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LABOR LAW REVIEW

Atty. Jefferson Marquez
School Year 2001-2002

LABOR STANDARDS
INTRODUCTION

Sources of Labor Laws

1. The Labor Code of the Philippines (Presidential Decree 442, as amended)
It is the law governing Labor Standards.
This law took effect on November 1, 1974. Since then, the Labor Code has undergone several
amendments. The most substantial amendment is RA 6715 (March 1989).

2. Judicial Decisions
Article 8, Civil Code: Judicial decisions applying or interpreting the laws or the Constitution shall
form part of the legal system of the Philippines.

3. Rules and Regulations issued by administrative agencies

Have the force and effect of laws. Provided, however, that these rules and issuance will not
expand the law or strip the law. Otherwise, under the rules on statutory construction, these will be
considered void.

e.g.
Policy Instruction No. 54-88 (issued by former Sec. Franklin Drilon) has been declared void by the
Supreme Court because this has expanded Art. 83 of the Labor Code on Employment of Health
Personnel by erroneously interpreting that health employees are entitled to a “full weekly wage
for 7 days” if they have completed the 40-hour/5-day workweek.

To recapitulate:
The Labor Laws will not only include PD 442, as amended, but as well as all decisions of the Supreme
Court which interpret these laws. Including as well, rules and regulations issued by the appropriate
government agencies. E.g. Department of Labor and Employment.

LABOR STANDARDS
The minimum requirements prescribed by existing laws, rules and regulations and other issuances relating
to wages, hours of work, cost of living allowances and other monetary and welfare benefits, including those
set by occupational safety and health hazards. (Section 7, Rule I, Rules on the Disposition of Labor Standards
Cases – September 16, 1987)

EMPLOYER - EMPLOYEE, DEFINITION AND DISTINCTIONS

Employer – Includes any person directly or indirectly in the interest of an employer in relation to an
employee and shall include the Government and all its branches, subdivision and instrumentalities, all
government-owned or controlled corporations and institutions, as well as non-profit private institutions, or
organizations. (Article 97 b)

The employer may be a natural or juridical person. May be a single proprietor, a partnership or a
corporation.

Example: Dumon Sari-sari Store (single proprietorship). Who is considered the employer?
Wilbert Dumon will be the employer, because the sari-sari store does not have a
separate juridical personality. So, if Dumon is made a defendant in a labor case, the caption will
be - “Employee vs. Wilbert Dumon, doing business under the name and style of Dumon Sari-sari
Store.”

The Government is an employer within the meaning of the Labor Code in Labor Standards.
So, a government agency with an original charter contracts with a security agency to supply security
guards, and this security agency is unable to pay the wages of its guards.
Issue: Is principal government agency considered jointly and severally liable with the security agency?
Will Article 106-109, LC apply to them? Can the guards file with the labor complaint with the nearest
arbitration branch of the NLRC and sue both the security and government agency? YES, the Labor Code
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will govern. The government agency cannot move for the dismissal of the complaint for lack of jurisdiction
on the part of the Labor Arbiter and say that they are governed by the Civil Service Law Rules and
Regulations. The government agency contracted the services of an independent contractor, so they are
considered principals. Therefore the LC will govern regarding the monetary gains of the security guards.

A motion to dismiss filed by the government agency in the above-cited example will not prosper on
the ground that the Labor Arbiter has no jurisdiction, because the term “Employer” includes government
agencies. It does not make any qualifications whether it is one with or without original charter.

Philippine Fisheries Development vs. NLRC

213 SCRA 21

The SC had the occasion to interpret the term “Employer” so as to include the government
including their subdivisions as well as instrumentalities.
Notwithstanding that the petitioner is a government agency, its liabilities, which are joint and
solidary with that of the contractor, are provided in Article 106, 107 and 109 of the Labor Code. This places
the petitioner’s liabilities under the scope of the NLRC. Moreover, Book III, Title II on Wages specifically
provides that the term “EMPLOYER” includes any person acting directly or indirectly in the interest of an
employer in relation to an employee and shall include the Government and all its branches, subdivisions and
instrumentalities, all governed-owned or controlled corporations and institutions as well as non-profit private
institutions. The NLRC, therefore, did not commit grave abuse of discretion in assuming jurisdiction to set
aside the Order of dismissal by the Labor Arbiter.

Employee – Includes any individual employed by an employer. (Article 97c)

Only a natural person can qualify as an employee. Natural persons may include Filipino citizens and
Foreigners.

Q: Is there a provision in the Labor Code governing the hiring of a Foreigner? A Filipino?
A: For Foreigners, Art 40-42 of PD 442 on employment of nonresident aliens by domestic or foreign
employer. In case of a Filipino, there is none because the Constitution and the Labor Code encourages the
employment of Filipinos.

Foreign Investments Act

There are industries that can be the subject of investment of full equity for foreign nationals. There
are certain activities where foreign companies can invest on. Thus, the employer may be foreigner. In
other words, there are corporations that are fully owned by foreigners of which is limited to a certain
percentage, like 60-40. Please take note of the Constitutional limitations on Foreign investments in the
Philippines.

If they want to employ an alien to be their employee in the Philippines, the law requires that such
domestic or foreign companies should obtain a permit from the DOLE.

Here is a company fully owned by foreigners in an area permissible for full ownership by foreign
entities. It may hire a person who is not a Filipino at its employee. It may happen that a domestic
corporation decides to hire an alien. Example: Hotels that wish to hire chefs.

Arts. 40-42 of the Labor Code shall govern. Such that the employer must obtain a work permit from
the DOLE (nearest regional office that covers the particular place). This work permit is what is called the
ALIEN EMPLOYMENT PERMIT (AEP). The process is that the employer (domestic or foreign), before
admitting this alien to be its employee, will have to file an application with DOLE for the issuance of AEP,
submitting therein certain documents t o justify that there is a need for the employment of such alien.

Q: Is there any other requirement?

A: Yes. There must be a determination of the non-availability of a person in the Philippines who is
competent, able and willing at the time of application to perform the services for which the alien is
desired.

Purpose: To protect the Filipinos.

The employer has to justify to the DOLE that it needs this person (alien) because he has special
expertise in this particular field that no other Filipino in the country is able, willing and competent to
discharge. The employer has the burden of proving with the DOLE. Failure to do so warrants the denial of
the application for AEP.
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If employer employs an alien without complying with the above requirement, then a case may be filed
against it for violation of the Labor Code.

ILLUSTRATION: Foreigner who wishes to be employed in a hotel establishment as a cook or chef. He

can enter the Philippines if he has a VISA (as to what kind of VISA, check Philippine Immigration Act of
1940) but usually, it is a 9-G VISA or a PRE-ARRANGED VISA. Together with such requirement under the
Philippine Immigration Act, is the requirements are distinct because different laws provide them for.

Employer-Employee Relationship vs. Principal-Agent Relationship

Employee is governed by the LC, while the agent is governed by the CC.

AGENT in Article 1868, Civil Code: By the contract of agency a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or authority of the latter.

It is the principal who selects the agent in a principal-agent relationship. An agent is compensated
under the contract of agency for services rendered. An agent is disciplined by the principal as in the case
of an employee, because the agent is under the authority of the principal. The principal controls the
means and methods of the work of an agent. In the principal-agent relationship, there is only one party.
The agent is merely an extension of the principal. They are regarded as one. So, if there is a contractor
relationship, it is not between 3 parties, but is between the principal or the agent as an extension of the
principal and the other party.

To make a distinction between a principal-agent relationship from a employer-employee relationship,

the Four-Fold Test will not be used because the agent is also selected by the principal and is also
compensated by the principal and most oftentimes, the principal also substitutes his own judgment for
that of the agent.

Maraginot vs. NLRC

284 SCRA 539 (Contracting)

The SC had the occasion to determine the existence of an agent-principal relationship.

The relationship between VIVA and its producers or associate producers seems to be that of
agency, as the latter make movies on behalf of VIVA, whose business is to "make" movies. As such, the
employment relationship between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by
the "control test." While four elements are usually considered in determining the existence of an
employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct,
the most important element is the employer's control of the employee's conduct, not only as to the
result of the work to be done but also as to the means and methods to accomplish the same. These
four elements are present here.
It may not be ignored, however, that private respondents expressly admitted that petitioners were
part of a work pool; 31 and, while petitioners were initially hired possibly as project employees, they
had attained the status of regular employees in view of VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee
when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; and
2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer.
However, the length of time during which the employee was continuously re-hired is not
controlling, but merely serves as a badge of regular employment.
A work pool may exist although the workers in the pool do not receive salaries and are free to seek
other employment during temporary breaks in the business, provided that the worker shall be available
when called to report for a project. Although primarily applicable to regular seasonal workers, this set-
up can likewise be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the status
of regular employees. Clearly, the continuous rehiring of the same set of employees within the
framework of the Lao Group of Companies is strongly indicative that private respondents were an
integral part of a work pool from which petitioners drew its workers for its various projects.[Tomas Lao
Construction Case]

Employer-Employee Relationship vs. Principal-Contractor Relationship

Contractor – Carries on a distinct and independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility, according to its own manner and method, and
free from the control and direction of the principal in all matters connected with the performance of the
work except as to the results thereof. (Department Order No. 9)
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In the principal-contractor relationship, the principal selects the contractor. The contractor is
compensated for services rendered. The contractor is not under the discipline of the principal. The
contractor is not under the control of the principal. The definition says that aside from engaging in a
business separately distinct from the principal, the performed job, work or service is, according to his own
means or methods, free from the control and direction of the principal except as to the results thereof.

Contractor may be an individual, or corporate or juridical contractor.

Principal-contractor relationship also exists in a situation under Article 106 wherein the principal will
engage the services of a security agency to render security services. That person rendering such services
will also qualify as a contractor.

Article 1713, Civil Code: By 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.

 Important!! Please note: the distinctions on –

Employer-employee relationship vs. Principal-agent relationship
Employer-employee relationship vs. Principal-contractor relationship

FOUR-FOLD TEST IN DETERMINING THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

1. The selection and engagement of the employee
2. The payment of wages or salaries for services
3. The power of dismissal or to impose disciplinary actions
4. The employer’s power to control the employee with respect to the means and methods by which
the work is to be accomplished.

It is the so-called “control test” that is the most important element.

FIRST TEST: The SELECTION and engagement of the employee

MANAGEMENT PREROGATIVE

Strictly speaking, the employer has no right to hire a person as his employee. The matter of selecting
a person as one’s employee is more appropriately described as a prerogative. It is not a right in which you
can go to court and enforce the right to hire a person otherwise it will violate the constitutional provision
against involuntary servitude if one is compelled to be another’s employee: No person can be compelled
against his will to do an act whether illegal or illegal. Thus, an employer cannot go to court and get an
injunction to compel a person to become his employee. If at all, the employer can only exercise the
prerogative to invite that person and to hire him if he so desires. In that sense, the right to hire is
essentially a management prerogative.

MANAGEMENT PREROGATIVE – An act of the employer according to his own judgment or discretion to
regulate his business. This includes hiring, transfer, dismissal, etc.

The exercise of the right or prerogative to hire is not absolute. It is regulated by law.

LIMITATIONS OR RESTRICTIONS ON THE RIGHT TO HIRE (PRIOR TO HIRING)

A. Under the Labor Code:

1. Prohibition against gender discrimination

Article 135. Discrimination Prohibited.

It shall be unlawful for any employer to discriminate against any woman employee with respect to
terms and conditions of employment solely on account of her sex.

The following are ACTS OF DISCRIMINATION:

(a) Payment of lesser compensation, including wage, salary or other form of remuneration or
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.
Criminal liability for the willful commission of any unlawful act as provided in this article or any
violation to the rules and regulations issued pursuant to Section 2 hereof (RA 6725) shall be
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penalized as provided in Articled 288 and 289 of this Code. Provided, that the institution of any
criminal action under this provision shall not bar the aggrieved employee from filing an entirely
separate and distinct action for money claims, for damages and other affirmative reliefs. The actions
hereby authorized shall proceed independently of each other.

Article 135 prohibits discrimination against women employees as regards terms and conditions of
employment on account of employment on account of sex. A recent development in this area is the
passage of RA 7192 (An Act Promoting the Integration of Women as Full and Equal Partners of Men
in Development and Nation Building).

2. Prohibition against stipulation of marriage

Article 136. Stipulation Against Marriage.

It shall be unlawful for an employer to require as a condition of employment 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 separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.

This provision covers women who are not yet married.

PT&T vs. NLRC

272 SCRA 596
“In the case at bar, PT&T’s 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 worker’s by our labor laws and by no less than the Constitution. xxx
Art 136 is not intended to apply to only women employed in ordinary occupations, or it should have
categorically expressed so. The sweeping intendment of the law, be it on special or ordinary
occupations, is reflected in the whole text and supported by Art 135 that speaks of non-discrimination
on the employment of women.
Petitioner’s policy is not only in derogation of Art 136 of the Labor Code on the right of the woman
to be free from any kind of stipulation against marriage in connection with her employment, but it
likewise assaults good morals and public policy, tending to deprive a woman of freedom to choose
her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable
right.”

3. Prohibition against child discrimination

Article 140. Prohibition Against Child Discrimination.

No employer shall discriminate against any person in respect to terms and conditions of
employment on account of his age.

4. Minimum Employable Age

Article 139. Minimum Employable Age.

(a) No child below 15 years of age shall be employed, except when he works directly under
the sole responsibility of his parents or guardian, and his employment does not in any way interfere
with his schooling.
(b) Any person between 15 and 18 years of age may be employed for such number of hours
and such periods of the day as determined by the Secretary of Labor in appropriate regulations.
(c) The foregoing provisions shall in no case allow the employment of a person below 18
years of age in an undertaking which is hazardous or deleterious in nature as determined by the
Secretary of Labor.

Note: Sec. 12 of RA 7610 amended Art 139 and provides instances where children below 15 years old may
be employed. (see below under Special Laws)

Situation:
In a construction business, can the employer hire a person 15 years of age?

The implementing rules explain that any person, regardless of sex, between ages 15 and 18
may be employed in any non-hazardous work. It follows that in any hazardous work, the
employable age is 18 and up.

NON-HAZARDOUS WORK OR UNDERTAKING –

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One where the employee is not exposed to any risk which constitutes imminent danger to his
safety and health.

Hazardous Workplaces
Section 8, Rule I, Book IV –
The Bureau of Labor Standards shall, with the approval of the Secretary of Labor, issue from
time to time a detailed list of hazardous workplaces for purpose of this Rule, in addition to the
following:

(a) Where the nature of the of the work exposes the workers to dangerous environment
elements, contaminants or work conditions including ionizing radiations, chemicals, fire,
flammable substances, noxious components and the like.
(b) The workers are engaged in construction work, logging, fire-fighting, mining, quarrying,
blasting, stevedoring, dock work, deep sea fishing and mechanized farming.
(c) Where the workers are engaged in the manufacture or handling of explosive and other
pyrotechnic products.
(d) Where the workers use or are exposed to heavy or power-driven machinery or equipment.
(e) Where workers use or are exposed to power-driven tools.

 Note: There is no prohibition for employment of a person 18 years old and above. The age of
majority is 18 years old under the Family Code. Before the Family Code took effect, it was 21.

As regards the employment of a person 15, 16, 17 years old, you have to make a qualification
whether the undertaking or establishment is hazardous or not. How do we know that it is
hazardous or not?
See Department Order No. 4-1999 (for the new rules including karaoke bars)

 Department Order No. 4-1999 shows what establishments have been classified by the DOLE
as hazardous. Therefore, if the establishment is classified as hazardous, a person 15-below 18
years of age cannot be employed.

Technical Guidelines for Classifying Hazardous and Non-Hazardous Establishments,

Workplaces and Work Processes (DOLE Memorandum Circular No. 2-1998)

Section 3. Criteria for Classifying Hazardous Establishments or Workplaces.

An establishment or workplace may be classified as hazardous if any of the conditions
provided under Rule 1013 of the OSHS has been confirmed, as follows:

(a) Where the nature of the of the work exposes the workers to dangerous environment
elements, contaminants or work conditions including ionizing radiations, chemicals, fire,
flammable substances, noxious components and the like;
(b) Where the workers are engaged in construction work, logging, fire-fighting, mining,
quarrying, blasting, stevedoring, dock work, deep sea fishing and mechanized farming;
(c) Where the workers are engaged in the manufacture or handling of explosives and other
pyrotechnic products;
(d) Where the workers use or are exposed to power-driven or explosive powder actuated tools;
and
(e) Where the workers are exposed to biologic agents like bacteria and fungi, viruses, protozoa,
nematodes and other parasites.

Example: Employment in a Karaoke Bar.

It was not considered hazardous before, but it is considered hazardous workplace now.
Therefore, the owner of the karaoke bar should not employ persons below 18 otherwise they
would violate the department order above-mentioned.

Employment of persons below 15: Consult RA 7610, because that is the law, which tells us the 2
instances an employer, can employ a person below 15.

 Note: the qualifications and the minimum employable age.

5. Yellow Dog Contract

The employer commits Unfair Labor Practice if he imposes as a precondition for hiring that an
employee shall not join or attempt to foster a union during their period of employment and shall
resign from the union to which they belong.
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B. Under Special Laws:

1. RA 7610, which amended Article 139 of the LC

Article VII, Section 12.

Children below 15 years of age shall not be employed, except:
(1) When a child works directly under the sole responsibility of his parents or legal guardian
and where only members of the employer’s family are employed; Provided:
(a) His employment neither endangers his life, safety, health and morals, nor impairs his
normal development;
(b) The parent or legal guardian shall provide the said minor child with the prescribed
primary and secondary education;
(c) The employer shall first secure, before engaging such child a work permit from DOLE
which shall ensure observance of the above requirements.

(2) When the child’s employment or participation in public and entertainment or information
through cinema, theater, radio or television is essential; Provided:
(a) The employer shall ensure the protection, health, safety, and morals of the child;
(b) The employer shall institute measures to prevent the child’s exploitation or
discrimination taking into account the system and level of remuneration, and the duration and
arrangement of working time;
(c)The employer shall formulate and implement, subject to the approval and supervision
of competent authorities, a continuing program for training and skills acquisition of the child;
(d) The employer shall first secure, before engaging such a child, a work permit from
DOLE which shall ensure observance of the above requirements;
(e) The employment contract is concluded by the child’s parents or legal guardian with
the express agreement of the child concerned, if possible.

Article VII, Section 14.

No person shall employ child models in all commercials or advertisements promoting alcoholic
beverage, intoxicating drinks, tobacco and its by-products and violence.

2. RA 7877 or the Anti-Sexual Harassment Act of 1995

Section 3(a). In a work-related environment, sexual harassment is committed when:

(1) A sexual favor is made as a condition in the hiring or in the employment, reemployment,
or continued employment of said individual.
(2) xxx

This prohibits the employer from asking sexual favor as a condition for employment. Thus
restricting the employer’s right to hire.

3. RA 7277 or the Magna Carta of Disabled Persons

Sec 32. Discrimination on Employment. No entity, public or private, should discriminate against
qualified disabled person in terms of job application procedures, hiring, promotion, discharge,
compensation and other benefits.

Sec. 5. Equal Opportunity for Employment. - No disable person shall be denied access to
opportunities for suitable employment. A qualified disabled employee 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.

Mandates that qualified disabled persons be granted the same terms and conditions of
employment as qualified able-bodied employees.

Once they have attained the status of regular workers, they should be accorded all the benefits
granted by law, notwithstanding written or verbal contracts to the contrary.

BERNARDO vs. NLRC

G.R. No. 122917, 12 July 1999
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The fact that the employees were qualified disabled persons necessarily removes the employment
contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified
able-bodied persons, they are thus covered by Article 280 of the Labor Code. x x x
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the
working class, but also the concern of the State for the plight of the disabled. The noble objectives of
Magna Carta for Disabled Persons are not based merely on charity or accommodation, but on justice
and the equal treatment of qualified persons, disabled or not. In the present case, the handicap of
petitioners (deaf-mutes) is not a hindrance to their work. The eloquent proof of this statement is the
repeated renewal of their employment contracts. Why then should they be dismissed, simply because
they are physically impaired? The Court believes, that, after showing their fitness for the work
assigned to them, they should be treated and granted the same rights like any other regular
employees.

4. RA 8791 or the General Banking Laws of 2000

Section 55.4. No bank shall employ casual or non-regular personnel or too lengthy probationary
personnel in the conduct of its business involving deposits.

There is a possibility on the part of the mentioned employees to disclose confidentiality of

bank deposits. They have no security of tenure.

Provisions under the Labor Code which restrict the rights of the employer DURING
EMPLOYMENT
1. Article 135 – Stipulation Against Marriage
2. Article 136 – Discrimination Prohibited

SECOND TEST: The PAYMENT OF WAGES or salaries for services

WAGE – Paid to any employee; shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to
be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee. “Fair and
reasonable value” shall not include any profit to the employer or to any person affiliated with the
employer. (Article 97f)

As defined, the WAGE is remuneration for services rendered and includes the fair and reasonable value of
facilities as may be determined by the Secretary of Labor. So it is not limited to cash payment for an
employee’s services.

 Note: Article 97 also defines the different Methods of Fixing Compensation:

1. Time (daily and monthly paid workers)
2. Commission
3. Job or task basis
4. Piece-rate basis (payment by results)
These are very important in relation to persons or employees who are exempted from enjoying the
benefits under the Labor Code. Because under Article 82, workers paid by results are exempted from
overtime pay, service incentive leave, etc. (Conditions of Employment)

Concept of Wage and Salary

WAGES as distinguished from SALARY applies to the compensation for manual labor, skilled or unskilled,
paid at stated times, and measured by the day, week, month, or season, while –
SALARY denotes a higher degree or employment, or superior grade of services, and implies a position or
office.
By contrast, the term WAGES indicates considerable pay for a lower and less responsible character of
employment, while –
SALARY is suggestive of a larger and more permanent or fixed compensation for more important service.
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Songco vs. NLRC

183 SCRA 618

Wage and salary have the same etymology. While they have the same concept, distinctions have to be
made. WAGE is compensation more for skilled or unskilled manual laborers. SALARY pertains to white collar
workers and those of a higher or grade of employment, superior grade of services and position of office.
Labor Law; Commissions; The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly tat commissions are part of petitioners’ wage or
salary. – We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners 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 ti the increase of income of Zuellig. COMMISSION is the recompense,
compensation or reward of an 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 to the principal. The
nature of the work of a salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of petitioners’ wage or salary. We take judicial notice of the fact
that some salesmen do not receive any basic salary but depend on commissions and allowances or receive any
basic salary but depend on commissions and allowances or commissions alone, although an employer-
employee relationship exists.

