared, provided the
latter yield him some benefit.
“The same rule shall apply if the contractor cannot finish the work due to circumstances
beyond his control.
“Art. 1727. The contractor is responsible for the work done by persons employed by him.
“Art. 1728. The contractor is liable for all the claims of laborers and others employed by him,
and of third persons for death or physical injuries during the construction.
“Art. 1729. Those who put their labor upon or furnish materials for a piece of work
undertaken by the contractor have an action against the owner up to the amount owing from
the latter to the contractor at the time the claim is made. However, the following shall not
prejudice the laborers, employees and furnishers of materials:
(1) Payments made by the owner to the contractor before they are due;
(2) Renunciation by the contractor of any amount due him from the owner.
“This article is subject to the provisions of special laws.
“Art. 1730. If it is agreed that the work shall be accomplished to the satisfaction of the
proprietor, it is understood that in case of disagreement the question shall be subject to expert
judgment.
“If the work is subject to the approval of a third person, his decision shall be final, except in
case of fraud or manifest error.
“Art. 1731. He who has executed work upon a movable has a right to retain it by way of
pledge until he is paid.”
In addition to the foregoing, there is this relevant Civil Code74 provision found in the law on
Sales:
“Art. 1467. A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market, whether the
same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured
specially for the customer and upon his special order, and not for the general market, it is a
contract for a piece of work.”

------------oOo------------

Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
B. Wages
1. Wage vs. salary
2. Minimum wage defined, Minimum wage setting
3. Minimum wage of workers paid by results
a) Workers paid by results
b) Apprentices
c) Learners
d) Persons with disability
4. Commissions
5. Deductions from wages
6. Non-diminution of benefits
7. Facilities vs. supplements
8. Wage Distortion/Rectification
9. Divisor to determine daily rate
B.
WAGES

1.
WAGE VS. SALARY
1. BASIC DISTINCTION.
The term “wage” is used to characterize the compensation paid for manual
skilled or unskilled labor. “Salary,” on the other hand, is used to describe the
compensation for higher or superior level of employment.1
2. DISTINCTION IN TERMS OF EXECUTION, ATTACHMENT OR
GARNISHMENT.
In cases of execution, attachment or garnishment of the compensation of an
employee received from work issued by the court to satisfy a judicially-determined
obligation, a distinction should be made whether such compensation is
considered “wage” or “salary.” Under Article 1708 of the Civil Code, if considered
a “wage,” the employee’s compensation shall not be subject to execution or
attachment or garnishment, except for debts incurred for food, shelter, clothing and
medical attendance. If deemed a “salary,” such compensation is not exempt from
execution or attachment or garnishment. Thus, the salary, commission and other
remuneration received by a managerial employee (as distinguished from an ordinary
worker or laborer) cannot be considered wages. Salary is understood to relate to a
position or office, or the compensation given for official or other service; while wage
is the compensation for labor.2
2.A.
MINIMUM WAGE DEFINED
1. BASIC WAGE.
The term “basic wage” means all the remuneration or earnings paid by an
employer to a worker for services rendered on normal working days and hours but
does not include cost-of-living allowances, profit-sharing payments, premium
payments, 13 month pay or other monetary benefits which are not considered as part
th

of or integrated into the regular salary of the workers.3

Further, as held in Honda Phils. , Inc. v. Samahan ng Malayang
Manggagawa sa Honda,4 the following should be excluded from the computation of
“basic salary,” to wit: payments for sick, vacation and maternity leaves, night
differentials, regular holiday pay and premiums for work done on rest days and
special holidays.5
2. ATTRIBUTES OF WAGE.
“Wage” paid to any employee has the following attributes:
1. It is the remuneration or earnings, however designated, for work done or to be
done or for services rendered or to be rendered;
2. It is capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of
calculating the same;
3. It is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done or for services rendered
or to be rendered; and
4. It includes the fair and reasonable value, as determined by the DOLE Secretary,
of board, lodging, or other facilities customarily furnished by the employer to
the employee. “Fair and reasonable value” shall not include any profit to the
employer or to any person affiliated with the employer.6
3. MINIMUM WAGE.
The minimum wage rates prescribed by law shall be the basic cash
wages without deduction therefrom of whatever benefits, supplements or allowances
which the employees enjoy free of charge aside from the basic pay.7
4. STATUTORY MINIMUM WAGE.
The term “statutory minimum wage” refers simply to the lowest basic
wage rate fixed by law that an employer can pay his workers.8
5. REGIONAL MINIMUM WAGE RATES.
The term “regional minimum wage rates” refers to the lowest basic wage
rates that an employer can pay his workers, as fixed by the Regional Tripartite
Wages and Productivity Boards (RTWPBs) , and which shall not be lower than the
applicable statutory minimum wage rates.9
The minimum wage rates for agricultural and non-agricultural employees and
workers in each and every region of the country shall be those prescribed by
the “RTWPBs”.10 These wage rates may include wages by industry, province or
locality as may be deemed necessary by the RTWPBs.11
6. WAGE RATES.
The term "wage rates" includes cost-of-living allowances as fixed by the
RTWPB, but excludes other wage-related benefits such asovertime pay, bonuses,
night shift differential pay, holiday pay, premium pay, 13 month pay, premium pay,
th

leave benefits, among others. 12

7. RATIONALE.
 The principal reason why a legislated wage increase is considered valid is that it
prevents the exploitation of defenseless workers who are situated in an unequal position
vis-à-vis their employers in terms of bargaining power. By setting the minimum
below which the law considers illegal, the workers are assured of decent living
subsistence without need for them to bargain for the same.
The employer cannot hope to validate his non-compliance with the legislated minimum wage by
contending that he has liquidity problem or is suffering from financial reverses or business losses. Whatever
problem he may have in the operation of his business cannot certainly affect his obligation to pay the
minimum wage rate fixed by law.
Thus, in Mayon Hotel & Restaurant v. Adana, 13 the Supreme Court ruled that petitioner’s
repeated invocation of serious business losses is not a defense to payment of labor standard benefits.
The employer cannot exempt himself from liability to pay minimum wages because of poor financial
condition of the company. The payment of minimum wages is not dependent on the employer’s ability
to pay.14
It must be noted that acceptance by the employee of wage below the minimum set by law does
not preclude him from suing for the deficiency. The principle of estoppel or laches does not apply
in this situation.

8. INTEGRATION OF COLA AND OTHER MONETARY BENEFITS INTO

THE BASIC PAY.
a. Meaning of cost-of-living allowance (COLA) .
Clearly, COLA is not in the nature of an allowance intended to reimburse
expenses incurred by employees in the performance of their official functions. It is
not payment in consideration of the fulfillment of official duty.15 As defined, “cost of
living” refers to “the level of prices relating to a range of everyday items”16 or “the
cost of purchasing the goods and services which are included in an accepted standard
level of consumption.” 17Based on this premise, COLA is a benefit intended to cover
increases in the cost of living.18
b. Validity of integration.
The integration of monetary benefits into the basic pay of workers is not a new
method of increasing the minimum wage.
By way of latest illustration, under Section 1 of Wage Order No. NCR-17 which
took effect on June 03, 2012, the COLA of P22.00 per day under Wage Order No. NCR-16
was ordered integrated into the basic pay upon its effectivity.
Under Section 1(c) of Wage Order No. NCR-18 which took effect on October
4, 2013, also ordered the integration of the P15.00 of the existing P30.00 COLA per
day under said Wage Order No. NCR-17 into the basic wage making the new basic
wage of covered workers, P451.00 (New Basic Wage of P436.00 plus P15.00 COLA
integrated as of January 1, 2014) and the new minimum wage rate of covered
workers, P466.00 (Basic Wage after integration of P451.00 plus COLA of P15.00)
effective January 1, 2014.19
9. “NO WORK, NO PAY” PRINCIPLE.
It must be emphasized that the age-old rule governing the relation between labor and capital,
or management and employee of “no work, no pay” or “fair day’s wage for fair day’s labor” remains
to be adhered to in our jurisdiction as the basic factor in determining the wages of employees. If the
worker does not work, he is generally not entitled to any wage or pay. The exception is when it was the
employer who unduly prevented him from working despite his ableness, willingness and readiness to
work; or in cases where he is illegally locked out or illegally suspended or illegally dismissed, or
otherwise illegally prevented from working, in which event, he should be entitled to his wage.20
 2.B.
MINIMUM WAGE SETTING
1. WAGE ORDER.
a. Wage order, defined.
The term “Wage Order” refers to the order promulgated by the RTWPB
pursuant to its wage fixing authority.21
b. Prescribed increases or adjustments, defined.
"Prescribed increases or adjustments" refer to the amount of increases
or adjustments in the wage rate of workers fixed by the RTWPB (hereafter may be referred to
as “Regional Board”) which the employer is mandated to pay upon effectivity of a
Wage Order.22
c. When proper to issue wage order.
Whenever conditions in the region so warrant, the Regional Board shall
investigate and study all pertinent facts and based on the prescribed standards and
criteria, shall proceed to determine whether a Wage Order should be issued. Any such
Wage Order shall take effect after fifteen (15) days from its complete publication in at
least one (1) newspaper of general circulation in the region.23
d. Public hearings/consultations.
In the performance of its wage-determining functions, the Regional Board
shall conduct public hearings/consultations, giving notices to employees’ and
employers’ groups, provincial, city and municipal officials and other interested
parties.24
e. Appeal by aggrieved party.
Any party aggrieved by the Wage Order issued by the Regional Board may
appeal such order to the National Wages and Productivity Commission
(hereafter “NWPC” or “Commission”) within ten (10) calendar days from the
publication of such order. It shall be mandatory for the Commission to decide such appeal
within sixty (60) calendar days from the filing thereof.
The filing of the appeal does not stay the order unless the person appealing
such order shall file with the Commission an undertaking with a surety or sureties
satisfactory to the Commission for the payment to the employees affected by the order
of the corresponding increase, in the event such order is affirmed.25
2. STANDARDS/CRITERIA FOR MINIMUM WAGE FIXING.
a. Relevant factors to consider in fixing minimum wage.
The minimum wage rates to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the workers within the framework of national economic and
social development goals. In the determination of regional minimum wages, the Regional Board shall,
among other relevant factors, consider the following:

(1) Needs of workers and their families

1) Demand for living wages;

2) Wage adjustment vis-à-vis the consumer price index;
3) Cost of living and changes therein;
 4) Needs of workers and their families;
5) Improvements in standards of living.

(2) Capacity to pay

1) Fair return on capital invested and capacity to pay of employers;

2) Productivity.

(3) Comparable wages and incomes

1) Prevailing wage levels.

(4) Requirements of economic and social development

1) Need to induce industries to invest in the countryside;

2) Effects on employment generation and family income;
3) Equitable distribution of income and wealth along the imperatives of economic and
social development. 26

b. Standard prevailing minimum wages in every region.

The wages shall be the standard prevailing minimum wages in every region.
These wages shall include wages varying with industries, provinces or localities if
in the judgment of the Regional Board, conditions make such local
differentiation proper and necessary to effectuate the purpose of the law.27
3. METHODS OF FIXING THE MINIMUM WAGE RATES.
a. Two (2) methods according to jurisprudence.
The Supreme Court has identified two (2) methods of fixing the minimum
wage, namely:
1. “Floor-Wage” method which involves the fixing of a determinate amount
to be added to the prevailing statutory minimum wage rates. This was
applied in earlier wage orders; and
2. “Salary-Cap” or “Salary-Ceiling” method where the wage adjustment is
to be applied to employees receiving a certain denominated salary
ceiling. In other words, workers already being paid more than the existing
minimum wage (up to a certain amount stated in the Wage Order) are also
to be given a wage increase.28
The “Salary-Cap” or “Salary-Ceiling” method is the preferred mode. 29
b. Distinction between the 2 methods.
The distinction between the two (2) methods is best shown by way of an
illustration. Under the “Floor Wage Method,” it would be sufficient if the Wage Order
simply set P15.00 as the amount to be added to the prevailing statutory minimum
wage rates; while in the “Salary-Ceiling Method,” it would be sufficient if the Wage Order
states a specific salary, such as P250.00, and only those earning below it shall be
entitled to the wage increase.
c. Current policy discourages across-the-board increase.
When neither of the 2 methods is used and instead what was granted was
an across-the-board (ATB) wage increase, the Regional Board is deemed to have
exceeded its authority (ultra vires) by extending the coverage of the Wage Order to
wage earners receiving more than the prevailing minimum wage rate without a
denominated salary ceiling.30
While ATB wage increases have been granted in the past, current policy discourages the
Regional Boards from granting ATB adjustments as they create more distortions in the labor market
which in turn affect adversely the income and standard of living of workers and their families.
Specifically:

o ATB wage increases have greater impact on inflation;

o ATB wage increases are disincentives to trade unionism;
o ATB increases are not consistent with the minimum wage fixing mandate of
the Regional Boards.31
4. SOME PRINCIPLES ON WAGE FIXING.
a. On issuance of wage order.
Contents of Wage Order. - A Wage Order shall specify the region, province, or industry
to which the minimum wage rates prescribed thereunder shall apply and provide
exemptions, if any, subject to guidelines issued by the Commission. 32
Frequency of Wage Order. - Any Wage Order issued by the Regional Board may not be
disturbed for a period of twelve (12) months from its effectivity, and no petition for
wage increase shall be entertained within the said period except when there are
supervening conditions, such as extraordinary increase in prices of petroleum products
and basic goods/services, which demand a review of the minimum wage rates as
determined by the Regional Board and confirmed by the Commission (NWPC) ,33 in
which case, the Regional Board shall proceed to exercise its wage fixing function even
before the expiration of the said period. 34
Review of Wage Order. - The Commission shall review the Wage Order issued by the
Regional Board prior to publication. 35
Effectivity of Wage Order; requirement of publication. - A Wage Order shall be
published only after its review by the Commission and shall take effect fifteen (15) days
after its publication in at least one (1) newspaper of general circulation in the region. 36

b. On public hearings/consultations.

Hearings may be conducted by the Regional Board en banc or by a duly authorized

committee thereof wherein each sector shall be represented. 37
No preliminary or permanent injunction or temporary restraining order may be issued
by any court, tribunal or any other entity against any proceeding before the Commission
or Regional Board. 38
Failure to conduct public hearings/consultations and to publish a wage order renders
it invalid. 39
c. On applicability of wage order.
Wage increases mandated by wage orders apply only to covered employees specified
therein.40
 If none of the employees are receiving salaries below the prescribed minimum wage, an
employer is not obliged to grant the wage increase to any of them.41
Workers are not required to refund what they have erroneously received consequent to
the implementation of a void provision of a wage order.42

3.
MINIMUM WAGE OF WORKERS PAID BY RESULTS
(a)
WORKERS PAID BY RESULTS
1. MINIMUM WAGE RATES OF WORKERS PAID BY RESULTS.
According to Article 124 of the Labor Code:
“All workers paid by results, including those who are paid on
piecework, takay, pakyaw or task basis, shall receive not less than
the prescribed wage rates per eight (8) hours of work a day, or
a proportion thereof for working less than eight (8) hours.” 43
2. PAYMENT BY RESULTS.
The Labor Code contains, in its Article 101, a provision directly dwelling on how
payment by results is to be made, thus:
“Article 101. Payment by Results. - (a) The Secretary of Labor
and Employment shall regulate the payment of wages by results,
including pakyao, piecework, and other non-time work, in order to
ensure the payment of fair and reasonable wage rates, preferably
through time and motion studies or in consultation with
representatives of workers‟ and employers‟ organizations.”
3. NATURE.
Article 101 of the Labor Code contemplates “non-time” workers. They are so called because they
are paid not on the basis of the time spent on their work but according to the quantity, quality or kind of job
and the consequent results thereof.
Because of the unique manner by which the work is compensated as distinguished from the
compensation calculated on the basis of time, it is subject to more regulations in order to ensure the payment
of fair and reasonable wage rates, basically through two (2) modes:

a. Time and motion study; or

b. As may be fixed through consultation with workers’ and employers’
organizations.
The time and motion study is the more scientific and preferred method.
4. CATEGORIES OF WORKERS PAID BY RESULTS.
Workers paid by results may be classified into:

a. Supervised workers; and

b. Unsupervised workers.
As the term clearly connotes, supervised workers are those whose manner of work is under the
control of the employer; while unsupervisedworkers are those whose work is controlled more in the results
than in the manner or method of performing it.
The law does not make any categorical differentiation among the workers
paid by results. Thus, the workers may be on pakyao (sometimes spelled “pakyaw”)
, takay or piece-rate or output basis. All of them are similar in character in that they are
all paid on the basis of the results of their work. When the law does not
distinguish, we should not distinguish.
5. TIME AND MOTION STUDIES.
On petition of any interested party or upon its own initiative, the DOLE shall
use all available measures, including the use of time and motion studies and
individual/collective bargaining agreement between the employer and its workers as
approved by the DOLE Secretary and consultation with representatives of employers’
and workers’ organizations, to determine whether the employees in any industry or
enterprise are being compensated in accordance with the minimum wage
requirements of the rule on wages.44
6. BASIS IN DETERMINING RATES.
The basis for the establishment of rates for piece, output or contract work is
the performance of an ordinary worker of minimum skill or ability.45
An ordinary worker of minimum skill or ability is the average worker of the
lowest producing group representing fifty percent (50%) of the total number of
employees engaged in similar employment in a particular establishment, excluding
learners, apprentices and persons with disability employed therein.46
7. ALLOWED TIME; MEANING.
In incentive wage system, the number of minutes allowed for tool care, personal needs and fatigue,
is added to operating time in establishing job standards or “task” as a basis for determining piece rates or
incentive bonus.
8. BASE RATE; MEANING.
In incentive wage system, the rate for the established task or job standard production is called
“base rate.” The base rate usually represents the one hundred percent (100%) basis for measuring the
incentive bonus. It is also used to describe the regular rate for time worked which is the established rate per
hour for the assigned job, exclusive of extras resulting from merit or service increase or overtime, among
others.
9. OUTPUT RATES IN WORK PAID BY RESULTS; EFFECT IF
DETERMINED BY EMPLOYER OR BY DOLE.
The employer shall basically prescribe the output rates in work paid by results. He may prescribe it himself or secure first
the prior approval of the DOLE.

If the output rates are prescribed solely by the employer and the same do not
conform with the standards prescribed under the implementing rules, or with the rates
prescribed by the DOLE in an appropriate order, the employees are entitled to the
difference between the amount which they are entitled to receive under such
prescribed standards or rates and that actually paid to them by the employer.47
Moreover, if by multiplying the rate per piece as determined by the employer without the approval of the DOLE and the
actual output of the worker paid by results, the amount arrived at conforms with or exceeds the statutory minimum wage, then
such worker should receive such higher amount. But if after such computation, the amount arrived at is less than the statutory
minimum wage, then, the employer should pay the difference in order to assure the worker of the statutory minimum wage.

In the case of Framanlis Farms, Inc. v. Minister of Labor,48 the High

Court ruled that respondent Minister of Labor did not err in requiring the petitioners to pay
wage differentials to their “pakyaw” workers who worked for at least eight (8) hours daily
and earned less than P8.00 per day.
The same thing may not be said if the output rates are prescribed by the DOLE, in which case,
the employer is duty-bound to follow it. Consequently, the wages of workers paid by results under this
situation are determined by simply multiplying the number of pieces produced by the rate fixed per
piece. Consequently, whether or not the eight (8) normal working hours are exceeded or that the total
output is equivalent to, more than or less than the statutory minimum wage, is immaterial. What is
material is the actual output or earnings for that particular day.

(b)
APPRENTICES
(c)
LEARNERS

1. WAGE RATE.
The wage rate of a learner or an apprentice is set at seventy-five percent
(75%) of the statutory minimum wage.49
2. EFFECT OF WAGE ORDERS.
The Labor Code, in its Article 124, categorically mentions the effect of
legally-mandated wage increases ordered by Wage Orders on the learnership and
apprenticeship agreements, to wit:
“All recognized learnership and apprenticeship agreements shall be
considered automatically modified insofar as their wage clauses are concerned to reflect
the prescribed wage rates.” 50

Consequently, all Wage Orders issued by the Regional Boards contain a

provision thereon. For example, the latest Wage Order No. NCR-18 (Effective 4
October 2013) states in its Section 7:
“Section 7. WAGES OF SPECIAL GROUPS OF WORKERS. - Wages
of apprentices and learners shall in no case be less than seventy-five percent (75%) of the
applicable minimum wage rates prescribed in this Order.
“All recognized learnership and apprenticeship agreements entered into before the
effectivity of this Order shall be considered automatically modified insofar as their wage
clauses are concerned to reflect the new minimum wage rates.
“All qualified handicapped workers shall receive the full amount of the minimum
wage rate prescribed herein pursuant to R.A. No. 7277, otherwise known as the Magna
Carta for Disabled Persons.” 51

(d)
PERSONS WITH DISABILITY
1. WAGE RATE.
Under Article 80 of the Labor Code, handicapped workers, now to be
properly called as “Persons With Disability” or “PWD,” are entitled to not less than
seventy-five percent (75%) of the applicable adjusted minimum wage.52 In view,
however, of R.A. No. 7277,53 the wage rate of PWDs had been increased to and fixed
at 100% of the applicable minimum wage.
Wage Orders issued by the Regional Boards normally reflect this principle.
For instance, as shown in Section 7 of Wage Order No. NCR-18quoted above, the
full amount of the minimum wage rate prescribed thereunder is granted to a PWD.
Moreover, the employment agreements with persons with disability are
deemed automatically modified insofar as their wage clauses are concerned to reflect
the said legally mandated increases.54
 4.
COMMISSIONS
1. MEANING AND NATURE OF COMMISSION.
“Commission” is the recompense, compensation or reward of an employee,
agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same
is calculated as a percentage on the amount of his transactions or on the profit of the
principal.55
2. COMMISSION MAY OR MAY NOT BE CONSIDERED PART OF WAGE/SALARY.
Commission earned may or may not be considered part of wage or salary depending on the
peculiar circumstances of a case and on the purpose for which the determination is being made. For
instance, the rule on the inclusion of commissions for purposes of computing the separation pay may
essentially differ from the inclusionary rule thereof for purposes of computing the 13th month pay.

3. NO LAW REQUIRING THE PAYMENT OF COMMISSION.

According to Lagatic v. NLRC,56 there is no law which requires employers to
pay commissions.
4. NO STANDARD FORMULA FOR THE COMPUTATION OF
COMMISSION.
Once commission is granted, there is no law which prescribes a method for
computing it. The determination of the amount of commissions is the result of
collective bargaining negotiations, individual employment contracts or established
employer practice.57
Consequently, as held in Lagatic, since the formula for the computation of
commissions was presented to and accepted by the petitioner employee, such
prescribed formula is in order. As to the allegation that said formula diminishes the
benefits being received by petitioner whenever there is a wage increase, it must be
noted that his commissions are not meant to be in a fixed amount. In fact, there was
no assurance that he would receive any commission at all. Non-diminution of
benefits, as applied here, merely means that the company may not remove
the privilege of sales personnel to earn a commission, not that they are entitled to a
fixed amount thereof.
5. INCLUSION OF COMMISSION IN THE COMPUTATION OF
SEPARATION PAY; EXCEPTION.
For purposes of determining the appropriate amount of separation pay of
salesmen who were terminated due to retrenchment, commissions earned from actual
transactions and received by them should be included in the monthly salary. This
holds true even if the commissions were merely in the form of incentives or
encouragement so that the salesmen would be inspired to put a little more industry on
the jobs particularly assigned to them. Still, these commissions are direct
remunerations for services rendered which contributed to the increase of the income
of the employer. For purposes of the computation of the separation pay, what should
be taken into account is the average commission earned during their last year of
employment.58
Commissions, however, should not be included in the computation of the base
figure if the same is dependent on the earnings of the employee through actual
marketing transactions taken by him.59
6. INCLUSION OF COMMISSION IN THE COMPUTATION OF THE 13 TH

MONTH PAY; EXCEPTION.

For purposes of computing the 13 month pay, the salesmen’s commissions
th

comprising a pre-determined percent of the selling price of the goods sold by each
salesman should be properly included in the term “basic salary” or “wage.” These
commissions are neither overtime payments nor profit-sharing payments nor any
other fringe benefit.60
But if the commissions were received by medical representatives
as “productivity bonuses,” the same should not be included in the term “basic
salary.” Productivity bonuses are generally tied to the productivity or capacity for
revenue production of a corporation. Such bonuses closely resemble profit-sharing
payments and have no clear, direct or necessary relation to the amount of work
actually done by each individual employee. More generally, a bonus is an amount
granted and paid ex gratia to the employee. Its payment constitutes an act of
enlightened generosity and self-interest on the part of the employer rather than as a
demandable or enforceable obligation.61
5.
DEDUCTIONS FROM WAGES

1. GENERAL RULE.
The general rule is that an employer, by himself or through his
representative, is prohibited from making any deductions from the wages of his
employees. The employer is not allowed to make unnecessary deductions without the
knowledge or authorization of the employees.62
2. PERMISSIBLE DEDUCTIONS FROM WAGES UNDER THE LABOR
CODE AND OTHER LAWS.
a. Deductions allowed under Article 113.
Article 113 of the Labor Code allows only three (3) kinds of deductions,
namely:
(a) In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued
by the DOLE Secretary.
b. Deductions allowed under other provisions of the Labor Code and
other laws.
Deductions from the wages of employees may be made by the employer in any of
the following cases:
1. Deductions for loss or damage under Article 114 of the Labor Code;
2. Deductions made for agency fees from non-union members who accept the
benefits under the CBA negotiated by the bargaining union. This form of
 deduction does not require the written authorization of the non-bargaining
union member concerned;63
3. Union service fees;64
4. When the deductions are with the written authorization of the employee
for payment to a third person and the employer agrees to do so,
provided that the latter does not receive any pecuniary benefit, directly or
indirectly, from the transaction;65
5. Deductions for value of meal and other facilities;66
6. Deductions for premiums for SSS, PhilHealth, employees‟ compensation
and Pag-IBIG;
7. Withholding tax mandated under the National Internal Revenue Code
(NIRC) ;
8. Withholding of wages because of the employee’s debt to the employer
which is already due;67
9. Deductions made pursuant to a court judgment against the worker under
circumstances where the wages may be the subject of attachment or
execution but only for debts incurred for food, clothing, shelter and
medical attendance;68
10. When deductions from wages are ordered by the court;
11. Salary deductions of a member of a cooperative.69

3. SOME PRINCIPLES ON DEDUCTIONS.

Deductions due to tardiness or absences. - Tardiness or absences may be lawfully deducted from
the wages of the workers. For purposes of computing the proper amount of deduction for the same,
the equivalent daily rate (EDR) of the employee concerned should be used as the basis thereof.
Deductions from 13 month pay. - 13 month pay is considered part of “wages” within the
th th

meaning and contemplation of the Labor Code.70No deduction therefore can be made therefrom
without the knowledge and consent of the employee concerned. Example: In Agabon v.
NLRC,71the Supreme Court disallowed for being unauthorized the deduction of SSS loan and the
value of shoes from the 13 month pay of the employee.
th

Deductions due to losses on account of alleged negligence. - In the case of Metropolitan Bank
and Trust Company v. NLRC,72 the act of the bank in deducting P1,000.00 bi-monthly from the
salary of a bank teller supposedly to answer for the loss of P96,370.00 on account of her
negligence in failing to ask the alleged representative of the depositor to present identification
papers and in failing to verify the withdrawal of the client-depositor considering the large amount
involved as required by the Manual of Procedure of the bank, was held, under the circumstances,
constitutive of illegal deduction since it was common knowledge that the bank procedures have
been relaxed especially to accommodate special clients who are often allowed to go directly to the
bank officials to facilitate withdrawals. The teller here was more of a victim than a culprit.
Deductions due to error in the automated payroll system. - In TSPIC Corp. v. TSPIC
Employees Union [FFW],73 the deductions made to correct the erroneous overpayment of salaries
were held valid since no vested right could have accrued in favor of the employees. Hence, any amount
given to the employees in excess of what they were legally entitled to may be deducted by the employer
from the employees’ salaries.

