Working With Labor Laws
The policy of the State to give maximum aid and protection
to labor is embodied in Article 3 of the Labor Code as follows:
Art. 3. Declaration of Basic Policy: The State shall af-
ford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed
and regulate the relations between workers and employ-
ers. The State shall assure the rights of workers to
self-organization, collective bargaining, security of ten-
ure, and just and humane conditions of work.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every dispute will be automatically decided in
favor of labor. The employer, or management, also has rights
which are entitled to respect and enforcement in the interest of
simple fair play. Although the Supreme Court has been more
often inclined toward the employee and has upheld his cause in
his conflicts with the employer, such favoritism has not blinded
the Supreme Court to rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts
and the applicable lawand doctrine."
II. A LIBERAL INTERPRETATION OF THE LABOR CODE
AND ITS IMPLEMENTING RULES
Under the policy of social justice, the law bends over backwards
to accommodate the interests of the working class on the hu-
have more privileges in ~
-----
"'----- ~--
mane justification that those with less privileges in life should
law." Thus, when conflicting interests
. of
labor and capital are weighed on the scales of social justice, the
3 Cruz P. 11011. Mml/nn, 01 al., G.R. No. 73053, 15 September 1989.
II Dttnn /I. "lIfII/lllilll' Ooorseas and Employment Administration et al.,
:.H. Nil. '/11'1/)0. :\ I)m;('mbcr 1990.
General Principles of the Labor Code 3
(b.eavier influence of the employer should be counter-balanced by
the law which must accord sympathy and compassion to the
underprivileged employee]
As such, any doubt concerning the rights of labor should be
resolved in favor of labor, pursuant to the social justice policy. 6
A. Liberal Interpretation Only in Case of Doubt
The mandate of the law is that all doubts in the implementation
and interpretation of the provisions of the Labor Code and its
Implementing Rules and Regulations should be ~~.lp favor
----~
of labor,"
For example, although the New Rules of Procedure of the
National Labor Relations Commission (NLRC) provides that the
submission of position papers of the employer and the employee
shall be simultaneous, the delay of the employee in the submis-
sion of his position paper is not a ground for the dismissal of his
complaint. This stance is in accord with the policy of the Labor
Code, which resolves all doubts in the interpretation of the law
and its implementing rules and regulations in favor of labor. 8
B. Where the Law is Clear, the Law
is to be Applied to the Facts of the Case
The doctrine of liberal construction cannot be applied where
the law invoked is clear, unequivocal and leaves no room for
interpretation or construction. Where the law is clear, it should
5 Philippine Telegraph and Telephone Corporation u. National Labor Rela-
tions Commission, 183 SCRA451 [1990].
6 Marcopper Mining Corporation u. National Labor Relations Commis-
sion, et aI., G.R. No. 103525, 29 March 1996.
7 Article 4, Labor Code; Section 3, Preliminary Provisions, Omnibus
Rules Implementing the Labor Code.
8 Fern's Elegance Lodging House, et al. u. Hon. Murillo, et al., G.R. Nos.
117442-43, 11 January 1995.
4 Working With labor laws
be applied to the facts of the case. Otherwise, it will contravene
the purpose for which the law was enacted, and will defeat the
ends which it seeks to attain. 9
For example, where the law expressly excluded services ren-
dered on a per diem basis in crediting the length of service for
retirement purposes, the said services cannot be included in the
computation of retirement benefits on the ground that laws
should be construed in favor of employees.t?
Furthermore, to disregard the employer's own rights and
interests solely on the basis of concern and solicitude for labor
is unjust and unacceptable.!' Justice is not fully served by sus-
taining the contention of the poor simply because he is poor.
Justice is done by properly applying the law regardless of the
station in life of the contending parties.P
III. PRINCIPLE OF NON-DIMINUTION OF BENEFITS
In order to further protect the interest of employees and pro-
mote social justice, the principle of non-diminution of benefits
is embodied in Article 100 of the Labor Code.
The principle of non-diminution of benefits prohibits the
elimination of supplements or other benefits already enjoyed by
the employees under existing laws, decrees, executive orders,
company policy or practice, or any agreement or contract be-
tween the employer and employees.P
In other words, supplements or benefits enjoyed by employ-
ees by virtue of:
9 Government Service Insurance System v. Civil Service Commission, et
al., G.R. No. 98395, 28 October 1994.
10 Ibid.
11 Soriano v. Offshore Shipping and Manning Corporation, et aI., G.R. No.
78409, 14 September 1989.
12 Villavilla, et al. v. Court of Appeals, et al., G.R. No. 79664, 11 August
1992.
1:1 M( iele 100, Labor Code; American Express Philippines Local Employ-
I\S.'1or;/ntion u. Leogardo, et a/., G.R. No. 75906, 18 May 1993.
111.'11
General Principles of the labor Code 5
1. law;
2. an agreement between the employer and the employee;
and
3. those which have ripened into company practice can no
longer be unilaterally withdrawn, reduced, diminished,
discontinued or eliminated by the employer.
A. Meaning of Supplements or Benefits
Supplements or benefits constitute extra remuneration. They
are special privileges given to or received by the employees over
and above their ordinary earnings or wages.!"
Supplements or benefits include, but are not restricted to:lS
1. pay for vacation and special holidays not worked;
2. paid sick leave;
3. overtime rate in excess of what is required by law;
4. profit-sharing;
5. family allowances;
6. Christmas and cost-of-living bonuses; or
7. bonuses other than those paid as a reward for extra
output or time spent on the job.
B. Indicators that Benefits have Ripened
into Company Practice
In order that benefits may be deemed to have ripened into
company practice, the following indicators are considered.!"
1. the employer's knowledge that he is not required to
extend such benefit to his employees;
14 States Marine Corporation and Royal Line Inc. v. Cebu Seamen's Asso-
ciation, G.R. No. L-12444, February 28, 1963.
15 Philippine National Bank v. Philippine National Bank Employees' Asso-
ciation, et al., G.R. No. L-30279, 30 July 1982.
16 Republic Planters Bank v. National Labor Relations Commission, G.R.
No. 117460,6 January 1997; Manila Electric Company v. Secretary of
.R. No. 12758,27 January] 999.
6 Working With labor laws
2. the granting of the benefits is consistent and deliberate;
and
3. the employer continues to grant his employees the ben-
efit for several years.
The considerable length of time that benefits have been
granted by the employer to the employees indicates a ~_
'!~ voluntary act on its Rart, sufficient in itself to negate any
claim of a mistake."?
For example, where the employer, for a period of six years,
freely, voluntarily and continuously included in.the computation
of his employees' 13th-month pay, the payments for sick, vaca-
tion and maternity leaves, premiums for work done on rest days
and special holidays, and pay for regular holidays, while the
"13th-Month Pay Law" requires only a month's basic salary as
13th-month pay, the considerable length of time that the pay-
ment for leaves and premiums for rest days and holidays was
included by the employer in the computation of the 13th-month
pay indicates a unilateral and voluntary act on the part of the
employer, sufficient in itself to negate any claim of mistake. As
such, a company practice favorable to the employees has been
established and has ripened into a benefit enjoyed by them.
Under the principle of non-diminution of benefits, this benefit
cannot be reduced, diminished, discontinued or eliminated by
the employer.l"
IV. PREROGATIVE OF MANAGEMENT TO REGULATE
All ASPECTS OF EMPLOYMENT
AND THE CONDUCT OF ITS BUSINESS
Even as the law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise what are clearly
17 Davao Fruits Corporation v. Associated Labor Unions (ALU),
No. 85073, 24 August 1993.
I n Ibid.
General Principles of the labor Code 7
management prerogatives. This is also known as the free will of
the employer to conduct his own business affairs to achieve his
purpose. 19
An employer is free.to regulate, according to his own discre-
tion and judgment, all aspects of employment, includingr'"
1. hiring;
2. work assignments;
3. working methods;
4. time, place and manner of work;
5. tools to be used;
6. processes to be followed;
7. supervision of employees;
8. working regulations;
9. transfer of employees;
10. work supervision;
11. the lay-off of employees; arid
12. the discipline, dismissal and recall of work.
Management prerogative is based on the established rule
that the labor law does not authorize the substitution of the
judgment of the employer in the conduct of his business. Every
business enterprise endeavors to increase its profits. In the pro-
cess, the employer may adopt or devise means designed toward
that goal.
Management prerogative may be availed of without fear of
any liability so long as the following conditions are met.?'
1. It is exercised in good faith for the advancement of the
)1 -- -
employer's interest and not for the purpose of defeating
or circumventing the rights of employees under special
laws or a valid agreement; and
19 Yap v. Hon. Inciong, et al., G.R. No. 51314, 21 June 1990.
20 San Miguel Brewery Sales Force Union (PTGWO) v. Hon. Ople, et al.,
et al., G.R. G.R. No. 53515, 8 February 1989.
21 Ibid; Wise and Co., Inc. v. Wise & Co., Inc. Employees Union-Natu, et
al., G.R. No. 87672, 13 October 1989.
8 Working With labor laws
2. It is not exercised in a malicious, harsh" oppressive,
vindictive or wanton manlier or out of malice or spite.
A. Management Prerogative to Hire and Fire Personnel
The hiring and firing of personnel is a management~t _ not involve a demotion in rank or a diminution of his salaries,
However, it is not without limitation. The limitation is embod-
ied in the constitutional requirement for the protection of labor
and the promotion of social justice, which tilts the scales of
justice, whenever there is doubt, in favor of the employee.P
Moreover, with regard to the dismissal of employees, cer-
tain mandatory requirements laid down by the law must be
complied with to ensure that this management prerogative is
exercised without ~i-tFa-r-i-rress>or abuse ofCOiscreticm Hence,
both the reason for dismissal and the manner of dismissing an
employee must be appropriate. Otherwise, the termination itself
is gravely defective and may be declared unlawful. This is be-
cause an employee's job is considered a property right and is
therefore within the constitutional mantle of protection that eno
person shall be deprived of life, liberty or property without due
process of law; nor shall any person be denied the equal protec-
tion of the laws~'23
B. Management Prerogative to Transfer Personnel
It is the employer's prerogative, based on his assessment of his
employees' qualifications, aptitudes, and competence, to move
the employees around in the various areas of his business opera-
tions so that they will function with maximum benefit to the
22 Employees Association of the Philippine American Life Insurance Com-
pany (EMAPALICO), et al. v. National Labor Relations Commission, et
aI., G.R. No. 82976, 26 July 1991.
23 Brahm Industries, Inc. v. National Labor Relations Commission, et al.,
G.R. No. 118853, 16 October 1997.
General Principles of the labor Code 9
company. An employee's right to security of tenure does not
} ,
give him such a vested right in his position as would deprive the
employer of his prerogative to change his assignment or transfer
him where he will be most useful. When his transfer is not
unreasonable, inconvenient, or prejudicial to him, and if it does
benefits, and other privileges, the employee may not complain
that the transfer amounts to a constructive dismissal. 24
However, like all other rights, there are limits. The manage-
ment prerogative to transfer personnel must be exercised without
grave abuse of discretion, but by putting to mind the basic
elements of justice and fair play. This is because having the right
should not be confused with the manner in which that right
must be exercised. Thus, the transfer of employees cannot be
used as a subterfuge by the employer to rid himself of an unde-
sirable employee or to penalize an employee for his union activities
and thereby defeat his right to self-organization. 25
24 Cruz v. Ron. Medina, et al., G.R. No. 73053, 15 September 1989.
25 Philippine Telegraph and Telephone Corporation v. Laplana, et al., G.R.
No. 76645,23 July 1991.
 Employment Relationship v. Independent Contractorship 11