Iran vs. NLRC

289 SCRA 433 (1998)

Workers were paid based on commission, not on time spent. Issue: whether or not that commission is
considered wage.
The SC ruled that commission are considered wage because Article 97 defines wage as to include payment
of remuneration in the form of commission.
Petitioner Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu, employing
truck drivers who double as salesmen, truck helpers, and non-field personnel in pursuit thereof. As part of
their compensation, the driver/salesman and truck helpers of the petitioner received commissions per case of
softdrinks sold.
The definition of WAGES in Article 97 (f) explicitly includes commissions as part of wages. While
commissions are indeed, incentives or forms of encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still these COMMISSIONS are direct remunerations for
services rendered. In fact, commissions have been defined as the recompense, compensation or reward
of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percetage on the amount of his transactions or on the profit to the principal. The
nature of the work of a salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of a salesman’s wage or salary.

Gaa vs. CA
140 SCRA 304

Sc ruled that the wage of the employee is exempt from garnishment. Under the Civil Code, there is a
provision on the exemption of the employee’s wage from garnishment. The SC was able to apply this
provision.
Article 1708 of the Civil Code which exempts “laborer’s wage” from attachment or execution does NOT apply
to a responsibly placed employee, supervisory or managerial employee, but only to rank-and-file.
Article 1708 used the word “WAGES” and not “SALARY” in relation to “LABORER” when it declared what are
to be exempted from attachment and execution. The term “WAGES” as distinguished from “SALARY”, applies
to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day,
week, month, or season, while “SALARY” denotes a higher degree of employment, or a superior grade of
services, and implies a position of office; by contrast, the term “WAGES” indicates a considerable pay for a
lower and less responsible character of employment. While “SALARY” is suggestive of a larger and more
important service.
The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co., wherein it
was said: “WAGES are the compensation given to a hired person for service, and the same is true of
SALARY. The words seem to be synonymous, convertible terms, though we believe that use and general
acceptation have given to the word ‘salary’ a significance somewhat different from the term ‘wages’ in this:
that the former is understood to relate to a position of office, to be compensation given for official or other
service, as distinguished from ‘wages’, the compensation for labor.”
Concept of Facilities and Supplements

FACILITIES – are items of expense necessary for the laborer’s and his family’s existence and subsistence.

Requisites for FACILITIES to be considered as an integral part of an employee’s wage:

1. Must be customarily furnished by the employer to the employees;
2. Must be charged at a fair and reasonable value; and
3. The provision on deductible facilities must be voluntarily accepted by the employee in writing.
  10

(Mabeza vs. NLRC, 271 SCRA 670)

Mabeza vs. NLRC

271 SCRA 670
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not
facilities but supplements. A benefit or privilege granted to an employee for the convenience of the employer is
NOT a facility. The criterion in making a distinction between the two not so much lies in the kind (food, lodging)
but the purpose. Considering, therefore, that hotel workers are required to work different shifts and are
expected to be available at various odd hours, their ready availability is a necessary matter in the operations of a
small hotel, such as private respondent’s hotel.

Millares vs. NLRC

305 SCRA 501

Defines FACILITIES and the term CUSTOMARY.

CUSTOMARY is founded on long-established and constant practice connoting regularity. The receipt of an
allowance on a monthly basis does not ipso facto characterize it as a regular and forming part of salary because
the nature of the grant is a factor worth considering. We agree with the observation of the Solicitor General that
the subject allowances were, temporarily, not regularly, received by the petitioners because – In the case of
housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee
concerned transfers to the company premises and his housing allowance is discontinued x x x x On the
otherhand, the transportation allowance is in he form of advance for actual transportation expenses subject to
liquidation x x x given only to employees who have personal cars. The Bislig allowance is given to Division
managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside
Bislig, the allowance stops.
Section 5, Rule VII, Book III, of the Implementing Rules gives meaning to the term FACILITIES as
including articles or services for the benefit of the employee or his family but excluding the 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.
The Secretary of Labor under Section 6, Rule VII, Book III, may from time to time fix in appropriate
issuances the “fair and reasonable value of the board, lodging and other facilities customarily
furnished by an employer to his employees.” Petitioners’ allowances do not represent such fair and
reasonable value as determined by the proper authority simply because the Staff/Manager’s allowance and
transportation allowance were amounts given by the employer in lieu of actual provisions for housing and
transportation needs whereas the Bislig allowance was given in consideration of being assigned to the hostile
environment then prevailing in Bislig.

SUPPLEMENTS – constitute extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages.

The classification of an item of expense as a facility or a supplement will depend on the purpose, and not
on the kind. So, if it is principally or mainly for the benefit of the employee, classify as facilities, and the fair
and reasonable value of that can be considered as deductible from the employee’s wage. An employer can
validly pay the employee in the form of cash or in kind. And that kind refers to facilities.
If the requisites are all present, that facilities may take the place of the cash payment of the employee’s
wage. This is one exception to the requirement that an employee’s wage shall be paid in legal tender; you
cannot pay it in kind.
If it classifies under facilities, it shall include the fair and reasonable value of board, lodging, etc. as long
as it is mainly and principally for the benefit of the employee.

WAGE RATIONALIZATION ACT (RA 6767)

Importance: This law, which amended the Labor Code, will tell us the different government agencies
involved in the fixing of wages, and also, how to resolve wage distortion.

Purpose: was intended to rationalize wages

FIRST, by providing for full-time boards to police wages round-the-clock.
SECOND, by giving the boards enough powers to achieve this objective.

Policies:
(a) To rationalize the fixing of the minimum wage. (important)

It has been rationalized because Article 124 provides for the standards and criteria that should guide
the agency of government when it comes to fixing the minimum wage. It is noted that under the standard
criteria, that the Congress has tried to weigh the factors involving the employers, as well as the factors
involving the laborers when it comes to fixing of employee’s wage in order to rationalize it.
  11

Before RA 6727, it was only Malacañang, through a Presidential Decree, that dictates how much
should be the minimum wage in the Philippines. Most often than not, those employers in the far-flung
areas are adversely affected because the fixing of minimum wage is not rationalized. It does not take into
consideration, for example, the capitalization of the employer, the profit expected, the cost of living in a
particular area.
With the advent of RA 6727, the law deems it necessary that there shall be standard criteria in fixing
the employee’s wage.

Article 124. Standards or Criteria for Minimum Wage Fixing.

a. The demand for living wages;
b. Wage adjustment vis-à-vis the consumer price index;
c. The cost of living and changes or increases therein;
d. The needs of workers and their families;
e. The need to induce industries to invest in the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return of the capital invested and capacity to pay of employers;
i. Effects on employment generation and family income; and
j. The equitable distribution of income and wealth along with the imperatives of economic and
social development.

(b) To promote productivity-improvement and gain-sharing measures to ensure a decent standard of

living for the workers and their family.

(c) To guarantee the rights of labor to its just share in the fruits of production.

(d) To enhance employment generations in the countryside through industry dispersal.

(e) To allow business and industry reasonable returns on investment, expansion and growth.

(f) The state shall also promote collective bargaining as the primary mode of setting wages and other
terms and conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted
in a fair and equitable manner, considering existing regional disparities in the cost-of-living and other
socio-economic factors and the national economic and social development plans. (important)

This is an important policy because it promotes collective bargaining as a mode of settling labor
disputes.

Ilaw at Buklod ng Manggagawa vs. NLRC

198 SCRA 586 (1991)

The policy of the state is promoting collective bargaining as a mode of settling labor dispute.
There was a wage distortion affecting the establishment and what the employees did
was to stage a strike in order to compel the employer to solve wage distortion. The SC said NO.
If RA 6727 is examined, strike is not provided as a solution in resolving wage distortion. It should
be through collective bargaining. Therefore, the SC declared the strike as illegal because the
Rules Implementing RA 6727 provides for a specific and detailed approach on how to resolve
wage distortion short of strike or lockout.
Among the rights guaranteed to employees by the Labor Code is that of engaging in
concerted activities in order to attain their legitimate objectives. Article 263 of the Labor Code, as
amended, declares that in line with “the policy of the State to encourage free trade unionism and
free collective bargaining, xx (w)orkers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection.” A similar right to
engage in concerted activities for mutual benefit and protection is tacitly and traditionally
recognized in respect of employers.
The more common of these concerted activities as far as employees are concerned are:
i. strikes – the temporary stoppage of work as a result of an industrial or labor dispute;
ii. picketing – the marching to and fro at the employer’s premises, usually accompanied
by the display of placards or other signs, making known the facts involved in a
labor dispute; and
iii. boycotts – the concerted refusal to patronize an employer’s goods or services and to
persuade others to a like refusal.
On the other hand, the counterpart activity that management may licitly undertake is the lockout
– the temporary refusal to furnish work on account of a labor dispute. In this connection, the
same Article 263 provides that the “the right of legitimate labor organizations to strike and
picket, and of employer to lockout, consistent with the national interest, shall continue to be
recognized and respected.” The legality of these activities is usually dependent on the legality of
the purposes sought to be attained and the means employed therefore.
  12

Cagayan Sugar Milling vs. Secretary or Labor

G.R. No. 128399. January 15, 1998

The record shows that there was no prior public consultation or hearings and newspaper
publication insofar as Wage Order No. RO2-02-A (Amended) is concerned (in violation of Art. 123 of the
Labor Coe). In fact, these allegations were not denied by public respondents in their comment. The Sec. of
Labor’s position is that there was no need to comply with the legal requirements of consultation and
newspaper publication as Wage Order No. RO2-02-A merely clarified the ambiguous provision of the original
wage order.
We are not persuaded.
To begin with, there was no ambiguity in the provision of Wage Order RO2-02 as it provided in
clear and categorical terms for an increase in statutory minimum wage of workers in the region. Hence, the
subsequent passage of RO2-02-A providing instead for an across the board increase in wages did not clarify
the earlier Order but amended the same. In truth, it changed the essence of the original Order.
In passing RO2-02-A without going through the process of public consultation and hearings, the
Regional Board deprived petitioner and other employers of due process as they were not given the
opportunity to ventilate their positions regarding the proposed wage increase.
In wage-fixing, factors such as fair return of capital invested, the need to induce industries to
invest in the countryside and the capacity of employers to pay are, among others, taken into consideration.
Hence, our legislators provide for the creation of Regional Tripartite Boards composed of representatives
from the government, the workers and the employers to determine the appropriate wage rates per region to
ensure that all sides are heard.
For the same reason, Article 123 of the Labor Code also provides that in the performance of their
wage-determining functions, the Regional Board shall conduct public hearings and consultations, giving
notices to interested parties. Moreover, it mandates that the Wage Order shall take effect only after
publication in a newspaper of general circulation in the region. It is a fundamental rule, borne out of a sense
of fairness, that the public is first notified of a law or wage order before it can be held liable for violation
thereof.
In the case at bar, it is indisputable that there was no public consultation or hearing conducted
prior to the passage of RO2-02-A. Neither was it published in a newspaper of general circulation as attested
in the February 3, 1995 minutes of the meeting of the Regional Wage Board that the non-publication was by
consensus of all the board members. Hence, RO2-02-A must be struck down for violation of Article 123 of
the Labor Code.

REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD (RTWPB)

An agency of Government responsible for fixing the minimum wage

Composition of the Board:

1) Regional Director of the DOLE as Chairman
2) Regional Directors of NEDA and DTI as Vice Chairmen
3) 2 members each from the workers and employers sector who shall be appointed by the President of
the Philippines, upon recommendation of the Secretary of the DOLE
4) Each Regional Board to be headed by its Chairman shall be assisted by a Secretariat
(7 members-please check wage order signatories)

Two Major Functions of the Board:

(1) It has the power to receive, act and process application for wage increase and adjustment.
(2) The power to act, process and approve application for exemption from the wage orders.
These are the two most important functions of the board as far as lawyers are concerned.
Because that is where lawyers play an active role in representing the parties: 1) on the matter of
application of wage increase, and 2) on the matter of granting wage exemption or exemption from the
minimum wage.

 Get a copy of the Revised Rules of Procedure on Minimum Wage Fixing. (1990)

NATIONAL WAGES AND PRODUCTIVITY COMMISSION (NWPC)

An appellate agency. This is not the same as the NLRC.

REVISED RULES OF PROCEDURE ON MINIMUM WAGE FIXING:

The procedure will tell us that you can file a petition for a wage increase with the RTWPB. Also, that the
Board can Motu Proprio fix the minimum wage or can act on the application for a minimum wage increase or
reduction.
Ordinarily, the Board will not act motu proprio. It will wait until an application for a wage increase is files
before it.
  13

Modes to initiate the fixing of the minimum wage:

1) Motu Proprio by the RTWPB
2) Wage fixing by virtue of a petition filed

Rule II. Section 3. Procedures in Minimum Wage Fixing:

(a) Motu Proprio by the Board

Whenever conditions in the region, province or industry so warrant, the Board may, motu proprio on its
own initiative, or as directed by the Commission (NWPC), initiate action or inquiry to determine whether a
wage order should be issued. The Board shall conduct public hearings. The Board may also conduct
consultations with concerned sectors/industries.

(b) By Virtue of a Petition Filed

1) Form and Content of Petition

Any party may file a verified (subscribed and sworn to) petition for wage increase with the
appropriate Board in 10 legible copies, which shall contain the following:
a) Names and addresses of petitioners and signatures of authorized officials
b) Grounds relied upon to justify the increase being sought
c) Amount of wage increase being sought
d) Area and/or industry covered.

 PROPER PARTY: Any party may file the petition to increase the wage or fix the
minimum wage, provided:
 The petitioner is a legitimate organization of workers duly registered with the
DOLE
 The employers are with substantial interest and are affected by the decision of
the order of the Board

If employed in an establishment, the employee cannot go to court and file a petition

for a wage increase because the employee is not considered a proper party. It must be an
employer or a legitimate labor organization.

2) Board Action

The Board must first examine if the formal and substantial requirements are complied with
and are completed.

If the petition conforms with the substantial requirements, the Board shall conduct public
hearings in the manner prescribed, to determine whether a wage order should be issued. The
Board may also conduct consultations with concerned sectors/industries.

3) Publication of Notice of Petition/Public Hearing

The notice shall be published in a newspaper of general circulation in the region and/or
posted in public places as determined by the Board. The publication or posting shall be made
at least 15 days before the date of initial hearing and shall be in accordance with the
suggested form.

The notice of petition and/or public hearing shall include

 The names and addresses of the petitioners
 The subject of the petition
 The date, place and time of the hearings

This is posted or published before the hearing of the petition.

4) Opposition

Any party may file his opposition to the petition on or before the initial hearing, copy
furnished to the petitioners. The opposition shall be filed with the appropriate Board in 10
typewritten legible copies, which shall contain the following:
a) Names and addresses of the oppositors, and signatures of authorized officials;
b) Reasons or grounds for the opposition; and
c) Relief sought
  14

5) Consolidation of Petitions

If there is more than one petition filed, the Board may motu proprio or on motion of any
party, consolidate these for purposes of conducting joint hearings or proceedings to expedite
resolutions of petitions. Petitions received after publication of an earlier petition need not go
through the publication or posting requirement.

6) Assistance of Other Government and Private Organizations

The Board may enlist the assistance and cooperation of an government agency or private
person or organization to furnish information in aid of it wage fixing function.

Rule III. Conduct of Hearings.

In the performance of its wage-fixing functions, the Board shall conduct public hearings or consultations,
giving notices to employees’ and employers’ groups, provincial, city and municipal officials and other
interested parties.
Hearings may be conducted by the Board en banc or by a duly authorized committee thereof. The Board
shall determine the date, place and time of the hearing which shall be open to the public except as otherwise
requested by the party and so determined by the Board.

Order of Hearing (Section 3)

As much as practicable, the petitioners shall present their evidence first, followed by the oppositors, the
Board may then call on other persons to present their views and submit position papers and other supporting
documents.

Manner and Duration of Hearings (Section 4)

Public hearing shall be conducted in each province in the region as far as practicable.
Hearings shall be concluded within 45 days from the date of initial hearing except when conditions in the
region warrant otherwise.

Records of Proceedings (Section 5)

The Board Secretariat shall keep records or minutes of all Board proceedings, duly noted by the members
of the Board.

Non-Applicability of Technical Rules (Section 6)

The Board shall not be bound strictly by technical rules of evidence and procedures.

Prohibition Against Injunction (Section 7)

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 Board.

On the date of hearing, the Board will sit as a collegial body and will hear the petition, first from the petitioner
presenting their position paper and after that from the oppositors. And thereafter, the Board will then
determine whether to grant the petition or not. Whether to grant the wage increase or not, and how much. In
effect, the Board will fix the minimum wage and this will be done through the issuance of a wage order.
Rule IV. Wage Order.

Issuance of Wage Order (Section 1)

Within 30 days after conclusion of the last hearing, the Board shall decide on the merits of the petition,
and where appropriate, issue a wage order establishing the regional minimum wage rates to be paid by
employers, which, shall in no case be lower than the applicable statutory minimum wage rates. The Wage
Order may include wages by industry, province or locality as may be deemed necessary by the Board,
provided, however, that such wage rates shall not be lower than the regional minimum wage rates unless
expressly specified in the Wage Order.
The Board shall furnish the NWPC a copy of the decision on the petition or the Wage Order.

Effectivity (Section 4)
A Wage Order shall take effect 15 days after its publication in at least 1 newspaper of general circulation
in the region

Upon issuance of the Wage Order, it does not immediately become effective. It has to be published and takes
effect 15 days after its publication.

Frequency of Wage Order (Section 3)

General Rule:
  15

Any Wage Order issued by the Board may not be disturbed for a period of 12 months from its effectivity.
And no petition for wage increase shall be entertained within the said period.
Exception:
In the event, however, that supervening conditions (such as extraordinary increase in prices of petroleum
products and basic goods and services), demand a review of the minimum wage rates as determined by the
Board and confirmed by the Commission, the Board shall proceed to exercise its wage fixing function even
before the expiration of the period (12 months).

Reason: The petitions would clog the Board dockets unreasonably.

The rules prohibit any interested party from filing a wage increase petition within 12 months from the
effectivity of a wage order. Please note the exception. Absent such circumstance, there will be no disturbance
of the Wage Order within 12 months from its effectivity. That is why the date of effectivity of a Wage Order is
important.

Remedy on the part of the aggrieved party from a Wage Order?

Rule V. Appeal.

Appeal to the Commission (NWPC) (Section 1)

Any party aggrieved by a Wage Order issued by the Board may appeal such Order to the Commission by
filing a verified appeal with the Board in 3 typewritten legible copies, not later than 10 days from the date of
publication of the Order.
The appeal shall be accompanied by a Memorandum of Appeal which shall state the grounds relied upon
and the arguments in support of the appeal.
The Board shall serve notice of the appeal to concerned parties.

So watch out for the date of the publication of the Wage Order because that is when the 10 calendar days will
start to run. Not from the effectivity, but from the date of publication.

Grounds for Appeal (Section 2)

(a) Non-conformity with prescribed guidelines and/or procedures
(b) Questions of law (Rule 45)
(c) Grave abuse of discretion (Rule 65)

The NWPC has established guidelines on the fixing of the minimum wage. If the Board, for instance, did not
conduct a hearing, that contravenes the guidelines, therefore, constituting the first ground.

As for instance, the Board is confronted with an issue on a question of law and the Board erred in interpreting
the law, this will fall under the second ground.

As when the Board acts arbitrarily, capriciously or whimsically in issuing the wage order, this will constitute
grave abuse of discretion.

Period to Act on Appeal (Section 4)

The Commission shall decide on the appeal within 60 days from the filing thereof.
Effect of Appeal (Section 5)
The filing of the appeal does not operate to stay the Order unless the party appealing such Order shall file
with the Commission an undertaking with a surety or sureties satisfactory to the Commission for payment to
employees affected by the Order of the corresponding increase, in the event such Order is affirmed.

Instance when the appeal will stay the Wage Order: In case the employer will post a surety bond.

The Wage Order fixes the minimum wage. The employer has to comply with that, unless the employer is
exempted from complying with the Wage Order. The employer, however, as an aggrieved party, can appeal
from the Wage Order on grounds provided by the law or by the rules. If he does appeal, that appeal will not
stop the employer from complying with the Wage Order. That means, he has to still pay his employees. He
can only refrain from paying his employees or giving them the minimum wage if he posts a cash or surety
bond in an amount equivalent to the wage increase. On the condition that the bond will answer in case his
appeal is dismissed by the NWPC.

Is the Regional Board under the DOLE?

It is not. It is only an attached to the department for policy and correlation purposes.

The decision of the Board is appealable to the NWPC. From the decision of the NWPC, does the aggrieved
party have any remedy? YES.
  16

Remedy from the decision of the NWPC:

No appeal from the decision of the NWPC. The legal remedy is by means of Special Civil Action of
Certiorari under Rule 65 to the Court of Appeals within the period of 60 days.