6.
NON-DIMINUTION OF BENEFITS
1. APPLICABILITY OF ARTICLE 100 OF THE LABOR CODE.
a. The non-elimination and non-diminution principle applies even to benefits granted after
the promulgation/effectivity of the Labor Code.
Albeit Article 100 is clear that the principle of non-elimination and non-diminution of benefits
apply only to the benefits being enjoyed “at the time of the promulgation” of the Labor Code, the
Supreme Court has consistently cited Article 100 as being applicable even to benefits granted after said
promulgation. It has, in fact, been treated as the legal anchor for the declaration of the invalidity of so
many acts of employers deemed to have eliminated or diminished the benefits of employees.
b. Proper basis of the non-elimination and non-diminution principle is not Article 100.
The language of Article 100 is clear as to its applicability. Therefore, subsequent to the date of
promulgation of the Labor Code, the non-elimination and non-diminution principle enunciated therein
can no longer be invoked as the same was explicitly and clearly made applicable only to “supplements
or other employee benefits being enjoyed at the time of promulgation” of the Labor Code.74
This view that Article 100 is not the proper basis for the invocation of the non-diminution and
non-elimination of benefits principle was underscored in the separate concurring opinion of Mr. Justice
Arturo D. Brion 75 in the case of Arco Metal Products, Inc. v. Samahang ng mga Manggagawa sa
Arco Metal-NAFLU (SAMARM-NAFLU) ,76 where he clarified that the basis for the prohibition
against diminution of established benefits is not really Article 100 of the Labor Code as the
respondents claimed and as the cases cited in the ponencia mentioned. He emphasized therein that Article
100 refers solely to the non-diminution of benefits enjoyed at the time of the promulgation of the Labor
Code.
Indeed, the view is advanced that even without Article 100, the protection-to-labor clause77 in
the Constitution and the grounds of justice and equity will not allow such diminution and/or
elimination of employee benefits.
Based on the ponencia and concurring opinion afore-cited in the Arco Metal case, it may be safely
concluded that the proper legal bases for the invocation of the principle that any benefit or supplement
being enjoyed by employees cannot be reduced, discontinued or eliminated by the employer are the
following:
(1) Express terms of an employment agreement;
(2) Company practice which refers to the implied terms of an employment
agreement which the employer has freely, voluntarily and consistently extended to its
employees and thus cannot be withdrawn except by mutual consent or agreement of the
contracting parties;
(3) The Constitution (Section 18 of Article II and Section 3 of Article XIII thereof) ; and
(4) Article 4 of the Labor Code.
Indeed, the express terms of an employment agreement which are not contrary to law, public
policy or public order are the touchstone of the employment relationship. Said terms constitute the law
between the employer and the employee which cannot be breached. The implied termsthereof, once
granted by the employer, may ripen into a company practice or even into a policy which generally can
no longer be withdrawn unilaterally by the employer except when the affected employee agrees to such
withdrawal.
And the protection-to-labor mandate enunciated in Section 18 of Article II and Section 3 of Article
XIII of the Constitution as well as the rule on the proper interpretation and construction of the provisions of
the Labor Code and its implementing rules enshrined in Article 4 thereof are the main bedrock and shield
against any attempt at reducing, diminishing or eliminating benefits that employers have granted and which the
employees have been enjoying.
c. Latest pronouncement on the application of the non-diminution rule in Article 100.
The 2014 case of Wesleyan University-Philippines v. Wesleyan University-Philippines
Faculty and Staff Association, 78 succinctly pointed out that the Non-Diminution Rule found in
Article 100 of the Labor Code explicitly prohibits employers from eliminating or reducing the benefits
received by their employees. This rule, however, applies only if the benefit is based on any of the
following:
 (1) An express policy;
(2) A written contract; or
(3) A company practice.79
2. ELIMINATION OR DIMINUTION OF BENEFITS MAY CONSTITUTE
DEMOTION OR CONSTRUCTIVE DISMISSAL.
a. When it constitutes demotion.
The illegal and unjustified elimination or diminution of certain benefits may
result in illegal demotion if it results in the lowering in position or rank or reduction
in salary of the employee.80
b. When it constitutes constructive dismissal.
Elimination or diminution of certain benefits may result in the constructive
dismissal of an employee when it amounts to an involuntary resignation resorted to
because continued employment is rendered impossible, unreasonable or unlikely;
when there is a demotion in rank and/or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to the
employee that it could foreclose any choice by him except to forego his continued
employment.81
3. COMPANY PRACTICE.
a. No hard and fast rule to establish company practice.
Company practice is a custom or habit shown by an employer’s repeated, habitual customary or
succession of acts of similar kind by reason of which, it gains the status of a company policy that can no
longer be disturbed or withdrawn.
b. The grant of benefit should not be by reason of legal or contractual obligation but by
reason of liberality.
To ripen into a company practice that is demandable as a matter of right, the giving of the
benefit should not be by reason of a strict legal or contractual obligation but by reason of an act of
liberality on the part of the employer.82
c. Criteria that may be used to determine existence of company practice.
There is no hard and fast rule which may be used and applied in determining whether a certain act of
the employer may be considered as having ripened into a practice which, having been elevated to such status,
may thus be accorded the same enforceability and binding effect equivalent to a demandable policy or
agreement.

According to the case of National Sugar Refineries Corporation v.

NLRC,83 the test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowing fully
well that said employees are not covered by the law requiring the payment
thereof.
The following criteria may, however, be used to determine whether an act has ripened into a
company practice:
(1) The act of the employer has been done for a considerable period of time;
(2) The act should be done consistently and intentionally; and
(3) The act should not be a product of erroneous interpretation or construction of a doubtful
or difficult question of law or provision in the CBA.
1. The act of the employer has been done for a considerable period of
time.
If done only once as in the case of Philippine Appliance Corporation
(Philacor) v. CA,84 where the CBA signing bonus was granted only once during the
1997 CBA negotiation, the same cannot be considered as having ripened into a
company practice. Similarly, in the 2011 case ofSupreme Steel Corporation
v. Nagkakaisang Manggagawa ng Supreme Independent Union (NMS-IND-
APL) ,85 it was held that the implementation of the COLA under Wage Order No.
RBIII-10 on an across-the-board basis, which only lasted for less than a year, cannot be
considered as having been practiced “over a long period of time. ” While it is true that
jurisprudence has not laid down any rule requiring a specific minimum number of years in
order for a practice to be considered as a voluntary act of the employer, under existing
jurisprudence on this matter, an act carried out within less than a year would certainly not
qualify as such. Hence, the withdrawal of the COLA Wage Order No. RBIII-10 from the
salaries of non-minimum wage earners did not amount to a “diminution of benefits”
under the law.
In the following cases, the act of the employer was declared company practice
because of the considerable period of time it has been practiced:
(a) Davao Fruits Corporation v. Associated Labor Unions. 86 - The act of the company of
freely and continuously including in the computation of the 13 month pay, items that
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were expressly excluded by law has lasted for six (6) years, hence, was considered
indicative of company practice.
(b) Sevilla Trading Company v. A. V. A. Semana‟ 87 - The act of including non-basic
benefits such as paid leaves for unused sick leave and vacation leave in the computation
of the employees’ 13 month pay for at least two (2) years was considered a company
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practice.
(c) The 2010 case of Central Azucarera de Tarlac v. Central Azucarera de Tarlac
Labor Union-NLU,88 also ruled as company practice the act of petitioner of granting for
thirty (30) years, its workers the mandatory 13 month pay computed in accordance with
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the following formula: Total Basic Annual Salary divided by twelve

(12) and Including in the computation of the Total Basic Annual Salary the following: basic
monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night
premium pay; and vacation and sick leaves for each year.
(d) Manila Electric Company v. Secretary of Labor,89 where the act of the employer in
granting, in addition to the regular 13 month bonus, an additional Christmas bonus at the
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tail-end of the year since 1988 was considered company practice. The considerable length
of time MERALCO has been giving these special grants to its employees indicates a
unilateral and voluntary act on its part to continue giving said benefits knowing that such
act was not required by law.
(e) Davao Integrated Port Stevedoring Services v. Abarquez. 90 - The employer, for three
(3) years and nine (9) months, approved the commutation to cash of the unenjoyed
portion of the sick leave with pay benefit of its intermittent workers. It was held that this
act of the employer has already ripened into a company practice which can no longer be
withdrawn.
(f) Tiangco v. Leogardo, Jr. ,91 where the employer carried on the practice of giving a
fixed monthly emergency allowance from November 1976 to February 1980, or for a
period of three (3) years and four (4) months. It was ruled that this has already ripened
into a company practice which cannot be peremptorily and unilaterally withdrawn by the
employer.
(g) Metropolitan Bank and Trust Company v. NLRC,92 where the act of Metrobank, for
over a decade, of consistently, deliberately and voluntarily granting improved benefits to
its officers, after the signing of each CBA with its rank and file employees, retroactive to
January 1 of the same year as the grant of improved benefits and without the condition
st

that the officers should remain employees as of a certain date is a company practice. This
undeniably indicates a unilateral and voluntary act on Metrobank’s part, to give said
benefits to its officers, knowing that such act was not required by law or the company
retirement plan. It must be noted that company practice or policy may still be
 invoked even if the claimant employees have already retired and received their
retirement benefits. Thus, the argument of Metrobank that it ceased to have any
obligation to grant improved retirement benefits to employees who are no longer its
employees at the time of the grant was debunked by the High Court.
2. The act should be done consistently and intentionally.
The intention to make a certain act a company practice may be logically
inferred from the peculiar circumstances obtaining in each case.
The following cases may be cited to illustrate this principle:
(a) Tiangco v. Leogardo, Jr. ,93 where the employer has consistently been granting fixed
monthly emergency allowance to the employees from November, 1976 but discontinued
this practice effective February, 1980 insofar as non-working days are concerned based
on the principle of “no work, no pay.” The Supreme Court ruled that the discontinuance
of said benefit contravened Article 100 of the Labor Code which prohibits the diminution
of existing benefits.
(b) Republic Planters Bank, [now known as PNB-Republic Bank] v. NLRC,94 where the
Supreme Court ruled, thus: “A punctilious perusal of the records leads us to the same
conclusion, i.e. , that PNB-RB has adopted the policy of granting gratuity benefits to its
retiring officers based on the salary rate of the next higher rank. It continued to adopt this
practice even after the expiration of the 1971-1973 CBA. The grant was consistent and
deliberate although petitioner knew fully well that it was not required to give the benefits
after the expiration of the 1971-1973 CBA. Under these circumstances, the granting of
the gratuity pay on the basis of the salary rate of the rank next higher may be deemed to
have ripened into a company practice or policy which can no longer be peremptorily
withdrawn.
(c) Standard Chartered Bank v. Standard Chartered Bank Employees Union
(SCBEU) ,95 where petitioner asserts that its employees are not entitled to “outpatient
medicine reimbursements” distinct and separate from the “medicine allowances” granted
in the CBA. It alleges that outpatient medicine reimbursement was not expressly
provided for in the Philamlife insurance policy and that this was precisely the reason
petitioner’s employees were provided with a medicine allowance under the CBA. The
Supreme Court, however, adopted the finding of the DOLE and the CA that the
“outpatient benefit [had] been a regular feature of the [petitioner’s] medical coverage and
as a regular feature, cannot be withdrawn unilaterally. ” The insurance policy issued by
Philamlife allowed outpatient benefits as claims against maximum disablement,
notwithstanding the lack of an express provision regarding outpatient benefits. Moreover,
it was found that petitioner acknowledged, without disapproval or objection, employees’
requests for reimbursement of outpatient medical expenses under the old insurance plan.
3. The act should not be a product of erroneous interpretation or
construction of a doubtful or difficult question of law or provision in the
CBA.
The general rule is that if it is a past error that is being corrected, no vested
right may be said to have arisen therefrom nor any diminution of benefit may have
resulted by virtue of the correction thereof.96 The error, however, must be corrected
immediately after its discovery;97 otherwise, the rule on non-diminution of benefits
would still apply.98
The following cases would illuminate this principle:
(a) Globe Mackay Cable and Radio Corporation v. NLRC,99 where the Supreme Court
ruled on the proper computation of the cost-of-living allowance (COLA) for monthly-
paid employees. Petitioner corporation, pursuant to Wage Order No. 6 (effective October
30, 1984) , increased the COLA of its monthly-paid employees by multiplying the P3.00
daily COLA by 22 days which is the number of working days in the company. The union
disagreed with the computation, claiming that the daily COLA rate of P3.00 should be
multiplied by 30 days which has been the practice of the company for several years. The
Supreme Court, however, upheld the contention of the petitioner corporation. It held that
 the grant by the employer of benefits through an erroneous application of the law due to
absence of clear administrative guidelines is not considered a voluntary act which cannot be
unilaterally discontinued.
(b) TSPIC Corp. v. TSPIC Employees Union [FFW],100 where the Supreme Court
reiterated the rule enunciated in Globe-Mackay,that an erroneously granted benefit may be
withdrawn without violating the prohibition against non-diminution of benefits. No vested
right accrued to individual respondents when TSPIC corrected its error by crediting the
salary increase for the year 2001 against the salary increase granted under Wage Order No. 8,
all in accordance with the CBA. Hence, any amount given to the employees in excess of
what they were entitled to, as computed above, may be legally deducted by TSPIC from the
employees’ salaries.
(c) Prubankers Association v. Prudential Bank and Trust Company,101 where petitioner
union asserts that respondent Bank has already adopted a uniform wage policy which has
attained the status of an established management practice; thus, it is estopped from
implementing a wage order for a specific region only. In this case, respondent Bank has
previously implemented Wage Orders Nos. NCR-01 and NCR-02 nationwide although
they are supposedly applicable to the National Capital Region only. With the issuance of
Wage Order No. RB 05-03 (applicable for Region V) and Wage Order No. RB VII-03
(applicable for Region VII) , respondent Bank started to regionalize the implementation
of the wage increases. In holding that this argument of petitioner is not persuasive, the
Supreme Court ruled that although the Bank implemented Wage Orders Nos. NCR-01
and NCR-02 nationwide instead of regionally even after the effectivity of R.A. No. 6727,
the Bank at the time was still uncertain about how to follow the new law. In any event,
that single instance cannot be constitutive of“management practice.”
But if the error does not proceed from the interpretation or construction of a law or
a provision in the CBA, the same may ripen into a company practice.
The following cases may be cited in accordance with this tenet:
(a) Hinatuan Mining Corporation and/or the Manager v. NLRC,102 where the act of the
employer in granting separation pay to resigning employees, despite the fact that the
Labor Code does not grant it, was considered an established employer practice.
(b) Arco Metal Products, Inc. v. Samahang ng mga Manggagawa sa Arco Metal-
NAFLU (SAMARM-NAFLU) ,103 where petitioner, despite the provision of the law and
the CBA that 13 month pay, vacation leave and sick leave conversion to cash should be
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computed in amounts proportional to the service the employees have actually rendered
within a year, had not pro-rated the payment of the same benefits to seven (7) employees
who had not served for the full 12 months in 1992, 1993, 1994, 1996, 1999, 2003, and
2004. Petitioner claims that its full payment of benefits regardless of the length of service
to the company does not constitute voluntary employer practice. It points out that the
payments had been erroneously made and they occurred in isolated cases in the years
1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that
the accounting department discovered the error “when there were already three (3)
employees involved with prolonged absences and the error was corrected by
implementing the pro-rata payment of benefits pursuant to law and their existing CBA. ”
It adds that the seven earlier cases of full payment of benefits went unnoticed
considering the proportion of one employee concerned (per year) vis à vis the 170
employees of the company. Petitioner describes the situation as a “clear oversight”
which should not be taken against it. To further bolster its case, petitioner argues that for
a grant of a benefit to be considered a practice, it should have been practiced over a long
period of time and must be shown to be consistent, deliberate and intentional, which is not
what happened in this case. In disagreeing to this contention, the Supreme Court
pronounced:
“In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted
a policy of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of
seven employees who benefited from such a practice, but it was an established
practice nonetheless. Jurisprudence has not laid down any rule specifying a
minimum number of years within which a company practice must be exercised in
order to constitute voluntary company practice. Thus, it can be six (6) years, three
 (3) years, or even as short as two (2) years. Petitioner cannot shirk away from its
responsibility by merely claiming that it was a mistake or an error, supported only
104
by an affidavit of its manufacturing group head.”

d. Some principles on the non-diminution principle.

As a final word, the Supreme Court, on the issue of what should be included in the
computation of the 13 month pay, declared that no more error can be asserted at this late
th

hour in the reckoning of the “basic salary” as basis for the computation of the 13 month
th

paybecause from the inception of P.D. No. 851 on December 16, 1975, clear-cut
administrative guidelines have been issued to insure uniformity in the interpretation,
application, and enforcement of the provisions of P.D. No. 851 and its implementing rules
and regulations. Thus, an employer cannot successfully assert that it has committed an
honest error in including such salary-related benefits as the cash equivalent of unused
vacation and sick leave credits, overtime, premium, night differential and holiday pay,
and cost-of-living allowances in the computation of the 13 month pay.105
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No company practice could ripen in situations where certain benefits are granted only
under certain specified circumstances such as in case of payment of per diem, relocation
allowance, dislocation pay, gasoline allowance, or similar
supplements. Consequently, even if the employee has been enjoying certain benefits for
quite a long period of time, if the circumstances have changed which no longer justify the
continuation of the grant of said benefits, the removal thereof does not certainly constitute
a violation of the non-diminution of benefits principle. Thus, the grant of relocation
allowance, dislocation pay, gasoline allowance or per diem intended for board and
lodging once an employee is assigned away from his home base, may be discontinued if
the employee is no longer assigned to posts requiring the grant thereof.106
Existence of a company practice must be duly proved by evidence.107
4. BONUS.
a. General rule: not demandable or enforceable.
Bonus, as a general rule, is an amount granted and paid ex gratia to the
employee. Its payment constitutes an act of enlightened generosity and self-interest on
the part of the employer rather than as a demandable or enforceable obligation.108 It is
an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer’s business and made possible the
realization of profits.109 It is something given in addition to what is ordinarily received
by or strictly due the recipient.110 It is a gratuity or act of liberality of the giver which
the recipient has no right to demand as a matter of right.111
The grant of bonus is a management prerogative.112 It cannot be forced upon
the employer who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employees’ basic salaries or wages. It is
something given in addition to what is ordinarily received by, or strictly due to, the
recipient.113 If there is no profit, there should be no bonus. If profit is reduced, bonus
should likewise be reduced, absent any agreement making such bonus part of the
compensation of the employees.114
b. Bonus, when demandable and enforceable.
In certain situations, however, the Supreme Court, on the basis of equitable
considerations, long practice and other peculiar circumstances, has recognized the
demandability and enforceability of bonuses although the grant thereof is undoubtedly
discretionary and notwithstanding the fact that they do not form part of the wage or
salary of the employees.115
Moreover, if bonus is granted as an additional compensation which the
employer agreed to give without any condition such as success of business or more
efficient or more productive operation, it is deemed part of wage or salary; hence,
demandable.116
It thus becomes a demandable and enforceable obligation only when it is made
part of the wage or salary or compensation. When considered as part of the
compensation and therefore demandable and enforceable, the amount is usually fixed.
If the amount thereof is dependent upon the realization of profits, the bonus is not
demandable and enforceable.117
c. Bonus, when considered a company practice.
Bonus may be granted on equitable considerations as when the giving of such
bonus has been the company’s long and regular practice.118
Citing American Wire and Cable Daily Rated Employees Union v.
American Wire and Cable Co. , Inc. ,119 the Supreme Court ruled in Mcleod v.
NLRC,120 that for a bonus to be enforceable, the employer must have promised it and
the parties must have expressly agreed upon it, or it must have had a fixed amount and
had been a long and regular practice on the part of the employer.121
To be considered a "regular practice," the giving of the bonus should have
been done over a long period of time and must be shown to have been consistent and
deliberate.122
The test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowing fully well
that said employees are not covered by the law requiring the payment thereof.123
d. Bonus, when not considered a company practice.
InTraders Royal Bank v. NLRC,124 it was held that even if the bonus has
been given for quite some time or since “time-immemorial” as asserted by the union,
in an amount equivalent to two (2) months gross pay for mid-year bonus and three (3)
months gross pay for the year-end bonus, the employer may validly reduce it to two
(2) months basic pay for mid-year bonus, and two-months for year-end bonus,
without violating the non-diminution clause in the law since bonuses are not part of
labor standards in the same class as salaries, cost-of-living allowances, holiday pay
and leave benefits provided under the Labor Code. The contention of the union that
the granting of said bonuses had ripened into a company practice that may no longer
be adjusted to the prevailing condition of the bank has no legal and moral bases. Its
fiscal condition having declined, the bank may not be forced to distribute bonuses
which it can no longer afford to pay and, in effect, be penalized for its past generosity
to its employees.
Based on the above ruling in Traders Royal Bank, the claim for the mid-year
bonus of private respondents in Businessday Information Systems and Services,
Inc. (BISSI) vs. NLRC,125 was denied underscoring the fact that the grant of bonus is
a prerogative, not an obligation, of the employer. The matter of giving a bonus over
and above the worker’s lawful salaries and allowances is entirely dependent on the
financial capability of the employer to give it. The fact that the company’s business
was no longer profitable (it was in fact moribund) plus the fact that the private
respondents did not work up to the middle of the year (they were discharged in May
1988) were valid reasons for not granting them a mid-year bonus. Requiring the
company to pay a mid-year bonus to them also would in effect penalize the company
for its generosity to those workers who remained with the company till the end of its days.
The award must therefore be deleted.
7.
FACILITIES VS. SUPPLEMENTS
1. FACILITIES, DEFINED.
The term “facilities” includes articles or services for the benefit of the
employee or his family but does not include tools of the trade or articles or services
primarily for the benefit of the employer or necessary to the conduct of the
employer’s business.126 They are items of expense necessary for the laborer’s and his
family’s existence and subsistence which form part of the wage and when furnished
by the employer, are deductible therefrom, since if they are not so furnished, the
laborer would spend and pay for them just the same.127
2. SUPPLEMENTS, DEFINED.
The term “supplements” means extra remuneration or special privileges or
benefits given to or received by the laborers over and above their ordinary earnings or
wages.128
3. FACILITIES VS. SUPPLEMENTS.
The benefit or privilege given to the employee which constitutes an extra
remuneration over and above his basic or ordinary earning or wage issupplement; and
when said benefit or privilege is made part of the laborer’s basic wage, it is a facility.
The criterion is not so much with the kind of the benefit or item (food, lodging, bonus
or sick leave) given but its purpose. Thus, free meals supplied by the ship operator to
crew members, out of necessity, cannot be considered as facilities but supplements
which could not be reduced having been given not as part of wages but as a necessary
matter in the maintenance of the health and efficiency of the crew during the
voyage.129
4. SOME PRINCIPLES ON FACILITIES AND SUPPLEMENTS.
Facilities are deductible from wage but not supplements.130
Legal requirements must be complied with before facilities may be deducted from wages. The
employer simply cannot deduct the value from the employee’s wages without satisfying the
following:
(1) Proof that such facilities are customarily furnished by the trade;
(2) The provision of deductible facilities is voluntarily accepted in writing by the
employee; and
(3) The facilities are charged at fair and reasonable value.131
An employer may provide subsidized meals and snacks to his employees provided that the
subsidy shall not be less than thirty percent (30%) of the fair and reasonable value of such
facilities. In such a case, the employer may deduct from the wages of the employees not more than
seventy percent (70%) of the value of the meals and snacks enjoyed by the employees, provided
that such deduction is with the written authorization of the employees concerned.132
The free board and lodging petitioner SIP furnished its employees cannot operate as a set-off for
the underpayment of their wages.133