2 performed reserves a right to control not only the end to be

achieved, but also the means to be used in reaching such end:
generally assumes primacy in the overall consideration of whether
EMPLOYMENT
or not an employer-employee relationship exists between the
RELATIONSHIP V.
INDEPENDENT
CONTRACTORSHIP u-I
parties."
If the power to control the employee's conduct is absent, no
employment relationshipmay b~nsidered as existing between
the parties." The power to control the ~mployee'~ conduCt is
deemed to be such an important factor that the other requisites
(selection and engagement of employee, payment of wages and
power of dismissal) may even be disregarded. 5

I. WHEN AN EMPLOYMENT RELATIONSHIP IS PRESENT

B.l. Sufficiency of the mere existence of the power to control
An employee is defined as a person who performs services for The power of control refers to the existence of the power to
an employer in which either or both mental and physical efforts control the employee's conduct and not necessarily to the actual
are used and who receives compensation for such services, where exercise of that power. In other words, it is not essential for the
there is an employer-employee relationship." employer to actually supervise the performance of duties of the
employee; it is enough that the employer has the right to wield
A. The Fourfold Test that power" in order that an employer-employee relationship
may be considered as existing between the parties.
To determine the existence of an employer-employee relation-
ship, the following fourfold test is applied:"
II. NO EMPLOYMENT RELATIONSHIP:
1. the selection and engagement of the employee;
INDEPENDENT CONTRACTORSHIP
2. the payment of wages;
3. the po;'er of dismissal; and There may be cases when an independent contractors hip and
4. the power to control the employee's conduct. not an employment relationship exists between the parties.
An independent contractor is one who has contracted to
B. The Right-of-Control Test do the work according to his own methods and without being

The power to control the employee's conduct or the right-of-

control test [where the person for whom the services are
1 Villavilla, et al. v. Court of Appeals, et aI., G.R. No. 79664, 11 August
1992.
2 Escario v. National Labor Relations Commission, G.R. No. 124055, 8
June 2000.
3 Villuga, et al. v. National Labor Relations Commission, et al., G.R. No.
75038, 23 August 1993.
4 Sara, et al. v. Agarrado, et al., G.R. No. L-73199, 26 October 1988.
5 Sandigan Savings and Loan Bank, Inc., et a!. v. National Labor Relations
Commission, G.R. No. 112877, 26 February 1996.
6 Equitable Banking Corporation v. National Labor Relations Commission,
273 SeRA 352.