St. Martin’s Funeral Home vs. NLRC

G.R. 130856, September 16, 1998

Under the Principle of hierarchy of courts, the certiorari should be filed not directly to the Supreme Court,
but to the Court of Appeals.
Senate Bill No. 1495, speech of Roco:
The Judiciary Reorganization Act, BP 129, reorganized the Court of Appeals and at the same time expanded
its jurisdiction and powers. Among others, its appellate jurisdiction was expanded to cover not only the final
judgment of the RTC, but also all final judgments, decisions, resolutions, orders, or awards of quasi-judicial
agencies, instrumentalities, boards and commissions, except those falling within the appellate jurisdiction of
the Supreme Court in accordance with the Constitution, the provisions of BP 129 and of subparagraph 1 of the
third paragraph and subparagraph 4 of Section 17 of the Judiciary Act of 1948.
The purpose of the law is to ease the workload of the Supreme Court by the transfer of some of its burden
of review of factual issues to the Court of Appeals, however, whatever benefits that can be derived from the
expansion of the appellate jurisdiction of the Court of Appeals was cut short by the last paragraph of Section 9
of BP 129 which excludes from its coverage the “decisions and interlocutory orders issued under the Labor
Code and by the Central Board of Assessment Appeals.”
There is a growing number of labor cases being elevated to this Court which, not being a trier of fact, has at
times been constrained to remand the case to the NLRC for resolution of unclear or ambiguous factual
findings; that the Court of Appeals is procedurally equipped for that purpose; aside from the increased number
of its component divisions; and that there is undeniably an imperative need for expeditious action on labor
cases as a major aspect of constitutional protection to labor.
Therefore, all references in the amended Section 9 of BP 129 to supposed appeals from the NLRC to the
Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule
65. Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict
observance of the Doctrine of Hierarchy of Courts as the appropriate forum for the relief desired.

 Under Rules of Civil Procedure, the Court of Appeals and the Supreme Court, shares original and
concurrent jurisdiction over Certiorari, including Prohibition, Mandamus, Quo Warranto, etc.

In Certiorari, there should be no other appeal, no other plain, speedy remedy in the course of law that is
why a motion for reconsideration should be filed from the decision of the NWPC.
If a motion for reconsideration is filed, the period for filing it will not be considered in determining the 60-
day period for filing the Certiorari. So, from the denial of the motion for reconsideration, there is still 60 days
to file for Certiorari.
It is the prevailing rule that even is a motion for reconsideration is filed; there is still 60 days to file a
Petition for Certiorari from receipt of the denial of the motion for reconsideration.
Under the old rule, the SC said that there will only be a balance, but a most recent Supreme Court Circular
has repealed that.
So, with or without a motion for reconsideration, there is 60 days to file the Petition for Certiorari. This
should be grounded on grave abuse of discretion amounting to lack or excess of jurisdiction.
Remedy from the decision of the Court of Appeals:
From the decision of the Court of Appeals ruling on the denial of the petition for certiorari, a motion for
reconsideration can still be filed within 15 days. If denied by the CA, the legal remedy is Rule 45 to the
Supreme Court on question of law.

Summary:
 The decision of the NWPC becomes final and executory.
 There is no appeal from the decision of the NWPC, but there is still a remedy of Certiorari to the Court of
Appeals within 60 days.
 From the decision of the CA, a motion for reconsideration can be filed
 And if the motion for reconsideration is denied, can file a Petition for Review on Certiorari or Appeal
by Certiorari under Rule 45 to the Supreme Court. Meanwhile, the decision of the CA will not become
final and executory. It can be reviewed by the SC. Of course, the decision of the NWPC becomes final and
executory upon the denial of motion for reconsideration. If it becomes final and executory, it could be
subject on execution. And the only way to prevent the enforcement of the decision of the CA would be to
file a Petition for Certiorari and simultaneous or subsequent therewith, apply for the issuance
of a Temporary Restraining Order and/or a Writ of Preliminary Injunction . Without the TRO
and/or WPI, the decision of the NWPC cannot be enjoined and therefore, it should be executed.

If the NWPC affirms the Wage Order and there is no more review or there is no more remedy availed of by
the aggrieved party, then the decision and the Wage Order will have to be complied with.
  17

Prevailing Wage Order: Wage Order No. 8, as of today, November 12, 2001. P190, covering the Cities of
Cebu, Lapulapu and Mandaue. Another round of increase of P5 will take effect on December 1, 2001.

EXEMPTION FROM MINIMUM WAGE

1) By operation of law
2) By application for wage exemption

Who are exempted from the minimum wage by operation of law?

Article 98. Application of Title.
This title (Wages) shall NOT apply to farm tenancy or leasehold, domestic service and persons working in
their respective homes in needle work or in any cottage industry duly registered in accordance with law.

Relate this to Employment of Homeworkers, Article 159-155. If a homeworker performs needlework in or at

his home, that person is exempted from employing the minimum wage by operation of law. So employers of
these employees are not obliged to comply with the minimum wage. If you are employing a househelper, you
are not covered by the minimum wage by operation of law. That means, you do not have to file an application
for exemption. And you do not have to comply with the P190 prevailing minimum wage.

Revised Guidelines on Exemption from Wage Orders – NWPC Guidelines No. 01-1996

Section 2. Criteria for Exemptible Establishments.

Exemption of establishments from compliance with the wage increases and cost of living allowances
prescribed by the Boards may be granted in order to
(1) Assist establishments experiencing temporary difficulties due to losses to maintain the financial
viability of their businesses and continued employment of their workers;
(2) Encourage the establishment of new businesses and the creation of more jobs, particularly outside
the National Capital Region and Export Processing Zones, in line with the policy on industry dispersal;
and
(3) Ease the burden of micro establishments, particularly in the retail and service sector, that have a
limited capacity to pay.

Types of Employers Eligible for Exemption from the Applicable Minimum Wage:
1) Distressed Establishments
2) New Business Enterprises (NBEs)
3) Retail or Service Establishments employing not more than 10 workers
4) Establishments adversely affected by natural calamities

Exemptible categories outside of the above-mentioned list may be allowed only if they are in accord with
the rationale for exemption reflected above. The concerned Regional Board shall submit strong and justifiable
reasons for the inclusion of such categories which shall be subject to review or approval by the Commission.

 Note: Please check the guidelines for the documentary requirements that must be submitted in order to
process and secure approval of the application for wage exemption.

SERVICE ESTABLISHMENT – refers to one principally engaged in the sale of services to individuals for their
own or household use and is generally recognized as such.

RETAIL ESTABLISHMENT – refers to one principally engaged in the sale of goods to end users for personal
or household use.

Cases: Wage Exemption

RCPI vs. National Wages Council
207 SCRA 581

The purpose of wage exemptions is to help financially distressed companies meet their labor costs without
endangering the existence or viability of the firm upon which both management and labor depend for a living.
Under the spirit of Wage Order No. 6, it is the actual ability of a firm to spend for its current needs and
costs and not how the assets and liabilities of a firm may appear in the technical jargon of higher accounting
principles which is important. True, the retained earnings account constitutes a company's accumulated profits
of losses. However, it is not enough to treat said earnings as "earnings" in the real sense of the word for
purposes of wage exemptions.
To a company striving to meet daily payrolls, it is not of any comfort to say that the "appraisal increment
transferred to retained earnings" represents actual earnings which were previously deducted from the actual
net income figure through additional depreciation expense resulting from appraisal. In purely technical
accounting terms, they may be considered as merely being returned not to the net income account but to the
retained earnings balance to which the net income account is ultimately closed.
This is to keep the books straight. For purposes of compliance with the law on wage exemptions, however,
the retained earnings arising from appraisal increment do not represent hard cash but merely theoretical
increases resulting from upward valuations of old fixed assets.
  18

There is no income or profit from the sale of goods or services. No income is realized from the reappraisal of
fixed assets until such a time as the machinery, equipment, and other fixed assets are sold or disposed of in
the event of a liquidation of assets.
The NWC ruling treats the revaluation increment as similar to the sale of fixed assets. In the same way,
however, that machinery and equipment should not be sold in order to meet increases in the wages of
workers (for this would destroy not only the company but the employment of the workers themselves) so
should a similar attitude be adopted when machinery or equipment is not sold but merely revalued. On
December 16, 1986, the NWC, through then Secretary Augusto B. Sanchez - its chairman, approved the
application for exemption of RCPI and stated, among other things, that: "The Executive Committee, therefore,
recognizes the necessity to set aside technicalities required by existing criteria under NWC Policy Guidelines
Nos. 6 and 8 and bestow greater significance to the actual financial condition of RCPI."
NWC decided to give RCPI a breathing spell because of numerous obligations that the company had to
meet. Under a compromise agreement, RCPI bound itself to pay 30% of whatever was due the employees
under PD 1713 for the mandatory third year increases and Wage Order No. 1 for the first and second year.
The balance of 70% was subject to negotiations. (See G.R. No. 77503, Buklod ng Manggagawa v. Sanchez,
supra, Rollo, p. 168). NWC found that RCPI's compliance with the Wage Orders would result in the company's
financial dislocation and, accordingly, granted it the prayed for exemption. We see no reason from the records
why a different treatment should apply in the following year. Simply because there were changes or transfers
of the same items to differently named accounts in the books of the company, it does not follow that it
thereby ceased to be entitled to exemptions.
(Distressed Establishment)
Joy Brothers vs. NWPC
273 SCRA 622

NWPC Revised Guidelines provides that it may be exempted upon application and due determination by the
board. The criteria for exemption for Distressed Establishments are as follows:
(a) In case of a stock corporation, partnership, single proprietorship, non-stock, non-profit organization or
cooperative engaged in a business activity or charging fees for its services –
a.1 When accumulated losses for the last 2 full accounting periods and interim period, if any, immediately
preceding the effectivity of the Order have impaired by at least 25% the:
-- Paid-up capital at the end of the last full accounting period preceding the effectivity of the Order, in case
of corporations.
-- Total invested capital at the beginning of the last full accounting period preceding the effectivity of the
Order in the case of partnerships and single proprietorships.
a.1.1 Establishments operating for less than 2 years may be granted exemption when accumulated losses
for said period have impaired by at least 25% the paid-up capital or total invested capital, as the case may be.
Section 8, paragraph a, of the Rules Implementing Wage Order No. NCR-03 provides that exemption from
compliance with the wage increase may be granted to distressed establishments whose paid-up capital has
been impaired by at least 25% or which registers capital deficiency or negative net worth.
The Revised Guidelines on Exemption expressly require interim quarterly financial statements for the period
immediately preceding December 16, 1993. it is clear that the financial statements worthy of consideration are
those of the three quarters prior to December 16, 1993, the third quarter ending on September 30, 1993.
Thus, petitioner manifestly errs in claiming that said interim period is up to December 15, 1993 or December
31, 1993.

(Retail Establishment)
C. Planas Commercial vs. NLRC
303 SCRA 49

Petitioners invoke the exemption provided by law for retail establishments which employ not more than 10
workers to justify their non-liability for the salary differentials in question. They insist that PLANAS is a retail
establishment leasing a very small and cramped stall in the Divisoria Market which cannot accommodate more
than 10 workers in the conduct of its business.
The SC is unconvinced. The records disclose de los Reyes’ clear entitlement to salary differentials. Well-
settled is the rule that factual findings of labor officials who are deemed to have acquired expertise in matters
within their jurisdiction are generally accorded not only respect but even finality and bind this Court when
supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion.
Section 4 (c) of RA 6727 categorically provides:
Retail or service establishments regularly employing not more than 10 workers may be exempted from the
applicability of this Act upon application with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the Commission. Whenever an application for
exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-
compliance with this Act shall be deferred pending resolution of the application for exemption by the
appropriate Regional Board. In the event that the applications for exemptions are not granted, employees
shall receive the appropriate compensation due them as provided for by this Act plus the interest of 1% per
month retroactive to the effectivity of this Act (emphasis supplied).

Nasipit Lumber vs. NWPC

289 SCRA 667
  19

The power to prescribe guidelines is lodged in the NWPC, not in the RTWPB. This is clearly provided for in
Article 121 of RA 6727, amending the Labor Code. it grants the NWPC, not the RTWPB, the power to prescribe
rules and guidelines for the determination of minimum wage and productivity measure.
While the RTWPB may issue wage orders under Article 122(b) of the Labor Code, such orders must be
under the guidelines of the NWPC. However, the NWPC has the power not only to prescribe guidelines to
govern wage but also to issue exemptions therefrom, as the said rule provides that whenever a wage order
provides for an exemption, application thereto must be filed with the appropriate Board which shall process
the same, subject to guidelines which the RTWPB implements. Significantly, the NWPC authorized the RTWPB
to issue exemptions from wage orders, but subject to its review and approval. Since the NWPC never assented
to Guideline No.3 of the RTWPB, the said guideline is inoperative and cannot be used by the latter in deciding
or acting on petitioners’ application for exemption.

Reason for Exemption

A wage exemption is intended to assist financially beleaguered companies to meet their labor cost without
endangering the viability of the company.

WAGE DISTORTION

WAGE DISTORTION – a situation where an increase in prescribed wage rates results in the elimination or
severe contraction of intentional quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions embodies in such wage
structure based on skills, length of service, or other logical bases of differentiation. (Article 124)

The definition of “Wage Distortion” as aforequoted, shows that such distortion can so exist when, as a
result of an increase in the prescribed wage rate, an “elimination or severe contraction of intentional
quantitative differences in wage or salary rates” would occur “between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.”

When does wage distortion happen?

It happens when the employer grants an increase only to a certain group of employees drastically
reducing or eliminating the normal salary differential or gap.

Possible Causes of Wage Distortion:

1) Government decreed increase thru wage orders
2) Merger of establishments (confusion or elimination of the status of employee)
3) Increase granted by employers
4) Passage of RA 6727 or the Wage Rationalization Act

1) Government decreed increases through issuance of Wage Orders

2 Kinds of Wage Orders:

(a) The Congress provides for a statutory minimum wage (during the martial law era) and an
increase is given and added to the daily wage.
(b) With the passage of RA 6727, instead of providing for a fixed amount for an increase, the
wage order now fixes a minimum wage below which the wages cannot fall.

2) Merger of two establishments whereby the employees of the dissolved company are
absorbed by the surviving company

Example:
Magnolia Nestle
Casual P160 P190
Permanent P190 P200

Magnolia-Nestle
Casual -- P190
Permanent -- P190
There will be wage distortion.

3) Employer granted increases to the workers of an establishment

The employer grants an increase affecting only a certain group of employees thereby reducing
drastically or totally eliminating the salary gap between such group and the next higher level.

4) Passage of RA 6727
  20

Example: SM Company
Casual -- P145 a wage order is passed = Casual -- P190
Permanent -- P180 particularly Wage Order = Permanent – P195
#8, increasing the minimum  wage distortion
wage to P190 now exists

Effects on Existing Wage Structure. (Section 16, IRR of RA 6727)

Where the application of the wage increase prescribed herein results in DISTORTIONS in the
wage structure within an establishment which gives rise to dispute therein, such dispute shall:
(a) First be settled voluntarily between the parties
(b) In the event of deadlock, such dispute shall be finally resolved through compulsory
arbitration by the Regional Arbitration Branch of the NLRC having jurisdiction in the
workplace.

Correction of Wage Distortion:

(brought about by the enactment or passage of a wage order)

The Court has pointed out that through Article 124, the law recognizes the validity of NEGOTIATED WAGE
INCREASES to correct wage distortion.

A. IF UNIONIZED –

(a) The employer and the union should first negotiate to correct the distortion (contemplates
the absence of a grievance procedure)
(b) If negotiations fail, the matter should be brought to the grievance (machinery) procedure
under their CBA
(c) If no settlement is arrived at, the dispute should be submitted to voluntary arbitration
(voluntary arbitrators or panel of voluntary arbitrators)
(d) If still unresolved, or parties are unsatisfied, an appeal may be made to the appropriate
branch of the NLRC.

B. IF NOT UNIONIZED –

(a) The employer and the workers should negotiate to correct the distortion.
(b) If negotiations fail, the matter should be brought to the National Conciliation and Mediation
Board (NCMB).
(c) If no settlement is arrived at after 10 calendar days of conciliation, the dispute should be
brought to the appropriate branch of the NLRC, which shall conduct continuous hearings and
decide the dispute within 20 calendar days from the time said dispute is submitted for
compulsory arbitration.

Grievance Machinery or Procedure (Article 260)

The parties to a collective bargaining agreement shall establish a machinery for the adjustment and
resolution of grievances arising from:
 The interpretation or implementation of CBA
 The interpretation or enforcement of company personnel policies (the voluntary arbitrator shall
have exclusive and original jurisdiction to hear and decide such grievances which remain
unresolved after exhaustion of grievance procedure)

All grievances submitted to the grievance machinery which are not settled within 7 calendar days from the
date of its submission shall automatically be referred to VOLUNTARY ARBITRATION prescribed in the CBA.

For this purpose, parties to a CBA shall

 Name and designate in advance a Voluntary Arbitrator or panel of Voluntary Arbitrators, or
 Include in the agreement a procedure for the selection of such Voluntary Arbitrator or panel of
Voluntary Arbitrators, preferably from the listing of qualified Voluntary Arbitrators duly accredited
by the Board.

In case the parties fail to select a Voluntary Arbitrator or panel of Voluntary Arbitrators, the Board shall
 Designate the Voluntary Arbitrators, as may be necessary, pursuant to the selection procedure
agreed upon in the CBA, which shall act with the same force and effect as if the Arbitrator or
panel of Arbitrators has been selected by the parties as prescribed.
  21

 The judge in voluntary arbitration is called ARBITRATOR while that in compulsory arbitration is called
LABOR ARBITER.

 A Petition for Certiorari under Rule 65 of the Revised Rules of Court will lie where
 A grave abuse of discretion or
 An act without or in excess of jurisdiction on the part of the voluntary arbitrator is clearly shown.

LABOR ARBITRATION – reference of a labor dispute to a third party for determination on the basis of
evidence and arguments presented by such parties, who are bound to accept the decision.

Arbitration may be classified on the basis of obligation on which it is based, it may either be:

(a) VOLUNTARY ARBITRATION – a contractual proceeding whereby the parties to any dispute
or controversy in order to obtain a speedy and inexpensive final disposition of the matter,
select a judge of their own choice and by consent, submit their controversy to him for
determination (this is pursuant to a voluntary arbitration clause in the CBA)

 The judge is called ARBITRATOR whose determination is a final and binding

resolution.
 The power of the Voluntary Arbitrator to try and decide the case if the same as that
of a Labor Arbiter.

VOLUNTARY ARBITRATOR – means

(1) Any person accredited by the Board as such, or
(2) Any person named or designated in the CBA by the parties to act as their voluntary
arbitrator, or
(3) One chosen, with or without the assistance of the NCMB, pursuant to a selection
procedure agreed upon in the CBA, or
(4) Any official that may be authorized by the Secretary of Labor to act as voluntary
arbitrator upon the written request and agreement of the parties to a labor dispute.

(b) COMPULSORY ARBITRATION – process of settlement of labor disputes by a government

agency (or by other means provided by the government) which has the authority to
investigate and to make award which is binding on all the parties.

Parties are compelled to forego their right to strike.

A disinterested person or third party is usually appointed by the state.

It is compulsory because the law declares the dispute subject to arbitration, regardless of the
consent of the parties.

Done by the Regional Arbitration branch of the NLRC (please refer to Article 217)

It is an adversarial proceeding initiated by a complaint (usually by the union) for wage

distortion before the Labor Arbiter. The other party is entitled to answer.

 The parties can agree to select a Labor Arbiter as a Voluntary Arbitrator because it is as to
the agreement between the parties.

ORGANIZED ESTABLISHMENT – refers to a firm or a company where there is a recognized or certified

exclusive bargaining agreement.

UNORGANIZED ESTABLISHMENT – where there is no recognized union or collective bargaining

agreement.

What should be contained in a CBA?

(1) Terms and conditions of employment
(2) Wages
(3) Hours of Work
(4) Procedure for resolving grievances

Organized or unionized establishments may:

(a) Meet and sit down and discuss the wage adjustment
  22

(b) In case of disagreement, the matter is elevated to the top executives

(c) Company grants an increase if it be proven that wage distortion exists (this increase may be called a
NEGOTIATED WAGE INCREASE)

 In case of organized or unionized establishments who submit to voluntary arbitration, the mutual
consent of the parties governs the selection of a common arbitrator, usually from a list found in the
National Conciliation and Mediation Board (Sanciangko) [it is a listing of qualified voluntary arbitrators duly
accredited by the Board].

 If one of the parties does not agree with the other party’s selection of a voluntary arbitrator, parties will
have to submit to compulsory arbitration.

Section 16 of Implementing Rules of RA 6727:

Any issue involving wage distortion shall not be a ground for strike or lockout.

STRIKE – any temporary stoppage of work by the concerted action of employees as a result of an industrial
or labor dispute.

LOCKOUT – is the temporary refusal of an employer to furnish work as a result of an industrial or labor
dispute.

Reasons why a STRIKE or LOCKOUT is prohibited:

(1) RA 6727 provides for a procedure in settling disputes (Article 124)
(2) RA 6727 (Section 2) provides that it is the policy of the state to promote collective bargaining as the
primary mode of settling wages and other terms and conditions of employment.
(Ilaw at Buklod ng Manggagawa vs. NLRC, 198 SCRA 586)

National Federation of Labor vs. NLRC, 234 SCRA 311

Correction of a wage distortion may be done by reestablishing a substantial or significant gap between the
wage rates of the differing classes of employees. It must be a reasonable but NOT necessarily a historical gap.
Should a wage distortion exist, there is not legal requirement that, in the rectification of that distortion by
readjustment of the wage rates of the differing classes of employees, the gap which had previously or
historically existed be restored in precisely the same amount. In other words, correction of a wage distortion
may be done by reestablishing a substantial or significant gap (as distinguished from the historical gap)
between the wage rates of differing classes of employees.

No law obligates the employer to restore the historical gap because:

(1) Adjustment of wage rates as mandated by law (RA 6727 and as the policy of the state) is not by way
of compulsion but through negotiation or CBA.
(2) Not all employers can afford to grant the same wage increase to all its employee (financial capacity
and the company has to be taken into consideration)

 The law is based on equity between the employer and employee.

 The employer, thru his own initiative (unilateral act) may correct wage distortion. The usual way though is
through negotiations between the employer and the employee or through CBA.