8.
WAGE DISTORTION/RECTIFICATION
1. WAGE DISTORTION.
 a. Wage distortion, as defined in the law and implementing rules.
“Wage distortion”134 contemplates a situation where an increase in
prescribed wage rates results in either of the following:
1. Elimination of the quantitative differences in the rates of wages or salaries;
or
2. Severe contraction of intentional quantitative differences in wage or salary
rates between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure
based on the following criteria:
a. Skills;
b. Length of service; or
c. Other logical bases of differentiation.135
Wage distortion presupposes a classification of positions and ranking of these
positions at various levels. One visualizes a hierarchy of positions with
corresponding ranks basically in terms of wages and other emoluments. Where a
significant change occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position from the next
higher level, and resulting in a parity between the lowest level and the next higher
level or rank, between new entrants and old hires, there exists a wage distortion. xxx.
The concept of wage distortion assumes an existing grouping or classification of
employees which establishes distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a differing wage rate for each of
the existing classes of employees.136
b. Four elements of wage distortion.
The four (4) elements of wage distortion are as follows:
(1) An existing hierarchy of positions with corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a
concomitant increase in the salary rate of a higher one;
(3) The elimination of the distinction between the two levels; and
(4) The existence of the distortion in the same region of the country.137
Normally, a company has a wage structure or method of determining the
wages of its employees. In a problem dealing with “wage distortion,”the basic
assumption is that there exists a grouping or classification of employees that
establishes distinctions among them on some relevant or legitimate bases.138
Involved in the classification of employees are various factors such as the
degrees of responsibility, the skills and knowledge required, thecomplexity of the job,
or other logical basis of differentiation. The differing wage rate for each of the existing
classes of employees reflects this classification.
c. “Elimination” and “severe contraction;” distinction.
In order to justify adjustment in wage rates, it is not required that there
should be a complete elimination of quantitative wage differences. The existence of
“severe contraction” of such quantitative wage differences is sufficient.
The law mentions “intentional quantitative differences” in wage or salary
rates between and among employee-groups in an establishment. By the
term “intentional” means that the quantitative differences had been arrived at through the
collective bargaining process and concluded by the parties. The intention of the parties on
the issue of whether or not the benefits under the CBA should be equated with those
granted by law must prevail and should be given full effect.
d. Severe contraction; measure thereof.
In Metropolitan Bank and Trust Company Employees Union-ALU-
TUCP v. NLRC,139 the Supreme Court said that the contraction between personnel
grouping at about eighty-three percent (83%) certainly cannot be considered less than
severe. Consequently, there is no doubt that there is an evident severe contraction which
resulted in wage distortion.
e. No wage distortion in case wage increases were granted by a wage
order to employees in one region and the same are not granted to their
counterparts in other regions who are not covered by the same wage
order.
In Prubankers Association v. Prudential Bank and Trust Company,140 it
was declared that wage distortion presupposes an increase in the compensation of the
lower ranks in an office hierarchy without a corresponding raise for higher-tiered
employees in the same region of the country, resulting in the elimination or the severe
diminution of the distinction between the two groups. Such distortion does not arise
when a wage order gives employees in one branch of a bank higher compensation
than that given to their counterparts in other regions occupying the same pay scale,
who are not covered by said wage order. In short, the implementation of wage orders
in one region but not in others does not in itself necessarily result in wage distortion.
A disparity in wages between employees holding similar positions but in different regions
does not constitute wage distortion as contemplated by law.It is the hierarchy of positions and the
disparity of their corresponding wages and other emoluments that are sought to be preserved by the
concept of wage distortion. Put differently, a wage distortion arises when a wage order engenders
wage parity between employees in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves a parity in the salary rates
of different pay classes which, as a result, eliminates the distinction between the different ranks in the
same region.
The difference in wages between employees in the same pay scale in different regions is not
the mischief sought to be banished by the law. In fact, R.A. No. 6727 recognizes “existing regional
disparities in the cost of living” in its Section 2.141
2. RECTIFICATION OF WAGE DISTORTION.
a. Formula for resolving wage distortion.
In the same case of Metropolitan Bank, 142 the Supreme Court has given
its imprimatur to the following formula for the correction of wage distortion in the pay
scale structures:
Minimum Wage = % x Prescribed Increase = Distortion
Adjustment
Actual Salary
The above formula was held to be just and equitable.
b. Wage distortion; how rectified.
 1. In organized establishments. - Where the application of any prescribed wage
increase by virtue of a Wage Order issued by the RTWPB results in distortions of the
wage structure within an establishment, the employer and the union should negotiate to
correct the distortions. Any dispute arising from wage distortions should be resolved
through the grievance procedure under their CBA and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute
should be decided by the Voluntary Arbitrator or panel of Voluntary Arbitrators within
ten (10) days from the time said dispute was referred to voluntary arbitration.143
2. In unorganized establishments. - In cases where there are no collective
agreements or recognized labor unions, the employers and workers should endeavor to
correct such distortions. Any dispute arising therefrom should be settled through the
National Conciliation and Mediation Board (NCMB) and, if it remains unresolved after
ten (10) days of conciliation, should be referred to any of the Labor Arbiters of the
appropriate branch of the NLRC. It shall be mandatory for the NLRC to conduct
continuous hearings and decide the dispute within twenty (20) days from the time said
dispute is submitted for compulsory arbitration.144
3. Effect of pendency of a wage distortion dispute. - The pendency of a dispute
arising from wage distortion shall not, in any way, delay the applicability of any increase
in prescribed wage rates pursuant to the provisions of the Wage Order.145
c. Prohibition on the staging of a strike or lockout involving the issue of
wage distortion.
Any issue involving wage distortion is not a valid ground for a strike or
lockout.146 Wage distortions should be corrected through voluntary negotiation or
arbitration instead of strikes, lockouts or other concerted activities. Unilateral or
negotiated wage increases granted by employers for the purpose of correcting such
wage distortions are in keeping with the public policy of encouraging employers to
grant wages higher than legislated wage rates.147
To compel employers simply to add upon legislated increases in salaries or
allowances without regard to what is already being paid would be to penalize
employers who grant their workers more than the statutorily-prescribed minimum
rates of increases. Clearly, this would be counter-productive so far as securing the
interests of labor is concerned.148
d. Wage distortion disputes made subject of a notice of strike or lockout.
Wage distortion is not a proper ground to be invoked in support of a strike or
lockout. Disputes arising from wage distortion resulting from wage orders issued by
the RTWPBs which are alleged in the notice of strike or notice of lockout should
be referred to the Labor Arbiter if not settled within ten (10) calendar days of
conciliation by the NCMB.149
e. Wage distortion can only be corrected if prescribed by law or wage
order, not if voluntarily increased by the employer.
The employer cannot legally be obligated to correct “wage distortion” if the
increase in the wages and salaries of the newly-hired employees was not due to a
prescribed law or wage order.
The wordings of Article 124 are clear. If it was the intention of the legislators
to cover all kinds of wage adjustments, then the language of the law should have been
broad, not restrictive, as it is currently phrased.150
 If the compulsory mandate under Article 124 to correct “wage distortion” is
applied to voluntary and unilateral increases effected by the employer in fixing hiring rates
which are inherently a business judgment or prerogative, then the hands of the employer
would be completely tied even in cases where an increase in wages of a particular
group is justified due to a re-evaluation of the high productivity of a particular group,
or the need to increase the competitiveness of the employer’s hiring rate. An employer
would be discouraged from adjusting the salary rates of a particular group of employees for
fear that it would result to a demand by all employees for a similar increase, especially if
the financial conditions of the business cannot address an across-the-board increase.
In the case of Bankard Employees Union-Workers Alliance Trade Unions,
v. NLRC,151 the petitioner cited Metro Transit Organization, Inc. v. NLRC,152 to
support its claim that the obligation to rectify wage distortion is not confined to wage
distortion resulting from government decreed law or wage order. Reliance on Metro
Transit is, however, misplaced as the obligation therein to rectify the wage distortion was
not by virtue of Article 124 of the Labor Code but on account of a then existing
“company practice” that whenever rank-and-file employees were paid a statutorily
mandated salary increase, supervisory employees were, as a matter of practice, also paid
the same amount plus an added premium.
The mere factual existence of wage distortion does not, however, ipso facto
result to an obligation to rectify it,absent a law or other source of obligation which
requires its rectification.
f. Requirement to restore substantial differentiation among classes of
employees.
It must be noted that in correcting wage distortion, the law does not require
that the difference which had previously existed between and among the employees of
different classes be restored in exactly the same amount. What is required
is substantial difference in such wage rates.153
9.
DIVISOR TO DETERMINE DAILY RATE
1. EQUIVALENT MONTHLY STATUTORY MINIMUM WAGE RATES OF
DAILY-PAID EMPLOYEES.
a. Monthly-paid employee vs. daily-paid employee.
A “monthly-paid employee” is one who is paid his wage or salary for every day of
the month, including unworked rest days, special days or regular holidays.
A “daily-paid employee” is one who is paid his wage or salary only on the days
he actually worked, except in cases of regular holidayswherein he is paid his wage or
salary even if he does not work during those days, provided that he is present or on leave of
absence with pay on the working day immediately preceding the regular holidays.
b. Department Advisory No. 01, Series of 2010.
This Advisory154 enunciated the Guidelines on the Computation of the
Estimated Equivalent Monthly Rates of Monthly-Paid Employees and Daily-
Paid Employees. This issuance was brought about by the enactment of R.A. No.
9849 (approved on December 11, 2009) declaring the tenth day of Zhul Hijja, the
twelfth month of the Islamic Calendar, a national holiday for the observance of Eidul
Adha. This regular holiday is now included in the twelve (12) guaranteed paid
regular holidays in the Philippines.
The wages of daily-paid employees may be converted to a fixed monthly rate if the number of days they are
considered paid in a year is known, using the formula/procedure, as follows:

Daily Rate x (No. of Days Considered

Paid in a Year Including Regular Holidays) = Equivalent Monthly Rate (EMR)
12

In computing employees’ benefits, the law recognizes the use of a lesser

factor as it will yield higher benefits to employees.155
Under the Labor Code, private sector workers should receive the applicable
minimum wages not lower than those prescribed by the RTWPBs under existing wage
orders. At present, the prescribed minimum wages are for normal working hours, which
shall not exceed eight (8) hours per day.
For monthly-paid employees
The factor 365 days in a year is used in determining the equivalent annual and
monthly salary of monthly-paid employees. To compute their Estimated Equivalent
Monthly Rate (EEMR) , the procedure is as follows:
Applicable Daily Rate x 365 days = EEMR
12
Where 365 days = 298 - Ordinary working days
52 - Rest days
12 - Regular Holidays 3 -
Special days
365 days - Total equivalent no. of days in a year

For daily-paid employees

The following formula may be used in computing the Estimated Equivalent
Monthly Rate (EEMR) of different groups of daily-paid employees for purposes of
entitlement to minimum wages and allied benefits under existing laws:
(a) For those who are required to work everyday including Sundays or rest days,
special days and regular holidays:

Applicable Daily Rate x 393.50 days = EEMR

12
Where 393.50 days = 298.00 days - Ordinary working days
24.00 days - 12 Regular holidays x 200%
67.60 days - 52 rest days x 130%
 3.90 days - 3 special days x 130%
393.50 days - Total equivalent no. of days in a
========== year
b) For those who do not work and are not considered paid on Sundays or rest days:
Applicable Daily Rate x 313 days = EEMR
12
Where 313 days = 298 days - Ordinary working days
12 days - Regular holidays 3
days - Special days
313 days - Total equivalent no. of days in a year

c) For those who do not work and are not considered paid on Saturdays and Sundays or
rest days:
Applicable Daily Rate x 261 days = EMR
12
Where 261 days = 246 days - Ordinary working days
12 days - Regular holidays 3
days - Special days
261 days - Total equivalent no. of days in a year

2. FACTORS/DIVISORS IN COMPUTING BENEFITS AND WAGE

DEDUCTIONS.
a. Choice of factors/divisors is a prerogative of the employer.
There is no law which requires employers to use specific factors or divisors
in the computation of employees’ benefits and wage deductions due to absences. The
choice of factors/divisors is a prerogative of the employer, the exercise of which
should not be contrary to law, public policy or order. What wage legislations
specifically require is that the employees be paid on all their actual working days and
on the twelve (12) regular holidays even if unworked. The principles of “no work, no
pay” and “equal pay for equal work” are also generally accepted. It likewise follows
that an employer may deduct a proportionate amount from the employees’ wages on
account of their unworked hours/days.156
It must be noted that it is the employees’ employment agreement or prevailing company
practice or policy on the number of days they are paid in a month or year, and not their mode of wage
payment, that determines what factor should be used in computing their equivalent monthly or daily
rate.
b. Equivalent daily rate (EDR) , the basis for deductions for absences and for computing
overtime pay and other benefits.
 As a general rule, the equivalent daily rate (EDR) should be the basis for deductions due to
absences and the computation of employee’s salary-related benefits such as overtime pay. Given a fixed
monthly rate, therefore, the formula/procedure is as follows:

Monthly Rate x 12
No. of Days Considered = Equivalent Daily Rate (EDR)
Paid in a Year
c. Divisor if all non-working days are already paid.
If all non-working days are paid , the divisor of monthly salary to obtain
daily rate should be 365 and not 251 days. In computing overtime compensation for
its employees, the Chartered Bank in The Chartered Bank Employees Association
v. Ople,157 employed a “divisor” of 251days. The 251 working days divisor is the
result of subtracting all Saturdays, Sundays and the ten (10) legal holidays [now
twelve (12) ]158 from the total number of calendar days in a year. It was held that if the
employees are already paid for all non-working days, the divisor should be 365
and not 251.
d. Reimbursement of overpayment in overtime pay due to use of 251 as
divisor; effect of mistake.
159
In another case, Union of Filipro Employees [UFE] v. Vivar, the petitioner union assailed the ruling of the
respondent arbitrator that the divisor should be changed from 251 to 261 days to include the additional ten (10) regular
160
holidays [now twelve (12) ] and the employees should reimburse the amounts overpaid by their employer due to the use of
251 days as divisor. The daily rate was computed by the employer since September 1, 1980, on the basis of the following
formula:

Monthly rate x 12 months

251 day
Following the criterion laid down in the said Chartered Bank case, the use
of 251 days’ divisor by respondent employer indicates that holiday pay is not yet
included in the employee’s salary; otherwise, the divisor should have been 261. It
must be stressed that the daily rate, assuming there are no intervening salary
increases, is a constant figure for the purpose of computing overtime and night
differential pay and commutation of sick and vacation leave credits. Necessarily, the
daily rate should also be the same basis for computing the ten (10) (now 12) unpaid
holidays.
The order of the arbitrator to change the divisor from 251 to 261 days would result in a lower
daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of
the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the
dividend which represents the employee’s annual salary should correspondingly be increased to
incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee’s annual
salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00. After the payment of
10 days’ holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 +
1,000) . Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent
employer’s claim of overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which is all based on the daily rate since the daily rate is still the same
before and after the grant of holiday pay.
Respondent employer’s invocation of solutio indebiti, or payment by
mistake due to its use of 251 days as divisor must fail in the light of the Labor Code
mandate enunciated in its Article 4 that “all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations, shall be
resolved in favor of labor. ” Moreover, prior to September 1, 1980, when the
company was on a 6-day working schedule, the divisor used by the company was 303,
indicating that the 10 holidays [now twelve (12) ]161 were likewise not paid. When the
employer shifted to a 5-day working schedule on September 1, 1980, it had the
chance to rectify its error, if ever there was one, but did not do so. It is now too late to
allege payment by mistake.
e. Computation should be similarly handled.
In the same case of Chartered Bank, the contention of the respondent bank that 100% base
pay and 50% premium pay for work actually rendered on holidays are given in addition to monthly
salaries only because the CBA so provides is itself an argument in favor of the petitioner-employees’
stand. It shows that the CBA already contemplated a divisor of 251 days for holiday pay computations
before the questioned presumption in Section 2, Rule IV of Book III of the Rules to Implement the
Labor Code and Policy Instructions No. 9 was formulated. There is, furthermore, a similarity between
overtime pay, which is computed on the basis of 251 working days a year, and holiday pay, which
should be similarly treated notwithstanding the public respondent DOLE Secretary’s issuances. In both
cases - overtime work and holiday work - the employee works when he is supposed to be resting. In the
absence of an express provision of the CBA or the law to the contrary, the computations should be
similarly handled.
f. Significance of divisor in determining compliance with the law.
In the same case of Union of Filipro Employees [UFE] v. Vivar,162 the High Court declared
that “[t]he divisor assumes an important role in determining whether or not holiday pay is already
included in the monthly-paid employee’s salary and in the computation of his daily rate. ” This
163
principle became the guidepost and was applied in a number of significant cases.

1. Wellington Investment and Manufacturing Corporation v. Trajano ;164

2. Trans-Asia Phils. Employees Association v. NLRC;165

3. Producers Bank of the Philippines v. NLRC;166

4. Odango v. NLRC;167

5. Arellano University Employees and Workers Union v. CA;168 and

6. Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-ALU. 169

In Wellington, the monthly salary was fixed by Wellington to provide for compensation for
every working day of the year including the holidays specified by law - and excluding only Sundays. In
fixing the salary, Wellington used what it called the “314 factor,” that is, it simply deducted 51
Sundays from the 365 days normally comprising a year and used the difference, 314, as basis for
determining the monthly salary. The monthly salary thus fixed actually covered payment for 314 days
of the year, including regular and special holidays, as well as days when no work was done by reason of
fortuitous cause, such as transportation strike, riot, or typhoon or other natural calamity, or causes not
attributable to the employees.
In Trans-Asia, the inclusion of holiday pay in petitioners' monthly salary is clearly established
by its consistent use of the divisor of "286" days in the computation of its employees' benefits and
deductions. The use by Trans-Asia of the "286" days divisor was never disputed by petitioners. A
simple application of mathematics would reveal that the ten (10) legal holidays in a year are already
accounted for with the use of the said divisor. As explained by Trans-Asia, if one is to deduct the
unworked 52 Sundays and 26 Saturdays (derived by dividing 52 Saturdays in half since petitioners are
required to work half-day on Saturdays) from the 365 calendar days in a year, the resulting divisor
would be 286 days (should actually be 287 days) . Since the ten (10) legal holidays were never
included in subtracting the unworked and unpaid days in a calendar year, the only logical conclusion
would be that the payment for holiday pay is already incorporated into the said divisor. Thus, when
viewed against this very convincing piece of evidence, the arguments put forward by petitioners to
support their claim of non-payment of holiday pay, i. e. , the pre-condition stated in the Employees'
Manual for entitlement to holiday pay, the absence of a stipulation in the employees' appointment
papers for the inclusion of holiday pay in their monthly salary, the stipulation in the CBA recognizing
the entitlement of the petitioners to holiday pay with a concomitant provision for the granting of an
"allegedly" very generous holiday pay rate, would appear to be merely inferences and suppositions
which, in the apropos words of the Labor Arbiter, "paled in the face of the prevailing company
practices and circumstances above-stated. "
Nevertheless, petitioners' cause is not entirely lost. The Court notes that there is a need to
adjust the divisor used by Trans-Asia to 287 days, instead of only 286 days, in order to properly
account for the entirety of regular holidays and special days in a year as prescribed by Executive
Order No. 203170 in relation to Section 6 of the Rules Implementing R.A. No. 6727.171
The proper divisor that should be used for a situation wherein the employees do not work
and are not considered paid on Saturdays and Sundays or rest days is 262 days. In the present case,
since the employees of Trans-Asia are required to work half-day on Saturdays, 26 days should be
added to the divisor of 262 days, thus, resulting to 288 days. However, due to the fact that the rest
days of petitioners fall on a Sunday, the number of unworked but paid legal holidays should be
reduced to nine (9) , instead of ten (10) , since one legal holiday under E.O. No. 203 always falls on the
last Sunday of August, National Heroes Day. Thus, the divisor that should be used in the present case
should be 287 days. However, the Court notes that if the divisor is increased to 287 days, the resulting
daily rate for purposes of overtime pay, holiday pay and conversions of accumulated leaves would be
diminished. To illustrate, if an employee receives P8,000.00 as his monthly salary, his daily rate would
be P334.49, computed as follows:
P8,000.00 x 12 months = P334.49/day
287 days

Whereas if the divisor used is only 286 days, the employee's daily rate would be P335.66,
computed as follows:

P8,000.00 x 12 months = P335.66/day

286 days
Clearly, this muddled situation would be violative of the proscription on the non-diminution
of benefits under Section 100 of the Labor Code. On the other hand, the use of the divisor of 287 days
would be to the advantage of petitioners if it is used for purposes of computing for deductions due to
the employee's absences. In view of this situation, the Court rules that the adjusted divisor of 287
days should only be used by Trans-Asia for computations which would be advantageous to
petitioners, i. e. , deductions for absences, and not for computations which would diminish the
existing benefits of the employees, i. e. , overtime pay, holiday pay and leave conversions.
 In Producers Bank, the employer used the divisor 314 in arriving at the daily wage rate of
monthly-salaried employees. The divisor 314 was arrived at by subtracting all Sundays from the total
number of calendar days in a year, since Saturdays are considered paid rest days. The Supreme Court
held that the use of 314 as a divisor leads to the inevitable conclusion that the ten (10) legal
holidays [now twelve (12) ]172 are already included therein.
In Odango, the High Court ruled that the use of a divisor that was less than 365 days cannot
make the employer automatically liable for underpayment of holiday pay. In this case, the employees
were required to work only from Monday to Friday and half of Saturday. Thus, the minimum
allowable divisor is 287, which is the result of 365 days, less 52 Sundays and less 26 Saturdays (or 52
half Saturdays) . Any divisor below 287 days meant that the employees were deprived of their
holiday pay for some or all of the ten legal holidays [now twelve (12) ].173 The 304-day divisor used by
the employer was clearly above the minimum of 287 days.
In Arellano University, petitioners claim that there was substantial diminution of their salary
on account of the divisor used by the University in its computation - 314 days, instead of 365 days. It
was held, however, that there is nothing wrong with such divisor. Sundays being un-worked and
considered unpaid rest days, while regular holidays as well as special holidays considered as paid
days, the factor used by the University merely complies with the basic rule in this jurisdiction of “no
work, no pay.” The right to be paid for unworked days is generally limited to the ten legal
holidays [now twelve (12) ]174 in a year.
In Leyte IV Electric Cooperative,the Supreme Court, in holding that the Voluntary Arbitrator
gravely abused his discretion when he gave a strict or literal interpretation of the CBA provisions that
the holiday pay be reflected in the payroll slips, declared that such literal interpretation ignores the
admission of respondent in its Position Paper that the employees were paid all the days of the month
even if not worked. In the light of such admission, petitioner's submission of its 360 divisor in the
computation of employees’ salaries gains significance. The employees in this case are required to
work only from Monday to Friday. Thus, the minimum allowable divisor is 263, which is arrived at by
deducting 51 unworked Sundays and 51 unworked Saturdays from 365 days. Considering that
petitioner used the 360-day divisor, which is clearly above the minimum, indubitably, petitioner's
employees are being given their holiday pay. Thus, the Voluntary Arbitrator should not have simply
brushed aside petitioner's divisor formula. In granting respondent union’s claim of non-payment of
holiday pay, a “double burden” was imposed upon petitioner because it was being made to pay twice
for its employees' holiday pay when payment thereof had already been included in the computation
of their monthly salaries. Moreover, it is absurd to grant respondent’s claim of non-payment when it
in fact admitted that the employees were being paid all of the days of the month even if not
worked. By granting respondent’s claim, the Voluntary Arbitrator sanctioned unjust enrichment in
favor of the respondent and caused unjust financial burden to the petitioner. Obviously, the Court
cannot allow this.
g. Proper reckoning of the number of working days in a month.
For purposes of computing benefits, how many working days should be reckoned in a month?
Should it be 26 days or 20 days?
 This poser was answered in the 2010 case of S.I.P. Food House v. Batolina. 175 The Supreme Court
affirmed the ruling of the Court of Appeals that found merit in petitioner SIP’s objection to the NLRC
computation and assumption that a month had twenty-six (26) working days, instead of twenty (20) working days.
The CA recognized that in a government agency such as the GSIS, where petitioner operated a canteen concession,
there are only 20 official business days in a month. It noted that the respondents presented no evidence that the
employees worked even outside official business days and hours. Indeed, in the absence of evidence that the
employees worked for 26 days a month, no need exists to recompute the award for the respondents who
were “explicitly claiming for their salaries and benefits for the services rendered from Monday to Friday or 5
days a week or a total of 20 days a month. ”

------------oOo------------

Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
C. Rest Periods
1. Weekly rest day
2. Emergency rest day work
C.
REST PERIODS

1.
WEEKLY REST DAY
1. RIGHT TO WEEKLY REST DAY.
a. Duration.
It shall be the duty of every employer, whether operating for profit or not, to provide each of
his employees a rest period of not less than twenty-four (24) consecutive hours after every six (6)
consecutive normal work days.1
b. Prerogative of employer to schedule; Exception - religious ground.
The employer shall determine and schedule the weekly rest day of his employees subject to
CBA and to such rules and regulations as the DOLE Secretary may provide. However, the employer
shall respect the preference of employees as to their weekly rest day when such preference is based
onreligious grounds.2
In other words, the employer’s right and prerogative is subject to the preference in the choice by the
employee of his rest day based on religious grounds. Article 91, in fact, makes the employer duty-bound to
respect such preference of the employee if based on religious grounds.
Where, however, the choice of the employees as to their rest day based on religious grounds
will inevitably result in serious prejudice or obstruction to the operations of the undertaking and the
employer cannot normally be expected to resort to other remedial measures, the employer may so
schedule the weekly rest day of their choice for at least two (2) days in a month.3
c. Sunday is not the rest day designated by law.
With the repeal of the Blue Sunday Law4 by the Labor Code,5 Sunday is no longer the rest day
designated by law. Consequent to such repeal, the rule now is that all establishments and enterprises
may operate or open for business on Sundays and holidays provided that the employees are given the
weekly rest day and the resultant benefits as provided in the law and its implementing rules.6
2. SOME PRINCIPLES ON WEEKLY REST DAY.
 Where the weekly rest is given to all employees simultaneously, the employer should make
known such rest period by means of a written notice posted conspicuously in the workplace at
least one (1) week before it becomes effective.7
Where the rest period is not granted to all employees simultaneously and collectively, the
employer shall make known to the employees their respective schedules of weekly rest day
through written notices posted conspicuously in the workplace at least one (1) week before they
become effective.8
An express waiver of compensation for work on rest days and holidays provided in an
employment contract which fixes annual compensation of the employees is not valid and does not
operate to bar claims for extra compensation therefor.9
Rest day cannot be offset by regular workdays.10
2.
EMERGENCY REST DAY WORK
1. WHEN EMPLOYER MAY REQUIRE WORK ON A REST DAY.
The employer may require any of its employees to work on their scheduled rest day for the
duration of the following emergency and exceptional conditions:
a. In case of actual or impending emergencies caused by serious accident, fire, flood,
typhoon, earthquake, epidemic or other disaster or calamity, to prevent loss of life and
property, or in case of force majeure or imminent danger to public safety;
b. In case of urgent work to be performed on machineries, equipment, or installations, to avoid
serious loss which the employer would otherwise suffer;
c. In the event of abnormal pressure of work due to special circumstances, where the employer
cannot ordinarily be expected to resort to other measures;
d. To prevent serious loss of perishable goods;
e. Where the nature of the work is such that the employees have to work continuously for
seven (7) days in a week or more, as in the case of the crew members of a vessel to
complete a voyage and in other similar cases; and
f. When the work is necessary to avail of favorable weather or environmental conditions
where performance or quality of work is dependent thereon.11
2. EXCLUSIVE NATURE OF THE ENUMERATION.
No employee shall be required against his will to work on his scheduled rest day except under
the circumstances provided therein where work on such day may be compelled.12
However, in case work on rest day is required and not one of the said circumstances is
present, the employee may work during such rest daybut only on voluntary basis. And once an
employee volunteers to work on his rest day, he should express such willingness and desire to work in
writing. Accordingly, he should be paid the additional compensation for working on his rest day under
the law.13

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
D. Holiday pay/Premium pay
1. Coverage, exclusions
2. Teachers, piece workers, takay, seasonal workers, seafarers
D.
HOLIDAY PAY/PREMIUM PAY
1.
 COVERAGE, EXCLUSIONS
1. RIGHT TO HOLIDAY PAY.
a. Coverage; exclusions.
Generally, all employees are entitled to and covered by the law on holiday pay,1 except:
a. Those of the government and any of the political subdivisions, including government-
owned and controlled corporations;
b. Those of retail and service establishments regularly employing less than ten (10) workers;
c. Domestic workers or Kasambahays;2
d. Persons in the personal service of another;
e. Managerial employees as defined in Book III of the Labor Code;
f. Field personnel and other employees whose time and performance is unsupervised by the
employer;
g. Those who are engaged on task or contract basis or purely commission basis;
h. Those who are paid a fixed amount for performing work irrespective of the time consumed
in the performance thereof;
i. Other officers and members of the managerial staff;
j. Members of the family of the employer who are dependent on him for support.3
b. Holiday pay, meaning and purpose.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the
State shall afford protection to labor.4 Its purpose is not merely to prevent diminution of the monthly
income of the workers on account of work interruptions. In other words, although the worker is forced
to take a rest, he earns what he should earn, that is, his holiday pay.5 It is also intended to enable the
worker to participate in the national celebrations held during the days identified as being imbued with great
historical and cultural significance.
Independence Day (June 12) , Araw ng Kagitingan (April 9) , National Heroes Day (last
Sunday of August) , Bonifacio Day (November 30) and Rizal Day (December 30) were declared
national holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of the
Filipino people, promote national identity, and deepen the spirit of patriotism. Labor Day (May 1) is a
day traditionally reserved to celebrate the contributions of the working class to the development of the
nation; while the religious holidays designated in Executive Order No. 203 [lately under R.A. No. 9177
(November 13, 2002) and R.A. No. 9492 (July 25, 2007) on Eidul Fitr; and R.A. No. 99849
(December 11, 2009) on Eidul Adha] allow the worker to celebrate his faith with his family.[6
Article 94 of the Labor Code, as well as the subsequent amendments thereto, afford a worker the
enjoyment of twelve (12) paid regular holidays .
The provision on holiday pay is mandatory, regardless of whether an employee is paid on
a monthly or daily basis. 7
2. LIST OF REGULAR HOLIDAYS.
a. Latest list for 2014.
Proclamation No. 655, Series of 2013,8 declared the following regular holidays, special (non-
working) days and special holidays (for all schools) for the year 2014:
A. Regular Holidays
New Year‟ s Day - 1 January (Wednesday)
Araw ng Kagitingan - 9 April (Wednesday)
Maundy Thursday - 17 April
Good Friday - 18 April
Labor Day - 1 May (Thursday)
Independence Day - 12 June (Thursday)
National Heroes Day - 25 August (Last Monday of
August)
Bonifacio Day - 30 November (Sunday)
Christmas Day - 25 December (Thursday)
Rizal Day - 30 December (Tuesday)