10
 Working With labor laws
ubjcct to the control of the employer except as to the result
the work.?
A. Test of an Independent Contractorship
In determining whether the relationship is that of employer and
employee or one of an independent contractor, each case must
be determined on its own facts and all the features of the rela-
tionship considered."
The significant factor in determining the relationship of the
parties is the presence or absence of a supervisory_.Row~
control the method and_detail of performance of the seryice,
and the degree to which the~erson for whom the services are
performed may intervene to exercise such control. The presence
of the power of control is indicative of an employment relation-
ship and the absence of such power is indicative of independent
contractorship.?
In other words, where the person for whom the services are
performed, or the principal, reserves the right to control both
the end to be achieved and the manner and means to be used in
reaching the end, an employer-employee relationship exists be-
tween the parties. Where the principal is interested only in the
end to be achieved or the results of the work, an independent
contractor relationship exists between the parties.
A.l. Not every form of control will establish
an employment relationship.
The principal may establish guidelines to be followed by the
person whose services are engaged. This will not necessarily
create an employment relationship between them because not
7 Yiliuga, et al. v. National Labor Relations Commission, et aI., G.R. No.
75038, 23 August 1993.
8 Ibid.
9 AFP Mutual Benefit Association, Inc. v. National Labor Relations Com-
mission, G.R. No. 102199,28 January 1997.
Employment Relationship v. Independent Contractorship 13
every form of control that the principal reserves to himself 'over
the conduct of the person whose services are engaged may be
accorded the effect of establishing an employer-employee rela-
tionship between them. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual
contractor is not to vanish altogether. This is because realisti-
cally, it would be a rare contract of service that gives untrammeled
freedom to the person whose services are engaged and eschews
any intervention whatsoever in his performance of the work. 10
A.2. There is no control when guidelines do not dictate the
methods to achieve the desired results.
The line should be drawn between rules that merely serve as
guidelines toward the achievement of the mutually desired re-
sult without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both
the result and the means used to achieve it. 11
The distinction between rules that merely serve as guidelines
toward the achievement of a mutually desired result and rules
that the person hired is bound to follow acquires particular
relevance in the case of an enterprise that affects public inter-
est, such as the business of insurance, which is subject to
regulation by the State with respect to the relations between
the insurer and the insured, and the internal affairs of the
insurance company. In the business of insurance, rules and
regulations governing the conduct of the business are provided
for in the Insurance Code and are enforced by the Insurance
Commissioner. 12
10 Insular Life Assurance Co., Ltd. v. National Labor Relations Commis-
sion, et aI., G.R. No. 84484, 15 November 1989.
11 Ibid.
12 Ibid.
 Working With Labor Laws
subject to the control of the employer except as to the result
the work."
A. Test of an Independent Contractorship
In determining whether the relationship is that of employer and
employee or one of an independent contractor, each case must
be determined on its own facts and all the features of the rela-
tionship considered."
The significant factor in determining the relationship of the
parties is the presence or absence of a sup~rvisory_.Ro~
co~trol the method _and detail of performance of the s~ryi~
and the degree to which the y-erson for whom the services are
performed may intervene to exercise such control. The presence
of the power of control is indicative of an employment relation-
ship and the absence of such power is indicative of independent
contractorship.?
In other words, where the person for whom the services are
performed, or the principal, reserves the right to control both
the end to be achieved and the manner and means to be used in
reaching the end, an employer-employee relationship exists be-
tween the parties. Where the principal is interested only in the
end to be achieved or the results of the work, an independent
contractor relationship exists between the parties.
A.l. Not every form of control will establish
an employment relationship.
The principal may establish guidelines to be followed by the
person whose services are engaged. This will not necessarily
create an employment relationship between them because not
7 Villuga, et al. v. National Labor Relations Commission, et al., G.R. No.
75038, 23 August 1993.
8 Ibid.
9 AFP Mutual Benefit Association, Inc. v. National Labor Relations Com-
mission, C.R. No. 102199,28 January 1997.
Employment Relationship v. Independent Contractorship 13
every form of control that the principal reserves to himself 'over
the conduct of the person whose services are engaged may be
accorded the effect of establishing an employer-employee rela-
tionship between them. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual
contractor is not to vanish altogether. This is because realisti-
cally, it would be a rare contract of service that gives untrammeled
freedom to the person whose services are engaged and eschews
any intervention whatsoever in his performance of the work. 10
A.2. There is no control when guidelines do not dictate the
methods to achieve the desired results.
The line should be drawn between rules that merely serve as
guidelines toward the achievement of the mutually desired re-
sult without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both
the result and the means used to achieve it.!'
The distinction between rules that merely serve as guidelines
toward the achievement of a mutually desired result and rules
that the person hired is bound to follow acquires particular
relevance in the case of an enterprise that affects public inter-
est, such as the business of insurance, which is subject to
regulation by the State with respect to the relations between
the insurer and the insured, and the internal affairs of the
insurance company. In the business of insurance, rules and
regulations governing the conduct of the business are provided
for in the Insurance Code and are enforced by the Insurance
Commissioner. 12
10 Insular Life Assurance Co., Ltd. v. National Labor Relations Commis-
sion, et al., G.R. No. 84484, 15 November 1989.
11 Ibid.
12 Ibid.
14 Working With Labor Laws
Hence, it is usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents in
selling its policies so that they will not violate the law. The
following are considered as guidelines to achieve the desired
results: '\
1. rules which prescribe the qualifications of persons who
may be insured;
2. subjecting insurance applications to processing and ap-
proval by the company; and
3. reserving to the company the determination of the pre-
miums to be paid and the schedules of payment.
No control is present in the above-enumerated guidelines for
as long as the agent's contractual prerogative to adopt his own
selling methods or to sell insurance at his own time and conve-
nience is not invaded.P
A.3. The dealer is an independent contractor.
Similarly, a person engaged to sell soft drinks for the principal,
using a truck supplied by the principal, but with the right to
employ his own workers, to sell according to his own methods,
subject only to prearranged routes, observing no working hours
fixed by the principal and obliged to secure his own licenses and
defray his own selling expenses, all in consideration of a peddler's
discount given by the principal for at least 250 cases of soft drinks
sold daily, is not an employee but an independent contractor."
A.4. An express provision in the contract that an employee is an
independent contractor cannot negate an employment
relationship.
The existence of an employer-employee relationship cannot be
negated by expressly repudiating it in the contract and stipulat-
ing that the employee is an independent contractor when the
terms of the contract clearly indicate that the relationship is in
13 Ibid.
1'1 Ibid.
Employment Relationship v, Independent Contractorship15
reality one of employment. This is because the employment
status of a person is defined and prescribed by law and not by
what the parties say it is. In determining the status of a con-
tract, the fourfold test of employment, specifically the
right-of-control test, has to be applied.:"
BJ Job Contracting
Independent contractors may engage in permissible job con-
tracting if the following conditions are met.!"
1. The contractor carries on an independent business and
undertakes the contract work on his own account, un-
der his own responsibility, and according to his own
manner and method, free from the control and direction
of his principal in all matters connected with the perfor-
mance of the work, except as to the results of the work;
2. The contractor has substantial capital or investment in
the form of tools, equipment, machineries, work pre-
mises, and other materials which are necessary in the
conduct of his business; and
3. The employees recruited and placed by the contractor
are not performing activities which are directly related
to the principal business of the principal.
Department Order No. 10-97, which was issued on 30 May
1997, superseded the Omnibus Rules Implementing the Labor
Code provisions on permissible job contracting and labor-only
contracting, or Articles 106 to 109.
15 Insular Life Assurance Co., Ltd. v. National Labor Relations Commis-
sion, G.R.No. 119930, 12 March 1998; LVN Pictures, Inc. v. Philippine
Musicians Guild (FFW), G.R. Nos. L-12582 and L-12598, 28 Janu-
ary 1961.
16 Pilipinas Shell Petroleum Corporation v. the Honorable Court of Appeals,
G.R. No. 104658, 7 April 1993; Neri, et al. v. National Labor Rela-
lions Commission, ot (II., C.R. Nos. 97008-09, 23 July 1
 16 Working With Labor Laws
On 8 May 2001, Department Order No. 03-01, "Revoking
Department Order No. 10, Series of 1997, and Continuing to.
Prohibit Labor-Only Contracting," was issued.
On 21 February 2002, Department Order No. 18-02, "Rules
Implementing Articles 106 to. 109 of the Labar Code, as
Amended" was issued.
~ The trilateral relationship in contracting agreements
,",Cantracting arrangements are expressly allawed by law but are
subject to. regulation in order to. promote employment and to.
observe the rights of employees to. just and humane conditions
of work, security of tenure, self-organization and collective bar-
gaining. Labor-only contracting is prohibited.l"
In legitimate contracting, there exists a trilateral relation-
ship under which there is a contract far a specific jab, work or
service between the principal and the contractor; and a contract
of employment between the contractor and its employees. Hence,
there are three parties involved in legitimate contracting ar-
J.ill1gements:18 ----
1. The principal, which decides to. farm aut a jab, work or
service to. the contractor;
---
2. The cantractor, which has the capacity to. independently
undertake the performance of the jab, work or service;
and
3. The contractual employees engaged by the can tractor to.
~plIsh the jab-:-work or service.
B.t.a.Definitions of contracting. principal, contractor and
contractual employee"
i. Contracting refers to. an rarra!!~~whereby the prin-
cipal agrees to. put out or Ka~~--?ut to. a contractor the
17 Section 1, Department Order No. 18-02.
18 Section 3, Ibid.
19 Section 4, Ibid.
Employment Relationship v. Independent Contractorship 17
performance or completion of a specific jab, work or
service within a .definite or predetermined period, re-
gardless of whether such jab, work or service is to. be
performed or completed within or outside the premises
of the principal.
ii, Principal refers to. any employer who. puts aut or farms
---
aut i!....jab, service or work to. a contractor, ---
iii. Contractor refers to. any person or entity engaged in a
~itimate cantractillg_ arrangement,
iv. A contractual employee includes one employed by a con.
tractor pursuant to. an arrangement between the contractor
and the principal.
B.2. Terms and conditions of a contract between a contractor
and a contractual employee
The can tract between a contractor and a contractual employee
should be in writing. The contract should include the following
terms and conditions, notwithstanding oral or written stipula-
tions to. the contraryr?
1. A specific description of the jab, work or service to. be
performed by the contractual employee;
2. The place of work and terms and conditions of employ-
ment, including a statement of the wage rate applicable
to. the individual contractual employee; and
3. The term or duration of employment, which shall be
coextensive with the can tract of the principal and the
contractor; or with the specific phase far which the can-
tractual employee is engaged, as the case may be.
The contractor shall inform the contractual employee of the
above terms and conditions, an or before the first day of his
employment.
20 Section 9, Ibid.
 18 Working With Labor Laws
(B.3.) Rights of contractual employees
Tn{ contractual employee shall be entitled to all the rights and
privileges due a regular employee as provided for in the Labor
Code, including the following.'"
1.' safe and healthful working conditions;
2. labor standards such as service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay and separa-
tion pay;
3. social security and welfare benefits;
4. self-organization, collective bargaining and peaceful con-
certed action; and
5. security of tenure.
B.4. Duty to produce a copy of the contract between the
principal and the contractor
The principal or the contractor has the obligation to produce a
copy of the contract between them in the ordinary course of an
inspection conducted by the Regional Director. Moreover, the
contractor has the obligation to produce a copy of the contract of
employment of the contractual employees when directed to do so
by the Regional Director or his authorized representative. 22
@ Labor-only Contracting
Labor-only contracting is prohibited. Labor-only contracting re-
fers to an arrangement where the contracj:or l!lerel)LLe.CIJJ.!!?,
supplies or places.workers.tc.pertorm.a.jcb, work or service for
~ principal, and if any of the following elements are present.>"
1. The contractor does not have substantial capital or in-
vestment which relates to the job, work or-se~ice to be
performed;
21 Section 8, Ibid.
22 Section 14, Ibid.
23 Section 5, par. 1, Ibid.
Employment Relationship v. Independent Contractorship 19
2. The employees recruited, supplied or placed by the con-
tractor are performing activities which are directly related
to the main business of the principal; or
3. The contractor does not exercise the right of control
over the performance of the work of the contractual
employee.
Substantial capital or investment refers to capital, stocks
and su~cr~d capitalization in the case of corporations, and
to the tools, equipment, implements, machinery and work
premises actually and directly used by the contractor in the
performance or completion of the job, work or service con-
tracted out.>"
D. Distinction Between a Job Contractor
and a Labor-only Contractor
The main distinction between a job contractor and a labor-only
contractor is that the legitimate job contractor yrovides ser-
vices, while the labor-only contractor, which is essentially
prohibited by law as mentioned earlier, provides manpower
0Eb'. The legitimate job contractor undertakes to perform a
specific job for the principal, while the labor-only contractor
merely provides the personnel who will work for the principal.
A legitimate job contractor validly provides services as it
carries on an independent business and has substantial capital
or investment. Also, the personnel recruited and placed by the
contractor with the principal do not perform activities directly
related to the main business of the principal. On the other hand,
the labor-only contractor only provides manpower since it does
not have substantial capital or investment. Moreover, the per-
sonnel supplied by the latter contractor perform activities directly
related to the main business of the principal.
24 Section 5, par. 3, Ibid.
 20 Working With Labor Laws Employment Relationship v. Independent Contractorship 21