PROCEDURE FOR RESOLVING WAGE DISTORTION

A. WAGE DISTORTION in an UNORGANIZED ESTABLISHMENT:

Situation: In a company, there are 3 classes of employees:

A – 200 (2 years or more) Wage Order No. 8 = 190
B – 195 (1 year to 2 years) December 1, 2001 + 5
C – 190 (newly hired) 195

A wage order is issued fixing the minimum wage at P190. which group will be affected?
Only class C because they are the minimum wage earners (unlike before when the wage orders provided
for an across-the-board increase which affected everybody).

Under Wage Order No. 8, only C is entitled to the wage adjustment come December 1, 2001. It will not
apply equally to A and B. A and B cannot validly demand a similar wage adjustment by virtue of the wage
order because the wage order only applies to those employees receiving the minimum wage.

As a result, B and C will receive the same salary of P195 come December 1. B now complains, what should
he do?
  23

Procedure for Resolving Wage Distortion in an UNORGANIZED ESTABLISHMENT:

(1) The employers and the workers should negotiate for the adjustment of the wage rates

 Should the employer refuse to grant an adjustment, then B should file a complaint with the
NCMB on the ground of wage distortion.

(2) The dispute should be referred to the NCMB for conciliation.

 HOW IS THIS DONE?

(a) This procedure is initiated by the filing of a complaint with the NCMB (Sanciangko)
on the ground of wage distortion.

(b) Just fill up the complaint form provided by the NCMB

(c) The Regional Director of the NCMB will now issue a NOTICE OF HEARING directed
to the employer inviting him to meet with them at a designated time, date, and
place.

(d) At the NCMB, the complainant B and the employer will have to be present. This
proceeding will be supervised by an NCMB Hearing Officer.

 This is entirely different from the first step because the third person (NCMB
Hearing Officer) now interferes and asks the employers –
“How much can you afford?”
And to the employees –
“How much increase do you want?”
In so doing, in takes into consideration the financial capacity of the employer
and the need of the workers.

(e) The NCMB will try to settle the dispute through AMICABLE SETTLEMENT.

Example: Employer wants to pay P1 increase.

Employee wants P5 increase.

 NCMB will settle for P3 and suggests this solution to both parties.

(f) Should the employer refuse to accede to the remedy suggested by the NCMB, the
NCMB cannot make negotiations to bind both parties because the main purpose of
NCMB is to conciliate and it will suggest that the parties submit to VOLUNTARY
ARBITRATION.

(3) If not settlement is arrived at, then the dispute shall be referred to the Regional Arbitration Branch of
the NLRC for COMPULSORY ARBITRATION.

 This is presided over by Labor Arbiters (Article 217).

 The proceeding is usually adversarial in character because it is initiated by a complaint before the
Labor Arbiter and the other party is required to answer.
 So, there will be a full-blown hearing to resolve wage distortion.
 Any decision coming out of the Labor Arbiter shall be binding on both parties, whether they like it
or not.

 Note: in the case of UNORGANIZED ESTABLISHMENTS –

 Prior to the time the parties submit their dispute to the NCMB, they could resort to VOLUNTARY
ARBITRATION.
 VOLUNTARY ARBITRATION is not compulsory; the parties will have to give their consent if they
want to submit their dispute to Voluntary Arbitration.
 They will be given a LIST of voluntary arbitrators from which they will pick out those which they
have chosen to be the arbitrators.
 However, most often than not, the parties do not submit their dispute to voluntary arbitration
because most of them do not trust the Voluntary Arbitrators.
 The decision of the Voluntary Arbitrator is BINDING upon the parties. Why? This is a contractual
proceeding and the contract is the law of the parties.
 In resolving wage distortions, you do not always consider monetary matters. You also have to
take into consideration the length of service, the skills.
  24

 Is the decision of the Voluntary Arbitrator appealable to the NLRC? NO, unless it becomes final
and executory.

 The legal remedy to the decision of the Voluntary Arbitrator

(1) To the Court of Appeals by way of Petition for Review under Rule 43 (Quasi-Judicial
Agency) within 15 days

Luzon Stevedoring Employees Union

If APPEAL, will that stay the decision of the Voluntary Arbitrator?

NO, because the decision of the Voluntary Arbitrator is final and inappelable, but Temporary
Restraining Order and a Writ of Preliminary Injunction may be applied for.

 So, use Petition for Review with Motion to Stay, because of its final and executory nature.

(2) Then to the Supreme Court under Rule 45 on questions of law (Appeal by Certiorari) 15
days from receipt of the decision of the Court of Appeals or receipt of the denial of the
motion for reconsideration.

 Before the St. Martin’s Funeral Homes Case (in the past), from the decision of the Voluntary
Arbitrator, the aggrieved party would go directly to the Supreme Court.

Cases: Wage Distortion

Prubankers Association vs. Prudential Bank and Trust Company

302 SCRA 74

WAGE DISTORTION presupposes an increase in the compensation of 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 the 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 the said wage order.
In short, the implementation of the wage orders in one region but not in others does not in itself necessarily
result in wage distortion.

Employees Confederation vs. NWPC

201 SCRA 759

The NWPC noted that the determination of wages has generally involved 2 methods, the floor wage
method and the salary-ceiling method.
RA 6727 was intended to rationalize wages, first, by providing for full-time boards to police wages round-
the-clock, and second, by giving the boards enough powers to achieve this objective.
The Act is meant to rationalize wages, that is, by having permanent boards to decide wages rather than
leaving wage determination to Congress year after year and law after law.
The court used the salary ceiling method to minimize wage distortions.
The court is not convinced that the board is decreeing the across the board hike, performed an unlawful act
of legislation. Though the wage fixing like rate fixing constitutes an act of Congress, the latter may also
delegate the power to fix rate provided there are sufficient standards.

Metrobank vs. NLRC

226 SCRA 268

WAGE DISTORTION as defined under RA 6727 means a situation where an increase in prescribed wage
rate result in the elimination as severe contraction of intentional quantitative differences in wage or salary
rates between and among employee groups in an establishment as to effectively obliterate the distinction
embodied in such wage structure based on skill, length of service, or other logical basis of differentiation.
Whether it exists is mainly a question of fact the determination of which is the statutory function of the
NLRC. In this case majority of the members of the NLRC agree that there is a wage distortion arising from the
banks implementation of a P25 wage increase.
NOTE: From a P900 salary difference to only P150, the SC said there is a distortion as there is SEVERE
CONTRACTION, not necessarily elimination.

Metro Transit Organization vs. NLRC

245 SCRA 767

A wage distortion existed when salaries of rank and file employees were increased by P500.
The defense of management prerogative that if it is not obligated to grant supervisory employee a salary
increase whenever rank and file employees are granted an increase is unavailing.
  25

BONUS is an act of gratuity or an act of liberality wherein the recipient has no right to demand as a matter
of right. A bonus however is demandable or an enforceable obligation when it is made part of the wage or
salary of an employee.
If it is an additional compensation which the employer promised and agreed to give without any conditions
such as success in business or increase in output, then it is part of the wage. But if it is paid only if profits are
realized or if a certain level of productivity is achieved, it cannot be considered as part of the wage. Where it is
not payable to all but only to some employees ans only when their labor becomes more efficient or productive,
it is only an inducement for efficiency, a prize thereof not a part of wage.
The demanded increase of SEAM is not a bonus and is an enforceable obligation as far as supervisory
employees of Metro are concerned.
The wage distortion had been corrected. A substantial gap or difference had been re-established between
rank and file and supervisory employees.

Capitol Wireless vs. Bate

246 SCRA 249
Petitioner and private respondent NAFLU signed a CBA with duration of 5 years. Included in the CBA is a
provision stating that “should there be any government mandated wage increase allowance, the same shall be
over and above the benefit granted.”
The wage orders did not give across the board wage increases to all employees in the National Capital
Region but limited such increase only to those already receiving not more than P125/day.
Since the wage order specified those who among the employees are entitled to the statutory wage
increases, then the increases applied only to those mentioned. The provisions of the CBA should be read in
harmony of the wage order whose benefit be given only to the employees entitled thereby.

B. WAGE DISTORTION in an ORGANIZED ESTABLISHMENT:

Most often than not, when there is a union, there is a CBA. And the most important matter in the CBA is
WAGES.

The union has more bargaining power than the ordinary employee; it can demand for better labor standards
(can even demand to see the president of the company).

The CBA provides usually for wage increases which are usually across-the-board (for the benefit of all
employees in the bargaining unit).

However, a wage order may be passed offsetting the increase given by the employer, so there is a WAGE
DISTORTION.

Procedure for Resolving Wage Distortion in an ORGANIZED ESTABLISHMENT:

(1) The employer and the union shall negotiate to correct the wage distortion.

(2) If the negotiations fail, then the dispute is settled through the grievance procedure under their CBA.

 GRIEVANCE MACHINERY – is simply a detailed procedure of how the parties would resolve a
dispute arising from:
i. The interpretation or implementation of the CBA and
ii. Those arising from the interpretation or enforcement of company personnel policies.

(3) If the dispute in unresolved, the matter is submitted for VOLUNTARY ARBITRATION (which is not
always the case because parties cannot be compelled to submit to it).

(4) The matter is also resolved through the NCMB by filing a complaint; MEDIATION is done by the NCMB
through its Hearing Officer, advising the parties to submit their dispute to a voluntary arbitrator.

 If both or one of the parties is unwilling to submit to Voluntary Arbitrator, then the matter
becomes unresolved.

(5) The matter is submitted to the Regional Arbitration Branch of the NLRC for COMPULSORY
ARBITRATION.

 How is this done?

By filing a complaint with the Regional Arbitration Branch

 The decision will be binding upon the parties.

  26

 From the decision of the Labor Arbiter, the matter would be brought to the NLRC,
then the CA, and even up to the SC.

Common Procedure in Unorganized and Organized Establishments:

 If negotiations fail, the matter shall be referred to the National Conciliation and Mediation Board (NCMB).
 Now, the Hearing Officer of the NCMB will try to conciliate and mediate between the parties so that they
will reach an AMICABLE SETTLEMENT.
 If an amicable settlement is not reached, the Hearing Officer of the NCMB will advise the parties to submit
the matter to VOLUNTARY ARBITRATION. So, there is Voluntary Arbitration for both organized and
unorganized establishments.

o National Conciliation and Mediation Board:

Main Office: DOLE, Intramuros, Manila
Executive Director: Rolando Rico C. Olalia
Region VII: Sanciangko, near UC, Coliseum
Director II: Isidro L. Sepeda

In settling disputes, strikes and lockouts are impliedly excluded as a mode of settlement because there is a
very detailed procedure provided for by the law in resolving wage distortions (Article 124). The authority on
this matter is Ilaw at Buklod at Mangagawa vs. NLRC.

Main Reason for Negotiations: Wage Adjustments

Does the procedure provided in Article 124 preclude the company from initiating a solution to the problem
of wage distortion? Say, the employer himself believes that with the passage of a certain wage order, a wage
distortion is created. Can he take action to solve it?

YES, because law through Article 124 has recognized the validity of negotiated wage increases.

The company can even provide for a unilateral wage increase to immediately solve the problem of
wage distortion.

 Note: The other level of employees receiving wages way above the minimum allowable by law cannot
legally compel the company to provide a similar rate of increase provided by the wage order for minimum
wage earners. Why?

(1) RA 6727 as well as the policy of the state requires that in the adjustment of wage rates, the same
must not be done by compulsion but through negotiation or CBA.
(2) Not all employers can afford the same amount of increase to all employees at the same time.
(National Federation of Labor vs. NLRC)

National Federation of Labor vs. NLRC

234 SCRA 311
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.
The remedy contemplated by the Wage Orders and Article 124, as a practical matter, ordinarily
meant a wage increase for one or more of the affected classes of employees so that some gap or
differential would be re-established.
The NLRC is not authorized unilaterally to impose, directly or indirectly, under the guise of
rectifying a “wage distortion,” upon an employer a new scheme of classification of employees where
none has been established either by management decision or by collective bargaining.

Two Methods of Minimum Wage Adjustment:

1. Floor Wage Method – involves the fixing of a determinate amount that would be added to the
prevailing statutory minimum wage.

2. Salary-ceiling Method – whereby the wage adjustment is applied to employees receiving a

certain denominated (minimum) salary ceiling.
  27

 The first method was adopted in the earlier wage orders, while the latter method was used
in RA 6640 and RA 6727.
 The shift from the first method to the second method was brought about by labor disputes
arising from wage distortions, a consequence of the implementation of the wage orders.
 The shift from the first to the second method was due to the fact that the latter minimized
wage distortion disputes.

Penal Provision for Non-compliance with the Wage Order:

Section 12, RA 6727

Any person, corporation, trust, firm, partnership, association or entity which refuses or fails to pay any of the prescribed
increases or adjustments in the wage rates made in accordance with this ACT shall be punished by a fine not exceeding
P25,000 and/or imprisonment of not less than 1 year nor more than 2 years: Provided, that any person convicted
under this Act shall not be entitled to the benefits under the Probation Law.
If the violation is committed by a corporation, trust or firm, partnership, association or any other entity, the penalty of
imprisonment shall be imposed on the entity’s responsible officers, including, but not limited to, the president, vice-
president, chief executive officer, general manager, managing director or partner.

However, RA 8188 Amended Sec. 12 of RA6727

RA 8188 (June 11, 1996): An Act Increasing The Penalty And Imposing Double Indemnity For Violation of the
Prescribed Increases or Adjustments in the Wage Rates, Amending for the Purpose Section 12 of RA 6727:
Any person, corporation, trust, firm, partnership, association or entity which refuses or

fails to pay any of the prescribed increases or adjustments in the wage rates made in

accordance with this Act shall be punished by a fine not less than P25,000 nor more than

P100,000 or imprisonment of not less than 2 years nor more than 4 years, or both such

fine and imprisonment at the discretion of the court: Provided, That any person

convicted under this Act shall not be entitled to the benefits provided for under the

Probation Law.

The employer concerned shall be ordered to pay an amount equivalent to double the

unpaid benefits owing to the employees: Provided, That payment of indemnity shall not

absolve the employer from the criminal liability imposable under this Act.

If the violation is committed by a corporation, trust or firm, partnership, association or

any other entity, the penalty of imprisonment shall be imposed on the entity’s responsible

officers, including, but not limited to, the president, vice-president, chief executive officer,

general manager, managing director or partner.

Penalty for Violation of the Prescribed Increase or Adjustment in the Wage Rate (RA 8188):

1. Payment of a fine of not less than P25,000 nor more than P100,000
  28

2. Imprisonment for not less than 2 years nor more than 4 years, the imprisonment being non-
probationable (The case should therefore be filed with the MTC pursuant to BP 129 as
amended by RA 7691, see below)
3. Both imprisonment and fine, at the discretion of the Court
4. Paying double the unpaid benefits/amounts owing the employees, provided that the Payment
of Indemnity shall not absolve the employer from criminal liability imposable under the Labor
Code.

Republic Act 7691

March 25, 1994

Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in

Criminal Cases. - Except in cases falling within the exclusive original jurisdiction of Regional Trial Courts and of the

Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not exceeding six

(6) years irrespective of the amount of fine, and regardless of other imposable accessory or other penalties, including

the civil liability arising from such offenses or predicated thereon, irrespective of kind, nature, value or amount

thereof: Provided, however, That in offenses involving damage to property through criminal negligence, they shall

have exclusive original jurisdiction thereof.

 Aside from the penal provision provided under RA 6727, there are provisions in the Labor Code
on the enforcement and recovery of minimum wage provisions. There are general two provisions
for the enforcement and recovery of minimum wage provisions – Articles 128 and 129. Remember
that the minimum wage is fixed by a wage order and there is a built in mechanism in the Labor
Code which provides the so-called enforcement tools for the recovery of wages, particularly the
minimum wage provisions.

 Article 128 – enforcement machinery in aid of the visitorial power of the Secretary of Labor. This
is described as inquisitorial. Why? Because the SOLE inquires – ask for documents, investigate,
etc.

 Article 129 – machinery of wage recovery via the administrative process initiated by a complaint.
This is described as adversarial. Why? Because it requires a complaint for its initiation.
  29

Article 128. Visitorial and Enforcement Power.

(a) The Secretary of Labor or his duly authorized representatives, including labor regulation
officers,
 Shall have access to employer’s records and premises at any time of the day or night
whenever work is being undertaken therein, and
 The right to copy therefrom,
 To question any employee and
 Investigate any fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and of any labor law, wage
order or rules and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of Labor and Employment
or his duly authorized representatives shall have the power to issue compliance orders to
give effect to the labor standards provisions of this Code and other labor legislation based on
the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. The Secretary or his duly authorized representatives
shall issue writs of execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor employment and
enforcement officer and raises the issues supported by documentary proofs which were not
considered in the course of inspection. ]-EXCEPTION CLAUSE
An order issued by the duly authorized representative of the Secretary of Labor and
Employment [Regional Director] under this Article may be appealed to the latter. In case said
order involves a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
SOLE in the amount equivalent to the monetary award in the order appealed from.

(c) The SOLE may likewise order stoppage of work or suspension of operations of any unit or
department of an establishment when non-compliance with the law or implementing rules
and regulations poses grave and imminent danger to the health and safety of workers in the
workplace. Within 24 hours, a hearing shall be conducted to determine whether an order for
stoppage of work or suspension of operations shall be lifted or not. In case the violation is
attributable to the employer, he shall pay the employees concerned their salaries or wages during
the period of such stoppage or work or suspension of operation. ]- CROSS REFER TO ARTICLE
286 ON CONSEQUENCE OF SUSPENSION OF OPERATIONS

(d) It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render
ineffective the orders of the SOLE or his duly authorized representatives issued pursuant to the
authority granted under this Article, and no inferior court or entity shall issue temporary or
permanent injunction or restraining order or otherwise assume jurisdiction over any case involving
the enforcement orders issued in accordance with this Article.

(e) Any government employee found guilty of violation of, or abuse of authority, under this Article
shall, after appropriate administrative investigation, be subject to summary dismissal from the
service.

(f) The SOLE may, by appropriate regulations, require employers to keep and maintain such
employment records as may be necessary in aid of his visitorial and enforcement powers under
this Code.

Scope of the Visitorial Power of the Secretary of Labor

Under the visitorial power, the SOLE or his duly authorized representative is given the right
  30

(1) To inspect and copy pertinent records and documents,

(2) To interview any employee and
(3) Investigate any fact, condition or matters at the premises of an employer,
At any time of the day or night, whenever work is undertaken therein, for the purpose of determining whether an employer is complying with
labor standards.

Does the Labor Code confer this Visitorial Power to be Exercised by the Regional Director?

YES. The Regional Director is the duly authorized representative of the SOLE.

Enforcement Power as regards Health and Safety of Workers

Article 128 (c).

This provision does not refer to violation of minimum wage laws. It refers to the instance that

when the non-compliance with the law or implementing rules and regulations poses grave and

imminent danger to the health and safety of workers in the workplace, the SOLE can issue an order

for the stoppage of work or the suspension of operations of any unit or department in an

establishment.

Illustration:

When there is a leak in a chemical plant, there is hazard to the employees. The SOLE can order suspension of

operation.

Is the power of SOLE to order suspension of operation similar to Article 286 on bona fide

suspension of operations?

NO. They are different. In Article 286, it is the employer who suspends the operations while on

the other hand, Article 128 speaks of suspension by the Secretary of Labor.

Example, for causes attributable to the employer and in the interest of health and safety of the

workers, the Regional Director orders the suspension of the company’s operation. The logical

question there is – What is the consequence of that? Will the employees be paid their wages?
  31

In Article 286, for example, if the employer decides to suspend his operations unilaterally, will the

employees be entitled to their daily wages?

 What is being inquired in Article 128 is whether or not the employer complies with labor
standards laws, rules and regulations, as well as social legislations. The power to visit the
employer’s premises is so broad enough as to enable the SOLE or his duly authorized
representative to make a finding after making such inspection. Since what will be involved would
be inquiring on violations of labor standard laws as well as wage orders, it would be important
for us to know the step-by-step procedure in the conduct of inspection under Article 128. And
since what is involved would be labor standard provisions such as the minimum wages laws or
rules – is the employer obliged to maintain a payroll?
YES. The employer is obliged to maintain a payroll pursuant to the power of the SOLE under

Article 128 (f) to issue such rules and regulations pertinent thereto. Under implementing

rules, see Section 6, Rule X, Book III.

 In the exercise of the visitorial power, can the SOLE be interfered with by the courts?
NO. This is pursuant to Article 128 (d). If the SOLE or the Regional Director, for that matter,

decides to inspect the employer’s premises, then no entity can lawfully interfere, obstruct or

delay the exercise of that authority; otherwise they would be penalized under that provision of

the LC. That is how comprehensive and that is how strong the visitorial and enforcement

power of the SOLE is.