B. Special (Non-Working) Days

Chinese New Year - 31 January (Friday)
 Black Saturday - 19 April
Ninoy Aquino Day - 21 August (Thursday)
All Saints Day - 1 November (Saturday)
Additional special
(non-working) days - 24 December (Wednesday)
- 26 December (Friday)
Last Day of the Year - 31 December (Wednesday)

C. Special Holiday (for all schools)

EDSA Revolution
Anniversary - 25 February (Tuesday)
Not included in the enumeration above on regular holidays are
(1) Eid’l Fitr and (2) Eidul Adha. The reason is that proclamations declaring
the observance of these national holidays shall hereafter be issued after the
approximate dates of the Islamic holidays have been determined in
accordance with the Islamic calendar (Hijra) or the lunar calendar, or upon
Islamic astronomical calculations, whichever is possible or convenient. To
this end, the National Commission on Muslim Filipinos (NCMF) shall inform
the Office of the President on which days the holidays shall respectively fall.9
b. Total of 12 regular holidays.
It is important to note that the total number of regular holidays is twelve (12) days per year.
This is important for purposes of reckoning certain divisors and computation of employee benefits.
3. PREMIUM PAY.
“Premium pay” refers to the additional compensation required by law to be paid for work
performed within the regular eight (8) hours on non-working days, such as rest days, regular and
special holidays.10
This term should not be confused with “overtime pay” which refers to the additional
compensation for work performed beyond or in excessof the regular eight (8) hours of daily work.
Premium pay and overtime pay are not mutually exclusive. Every employee who is entitled to
premium pay is likewise entitled to the benefit of overtime pay if overtime work is actually rendered.11
4. COMPUTATION OF PREMIUM PAY FOR HOLIDAYS.
Labor Advisory No. 06, Series of 2013,12 on the Payment of Wages for the Regular Holidays,
Special (Non-working) Days, and Special Holiday (For all Schools) for the Year 2014, specifically
promulgated the following rules that shall apply:
a. Regular Holidays
• If the employee did not work, he/she shall be paid 100 percent of his/her salary for that day.
Computation: (Daily rate + Cost of Living Allowance) x 100%. The COLA is included in the
computation of holiday pay.
• If the employee worked , he/she shall be paid 200 percent of his/her regular salary for that day for
the first eight hours. Computation: (Daily rate + COLA) x 200%. The COLA is also included in
computation of holiday pay.
• If the employee worked in excess of eight hours (overtime work) , he/she shall be paid an
additional 30 percent of his/her hourly rate on said day. Computation: Hourly rate of the basic
daily wage x 200% x 130% x number of hours worked.
• If the employee worked during a regular holiday that also falls on his/her rest day, he/she shall be
paid an additional 30 percent of his/her daily rate of 200 percent. Computation: (Daily rate +
COLA) x 200%] + (30% [Daily rate x 200%) ].
• If the employee worked in excess of eight hours (overtime work) during a regular holiday that
also falls on his/her rest day, he/she shall be paid an additional 30 percent of his/her hourly rate
on said day. Computation: (Hourly rate of the basic daily wage x 200% x 130% x 130% x
number of hours worked) ;
b. Special (Non-Working) Days
 • If the employee did not work, the “no work, no pay” principle shall apply, unless there is a
favorable company policy, practice, or CBA granting payment on a special day.
• If the employee worked, he/she shall be paid an additional 30 percent of his/her daily rate on the
first eight hours of work. Computation: [(Daily rate x 130%) + COLA) .
• If the employee worked in excess of eight hours (overtime work) , he/she shall be paid an
additional 30 percent of his/her hourly rate on said day. Computation: (Hourly rate of the basic
daily wage x 130% x 130% x number of hours worked) .
• If the employee worked during a special day that also falls on his/her rest day, he/she shall be
paid an additional fifty percent of his/her daily rate on the first eight hours of work.
Computation: [(Daily rate x 150%) + COLA].
• If the employee worked in excess of eight hours (overtime work) during a special day that also
falls on his/her rest day, he/she shall be paid an additional 30 percent of his/her hourly rate on
said day. Computation: (Hourly rate of the basic daily wage x 150% x 130% x number of hours
worked) .
c. Special Holiday for all schools
For private establishments, 25 February 2014 is an ordinary workday and no premium is
required to be paid for work on said day.
On the other hand, employees in private schools, whether academic or administrative
personnel, shall be paid in accordance with the rules for pay on special (non-working) days as
stated above.
5. RIGHT TO HOLIDAY PAY IN CASE OF ABSENCES.
a. Effect of absences on entitlement to holiday pay.
1. Employees on leave of absence with pay - entitled to holiday pay when they are on
leave of absence with pay.13
2. Employees on leave of absence without pay on the day immediately preceding the
regular holiday - may not be paid the required holiday pay if they have not worked on
such regular holiday.14
3. Employees on leave while on SSS or employee’s compensation benefits - Employers
should grant the same percentage of the holiday pay as the benefit granted by competent
authority in the form of employee’s compensation or social security payment, whichever
is higher, if they are not reporting for work while on such benefits.15
4. When day preceding regular holiday is a non-working day or scheduled rest day -
should not be deemed to be on leave of absence on that day, in which case, employees
are entitled to the regular holiday pay if they worked on the day immediately preceding
the non-working day or rest day.16

6. RIGHT TO HOLIDAY PAY IN CASE OF TEMPORARY CESSATION OF WORK.

a. Temporary or periodic shutdown or cessation of work not due to business reverses.
In cases of temporary or periodic shutdown and temporary cessation of work of an
establishment, as when a yearly inventory or when the repair or cleaning of machineries and equipment
is undertaken, the regular holidays falling within the period should be compensated in accordance with
the Implementing Rules.17
b. Temporary cessation of operation due to business losses or reverses.
The regular holidays during the temporary cessation of operation of an enterprise due to
business losses or financial reverses as authorized by the DOLE Secretary may not be paid by the
employer.18
2.
HOLIDAY PAY/PREMIUM PAY OF
TEACHERS, PIECE WORKERS, TAKAY,
SEASONAL WORKERS, SEAFARERS
1. RIGHT TO HOLIDAY PAY OF TEACHERS.
a. Private school teachers, in general.
 Private school teachers, including faculty members of colleges and universities, may not be
paid for the regular holidays during semestral vacations. They shall, however, be paid for the regular
holidays during Christmas vacation.19
b. Holiday pay of hourly-paid teachers.
A school is exempted from paying hourly-paid faculty members their pay
for regular holidays, whether the same be during the regular semesters of the school year or during
semestral, Christmas, or Holy Week vacations. However, it is liable to pay the faculty members their
regular hourly rate on days declared as special holidays or if, for some reason, classes are called off or
shortened for the hours they are supposed to have taught, whether extensions of class days be ordered
or not; and in case of extensions, said faculty members shall likewise be paid their hourly rates should
they teach during said extensions.20
2. RIGHT TO HOLIDAY PAY OF PIECE-WORKERS, TAKAY AND OTHERS PAID BY
RESULTS.
a. Holiday pay of piece workers, takay or employees paid by results.
Where a covered employee is paid by results or output such as payment on piece-work, his
holiday pay should not be less than his average daily earnings for the last seven (7) actual working
days preceding the regular holiday. In no case, however, should the holiday pay be less than the
applicable statutory minimum wage rate.21
b. Workers paid by results classified into supervised and unsupervised.
The principal test to determine entitlement to holiday pay is whether the employees’ time and
performance of the work are “supervised” or“unsupervised” by their employer. If supervised, the
employee is entitled to holiday pay. If unsupervised, he is not.22
The distinctions between supervised and unsupervised workers paid by results are as follows:
(1) Those whose time and performance are supervised by the employer. Here, there is an
element of control and supervision over the manner as to how the work is to be
performed. A piece-rate worker belongs to this category especially if he performs his
work in the company premises; and
(2) Those whose time and performance are unsupervised. Here, the employer’s control is
over the result of the work. Workers on pakyao andtakay basis belong to this
group. Both classes of workers are paid per unit accomplished. Piece-rate payment is
generally practiced in garment factories where work is done in the company premises,
while payment on pakyao and takay basis is commonly observed in the agricultural
industry, such as in sugar plantations where the work is performed in bulk or in volumes,
hence, difficult to quantify.23

3. RIGHT TO HOLIDAY PAY OF SEASONAL WORKERS.

Seasonal workers are entitled to holiday pay while working during the season. They may not
be paid the required regular holiday pay during off-season where they are not at work.24
4. RIGHT TO HOLIDAY PAY OF SEAFARERS.
Any hours of work or duty including hours of watchkeeping performed by the seafarer on
designated rest days and holidays shall be paid restday or holiday pay.25
The following shall be considered as holidays at sea and in port:

New Year‟ s Day - January 1

Maundy Thursday - Movable date
Good Friday - Movable date
Araw ng Kagitingan
(Bataan & Corregidor Day) - April 9
Labor Day - May 1
Independence Day - June 12
National Heroes Day - Last Sunday of August
All Saints Day - November1
 Bonifacio Day - November 30
Christmas Day - December 25
Rizal Day - December 3026
It must be noted that the foregoing listing and enumeration of the holidays are different from that
prescribed for local workers. (See above listing thereof) .
5. SOME IMPORTANT PRINCIPLES ON HOLIDAYS.
Non-Muslims are entitled to Muslim holiday pay during Muslim holidays27 considering that
all private corporations, offices, agencies, and entities or establishments operating within the
designated Muslim provinces and cities are required to observe Muslim holidays, hence, both
Muslims and Christians working within the Muslim areas may not report for work on the days
designated by law as Muslim holidays. 28
The day designated by law for holding a general election is deemed a regular holiday.29
As far as the May 13, 2013 midterm elections are concerned, President Benigno Aquino III declared
under Proclamation No. 571, signed on April 24, 2013, that it is a special public non -
working holiday. As such, the "no work, no pay" principle shall apply. Employees who choose to work on
that day as allowed by their employers shall be paid an additional thirty percent (30%) of the salary due to
them for the day.
In case of two (2) regular holidays falling on the same day, the worker should be compensated as follows:
o If unworked - 200% for the two regular holidays;
o If worked - 200% for the two regular holidays plus premium of 100% for work on that day.30
“Monthly-paid” employees are not excluded from the coverage of holiday
pay.31 (Note: A “monthly-paid employee” refers to one who is paid his wage or salary for every day of the
month, including rest days, Sundays, regular or special days, although he does not regularly work on these
days. A “daily-paid employee” refers to one who is paid his wage or salary only on the days he actually
worked, except in cases of regular holidays wherein he is paid his wage or salary even if he does not work
during those days, provided that he is present or on leave of absence with pay on the working day
immediately preceding the regular holidays. As distinguished from monthly-paid employees who are assured
of being paid for every day of the month, the provision of the Labor Code on holiday pay is principally
intended to benefit daily-paid employees who are normally bound by the principle of “no work, no
pay.” Before the advent of the Labor Code, they are not paid for unworked regular holidays) .
Regular or special holiday pay benefit cannot be withdrawn after being practiced for quite a
time32 as when it has been practiced continuously for eight (8) months.33
Offsetting of holiday work with work on regular days is not allowed.34

------------oOo------------

Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
E. Leaves
1. Service Incentive Leave
2. Maternity Leave
3. Paternity Leave
4. Parental Leave (R.A. No. 8972)
5. Leave for Victims of Violence against Women and Children (R.A. No. 9262)
6. Special leave benefit for women
 E.
LEAVES

1.
SERVICE INCENTIVE LEAVE1
1. RIGHT TO SERVICE INCENTIVE LEAVE.
Every covered employee who has rendered at least one (1) year of service is entitled to a
yearly service incentive leave of five (5) days with pay.2
The term “at least one year of service” should mean service within twelve (12) months,
whether continuous or broken, reckoned from the date the employee started working, including
authorized absences and paid regular holidays, unless the number of working days in the establishment
as a matter of practice or policy, or that provided in the employment contract, is less than twelve (12)
months, in which case, said period should be considered as one (1) year for the purpose of determining
entitlement to the service incentive leave benefit.3
2. EXCLUSIONS FROM COVERAGE.
All employees are covered by the rule on service incentive leave except:
a. Those of the government and any of its political subdivisions, including government-owned
and controlled corporations;
b. Domestic workers or kasambahays;4
c. Persons in the personal service of another;
d. Managerial employees as defined in Book III of the Labor Code;
e. Field personnel and other employees whose performance is unsupervised by the employer;
f. Those who are engaged on task or contract basis, purely commission basis, or those who are
paid in a fixed amount for performing work irrespective of the time consumed in the
performance thereof;
g. Those who are already enjoying the benefit provided in the law;
h. Those enjoying vacation leave with pay of at least five (5) days;
i. Those employed in establishments regularly employing less than ten (10) employees;
j. Other officers and members of the managerial staff; and
k. Members of the family of the employer who are dependent on him for support.5
3. COMMUTABLE NATURE OF BENEFIT.
The service incentive leave is commutable to its money equivalent if not used or exhausted at
the end of the year.6 The phrase “leave with pay”means that the employee is entitled to his full
compensation during his leave of absence from work.7
In computing the service incentive leave benefit, the basis is the salary rate at the date of
commutation. The availment and commutation of the service incentive leave benefit may be on a pro-
rata basis.8
4. ILLUSTRATION.
To illustrate the computation of the service incentive leave (SIL) cash commutation, an
employee who is hired on January 1, 2010 and resigned on March 1, 2011, assuming he has not used or
commuted any of his accrued SIL, is entitled upon his resignation to the commutation of his accrued SIL as
follows:
SIL earned as of December 31, 2010 - Five (5) days
Proportionate SIL for Jan. and Feb.
2011 (2/12 x 5 days) - 0.833 day
Total accrued SIL as of March 1, 2011 - 5.833 days9
2.
MATERNITY LEAVE10
1. COVERAGE.
 “Maternity leave” is the period of time which may be availed of by a woman employee, married
or unmarried, to undergo and recuperate from childbirth, miscarriage or complete abortion during which she
is permitted to retain her rights and benefits flowing from her employment.
Section 14-A11 of the Social Security Law now provides as follows:
“Sec. 14-A. Maternity Leave Benefit. - A female member who has paid at least three
(3) monthly contributions in the twelve-month period immediately preceding the semester
of her childbirth or miscarriage shall be paid a daily maternity benefit equivalent to one
hundred percent (100%) of her average daily salary credit for sixty (60) days or seventy-
eight (78) days in case of caesarian delivery, subject to the following conditions:
“(a) That the employee shall have notified her employer of her pregnancy and the
probable date of her childbirth, which notice shall be transmitted to the SSS in
accordance with the rules and regulations it may provide;
“(b) The full payment shall be advanced by the employer within thirty (30) days from the
filing of the maternity leave application;
“(c) That payment of daily maternity benefits shall be a bar to the recovery of sickness
benefits provided by this Act for the same period for which daily maternity benefits
have been received;
“(d) That the maternity benefits provided under this section shall be paid only for the first
four (4) deliveries or miscarriages;
“(e) That the SSS shall immediately reimburse the employer of one hundred percent
(100%) of the amount of maternity benefits advanced to the employee by the
employer upon receipt of satisfactory proof of such payment and legality thereof; and
“(f) That if an employee member should give birth or suffer miscarriage without the
required contributions having been remitted for her by her employer to the SSS, or
without the latter having been previously notified by the employer of the time of the
pregnancy, the employer shall pay to the SSS damages equivalent to the benefits
which said employee member would otherwise have been entitled to.”
2. CONDITIONS TO ENTITLEMENT.
The following are the qualifications for entitlement to maternity benefits:
1. The female member should be employed at the time of delivery, miscarriage or abortion.
2. She must have given the required notification to the SSS thru her employer.
3. Her employer must have paid at least three (3) months of maternity contributions within the
12-month period immediately before the semester of contingency.12
3. AVAILMENT.
a. Pregnant women, whether married or unmarried, are entitled to maternity leave
benefits.
Entitlement to maternity leave benefits is not dependent on the civil status of the pregnant
woman. Every pregnant woman in the private sector, whether married or unmarried, is entitled to the
maternity leave benefits.13
b. Maternity benefits, not part of 13 month pay computation.
th

Maternity benefits, like other benefits granted by the SSS, are granted to employees in lieu of
wages and, therefore, may not be included in computing the employee’s 13 month pay for the calendar
th

year.14
c. Computation of maternity benefits.
The maternity benefits shall be computed as follows:
1. Exclude the semester of contingency (delivery, miscarriage or abortion) . A semester refers
to two consecutive quarters ending in the quarter of contingency. A quarter refers to three
(3) consecutive months ending in March, June, September or December.
2. Count twelve (12) months backwards starting from the month immediately before the
semester of contingency.
3. Identify the six (6) highest monthly salary credits within the 12-month period. “Monthly
salary credit” means the compensation base for contributions and benefits related to the
total earnings for the month.15
4. Add the six (6) highest monthly salary credits to get the total monthly salary credit.
5. Divide the total monthly salary credit by 180 days to get the average daily salary credit.
This is equal to the daily maternity allowance.
 6. Multiply the daily maternity allowance by sixty (60) days16 (or 78 days) 17 to get the total
maternity allowance.
d. Entitlement to maternity benefit forecloses entitlement to sickness benefit.
A female member of the SSS who has availed of maternity benefit cannot claim for sickness
benefit for a period of sixty (60) days (or 78 days) within which she was already paid the maternity
benefit. As a rule, no member can be entitled to two (2) benefits for the same period.
e. Notification to SSS in case of pregnancy.
It is a requirement to notify the SSS. As soon as a female member becomes pregnant, she must
immediately inform her employer of such pregnancy by accomplishing the Maternity Notification Form. The
employer must, in turn, notify the SSS thru the submission of said form.
f. Payment of maternity benefit; how made.
The benefit is advanced by the employer to the qualified employee in full or in two (2) equal
installments. The first installment will be paid upon receipt of the maternity leave application. The second
will be paid not later than thirty (30) days after payment of the first installment. Upon receipt of satisfactory
proof of such payment, the SSS will pay back the employer the amount of maternity benefit it legally
advanced to the employee.
3.

PATERNITY LEAVE18
1. COVERAGE.
“Paternity leave” covers a married male employee allowing him not to report for work
for seven (7) calendar days but continues to earn the compensation therefor, on the condition that his
spouse has delivered a child or suffered miscarriage for purposes of enabling him to effectively lend
support to his wife in her period of recovery and/or in the nursing of the newly-born child.19
“Delivery” includes childbirth or any miscarriage.20
“Spouse” refers to the lawful wife. For this purpose, “lawful wife” refers to a woman who is
legally married to the male employee concerned.21
“Cohabiting” refers to the obligation of the husband and wife to live together.22
2. CONDITIONS TO ENTITLEMENT.
Every married employee in the private and public sectors is entitled to a paternity leave of
seven (7) calendar days with full pay for the first four (4) deliveries of the legitimate spouse with
whom he is cohabiting. The male employee applying for paternity leave should notify his employer of
the pregnancy of his legitimate spouse and the expected date of such delivery.23
Paternity leave benefits are granted to the qualified employee after the delivery by his wife,
without prejudice to an employer allowing an employee to avail of the benefit before or during the
delivery, provided that the total number of days should not exceed seven (7) calendar days for each
delivery. In the event that the paternity leave benefit is not availed of, said leave shall not be
convertible to cash.24
3. AVAILMENT.
The employee is entitled to his full pay, consisting of basic salary, for the seven (7) calendar
days during which he is allowed not to report for work provided that his pay shall not be less than the
mandated minimum wage.25

4.
PARENTAL LEAVE26
(R.A. No. 8972)
1. COVERAGE.
“Parental leave” is the leave benefit granted to a male or female solo parent to enable him/her to
perform parental duties and responsibilities where physical presence is required.
The parental leave shall not be more than seven (7) working days every year to a solo parent
who has rendered service of at least one (1) year, to enable him/her to perform parental duties and
responsibilities where his/her physical presence is required. This leave shall be non-cumulative.27
 It bears noting that this leave privilege is an additional leave benefit which is separate and
distinct from any other leave benefits provided under existing laws or agreements.28
The term "solo parent" refers to any individual who falls under any of the following
categories:
(1) A woman who gives birth as a result of rape and other crimes against chastity even
without a final conviction of the offender: Provided, That the mother keeps and raises the
child;
(2) Parent left solo or alone with the responsibility of parenthood due to death of spouse;
(3) Parent left solo or alone with the responsibility of parenthood while the spouse is detained
or is serving sentence for a criminal conviction for at least one (1) year;
(4) Parent left solo or alone with the responsibility of parenthood due to physical and/or
mental incapacity of spouse as certified by a public medical practitioner;
(5) Parent left solo or alone with the responsibility of parenthood due to legal separation or de
facto separation from spouse for at least one (1) year, as long as he/she is entrusted with
the custody of the children;
(6) Parent left solo or alone with the responsibility of parenthood due to declaration of nullity
or annulment of marriage as decreed by a court or by a church as long as he/she is
entrusted with the custody of the children;
(7) Parent left solo or alone with the responsibility of parenthood due to abandonment of
spouse for at least one (1) year;
(8) Unmarried mother/father who has preferred to keep and rear her/his child/children instead
of having others care for them or give them up to a welfare institution;
(9) Any other person who solely provides parental care and support to a child or children;
(10) Any family member who assumes the responsibility of head of family as a result of the
death, abandonment, disappearance or prolonged absence of the parents or solo parent.
A change in the status or circumstance of the parent claiming benefits under this Act, such
that he/she is no longer left alone with the responsibility of parenthood, shall terminate his/her
eligibility for these benefits.29
"Children" refer to those living with and dependent upon the solo parent for support who are
unmarried, unemployed and not more than eighteen (18) years of age, or even over eighteen (18) years
but are incapable of self-support because of mental and/or physical defect/disability.30
"Parental responsibility" with respect to their minor children shall refer to the rights and duties
of the parents as defined in Article 220 of Executive Order No. 209, as amended, otherwise known as the
"Family Code of the Philippines" and hereunder enumerated as follows:
(1) To keep them in their company, to support, educate and instruct them by right precept and
good example and to provide for their upbringing in keeping with their means;
(2) To give them love and affection, advice and counsel, companionship and understanding;
(3) To provide them with moral and spiritual guidance, inculcate in them honesty, integrity,
self-discipline, self-reliance, industry and thrift, stimulate their interest in civic affairs,
and inspire in them compliance with the duties of citizenship;
(4) To furnish them with good and wholesome educational materials, supervise their activities,
recreation and association with others, protect them from bad company, and prevent them
from acquiring habits detrimental to their health, studies and morals;
(5) To represent them in all matters affecting their interest;
(6) To demand from them respect and obedience;
(7) To Impose discipline on them as may be required under the circumstances; and
(8) To perform such other duties as are imposed by law and upon parents and guardians.31
2. CONDITIONS TO ENTITLEMENT.
A solo parent shall be entitled to parental leave provided that:
(a) He/She has rendered at least one (1) year of service whether continuous or broken at the
time of the affectivity of the Act;
 (b) He/She has notified his/her employer of the availment thereof within a reasonable period
of time; and
(c) He/She has presented a Solo Parent Identification Card to his/her employer.32
3. AVAILMENT.
a. Non-conversion of parental leave. - In the event that the parental leave is not availed of,
said leave shall not be convertible to cash unless specifically agreed upon previously.
However, if said leave were denied an employee as a result of non-compliance with the
provisions of the Implementing Rules by an employer, the aforementioned leave may be
used a basis for the computation of damages.33
b. Crediting of existing leave. - If there is an existing or similar benefit under a company
policy, or a CBA or collective negotiation agreement, the same shall be credited as such. If
the same is greater than the seven (7) days provided for in the Act, the greater benefit shall
prevail. Emergency or contingency leave provided under a company policy or a collective
bargaining agreement shall not be credited as compliance with the parental leave provided
for under the Act and its Implementing Rules.34
c. Benefits. - Any solo parent whose income in the place of domicile falls below the poverty
threshold as set by the National Economic and Development Authority (NEDA) and
subject to the assessment of the DSWD worker in the area shall be eligible for
assistance: Provided, however, That any solo parent whose income is above the poverty
threshold shall enjoy the benefits mentioned in Sections 6, 7 and 8 of R.A. No. 8972, to
wit:
Section 6. Flexible Work Schedule. - The employer shall provide for a flexible working
schedule for solo parents: Provided, That the same shall not affect individual and company
productivity: Provided, further, That any employer may request exemption from the above
requirements from the DOLE on certain meritorious grounds.
Section 7. Work Discrimination. - No employer shall discriminate against any solo parent
employee with respect to terms and conditions of employment on account of his/her status.
Section 8. Parental Leave. - In addition to leave privileges under existing laws, parental leave
of not more than seven (7) working days every year shall be granted to any solo parent
employee who has rendered service of at least one (1) year.
d. Other benefits under the R.A. No. 8972. - Other benefits consist of the following:
Section 9. Educational Benefits . - The DECS, CHED and TESDA shall provide the
following benefits and privileges:
(1) Scholarship programs for qualified solo parents and their children in institutions of
basic, tertiary and technical/skills education; and
(2) Non-formal education programs appropriate for solo parents and their children.
The DECS, CHED and TESDA shall promulgate rules and regulations for the proper
implementation of this program.
Section 10. Housing Benefits . - Solo parents shall be given allocation in housing projects and
shall be provided with liberal terms of payment on government low-cost housing projects in
accordance with housing law provisions prioritizing applicants below the poverty line as
declared by the NEDA.
Section 11. Medical Assistance. - The DOH shall develop a comprehensive health care
program for solo parents and their children. The program shall be implemented by the
DOH through their retained hospitals and medical centers and the local government units
(LGUs) through their provincial/district/city/ municipal hospitals and rural health units
(RHUs) .
5.
LEAVE FOR VICTIMS OF VIOLENCE
AGAINST WOMEN AND CHILDREN
(R.A. No. 9262)
1. COVERAGE.
R.A. No. 926235 grants to victims a total of ten (10) days of paid leave of absence,
in addition to other paid leaves under the Labor Code and Civil Service Rules and Regulations. It
is extendible when the necessity arises as specified in the protection order. This is afforded to the
woman employee to enable her to attend to the medical and legal concerns relative to said law. This
leave is not convertible to cash.36
Any employer who shall prejudice the right of the person under this law shall be penalized in
accordance with the provisions of the Labor Code and Civil Service Rules and Regulations. Likewise,
an employer who shall prejudice any person for assisting a co-employee who is a victim under this Act
shall likewise be liable for discrimination.37
2. CONDITIONS OF ENTITLEMENT.
At any time during the application of any protection order, investigation, prosecution and/or
trial of the criminal case, a victim of Violence Against Women and their Children (VAWC) who is
employed shall be entitled to said paid leave of up to ten (10) days. The Punong Barangay/kagawad or
prosecutor or the Clerk of Court, as the case may be, shall issue a certification at no cost to the woman
that such an action is pending, and this is all that is required for the employer to comply with the 10-
day paid leave.
For government employees, in addition to the aforementioned certification, the employee
concerned must file an application for leave citing as basis R.A. 9262. The administrative enforcement
of this leave entitlement shall be considered within the jurisdiction of the Regional Director of the
DOLE under Article 129 of the Labor Code for employees in the private sector, and the Civil Service
Commission, for government employees.38
3. AVAILMENT.
The availment of the ten (10) day-leave shall be at the option of the woman employee, which shall
cover the days that she has to attend tomedical and legal concerns. Leaves not availed of are noncumulative
and not convertible to cash.
The employer/agency head who denies the application for leave, and who shall prejudice the
victim-survivor or any person for assisting a co-employee who is a victim-survivor under the Act shall
be held liable for discrimination and violation of R.A. No. 9262. The provision of the Labor Code and
the Civil Service Rules and Regulations shall govern the penalty to be imposed on the said
employer/agency head.39
6.
SPECIAL LEAVE BENEFIT FOR WOMEN40
1. GYNECOLOGICAL SURGERY LEAVE.
A special leave benefit for women was granted under R.A. No. 9710.41 Thus, any female
employee in the public and private sector regardless of age and civil status shall be entitled to a special leave
of two (2) months with full pay based on her gross monthly compensation subject to existing laws, rules
and regulations due to surgery caused by gynecological disorders under the following terms and
conditions:
1. She has rendered at least six (6) months continuous aggregate employment service for the
last twelve (12) months prior to surgery;
2. In the event that an extended leave is necessary, the female employee may use her earned
leave credits; and
3. This special leave shall be non-cumulative and non-convertible to cash.42
“Gynecological disorders” refer to disorders that would require surgical procedures such as,
but not limited to, dilatation and curettage and those involving female reproductive organs such as the
vagina, cervix, uterus, fallopian tubes, ovaries, breast, adnexa and pelvic floor, as certified by a
competent physician. Gynecological surgeries shall also include hysterectomy, ovariectomy, and
mastectomy.43

2. SEPARATE AND DISTINCT FROM MATERNITY LEAVE.

 This leave should be distinguished from maternity leave benefit, a separate and distinct
benefit, which may be availed of in case of childbirth, miscarriage or complete abortion.
A woman, therefore, may avail of this special leave benefit in case she undergoes surgery
caused by gynecological disorder and at the same time maternity benefit as these two leaves are not
mutually exclusive.