E. Extent of Liability of Principals
of Job Contractors
and labor-only Contractors
In legitimate job contracting, the principal is considered only as
an indirect employer of the contractual employees. The contrac-
tor is the direct employer of the contractual employees.
In labor-only contracting, the principal is considered the
direct employer of the contractual employees. The contractor is
considered as a mere agent of the principal.
are paid the wages due them.F For as long as the work, task,
job or project has been performed for the principal's benefit,
the liability accrues for such period even if, later on, the con-
tractual employees are eventually transferred or reassigned
elsewhere by the contractor.
The principal's liability to the contractual employees extends
only to the period during which the contractual employees work
for the principal. The fact that they are reassigned to another
principal necessarily ends such responsibility. 28

E.l.a. Rationale for the solidary liability

E.1. The principal of the job contractor is an indirect employer.
of a job contractor and_a_pri..ncipal
In legitimate job contracting, no employer-employee relation-
The solidary liability of the job contractor and the principal was
ship exists between the contractual employees and the principal.
enacted to ensure compliance with the provisions of the Labor
However, when the job contractor fails to pay the wages of his
Code, principally those on statutory minimum wage. The job
contractual employees in accordance with the Labor Code, the
contractor is made liable by virtue of his status as a direct
principal becomes solidarily liable with his contractor to the
employer. On the other hand, the principal is liable as the indi-
contractual employees to the extent of the work performed un-
rect employer of the contractual employees. This solidary liability
der the contract, as though the contractual employees were
facilitates, or if not, guarantees, payment of the employees'
directly employed by the principal. 25. ~ (
compensation. The 1987 Constitution mandates that employees
Solidary liability means "joint and several liability~" A sol-
be given ample protection.P?
idary liability is one in which each debtor is liable for the entire
The imposition of solidary liability is not unduly burden-
obligation. Hence, with solidary liability, the liability of the prin-
some to the principal. The principal is made liable to the
cipal and the contractor for unpaid wages may be enforced
contractual employees because he can protect himself from irre-
against them both by a joint action; or against any of them by an
sponsible job contractors by withholding such sums and paying
individual action.s" In other words, if the wages of the contrac-
them directly to the contractual employees, or by requiring a
tual employee are not paid, both the principal and the job
bond from the job contractor for this purpose.P?
contractor may be held liable for the full amount.
In sum, the law itself establishes an employer-employee rela-
tionship between the principal and the contractual employees
for a limited purpose: to ensure that the contractual employees 27 Philippine Bank of Communications v. National Labor Relations Com-
•
mission, G.R. No. L-66598, 19 December 1986; Section 7,
Department Order No. 18-02.
25 Article 106, par. 2, Labor Code. 28 Rosewood Processing, Inc. v. National Labor Relations Commission, et
26 Industrial Management International Development Corp. (INlMACO) v. al., G_R.Nos. 116476-84, 21 May 1998.
National Labor Relations Commission, et aI., G.R. No. 101723, 11 29 Ibid.
May 2000. 30 Ibid; Article 108, Labor Cod".
22 Working With labor laws
E.J.b. Right of reimbursement from the job contractor
While the principal and the job contractor are solidarily liable
for the payment of wages of the contractual employees, the
principal has the right of reimbursement from the job contrac-
tor in case he pays the obligation to the contractual employees."
E.2. The principal of the labor-only contractor
is a direct employer.
In labor-only contracting, an employer-employee relationship is
created by law between the principal and the contractual em-
ployees. The principal is responsible to the contractual employees,
as though such employees were directly employed by him. In
this case, the labor-only contractor is considered merely an agent
of the principal. 32
In labor-only contracting, the principal becomes solidarily
liable with the labor-only contractor for all the rightful claims of
the contractual employees.P This should be distinguished from
the liability of the principal of a job contractor, whose liability is
limited to the wages of the contractual employees for work
done for the benefit of the principal.
E.2.a. Rationale of the liability of principals
of labor-only contractors
Where labor-only contracting exists, the law establishes an em-
ployer-employee relationship between the principal and the
contractual employees for a comprehensive purpose-to pre-
vent any violation or circumvention of any provision of the
Labor Code and to safeguard the employees' rights under the
Labor Code.
31 Philippine Fisheries Development Authority v. National Labor Relations
Commission, G.R. No. 94825, 4 September 1992.
32 Article 106, par. 4, Labor Code.
33 PCI Automation Center, Inc. v. National Labor Relations Commission,
G.R. No. 115920,29 January 1996; Articles 106, par. 4 and Article
107, Labor Code.
Employment Relationship v. Independent Contractorship 23
The Supreme Court has observed that businessmen, with the
aid of lawyers, have tried to avoid bringing about an employer-
employee relationship in some of their enterprises because that
juridical relationship spawns obligations connected with
workmen's compensation, social security, Medicare, minimum
wage, termination pay and unionism.v'
@Prohibited Acts
Even if a contractor met all the requirements for legitimate job
contracting, the following acts are prohibited for being contrary
to law or public policy.:"
1. Contracting out of a job, work or service when not done
in good faith/ and not justified by the exigencies of the
business, and the contracting results in the termination
of regular employees and the reduction of work hours or
the reduction or splitting of the bargaining unit;
2. Contracting out of work with a "cabo,"/or a person,
group of persons or to a labor group which, in the guise
of a labor organization, supplies workers to an employer,
with or without monetary or other consideration, whether
in the capacity of an agent of the employer or as an
ostensibly independent contractor;
3. Taking undue advantage of the economic situation or
lack of bargaining strength of the contractual employe1
or undermining his security of tenure or basic rights, or
circumventing the provisions of regular employment, in
any of the following instances:
a. in addition to his assigned functions, requiring the
contractual employee to perform functions which are
34 Crisologo, et al., v. National Labor Relations Commission, G.R. Nos.
92777-78, et al., 13 March 1991-
35 Section 6, Department Order No. 10-02.
24 Working With Labor Laws Employment Relationship v, Independent Contractorship 25

currently being performed by the regular employees for effective labor market information and monitoring. Failure
of the principal .or of the contractor; of a contractor to register shall give rise to the presumption that
b. requiring him to sign, as a precondition to employ- the contractor is engaged in labor-only contracting.:"
ment or continued employment, any of the following A contractor shall be listed in the registry of contractors
documents: upon completion of an application form to be provided by the
DOLE. The application shall be verified and shall include an
i. an antedated resignation letter;
undertaking that the contractor shall abide by all applicable
ii. a blank payroll;
labor laws and regulations.P? The application and its supporting
iii.a waiver of labor standards including minimum
documents shall be filed with the Regional Offices of the DOLE
wages and social welfare benefits; or
iv. a quitclaim releasing the principal or contractor from where the applicant principally operates.i"
All registered contractors or subcontractors may apply for
any liability as to payment of future claims; and
the renewal of registration every three years.:"
c. requiring him to sign a contract fixing the period of
employment to a term shorter than the term of the
contract between the principal and the contractor, H. Annual Reporting of Registered Contractors
unless the latter contract is divisible into phases for
Using a prescribed form, the contractor shall submit its annual
which substantially different skills are required, and
report to the Regional Office not later than the 15th of January
this is made known to the employee at the time of
of the following year.
engagement.
The report shall include/Indicate:"?
4. Contracting out a job, work or service through an in-
1. a list of contracts entered with the principal during the
house agency,fwhich refers to a contractor engaged in
the supply of labor which is owned, managed or con- subject reporting period;
2. the number of employees covered by each contract with
trolled by the principal, and operates solely for the
principal; the principal; and
3. a sworn undertaking that the benefits from the Social
5. Contracting out a job, work or service directly related to
the business or operation of the principal by reason of a Security System (555), the Home Development Mutual
Fund (HDMF), PhilHealth, Employees Compensation Com-
strike or lockout, whether actual or imminent; and
mission (ECC), and remittances to the Bureau of Internal
6. Contracting out of a job, work or service being Q..er-
Revenue (BIR) due the contractual employees have been
formed by union members .when such will interfere with,
made during the subject reporting period.
restrain or coerce employees in the exercise of their,
rights to self-organization.