Enforcement Machinery under Article 128:

(a) There is a report on the non-compliance of the employer with the minimum wage law.
(b) Upon receipt of the Regional Director of this information, there will be an ORDER OF
INSPECTION.
 The SOLE or the Regional Director.
 The order of inspection will simply state that this person is authorized to
conduct an inspection on this date, place and time.
(c) This inspection authority will then be implemented by a Labor and Employment Officer
of the DOLE. And this person will visit the employer’s premises and then conduct an
inspection.
 He will inspect the payroll to determine if indeed there was underpayment
of wages, inspect the employer’s premises, interview and ask the
employees themselves if they are indeed paid such amount of wages,
compare the payment records and confer with the employees.
  32

(d) If the inspector finds that there is a violation or underpayment of wages, he will make an
INSPECTION REPORT
 Usually embodied in a NOTICE OF INSPECTION RESULTS.
 All violations that the Labor Employment Officer will find in the
employer’s premises will be enumerated and be put as his findings in the
notice.
(e) The employer is first informed of the results of the inspection.
(f) The employer is given the opportunity to comply within 7 days or
(g) The employer may contest the notice of inspection results and raise issues which cannot
be resolved without considering evidentiary matters that are not verifiable in the normal
course of inspection.
 HOW SOON? The employer shall raise such objections during the hearing
of the case or at any time after the receipt of the notice of inspection
results.
(h) If on the other hand, the employer does not or fails to contest the notice of inspection
result, as well as fails to comply with such notice.
 The Regional Director will issue an ORDER OF COMPLIANCE.
 The order of compliance will basically be based on the notice of inspection
results, so if the inspection says that you are underpaying 10 workers or
just paying them P100, the RD will issue an order of compliance ordering
this time the employer to pay the following workers the following sums of
money.
(i) Remedy of the employer from the order of compliance.
 The order of compliance can be questioned within 10 calendar days.
 Then the employer will file a motion for reconsideration with the RD
within 7 calendar days.
 If the employer files it beyond 7 days but not beyond 10 days, that will be
considered an appeal from the RD to the SOLE.
(j) If the employer will not file a motion for reconsideration, what will happen to the order
of compliance? It becomes final and executory.
 The SOLE or RD can issue a WRIT OF EXECUTION, then it will levy.
 Pursuant to Rule 39 in Civil Procedure, the final judgment can be subject
of execution and the RD can levy on the properties of the employer to
satisfy the judgment or the order of compliance.
 Note: that this is if there is no obedience to the order of compliance or
there is no contesting done or no motion for reconsideration resorted to by
the employer in that regard.
(k) On the other hand, if the employer validly contests by raising issues supported by
documentary proofs which were not considered in the course of inspection – what will
happen?
 Can the RD still proceed with the case? NO.
 The RD will endorse the case to the appropriate Arbitration Branch of the
NLRC.
 Why? It is no longer a summary proceeding. It now becomes an
adversarial proceeding which the RD is not equipped to handle. RD has no
other recourse but to endorse it to the Arbitration Branch of the NLRC.

 Note: It is very important that you be able to contest the notice of inspection results within the
time frame authorized by the RULES ON DISPOSITION OF LABOR STANDARDS CASES.
Because if you fail or if you contest but the wrong way, or you fail to contest it at all, then the RD
will have no recourse but to issue an order of compliance. And then your remedy therefore is no
longer to contest but to a motion for reconsideration or probably an appeal to the SOLE. In case
you still fail to do that, then that order of compliance will become final and executory for which
the SOLE or the Rd for that matter is now authorized to issue a writ of execution. Then that is the
end of the case.
  33

If you decide to file a motion of reconsideration from the order of compliance and the RD denies

it, can you still appeal to the SOLE?

YES, within 10 days from the receipt of the order of denial.

From the decision of the SOLE, is it final already? No more appeal?

No more appeal, but there is a remedy of Special Civil Action of Certiorari under Rule 65 to

the Court of Appeals. Then from the Court of Appeals to the Supreme Court under Rule 45.
  34

RULES IN THE DISPOSITION OF LABOR STANDARDS CASES

COMPLAINTS INVOLVING MONEY CLAIMS

Arising from alleged violations of labor standards.

COMPLAINT INSPECTION
All such complaints shall immediately be forwarded to
the Regional Director who shall refer the case to the
appropriate unit in the Regional Office for assignment
to a Labor Standards and Welfare Officer for field
inspection.

INSPECTION REPORT SUMMARY

The LSWO shall conduct the necessary INVESTIGATION
investigation and submit a report When the field inspection does
thereof to the Regional Director, not produce the desired results,
the Regional Director shall
through the Chief of the Labor summon the parties for
Standards Enforcement Division summary investigation to
(LSED), expedite the disposition of the
within 24 hours after the investigation case.
or within a reasonable period as may
be determined by the Regional
Director.
The report shall specify the violations
discovered, if any, together with his REGIONAL DIRECTOR
recommendations and computations of The investigation shall be
the amount due each worker. concluded within 15 calendar
days from the date of the first
hearing and a proposed Order
COVERAGE OF COMPLAINT disposing of the case shall be
submitted to the Regional
INSPECTION Director within 3 calendar days
Shall not be limited to the specific from the conclusion of the
allegations or violations raised by the investigation.
complaints/workers but shall be a
thorough inquiry into the verification of
the compliance by employer with
existing labor standards and shall
cover all workers similarly situated

NOTICE OF INSPECTION RESULTS

COMPLIANCE CONTEST THE FINDINGS OF LSWO


COMPLIANCE
RESTITUTION
a) Restitutions may be effected at the
plant-level within 5 calendar days from
receipt of the inspection results by the
employer or his authorized
representative.
b) Plant-level restitutions may be effected
for money claims not exceeding
P50,000.
c) Restitutions in excess of the
aforementioned amount shall be
effected at the Regional Office or at
the worksite subject to the prior
approval of the Regional Director.
HEARING
Where no proof of compliance is submitted by
the employer after 7 calendar days from receipt
of the inspection results,
The Regional Director shall summon the
employer and the complainants to a summary
investigation.
The proceedings before the Regional Office
shall be summary and non-litigious in nature.
Subject to the requirements of due process, the
technicalities of law and procedure and the
rules governing admissibility and sufficiency of
evidence obtaining in the courts of law shall not
strictly apply thereto.
The Regional Office may, however, avail of all
reasonable means to ascertain the facts of the
Where the employer or the complainant fails or
controversy speedily and objectively…
reasons, the hearing officer may recommend to
COMPLAINCE ORDER
If the Regional Director finds after hearing that
violations have been committed, he shall issue
an Order directing the employer to restitute the
amount due the workers or institute other
corrective measures within 10 calendar days
upon receipt of the Order and to submit proof
of compliance. The Order shall specify the
amount due each worker and shall include the
computations on which the Order is based.
CONTEST ORDER OF REGIONAL DIRECTOR
 35
CONTEST FINDINGS OF LSWO
CONTESTED CASES
The employer contests the
findings of the LSWO and the
issues cannot be resolved without
considering evidentiary matters
that are not verifiable in the
normal course of inspection
REGIONAL ARBITRATION
BRANCH
The Regional Director shall
endorse such case to the
appropriate Arbitration Branch of
the NLRC.
Note: The employer shall raise
such objections during the
hearing of the case or at any
time after the receipt of the
notice of inspection results.
The issue of whether or not the
case shall be endorsed to the
NLRC shall be resolved by the
Regional Director in the final
disposition of the case.
FAILURE TO APPEAR
refuses to appear during the investigation,
despite proper notice, without justifiable
the Regional Director the issuance of a
compliance order based on the evidence at
hand or in an order of dismissal of the
complaint as the case may be.
  36

CONTEST ORDER OF REGIONAL DIRECTOR

MOTION FOR RECONSIDERATION APPEAL

The aggrieved party may file a motion for
reconsideration of the Order of the Regional
Office within 7 calendar days from receipt by
him of a copy of said order.
The Order of the Regional Director shall be final
and executory unless appealed to the
SECRETARY OF LABOR AND EMPLOYMENT
within 10 calendar days from receipt thereof.

The Regional Director shall resolve the

motion for reconsideration within 10 calendar
days from receipt thereof.
A motion for reconsideration filed beyond the
7-day reglementary period shall be treated as
an APPEAL if filed within the 10-day
reglementary period for appeal, but subject
to the requirements for the perfection of an
appeal.
GROUNDS FOR APPEAL
(a) There is a prima facie evidence of
abuse of discretion on the part of the
Regional Director;
(b) The Order was secured through fraud,
coercion or graft and corruption;
(c) Serious errors in the findings of facts
were committed which, if not
corrected, would cause grave and
irreparable damage or injury to the
appellant.

WHERE TO FILE
The appeal shall be filed in 5 legible typewritten
copies with the Regional Office which issued the
Order. Subject to the requisites of appeal, the
appeal shall not be deemed perfected if it is filed
with any other office or entity.

REQUISITES OF APPEAL
(a) The appeal shall be filed within the
reglementary period. It shall be under
oath with proof of service of a copy
thereof to the other party and shall be
accompanied by a Memorandum of
Appeal which shall state the date
appellant received the Order and the
grounds relied upon and arguments in
support thereof;
(b) The appellee may file with the
Regional Office his reply or opposition
to the appeal within 10 calendar days
from the receipt thereof. Failure on
the part of the appellee to file his reply
or opposition within the said period
shall be construed as a waiver on his
part to file the same.

TRANSMITTAL OF RECORDS ON APPEAL

Within 3 calendar days after the filing of the
reply or opposition of the appellee or after the
expiration of the period to file the same, the
entire records of the case, together with the
Memorandum of Appeal, shall be transmitted by
the Regional Office concerned to the Office of
the SOLE.

In addition:
(a) Should the company lawyer file a motion for reconsideration and in the same motion he only
denies the findings of the LSWO, the Regional Director should deny it.
(b) Once denied, the Regional Director will now issue a writ of execution, which can be carried out by
levying upon the properties, personal and real, of the company. So if the company has money in the
bank, the bank account will be garnished by the writ. Here, the banks can no longer dispose of the
funds.
(c) Assuming that the Regional Director believes the lawyer of the company after he has raised the issues
supported by the new payroll and other documentary proofs not considered in the course of
inspection and the lawyer filed a timely motion for reconsideration, the case will now be passed to the
Regional Arbitration Branch of the NLRC. The Regional Director will lose jurisdiction over the
case and the writ of execution will no longer be executed.
(d) It goes to the Regional Arbitration Branch of the NLRC because it has become an adversarial
proceeding. The parties now present evidence and offer arguments before the Labor Arbiter (Article
217). The proceeding undertaken before the Regional Director is merely summary. That before the
Arbitration Branch is adversarial – and bound by certain rules of procedure in resolving cases.
  37

Issuance of writ:
(a) If no appeal is perfected within the reglementary period, as evidenced by proof of service, the
Regional Director shall, motu proprio or upon motion by any interested party, issue the writ of
execution which shall be served by the Regional Sheriff. In the enforcement of the writ of
execution, the assistance of the law enforcement authorities may be sought;
(b) A writ of execution may be recalled subsequent to its issuance, if it is shown that an appeal has
been perfected in accordance with these rules.

Execution before Perfection of Appeal or Pending Appeal:

During the period of appeal and before an appeal is perfected, or during the pendency of an appeal,
execution may, upon proper motion, also issue where it is shown that compliance with the order of the
Regional Director cannot be secured unless this is done. The writ may be stayed at the instance of the
losing party by the filing of a supersedeas bond in an amount which is adequate to protect the interests of the
prevailing party, subject to the approval of the Regional Director before the perfection of the appeal, or the
SOLE during the pendency of the appeal.

Execution after Motion for Reconsideration:

The compliance order shall be executory after 10 calendar days from receipt of the resolution of
such motion.

Finality of the Decisions of the SOLE:

The decisions, orders or resolutions of the SOLE shall become final and executory after 10 calendar
days from receipt of the records of the case. The Regional Director shall issue a writ of execution to enforce
the order or decision of the SOLE.
The filing of a petition of certiorari before the Supreme Court shall not stay the execution of the order
or decision unless
(a) The aggrieved party secures a temporary restraining order from the Court within 15 calendar days
from the date of finality of the order or decision or
(b) Posts a supersedeas bond in an amount which is adequate to protect the interests of the prevailing
party subject to the approval of the SOLE.
  38

Article 129. Recovery of Wages, Simple Money Claims and other benefits.
Upon complaint of any interested party, the Regional Director of the DOLE or any of the duly
authorized hearing officers of the Department is empowered, through summary proceeding and after due
notice, to hear and decide any matter involving the recovery of wages and other monetary claims and
benefits, including legal interest, owing to an employee or person employed in domestic or household service or
househelper under this Code, arising from employer-employee relations: Provided, That such complaint does not
include a claim for reinstatement: Provided further, That the aggregate money claims of each employee or
househelper does not exceed P5,000. The Regional Director or hearing officer shall decide or resolve the
complaint within 30 calendar days from the date of the filing of the same. Any sum recovered on behalf
of any employee or househelper pursuant to this Article shall be held in a special deposit account by, and
shall be paid on order of, the SOLE or the Regional Director directly to the employee or househelper
concerned. Any such sum not paid to the employee or househelper, because he cannot be located after
diligent and reasonable effort to locate him within a period of 3 years, shall be held as a special fund of
the DOLE to be used exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or the hearing officer pursuant to this provision
may be appealed on the same grounds provided in Article 223, within 5 calendar days from receipt of a
copy of said decision or resolution, to the NLRC which shall resolve the appeal within 10 calendar days
from the submission of the last pleading required or allowed under its rules.
The SOLE or his duly authorized representative may supervise the payment of unpaid wages and
other monetary claims and benefits, including legal interest, found owing to any employee or
househelper under this Code.

 This is the second method of the enforcement and recovery of minimum wage provisions, which refers to
simple money claims.

Requisites for a Valid Exercise of Adjudicatory Power:

(a) The claim should be filed by an employee or person employed in domestic or household service, or
househelper;
(b) The claimant no longer being employed does not seek reinstatement; and
(c) The aggregate claim of the employee does not exceed P5,000.
(d) The claim arises from employer-employee relationship.

 Under Article 128, the claim arises from employer-employee relationship. It is a requisite under Article 128
that there is still an employer-employee relationship existing. On the otherhand, in Article 129, the claim
arises from an employer-employee relationship.

 In Article 129, the claim is not limited to the claim of househelpers. Article 129 speaks of claims of
(1) employees or
(2) persons employed in domestic or household service or
(3) househelpers.

 The claim shall not exceed P5,000 under Article 129 and there must be no claim for reinstatement by a
claimant who is no longer employed.

 The limit of P5,000 under Article 129 is not applicable in Article 128 because of the amendatory provision
of RA 7730, further strengthening the visitorial power of the Secretary of Labor. The SOLE can issue
compliance order regardless of the amount of the money involved in the violation of the labor standard
provisions.

 If through an inspection made by the RD, it is found out that each employee in certain establishment has
not been paid the total sum of P100,000, that is within the visitorial and enforcement power of the SOLE
under Article 128.

Cases: Articles 128 and 129

Rajah Humabon Hotel vs. Trajano

226 SCRA 394

This case is still the authority which enumerates for us the requisites before the Regional Director
can exercise jurisdiction over simple money claims.
There is no doubt that the Regional Directors under RA 6715 can try money claims only if the
following requisites concur:
  39

(1) The claim is presented by an employee or person employed in domestic or household service,
or househelper under the code;
(2) The claimant, no longer being employed, does not seek reinstatement; and
(3) The aggregate money claim of the employee or housekeeper does not exceed P5,000.
Verily, further discussion on the retrospective operation of RA 6715 to the cause initiated by herein
private respondents on March 14, 1989 is now a futile exercise in exegesis considering that the application of
the recent legislation to pending cases have been recognized in the South Motorist case, along with other
kindred cases, especially so when the private respondents explicitly acknowledged in their Comment that
curative statutes have long been considered valid.
On the supposed restrictive application of Article 217(6) of the Labor Code only to domestic
workers, it may be recalled that the DOLE emphasized that said proviso is inapplicable to private respondents
since the latter are not domestic workers. But the prefatory statement of Article 217 speaks loudly about the
original and exclusive jurisdiction of the Labor Arbiters over all workers, whether agricultural or non-
agricultural, subject to particular cases specified therein.

Guico vs. SOLE

298 SCRA 666

This explains that under the amendment to Article 128, the SOLE can now award claims even more
than P5,000.
This is a case involving the exercise of the Regional Director of his visitorial power in investigating
the company of the petitioner Copylandia Service and Trading for violation of Labor Standard laws.
Petitioner alleged that the Regional Director has no jurisdiction over the instant case since the
individual monetary claims of the 21 employees exceed P5,000.
The Supreme Court sustained the jurisdiction of the respondent Secretary. As the respondent
correctly pointed out, the SC’s ruling in the Servando case – that the visitorial power of the SOLE to order and
enforce compliance with labor standard laws cannot be exercised where the individual claim exceed P5,000
can no longer be applied in view of the enactment of RA 7730 amending Article 128(b) of the Labor Code.
Article 128(b) clearly provides that the appeal bond must be “in the amount equivalent to the
monetary award in the order appealed from.” The record shows that the petitioner failed to post the required
amount of the appeal bond. His appeal was therefore not perfected.

M. Ramirez Industry vs. SOLE

266 SCRA 111

A reiteration of the requirements.

The Regional Director has the power to decide the cases involving money claims of laborers where
the following requisites concur:
(1) The claim must arise from employer-employee relationship;
(2) The claimant does not seek reinstatement; and
(3) The aggregate money claim of each employee does not exceed P5,000.
On the other hand, if the individual claims of employees exceed P5,000 and, even if they do not, if
they include claims for reinstatement, the matter falls within the original and exclusive jurisdiction of the Labor
Arbiter.
Moreover, petitioner is estopped from questioning the jurisdiction of the Regional Director, having
previously invoked it by filing a motion to dismiss. As has been held: a party cannot invoke the jurisdiction of
a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain such relief,
repudiate or question that same jurisdiction.
The Regional Director may not be divested of jurisdiction over these claims, unless the following
elements are present:
(a) That the petitioner (employer) contests the findings of the labor regulation officer and raises issues
thereon;
(b) That in order to resolve such issues, there is need to examine evidentiary matters; and
(c) That such matters are not verifiable in the normal course of inspection.

Batong Buhay Gold vs. de la Cerna, 312 SCRA 28

 If the 3 requisites are not present or any of the requites are absent, it is the Labor Arbiter who has
jurisdiction over the money claim pursuant to Article 217.

For example: If the claimant, who is an employee who is still employed and seeks reinstatement

although his money claim is only P4,000, that will fall under the jurisdiction of the Labor Arbiter.
  40

 Note: Distinguish Article 129 from Article 217.

Procedure under Article 129:

a.The employee files a pro-forma complaint with the Regional Director.

b. The Regional Director dockets the complaint as simple money claim.
c.The Regional Director issues summons served upon employer (respondent), together with the
copy of the compliant, and sends a copy of the same to the respondent.
d. The employer-respondent is given 5 calendar days to answer the complaint. The
employer can either admit the allegations or deny it.
e.After receiving the answer, the Regional Director calls for a summary hearing and decides on
the matter within 30 calendar days from the date of filing of the complaint.
f. If the decision is adverse, the employer may appeal the decision to the NLRC within 5
calendar days from the receipt of the copy of said decision or resolution. The appeal must
conform to the requirements provided for under Article 217 and the NLRC Rules. To perfect
the appeal, the employer must post a cash or surety bond.

 In the appeal from the RD decision to the NLRC, the aggrieved party has 5
calendar days, while in the appeal from LA decision to the NLRC, the aggrieved party has 10 days.
g. From the adverse decision of the NLRC, the employer can then file a motion for reconsideration.
h. If said motion is denied, the employer may still file a Special Civil Action for Certiorari with the
Court of Appeals under Rule 65 of the Rules of Court within a period of 60 days from receipt of the
decision.

 The Regional Tripartite Wages and Productivity Board (RTWPB) do not have the power to
promulgate rules providing who is exempted from minimum wage. It is the National Wages and
Productivity Board (NWPC) that has the rule-making power to promulgate rules on exemption and
minimum wage fixing, and not the RTWPB.

Nasipit Lumber vs. NWPC, 289 SCRA 667

The Board has no power but it is the NWPC who has the power to promulgate rules on exemption, for example.
  41

PROHIBITIONS REGARDING WAGES

Article 112. Non-Interference in Disposal of Wages.

No employer shall limit or otherwise interfere with the freedom of any employee to dispose
of his wages. ]- interference
He shall not in any manner force, compel, or oblige his employees to purchase merchandise,
commodities or other property from the employer or from any other person, or otherwise make
use of any store or services of such person.]- compulsory patronage

Section 12 Rule VIII Book III

No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his

wages and no employer shall in any manner oblige any of his employees to patronize any store or

avail of the services offered by any person.

Why is the employer prohibited from interfering with the employee’s disposal of their wages?

The employee is the owner of the wage, so there should be no interference even by your

employer as regard disposal of that wage.

 Article 112 does not allow compulsory patronage.

COMPULSORY PATRONAGE – the employer shall not in any manner force, compel or

oblige, or intimidate or threaten his employees to purchase merchandise, commodities or

other property from the employer or from any other person, or otherwise make use of any

store or services of such person.

The employer cannot require the employee to buy a pair of shoes every 15th of the month otherwise

the employee will be terminated, because that cannot be done. It is prohibited under the Labor Code.
  42

 Of course, in the absence of those acts of compulsion like force, intimidation or threat, there can
be no challenge to a situation where the employer will ask the employees to patronize their
products.

Article 113. Wage Deduction.

No employer, in his own behalf or in behalf of any person, shall make any deduction from
the wages of his employees, except:
(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; ]- by
virtue of a CONTRACT authorized by law
(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 regulation issued by the Secretary of
Labor.

General Rule

There can be no deduction from an employee’s wage.

Exceptions:

(1) when specifically required by law

(2) when specifically authorized by law
(3) when provided for in contracts authorized specifically by law
(4) regulation issued by DOLE

Required by Law:

(a) Social Security Act – which requires compulsory membership with the Social
Security System for all employees on the first day of their employment. The employer is
also required to be a compulsory member of the SSS on the first day of operation. Whether
you like it or not, you have to be a member of this system. So, deductions from your
salary/wage corresponding to the Social Security Contribution can be done by the employer
even without your consent because such deduction is required by law.
(b) Tax Reform Code – this is as regard the withholding taxes on incomes. So you will
find your salary automatically deducted for withholding tax whether you like it or not.

Authorized by Law:
  43

(a) Facilities – Article 97 (f) defining Wage on deductible facilities.

(b) Union dues – the Labor Code contemplates of deduction from the employees salary of
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.

These two are not the same. The first situation when it is recognized by the employer will

happen when there is a CBA because the CBA is the law that governs the employer and the

union. If the right to deduct from the wages for union dues is recognized by the employer, it

will not require the individual consent of the employee.

On the other hand, if there is no recognition, then it must be through an authorization

made by the individual employee.

Those two situations are not the same they are different!!!

 The first speaks of a deduction by virtue of a contract authorized by law as when there
is insurance. Here, the employer tells the employees that their lives will be insured but they
will have to pay a share in the payment of the premium, will you agree to that? Then the
employee says yes, that will be done through a contract authorized by law. That is what is
contemplated in the first situation wherein the employee consents to the deduction involving
insurance and that deduction is by virtue of a contract authorized by law.