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
F. Service Charge

F.
SERVICE CHARGE1
1. COVERAGE.
a. Establishments covered.
The rules on service charge apply only to establishments collecting service charges, such as
hotels, restaurants, lodging houses, night clubs, cocktail lounges, massage clinics, bars, casinos and
gambling houses, and similar enterprises, including those entities operating primarily as private
subsidiaries of the government.2
b. Employees covered.
The same rules on service charges apply to all employees of covered employers, regardless of
their positions, designations or employment status, and irrespective of the method by which their wages
are paid except those receiving more than P2,000.00 a month.3
2. EXCLUSION.
Specifically excluded from coverage are employees who are receiving wages of more
than P2,000.00 a month.4 However, it must be pointed out that the P2,000.00 ceiling is no longer
realistic considering the applicable minimum wages prevailing in the country. Hence, it must be
disregarded.5
3. DISTRIBUTION.
a. Percentage of sharing.
All service charges collected by covered employers are required to be distributed at the
following rates:
1. 85% to be distributed equally among the covered employees; and
2. 15% to management to answer for losses and breakages and distribution to employees
receiving more than P2,000.00 a month, at the discretion of the management.6
b. Frequency of distribution.
The share of the employees referred to above should be distributed and paid to them not
less often than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.7
4. INTEGRATION.
In case the service charge is abolished, the share of covered employees should be considered
integrated in their wages, in accordance with Article 96 of the Labor Code. The basis of the amount to
be integrated is the average monthly share of each employee for the past twelve (12) months
immediately preceding the abolition or withdrawal of such charges.8
5. SOME PRINCIPLES ON SERVICE CHARGE.
 Tips and services charges are two different things. Tips are given by customers voluntarily to
waiters and other people who serve them out of recognition of satisfactory or excellent service.
There is no compulsion to give tips under the law. The same may not be said of service charges
which are considered integral part of the cost of the food, goods or services ordered by the
customers. As a general rule, tips do not form part of the service charges which should be
distributed in accordance with the sharing ratio prescribed under Article 96 of the Labor Code.
However, where a restaurant or similar establishment does not collect service charges but has a
practice or policy of monitoring and pooling tips given voluntarily by its customers to its
employees, the pooled tips should be monitored, accounted for and distributed in the same manner
as the service charges.9 Hence, the 85% : 15% sharing ratio should be observed.
Service charges are not in the nature of profit share and, therefore, cannot be deducted
from wage. 10

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
G. Thirteenth Month Pay

G.

THIRTEENTH MONTH PAY1

1. COVERAGE.
All employers are required to pay all their rank-and-file employees, a 13 month pay not later
th

than December 24 of every year.

Only rank-and-file employees, regardless of their designation or employment status and
irrespective of the method by which their wages are paid, are entitled to the 13 month pay
th

benefit.2 Managerial employees are not entitled to 13 month pay.3

th

2. EXCLUSIONS/EXEMPTIONS FROM COVERAGE.

The following employers are not covered by the 13 month pay law:4
th

1. The government and any of its political subdivisions, including government-owned and
controlled corporations, except those corporations operating essentially as private
subsidiaries of the government.5
2. Employers already paying their employees 13 month pay or more in a calendar year or its
th

equivalent at the time of the issuance of the Revised Guidelines.6

3. Employers of those who are paid on purely commission, boundary, or task basis, and those
who are paid a fixed amount for performing a specific work, irrespective of the time
consumed in the performance thereof, except where the workers are paid on piece-rate
basis, in which case, the employer shall be covered by the Revised Guidelines insofar as
such workers are concerned. Workers paid on piece-rate basis shall refer to those who
are paid a standard amount for every piece or unit of work produced that is more or less
regularly replicated without regard to the time spent in producing the same.7
Domestic workers or Kasambahays, now covered.
Previously, not covered by the 13 month pay law are employers of household helpers and
th

persons in the personal service of another in relation to such workers.8 However, R.A. No. 10361 is
now explicit in its commandment that a domestic worker or Kasambahay is entitled to 13 month pay as
th

provided for by law.9

3. NATURE OF 13 MONTH PAY.
TH

13 month pay is in the nature of additional income granted to employees who are not
th

receiving the same.10 P.D. No. 851 is undoubtedly a labor standards law whose purpose is to increase
the real wages of the workers.11 It is based on wage but not part of wage.12
4. MINIMUM AMOUNT OF 13 MONTH PAY. TH

The minimum 13 month pay required by law should not be less than one-twelfth (1/12) of the
th

total basic salary earned by an employee within a calendar year.13

5. MINIMUM PERIOD OF SERVICE REQUIRED.
To be entitled to the 13 month pay benefit, it is imposed as a minimum service
th

requirement that the employee should have worked for at least one (1) month during
a calendar year.14
6. COMMISSION VIS-A-VIS 13 MONTH PAY. TH

In order to be considered part of 13 month pay, the commission should be part of the basic salary
th

of the employee.
However, whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment which indubitably are factual in nature for they will require
a re-examination and calibration of the evidence on record.15
If the commission paid in addition to the basic salary is in the nature of a productivity
bonus or profit-sharing benefit which is dependent on and generally tied to the productivity or capacity
for revenue production of a company, it should not be considered as part of basic salary.16
But if the commission paid in addition to the basic salary has a clear direct or necessary
relation to the amount of work actually done by the employee, it should be considered as part of basic
salary.17
If the employee is paid on commission basis only, he is excluded from receiving the
13 month pay benefit.18
th

7. CBA VIS-A-VIS 13 MONTH PAY.

TH

For purposes of computing the 13 month pay, “basic salary” includes all remunerations or
th

earnings paid by the employer for services rendered but does not include allowances and monetary
benefits which are not considered or integrated as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits, maternity leave, overtime, premium, night
differential and holiday pay, premiums for work done on rest days and special holidays and cost-of-
living allowances. However, these salary-related benefits should be included as part of the basic salary
in the computation of the 13 month pay if by individual or collective bargaining
th

agreement, company practice or policy, the same are treated as part of the basic salary of the
employees.19
8. SOME PRINCIPLES ON 13 MONTH PAY. TH

1. “Basic salary” or “basic wage” contemplates work within the normal eight (8) working hours in a
day. This means that the basic salary of an employee for purposes of computing the 13 month
th

pay should include all remunerations or earnings paid by the employer for services rendered
during normal working hours.20
2. For purposes of computing the 13 month pay, “basic salary” should be interpreted to mean not the
th

amount actually received by an employee, but1/12 of their standard monthly wage multiplied by
their length of service within a given calendar year.21
3. Extras, casuals and seasonal employees are entitled to 13 month pay.22 th

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
H. Separation Pay

H.
 SEPARATION PAY
1. SEPARATION PAY.
Separation pay, as a remedy, is provided under the following:
(a) Labor Code;
(b) Special laws; and
(c) Jurisprudence.
2. SEPARATION PAY UNDER THE LABOR CODE.
The Labor Code prescribes the payment of separation pay only in the following four (4)
situations:
(1) When termination is due to authorized causes:
(a) Under Article 2831 such as:
(1) installation of labor-saving devices;
(2) redundancy;
(3) retrenchment; or
(4) closing or cessation of business operations; and
(b) Under Article 284 2 when termination is due to the disease of an employee and his
continued employment is prejudicial to himself or his co-employees.
(2) Under Article 2863 when employment is deemed terminated after the lapse of six (6)
months in cases involving bona-fide suspension of the operation of business or
undertaking or after the lapse of “floating status. ”
(3) Under Article 149 when the employer terminates without just cause, the services of a
househelper prior to the expiration of the fixed-term employment.4 This provision of the
Labor Code, however, has been superseded by Section 32, Article V of R.A. No. 10361,
otherwise known as the “Domestic Workers Act” or “Batas Kasambahay.” Thus, “(i)f the
domestic worker is unjustly dismissed, the domestic worker shall be paid the compensation
already earned plus the equivalent of fifteen (15) days work by way of indemnity.”
3. SEPARATION PAY UNDER SPECIAL LAWS.
There are special laws which specifically require the payment of separation pay in case of the
occurrence of certain specified events.
For instance, it is provided under R.A. No. 7610 [June 17, 1992], otherwise known as
the “Special Protection of Children Against Abuse, Exploitation and Discrimination Act,” as
amended,5 that in case the violation of its provisions has resulted in the death, insanity or serious
physical injury to a child employed in such establishment or that the firm or establishment has
employed a child for prostitution or obscene or lewd shows or if there is imminent danger to the life
and limb of the working child in accordance with the occupational safety and health standards, the
establishment shall be ordered closed immediately and permanently and the employer shall pay all
employees affected by the closure their separation pay and other monetary benefits provided for by
law.6
Although the said law does not specify the amount of separation pay and other monetary
benefits that should be paid to the employees affected by the closure, the same is readily determinable
as the law itself and its implementing rules state that it shall be in accordance with the separation pay
and other monetary benefits “provided for by law,” obviously referring to the separation pay provided
under Article 283 of the Labor Code on closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses the amount of whi ch shall be
equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever
is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
4. SEPARATION PAY PER JURISPRUDENCE.
In accordance with jurisprudence, the following separation pay may be cited:
(1) Separation pay in lieu of reinstatement; and
(2) Separation pay as financial assistance.
4.1. SEPARATION PAY IN LIEU OF REINSTATEMENT.

(NOTE: This subject matter is extensively discussed under the topic “IV. TERMINATION OF EMPLOYMENT xxx C.

Reliefs for Illegal Dismissal xxx 1. Reinstatement xxx b. Separation pay in lieu of reinstatement”, infra)

4.2. SEPARATION PAY AS “FINANCIAL ASSISTANCE.”

a. No Labor Code provision granting financial assistance.
The concept of financial assistance which is sometimes given to employees whose dismissal
for cause has been affirmed as legal is not provided under the Labor Code or in the rules implementing
it.
b. When granted unilaterally or mutually by agreement.
Separation pay in the form of “financial assistance” may be granted by the employer
unilaterally by way of a voluntary policy or practice or through negotiated agreement such as a CBA.
c. When granted by jurisprudence.
In a number of cases, separation pay has been awarded by way of financial assistance as a
measure of social justice under certain exceptional circumstances and by reason of equity.7
d. Doctrines.
Over the years, the doctrines applied to the grant of separation pay as financial assistance
have continued to evolve. The following may be cited:
(1) PLDT Doctrine;8
(2) Toyota Doctrine;9

(3) PAL Doctrine;10 and

(4) Solidbank Doctrine.11

The PLDT doctrine.

Under this doctrine,12 separation pay as a measure of social justice shall be allowed only if the
employee is validly dismissed:
(1) for causes other than serious misconduct; or
(2) for causes that do not reflect on his moral character.13
The Toyota doctrine.
The Toyota doctrine14 has expanded the coverage of excepted cases. Thus, the commission
of any of the grounds in Article 28215 of the Labor Code, except analogous causes, would not merit
payment of financial assistance.
In the following cases, the Toyota doctrine was applied; hence, no financial assistance was
awarded because the grounds invoked are in accordance with Article 282:
Reno Foods v. Nagkakaisang Lakas ng Manggagawa (NLM) ,16 where it was maintained
that labor adjudicatory officials and the Court of Appeals must demur the award of separation pay
based on social justice when an employee’s dismissal is based on serious misconduct or willful
disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a
crime against the person of the employer or his immediate family - grounds under Article 282 of the
Labor Code that sanction dismissals of employees.17
Equitable PCI Bank v. Dompor,18 Moya v. First Solid Rubber Industries, Inc.
, and Unilever Philippines, Inc. v. Rivera,20 where the infractions committed by the respondent
19

constituted serious misconduct or willful disobedience resulting to loss of trust and confidence.
Central Philippines Bandag Retreaders, Inc. v. Diasnes,21 and Quiambao v. Manila
Electric Company,22 involving gross and habitual neglect of duties due to respondent’s repeated and
continuous absences without prior leave and frequent tardiness.
Exception to Toyota doctrine: When termination is based on analogous causes.
 Toyota, however, makes a distinction when the grounds cited are the analogous causes for
termination under Article 282(e) , like inefficiency, incompetence, ineptitude, poor performance and others.
It declared that in these cases, the NLRC or the courts may opt to grant separation pay anchored on social
justice in consideration of the length of service of the employee, the amount involved, whether the act
is the first offense, the performance of the employee and the like, using the guideposts enunciated in PLDT on
the propriety of the award of separation pay.
Illustrative cases.
Yrasuegui v. Philippine Airlines, Inc. ,23 where the dismissal of petitioner (an international
flight attendant) due to his obesity was held valid as an analogous cause under Article 282(e) of the
Labor Code. The Supreme Court, however, as an act of social justice and for reason of equity, awarded
him separation pay equivalent to one-half (1/2) month’s pay for every year of service, including his
regular allowances. The Court observed that his dismissal occasioned by his failure to meet the weight
standards of his employer was not for serious misconduct and does not reflect on his moral character.
International School Manila v. International School Alliance of Educators (ISAE)
,24 where the teacher was validly dismissed on the ground of gross inefficiency, an analogous cause,
hence, falling under the exception in Toyota.
The PAL doctrine.
This 2010 doctrine25 enunciates a reversion to PLDT doctrine’s equity and social justice
exception. While the Toyota case clarified that the grant of separation pay may still be precluded even
if the ground for the employee’s dismissal is not serious misconduct under Article 282(a) of the Labor
Code but other just causes under the same article and/or other authorized causes provided for under the
Labor Code, however, Toyota still recognized the social justice exception prescribed in PLDT v.
NLRC and Abucay. 26
In other words, under the present jurisprudential framework, the grant of separation pay as a
matter of equity to a validly dismissed employee is not contingent on whether the ground for
dismissal is expressly provided under Article 282(a) but whether the ground relied upon
is akin to serious misconduct or involves willful or wrongful intent on the part of the
employee. Consequently, there is a need to examine in every case if the special circumstances
described in PLDT are present to determine whether the validly dismissed employee is entitled to
separation pay.
In the case at bar, there were uncontroverted special circumstances which justify the grant of
separation pay to private respondent onequitable considerations. The transgressions imputed to
private respondent have never been firmly established as deliberate and willful acts clearly
directed at making petitioner lose millions of pesos. At the very most, they can only be
characterized as unintentional, albeit major, lapses in professional judgment. Likewise, the
same cannot be described as morally reprehensible actions. Thus, private respondent may be
granted separation pay on the ground of equity which is defined as “justice outside law, being ethical
rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of
conscience and not on any sanction of positive law, for equity finds no room for application where
there is law.” 27

The Solidbank doctrine.

Under this 2010 doctrine,28 as distinguished from just cause termination, employees
terminated due to authorized cause are not entitled to be paid additional separation pay by way of
financial assistance.

The reason is that the employer is only required under the law to pay his employees
separation pay in accordance with Article 283 of the Labor Code. That is all that the law requires. The
Court should refrain from adding more than what the law requires, as the same is within the realm of the
legislature.

SOME PRINCIPLES ON GRANT OF SEPARATION PAY AS FINANCIAL ASSISTANCE.

 If there is no dismissal to speak of, no financial assistance may be granted.29

  Amount of financial assistance is not fixed in law or jurisprudence. The amount thereof
varies. It may be equivalent to the separation pay under the law, or under the CBA or company
policy or practice, whichever is higher, or even lower than any of the separation pay provided
therein, depending upon the sound discretion of the court.30 The financial assistance may be
equivalent to one-half (1/2) month’s pay for every year of service,31 plus regular allowances,32 or
it may be fixed at a certain amount.33

 When long years of service, equity or compassionate justice merit the award of financial
assistance. - In quite a number of cases, the Supreme Court considered long years of service,
equity or social or compassionate justice as basis for the award of financial assistance.34
In the 2014 case of International School Manila v. International School Alliance of Educators
(ISAE) ,35 the teacher’s dismissal on the ground of gross inefficiency was held valid. The ground
being an analogous cause and thus falling under the exception in Toyota, separation pay was
awarded to her. In so awarding, her long 17 years of service was likewise cited as basis.
In the 2011 case of Villaruel v. Yeo Han Guan,36 petitioner’s act of terminating his employment
relationship with respondent on the ground of disease under Article 284 of the Labor Code was held as
being tantamount to resignation. This is so because only the employer is allowed to invoke said article to
terminate employment based on disease. He is therefore not entitled to the separation pay provided
therein. This notwithstanding, he was awarded the amount of P50,000.00 as financial assistance as a
measure of social and compassionate justice and as an equitable concession taking into consideration,
inter alia, his service for more than 35 years.
In the 2013 case of Padillo v. Rural Bank of Nabunturan, Inc. ,37 which, like Villaruel, involves
the termination by petitioner employee of his employment due to disease under Article 284 of the
Labor Code, no separation pay by virtue of this article of the Labor Code was awarded to him.
Neither was he given any retirement benefit since he terminated his employment when he was 55
years of age - 5 years short of the 60-year old optional retirement age provided in Article 287 of
the Labor Code. Nevertheless, the Court concurred with the CA that financial assistance should be
awarded to him but at an increased amount. With a veritable understanding that the award of
financial assistance is usually the final refuge of the laborer, considering as well the supervening
length of time which had sadly overtaken the point of Padillo’s death - an employee who had
devoted twenty-nine (29) years of dedicated service to the respondent bank - the Supreme Court,
in light of the dictates of social justice, held that the CA’s financial assistance award should be
increased from P50,000.00 to P75,000.00, in addition to and exclusive of the P100,000.00 benefit
receivable by the petitioner under the Philam Life retirement/insurance plan coverage of petitioner
which remained undisputed by the parties.
 When long years of service was considered against the grant of financial assistance. - There
are a number of cases where the long years of service were taken against the grant of financial
assistance to the validly dismissed employee. Indeed, length of service and a previously clean
employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant
employee.38
The 2010 case of Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) -
Katipunan,39 instructs that “xxx Length of service is not a bargaining chip that can simply be
stacked against the employer. After all, an employer-employee relationship is symbiotic where both
parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee
well, has accorded him fairness and adequate compensation as determined by law, it is only fair to
expect a long-time employee to return such fairness with at least some respect and honesty.
Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair
employer. ”

In accordance with Reno, petitioner’s length of service of more than 10 years, in the 2013 case
of Moya v. First Solid Rubber Industries, Inc. ,40 was taken against him. In affirming the CA’s
deletion of the separation pay awarded to him as financial assistance, it was declared that he is
outside the protective mantle of the principle of social justice as his act of concealing the
truth41 from the company is clear disloyalty to the company which has long employed him.
 ------------oOo------------

Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
I. Retirement Pay
a. Eligibility
b. Amount
c. Retirement benefits of workers paid by results
d. Retirement benefits of part-time workers
e. Taxability
I.
RETIREMENT PAY1

a.
ELIGIBILITY

1. COVERAGE OF THE RETIREMENT PAY LAW.

The following employees are eligible to avail of retirement benefits under Article 287 of the Labor
Code:
1. All employees in the private sector, regardless of their position, designation or status
and irrespective of the method by which their wages are paid;2
2. Part-time employees;
3. Employees of service and other job contractors;
4. Domestic helpers or persons in the personal service of another;3
3. Underground mine workers;4
4. Employees of government-owned and/or controlled corporations organized under the
Corporation Code (without original charters) .5
2. EXCLUSIONS FROM COVERAGE.
Article 287, as amended, does not apply to the following employees:
1. Employees of the national government and its political subdivisions, including government-
owned and/or controlled corporations, if they are covered by the Civil Service Law and its
regulations.
2. Employees of retail, service and agricultural establishments or operations regularly
employing not more than ten (10) employees. These terms are defined as follows:
a. “Retail establishment” is one principally engaged in the sale of goods to end-users for
personal or household use. It shall lose its retail character qualified for exemption if it
is engaged in both retail and wholesale of goods.
b. “Service establishment” is one principally engaged in the sale of service to
individuals for their own or household use and is generally recognized as such.
c. “Agricultural establishment/operation” refers to an employer which is engaged in
agriculture. This term refers to all farming activities in all branches and includes,
among others, the cultivation and tillage of soil, production, cultivation, growing and
harvesting of any agricultural or horticultural commodities, dairying, raising of
livestock or poultry, the culture of fish and other aquatic products in farms or ponds,
and any activities performed by a farmer or on a farm as an incident to, or in
conjunction with, such farming operations, but does not include the manufacture
and/or processing of sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm
products.6
3. OPTIONAL OR COMPULSORY RETIREMENT AGE.

a. Under Article 287.

 This article provides for two (2) types of retirement:
(1) Optional retirement upon reaching the age of sixty (60) years.7
(2) Compulsory retirement upon reaching the age of sixty-five (65) years.8
It is the employee who exercises the option under No. 1 above.9
b. Under retirement plan.

The optional and compulsory retirement schemes provided under Article 287 come into play
only in the absence of a retirement plan or agreement setting forth other forms of optional or
compulsory retirement schemes. Thus, if there is a retirement plan or agreement in an establishment
providing for an earlier or older age of retirement (but not beyond 65 which has been declared the
compulsory retirement age) , the same shall be controlling.
c. Retirement at an earlier age or after rendering certain period of service.
Based on Article 28710 the employers and employees are free to agree and stipulate on the
retirement age, either in a CBA or employment contract. It is only in the absence of such agreement
that the retirement age shall be fixed by law, that is, in accordance with the optional and compulsory
retirement age prescribed under Article 287.11
This is so because retirement is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter, after reaching a certain age,
agrees to sever his or her employment with the former.12
d. By mutual agreement, employers may be granted the sole and exclusive prerogative to
retire employees at an earlier age or after rendering a certain period of service.
This agreement may be stipulated in an employment contract or a CBA. By entering into an
employment contract containing such stipulation, the employee is bound to adhere thereto. In the same
vein, by their acceptance of the CBA, the union and its members are obliged to abide by the
commitments and limitations they had agreed to cede to the employer. It is not repugnant to the
constitutional guarantee of security of tenure.13
Cainta Catholic School v. Cainta Catholic School Employees Union [CCSEU],14 where
the Supreme Court upheld the exercise by the school of its option to retire employees pursuant to the
existing CBA where it is provided that the school has the option to retire an employee upon
reaching the age limit of sixty (60) or after having rendered at least twenty (20) years of service to
the school, the last three (3) years of which must be continuous. Hence, the termination of
employment of the employees, arising as it did from an exercise of a management prerogative granted by the
mutually-negotiated CBA between the school and the union is valid.
In Pantranco North Express, Inc. v. NLRC,15 the Supreme Court upheld the validity of the
CBA stipulation that allowed the employee to be compulsorily retired upon reaching the age of sixty
(60) “or upon completing [25] years of service to [Pantranco].”
e. To be valid, retirement at an earlier age must be voluntarily consented to by the
employee.
In Jaculbe v. Silliman University,16 the Supreme Court ruled that in order for retirement at an
earlier age to be valid, it must be shown that the employee’s participation in the plan is voluntary. An
employer is free to impose a retirement age of less than 65 for as long as it has the employees’ consent. Stated
conversely, employees are free to accept the employer’s offer to lower the retirement age if they feel they can get
a better deal with the retirement plan presented by the employer.
Following Jaculbe, the retirement of petitioner in the 2010 case of Lourdes Cercado v.
Uniprom, Inc. 17 at the age of 47, after having served respondent company for 22 years, pursuant to
its Employees’ Non-Contributory Retirement Plan, which provides that employees who have rendered
at least 20 years of service may be retired at the option of the company, was declared illegal because it
was not shown that she has given her consent thereto. Not even an iota of voluntary acquiescence to
respondent’s early retirement age option is attributable to petitioner. The assailed retirement plan was
not embodied in a CBA or in any employment contract or agreement assented to by petitioner and her
co-employees. On the contrary, it was unilaterally and compulsorily imposed on them.
f. Retiring at an earlier age will amount to illegal dismissal if employee did not consent
thereto.
 In the same cases of Jaculbe and Lourdes Cercado, having terminated the employee solely on the
basis of a provision of a retirement plan which was not freely assented to by the employee, the employer
was held guilty of illegal dismissal.
4. MINIMUM YEARS OF SERVICE REQUIREMENT.
a. Significance of five (5) years.
Five (5) years is the minimum years of service that must be rendered by the employee before he
can avail of the retirement benefits upon reaching optional or compulsory retirement age under Article
287.
But this period holds true only “in the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment. ” Hence, the employer and the employee are free
to stipulate a different period in the retirement plan, employment contract or CBA.
However, being in the nature of “minimum” requirement, the parties cannot stipulate a
period higher than five (5) years since this will run counter to the intention of the law to grant
retirement benefits not upon reaching the “maximum” but merely the “minimum” requirement - a
rule that obviously favors the workers and therefore deserves to be construed for their benefit.
b. Components of the minimum 5-year service requirement.
The minimum length of service of at least five (5) years required for entitlement to
retirement pay under Article 287 includes authorized absences and vacations, regular holidays, and
mandatory fulfillment of a military or civic duty.18 In case, however, the business establishment has
closed its operations for sometime, only the period of actual service should be counted and reckoned
in computing the retiring employee’s length of service. The period of time when the business
establishment was closed should not be included.19
c. The age and service requirements are cumulative; non-compliance with one negates
entitlement to the retirement benefits.
Simply stated, in the absence of any retirement plan or applicable agreement, an employee
must (1) retire when he is at least sixty (60) years of age and (2) serve at least (5) years in the company
to entitle him/her to the retirement benefits provided under the law.20
Thus, where an employee like the petitioner in the 2013 case of Padillo v. Rural Bank of
Nabunturan, Inc. ,21 terminated his employment due to disease22 when he was at 55 years of age, his
claim for retirement benefits was not granted and instead, he was simply awarded financial assistance
of P75,000.00, exclusive of the P100,000.00 benefit under the Philam Life retirement/insurance plans
earlier taken out for the employees by respondent bank in anticipation of its possible closure and the
concomitant severance of its personnel. In the absence of any applicable contract or any evolved
company policy, Padillo should have met the age and tenure requirements set forth under Article 287
of the Labor Code to be entitled to the retirement benefits provided therein. Unfortunately, while
Padillo was able to comply with the five (5) year tenure requirement - as he served for twenty-nine
(29) years - he, however, fell short with respect to the sixty (60) year age requirement given that he was
only fifty-five (55) years old when he retired.
The 2014 case of Intel Technology Philippines, Inc. v. NLRC and Jeremias Cabiles,23 similarly
held that if the retirement plan requires a minimum number of years of service as a pre-requisite to
entitlement to retirement benefits, the employee seeking such benefits should fully comply
therewith.
5. RETIREMENT OF UNDERGROUND MINE WORKERS.
a. Special treatment of underground mine workers.
As a manifestation of concern for the welfare of underground mine workers, Article 287 was
amended by R.A. No. 8558.24 Department Order No. 09, Series of 1998 was issued to implement this
law.25
b. Underground mine employee.
 An underground mine employee refers to any person employed to extract mineral deposits
underground or to work in excavations or workings such as shafts, winzes, tunnels, drifts, crosscuts,
raises, working places whether abandoned or in use beneath the earth’s surface for the purpose of
searching for and extracting mineral deposits.26
c. Different optional and compulsory retirement age.
The optional retirement age of underground mine workers is fifty (50) years of age;27 while
the compulsory retirement age is sixty (60) years old.28
d. Minimum years of service requirement.
To be entitled to retirement benefits, the underground mine worker should have rendered
service as such for at least five (5) years, in addition to the age requirement.29 The minimum length of
service of at least five (5) years required for entitlement to retirement pay shall include authorized
absences and vacations, holidays, and mandatory fulfillment of a military or civic duty.30