36 Section 11, Ibid.

G. Registration of Contractors 37 Section 12, Ibid.
38 Section 13, Ibid.
A registration system to govern contracting arrangements
39 Section 17, Ibid.
and the registration of contractors is established by the DOLE o Section ] 5, Ibid.
26 Working With labor laws

I. Delisting of Contractors

Subject to due process, the Regional Director shall cancel the

3
registration of contractors based on any of the following
grounds.:" WORKING CONDITIONS
1. non-submission of contracts between the principal and AND REST PERIODS
the contractor when required to do so;
2. non-submission of annual report;
3. findings through arbitration that the contractor has en-
gaged in labor-only contracting and prohibited acts; and
4. non-compliance with labor standards and working condi-
tions.
I. NORMAL HOURS OF WORK

CD Solidary liability The normal hours of work of employees shall not exceed eight
~in a day.'
The principal shall be deemed as the direct employer of the
contractual employees and is therefore solidarily liable with the
contractor for whatever monetary claims the contractual em- A. Coverage
ployees may have against the contractor in case of violations in All employees are covered by the eight-hour work day except
the following instances.v' the following employees."
1. labor-only contracting; 1. government employees;
2. prohibited acts; 2. managerial employees;
3. rights of contractual employees; 3. officers and members of the managerial staff;
4. delisting; and 4. field personnel;
5. pretermination of the contract between the principal and 5. employer's family members;
contractor for reasons not attributable to a fault of the 6. domestic helpers and persons in the personal service of
contractor. another; and
7. workers paid by result: pakyaw and piece-rate workers.
41 Section 16, Ibid.
42 Section 19, Ibid.

1 Article 83, par. 1, Labor Code.

2 Article 82, par. 1, Ibid.; Section 2, Rule I, Book III, Omnibus Rules
Implementing the Labor Code.
 II Working With Labor Laws
A. I. Definition of government employees, managerial employees,
officers and members of the managerial staff, field personnel,
employer's family members, domestic helpers and workers
paid by result
a. Govemme.n.Lfillll2k!JLee!c refer to those employed by the
National Government or any of its political subdivisions,
including those employed in government-owned and/or
controlled corporations. 3
b. Managerial employe.!!§. refer to those whose primary duty
consists of the management of the establishment, or a
department or subdivision of the establishment in which
they are employed, including other officers or members
of the managerial staff. 4
Employees shall be considered as managerial employees, if
they meet all of the following conditions:"
i. Their primary duty consists of the management of the
establishment in which they are employed, or of a
department or subdivision of the establishment;
ii. They customarily and regularly direct the work of
two or more employees in the establishment, or a
department or subdivision of the establishment; and
iii. They have the authority to hire or fire employees of
lower rank; or their suggestions and recommenda-
tions as to hiring and firing, or the promotion or any
other change of status of other employees, is given
particular weight.
Employees shall be considered as officers or members of the
managerial staff if they perform the following duties and respon-
sibilities:"
3 Section 2(a), Rule I, Book III, Omnibus Rules Implementing the Labor
Code.
4 Article 82, par. 2, Labor Code.
5 Section 2(b), Rule I, Book III, Omnibus Rules Implementing the Labor
Code.
6 Section 2(c), Ibid.
Working Conditions and Rest Periods 29
i. Their primary duty consists of the performance of
work directly related to the management policies of
their employer;
ii. They customarily and regularly exercise discretion and
independent judgment;
iii. They either:
(a) regularly and directly assist a proprietor or a mana-
gerial employee;
(b)execute under general supervision work along spe-.
cialized or technical lines requiring special training,
experience, or knowledge; or
(c) execute, under general supervision, special assign-
ments and tasks.
iv. They do not devote more than 20 percent of their
hours worked in a workweek to activities which are
not directly and closely related to the performance
of the work described in paragraphs (a), (b) and (c)
above.
-
c. Field personnel refer to non-agricultural employees who
regularly perform their duties away from the principal
place of business or branch office of the employer, and
whose actual hours of work in the field cannot be deter-
mined with reasonable certainty. 7
d. The term "~ily. members" refers to the
members of the family of the employer who are depen-
dent on the employer for support. 8
e. The terms "domestic hel.Qers" and "persons in the
personal service of another" refer to those who perform
services in the employer's home which are usually neces-
sary or desirable for the maintenance and enjoyment of
the home, or who minister to the personal comfort,
7 Article 82, par. 3, Labor Code; Section 2(f), Rule I, Book III, Omnibus
Rules Implementing the Labor Code.
8 Article 82, par. 1, Labor Code.
30 Working With Labor Laws
convenience, or safety of the employer as well as the
members of his household."
f. The term "workers paid by result" refers to those who
-- =
are paid on piece-work, takau, pakyaw or task basis, and
other non-timed work. 10
B. What Hours Worked Includes
Hours worked shall include: 11
1. all the time during which an employee is required to be
on duty or to be at a prescribed workplace; and
2. all the time during which an employee is suffered or
permitted to work.
For example, if an unscheduled brownout occurs for one
hour in the establishment of the employer and the employees
are required to remain in their posts while waiting for power to
resume, the one-hour period is considered working time be-
cause the employees are required to be at the prescribed
workplace.
B.l. Broken shifts
The employer and employee may agree on the schedule of the
working hours of the employee. If the established working hours
of an employee run from 8 a.m. to 12 noon and then from 4
p.m. to 8 p.m., the employee may only be compensated for the
actual hours worked. The period from 12 noon to 4 p.m. is not
considered as working time as he is not required to be at the
prescribed workplace during this four-hour period.
9 Section 2(d), Rule I, Book III, Omnibus Rules Implementing the Labor
Code.
10 Section 2(e), Ibid.
11 Article 84, par. 1, Labor Code; Section 3, Rule I, Book III, Omnibus
Rules Implementing the Labor Code.
Working Conditions and Rest Periods 31
C. Principles in Determining Hours Worked
The following general principles shall govern the determination
of whether the time spent by an employee is considered "hours
worked":
1. All hours are hours worked which the employee is
required to give his employer, regardless of whether
or not such hours are spent in productive labor, or
involve physical or mental exertion.P
2. An employee need not leave the premises of the work-
place in order that his rest period will not be counted
as hours worked. It is enough that he stop working, may
rest completely and may leave his workplace to go else-
where, whether within or outside the premises of his
workplace.P However, rest periods of short duration,
running from 5 to 20 minutes during working hours,
shall be considered as hours worked.I"
3. If the work performed was necessary, if it benefited
the employer, or if the employee could not abandon his
work at the end of his normal working hours because he
had no replacement, then all the time he spent for such
work shall be considered as hours worked, if the work
was with the knowledge of his employer or immediate
supervisor. 15
4. The time during which an employee is inactive by
reason of interruptions in his work beyond his con-
trol shall be considered working time if the imminence
of the resumption of work requires the employee's
12 Section 4(a), Rule I, Book III, Omnibus Rules Implementing the Labor
Code.
13 Section 4(b), Ibid.
14 Article 84, par. 2, Labor Code; Section 7, par. 2, Rule I, Book III,
Omnibus Rules Implementing the Labor Code.
15 Section 4(c), Rule I, Book III, Omnibus Rules Implementing the Labor
Code.
32 Working With Labor Laws Working Conditions and Rest Periods 33

presence at the place of work, or if the interval is too However, an employee is not working while on call when he
brief to be utilized effectively and gainfully for the employee's is not required to leave word at his home or with company
own interest;" officials as to where he may be reached.i"

D. When Waiting Time is Working Time F. When Attendance at Lectures, Meetings

Waiting time spent by an employee shall be considered as work-
ing time in the following instances.!?
1. when waiting is an integral part of his work; or
2. the employee is required or engaged by the employer to
wait.
For example, a company driver who brings the manager to a
meeting, waits for the manager, and after the m.eeting, drives
the manager back to the establishment of the employer, is con-
sidered to be working while waiting.
E. When Being On Call is Working Time
An employee required to remain on call in the employer's pre-
mises or so close to the premises that he cannot use the time
effectively and gainfully for his own purpose shall be considered
as working while on call. 18
For example, an X-ray technician who is required to remain
in the premises of the hospital at night so that should there be
any X-ray case or surgical operation during his "on call" duty
hours does not actually stop working. Although the small num-
ber of X-ray and operation cases during the night shift may
enable him to take a rest, this is not complete rest because
or Training Programs is not Working Time
Attendance at lectures, meetings, training programs, and other
similar activities shall not be counted as working time if all of
the following conditions are metr"
1. attendance is outside of the employee's regular working
hours;
2 . attendance is in fact voluntary; and
3. the employee does not perform any productive work
during such attendance.
For example, meetings conducted by employees to organize
themselves to form a union is not working time. Similarly, atten-
dance at a company outing is not working time unless attendance
is compulsory.
II. MEAL PERIOD
A meal period or a meal break is a period consisting of 60
rr:inutes or one hour of time-off given by employers to employ-
ees for their re~ meals.P
The one-hour meal break is not considered working time.P
.---=-----
Hence, it is not compensable .