Authorized by law or regulation issued by the SOLE (Article 113c):

Omnibus rules which was promulgated by the SOLE allowing deductions?

Section 10. Wage Deduction. Rule VIII, Book III.

Deductions from the wages of the employee may be made by the employer in any of
the following cases:
(a) When the deductions are authorized by law including deductions for the
insurance premiums advanced by the employer in behalf of the employee as well as
union dues where the right to check-off has been recognized by the employer or
authorized in writing by the individual employee himself;
(b) When the deductions are with the written authorization of the employees 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.
  44

Article 114. Deposits for Loss or Damage.

No employer shall require his worker to make deposits from which deductions shall be made
for the reimbursement of loss or damage to tools, materials, or equipment supplied by the
employer, except when the employer is engaged in such trades, occupations, or business where
the practice of making deductions or requiring deposits is a recognized one, OR is necessary or
desirable as determined by the Secretary of Labor in appropriate rules and regulations.

Section 11. Deduction for Loss or Damages. Rule VIII, Book III.
Where the employer is engaged in a trade, occupation or business where the practice of
making deductions or requiring deposits is recognized, to answer for the reimbursement of loss or
damage to tools, materials, or equipment supplied by the employer to the employee, the employer
may make wage deductions or require the employees to make deposits from which deductions
shall be made subject to the following conditions:
(a) That the employee concerned is clearly shown to be responsible for the loss or damage;
(b) That the employee is given reasonable opportunity to show cause why deduction should
not be made;
(c) That the amount of such deductions is fair and reasonable and shall not exceed the actual
loss or damage; and
(d) That the deduction from the wages of the employee does not exceed 20% of the
employee’s wages in a week.
 The making of deductions or requiring deposits must be a recognized practice in the trade,
occupation, or business of the employer.

Assuming that all the requirements for the deductions for loss or damage are present, will that require

the consent of the employee before the deduction can be effected?

The law does not require the consent of the employee, as long as deduction is authorized. So,

consent is not required as long as all the requirements for deduction enumerated are present.

Cases:

Five J Taxi vs. NLRC

235 SCRA 556

The employer is engaged in the operation of a taxi business and the employer required the employee taxi
driver to make the deposit of P15.00 daily to be used to defray shortage in the boundary fee, the SC ruled it as a violation
of the LC and that the business of the employer does not fall within that contemplated by law. Moreover, the SC said that
payment for carwash, a necessary expense, must be shouldered by the employee. Why? Since the car is owned by the
employer and it was clean when it was handed over to the employee, the Supreme Court said it is fair to ask the taxi
driver to restore the car as clean or to its original condition before its use by the taxi driver. It is but fair to ask the taxi
driver to assume the cost of the carwash.
If the taxi driver does not assume the carwash, then the same will be deducted from his wage or salary. The SC said
that this it recognized in the taxi industry. That once you use the car and you use it for a day, then it is your obligation to
  45

make sure that you return it clean to the taxi operator. If it is not clean and the employer does clean it, it should be at your
expense.
It can be deduced from Article 114 that it provides the rule on deposits for loss or damage to tools, materials

or equipment supplied by the employer. Clearly, the same does nit apply to or permit deposits to defray any deficiency

which the taxi driver may incur in the remittance of his boundary.” Also, when private respondents stopped working for

petitioners, the alleged purpose for which the petitioners required such unauthorized deposits no longer existed. In other

case, any balance due to private respondents after proper accounting must be returned to them with legal interest.

Jardin vs. NLRC

326 SCRA 299 (2000)

It is not lawful for the employer to require the taxi driver to deposit to answer for shortage in the boundary,

but it is lawful in a taxi business for an employer or a taxi operator to require the taxi driver to assume the cost of washing

the car.

Article 115. Limitations.

No deduction from the deposits of an employee for the actual amount of the loss or
damage shall be made unless the employee has been heard thereon, and his responsibility has
been clearly shown.

Article 116. Withholding of Wages and Kickbacks Prohibited.

It shall be unlawful for any person directly or indirectly, to withhold any amount from
the wages of a worker OR induce him to give up any part of his wages BY force, stealth,
intimidation, threat or by any other means whatsoever without the worker’s consent.

Distinctions:

Withholding of Wages Inducement to Surrender Wages

  46

Wages do not reach the hands of the employee The worker has the money but was

induced

to surrender a portion thereof through any

of the forms of vitiating consent mentioned

Article 117. Deduction to ensure employment.

It shall be unlawful to make any deduction from the wages of any employee for the benefit of the
employer or his representative or intermediary as consideration as a promise of employment or retention
in employment.

Article 118. Retaliatory Measures.

It shall be unlawful for an employer
 To refuse to pay or reduce the wages and benefits,
 Discharge or in any manner discriminate
against any employee who has filed any complaint or instituted any proceeding under this title or
has testified or is about to testify in such proceedings.

 In the exercise of the visitorial and enforcement power, it may happen that the employees will be
asked to testify against the employer for violation of labor standards law. Article 118 protects the
employee against reprisals or retaliation on the part of the employer.

Article 119. False Reporting.

It shall be unlawful for any person to make any statement, report, or record filed or kept
pursuant to the provisions of this Code knowing such statement, report, or record to be false in any
material respect.

For example, the employer makes a fabricated or bogus payroll, he will fall under this provision.
  47

CIVIL CODE PROVISIONS

Is it possible to withhold from the employee’s wage a debt due and demandable from him?

Article 1706:
Withholding of the wages, except for debt due, shall not be made by the employer. ]- set-off or
compensation

For example, you are an employer and your employee borrowed P10,000 from you as a form of a

loan – employee’s salary loan – can you deduct from the employee’s wage at the end of the month the

amount corresponding to his loan?

Only when the debt is due and demandable. The maturity date has to be taken into

consideration.

 You cannot just deduct the amount of the loan unless the debt is due and demandable. So if you
have given your employee two years to pay, you cannot just say that at the end of the month, you
will deduct the amount borrowed by the employee from you. You cannot do that because what
will come into play is the provision of the Civil Code on set-off or compensation. And you will
realize under your civil law that one of the requirements for set-off or compensation would be the
due and demandability of the obligation.

 If there is no definite date as to when the employee should pay the loan, when will it be due and
demandable. It is a pure obligation and it becomes due and demandable at anytime but there must
be a demand first. In the absence of a demand, it will not become due and demandable because
there is no specific period or term.

 It may happen that an employee owes an employer a sum of money but there is no definite date
when it becomes due and demandable, so, to allow the interplay of the Civil Code provision of
set-off or compensation, the lawyer should advise his client (employer) to make the demand first,
to make it due and demandable. If that demand is ignored, or not obeyed by the employee, that is
when you can now apply the provision of set-off and compensation.

It may happen that the employee is a member of a so-called employee’s

cooperative. If you are a member, sometimes, the employees borrow money

from the cooperative. Can the employer set-off the amount owed by the

employee to the cooperative from his wage or salary?

  48

YES, under a special law. One of the deductions authorized by law –

salary deductions of a member of a legally established cooperative. (As

answered by MWRosal. Please check the Cooperative Act. This will be

answered next meeting.)

Article 100. Prohibition against elimination or diminution of benefits.

Nothing in this book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of the promulgation of the Labor Code.

Non-diminution of employees wage under RA 6727:

Section 3. Article 127. Non-diminution of Benefits.

No Wage Order issued by any Regional Board shall provide for wage rates lower than the

statutory minimum rates prescribed by Congress.

Does Article 100 apply to benefits, supplements granted by the employer after the promulgation

of the Labor Code (November 1, 1974)?

NO.

 The LC took effect November 1, 1974, at the time when it was promulgated, the employers at that
time were already giving benefits, supplements to their employees. When the LC took effect, the
LC found it fit that any benefit or supplement given by the employer at the time of the
promulgation of the Code should not be unilaterally reduced or withdrawn by the employer. And
therefore, there is a provision on the non-diminution of benefits. So you will realize that in so
many Supreme Court decisions, wherein benefits were attempted to be withdrawn or reduced by
the employer, they faced with Article 100 of the LC, telling them that they cannot diminish or
reduce these benefits unilaterally. What is prohibited is the unilateral withdrawal or diminution of
these benefits.

Does that mean that the employer can unilaterally withdraw or reduce these supplements or

benefits if they are granted after the effectivity of the LC?

  49

It may happen that the establishment started after 1974. If these employers give, for example,

rice allowance, gasoline allowance, housing allowance, and they were given after the effectivity of

the Labor Code, can the employer unilaterally withdraw these benefits assuming that they have been

enjoyed by the workers for quite a time? NO, because it is grounded on the PRINCIPLE OF

EQUITY.

If we cannot use Article 100 and there is no statutory provision other than Article 100, then EQUITY

dictates or prohibits the employer from unilaterally withdrawing or reducing these benefits.

 You will find some SC decisions wherein some supplements granted by the employer after the
promulgation of the Code, the employer was prohibited from unilaterally withdrawing or
reducing these benefits under the principle that if it has been practiced by the company for quite a
time, couple by regularity, then those benefits becomes a vested right on the part of the employee,
which the employer cannot unilaterally withdraw or reduce.

Cases:

Apex Mining vs. NLRC

206 SCRA 497

It is important to note that the creditability provisions in Wage Orders 5 and 6 (as well as the parallel

provisions in Wage Orders 2, 3 and 4 are grounded in an important public policy. That public policy may be seen to be the

encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of

increases prescribed by statute or administrative regulation.

Sandigan, however, argues that to consider the P2 increase in basic salary effective February 1, 1984

provided by the CBA as compliance with the requirements of Wage Orders 5 and 6, would be to violate Article 100 of the

Labor Code as well as Section 6 of the Rules Implementing Wage Order No.6. These provisions read respectively:

Article 100. Prohibition against elimination or diminution of benefits. -- Nothing in this

book [Book III – Conditions of Employment] shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of the promulgation of the Labor Code.

Section 6. Non-diminution of benefits. – The statutory minimum wage rates shall be exclusive of whatever
supplements and other benefits the workers are enjoying without cost at the time of the effectivity of this Order.
Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code

is specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Article 100

does not, in other words, purport to apply to situations arising after the promulgation date of the Labor Code, Section 6 of

the Rules Implementing Wage Order No.6 relates to “supplements and other benefits which employees are already

“enjoying without cost at the time of the effectivity of WO 6.” Such benefits which employees are already enjoying
  50

“without cost” could not, under Section 6, suddenly be ascribed monetary value so as to offset or diminish increases in the

minimum wage reate prescribed by statute.

Kamaya Point Hotel vs. NLRC

177 SCRA 160

There is no law that mandates the payment of the 14 th month pay. This is emphasized in the grant of

exemption under PD 851 (13th Month Pay Law) which states: “Employers already paying their employees a 13th month

pay or its equivalent are not covered by this Decree.” Necessarily then, only the 13th month pay is mandated. Having

enjoyed the additional income in the form of 13th month pay, private respondents’ insistence on the 14th month pay for

1982 is already an unwarranted expansion of the liberality of the law. Also contractually, as gleaned from the CBA

between management and the union, there is no stipulation as to such extra remuneration. Evidently, this omission is an

acknowledgment that such benefit is entirely contingent or dependent on the profitability of the company’s operations.

Verily, a 14th month pay is a misnomer because it is basically a bonus and therefore, gratuitous in nature. The

granting of the 14th month pay is a management prerogative which cannot be forced upon the employer. It is something

given in addition to what is ordinarily received by or strictly due the recipient. It is a gratuity to which the recipient has no

right to make a demand.

This court is not prepared to compel petitioner to grant the 14 th month pay solely because it has already

ripened into a “company practice” as the Labor Arbiter has put it. having lost its catering business derived from Libyan

students, Kamaya Hotel should not be penalized for its previous liberality. An employer may not be obliged to assume a

“double burden” of paying the 13th month pay in addition to bonuses or other benefits aside from the employee’s basic

salaries or wages. Restated differently, we rule that an employer may not be obliged to assume the onerous burden of

granting bonuses or other benefits aside from the employee’s basic salaries or wages in addition to the required 13 th month

pay.

]- On these 2 cases: Article 100 applies to benefits and supplements before promulgation of the Labor

Code.

So that the rule against diminution of supplements or benefits may apply:

1. It must be shown that the grant of the benefit ripened into a practice over a long period of time.
2. That the practice is consistent and deliberate.
3. That the practice is not due to error in the construction and application of a doubtful or difficult
question of law.
  51

Remember that grant of benefits and supplements can be done through

(a) a company written policy or

(b) a company practice

If it done through a policy, then there is no problem because this is black and white, you can see it

and if it is put into writing, then certainly that benefit will form part of the terms and conditions of

employment which cannot be withdrawn unilaterally by the employer or reduced without the consent

of the employee.

It may happen, on the otherhand, that the supplement is granted by the employer, not through a

company policy, but through company practice. So, if at the time of establishment, the company

usually grants a sack of rice every Christmas, and the grant thereof is not dependent on the profit of

the employer. The continued practice thereof may amount to a COMPANY PRACTICE and

therefore, if it has been done for a considerable length of time, and the same has been consistent and

deliberate on the part of the employer, the same may no longer be withdrawn or reduced without the

consent of the employees.

Cases: wherein benefits were granted by the employer, the employer was already barred from

reducing these benefits.

Davao Fruits vs. Associated Labor Union (ALU)

225 SCRA 562

In this case, the employer in computing the 13th Month Pay of his employees included in the computation the

cash equivalent of sick leave and vacation leave, etc. [In the 13 th Month Pay law, the 13th month pay shall be at least 1/12

of the total basic salary earned and it excludes among others sick leave and vacation leave, etc. But if what the employer

is doing is that in computing the 13th month pay, you include, for example, sick leave and vacation leave, etc., and he has

been doing that for a considerable length time and you have been doing that not through mistake but through

deliberateness and consistency, that may ripen into a company benefit and a company practice. The employer can no

longer withdraw without the consent of the employees.]

The employer has been doing this practice for at least 6 years.
  52

Manila Bank vs. NLRC

279 SCRA 602

In this case, it involves the granting of gas allowance, uniform allowance which has been practiced there by

Manila Bank since 1984. It has been quite long.

When Manila Bank suffered financial problems, they tried to justify removing these allowance. The SC said,

NO YOU CANNOT DO THAT. It has already ripened into a company practice and you cannot just unilaterally withdraw

these benefits.

MERALCO vs. SOLE

GR 127598 (January 27, 1999) [Get a copy]

MERALCO has a practice for quite a number of years of giving bonus to its employees. The problem with

that bonus is that it was not dependent upon the financial viability of MERALCO. At one time, when the employees tried

to recover this bonus, the SC said that SORRY MERALCO, YOU CANNOT WITHDRAW THIS BONUS

UNILATERALLY, because it is not dependent on your financial profitability, but you have giving that as and by way of

company practice.

The SC interpreted the meaning of REGULARITY. (That is why we should get a copy.)

 In labor law practice, sometimes your client will ask you whether or not they can withdraw or
reduce certain benefits that they have been giving to their employees. You have to know these
cases to be able to determine whether or not these benefits have already ripened into a company
practice or not because if it has been given to you only twice or thrice, and there is no consistency
or deliberateness on the part of the employer, then the employees cannot say that they have
acquired a vested right on these benefits. So, it will depend on the criteria set forth by the SC in
these cases.

Philippine Veterans Bank vs. NLRC

GR 130439 (October 26, 1999)

  53

In 1983, petitioner Philippine Veterans Bank was placed under receivership by the Central Bank (now Bangko

Sentral) by virtue of Resolution No. 334 issued by the Monetary Board. Petitioner was subsequently placed under

liquidation on 15 June 1985. Consequently, its employees, including private respondent Dr. Jose Teodorico V. Molina

(MOLINA), were terminated from work and given their respective separation pay and other benefits. To assist in the

liquidation, some of petitioner’s former employees were rehired, among them MOLINA, whose re-employment

commenced on 15 June 1985.

On 11 May 1991, MOLINA filed a complaint against Renan V. Santos, Pacifico U. Cervantes and Alfredo L.

Dizon, members of the liquidation team. Docketed as NLRC-NCR Case No. 05-02940-91, the complaint demanded the

implementation of Wage Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral damages and

attorney’s fees in the amount of P300,000.

In his position paper, MOLINA alleged that he started working for petitioner as a legal assistant on 17 March

1974. When petitioner was placed under liquidation in 1985, he was retained as Manager II in the Legal Department,

where he continued to receive a monthly salary of P3,754.60.

Meanwhile, W.O. 1 took effect on 10 November 1990, prescribing a P17-increase in the daily wage of

employees whose monthly salary did not exceed P3,802.08. On the other hand, W.O. 2, which became effective on 8

January 1991, mandated a P12-increase in the daily wage of employees whose monthly salary did not exceed P4,319.16.

MOLINA claimed that his salary should have been adjusted in compliance with said wage orders.

In their position paper, the liquidation team countered that MOLINA was not entitled to any salary increase

because he was already receiving a monthly salary of P6,654.60 broken down as follows: P3,754.60 as basic

compensation, P2,000 as representation and transportation allowance (RATA), and a special allowance of P900.

The Office of the Solicitor General supports the NLRC’s finding that MOLINA was entitled to the wage

increases because it was never disputed that his salary of P3,754.60 was clearly covered by the wage orders. The

liquidators, however, used the 26.16 instead of the 365 factor in computing his daily wage. The OSG cites the ruling of

the National Wages Council in its letter to the Philippine Veterans Bank Retained Employees, where the Council opined

that the retained employees were entitled to the wage increase computed on the basis of 365 days. It also agrees with the

NLRC’s conclusion that MOLINA is entitled to moral damages and attorney’s fees, although they must be separately

specified. Finally, the OSG opines that upon the rehabilitation of petitioner, it assumed all the assets, liabilities, rights and

obligations of the liquidation team. This would include the salaries of the employees hired for liquidation purposes, such

as MOLINA.

We see no reason to disturb the factual finding of the labor arbiter, and affirmed by the NLRC, that

MOLINA’s salary was within the coverage of the cited wage orders. Well-settled is the rule that the findings of fact of

quasi-judicial bodies are generally accorded respect and finality where they are supported by substantial evidence. (Metro

Transit Organization, Inc. v. NLRC, 263 SCRA 313, 319 [1996]; Sebuguero v. NLRC, 248 SCRA 532, 544 [1995];

Philippine National Construction Corporation v. NLRC, 245 SCRA 668, 675 [1995].) Indeed, MOLINA’s monthly

salary of P3,754.60 was never at issue. What was in dispute was the computation of his daily wage.

W.O. 1 expressly states that employees having a monthly salary of not more than P3,802.08 are entitled to

receive the mandated wage increase. Undeniably, MOLINA was receiving a monthly salary of P3,754.60. This fact alone

leaves no doubt that he should benefit from said wage order.

  54

On the other hand, W.O. 2 raised the ceiling for entitlement to the wage increase. If MOLINA was covered by

the earlier wage order, with more reason should the later wage order apply to him.

Worth mentioning is the opinion rendered by the National Wages Council on the query of the Philippines

Veterans Bank Retained Employees, on whether they were entitled to a wage increase under Republic Act No. 6640,viz.:

The documents attached to your query show that the Bank has been consistently using the factor of 365 days

in computing your equivalent monthly salary prior to its being placed under receivership by the Central Bank. This is

evident in the wage and allowance increases granted under previous Presidential Decrees and Wage Orders, which were

given by the Bank on monthly basis, i.e., where the rest days are unworked [sic] but paid. This is also indicated in the

appointment and service records of bank personnel who started out as daily paid employees and were eventually

promoted as permanent employees with fixed monthly salaries. However, when R.A. 6640 went into force, the Bank

unilaterally reduced the factor to 262 instead of maintaining factor 365 as was the practice/policy long before the

effectivity of the Act. And when R.A 6727 took effect, the Bank reverted to the old practice/policy of using factor 365

days in computing your equivalent monthly rate salary. Xxx

May we add that the old practice of the bank in using factor 365 days in a year in determining your

equivalent monthly salary cannot unilaterally be changed by your employer without the consent of the employees, such

practice being now a part of the terms and conditions of your employment. An employment agreement, whether written or

unwritten, is a bilateral contract and as such either party thereto cannot change or amend the terms thereof without the

consent of the other party thereto.

From the foregoing, it is clear that you are entitled to the wage increase under R.A. 6440 computed on the basis of 365

paid days and to the corresponding salary differentials as a result of the application of this factor. [Emphasis supplied]

Evidently, the use of the 365 factor is binding and conclusive, forming as it did part of the employment contract.

Petitioner can no longer invoke the 26.16 factor after it voluntarily adopted the 365 factor as a policy even prior to its

receivership. To abandon such policy and revert to its old practice of using the 26.16 factor would be a diminution of a

labor benefit, which is prohibited by the Labor Code. [Article 100 of the Labor Code provides: Prohibition against

elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish

supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.] It cannot be doubted

that the 365 factor favors petitioner’s employees, including MOLINA, because it results in a higher determination of their

monthly salary.
  55

PAYMENT OF WAGES

Article 102. Form of Payment.

No employer shall pay the wages of an employee by means of promissory notes, vouchers,
coupons, tokens, tickets, chits or any object other than legal tender, even when expressly requested by
the employee.
Payment of wages by check or money order shall be allowed:
(a) when such manner of payment is customary on the date of effectivity of this Code, or
(b) is necessary because of special circumstances as specified in appropriate regulations to be issued
by the Secretary of Labor, or
(c) as stipulated in a collective bargaining agreement.

The wages will have to be paid in the form of legal tender.

LEGAL TENDER – is that currency which has been made suitable by law for the purpose of a tender of
payment of debts.

 All notes and coins issued by the Central Bank are legal tender.

The payment of wages in the form of cash considered legal tender?

YES.

Can the employer pay the employee partly in cash and partly in kind?

Generally, no, but there are cases decided by the Supreme Court wherein such is allowed.

Such as payment for facilities.