6. ENTITLEMENT OF EMPLOYEES DISMISSED FOR JUST CAUSE TO RETIREMENT BENEFITS.

a. General rule.
Management discretion may not be exercised arbitrarily or capriciously especially with
regards to the implementation of the retirement plan. As held in Razon, Jr. v. NLRC,31 upon
acceptance of employment, a contractual relationship is established giving the employee an enforceable
vested interest in the retirement fund. Hence, the dismissed employee is entitled to the retirement
benefits provided thereunder.
b. Cases where just cause termination was cited to validly deny claim for retirement
benefits.
However, in a number of cases, the Supreme Court ruled that an employee who is dismissed for
cause loses his right to claim for his retirement benefits.
In San Miguel Corporation v. Lao,32 an employee who was dismissed for just cause was
held not entitled to the retirement benefits under the company’s retirement plan which concededly prohibits
the award of retirement benefits to an employee dismissed for just cause, a proscription that binds the parties
to it.
Distinguishing Razon and San Miguel, the Supreme Court declared that in Razon, the
employer’s refusal to give the employee his retirement benefits is based on the provision of the
retirement plan giving management wide discretion to grant or not to grant retirement benefits, a
prerogative that obviously cannot be exercised arbitrarily or whimsically. But in San Miguel, the
retirement plan expressly prohibits the grant of retirement benefits in case of dismissal for just cause. Hence,
the employee is bound by such prohibition.
In the case of PLDT v. Bolso,33 the same ruling in San Miguel was made. Thus, it was held in
this case that since the employee was dismissed for just cause, neither he nor his heirs can avail of the
retirement benefits.
In the 2010 case of Philippine Airlines, Inc. v. NLRC,34 it was held that private
respondent’s termination for cause thereby rendered nugatory any entitlement to mandatory or
optional retirement pay that she might have previously possessed. ”
In the 2013 case of Daabay v. Coca-Cola Bottlers Phils. , Inc. , 35 the Supreme Court relied
on the above ruling in Philippine Airlines in denying the claim for retirement benefits of petitioner
Daabay in view of his lawful dismissal by Coca-Cola on the grounds of serious misconduct, breach of trust and
loss of confidence.
7. RETIREMENT BENEFITS VS. SEPARATION PAY.
a. Distinctions.
Retirement pay and separation pay are two distinct benefits granted under the law. Their
distinctions are as follows:
1. While both retirement pay and separation pay are fixed by law, retirement pay differs from
separation pay in that the former is paid by reason of retirement; while the latter is required in the cases
enumerated in Articles 283 and 284 of the Labor Code and as substitute remedy in cases where
reinstatement is not possible.36
 2. The purpose for the grant of retirement pay is to help the employee enjoy the remaining
years of his life thereby lessening the burden of worrying for his financial support. It is also a form of
reward for the employee’s loyalty and service to the employer.37
Separation pay, on the other hand, is designed as a wherewithal during the period that an
employee is looking for another employment after his termination.38
b. When both retirement pay and separation pay must be paid.
There are cases where both retirement pay and separation pay for authorized cause termination
were awarded and ordered paid. The most eloquent example of this situation is Aquino v.
NLRC,39 where the Supreme Court ordered the payment to the retrenched employees of both the
separation pay for retrenchment embodied in the CBA as well as the retirement pay provided under a
separate Retirement Plan. The argument of the company that it has more than complied with the
mandate of the law on retrenchment by paying separation pay double that required by the Labor Code
(at the rate of one [1] month pay instead of the one-half [½] month pay per year of service) was not
favorably considered by the Supreme Court because the employees were not pleading for generosity
but demanding their rights embodied in the CBA which was the result of negotiations between the
company and the employees. The company’s counsel should have made it a point to categorically
provide in the Retirement Plan and the CBA that an employee who had received separation pay would
no longer be entitled to retirement benefits. Or to put it more plainly, collection of retirement benefits
was prohibited if the employee had already received separation pay. This, however, he failed to do.40
c. When separation pay may be charged to retirement pay.
In Ford Philippines Salaried Employees Association v. NLRC,41 a case decided before the
advent of R.A. No. 7641, the Supreme Court ruled that if it is provided in the retirement plan of the
company that the retirement, death and disability benefits paid in the plan are consideredintegrated with and
in lieu of termination benefits under the Labor Code, then the retirement fund may be validly used to pay such
termination or separation pay because of closure of business.
d. When employees are entitled to only one form of benefit.
In Cipriano v. San Miguel Corporation,42 it was ruled that in case the retirement plan of the
company provides that the employee shall be entitled to either the retirement benefit provided
therein or the separation pay provided by law, whichever is higher, the employee cannot be entitled to
both benefits.43
In the 2013 case of Zuellig Pharma Corporation v. Sibal, 44 respondents (36 in all) , were
terminated on the ground of redundancy. They were properly notified of their termination and were
paid their respective separation pay in accordance with the CBA45 for which respondents individually
signed Release and Quitclaim in full settlement of all claims arising from their employment with Zuellig.
Controversy arose when respondents later on filed separate Complaints (which were later consolidated)
before the Labor Arbiter for payment of retirement gratuity and monetary equivalent of their unused sick leave
on top of the separation pay already given them. Respondents claimed that they are still entitled to retirement
benefits and that their receipt of separation pay and execution of Release and Quitclaim do not preclude
pursuing such claim. In ruling against respondents, the Supreme Court declared that the provision in the CBA
is an effective bar to the availment of retirement benefits once the employees have chosen separation pay or
vice versa. Thus, having chosen and accepted redundancy pay, respondents are thus precluded from seeking
payment of retirement pay under the CBA, which enunciates express prohibition against “double recovery.”
8. RETIREMENT PAY UNDER THE LABOR CODE OR RETIREMENT PLAN VS.
RETIREMENT PAY UNDER SSS, GSIS AND PAG-IBIG.
a. SSS retirement pay46 is separate and distinct from the retirement pay under the Labor
Code,47 retirement policy or plan of the employer or under a CBA.
b. GSIS retirement benefits48 apply to government employees only.
c. The coverage of the Pag-IBIG Fund49 may be treated as a substitute retirement benefit for
the employee within the purview of the Labor Code.
b.
AMOUNT OF RETIREMENT PAY
1. COMPONENTS OF RETIREMENT PAY.
a. The Superiority of Benefits Rule: Article 287 is not controlling but the retirement plan in
the CBA or employment contract.
At the outset, it must be underscored that once an employee retires, it is not Article 287 that is
controlling but the retirement plan under the CBA or other applicable employment contract.50 Article
287 becomes relevant only in the matter of ensuring that the retirement benefits are not less than those provided
therein.
b. Instances when Article 287 applies.
Article 287 only applies in a situation where:
(1) there is no CBA or other applicable employment contract providing for retirement benefits
for an employee; or
(2) there is a CBA or other applicable employment contract providing for retirement benefits
for an employee, but it is below the requirements set by law.51
The reason for the first situation is to prevent the absurd situation where an employee, who is
otherwise deserving, is denied retirement benefits by the nefarious scheme of employers in not
providing for retirement benefits for their employees. The reason for the second situation is expressed
in the Latin maxim pacta privata juri publico derogare non possunt. Private contracts cannot derogate
from the public law. “Ang kasunduang pribado ay hindi makasisira sa batas publiko.” 52
c. One-half (½) month salary.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee, upon reaching the optional or compulsory retirement age
specified in Article 287, shall be entitled to retirement pay equivalent to at least one-half (½) month
salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole
year.53
d. Components of one-half (½) month salary.
For purposes of determining the minimum retirement pay due an employee under Article 287, the
term “one-half month salary” shall include all of the following:
(1) Fifteen (15) days salary of the employee based on his latest salary rate. The
term “salary” includes all remunerations paid by an employer to his employees for
services rendered during normal working days and hours, whether such payments are
fixed or ascertained on a time, task, piece or commission basis, or other method of
calculating the same, and includes the fair and reasonable value, as determined by the
DOLE Secretary, of food, lodging or other facilities customarily furnished by the
employer to his employees. The term does not include cost of living allowances, profit-
sharing payments, and other monetary benefits which are not considered as part of or
integrated into the regular salary of the employees;
(2) The cash equivalent of five (5) days of service incentive leave ;
(3) One-twelfth (1/12) of the 13 month pay due the employee; and
th

(4) All other benefits that the employer and employee may agree upon that should be
included in the computation of the employee’s retirement pay.54
e. “One-half (½) month salary” means 22.5 days.
To dispel any further confusion on the meaning of “one-half [½] month salary” provided in Article
287, the Supreme Court, in the case ofCapitol Wireless, Inc. v. Confesor, [G.R. No. 117174, November 13,
1996, 264 SCRA 68, 77] , simplified its computation by declaring that it means the total of “22.5 days”
arrived at after adding 15 days plus 2.5 days representing one-twelfth [1/12] of the 13 month pay plus 5 days
th

of service incentive leave.

Evidently, the law expanded the concept of “one-half month salary” from the usual one-month
salary divided by two.55
2. FIVE (5) DAYS OF SERVICE INCENTIVE LEAVE, HOW RECKONED.
The five (5) days of service incentive leave provided under Article 287 as part of the
retirement benefit of one-half (½) month salary for every year of service should be paid in full. It
should not be computed on the basis of 1/12 of the 5-day service incentive leave.56
3. 1/12 OF 13 MONTH PAY AND 5 DAYS OF SERVICE INCENTIVE LEAVE (SIL)
TH

SHOULD NOT BE INCLUDED IF THE EMPLOYEE WAS NOT ENTITLED TO 13 TH

MONTH PAY AND SIL DURING HIS EMPLOYMENT.

Supposing the retiring employee, by reason of the nature of his work, was not entitled to 13 th

month pay or to the SIL pay pursuant to the exceptions mentioned in the 13 Month Pay Law and the Labor
th

Code, should he be paid upon retirement, in addition to the salary equivalent to fifteen (15) days, the additional
2.5 days representing one-twelfth [1/12] of the 13 month pay as well as the five (5) days representing the
th

service incentive leave for a total of 22.5 days?

This question was answered in the negative in R & E Transport, Inc. v. Latag,57 The
Supreme Court in this case ruled that employees who are not entitled to 13 month pay and SIL pay
th

while still working should not be paid the entire “22.5 days” but only the fifteen (15) days salary. In
other words, the additional 2.5 days representing one-twelfth [1/12] of the 13 month pay and the five
th

(5) days of SIL should not be included as part of the retirement benefits.
The employee in this case was a taxi driver who was being paid on the “boundary” system
basis. It was undisputed that he was entitled to retirement benefits after working for fourteen (14) years
with R & E Transport, Inc. However, he was not entitled to the 13 month pay since Section 3 of the
th

Rules and Regulations Implementing P.D. No. 85158 exempts from its coverage employers of those
who are paid on purely boundary basis. He was also not entitled to the 5-day service incentive leave
pay pursuant to the Rules to Implement the Labor Code59 which expressly excepts field personnel and
other employees whose performance is unsupervised by the employer.60
4. DISTINCTION BETWEEN DRIVERS PAID ON “BOUNDARY SYSTEM” AND
CONDUCTORS PAID ON “COMMISSION” BASIS.
The said R & E Transport case should be distinguished from the 2010 case of Serrano v.
Severino Santos Transit,61 which involves a bus conductor (petitioner) who worked for 14 years for
respondent bus company which did not adopt any retirement scheme. It was held herein that even if
petitioner as bus conductor was paid on commission basis, he falls within the coverage of R.A. 7641
and its implementing rules. This means that his retirement pay should include the cash equivalent of
the 5-day SIL and / of the 13 month pay for a total of 22.5 days. The affirmance by the Court of
1 12 th

Appeals of the reliance by the NLRC on R & E Transport case was held erroneous. For purposes of
applying the law on SIL, as well as on retirement, there is a difference between drivers paid under the
“boundary system” and conductors who are paid on commission basis. This is so because in practice,
taxi drivers do not receive fixed wages. They retain only those sums in excess of the “boundary” or fee
they pay to the owners or operators of the vehicles. Conductors, on the other hand, are paid a certain
percentage of the bus’ earnings for the day. It bears emphasis that under P.D. No. 851 or the SIL Law,
the exclusion from its coverage of workers who are paid on a purely commission basis is only with
respect to field personnel.
The earlier case of Auto Bus Transport Systems, Inc. , v. Bautista,62 clarifies that an
employee who is paid on purely commission basis is entitled to SIL.
5. CONTRIBUTORY OR NON-CONTRIBUTORY RETIREMENT PLAN.
a. Right to contributory retirement plan.
Where both the employer and the employee contribute to a retirement fund in accordance with
a CBA or other applicable employment contract, the employer’s total contribution thereto should not
be less than the total retirement benefits to which the employee would have been entitled had there
been no such retirement fund. In case the employer’s contribution is less than the retirement benefits
provided under thelaw, the employer should pay the deficiency.63
b. Right to non-contributory retirement plan.
The employees have a vested and demandable right to a non-contributory retirement plan. It is
an existing benefit voluntarily granted to them by their employer. The latter may not unilaterally
withdraw, eliminate or diminish such benefits.64
6. RETIREMENT BENEFITS OF UNDERGROUND MINE WORKERS.
The retirement benefits to which an underground mine worker is entitled shall be the
retirement benefits provided under Article 287 of the Labor Code, as amended.65 The components of
the retirement benefits consisting of one-half (½) month salary are the same as those prescribed in
Article 287 as described above.66
 c.
RETIREMENT BENEFITS OF
WORKERS PAID BY RESULTS
1. ONE-HALF MONTH SALARY OF EMPLOYEES WHO ARE PAID BY RESULTS.
For covered workers who are paid by results and do not have a fixed monthly rate, the basis
for the determination of the salary for fifteen (15) days shall be their average daily salary (ADS) . The
ADS is the average salary for the last twelve (12) months reckoned from the date of their retirement,
divided by the number of actual working days in that particular period.67
2. PROVISION IN THE IMPLEMENTING RULES.
Section 8, Rule VII-A, Book III of the Rules to Implement the Labor Code provides that:
“(a) On petition of any interested party, or upon its initiative, the
Department of Labor shall use all available devices, including the use of time
and motion studies and consultation with representatives of employers‟ and
workers‟ organizations, to determine whether the employees in any industry
or enterprise are being compensated in accordance with the minimum wage
requirements of this Rule.
“(b) The basis for the establishment of rates for piece, output or
contract work shall be the performance of an ordinary worker of minimum skill or
ability.
“(c) An ordinary worker of minimum skill or ability is the average
worker of the lowest producing group representing fifty percent (50%) of the total
number of employees engaged in similar employment in a particular
establishment, excluding learners, apprentices and handicapped workers
employed therein.
“(d) Where the output rates established by the employer do not
conform with the standards prescribed herein, or with the rates prescribed by
the Department of Labor in an appropriate order, the employees shall be
entitled to the difference between the amount to which they are entitled to
receive under such prescribed standards or rates and that actually paid them
by the employer.” 68
3. UNDERGROUND MINE EMPLOYEES PAID BY RESULTS.
The rule mentioned above is the same for underground mine employees.69
d.
RETIREMENT BENEFITS OF PART-TIME WORKERS
1. PART-TIME WORKERS ARE ENTITLED TO RETIREMENT BENEFITS.
There can be no question that part-time workers are also entitled to retirement pay of “one-
half month salary” for every year of service under Article 287, as amended by Republic Act No. 7641,
after satisfying the following conditions precedent for optional retirement: (a) there is no retirement
plan between the employer and employee; (b) the employee should have reached the age of sixty (60)
years; and (c) should have rendered at least five (5) years of service with the employer. Meanwhile, the
compulsory retirement age under the law is sixty-five (65) years.70
2. HOW COMPUTED.
Applying, therefore, the principles under Article 287, as amended,71 the components of
retirement benefits of part-time workers may likewise be computed at least in proportion to the salary and
related benefits due them.
e.

TAXABILITY OF RETIREMENT BENEFITS

1. EXEMPTION OF RETIREMENT BENEFITS FROM TAXES.
a. Conditions for exemption from taxation.
R.A. No. 4917,72 mandates that retirement benefits of employees of private firms shall not be
subject to any tax provided the following conditions set forth therein are fully complied with:
 (1) The retirement benefits received by officials and employees of private firms, whether
individual or corporate, is in accordance with areasonable private benefit
plan maintained by the employer;
(2) The retiring official or employee has been in the service of the same employer for at least
ten (10) years;
(3) He/she is not less than fifty (50) years of age at the time of his/her retirement; and
(4) The benefits shall be availed of by an official or employee only once.
As used in said law, the term „reasonable private benefit plan‟ means a pension, gratuity, stock
bonus or profit sharing plan maintained by an employer for the benefit of some or all of his officials and
employees, wherein contributions are made by such employer or officials and employees, or both, for the
purpose of distributing to such officials and employees the earnings and principal of the fund thus
accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of
the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said officials and
employees.
2. EXCLUSION OF RETIREMENT BENEFITS FROM GROSS INCOME.
In addition to R.A. No. 4917, another law, R.A. No. 8424,73 otherwise known as the “Tax
Reform Act of 1997,” which amended the National Internal Revenue Code (NIRC) , expressly excludes
retirement benefits from gross income based on the same four (4) conditions enumerated above.
3. PERTINENT JURISPRUDENCE.
In holding that the petitioner in Santos v. Servier Philippines, Inc. 74 is not entitled to any tax
exemption from her retirement benefits, the Supreme Court cited the fact that at the time of her
retirement, petitioner was only 41 years of age and had been in the service for more or less eight (8)
years. As such, the above provision is not applicable for failure to comply with the age and length of
service requirements. Therefore, respondent employer cannot be faulted for deducting from
petitioner’s total retirement benefits the amount of P362,386.87 for taxation purposes.
4. EXEMPTION OF RETIREMENT PAY OF UNDERGROUND MINE WORKERS FROM
TAX.
The retirement pay provided in R.A. No. 8558 may be exempted from tax consistent with the
requirements set by the Bureau of Internal Revenue (BIR) 75 as discussed and described above.

------------oOo------------

Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
J. Women Workers
a. Provisions against discrimination
b. Stipulation against marriage
c. Prohibited acts
d. Anti-Sexual Harassment Act (R.A. No. 7877)
J.
WOMEN WORKERS
a.
PROVISIONS AGAINST DISCRIMINATION
1. ACTS OF DISCRIMINATION UNDER THE LABOR CODE.
Article 135 of the Labor Code considers as unlawful the act of an employer to discriminate
against any woman employee with respect to terms and conditions of employment solely on account of
her sex.
More specifically, it enumerates the following acts of discrimination:
 (a) Payment of a lesser compensation, including wage, salary or other form of remuneration
and fringe benefits, to a female employee as against a male employee, for work of equal
value; and
(b) Favoring a male employee over a female employee with respect to promotion, training
opportunities, study and scholarship grants solely on account of their sexes.
2. ACTS OF DISCRIMINATION UNDER THE MAGNA CARTA OF WOMEN.
R.A. No. 9710,1 otherwise known as “The Magna Carta of Women,” is a comprehensive
women’s human rights law that seeks to eliminate discrimination against women by recognizing,
protecting, fulfilling and promoting the rights of Filipino women, especially those in marginalized
sector.
Based on the definition of the term “Discrimination Against Women” in R.A. No. 9710,2 the
following are considered discriminatory acts:
1. Any gender-based distinction, exclusion, or restriction which has the effect or purpose of
impairing or nullifying the recognition, enjoyment, or exercise by women, irrespective of
their marital status, on a basis of equality of men and women, of human rights and
fundamental freedoms in the political, economic, social, cultural, civil or any other field;
2. Any act or omission, including by law, policy, administrative measure, or practice, that
directly or indirectly excludes or restricts women in the recognition and promotion of their
rights and their access to and enjoyment of opportunities, benefits or privileges;
3. A measure or practice of general application that fails to provide for mechanisms to offset
or address sex or gender-based disadvantages or limitations of women, as a result of which
women are denied or restricted in the recognition and protection of their rights and in their
access to and enjoyment of opportunities, benefits, or privileges; or women, more than
men, are shown to have suffered the greater adverse effects of those measures or practices;
and
4. Discrimination compounded by or intersecting with other grounds, status, or condition,
such as ethnicity, age, poverty or religion.3
Additionally, women are guaranteed their right to decent work. The State shall progressively
realize and ensure decent work standards for women that involve the creation of jobs of acceptable
quality in conditions of freedom, equity, security and human dignity.4
b.
STIPULATION AGAINST MARRIAGE
1. INVALIDITY OF STIPULATION AGAINST MARRIAGE.
Article 136 of the Labor Code considers as an unlawful act of the employer to require as a
condition for or continuation of employment that a woman employee shall not get married or to
stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or
separated.
It is likewise an unlawful act of the employer, to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of her marriage.5
2. RELEVANT JURISPRUDENCE.
The following cases are relevant:
1. Zialcita v. Philippine Airlines, Inc. 6 - In this case decided by the Office of the
President, the provision in a contract between an airline company and a flight attendant
which states that “flight attendant-applicants must be single and that they shall be
automatically separated from employment in the event they subsequently get married” was
declared as a null and void provision; hence, cannot be enforced for being contrary to
Article 136 of the Labor Code and the protection-to-labor clause in the Constitution.
2. Philippine Telegraph and Telephone Company v. NLRC. 7 - It was declared here that
the company policy of not accepting or considering as disqualified from work any woman
worker who contracts marriage runs afoul of the test of, and the right against,
 discrimination afforded all women workers by our labor laws and by no less than the
Constitution.8
3. Star Paper Corp. v. Simbol, Comia and Estrella. 9 - The following policies were struck
down as invalid for violating the standard ofreasonableness which is being followed in our
jurisdiction, otherwise called the “Reasonable Business Necessity Rule”:
“1. New applicants will not be allowed to be hired if in case he/she has [a]
relative, up to [the] 3 degree of relationship, already employed by the company.
rd

“2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then
decided to get married, one of them should resign to preserve the policy stated above.”