anytime, he can be jolted into the reality of work by a call for an

X-ray or an operation.P 20 Section 5(b), Rule I, Book III, Omnibus Rules Implementing the Labor
Code.
21 Section 6, Rule I, Book III, Omnibus Rules Implementing the Labor
16 Section 4(d), Ibid. Code.
17 Section 5(a), Ibid. 22 Article 85, Labor Code; Section 7, Rule I, Book III, Omnibus Rules
18 Section 5(b), Ibid. Implementing the Labor Code.
1 9 San Pedro Hospital Employees Union-FFW v. San Pedro Hospital, Inc., 23 Philippine Airlines, Inc. v. National Labor Relations Commission, et al.,
Case No. CA-218-RBXI-06-02-90, 1 October 1990. G.R. No. 132805, 2 February 1999.
34 Working With Labor Laws
A. Coverage
All employees, except for the following, are entitled to a meal
period or meal break.>"
1. government employees;
2. managerial employees;
3. officers and members of the managerial staff;
4. field personnel;
5. the employer's family members;
6. domestic helpers and persons in the personal service of
another; and
7. workers paid by result: pakyaw and piece-rate workers.
A.1. Non-diminution of benefits
If the exempted employees are already enjoying a meal period
either by agreement between the employer and the employees,
or because of an established company practice, this benefit may
not be eliminated or reduced because of the principle of non-
diminution of benefits.
Also, applying the principle of non-diminution of benefits, if
the covered employees are enjoying a meal period longer than
the 60 minutes prescribed by law, the meal period cannot be
shortened to 60 minutes. If the meal period is compensable, it
cannot become non-compensable.
B. Meals May Be Taken
Outside the Premises of the Employer
Meals need not be taken within the premises of the company.
Even if an employee is obliged to stay in the company premises
for eight hours, there is nothing in the law which states that
employees must take their meals within the company premises.
24 Article 82, par. 1, Labor Code; Section 2, Rule I, Book III, Omnibus
Rules Implementing the Labor Code.
Working Conditions and Rest Periods 35
Employees are not prohibited from leaving the premises as long
as they return to their posts on time'.25
C. Exception to the 60-minute Meal Period:
The 20-minute Meal Period
In the following cases, a meal period of at least 20 minutes may
be given by the employer. However, this much shorter meal
period is credited as compensable hours worked by the em-
ployee in the following situationsr"
1. Where the nature of the work is non-manual or does not
involve strenuous physical exertion;
2. Where the establishment regularly operates at least 16
hours a day;
3. In cases of actual or impending emergencies or if there
is urgent work to be done on machinery, equipment or
installations to avoid serious loss which the employer
would otherwise suffer; and
4. Where the work is necessary to prevent serious loss of
perishable goods.
III. REST PERIODS
Rest periods or coffee breaks are periods of short duration,
running from 5 to 20, minutes during working hours.F'
Rest periods or coffee breaks are counted as hours worked.
Hence, they are considered as compensable working time.P"
25 Philippine Airlines, Inc. v. National Labor Relations Commission, et al. ,
G.R. No. 132805, 2 February 1999.
26 Section 7, par. 1, Rule I, Book III, Omnibus Rules Implementing the
Labor Code.
2 7 Section 7, par. 2, Ibid.
28 Article 84, par. 2, Labor Code; Section 7, par. 2, Rule I, Book III,
Omnibus Rules Implementing the Labor Code.
 36 Working With Labor Laws
A. Coverage
All employees, except for the following, are entitled to rest
periods or coffee breaks.>?
1. government employees;
2. managerial employees;
3. officers and members of the managerial staff;
4. field personnel;
5. the employer's family members;
6. domestic helpers and persons in the personal service of
another; and
7. workers paid by result: pakyaw and piece-rate workers.
A.1. Non-diminution of benefits
If the exempted employees already enjoy rest periods or coffee
breaks either by agreement between the employer and the em-
ployees, or because of its being an established company practice,
this benefit may not be eliminated or reduced because of the
principle of non-diminution of benefits.
Also, applying the principle of non-diminution of benefits, if
the covered employees enjoy compensable rest periods or coffee
breaks longer than the 5- to 20-minute periods prescribed by
law, these rest periods or coffee breaks cannot be reduced.
IV. NIGHT-SHIFT DIFFERENTIAL
Night-shift differential is the additional compensation paid to
employees for each hour of work performed between 10 p.J~:
a~30
A night-shift differential is paid for work done during the
"graveyard shift" because an employee must contend with night
- -"..
29 Article 82, par. 1, Labor Code; Section 2, Rule I, Book III, Omnibus
Rules Implementing the Labor Code.
30 Article 86, Labor Code; Section 2, Rule II, Book III, Omnibus Rules
Implementing the Labor Code.
Working Conditions and Rest Periods 37
work inconveniences and disadvantages such as the disarrange-
ment of his social life, the loss of recreation or activities for
leisure, and the ordinary associ~tion of normal family relations,
the work time's adverse effect upon efficiency and output, and
its remotely injurious effect on his health, consonant with the
common saying among wage-earning people that the night was
made for rest and sleep, and not for work. 31
A. Coverage
All employees, except for the following, are entitled to a night-
shift differentialr'"
1. government employees;
2. managerial employees;
3. officers and members of the managerial staff;
4. field personnel;
5. the employer's family members;
6. domestic helpers and persons in the personal service of
another;
7. workers paid by result: pakyaw and piece-rate workers;
and
8. employees of retail and service establishments with only
five employees or less.
A.1. Definition of retail and service establishments
a. A retail establishment is one principally engaged in the sale
of goods to end-users for personal or household use.P"
b. A service establishment is one primarily engaged in the
sale of service to individuals for their own use or for
household use.?"
31 San Pedro Hospital Employees Union-FFW v. San Pedro Hospital, Inc.,
Case No. CA-218-RBXI-06-02-90, 1 October 1990.
32 Article 82, par. 1, Labor Code; Section 1, Rule II, Book III, Omnibus
Rules Implementing the Labor Code.
33 Section(f), Definition of terms, Rules Implementing R.A. 6727.
34 Section(g), Ibid.
 1/1 Work",!; With labor laws Working Conditions and Rest Periods 39

A.'J.. Non-diminution of benefits P 312.50 (P62.50 x 5) (2 p.m. to 7 p.m. [5 hours])

II the exempted employees are being paid a night-shift differen- + P 0.00 (7 p.m. to 8 p.m. [not compensable])
tial for work performed between 10 p.m. to 6 a.m. either by + P 125.00 (P62.50 x 2) (8 p.m. to 10 p.m. [2 hours])
agreement between the employer and employees, or because of + P 68.75 (10 p.m. to 11 p.m. [regular rate per
an established company practice, this benefit may not be elimi- hour + night-shift differential])
nated because of the principle of non-diminution of benefits. P 506.25
Also, applying the principle of non-diminution of benefits, if
the night-shift differential rate of covered employees is higher
than that prescribed by law, it cannot be reduced.
-----
V. OVERTIME PAY

Overtime pay is the additional compensation given to employees

B. The Night-shift Differential Rate for each hour of work performed in excess of the normal work-
on a Regular Working Day i~g hours of eight hours a day. 36 -