Congson vs. NLRC

243 SCRA 260

[tuna liver + intestines + legal tender]

It involves the application of Article 102 in payment of wage in the form of legal tender. In this case, the

employer paid the employees legal tender combined with tuna liver and intestines. So what the employers did was pay
  56

the wages partly in cash and partly in kind. Issue was raised as to whether or not there was a valid payment of wages.

The SC said this is a violation of Article 102 which requires the payment of wage in the form of legal tender.

Undoubtedly, the petitioner’s practice of paying the private respondents the minimum wage by means of legal

tender combined with tuna liver and intestines runs counter to Article 102 of the Labor Code. The fact that the said

method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even

expressly requested by private respondents, does not shield petitioner. Article 102 is clear. Wages shall be paid only by

means of legal tender. The only instance when an employer is permitted to pay wages in forms other than legal tender,

that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article 102 is

present.

Can the employer pay the employee in the form other than cash?

YES, through money order or check. This is by way of exception, the rules allow the

employer to pay employees’ wages in these forms. Note the instances.

Payment of wages by BANK CHECKS, POSTAL CHECKS or MONEY ORDER is allowed:

Section 2 (Payment by check), Rule VIII, Book III

(a) Where such manner of wage payment is customary on the date of effectivity of the Code
(November 1, 1974), or
(b) Where it is stipulated in a collective agreement, or
(c) Where all the following conditions are met:
(1) There is a bank or other facility for encashment within a radius of 1 kilometer from the
workplace;
(2) The employer, or any of his agents or representatives, does not receive any pecuniary
benefit directly or indirectly from the arrangement;
(3) The employees are given reasonable time during banking hours to withdraw their wages
from the bank which time shall be considered compensable hours worked if done
during working hours; and
(4) The payment by check is with the written consent of the employees concerned if there
is no collective agreement authorized the payment of wages by bank checks.

 If all of these conditions are met, the employer can validly, by himself, pay wages by checks.

 Note the differences of the instances in the rules that allow payment by check and place of payment,
because that it usually the mistake of students when they interchange the instances and of course, these
being different, they will end up wrong.

 Note that the employer should not enter into an arrangement with the bank that the employer will receive
commission if the employer pays in the form of check. There should be no pecuniary benefit from this
arrangement of payment through check.

Article 104. Place of Payment.

Payment of wages shall be made at or near the place of undertaking, except as otherwise
  57

provided by such regulations as the Secretary of Labor may prescribe under conditions to
ensure greater protection of wages.

Is there an instance when the employer may be allowed to pay the employees’ wage other than
at the place of undertaking?

Exception to the rule:

Section 4. Place of Payment. Rule VIII, Book III.

(a) Payment in a place other than the workplace shall be permissible only under
the following circumstances:
(1) When payment cannot be effected at or near the place of work by reason of the
deterioration of peace and order conditions, or by reason of actual or
impending emergencies caused by fire, flood, epidemic or other calamity
rendering payment thereat impossible;
(2) When the employer provides for transportation to the employees back and
forth; and
(3) Under any other analogous circumstances; provided that the time spent by the
employees in collecting their wages shall be considered as compensable hours
worked.

(b) Payment in recreational places prohibited:

No employer shall pay his employees in any bar, night or day club, drinking
establishment, massage clinic, dance hall, or other similar places or in places where
games are played with stakes of money or things representing money except in the
case of persons employed in said places.

North Davao Mining Corporation vs. NLRC

254 SCRA 721

The employer pays its employees at a bank where travel time took them 2 and ½ hours. The SC
said that the employees travel time should be compensable hours worked and the transportation fare that
they spent should be reimbursed to them.
[NOT yet asked in the BAR Examination]
To justify the award of 2 days a month in backwages and P80 per month of transportation
allowance, respondent Commission ruled:
“As to the appellants’ claim that complainants-appellees’ time spent in collecting their wages in
Tagum, Davao is not compensable allegedly because it was on official time cannot be given credence. No
iota of evidence has been presented to back up said contention. The same is true with appellants’ assertion
that the claim for transportation expenses is without basis since they were incurred by the complainants.
Appellants should have submitted the payrolls to prove that complainants appellees were not the ones who
personally collected their wages and/or the bus/jeep trip tickets or vouchers to show that the complainants-
appellees were provided with free transportation as claimed.”

Is it possible to pay the employee’s wage through the facilities in a bank?

YES, note the conditions.
Payment of Wages through Banks (cash), all of these must concur:

Section 7, RA 6727
(1) Upon written permission of the majority of the employees or workers concerned,
(2) All private establishments, companies, businesses, and other entities with at least 25 or more
employees, and
(3) Located within 1 kilometer radius to a commercial, savings, or rural banks shall pay wages or
benefits of their employees through any of said banks,
(4) Within the period of payment of wages fixed by PD 442, the Labor Code, as amended.
  58

Is the employer allowed by existing rules and regulations to pay the employees’ wage through
the facility of the ATM?
YES, note the conditions.

When we say ATM, is that same as the payment of wages through the banks?
That may, or may not be different. There is an ATM in a bank, but an ATM is not always located in a
bank.

LABOR ADVISORY ON PAYMENT OF SALARIES THROUGH ATM:

[Issued by then Secretary Leonardo Quisumbing]
Article 104, as amended, requires that payment of wages shall be made at or near the place of
undertaking, except as otherwise provided by such regulations as the Secretary of Labor may
prescribe under conditions that would ensure prompt payment and protection of wages.
Based on Article 104, as well as the provisions of Section 4, Rule VIII, Book III and
considering present-day circumstances, practices and technology, employers may adopt a system
of payment other than in the workplace, such as through ATMs of banks, provided that the
following CONDITIONS are met:
(1) The ATM system of payment is with the written consent of the employees concerned.
(2) The employees are given reasonable time to withdraw their wages from the bank facilities
which time, if done during working hours, shall be considered as compensable hours worked.
(3) The system shall allow workers to receive their wages within the period or frequency and in
the amount prescribed under the Labor Code.
(4) There is a bank or ATM facility within a radius of 1 kilometer to the place of work.
(5) Upon request of the concerned employee/s, the employer shall issue a record of payment of
wages, benefits and deductions for a particular period.
(6) There shall be no additional expenses and no diminution of benefits and privileges as a result
of the ATM system of payment.
(7) The employer shall assume responsibility in case the wage protection provisions of law and
regulations are not complied with under the arrangement.

 The point here is that, if the employer elects to pay the employee’s wage through the ATM, there should
be no diminution of the employees wage. The employees can also demand from the employer, proof of
how much they are paid including the itemize deduction. In other words, it will not dispense with the
requirement of the pay slip. Remember, that the employers decide on their own without the employees’
consent to pay their wages through the ATM facilities. Evidently in violation or non-conformity with the
guidelines issued by the DOLE. If that happens, then the remedy of the employees would be to report it to
the DOLE for an inspection and for the correction of that particular system. The DOLE, in the exercise of
its visitorial and enforcement power can order the employer to correct any deficiency in that kind of
practice.
  59

Article 105. Direct Payment of Wages.

Wages shall be paid directly to the workers to whom they are due, except:
(a) In cases of force majeure rendering such payment impossible or under other special
circumstances to be determined by the Secretary of Labor in appropriate regulations, in
which case the worker may be paid through another person under written authority given by
the worker for the purpose; or
(b) Where the worker has died, in which case the employer may pay the wages of the deceased
worker to the heirs of the latter without necessity of intestate proceedings. The claimants, if
they are all of age, shall execute an affidavit attesting to their relationship to the deceased
and the fact that they are his heirs, to the exclusion of all other persons. If any of the heirs is
a minor, the affidavit shall be executed on his behalf by his natural guardian or next of kin.
The affidavit shall be presented to the employer who shall make payment through the
Secretary of Labor or his representative. The representative of the Secretary of Labor shall
act as referee in dividing the amount paid among the heirs. The payment of wages under this
Article shall absolve the employer of any further liability with respect to the amount paid.

To whom should the wage be paid?

Article 105 provides that wages should be paid directly to the employees. This is because it is the
worker who earns that money and it should be paid directly to him and not to his girlfriend, not to his lola, or
whoever. Otherwise, it is not a valid payment. As learned in Civil Law, payment or performance is a mode of
extinguishing an obligation. And if there is an improper payment or performance, it will not extinguish your
obligation. That is how important this rule is.

Is it possible to pay the wage to other than the employee himself?

YES, note the circumstances provided in Article105:
(a) In cases of force majeure rendering such payment impossible; or
(b) Under special circumstances to be determined by the SOLE in appropriate
regulations; or
(c) Where the worker has died.

Section 5. Direct Payment of Wages. Rule VIII, Book III.

Payment of wages shall be made direct to the employee entitled thereto except in the
following cases:
(a) Where the employer is authorized in writing by the employee to pay his wages to a
member of his family;
(b) Where payment to another person of any part of the employee’s wages is authorized
by existing law, including payments for the insurance premiums of the employee and
union dues where the right to check-off has been recognized by the employer in
accordance with a collective agreement or authorized in writing by the individual
employees concerned; or
(c) In case of death of the employee as provided to the succeeding section.

 In cases of payment of deceased worker’s wages to his heirs, they do not need a court order, because
there is not need for an intestate proceeding. What they need is an AFFIDAVIT OF HEIRSHIP.

 Also a valid payment: when the payment of the employees’ wage through any of the authorized
deductions, such as by virtue of a check-off provision, then that is also a valid form of payment. So if
there is a CBA where there is a check-off provision for union dues, the employer will pay a portion of your
salary directly to the union and it will no longer pass through you, and this is a valid form of payment.
  60

Article 103. Time of Payment.

Wages shall be paid at least once every 2 weeks or twice a month at intervals not exceeding 16
days. If on account of force majeure or circumstances beyond the employer’s control, payment
of wages on or within the time herein provided cannot be made, the employer shall pay the
wages immediately after such force majeure or circumstances have ceased. No employer shall
make payment with less frequency than once a month.
The payment of wages of employees engaged to perform a task which cannot be completed in 2
weeks shall be subject to the following conditions, in the absence of collective bargaining
agreement or arbitration award:
(1) That payments are made at intervals not exceeding 16 days, in proportion to the
amount of work completed;
(2) That final settlement is made upon completion of the work.

Section 3, Rule VIII, Book III

(a) Wages shall not be paid less often than once every two weeks or twice a month at intervals not exceeding
16 days, unless payment cannot be made with such regularity due to force majeure or circumstances beyond
the employer’s control, in such case the employer shall pay the wages immediately after such force majeure
or circumstances have ceased.

(b) In case of payment of wages by results involving work which cannot be finished in 2 weeks, payment shall
be made at intervals not exceeding 16 days in proportion to the amount of work completed. Final settlement
shall be made immediately upon completion of the work.

Frequency of Payment – how often?

Wages shall be paid at least once every 2 weeks or twice a month at intervals not exceeding 16 days.
It translates into twice a month!

Exception:
In case of force majeure or in circumstances beyond the employer’s control, wherein the payment of wages on or within the time herein provided
cannot be made, the employer shall pay the wages immediately after such force majeure or circumstances have ceased.
  61

HOURS OF WORK
A workweek consists of 6 days
This is pursuant to Article 91.

Article 91. Right to weekly rest day.

(a) 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 24 consecutive hours after every 6 consecutive normal work
days.
(b) The employer shall determine and schedule the weekly rest day of his employees subject to
collective bargaining agreement and to such rules and regulations the SOLE may provide. However,
the employer shall respect the preference of employees as to their weekly rest day when such
preference is cased on religious grounds.

Section 3. Weekly Rest Day. Rule III, Book III:

Every employer shall give his employees a rest period of not less than 24 hours after
every 6 consecutive normal work days.

What happens on the seventh day?

It becomes the rest day. It is mandatory on the part of the employer because it is provided for under
Article 91. That is how we arrive on a 48-hour work week.

Will the seventh day be considered always and at all times the rest day?
YES.

Does the LC tell us what specific day of the week will the employees rest day be?
NO.

 Of course, under the BLUE SUNDAY LAW, the employees’ rest day was imposed every Sunday. But when
the Labor Code took effect in 1974, it gave more flexibility on the part of the employer to determine what
rest day will be best for his business. There are certain types of establishments that derives more money
during Sundays and Saturdays. And on the otherhand, there may be some establishments that are not
productive during Sundays. Example: Malls, Department Stores. In those establishments, it will be possible
to schedule the employees’ rest day on days other than Sunday.

 The employer has the prerogative to determine the employee’s rest day. When it does, the employer can
change the employees’ rest day only after giving a NOTICE, and the change will take effect 1 week after
such notice.
(a) The employer has to notify the employees of any change in the rest day.
(b) The change will have to take effect at least 7 days after the change of schedule.
This is so as not to cause inconvenience on the part of the employees who may expect to be enjoying
their rest day on a particular day. If the employer decides to change it because that is his prerogative, he
still has to inform his employees of the change in advance.

The choice of rest day rests upon the employer, is there an instance when the employer will have
to give some deference to the employees’ choice of their rest day?
YES. Under Article 91 (b). Based on religious grounds. The employer has to respect such employees’
preference.

(b) The employer shall determine and schedule the weekly rest day of his employees subject to collective
bargaining agreement and to such rules and regulations the SOLE may provide. However, the employer
shall respect the preference of employees as to their weekly rest day when such preference is cased on
religious grounds.

Exception to exception:
Under the implementing rules, when it will cause serious obstruction or prejudice to the operations or
undertaking of the employer, the employer shall schedule the rest day of their choice for at least 2 days in a
month.

 But of course, customarily in the Philippines, the employer gives respect to the employees’ choice of rest
day if the same is based on religious grounds.
  62

Does the 6 consecutive days workweek apply to all employers or employees?

NO, it does not apply to:
(a) Health personnels in cities or municipalities with a population of 1 million or
(b) Hospitals with a bed capacity of at least 100.

 The population requirement and the bed capacity need not go together. They are to be taken
separately.
 Remember that the bed capacity is not required to be occupied as long as the requirement of
at least a hundred is met OR you belong in a municipality or city with at least 1 million in
population.

 In this case, the normal workweek consists of 5 consecutive workdays. In effect, the rest day consists of 2
days. The law does not tell us the specific days when the rest days will fall. They have 40-hour workweek
and they will enjoy 2 rest days. This is due to the nature of their job or activities involving more strenuous
type of work compared to other establishments.

HEALTH PERSONNEL – shall include:

(a) Resident physicians,
(b) Nurses,
(c) Nutritionists,
(d) Dietitians,
(e) Pharmacists,
(f) Social workers,
(g) Laboratory technicians,
(h) Paramedical technicians,
(i) Psychologists,
(j) Midwives,
(k) Attendants, and
(l) All other hospital or clinic personnel.

Policy Instruction No. 54

[issued by Franklin Drilon]
This says in effect that those health personnel will have to be considered paid 7 days a week. Is this
valid?
NO, this was held to be void in the case of San Juan de Dios Hospital Employees Association
vs. NLRC, GR 126383 (November, 28, 1997). This is because it contravenes the LC because the LC does
not say that these 2 days off shall be paid, but rather, it only says that there will be 30% which will be added
to the regular wage if they work on the rest day.

The LC does not give them a full 7 days with pay but rather, only additional compensation.

San Juan de Dios Hospital Employees Association vs. NLRC, GR 126383 (November, 28, 1997)
A cursory reading of Article 83 of the Labor Code betrays petitioners’ position that “hospital
employees” are entitled to “a full weekly salary with paid 2 days’ off if they have completed the 40-hour/5day
workweek.”
What Article 83 merely provides are:
(1) The regular office hour of 8 hours a day, 5 days a week for health personnel, and
(2) Where the exigencies of service require that health personnel work for 6 days or 48
hours, then such health personnel shall be entitled to an additional compensation of at
least 30% of their regular wage for work on the sixth day.
There is nothing in the law that supports then SOLE’s assertion that “personnel in subject hospitals
and clinics are entitled to a full weekly wage for 7 days is they have completed the 40-hour/5-day workweek
in any given workweek.” Needless to say, the SOLE exceeded his authority by including a 2 days off with pay
in contravention of the clear mandate of the statute. Such an act the Court shall not countenance.
Administrative interpretation of the law, we reiterate, is at best merely advisory, and the Court will not
hesitate to strike down an administrative interpretation that deviates from the provision of the statute.
Policy Instruction 54 to our mind unduly extended the statute. It being inconsistent with and
repugnant to the provision of Article 83, as well as to RA 5901, PI 54 is declared VOID.

Can the employees be compelled to work during rest day?

Article 92.

The general rule is that under normal circumstances, the employer cannot require to compel his employee to
work on the latter’s scheduled rest day against his will. The general rule however admits of certain
exceptions, and these are found in Article 92 of the Labor Code and Section 6 Rule III of the Omnibus Rules.
  63

An employer may require any of his employees to work on his scheduled rest day for the duration of the following
emergencies and exceptional conditions:
1. 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 or property, or in case of
force majeure or imminent danger to public safety;
2. In case of urgent work to be performed on machineries, equipment or installations to avoid serious
loss which the employer would otherwise suffer;
3. In the event of abnormal pressure or work due to special circumstances, where the employer cannot
be ordinarily be expected to resort to other measures;
4. To prevent serious loss of perishable goods;
5. Where the nature of the work is such that the employees have to work continuously for 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;
6. When the work is necessary to avail of favorable weather or environmental conditions where
performance or quality of work is dependent thereon.

No employee shall be required against his will to work on his scheduled rest day except under the
circumstances provided. Provided, however, that where an employee volunteers to work on his rest day
under other circumstances, he shall express such desire in writing.

If the employee works on his rest day, he is entitled to additional compensation and this is called PREMIUM
PAY. This is not the same as overtime pay. This is additional compensation for the work of the employee for
not more than 8 hours during his rest day.

Meal Period

Article 85. Meal Periods.

Subject to such regulations as the Secretary of Labor and Employment may prescribe, it shall

be the duty of every employer to give his employees not less than 60 minutes time off for their

regular meals.

The employer is required to give his employees not less than 60 minutes or 1 hour for their regular meals
everyday. The LC does not specify as to what specific hour of the day the meal period are to be given.

The 60-minute meal period is not compensable because during this time, the worker does not work.

Possible to reduce the meal period to less than 60 minutes? If so, under what instances?
YES, under Section 7, Rule I, Book III.
A meal period of not less than 20 minutes may be given by the employer provided that such shortened meal
period is credited as compensable hours worked of the employee:
(a) Where the work is non-manual work in nature or does not involve strenuous physical
exertion;
(b) Where the establishment regularly operates not less than 16 hours a day;
(c) In cases of actual or impending emergencies or there is urgent work to be performed on machineries,
equipment or installations to avoid serious loss which the employer should otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
compensable working time.

 Short coffee breaks of 5 – 20 minutes is compensable. So if the employer gives the employees break in
the morning and in the afternoon, this time is considered compensable.

 Note that the employer is not obliged by law to give this coffee break.

 The employer can lessen the 60-minute meal period into 30 minutes. And this is compensable. Note that
the employer shall pay the Overtime Pay whenever proper. Note that meal periods can be reduced to less
  64

than 60 minutes but not less than 20 minutes, and it is compensable. For example, if the meal period is
reduced to 59 minutes  it is compensable.
Sime Darby vs. NLRC
289 SCRA 86

The meal period was shortened to less than 60 minutes. Then later, the employer decided to revert
to the 60 minutes. In which case, it was no longer compensable.
Prerogative of the employer to revert because they are not obliged by law. What is in fact required
is 60 minutes. Thus, this action by the employer is valid.
The right to fix the work schedules of the employees rests principally on their employer. In the instant case,

petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its business operations and its

improved production. It 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 dominated 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 1-hour lunch break without any interruption

from their employer. For a full 1 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 1-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 complied with the daily work period of 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.

Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that

goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to

exercise what are clearly management prerogatives.

Thus, management is free to regulate, according to its own discretion and judgment, all aspects of

employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be

followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and

discipline, dismissal and recall of workers.

Further, management retains the prerogative, whenever exigencies of the service so require, to change the

working hours of its employees. So long as such prerogative is exercised in good faith for the advancement of the

employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special

laws or under valid agreements, this Court will uphold such exercise.

 The employer cannot prohibit employees from leaving the premises during the meal period of employees.
The law in fact does not require that the 60 minutes to be spent in the employer’s premises. There is no
labor code provision to this effect.

Philippine Airlines vs. NLRC, 302 SCRA 532

Issue: Required to spend the 60 minutes in the company premises.
  65

NORMAL WORK WEEK

Article 91. Right to weekly rest day.

(a) 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 24 consecutive hours after every 6 consecutive normal work
days.
(b) The employer shall determine and schedule the weekly rest day of his employees subject to
collective bargaining agreement and to such rules and regulations as the Secretary of Labor may provide.
However, the employer shall respect the preference of employees as to their weekly rest day when such
preference is based on religious grounds.

Section 2. Business on Sundays/Holidays. Rule III, Book III

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 benefits due them under the law.

 The rest day need not be a Sunday, because the Blue Sunday Law no longer finds application in the
present.

Section 3. Weekly rest day. Rule III, Book III

Every employer shall give his employees a rest period of not less than twenty-four (24) hours

after every six consecutive normal work days.

Section 4. Preference of employee. Rule III, Book III

The preference of the employee as to his weekly day of rest shall be respected by the employer if the
same is based on religious grounds. The employee shall make known his preference to the employer in
writing at least seven (7) days before the desired effectivity of the initial rest day so preferred.
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.

COMPRESSED WORK WEEK

While as a general rule the right to overtime pay cannot be waived under existing laws, the compressed
workweek arrangement may be imposed if the following conditions are met:
1. The employees voluntarily agree to work 9 hours a day from Monday to Friday;
2. That there will not be any diminution whatsoever in the monthly or weekly take home pay and fringe
benefits of the employees;
3. The value of the benefits that will accrue to the employees under the proposed work schedule is more
than or at least commensurate with or equal to the one-hour overtime pay that is due them during
the weekdays based on the employee’s qualifications;
4. The one-hour overtime pay of the employees will become due and demandable if ever they are
permitted or made to work on any Saturday during the effectivity of the new working time
arrangement, since the agreement between the management is that there will be no Saturday work in
exchange for longer workday during weekdays;
5. The work of the employees does not involve strenuous physical exertion and that they are provided
with adequate rest periods or coffee breaks in the morning and afternoon;
6. The effectivity of the proposed working time arrangement shall be of temporary duration as
determined by the SOLE.