4. Duncan Association of Detailman-PTGWO v. Glaxo Welcome Philippines, Inc. 10 In

this case, the prohibition against marriage embodied in the following stipulation in the
employment contract was held as valid:
“10. You agree to disclose to management any existing or future relationship you may
have, either by consanguinity or affinity with co-employees or employees of competing
drug companies. Should it pose a possible conflict of interest in management
discretion, you agree to resign voluntarily from the Company as a matter of Company
policy.”
The Supreme Court ruled that the dismissal based on this stipulation in the employment
contract is a valid exercise of management prerogative. The prohibition against personal or
marital relationships with employees of competitor companies upon its employees was held
reasonable under the circumstances because relationships of that nature might compromise
the interests of the company. In laying down the assailed company policy, the employer only
aims to protect its interests against the possibility that a competitor company will gain
access to its secrets and procedures.
c.
PROHIBITED ACTS
1. PROHIBITED ACTS UNDER ARTICLE 137 AND ITS IMPLEMENTING RULES.
Article 137 of the Labor Code and its implementing rule consider unlawful the followings acts of the
employer:
1. To discharge any woman employed by him for the purpose of preventing such woman from
enjoying maternity leave, facilities and other benefits provided under the Labor Code;
2. To discharge such woman on account of her pregnancy, or while on leave or in confinement
due to her pregnancy;
3. To discharge or refuse the admission of such woman upon returning to her work for fear
that she may again be pregnant;
4. To discharge any woman or any other employee for having filed a complaint or having
testified or being about to testify under the Labor Code; or
5. To require as a condition for or continuation of employment that a woman employee shall
not get married or to stipulate expressly or tacitly that upon getting married, a woman
employee shall be deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by reason of marriage.11
2. DENIAL OF BENEFITS OR DISMISSAL OF A WOMAN EMPLOYEE TO DEPRIVE HER OF
BENEFITS.
The following are the prohibited acts under Article 137 of the Labor Code:12
1. To deny any woman employee the following benefits,13 namely:
a. Facilities for women;14
b. Maternity leave benefits;15 and
c. Family planning services and incentives for family planning.16
 2. To discharge any woman employee for the purpose of preventing her from enjoying any of
the benefits provided under the Labor Code.17
Under No. 1 above, mere denial of the afore-described benefits would already constitute a
violation of Article 137.
Under No. 2 above, it is required that there must not only be denial but actual discharge or
dismissal of the woman employee meant to prevent her from enjoying any of the benefits under the
Labor Code and not only of the benefits under Chapter I, Title III of Book III of the Labor Code.
3. DISCHARGING A WOMAN DUE TO PREGNANCY.
Article 13718 contemplates the following prohibited acts in connection with the pregnancy of a
woman employee:
1. To discharge her on account of her pregnancy; or
2. To discharge her while she is on leave due to her pregnancy; or
3. To discharge her while she is in confinement due to her pregnancy; or
4. To discharge her upon returning to her work for fear that she may again be pregnant; or
5. To refuse her admission upon returning to her work for fear that she may again be
pregnant.19
Del Monte Philippines, Inc. v. Velasco. 20 - The series of absences of the respondent due to
pregnancy and its related ailments, such as urinary tract infection, was found not to be a valid ground
to dismiss her from employment. The Supreme Court agreed with the Court of Appeals in concluding
that respondent’s sickness was pregnancy-related and, therefore, the petitioner cannot terminate
respondent’s services because in doing so, petitioner will, in effect, be violating the Labor Code which,
under Article 137 thereof, prohibits an employer to discharge an employee on account of the latter’s
pregnancy. The Court was convinced that the petitioner terminated the services of respondent on
account of her pregnancy which justified her absences and, thus, committed a prohibited act rendering
the dismissal illegal.
Lakpue Drug, Inc. v. Belga. 21 - Respondent was dismissed for allegedly deliberately
concealing her pregnancy and for incurring absences without official leave for 16 days at which time
she delivered her baby. Petitioner argues that such non-disclosure is tantamount to dishonesty. In
finding the penalty of dismissal too harsh and illegal, the Supreme Court ruled that the alleged
misconduct of Belga barely falls within the situation contemplated by law. Her absence for 16 days
was justified considering that she had just delivered a child, which can hardly be considered a
forbidden act, a dereliction of duty; much less does it imply wrongful intent on the part of
Belga. Petitioner harps on the alleged concealment by Belga of her pregnancy. This argument,
however, begs the question as to how one can conceal a full-term pregnancy. The Court agreed with
respondent’s position that it can hardly escape notice how she grows bigger each day. While there may
be instances where the pregnancy may be inconspicuous, it has not been sufficiently proven by
petitioner that Belga’s case is such.
4. DISCHARGING A WOMAN EMPLOYEE FOR HAVING FILED A CASE OR FOR
TESTIFYING OR BEING ABOUT TO TESTIFY IN A CASE.
An additional prohibited act22 is the act of discharging any woman or any other employee for
having filed a complaint or having testified or being about to testify under the Labor Code.
Of relevance to this prohibited act are the parallel provisions in Articles 118 and 248 [f] of the
Labor Code. Under Article 118, it is considered unlawful for an employer to discharge or in any
manner discriminate against any employee who has filed any complaint or instituted any proceeding
under Title II (Wages) of Book III or has testified or is about to testify in such proceedings. Under
Article 248 [f], it is considered an unfair labor practice (ULP) to dismiss, discharge or otherwise
prejudice or discriminate against an employee for having given or being about to give testimony under
the Labor Code. This is the only ULP act of the employer which need not be related to the exercise by
the employee of his right to self-organization and collective bargaining.23
5. PENALTY FOR COMMISSION OF THE PROHIBITED ACTS UNDER ARTICLE 137.
Having been declared unlawful, the commission of any of the prohibited acts under Article
137 would subject the offender to the penalties provided under Article 28824 of the Labor Code.

d.
 ANTI-SEXUAL HARASSMENT ACT
(R.A. No. 7877) 25
1. THREE (3) SITUATIONS ONLY.
R.A. No. 7877 declares sexual harassment unlawful only in three (3) situations, namely:

(1) employment;
(2) education; and
(3) training environment.
Notably, sexual harassment is not the sole domain of women as men may also be subjected to the
same despicable act. Said law does not limit the victim of sexual harassment to women.
b. Specific acts penalized.
The law punishes sexual harassment if the same is:
1. work-related; or
2. education-related; or
3. training-related.26
c. Persons who may be liable for sexual harassment.
Work, education or training-related sexual harassment is committed by any employer,
employee, manager, supervisor, agent of the employer, teacher, instructor, professor, coach, trainor, or
any other person who, having authority, influence or moral ascendancy over another in a work or
training or education environment, demands, requests or otherwise requires any sexual favor from
another, regardless of whether the demand, request or requirement for submission is accepted by the
object of said act.27
Further, any person who directs or induces another to commit any act of sexual harassment as
defined in the law, or who cooperates in the commission thereof by another without which it would not
have been committed, shall also be held liable under the law.28
d. Sexual harassment in a work-related or employment environment.
In a work-related or employment environment, sexual harassment is committed when:
1. The sexual favor is made a condition in the hiring or in the employment, re-employment or
continued employment of said individual or in granting said individual favorable
compensation, terms, conditions, promotions, or privileges; or the refusal to grant the
sexual favor results in limiting, segregating or classifying the employee which in any way
would discriminate, deprive or diminish employment opportunities or otherwise adversely
affect said employee;
2. The above acts would impair the employee’s rights or privileges under existing labor laws;
or
3. The above acts would result in an intimidating, hostile, or offensive environment for the
employee.29
Libres v. NLRC. 30 - The act of the manager in touching a female subordinate’s hand and
shoulder, caressing her nape and telling other people that the subordinate was the one who hugged and
kissed him or that she responded to his sexual advances, was considered an act of sexual harassment
for which he was penalized by the company with a 30-day suspension whose validity the Supreme
Court affirmed.31
Domingo v. Rayala. 32 - This involves a sexual harassment suit filed against Rogelio I.
Rayala, the former Chairman of the National Labor Relations Commission (NLRC) by a subordinate, Ma.
Lourdes T. Domingo, then Stenographic Reporter III. Rayala contends that the acts ascribed to him do not
constitute sexual harassment because Domingo did not allege in her complaint that there was a demand,
request, or requirement of a sexual favor as a condition for her continued employment or for her promotion to
a higher position. In disagreeing to this postulation and in holding Rayala liable for sexual harassment, the
High Court ruled:
“xxx
 “Yet, even if we were to test Rayala‟ s acts strictly by the standards set in Section 3, RA
7877, he would still be administratively liable. It is true that this provision calls for a „demand,
request or requirement of a sexual favor. ‟ But it is not necessary that the demand, request
or requirement of a sexual favor be articulated in a categorical oral or written statement. It
may be discerned, with equal certitude, from the acts of the offender. Holding and
squeezing Domingo‟ s shoulders, running his fingers across her neck and tickling her ear,
having inappropriate conversations with her, giving her money allegedly for school expenses
with a promise of future privileges, and making statements with unmistakable sexual overtones
- all these acts of Rayala resound with deafening clarity the unspoken request for a sexual
favor.
“Likewise, contrary to Rayala‟ s claim, it is not essential that the demand, request or
requirement be made as a condition for continued employment or for promotion to a higher
position. It is enough that the respondent‟ s acts result in creating an intimidating, hostile or
offensive environment for the employee. That the acts of Rayala generated an
intimidating and hostile environment for Domingo is clearly shown by the common factual
finding of the Investigating Committee, the OP and the CA that Domingo reported the matter
to an officemate and, after the last incident, filed for a leave of absence and requested
transfer to another unit.”
e. Sexual harassment in an education or training environment.
In an education or training environment, sexual harassment is committed:
1. against one who is under the care, custody or supervision of the offender;
2. against one whose education, training, apprenticeship or tutorship is entrusted to the
offender;
3. when the sexual favor is made a condition to the giving of a passing grade, or the granting
of honors and scholarships, or the payment of a stipend, allowance or other benefits,
privileges, or considerations; or
4. when the sexual advances result in an intimidating, hostile or offensive environment for
the student, trainee or apprentice.33
f. Duty of the employer or head of office.
It is the duty of the employer or the head of the work-related, educational or training
environment or institution, to prevent or deter the commission of acts of sexual harassment and to
provide the procedures for the resolution or prosecution of acts of sexual harassment.
Towards this end, the employer or head of office is required to:
1. promulgate appropriate rules and regulations, in consultation with and jointly approved by
the employees or students or trainees, through their duly designated representatives,
prescribing the procedure for the investigation of sexual harassment cases and the
administrative sanctions therefor. The said rules and regulations issued shall include,
among others, guidelines on proper decorum in the workplace and educational or training
institutions.
2. create a committee on decorum and investigation of cases on sexual harassment. The
committee shall conduct meetings, as the case may be, with officers and employees,
teachers, instructors, professors, coaches, trainors and students or trainees to increase
understanding and prevent incidents of sexual harassment. It shall also conduct the
investigation of alleged cases constituting sexual harassment.
In the case of work-related environment, the committee is composed of at least one (1)
representative each from the management, the union, if any, the employees from the supervisory rank and
from the rank-and-file employees.
In the case of educational or training institution, the committee is composed of at least one
(1) representative from the administration, the trainors, teachers, instructors, professors, or coaches and
students or trainees, as the case may be.34
g. Some principles on sexual harassment.
1. The employer or head of office or the educational or training institution are solidarily liable
for damages arising from the acts of sexual harassment committed in an employment,
education or training environment, if such employer or head of office or educational or
 training institution is informed of such acts by the offended party and no immediate action
is taken thereon.35
2. The victim of sexual harassment is not precluded from instituting a separate and
independent action for damages and other affirmative reliefs.36
3. Any action arising from sexual harassment prescribes in three (3) years.37
4. Any person who violates the provisions of R.A. No. 7877 shall, upon conviction, be
penalized by imprisonment of not less than one (1) month nor more than six (6) months, or
a fine of not less than ten thousand pesos (P10,000.00) nor more than twenty thousand
pesos (P20,000.00) , or both such fine and imprisonment at the discretion of the court.38
Dr. Rico S. Jacutin v. People. 39 - This case illustrates the proper penalty imposable on the
violator. Here, the Supreme Court affirmed the Sandiganbayan’s decision finding Dr. Rico
Jacutin y Salcedo guilty of the crime of sexual harassment defined and punished under R.A. No. 7877,
particularly Sections 3 and 7 thereof, and penalizing him with imprisonment of six (6) months and to
pay a fine of Twenty Thousand (P20,000.00) Pesos, with subsidiary imprisonment in case of
insolvency. Additionally, he was ordered to indemnify the offended party, Juliet Yee, in the amount
ofP30,000.00 and P20,000.00 by way of moral damages and exemplary damages, respectively.

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS

K. Employment of Minors (Labor Code and R.A. No. 7678, R.A. No. 9231)

K.
EMPLOYMENT OF MINORS
(Labor Code and R.A. No. 7678, R.A. No. 9231)
1. “CHILD” AND “WORKING CHILD.” MEANING.
For legal purposes, the term “child” refers to any person less than eighteen (18) years of age. A
“working child” refers to any child engaged as follows:
i. when the child is below eighteen (18) years of age, in work or economic activity that is
not “child labor;” and
ii. when the child below fifteen (15) years of age:
(a) in work where he/she is directly under the responsibility of his/her parents or legal
guardian and where only members of the child’s family are employed; or
(b) in “public entertainment or information”which refers to artistic, literary, and cultural
performances for television show, radio program, cinema or film, theater, commercial
advertisement, public relations activities or campaigns, print materials, internet, and
other media.
2. REGULATION OF WORKING HOURS OF A CHILD.
The term “hours of work” includes (1) all time during which a child is required to be at a
prescribed workplace, and (2) all time during which a child is suffered or permitted to work. Rest
periods of short duration during working hours shall be counted as hours worked.1
The following hours of work shall be observed for any child allowed to work under R.A. No. 9231
and its Implementing Rules:
 (a) For a child below fifteen (15) years of age, the hours of work shall not be more than
twenty (20) hours per week, provided that the work shall not be more than four (4) hours
at any given day;
(b) For a child fifteen (15) years of age but below eighteen (18) , the hours of work shall not
be more than eight (8) hours a day, and in no case beyond forty (40) hours a week; and
(c) No child below fifteen (15) years of age shall be allowed to work between eight (8)
o’clock in the evening and six (6) o’clock in the morning of the following day and no
child fifteen (15) years of age but below eighteen (18) shall be allowed to work between
ten (10) o’clock in the evening and six (6) o’clock in the morning of the following day.2
3. EMPLOYMENT OF THE CHILD IN PUBLIC ENTERTAINMENT.
Sleeping time as well as travel time of a child engaged in public entertainment or information
from his residence to his workplace shall not be included as hours worked without prejudice to the
application of existing rules on employees’ compensation.3
4. PROHIBITION OF EMPLOYING MINORS IN CERTAIN UNDERTAKINGS AND
ADVERTISEMENTS.
No child below eighteen (18) years of age is allowed to be employed as a model in any
advertisement directly or indirectly promoting alcoholic beverages, intoxicating drinks, tobacco and its
by-products, gambling or any form of violence or pornography.4
5. PROHIBITION ON THE EMPLOYMENT OF CHILDREN BELOW 15 YEARS OF AGE;
EXCEPTIONS AND CONDITIONS.
1. General rule. The general rule is that no child below fifteen (15) years of age shall be
employed, permitted or suffered to work in any public or private establishment.5
2. Exceptions. The following shall be the only exceptions to the prohibition on the
employment of a child below fifteen (15) year of age:
(a) When the child works under the sole responsibility of his/her parents or guardian,
provided that only members of the child’s family are employed.
(b) When the child’s employment or participation in public entertainment or
information is essential, regardless of the extent of the child’s role.6
3. Conditions to the prohibition. Such employment shall be strictly under the following
conditions:
a. The total number of hours worked shall be in accordance with Section 15 [Hours of
Work of a Working Child] of the Rules [supra];
b. The employment does not endanger the child’s life, safety, health and morals, nor
impair the child’s normal development ;
c. The child is provided with at least the mandatory elementary or secondary education;
and
d. The employer secures a work permit for the child. 7
“Normal development of the child” refers to the physical, emotional, mental, and
spiritual growth of a child within a safe and nurturing environment where he/she is
given adequate nourishment, care and protection and the opportunity to perform tasks
appropriate at each stage of development.8

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
L. Househelpers (Labor Code as amended by R.A. No. 7655, An Act Increasing the
Minimum Wage of Househelpers; see also - Household Service under the Civil
Code)

L.
HOUSEHELPERS
(Labor Code as amended by R.A. No. 7655,
An Act Increasing the Minimum Wage of Househelpers;
See also - Household Service under the Civil Code)
1. EXPRESS REPEAL OF ENTIRE CHAPTER III, TITLE III, BOOK III OF THE LABOR
CODE.
This Chapter on Househelpers originally covers Articles 141 to 152. The entire Chapter III,
however, has been expressly repealed by R.A. No. 10361, otherwise known as “Domestic Workers
Act” or “Batas Kasambahay” approved by President Benigno S. Aquino III on January 18, 2013.1
Further, note must be made that R.A. No. 10361, despite its expressed intent of repealing the
said provisions, did not follow the numbering pattern of the Labor Code, as renumbered lately pursuant
to Section 5 of R.A. No. 10151 [June 21, 2011]. It, in fact, has its own designation of its provisions
which it denominated as “sections.” This notwithstanding the fact that it merely rehashed or revived
some principles already embodied in the repealed provisions of the Labor Code. For purposes of
discussion, therefore, its substantive provisions are presented herein following the presentation in the
law itself.
2. REFERENCES IN THE SYLLABUS, NO LONGER ACCURATE.
The prescribed references mentioned in the syllabus, namely: “Labor Code as amended by
R.A. No. 7655, An Act Increasing the Minimum Wage of Househelpers; See also - Household Service under
the Civil Code,” are no longer accurate by reason of the passage of R.A. No. 10361.
Necessarily, the discussion herein of this particular topic shall be made in accordance with
R.A. No. 10361.
3. COVERAGE/EXCLUSIONS OF R.A. NO. 10361.
a. Coverage.
R.A. No. 10361 applies to all domestic workers employed and working within the
country.2 It shall cover all parties to an employment contract for the services of the following
Kasambahay, whether on a live-in or live-out arrangement, such as, but not limited to:
(a) General househelp;
(b) Yaya;
(c) Cook;
(d) Gardener;
(e) Laundry person; or
(f) Any person who regularly performs domestic work in one household on an occupational
basis.3
b. Exclusions.
The following are not covered:
(a) Service providers;
(b) Family drivers;
(c) Children under foster family arrangement;4 and
(d) Any other person who performs work occasionally or sporadically and not on an
occupational basis.5
4. DEFINITIONS.
Some important terms are defined below:
(a) “Domestic worker” or “kasambahay” refers to any person engaged in domestic work
within an employment relationship, whether on a live-in or live-out arrangement, such as, but not
limited to, general househelp, "yaya", cook, gardener, or laundry person, but shall exclude service
providers, family drivers, children who are under foster family arrangement, or any person who
performs domestic work only occasionally or sporadically and not on an occupational basis.6
This term shall not include children who are under foster family arrangement which refers
to children who are living with a family or household of relative/s and are provided access to education
and given an allowance incidental to education, I.e. , "baon", transportation, school projects, and
school activities; provided, that the foster family and foster care arrangements are in compliance with
the procedures and requirements as prescribed by R.A. No. 10165 or the “Foster Care Act of 2012.” 7
Because of these new terminologies prescribed in the law, the use of the term “househelper” may no
longer be legally correct.
(b) “Domestic work” refers to work performed in or for a household or households.8
(c) "Household" refers to the immediate members of the family or the occupants of the house
who are directly and regularly provided services by the Kasambahay.9
(d) "Employer" refers to any person who engages and controls the services of a Kasambahay
and is party to the employment contract.10
(e) "Live-out arrangement" refers to an arrangement whereby the Kasambahay works
within the employer's household but does not reside therein.11
(f) "Service provider" refers to any person or entity that carries an independent business and
undertakes to perform job, work or service on his/her own for a household, according to his/her own
manner and method, and free from the control and direction of the employer in all matters in
connection with the performance of the work except as to the results thereof.12
5. HIRING OF KASAMBAHAY.
a. Mode of Hiring. - A Kasambahay can be hired by the employer directly or indirectly
through a licensed PEA.13 A “Private Employment Agency (PEA) ” refers to any individual,
partnership, corporation or entity licensed by the Department of labor and Employment (DOLE) to
engage in the recruitment and placement of Kasambahay for local employment.14
b. Cost of Hiring. - The employer shall shoulder the cost of hiring of a Kasambahay, whether
he/she is hired through a licensed PEA.15
In no case shall the recruitment or finder's fees be charged against the
Kasambahay.16 “Recruitment and finder's fees” refers to charges or any amount collected by the
licensed PEA from the Kasambahay for his/her recruitment and placement.17
c. Deployment Expenses. - The employer, whether the Kasambahay is hired directly or
through a PEA, shall pay the expenses directly used for his/her transfer from place of origin to the
place of work. The employer may recover deployment costs from the Kasambahay whenever he/she
leaves without justifiable reason within six (6) months from employment.18
"Deployment expenses" refers to expenses that are directly used for the transfer of the
Kasambahay from place of origin to the place of work covering the cost of transportation, meals,
communication expense, and other incidental expenses. Advances or loans by the Kasambahay are not
included in the definition of deployment expenses.19
6. PRE-EMPLOYMENT REQUIREMENT.
Prior to the execution of the employment contract, the employer may require the following from
the Kasambahay:
(a) Medical certificate or a health certificate issued by a local government health officer;
(b) Barangay and police clearance;
(c) National Bureau of Investigation (NBI) clearance; and
(d) Duly authenticated birth certificate or, if not available, any other document showing the
age of the Kasambahay such as voter’s identification card, baptismal record or passport.

The foregoing shall be the standard requirements when the employment of the Kasambahay is
facilitated through a PEA.
 The cost of the foregoing shall be borne by the prospective employer or agency,20 as the case
21
may be.
7. WRITTEN EMPLOYMENT CONTRACT.
a. The employment contract must be in writing and should contain the conditions set by
law.
To make the relationship between the employer and the kasambahay more formal, R.A. No.
1036122 requires that a written contract of employment be executed between them. This is a very
significant improvement since not even the Labor Code requires the execution of a written instrument in
order to create or establish an employer-employee relationship. It is a well-established rule that such
relationship need not be documented by a written contract. Once the elements of the
employeremployee relationship are determined and established, it is immaterial whether such relationship
was created verbally or in writing.
b. Contents of the employment contract.
Before the commencement of the service, a written employment contract between the
Kasambahay and the employer shall be accomplished in three (3) copies. The contract shall be in a
language or dialect understood by both the Kasambahay and the employer, and shall include the
following:

(a) Duties and responsibilities of the Kasambahay, including the responsibility to render
satisfactory service at all times;
(b) Period of employment;
(c) Compensation;
(d) Authorized deductions;
(e) Hours of work and proportionate additional payment;
(f) Rest days and allowable leaves;
(g) Board, lodging and medical attention;
(h) Agreements on deployment expenses, if any;
(i) Loan agreement, if any;
(j) Termination of employment; and
(k) Any other lawful condition agreed upon by both parties. If the Kasambahay is below 18
years old, the employment contract shall be signed by his/her parent or lawful guardian
on his/her behalf.23

Upon the request of either party, the Punong Barangay or his/her designated officer shall read
and explain the contents of the contract to both parties and shall serve as its witness.24
c. Standard employment contract. - The employment contract shall conform to the DOLE
Standard Employment Contract (Kontrata sa Paglilingkod sa Tahanan) or Form BK-1.25
d. Distribution of copies of employment contract. - The employer shall have the obligation
to furnish a copy of the employment contract to the Kasambahay and to the Office of the Punong
Barangay in the barangay where the employer resides.26
e. Renewal of Contract. - Should the parties mutually agree to continue their employment
relationship upon expiration of the contract, they shall execute a new contract to be registered with the
concerned barangay. However, if the parties fail to execute a new contract, the terms and conditions of
the original contract and other improvements granted during the effectivity of said contract are deemed
renewed.27
f. Domestic workers cannot acquire regularity of employment under R.A. No. 10361.
Despite the repeal of the entire chapter of the Labor Code on Househelpers by R.A. No.
10361, all the indicia of regularity of employment remain absent in the employment of domestic
helpers. The following factors clearly show that domestic helpers can never become regular employees:
1. By express provision of the law, the employment contracts of Kasambahays are for fixed or
definite term.28 They do not fix the period of employment nor put a cap on their duration,
unlike in Article 142 of the Labor Code.29
2. The law does not recognize any probationary employment of Kasambahays;30
 3. The Kasambahays are not included in the concept of regular employment under Article 280
(Regular and Casual Employment) of the Labor Code;31
4. The Kasambahays are not entitled to the reliefs provided under Article 279 of the Labor
Code such as “reinstatement without loss of seniority rights and other privileges and to
his/her full backwages, inclusive of allowances, and to his/her other benefits or their
monetary equivalent computed from the time his/her compensation was withheld from
him/her up to the time of his/her actual reinstatement”;32
5. The Kasambahays’ enjoyment of security of tenure holds true only during the effectivity of
their fixed-term employment;33
6. The employment of Kasambahays ceases upon the expiration of the fixed term thereof;34
7. The contract of employment of Kasambahays is terminable by mere notice, a clear
indication that the employment is not regular in nature;35
8. The Kasambahay is given the right to pre-terminate the employment contract.36
8. RIGHTS AND PRIVILEGES OF KASAMBAHAY.
The rights and privileges37 of the Kasambahay are as follows:
(a) Minimum wage;
(b) Other mandatory benefits, such as the daily and weekly rest periods, service incentive
leave, and 13 month pay;
th

(c) Freedom from employers' interference in the disposal of wages;

(d) Coverage under the SSS, PhilHealth and Pag-IBIG laws;
(e) Standard of treatment;
(f) Board, lodging and medical attendance;
(g) Right to privacy;
(h) Access to outside communication;
(i) Access to education and training;
(j) Right to form, join, or assist labor organization;
(k) Right to be provided a copy of the employment contract;
(I) Right to certificate of employment;
(m) Right to terminate the employment; and
(n) Right to exercise their own religious beliefs and cultural practices.38
The foregoing rights and privileges are discussed below.
9. MINIMUM WAGE.
a. Amount of minimum wages.
The citation in the syllabus of R.A. No. 7655,39 as part of the materials on this topic is no
longer appropriate in the light of the new set of minimum wage rates prescribed in R.A. No.
10361,40 thus:
“SEC 24. Minimum Wage. - The minimum wage of domestic workers shall not be less
than the following:
(a) Two thousand five hundred pesos (P2,500.00) a month for those employed in
the National Capital Region (NCR) ;
(b) Two thousand pesos (P2,000.00) a month for those employed in chartered cities
and first class municipalities; and
(c) One thousand five hundred pesos (P1,500.00) a month for those employed in
other municipalities.
“After one (1) year from the effectivity of this Act, and periodically thereafter, the
Regional Tripartite and Productivity Wage Boards (RTPWBs) shall review, and if proper,
41
determine and adjust the minimum wage rates of domestic workers.”
b. Some important principles on wage.
Frequency of payment of wages. - The wages of the Kasambahay shall be paid at
least once a month.42 This is so because the minimum wage rates are on a monthly
basis.43
The equivalent minimum daily wage rate of the Kasambahay shall be determined by
dividing the applicable minimum monthly rate by thirty (30) days.44
 The amount of the minimum wage depends on the geographical area where
the Kasambahay works.45
Payment of wages:
1. To whom paid. - It should be made on time directly to the Kasambahay to whom
they are due in cash at least once a month.46
2. Deductions, prohibition; when allowed. - The employer, unless allowed by
the Kasambahay through a written consent, shall make no deductions from the wages
other than that which is mandated by law47 such as for SSS, Philhealth or Pag-IBIG
contributions.48

Deduction for loss or damage shall only be made under the following conditions:
(a) The Kasambahay is clearly shown to be responsible for the loss or damage;
(b) The Kasambahay is given reasonable opportunity to show cause why deduction
should not be made;
(c) The total amount of such deductions is fair and reasonable and shall not exceed
the actual loss or damage; and
(d) The deduction from the wages of the Kasambahay does not exceed 20% of
his/her wages in a month.
The DOLE shall extend free assistance in the determination of fair and
reasonable wage deductions.49
3. Mode of payment. - It should be paid in cash and not by means of promissory
notes, vouchers, coupons, tokens, tickets, chits, or any object other than the cash
wage as provided for under this Act.50
4. Pay slip. - The employer shall at all times provide the Kasambahay with a copy of
the pay slip containing the amount paid in cash every pay day, and indicating all
deductions made, if any. The copies of the pay slip shall be kept by the employer for
a period of three (3) years.51
5. Prohibition on Interference in the disposal of wages. - It shall be unlawful for the
employer to interfere with the freedom of the Kasambahay in the disposition of
his/her wages, such as:
(a) Forcing, compelling, or obliging the Kasambahay to purchase merchandise,
commodities or other properties from the employer or from any other person; or
(b) Making use of any store or services of such employer or any other person.52
6. Prohibition against withholding of wages. - It shall be unlawful for an employer,
directly or indirectly, to withhold the wages of the Kasambahay. If
the Kasambahay leaves without any justifiable reason, any unpaid salary for a period
not exceeding fifteen (15) days shall be forfeited. Likewise, the employer shall not
induce the Kasambahay to give up any part of the wages by force, stealth,
intimidation, threat or by any other means whatsoever.53
10. TERMS AND CONDITIONS OF EMPLOYMENT.
The following is a rundown of the basic terms and conditions that should be observed in the
employment of a Kasambahay:
a. Employable age. - Children whose age is below 15 years are absolutely prohibited to
work as Kasambahay.54
b. Normal daily hours of work. - Because R.A. No. 10361 does not contain any provision
on the number of normal hours of work that aKasambahay should render in a day but
merely prescribes said daily rest period of eight (8) hours per day, it may be concluded that
theKasambahay should work for at least a total of sixteen (16) hours per day as normal
hours of work. However, it must be noted that the Labor Code does not contain any
provision on the normal hours of work of househelpers. Article 1695 of the Civil Code,
however, specifically provides that househelpers shall not be required to work for more
 than ten (10) hours a day. Since R.A. No. 10361, a special law, is the most recent piece of
legislation, it should prevail over the general provision of the Civil Code.
c. Normal daily hours of work for working child-kasambahay is eight (8) hours per
day.55
d. 13 month pay. - The Kasambahay who has rendered at least one (1) month of service is
th

entitled to a 13 month pay which shall not be less than one-twelfth (1/12) of his/her total
th

basic salary earned in a calendar year. The 13 month pay shall be paid not later than
th

December 24 of every year or upon separation from employment.56

e. Daily rest period. - The Kasambahay shall be entitled to an aggregate daily rest period of
eight (8) hours per day.57
f. Weekly rest period. - The Kasambahay shall be entitled to at least twenty-four (24)
consecutive hours of rest in a week. The employer and the Kasambahay shall agree in
writing on the schedule of the weekly rest day but the preference of the Kasambahay, when
based onreligious grounds, shall be respected.58 Nothing in this provision shall deprive the
Kasambahay and the employer from agreeing to the following:
(1) Offsetting a day of absence with a particular rest day;
(2) Waiving a particular rest day in return for an equivalent daily rate of pay;
(3) Accumulating rest days not exceeding five (5) days; or
(4) Other similar arrangements.59
g. Service incentive leave. - A Kasambahay who has rendered at least one (1) year of
service shall be entitled to an annual service incentive leave of at least five (5) days with
pay. Any unused portion of said annual leave shall not be cumulative or carried over to the
succeeding years. Unused leaves shall not be convertible to cash.60
h. Social security benefits. - A Kasambahay who has rendered at least one (1) month of
service shall be covered by the Social Security System (SSS) , Employees Compensation
Commission (ECC) , Philippine Health Insurance Corporation (PhilHealth) , and Home
Development Mutual Fund or Pag-IBIG, and shall be entitled to all the benefits in
accordance with their respective policies, laws, rules and regulations.61
Benefits under the SSS include sickness, maternity, disability, retirement, death and
funeral. A unified benefit package under PhilHealth includes Inpatient Hospital Care and
Outpatient Care.62

Mandatory premium payments or contributions shall be shouldered by the employer.