An employee who works beyond the regular working hours is

Night-shift differential per hour of work rendered from 10 p.m.
entitled to overtime pay because he is made to work longer than
to 6 a.m. is equivalent to at least 10 percent of the regular wage
the agreed upon working hours. When an employee spends addi-
of the employee. 35
tional time on his work, the effect on him is multi-faceted: he puts
Hence, NIGHT-SHIFT DIFFERENTIAL = ADDITIONAL PAYMENT OF
in more physical and/or mental effort; he experiences a delay in
ATLEAST10 PERCENTOF THERATEPERHOUR
going home to his family to enjoy the comforts of his home; he
Illustration: If an employee's rate per day is P500.00, how much might have no time for relaxation, amusement or sports; he might
should the employee be paid on a regular working day from 2 miss important pre-arranged engagements. It is the additional work,
p.m. to 11 p.m., with a meal break from 7 p.m. to 8 p.m.? labor or service employed and the adverse effects of his longer
Solution: 2 p.m. to 11 p.m. is 9 hours less 1 hour of non- stay in his place of work that justify overtime pay."?
compensable meal break = 8 hours.
A. Coverage
The employee's rate per hour on a regular day is P62.50
(P500.00 divided by 8 hours). All employees, except for the following, are entitled to over-
For work done from 10 p.m. to 11p.m., the employee is time payr"
entitled to: 1. government employees;
P 62.50 (rate per hour on a regular day) 2. managerial employees;
+ P 6.25 (10% of P62.50) 3. officers and members of the managerial staff;
4. field personnel;
P 68.75
Hence, for work done from 2 p.m. to 11 p.m., the em- 36 Article 87, Labor Code; Section 8, Rule I, Book III, Omnibus Rules
ployee is entitled to: Implementingthe Labor Code.
37 Philippine National Bank v. Philippine National Bank Employees Asso-
ciation, et al., G.R. No. L-30279, 30 July 1982.
35 Article 86, Labor Code; Section2, Rule II, BookIII, Omnibus Rules 38 Article 82, par. 1, Labor Code; Section 2, Rule I, BookIII, Omnibus
Implementingthe Labor Code. RulesImplementingthe LaborCode.
 III Will hhm Willi Labor Laws
[I Ihe employer's family members;
f,), domestic helpers and persons in the personal service of
another; and
workers paid by result: pakyaw and piece-rate workers,
A.1. Non-diminution of benefits
If the exempted employees receive overtime pay for work per-
formed in excess of eight hours a day either per an agreement
between the employer and the employees, or because of an
established company practice, this benefit may not be elimi-
nated because of the principle of non-diminution of benefits,
Also, applying the principle of non-diminution of benefits,
even if the overtime rate of covered employees is higher than
that prescribed by law, it cannot be reduced.
B. When the Meal Period is Considered Overtime
Where during the meal period the employees are required to stand
by for emergency work, or where the one-hour meal period is not
one of complete rest, the meal period is considered overtime. 39
A meal period is considered as overtime work in the follow-
ing instances:
1. When an employee is required to stand by for emergency
work and if he happened to be unavailable when called,
he was reprimanded by the supervisor; or
2. When the employee is called from his meals or told to
hurry eating to perform work during the meal period.
C. Compulsory Overtime Work
Subject to the giving of the additional compensation required
for overtime work, any employee may be required by the em-
ployer to perform overtime work in any of the following cases."?
39 Pan American World Airways System (Philippines) v. Pan American Em-
ployees Association, G.R. No, L-16275, 23 February 1961.
40 Article 89, Labor Code; Section 10, Rule I, Book III, Omnibus Rules
Implementing the Labor Code.
Working Conditions and Rest Periods 41
1, When the country is at war or when any other national
or local emergency has been declared by Congress or by
the President of the Philippines;
2, When it is necessary to prevent loss of life or property,
or in case of imminent danger to public safety due to an
actual or impending emergency in the locality caused by
serious accidents, fires, floods, typhoons, earthquakes,
epidemics or other disasters or calamities;
3, When there is urgent work to be performed on machines,
on an installation or equipment, in order to avoid seri-
ous loss or damage to the employer; or some other cause
of a similar nature;
4. When the work is necessary to prevent loss or damage to
perishable goods;
5. Where the completion or continuation of the work started
before the eighth hour is necessary to prevent serious
obstruction or prejudice to the business or operations of
the employer; and
6. When the overtime work is necessary to avail of favor-
able weather or environmental conditions where the
performance or quality of work is dependent on the
weather or environmental conditions.
In cases not falling under any of the above enumeration, an
employee may not be made to work beyond 8 hours eight day
against his will."!
D. Overtime Pay On A Regular Working Day
Overtime pay on a regular working day is equivalent to at least
th~ regular wage of the emplozee.p us at least 25 percent of the
regular wage.42
41 Section 10, par. 2, Rule I, Book III, Omnibus Rules Implementing the
Labor Code.
42 Article 87, Labor Code; Section 8, Rule I, Book III, Omnibus Rules
Implementing the Lnbor
42 Working With labor laws Working Conditions and Rest Periods 43

lienee, OVERTIME PAY is computed thus: Hence, OVERTIME PAY FOR WORK RENDERED BETWEEN 10 P.M.

HA.TEFOR REGULAR WORKING DAY + TO 6 A.M. is computed thus:

25 PERCENT OF REGULAR WAGE = 125 PERCENT OVERTIME RATE +
10 PERCENT OF OVERTIME RATE = 137.5 PERCENT
Illustration: If an employee's rate per day is P500.00, how
much should the employee be paid on a regular working day for Illustration: If an employee's rate per day is P500.00, how
work done from 8 a.m. to 7 p.m., with a meal break from 12 much should the employee be paid on a regular working day
noon to 1 p.m.? from 1 p.m. to 12 midnight, with a meal break from 6 p.m. to
7 p.m.?
Solution: 8 a.m. to 7 p.m. is 11 hours, less 1 hour of non-
compensable meal break = 10 hours. Solution: 1 p.m. to 12 midnight is 11 hours, less 1 hour for a
The employee's rate per hour on a regular day is P62.50 non-compensable meal break = 10 hours.
(P500.00 divided by 8 hours). The employee's rate per hour on a regular day is P62.50;
For the overtime work done from 5 p.m. to 7 p.m., the overtime rate per hour on a regular day is P78.125.
employee is entitled to: For overtime work done from 10 p.m. to 12 midnight, an
employee is entitled to:
P 62.50 (rate per hour on a regular day)
+ P 15.625 (25% of P62.50) P 78.125 (overtime rate per hour)
P 78.125 (125% of rate per hour on a regular day + P 7.8125 (10% of P78.125)
[P62.50 x 125%]) P 85.9375(137.5% of rate per hour
[P62.50 x 137.5%] )
Hence, for work done from 8 a.m. to 7 p.m., the employee
is entitled to: Hence, for work done from 1 p.m. to 12 midnight on a
regular working day, an employee is entitled to:
P 500.00 (8 a.m. to 5 p.m. [8 working hours])
+ P 156.25 (P78.125 [overtime pay per hour] x 2) P 500.00 (1 p.m. to 10 p.m. [8 working hours])
P 656.25 + P 171.875 (10 p.m. to 12 mn. [(P85.9375 x 2])
P 671.875

E. Overtime Pay on a Regular Working Day When

Overtime Work is Rendered from 10 P.M. to 6 A.M. F. Undertime Cannot be Offset by Overtime Work

Where an employee renders overtime work between 10 p.m. to Undertime work on any particular day shal~t by
6 a.m. on a regular working day, he shall be entitled to his overtime work on any other day. Permission given to the em-
overtime rate and an additional amount of at least 10 percent of ployee to go-on leave on some other day of the week shall not
the overtime rate for each hour of work performed. 43 exempt the employer from paying the premium for overtime work. 44

43 Section 3, Rule II, Book III, Omnibus Rules Implementing Labor Code. Article 88, Labor Cede.
 44 Working With Labor Laws Working Conditions and Rest Periods 45

The legal prohibition to offset overtime against undertime
Ipplles only to undertime incurred and overtime work rendered
I~ different days, because the employee would be deprived of
idditional pay for overtime work rendered. Hence, an employee
who was late by 30 minutes on a regular working day lasting
from 8 a.m. to 5 p.m. and rendered work until 7 p.m. on the
same day is entitled to only 1 1/2 hours of overtime pay due to
his 30-minute tardiness.
or because of an established company practice, this benefit may
not be eliminated because of the principle of non-diminution of
benefits.
Also, applying the principle of non-diminution of benefits, if
the covered employees enjoy a weekly rest period longer than
the 24 hours prescribed by law, then the weekly rest period
cannot be shortened to 24 hours. If the weekly rest period is
compensable, it cannot become non-compensable.