However, if the Kasambahay is receiving a monthly wage rate of Five Thousand Pesos
(P5,000.00) and above, the Kasambahay shall pay the proportionate share in the premium
payments or contributions, as provided by law.63
In the event the Kasambahay avails of certain loan privileges from Pag-IBIG Fund which
require the payment of additional or upgraded contributions, the said additional or
upgraded contributions shall be shouldered solely by the Kasambahay.64
The SSS, Pag-IBIG and PhilHealth shall develop a unified system of registration and
enrollment within six (6) months from the promulgation of this IRR.65
Obligation of employer to register and enrol with SSS, PhilHealth, and Pag-IBIG. -
As employer of the Kasambahay, he/she shall register himself/herself with, and enroll the
latter as his/her employee to the SSS, PhilHealth, and Pag-IBIG.66
i. Loan assistance. - An employer may agree to extend loan assistance to the Kasambahay
in an amount not exceeding his/her six (6) months' salary. This provision shall not apply to
working children.67
j. Deduction for loans. - By written agreement, the employer may deduct the loans from
the wages of the Kasambahay, which amount shall not exceed 20% of his/her wages every
month.68
k. Deposits for loss or damage. - It shall be unlawful for the employer or any other person
to require a Kasambahay to make deposits from which deductions shall be made for the
reimbursement of loss or damage to tools, materials, furniture and equipment in the
household.69
11. OTHER TERMS AND CONDITIONS OF EMPLOYMENT.
In addition to the foregoing, the following terms and conditions are mandated under R.A. No.
10361:
a. Standard of treatment. - The Kasambahay shall be treated with respect by the employer or
any member of the household. He/she shall not be subjected to any kind of abuse, including repeated
verbal or psychological, nor be inflicted with any form of physical violence or harassment or any act
tending to degrade his/her dignity, as defined under the Revised Penal Code, Violence Against Women
and their Children Law (R.A. No. 9262) , Special Protection of Children Against Child Abuse,
Exploitation and Discrimination Act (R.A. No. 7610) as amended by R.A. No. 9231, Anti-Trafficking
in Persons Act of 2003 (R.A. No. 9208) , and other applicable laws.70
b. Board, lodging and medical attendance. - The employer shall provide for the basic
necessities of the Kasambahay, to include the following:
(1) At least three (3) adequate meals a day, taking into consideration the Kasambahay's
religious beliefs and cultural practices;
(2) Humane sleeping condition that respects the person's privacy for live-in arrangement; and
(3) Appropriate rest and medical assistance in the form of first-aid medicines, in case of
illnesses and injuries sustained during service without loss of benefits.
For the Kasambahay under live-out arrangement, he/she shall be provided space for rest and
access to sanitary facility. At no instance shall the employer withdraw or hold in abeyance the
provision of these basic necessities as punishment to, or disciplinary action against, the Kasambahay.71
c. Guarantee of privacy. - The employer shall, at all times, respect the right of the
Kasambahay to privacy, which shall extend to all forms of communication and personal effects.72
d. Access to outside communication. - During free time, the Kasambahay shall be granted
access to outside communication. In case of emergency, access to communication shall be granted even
during working time. Should the Kasambahay use the employer's telephone or other communication
facilities, the costs shall be borne by the Kasambahay, unless waived by the employer.73
e. Prohibition against privileged information. - All communication and information
pertaining to the employer or members of the household shall be treated as privileged and confidential,
and shall not be publicly disclosed by the Kasambahay during and after employment. Such privileged
information shall be inadmissible in evidence, except when the suit involves the employer or any
member of the household in a crime against persons, property, personal liberty and security and
chastity.74
f. Opportunities for education and training. - The Kasambahay shall be afforded the
opportunity to finish basic education, which shall consist of elementary and secondary education.
He/she may be allowed access to alternative learning systems and, as far as practicable, higher
education or technical vocational education and training.
The employer shall adjust the work schedule of the Kasambahay to allow his/her access to
education or training without hampering the services required by the employer. Access to education may
include financial assistance at the option of the employer.
The Department of Education (DepEd) shall ensure continued access of the Kasambahay to
alternative learning system education.75
g. Membership in labor organization. - The Kasambahay shall have the right to join a labor
organization of his/her own choosing for purposes of mutual aid and collective negotiation. The
Kasambahay shall be afforded opportunity to attend organization meetings during free time.76
h. Health and safety. - The employer shall safeguard the safety and health of the
Kasambahay in accordance with the standards which the DOLE shall develop through the Bureau of
Working Conditions (BWC) and the Occupational Safety and Health Center (OSHC) within six (6)
months from the promulgation of this IRR. The said standards shall take into account the peculiar
nature of domestic work.77
i. Prohibition on debt bondage. - It shall be unlawful for the employer or any person acting
on his/her behalf to place the Kasambahay under debt bondage.78 “Debt bondage” refers to the
rendering of service by the Kasambahay as security or payment for a debt where the length and nature
of service is not clearly defined or when the value of the service is not reasonably applied in the
payment of the debt.79
j. Assignment to non-household work. - The employer shall not assign the Kasambahay to
work, whether in full or part-time, in a commercial, industrial or agricultural enterprise at a wage rate
lower than that provided for agricultural or non-agricultural workers.80
k. Extent of duty outside the household. - The Kasambahay and the employer may mutually agree
for the Kasambahay to temporarily perform a task for the benefit of another household under the following
conditions:
(a) There is an agreement between the Kasambahay and the employer for the purpose,
particularly on the tasks to be performed;
(b) The Kasambahay is entitled to additional payment of not less than the applicable minimum
wage rate:
(c) The original employer shall be responsible for any liability incurred by the Kasambahay on
account of such arrangement; and
(d) The original employer is not charging any amount from the other household for the
arrangement.
The temporary performance of work shall not exceed thirty (30) days per assignment. The other
household where the Kasambahay is temporarily assigned is solidarily liable with the original employer for
any non-payment of wages during such temporary assignment.
It shall be unlawful for the original employer to charge any amount from the said household
where the service of the Kasambahay was temporarily performed.81
Relevant cases re: Assignment to Non-household Work.
The following cases decided prior to R.A. No. 10361, are still relevant to this proscription in
the law:
(1) Apex Mining Company, Inc. v. NLRC . 82 - In this case, the High Court held that a
househelper in the staffhouses of an industrial company is considered a regular employee thereof. The
mere fact that the househelper is working within the premises of the business of the employer and in
relation to or in connection with its business, as in its staffhouses for its guest or even for its officers
and employees, warrants the conclusion that such househelper is and should be considered as a regular
employee of the employer and not as a mere family househelper or as contemplated in the law.83
(2) Remington Industrial Sales Corp. v. Castaneda. 84 - The same ruling as in Apex was
made in this case. Respondent worked at the company premises and her duty was to cook and prepare its
employees’ lunch and merienda. Clearly, the situs as well as the nature of respondent’s work as a cook, who
caters not only to the needs of Mr. Tan (Managing Director of petitioner) and his family but also to that of the
petitioner’s employees, made her fall squarely within the definition of a regular employee under the
doctrine enunciated in the Apex Mining case. That she works within company premises and that she does
not cater exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of the
petitioner’s right of control over her functions, which is the primary indicator of the existence of an
employer-employee relationship.
85
(3) Barcenas v. NLRC. - In this case, private respondent contends that petitioner was not
an employee but a servant at the Manila Buddhist Temple. The Supreme Court, however, disagreed. It
held that petitioner was a regular employee thereof considering that the work that she performed in
the temple could not be categorized as mere domestic work. Petitioner, being proficient in the
Chinese language, attended to the visitors, mostly Chinese, who came to pray or seek advice before
Buddha for personal or business problems; arranged meetings between these visitors and the Head
Monk and supervised the preparation of the food for the temple visitors; acted as tourist guide of
foreign visitors; acted as liaison with some government offices; and made the payment for the
temple's Meralco, MWSS and PLDT bills. Indeed, these tasks may not be deemed activities of a
household helper. They were essential and important to the operation and religious functions of the
temple.
12. STANDARDS FOR EMPLOYMENT OF WORKING CHILDREN.
a. Working children. - This term refers to Kasambahays who are fifteen (15) years old and
above but below eighteen (18) years old.86
b. General prohibition. - It shall be unlawful to employ any person below fifteen (15) years
of age as Kasambahay.87
c. Benefits of working children. - Working children shall be entitled to minimum wage,
and all benefits provided under R.A. No. 10361, the Batas Kasambahay, which include access to
education and training.88
d. Employment of working children. - Pursuant to R.A. No. 9231,89 working children shall
not be subjected to the following:
(1) Work for more than eight (8) hours a day and beyond forty (40) hours a week;
(2) Work between ten o'clock in the evening and six o'clock in the morning of the following
day; and
(3) Work which is hazardous or likely to be harmful to the health, safety or morals of children,
as defined under existing laws and regulations.90
13. TERMINATION OF KASAMBAHAY.
a. Pre-termination of employment. - The following rules shall be observed:
(1) In case the duration of employment is specified in the contract, the Kasambahay and the
employer may mutually agree upon notice to terminate the contract of employment before
the expiration of its term.91
(2) In case the duration is not determined by stipulation or by nature of service, the employer
or the Kasambahay may give notice to end the employment relationship five (5) days
before the intended termination of employment.92
b. Termination of employment initiated by the Kasambahay. - The Kasambahay may
terminate the employment relationship at any time before the expiration of the contract for any of the
following causes:
(1) Verbal or emotional abuse of the Kasambahay by the employer or any member of the
household;
(2) Inhuman treatment including physical abuse of the Kasambahay by the employer or any
member of the household;
(3) Commission of a crime or offense against the Kasambahay by the employer or any
member of the household;
(4) Violation by the employer of the terms and conditions of the employment contract and
other standards set forth in the law;
(5) Any disease prejudicial to the health of the Kasambahay, the employer, or members of the
household; and
(6) Other causes analogous to the foregoing.93
If the Kasambahay leaves without cause, any unpaid salary due, not exceeding the equivalent
of fifteen (15) days work, shall be forfeited. In addition, the employer may recover from the
Kasambahay deployment expenses, if any, if the services have been terminated within six (6) months
from employment.94
c. Termination of employment initiated by the employer. - An employer may terminate the
employment of the Kasambahay at any time before the expiration of the contract for any of the
following causes:
(1) Misconduct or willful disobedience by the Kasambahay of the lawful order of the
employer in connection with the former's work;
(2) Gross or habitual neglect or inefficiency by the Kasambahay in the performance of duties;
 (3) Fraud or willful breach of the trust reposed by the employer on the Kasambahay;
(4) Commission of a crime or offense by the Kasambahay against the person of the employer
or any immediate member of the employer's family;
(5) Violation by the Kasambahay of the terms and conditions of the employment contract and
other standards set forth under the law;
(6) Any disease prejudicial to the health of the Kasambahay, the employer, or members of the
household; and
(7) Other causes analogous to the foregoing.95
If the employer dismissed the Kasambahay for reasons other than the above, he/she shall pay
the Kasambahay the earned compensation plus indemnity in the amount equivalent to fifteen (15) days
work.96
d. Invalid ground for termination. - Pregnancy and marriage of the Kasambahay are not
valid grounds for termination of employment.97
e. Employment Certification. - Upon the termination of employment, the employer shall
issue the Kasambahay, within five (5) days from request, a certificate of employment indicating the
nature, duration of the service and work description.98

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
M. Employment of Homeworkers

M.
EMPLOYMENT OF HOMEWORKERS1
1. DEFINITIONS.
a. “Industrial homeworker. ” - It refers to a worker who is engaged in industrial
homework.2
b. “Industrial homework. ” - It refers to a system of production under which work for an
employer or contractor is carried out by a homeworker at his/her home. Materials may or may not be
furnished by the employer or contractor. It differs from regular factory production principally in that, it
is a decentralized form of production where there is ordinarily very little supervision or regulation of
methods of work.3
c. “Home. ” - Itmeans any nook, house, apartment or other premises used regularly, in whole
or in part, as a dwelling place, except those situated within the premises or compound of an employer,
contractor/subcontractor and the work performed therein is under the active or personal supervision by
or for the latter.4
d. “Field personnel. ” - It refers to a non-agricultural employee who regularly performs his
duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.5
e. “Employer. ” - It refers to any natural or artificial person who, for his own account or benefit,
or on behalf of any person residing outside the Philippines, directly or indirectly, or through any employee,
agent, contractor, subcontractor or any other person:
1. delivers or causes to be delivered any goods, articles or materials to be processed or
fabricated in or about a home and thereafter to be returned or to be disposed of or
distributed in accordance with his direction; or
2. sells any goods, articles or materials for the purpose of having such goods or articles
processed in or about a home and then repurchases them himself or through another after
such processing.
 f. “Contractor” or “subcontractor. ” - It refers to any person who, for the account or benefit
of an employer, delivers or causes to be delivered to a homeworker, goods or articles to be processed in
or about his home and thereafter to be returned, disposed of or distributed in accordance with the
direction of the employer.6
g. “Processing. ” - It refers to manufacturing, fabricating, finishing, repairing, altering,
packing, wrapping or handling in any way connected with the production or preparation of an article or
material.7
2. DUTIES OF EMPLOYER, CONTRACTOR OR SUBCONTRACTOR.
Whenever an employer contracts with another for the performance of the employer’s work, it
shall be the duty of such employer to provide in such contract that the employees or homeworkers of
the contractor and the latter’s subcontractor shall be paid in accordance with the provisions of the Rules
to Implement the Labor Code.8 In the event that such contractor or subcontractor fails to pay the wages
or earnings of his employees or homeworkers as specified in said Rules, such employer shall be jointly
and severally liable with the contractor or subcontractor to the workers of the latter, to the extent that
such work is performed under such contract, in the same manner as if the employees or homeworkers
were directly engaged by the employer. The employer, contractor or subcontractor shall assist the
homeworkers in the maintenance of basic safe and healthful working conditions at the homeworkers’
place of work.9

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
N. Apprentices and Learners

N.
APPRENTICES AND LEARNERS1
1. DISTINCTIONS BETWEEN LEARNERSHIP AND APPRENTICESHIP.
The following are the distinctions:
1. Practical training. Both learnership and apprenticeship involve practical training on-the-
job.
2. Training agreement. Learnership is governed by a learnership agreement; while
apprenticeship is governed by an apprenticeship agreement.
2. Occupation. Learnership involves learnable occupations consisting of semi-skilled and
other industrial occupations which are non-apprenticeable; while apprenticeship
concerns apprenticeable occupations or any trade, form of employment or occupation
approved for apprenticeship by the DOLE Secretary.
3. Theoretical instructions . Learnership may or may not be supplemented by related
theoretical instructions; while apprenticeship should always be supplemented by related
theoretical instructions.
4. Ratio of theoretical instructions and on-the-job training . For both learnership and
apprenticeship, the normal ratio is one hundred (100) hours of theoretical instructions for
every two thousand (2,000) hours of practical or on-the-job training. Theoretical
instruction time for occupations requiring less than two thousand (2,000) hours for
proficiency should be computed on the basis of such ratio.2
5. Competency-based system. Unlike in apprenticeship, it is required3 in learnership that it be
implemented based on the TESDA-approved competency-based system.4
 6. Duration of training. Learnership involves practical training on the job for a period not
exceeding three (3) months; while apprenticeship requires for proficiency, more
than three (3) months but not over six (6) months5 of practical training on the job.
7. Qualifications . The law does not expressly mention any qualifications for learners; while
the following qualifications are required to be met by apprentices under Article 59 of the
Labor Code:
(a) Be at least fourteen (14) years of age;
(b) Possess vocational aptitude and capacity for appropriate tests; and
(c) Possess the ability to comprehend and follow oral and written instructions.
8. Circumstances justifying hiring of trainees . Unlike in apprenticeship, in learnership, the
law, Article 74 of the Labor Code, expressly prescribes the pre-requisites before learners
may be validly employed, to wit:
(a) When no experienced workers are available;
(b) The employment of learners is necessary to prevent curtailment of employment
opportunities; and
(c) The employment does not create unfair competition in terms of labor costs or impair or
lower working standards.6
9. Limitation on the number of trainees . In learnership, a participating enterprise is allowed
to take in learners only up to a maximum of twenty percent (20%) of its total regular
workforce.7 No similar cap is imposed in the case of apprenticeship.
10. Option to employ. In learnership, the enterprise is obliged to hire the learner after the lapse
of the learnership period; while in apprenticeship, the enterprise is given only
an “option” to hire the apprentice as an employee.8
11. Wage rate . The wage rate of a learner or an apprentice is set at seventy-five percent
(75%) of the statutory minimum wage.9

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Chapter Three
LABOR STANDARDS
TOPICS PER SYLLABUS
O. Persons with disability (R.A. No. 7277, as amended by R.A. No. 9442)
a. Definition
b. Rights of persons with disability
c. Prohibition on discrimination against persons with disability
d. Incentives for employers

O.
PERSONS WITH DISABILITY
(R.A. No. 7277, as Amended by R.A. No. 9442)
1. LEGAL BASIS.
Prior to the advent of R.A. No. 7277,1 otherwise known as the “Magna Carta for Disabled
Persons,” the relevant provisions are found in the Labor Code on handicapped workers, namely:
Articles 78 to 81 thereof. R.A. No. 7277 is now the prevailing law. Subsequently, however, R.A. No.
94422was enacted for purposes, inter alia, of changing the title of R.A. No. 7277 to read as
the “Magna Carta for Persons with Disability,” and all references in the said law to “disabled
person” were likewise amended to read as “person with disability” or “PWD.” The
term “handicapped workers” therefore should no longer be used to describe persons with disability as this is
no longer legally correct.
a.
DEFINITION
1. DEFINITION OF IMPORTANT TERMS.
The following terms are specifically defined in the law:
1. “Persons with Disability” are those suffering from restriction or different abilities, as a
result of a mental, physical or sensory impairment, to perform an activity in the manner or
within the range considered normal for a human being.
2. “Impairment” refers to any loss, diminution or aberration of psychological, physiological,
or anatomical structure or function.
3. “Disability” means (1) a physical or mental impairment that substantially limits one or
more psychological, physiological or anatomical functions of an individual or activities of
such individual; (2) a record of such an impairment; or (3) being regarded as having such
an impairment.
4. “Handicap” refers to a disadvantage for a given individual, resulting from an impairment or a
disability that limits or prevents the function or activity that is considered normal given the age and
sex of the individual.
5. “Reasonable Accommodations” include: (1) improvement of existing facilities used by
employees in order to render these readily accessible to and usable by persons with
disability; and (2) modification of work schedules, reassignment to a vacant position,
acquisition or modification of equipment or devices, appropriate adjustments or
modifications of examinations, training materials or company policies, rules and
regulations, the provision of auxiliary aids and services, and other similar accommodations for
persons with disability.
6. “Marginalized Disabled Persons” or more appropriately, “Marginalized Persons with
Disability” refer to persons with disability who lack access to rehabilitative services and
opportunities to be able to participate fully in socio-economic activities and who have no
means of livelihood and whose incomes fall below the poverty threshold.
7. “Qualified Individual with a Disability” means an individual with a disability who, with or
without reasonable accommodations, can perform the essential functions of the employment
position that such individual holds or desires. However, consideration shall be given to the
employer’s judgment as to what functions of a job are essential, and if an employer has prepared
a written description before advertising or interviewing applicants for the job, this description shall
be considered evidence of the essential functions of the job.
8. “Covered Entity” means an employer, employment agency, labor organization or jointlabor
management committee.
b.
RIGHTS OF PERSONS WITH DISABILITY
1. EQUAL OPPORTUNITY FOR PWD.
Under the law,3 PWDs are entitled to equal opportunity for employment. Consequently, no
PWD shall be denied access to opportunities for suitable employment. A qualified employee with
disability shall be subject to the same terms and conditions of employment and the same compensation,
privileges, benefits, fringe benefits, incentives or allowances as a qualified able-bodied person.
Five percent (5%) of all casual emergency and contractual positions in the Departments of
Social Welfare and Development, Health, Education and other government agencies, offices or
corporations engaged in social development shall be reserved for PWDs.4
2. SHELTERED EMPLOYMENT FOR PWDS.
“Sheltered Employment” refers to the provision of productive work for PWDs through
workshops providing special facilities, income-producing projects or homework schemes with a view
to giving them the opportunity to earn a living thus enabling them to acquire a working capacity
required in open industry.
If suitable employment for PWDs cannot be found through open employment, the State shall
endeavor to provide it by means of sheltered employment. In the placement of PWDs in sheltered
employment, it shall accord due regard to the individual qualities, vocational goals and inclinations to
ensure a good working atmosphere and efficient production.5
3. VOCATIONAL REHABILITATION.
Consistent with the principle of equal opportunity for workers with disability and workers in
general, the State shall take appropriate vocational rehabilitation measures that shall serve to develop the
skills and potentials of PWDs and enable them to compete favorably for available productive and
remunerative employment opportunities in the labor market.
The State shall also take measures to ensure the provision of vocational rehabilitation and
livelihood services for PWDs in the rural areas. In addition, it shall promote cooperation and
coordination between the government and non-governmental organizations and other private entities
engaged in vocational rehabilitation activities.
The Department of Social Welfare and Development (DSWD) shall design and implement
training programs that will provide PWDs with vocational skills to enable them to engage in livelihood
activities or obtain gainful employment. The Department of Labor and Employment (DOLE) shall
likewise design and conduct training programs geared towards providing PWDs with skills for
livelihood.6
4. VOCATIONAL GUIDANCE AND COUNSELLING.
The DSWD shall implement measures providing and evaluating vocational guidance and
counselling to enable PWDs to secure, retain and advance in employment. It shall ensure the
availability and training of counsellors and other suitably qualified staff responsible for the vocational
guidance and counselling of PWDs.7
5. PWDS ARE ELIGIBLE FOR APPRENTICESHIP AND LEARNERSHIP.
Under R.A. No. 7277,8 it is provided that subject to the provisions of the Labor Code, as
amended, PWDs shall be eligible as apprentices or learners; provided that their handicap is not as much as to
effectively impede the performance of job operations in the particular occupation for which they are hired
and provided further that after the lapse of the period of apprenticeship, if found satisfactory in the job
performance, they shall be eligible for employment.
6. WAGE RATE.
Under Article 80 of the Labor Code, handicapped workers are entitled to not less than
seventy-five percent (75%) of the applicable adjusted minimum wage.9 In view, however, of R.A. No.
7277,10 the wage rate of PWDs is 100% of the applicable minimum wage.
Wage orders issued by the Regional Tripartite Wages and Productivity Boards (RTWPBs)
normally reflect this principle. To cite an example, Section 7 of Wage Order No. NCR-18 [effective
October 4, 2013] issued by RTWPB-National Capital Region states:
“All qualified handicapped workers shall receive the full amount of the minimum wage
rate prescribed herein pursuant to Republic Act No. 7277, otherwise known as the Magna
11
Carta for Disabled Persons. ”
Moreover, in case of legally-mandated wage increases enunciated in wage orders issued by
the RTWPBs, the employment agreements with persons with disability are deemed automatically
modified insofar as their wage clauses are concerned to reflect the said increases.12
7. WAGE RATE AS APPRENTICE OR LEARNER.
A PWD hired as an apprentice or learner shall be paid not less than seventy-five percent (75%)
of the applicable minimum wage.
If the PWD, however, is hired as a learner and employed in piece or incentive-rate jobs during
the training period, he shall be paid one hundred percent (100%) of the applicable minimum wage.
c.
 PROHIBITION ON DISCRIMINATION
AGAINST PERSONS WITH DISABILITY
1. DISCRIMINATION ON EMPLOYMENT PROHIBITED.
No entity, whether public or private, shall discriminate against a qualified PWD by reason of
disability in regard to job application procedures, the hiring, promotion, or discharge of employees,
employee compensation, job training, and other terms, conditions and privileges of employment. The
following constitute acts of discrimination:
(a) Limiting, segregating or classifying a job applicant with disability in such a manner that
adversely affects his work opportunities;
(b) Using qualification standards, employment tests or other selection criteria that screen out
or tend to screen out a PWD unless such standards, tests or other selection criteria are
shown to be job-related for the position in question and are consistent with business
necessity;
(c) Utilizing standards, criteria, or methods of administration that:
(1) have the effect of discrimination on the basis of disability; or
(2) perpetuate the discrimination of others who are subject to common administrative
control.
(d) Providing less compensation, such as salary, wage or other forms of remuneration and
fringe benefits, to a qualified employee with disability, by reason of his disability, than
the amount to which a non-disabled person performing the same work is entitled;
(e) Favoring a non-disabled employee over a qualified employee with disability with respect
to promotion, training opportunities, study and scholarship grants, solely on account of
the latter’s disability;
(f) Re-assigning or transferring an employee with a disability to a job or position he cannot
perform by reason of his disability;
(g) Dismissing or terminating the services of an employee with disability by reason of his
disability unless the employer can prove that he impairs the satisfactory performance of
the work involved to the prejudice of the business entity; provided, however, that the
employer first sought to provide reasonable accommodations for persons with disability;
(h) Failing to select or administer in the most effective manner employment tests which
accurately reflect the skills, aptitude or other factor of the applicant or employee with
disability that such tests purports to measure, rather than the impaired sensory, manual or
speaking skills of such applicant or employee, if any; and
(i) Excluding PWD from membership in labor unions or similar organizations.13
d.
INCENTIVES FOR EMPLOYERS
1. INCENTIVES FOR EMPLOYERS WHO EMPLOY PWDs.
To encourage the active participation of the private sector in promoting the welfare of PWDs
and to ensure gainful employment for qualified PWDs, adequate incentives shall be provided to private
entities which employ PWDs.14
Private entities that employ PWDs who meet the required skills or qualifications, either as a
regular employee, apprentice or learner, shall be entitled to an additional deduction from their gross
income equivalent to twenty-five percent (25%) of the total amount paid as salaries and wages to
PWDs; provided, however, that such entities could present proof as certified by the Department of
Labor and Employment (DOLE) that PWDs are under their employ and provided further that the
employee with disability is accredited with the DOLE and the Department of Health (DOH) as to his
disability, skills and qualifications. 15
2. INCENTIVES TO ENTITIES THAT IMPROVE OR MODIFY THEIR PHYSICAL
FACILITIES.
Private entities that improve or modify their physical facilities in order to provide reasonable
accommodation for PWDs shall also be entitled to an additional deduction from their net taxable
income equivalent to fifty percent (50%) of the direct costs of the improvements or modifications. This
Section, however, does not apply to improvements or modifications of facilities required under Batas
Pambansa Bilang 344 [February 25, 1983], entitled“An Act to Enhance the Mobility of Disabled
Persons by Requiring Certain Buildings, Institutions, Establishments, and Public Utilities to Install
Facilities and Other Devices.” 16

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