VI. WEEKLY REST PERIOD B. Business on Sundays and Holidays

A weekly rest period, or a rest day, is a rest period of not less All establishments and enterprises may operate or open for busi-
than 24 consecutive hours or one day, after every six consecu-
,..---- ness on Sundays and holidays, provided that the covered
- . '-'"
tive normal workdays.:" employees are given a weekly rest day. 47
An employee shall be entitled to additional compensation for
work performed on a Sunday, only when Sunday is his estab-
A. Coverage lished rest day. 48
All employees, except for the following, are entitled to a weekly
rest dayr'" C. Determination of Weekly Rest Day
1. government employees; and Preference of Employee
2. managerial employees;
The employer shall determine and schedule the weekly rest day
3. officers and members of the managerial staff;
of the employee, subject to the agreement entered into by the
4. field personnel;
parties.:" However, the employer shall respect the preference of
5. the employer's family members;
the employee as to his weekly rest day, when the preference is
6. domestic helpers and persons in the personal service of
based on religious grounds.t? The employee shall make known
another; and
his rest day preference to the employer in writing at least seven
7. workers paid by result: pakyaw and piece-rate workers.
days before the desired effectivity of the initial rest day pre-
ferred.
A.1. Non-diminution of benefits
If the exempted employees enjoy a weekly rest period either
because of an agreement between the employer and employees, 47 Section 3, Rule III, Book III, Omnibus Rules Implementing the Labor
Code.
48 Article 93(a), Labor Code; Section 7(a), Rule III, Book III, Omnibus
45 Article 91, par. 1, Labor Code; Section 3, Rule III, Book III, Omnibus Rules Implementing the Labor Code.
Rules Implementing the Labor Code. 49 Article 91, par. 2, Labor Code.
46 Article 82, par. 1, Labor Code. 50 Ibid.
46 Working With Labor Laws
However, where the choice of the employee as to his rest
day based on religious grounds will inevitably result in serious
prejudice or obstruction to the operations of the establishment
of the employer, and the employer cannot normally be expected
to resort to other remedial measures, the employer may sched-
ule the weekly rest day chosen by the employee for at least two
days a month. 51
For example, an employee from the Iglesia ni Cristo sect
may request for Thursday as his rest day. However, if having the
employee take his rest day every Thursday of the month will
prejudice the operations of the establishment of the employer,
the employee may schedule the employee's rest day for two
weeks on a Thursday. Meanwhile, for the other two weeks of
the month, the employer's preference will be followed.
D. Exception to the 48-hour Workweek
As a normal work day lasts eight hours,. a normal workweek of
an employee lasts 48 hours. However, an establishment may
have a 40-hour workweek in the following cases:
1. when there is an agreement between the employer and
employee; and
2. when health personnel are involved.
0.1. The 40-hour workweek by agreement
Normally, Saturday is not a rest day or "day off." However, the
employer and employee may agree on a regular workweek of
only 40 hours, or eight hours a day for five days. Hence,
when an employee is required to render work on a Saturday in
excess of the 40 hours of a regular workweek, the employee
may be considered as performing overtime work on that par-
ticular Saturday. 52
51 Section 4, Rule III, Book III, Omnibus Rules Implementing the Labor
Code.
52 CaltexRegular Employees v. Caltex (Philippines, Inc.), G.R. No. 111359,
15 August 1995.
Working Conditions and Rest Periods 47
0.2. The 40-hour workweek for health personnel
Health personnel in cities or municipalities with a population of
at least one million, or in hospitals or clinics with a bed capacity
of at least one hundred, are required to hold regular office
hours for eight hours a day, five days a week, exclusive of time
for meals. However, health personnel may work for six days or
48 hours per week, when the exigencies of the service so re-
quire. For work done on the sixth day, health personnel shall be
entitled to an additional compensation of at least 30 percent of
their regular wage. 53
Health personnel include resident physicians, nurses, nutri-
tionists, dieticians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives,
attendants and all other hospital or clinic personnel. 54
D.2.a. Rationale for the 40-hour workweek for health personnel
Compared to other employees, hospital and health clinic person-
nel are overworked despite the fact that their duties are more
delicate in nature. The fact that hospitals and health clinic per-
sonnel perform duties which are directly concerned with the
health and lives of people does not mean that they should work
for longer periods than most employees. Making them work
longer than is necessary may endanger, rather than protect, the
health of their patients. 55
E. Compulsory Work on a Rest Day
The employer may require an employee to work on his rest day
in any of the following casesr"
53 Article 83, par. 2, Labor Code; Rule I-A, Book III, Omnibus Rules
Implementing the Labor Code.
54 Ibid.
55 San Juan de Dios Hospital Employees Association-AF'Tt\f,et a/. v. National
Labor Relations Commission, et a/., G.R. No. 126383, 28 November
1997.
6 Article 92, Labor Code; Section 6, Rule III, Book III, Omnibus Rules
Implementing the Labor Code.
48 Working With Labor Laws Working Conditions and Rest Periods 49

1. In case of actual or impending emergencies caused by
serious accidents, fires, floods, typhoons, earthquakes,
epidemics or other disasters or calamities, to prevent
loss of life and property or imminent danger to public
safety;
2. In cases of urgent work to be performed on machinery,
equipment or an installation, to avoid serious loss which
the employer would otherwise suffer;
3. In the event of abnormal pressure from work due to
special circumstances, where the employer cannot ordi-
narily be expected to resort to other measures;
4. To prevent loss or damage to perishable goods;
5. Where the nature of the work requires continuous op-
erations for seven days a week and the stoppage of work
may result in irreparable injury or loss to the employer,
as in the case of the crew members of a vessel to com-
plete a voyage, and in other similar cases; and
6. When the work is necessary to avail of favorable weather
or environmental conditions, where the performance or
quality of the work is dependent on the weather or envi-
ronmental conditions.
An employee cannot be required to work against his will
on his scheduled rest day, except under the above circum-
stances. When an employee volunteers to work on his rest day
under other circumstances, he shall express such desire in writ-
ing, and shall be given additional compensation for work done
on a rest day. 57
Hence, the formula for REST DAY PAY is as follows:
RATEFORREGULARDAY+
30 PERCENTOF REGULARWAGE == 130 PERCENT
Illustration: If an employee's rate per day is P500.00, how
much should the employee be paid for working 8 hours on a
Sunday, assuming that Sunday were his scheduled rest day?
Solution: For work done on a Sunday, the employee is entitled to:
P 500.00 (rate per day)
+ P 150.00 (30% of P500.00)
P 650.00 (130% of rate per day [P500 x 130%])
G. Overtime Work on a Rest Day
For overtime work on a rest day, an employee is entitled to an
additional compensation of at least 30 percent of his wage on a
rest day."?
Hence, OVERTIMEPAYON A RESTDAYis computed thus:
RATEFOR RESTDAY(130 PERCENT)+
30 PERCENTOF WAGEFOR THE RESTDAY == 169 PERCENT
Illustration: If an employee's rate per day is P500.00, how
much should the employee be paid for working 10 hours on a
Sunday, assuming that Sunday is his scheduled rest day?
Solution: The employee's rate per hour on a Sunday is P81.25
(P650.00 divided by 8 hours).
For work done in excess of 8 hours, the employee is en-

F. Rest Day Pay

-
I
to
;.:0
titled to:

)::- P 81.25 (rate per hour on a Sunday)

Rest day pay is equivalent to at least the regular wage of the ::0 + P 24.375 (30% of P81.25)
employee plus at least 30 percent of the regular wage. 58
-<
P 105.625 per hour
(169% of rate per hour [P62.50 x 169%])
57 Section 6, par. 2, Ibid.
58 Article 93(a), Labor Code; Section 7 (a), Rule III, Book III, Omnibus Article 87, Labor Code; Section 9(a), Rule I, Book III, Omnibus Rules
Rules Implementing the Labor Code. Implementing the Labor Code.
50 W••rkhl~\ Will. l ahor Laws Working Conditions and Rest Periods 51

111~11I~t). I()J 10 hours of work on a Sunday, an employee is Hence, for 10 hours of work on a Sunday, with overtime
III II 1I11~dIn: rendered from 10 p.m. to 6 a.m., an employee is entitled to:

P 650.00 (rate for 8 hours on a Sunday) P 650.00 (rate on a Sunday)

P 211.25 (P105.625 x 2) + P 232.375 (Pl16.1875 x 2)

P 861.25 P 882.375

H. Overtime Work on a Rest Day
Rendered from 10 P.M. to 6 A.M.
When an employee renders overtime work between 10 p.m. to
6 a.m. on a rest day, he shall be given compensation equivalent
to his overtime rate on a rest day and an additional amount of
not less than 10 percent of the overtime rate on a rest day, for
each hour of work performed. 60
Hence, PAY FOR OVERTIME WORK ON A REST DAY RENDERED
FROM 10 P.M. TO 6 A.M. is computed thus:
OVERTIME RATE ON A REST DAY + 10 PERCENT OF
OVERTIME RATE ON A REST DAY = 185.9 PERCENT
Illustration: If an employee's rate per day is P500.00, how much
should the employee be paid for 10 hours of work on a Sunday,
assuming that Sunday is his scheduled rest day, if the 2 hours of
overtime work were rendered between 10 p.m. and 6 a.m.?
Solution: The employee's rate per hour on a Sunday is P81.25;
overtime rate per hour on a Sunday is P105.625.
For overtime work done from 10 p.m. to 6 a.m., an em-
ployee is entitled to:
P 105.625 (overtime rate per hour on a Sunday)
+ P 10.5625 (10% of P105.625)
P 116.1875 per hour (185.9% of rate per hour
[P62.50 x 185.9%])
I. Compressed Workweek61
The compressed workweek scheme was originally conceived for
establishments wishing to save on energy costs, to promote greater
work efficiency and lower the rate of employee absenteeism, among
others. Employees favor the scheme because it translates to sav-
I ings on the increasing cost of transportation fare for at least one
day a week, savings on meal and snack expenses; longer week-
ends, or an additional 52 off-days a year, that can be devoted to
rest, leisure, family responsibilities, studies and other personal
matters. It will also spare them for at least another day in a week
from certain inconveniences that are the normal incidents of em-
ployment, such as commuting to and from the workplace, travel
time spent, exposure to dust and motor vehicle fumes, and dress-
ing up for work. Thus, under the compressed workweek scheme,
the generally observed workweek of six days is shortened to five
days, but the working hours from Monday to Friday are prolonged
without the employer's being obliged to give overtime premium
compensation for work performed in excess of eight hours on
weekdays, in exchange for the benefits mentioned above that will
accrue to the employees.
Considering the acceptability of the compressed workweek
scheme in several establishments, and considering further the
present energy situation, the DOLE,after consultations with the
representatives of management and labor, recommended the
adoption of the compressed workweek scheme by an establish-
ment on a voluntary basis.

60 Section 4, Rule II, Book III, Omnibus Rules Implementing the Labor 61 Department Order No. 021-90, "Guidelines on the Implementation of
Code. Compressed Workweek," 31 Auzust 1990.