 This was from an Explanatory Bulletin dates August 20, 1984 of the Director of the Bureau of Working
Conditions, citing the opinion of the Acting Minister of Labor and Employment on the letter-query of
Hydro-Resources Contractors Corporation.
  66

 This came about not so long ago when our country was suffering an energy crisis and power supply was
always interrupted.

 The payment of overtime pay is actually waived under a compressed workweek arrangement, which is
valid if the conditions provided under the rules are complied with. This arrangement is the exception to
the general rule that overtime pay cannot be waived. If however during any day in the compressed
workweek is asked to work beyond the agreed 9 hours, or when he is made to work on a Saturday, the
employer should pay the employee overtime pay.

The Labor Code does not provide for a compressed workweek. This is only an agreement between the
employer and the employee. In such an agreement, the employees agree to perform work 9 hours a day for 5
days instead of the normal work period of 8 hours a day for 6 days in a week. The overtime rendered for each
day is normally compensable with Overtime pay. However, in this arrangement, the employees waive their
right to Overtime pay, in lieu of a longer weekend.

In practice, employer and employee should agree. The employee writes a letter petition containing the
following:
1) Request for a compressed workweek.
2) In effect thereto, they will render work for 9 hours a day for 5 days thereby extending their rest
day into 2 days.
3) Implied in this agreement are
a) Should the employer require them to work on their scheduled rest day, employer
shall pay them Overtime already rendered during their 5 working days as well as
Premium Pay for working during their rest day;
b) There will be no diminution of benefit as a result of this agreement.
4) Employees are given the leeway to revert to their normal workweek. This agreement is dependent
on the discretion of the employees to revert to the normal workweek.

 Note that this agreement on the compressed workweek will depend on the willingness of the employees.

Lagatic vs. NLRC

285 SCRA 262

Employees can waive their overtime pay as a result of a shortened workweek. In this case, there
was compressed workweek but the court is not admitting to its legality.
Petitioner Romeo Lagatic was employed by Cityland, first as a probationary sales agent, and later
on as a marketing specialist. He was tasked with soliciting sales for the company, with the corresponding
duties of accepting call-ins, referrals, and making client calls and cold calls. COLD CALLS refer to the
practice of prospecting for clients through the telephone directory. Cityland, believing that the same is
effective and cost-efficient method of finding clients, requires all its marketing specialists to make cold calls.
The number of cold calls depends on the sales generated by each: more sales means less cold calls.
Likewise, in order to access cold calls made by the sales staff, as well as to determine the results thereof,
Cityland requires the submission of daily progress reports on the same.
Cityland issued a written reprimand to petitioner for his failure to submit cold call reports.
Petitioner was required to explain his inaction, with a warning that further non-compliance would result in
his termination from the company.
Petitioner failed to show his entitlement to overtime and rest day pay due, to the lack of
sufficient evidence as to the number of days and hours when he rendered overtime and rest day work.
Entitlement to overtime pay must first be established by proof that said overtime work was actually
performed, before an employee may avail of said benefit. To support his allegations, petitioner submitted in
evidence minutes of meetings wherein he was assigned to work on weekends and holidays at Cityland’s
housing projects. Suffice it to say that said minutes do not prove that petitioner actually worked on said
dates. It is a basic rule in evidence that each party must prove his affirmative allegations. This petitioner
failed to do.
(Please see related discussion of this case under Prohibition against Offsetting, infra)

OVERTIME WORK

Article 83. Normal Hours of Work.

The normal hours of work of any employee shall not exceed 8 hours a day.
XXX

Can the employer validly require his employees to work longer than 8 hours a day? Say 10 a day?
  67

NO. Labor Code says in Article 83 that the normal hours of work shall not exceed 8 hours a day.
However, should they be engaged to perform work in excess of that required by law, employer is mandated to
pay the overtime pay.

Article 87. Overtime Work.

Work may be performed beyond 8 hours a day provided that the employee is paid for the overtime
work, an additional compensation equivalent to his regular wage plus at least 25% thereof. Work performed
beyond 8 hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate of the
first 8 hours on a holiday or rest day plus at least 30% thereof.

Section 8. Overtime Pay. Rule I, Book III

Any employee covered by this Rule who is permitted or required to work beyond 8 hours on

ordinary working days shall be paid an additional compensation for the overtime work in an

amount equivalent to his regular wage plus at least 25% thereof.

Regular wage + At least 25% of the Regular Wage = Overtime Pay

Section 9. Premium and Overtime Pay for Holiday and Rest Day Work. Rule I, Book III

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

 A normal work day can be shorter than 8 hours, like say, 5 hours because the Labor Code is worded X X X
not to exceed eight (8) hours.

Can ER be compelled to pay OT if work is rendered by an employee beyond the 5 hour working time?

NO. Labor Code says Overtime is an additional compensation required by law for work rendered in
excess of 8 hours in a day. However, if the ER decides to pay for the overtime work rendered, this is valid.
There is no legal prohibition.

OVERTIME COMPENSATION – Overtime compensation is additional pay for service or work rendered in
excess of 8 hours a day by employees or laborers in employment covered by the 8-hour Labor Law and not
exempt from its requirements. It is computed by multiplying the overtime hourly rate by the number of hours
worked in excess of 8 hours.

REGULAR WAGE for the purposes of computing overtime and other additional remuneration shall include the
cash wage only, without deduction on account of facilities provided by the employer.

Reason for the Overtime Pay

There can be no other reason that a worker is made to work longer than is commensurate with his
agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is supposed to. When he
thus spends additional time for his work, he puts in more physical and mental effort and he is delayed in going
home to his family and to enjoy the comforts of his home. The reason why employers are discouraged to
require employees to work overtime is the human factor.

There are establishments operating more than 8 hrs a day. Can the ER validly compel them to work beyond the 8 hour period?

Generally, NO. For exceptions see Rule I, Section 10 on Compulsory Overtime Work.
  68

Section 10. Compulsory Overtime Work. Rule I, Book III

In any of the following cases, an employer may require any of his employees to work beyond 8 hours
a day, provided that the employee required to render overtime work is paid the additional compensation
required by these regulations.
(a) When the country is at war or when any other national or local emergency has been declared by
the National Assembly or the Chief Executive;
(b) When overtime work is necessary to prevent loss of life or property, or in case of imminent
danger to public safety due to actual or impending emergency in the locality caused by serious
accident, fire, floods, typhoons, earthquake, epidemic or other disaster or calamities;
(c) When there is urgent work to be performed on machineries, installations, or equipment, in order
to avoid serious loss or damage to the employer or some other causes of similar nature;
(d) When the work is necessary to prevent loss or damage to perishable goods;
(e) When the completion or continuation of work started before the 8 th hour is necessary to prevent
serious obstruction or prejudice to the business or operations of the employer;
(f) When overtime work is necessary to avail of favorable weather or environmental conditions where
performance or quality of work is dependent thereon.
In cases not falling within any of these enumerated in this Section, no employee may be made to work
beyond eight hours a day against his will.

Article 88. Overtime not offset by Undertime.

Under time work on any particular day shall not be offset by overtime work on any other day.
Permission given to the employee to go on leave on some other day of the week shall not exempt the
employer from paying the additional compensation required (in this Chapter) [Hours of Work].

 If the employee worked overtime and on the following day he worked under time, his under time work
cannot be offset by his overtime work. The reason is fairness. If the employee works for less than 8
hours, he will be paid by the employer only for the corresponding number of hours he had actually
worked.

 Overtime pay if not paid is not only illegal. It is also contrary to public policy. The employer cannot use
the overtime of the employee to offset the under time because payment of overtime pay is mandatory.
The employer may either deduct the under time from the wage of the employee, or charge it to the
employee’s leave of absence depending on how many times the employee has worked under time. These
approaches are not in the Labor Code but may be found in company policy.

Prohibition against Offsetting

The obligation to pay overtime compensation is MANDATORY. An employer cannot evade payment of
overtime rendered on one day by offsetting it with undertime incurred on another day. Equally objectionable is
the practice of offsetting overtime with undertime and at the same time charging said undertime to the
accrued leave of the employee. For under such method, the employee is made to pa twice for his undertime
because his leave is reduced to that extent while he was made to pay for it with work beyond the regular
working hours. The proper method should be to deduct the undertime from the accrued leave but
pay the overtime to which the employee is entitled. (NAWASA vs. NWSA Consolidated Unions, 11
SCRA 766).

Lagatic vs. NLRC

285 SCRA 262
With respect to petitioner’s claims for overtime pay, rest day pay and holiday premiums, Cityland
maintains that Saturday and Sunday call-ins were voluntary activities on the part of sales personnel who
wanted to realize more sales and thereby earn more commissions. It is their contention that sales personnel
were clamoring for the “privilege” to attend Saturday and Sunday call-ins, as well as to entertain walk-in
clients at project sites during weekends, that Cityland had to stagger the schedule of sales employees to
give everyone a chance to do so. Put simultaneously, Cityland claims that the same were optional because
call-ins and walk-ins were not scheduled every weekend. If there really were a clamor on the part of sales
staff ro “voluntarily” work on weekends, so much so that Cityland needed to schedule them, how come no
call-ins or walk-ins were scheduled on some weekends?
In addition to the above, the Labor Arbiter and the NLRC sanctioned respondents practice of
offsetting rest day or holiday work with equivalent time o regular workdays on the ground that the same is
authorized by Department Order 21, Series of 1990. As correctly pointed out by petitioner, said DO was
misapplied in this case. The DO involves the shortening of the workweek from 6 days to 5 days but
with prolonged hours on those 5 days. Under this scheme, non-payment of overtime premiums was
allowed in exchange for longer weekends for employees. In the instant case, petitioner’s workweek was
never compressed. Instead, he claims payment for work over and above his normal 5 ½ days of work in
  69

a week. Applying by analogy the principle that overtime cannot be offset by undertime, to allow
offsetting woutld prejudice the worker. He would be deprived of the additional pay for the rest
day work he has rendered and which is utilized to offset his equivalent time off on regular
workdays. To allow Cityland to do so would be to circumvent the law on payment of premiums for the rest
day and holiday work.

 In the same way or by analogy, it is not valid for an employer to offset a regular work day from that of a
regular holiday. Because the employee will be deprived of additional compensation of the premium rate
on working on a holiday.

Example: ER tells you November 30 is a regular working day, I will give you a day-off on December 3.
He cannot do that because of the non-diminution clause.

HOURS WORKED

Article 84. Hours worked.

Hours worked shall include
(a) All time during which an employee is required to be on duty or to be at a prescribed
workplace, and
(b) All time during which an employee is suffered or permitted to work.

Rest periods of short duration during working hours shall be counted as hours worked.

What is the reason why we should know this?

So that we will know when to start counting the normal hours of work.
This is also a prerequisite in determining compensation.

Can an employer validly require the employee to work before and after the 8 hours of work? Is this valid?

Yes. These are what we call the preliminary and postliminary work.

Preliminary and Postliminary activities are deemed performed during working hours, where such activities are:

1) Controlled and required by the employer.

2) Pursued necessarily and primarily for the employer’s benefit.

 The 60-minute meal period required by law is not compensable. This period is primarily devoted for the
personal interests of the employees. Hence, the Principle of NO WORK NO PAY applies.

 The employee can devote this period for personal needs. In fact he may go out or opt to stay within his
work premises.

 If during such meal period, an employee is permitted or required to work, that will be considered as hours
of work.

So what is the criteria to consider rest period as hours work?

See Art. 84, Labor Code.

Section 3. Hours Worked. Rule I, Book III

The following shall be considered as compensable hours worked:
(a) All time during which an employee is required to be on duty or to be at the employer’s
premises or to be at a prescribed workplace; and
(b) All time during which an employee is suffered or permitted to work.

Section 4. Principles in Determining Hours Worked. Rule I, Book III

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;
  70

2. An employee need not leave the premises of the workplace in order that his rest period shall be
counted, it being enough that he stops working, may rest completely and may leave his workplace to go
elsewhere, whether within or outside the premises of his workplace;
3. If the work performed was necessary, or it benefited the employer, or the employee cannot abandon his
work at the end of his normal working hours because he has 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;
4. 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.

 So, if an employee cannot rest completely during his rest periods, that will be considered as hours worked
for as long as it was for the benefit of the employer.

What about those who work aboard ship or vessels? Will you consider the whole time they are aboard the vessel hours worked?

NO, because of the nature of their work. They are always on board the ship. Their hours of worked
will depend upon what they are doing. If it is for the benefit of the employer, it will be considered as hours
worked.
In the case of Luzon Stevedoring Co. Inc. vs. Luzon Marine Department Union, 101 Phil.
257, where it was held:
“For purposes of this case, we do not need to set for seamen a criterion different from that applied to
laborers on land, for under the provisions of the above quoted section, the only thing to be done is to
determine the meaning of the term ‘working place’ used therein. As we understand this term, a laborer
need not leave the premises of the factory, shop or boat in order that his rest period shall not be counted, it
being enough that he ‘cease to work’, may rest completely and leave or may leave at will the spot where he
actually stays while working, to go somewhere else, whether within or outside the premises of the said
factory, shop or boat. If these requisites are complied with, the period of such rest shall NOT be counted.”

Cagampan vs. NLRC

195 SCRA 533

Petitioners have conveniently adopted the view that the “guaranteed or fixed overtime pay of 30%
of the basic salary per month” embodied in their employment contract should be awarded to them as part
of a “package benefit.” They have theorized that even without sufficient evidence of actual rendition of
overtime work, they would automatically be entitled to overtime pay. Their theory is erroneous for being
illogical and unrealistic. Their thinking even runs counter to the intention behind the provision. The contract
provision means that the fixed overtime pay of 30% would be the basis for computing the overtime pay if
and when overtime work would be rendered. Simply stated, the rendition of overtime work and the
submission of sufficient proof that said work was actually performed are conditions to be satisfied before a
seaman could be entitled to overtime pay which should be computed on the basis of 30% of the basic
monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established. Realistically speaking, a seaman, by the very nature of his job, stays
on board a ship or vessel beyond the regular 8-hour work schedule. For the employer to give him overtime
pay for the extra hours when he might be sleeping or attending to his personal chores or even just lulling
away his time would be extremely unfair and unreasonable.
We already resolved the question of OVERTIME PAY OF A WORKER ABOARD A VESSEL in the case
of National Shipyards and Steel Corporation vs. CIR, 3 SCRA 890:
“We cannot agree with the Court below that the respondent should be paid overtime compensation
for every hour in excess of the regular working hours that he was on board his vessel or barge each day,
irrespective of whether or not he actually put in work during those hours. Seamen are required to stay on
board their vessels by the very nature of their duties, and it is for this reason that, in addition to their
regular compensation, they are given free living quarters and subsistence allowance when required to be on
board. It could not have been the purpose of our law to require their employers to pay them overtime even
when they are not actually working; otherwise, every sailor on board a vessel would be entitled to overtime
for 16 hours each day, even if he spent all those hours resting or sleeping in his bunk, after his regular tour
of duty. The criterion in determining whether or not seamen are entitled to overtime pay is not, whether
they were on board and cannot leave the ship beyond the regular 8-working hours a day, but whether they
actually rendered service in excess of said number of hours.

Stolt-Nielsen vs. NLRC

258 SCRA 643
Private respondent Meynardo J. Hernandez was hired by petitioner Stolt-Nielsen Marine Services
(Philippines), Inc. as radio officer on board M/T Stolt Condor for a period of 10 months. He boarded the
vessel on January 20, 1990.
  71

On April 26, 1990, the ship captain ordered private respondent to carry the baggage of crew
member Lito Loveria who was being repatriated. He refused to obey the order out of fear in view of the
utterance of said crew member “Makakasaksak ako” and also because he did not perceive such task as one
of his duties as radio officer. As a result of such refusal, private respondent was ordered to disembark and
was himself repatriated. He was paid his salaries and wages only up to May 16, 1990.
The Court agrees that by virtue of the CBA and POEZ Standard Contract provisions, private
respondent is indeed bound to obey the lawful commands of the captain of the ship, but only as long as
these pertain to his duties. The order to carry the luggage of a crew member, while being lawful, is not part
of the duties of a radio officer.
On the award of overtime pay, the NLRC in its assailed resolution states:
“Anent the overtime pay, complainant alleged that he is entitled thereto as the same is a fixed
overtime pay. The respondents failed to controvert said allegations. In short, the complainant’s claim was
for overtime pay was undisputed and for this reason, the grant of this claim must be upheld.”
Petitioner cites the case of Cagampan and his argument is well taken. A close scrutiny of the
computation of the monetary award shows that the award for overtime was for the remaining 6 months and
3 days of private respondent’s contract at which time he was no longer rendering services as he has already
been repatriated. In light of the decision in Cagampan, said award for overtime should be, as it is hereby,
disallowed for being unjustified.

WORK INTERRUPTION

Section 4, Rule I, Book III

(d) The time during which an employee is inactive by reason of interruptions in his work beyond his
control shall be considered 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.

Power interruptions or brownouts

Brownouts of short duration but not exceeding 20 minutes are considered as hours worked, whether
used productively by the employees or not.
Reason: The imminence of the resumption of work requires the employee’s presence at the place of
work and the time is too short for the employees to utilize it effectively and gainfully for his own interest.

 Note: this was not discussed but is relatively important.

Brownouts exceeding 20 minutes will not be treated as hours worked is any of the following
conditions are present:
(a) The employees can leave their workplace to go elsewhere within or without the work premises;
or
(b) The employee can use the time effectively for their own interest.
In either case, the employer can extend the working hours beyond the regular schedule to
compensate the loss of productive man-hours without being liable for overtime pay.
Industrial enterprises with 1 or 2 work shifts may adopt any of the work shifts prescribed for
enterprises with 3 work shifts to prevent serious loss or damage to materials, machineries or equipment that
may result in case of power interruptions (Policy Instructions #36).

Section 5. WAITING TIME. Rule I, Book III

(a) Waiting time spent by an employee shall be considered as working time if waiting is an integral
part of his work or the employee is required or engaged by the employer to wait.
(b) An employee who is required to remain on call
in the employer’s premises or
so close thereto
that he cannot use the time effectively and gainfully for his own purpose shall be considered as working
while on call. An employee who is not required to leave work at his home or with company officials where
he may be reached is not working while on call.

 Examples of employees in which waiting is an integral part of their job

1. Driver
2. Sales lady
3. Barbers
4. Workers of massage parlors
5. Standby crew of airline companies
6. Co-pilots
7. Laboratory technicians
  72

 Art. 84 speaks of two definition of hours work in relation to waiting time. So even if drivers are doing
nothing, or even if the sales ladies are just sitting doing nothing, for as long as they are required to be on
duty or to be at a specified workplace, then the time spent during such period is considered as hours
worked.

Pan-American World Airways Employees vs. Pan-American World Airways,

1 SCRA 527, GR L-16275, February 23, 1961

STATEMENT OF THE JURISDICTIONAL RULE ON CLAIM FOR OVERTIME PAY. — Where the

claimants, at the time of the filing of the petition, were still in the service of the employer, or, having been separated

from service, should also ask for reinstatement, the claim must be brought before the Court of Industrial Relations;

otherwise, such claim should be brought before the regular courts. (NASSCO, vs. CIR, et al., 107 Phil., 1006; 58 Off.

Gaz., [36] 5875; PRISCO vs. CIR, et al., 102 Phil., 515; Board of Liquidation, et al., vs. CIR, 108 Phil., 330; Ajax-

International Corp. vs. Seguritan, 109 Phil., 815, Sampaguita Pictures, Inc., et al. vs. CIR, 109 Phil., 818).

WHEN MEAL PERIOD CONSIDERED OVERTIME WORK. — Where during the so-called meal period,

the laborers are required to stand by for emergency work, or where said meals hour is not one of complete rest, such

period is considered overtime.

COMPENSATION BY CIR'S EXAMINING DIVISION NOT UNDUE DELEGATION OF JUDICIAL

FUNCTION; LACK OF SPECIFIC AMOUNT OF OVERTIME PAY IN DECISION DOES NOT MAKE IT

INCOMPLETE. — Computation of overtime pay involves, at the most, a mechanical act, and its being computed by

the Chief, Examining Division of the CIR, is not undue delegation of its judicial functions; the lack of a specific

amount of overtime pay in the decision does not render it incomplete.

Section 6. Lectures, Meetings and Training Programs. Rule I, Book III

Attendance at lectures, meetings, training programs and other similar activities shall NOT be counted
as working time if ALL the following conditions are met:
(c) Attendance is outside of the employee’s working hours;
(d) Attendance is in fact voluntary;
(e) The employee does not perform any productive work during such attendance

There are certain personnel who are exempt from enjoying labor standards benefits.
By express provision of the law, this is the coverage of Book III on Condition of Employment, Title I
on Working Conditions and Rest Periods – Hours of Work. The Chapters under this Title are as follows:

Chapter 1 - Hours of Work

Chapter 2 - Weekly Rest Periods
Chapter 3 - Holidays, Service Incentive Leave, Service Charges

Article 82. Coverage

The provisions of this Article shall apply to employees in all establishments and undertakings whether
for profit or not, but not to government employees, managerial employees, field personnel, members of the
family who are dependent on him for support, domestic helpers, persons in the personal service of another,
and workers who are paid by result as determined by the Secretary of Labor in appropriate regulations.
As used herein, “Managerial Employees” refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision thereof, and
to other officers or members of the managerial staff.
“Field Personnel” shall refer to non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty.
  73

Labor Standards Benefits covered under Art. 82:

(a) Night Shift Differential;

(b) Overtime pay;
(c) Holiday pay;
(d) Service Incentive Leave; and
(e) Service Charges

Employees not covered by this provision:

1. Government Employees – whether employed by the national government or any of its political
subdivisions, including those employed in government-owned and –controlled corporations

REASON: They are governed by different set of laws, which are the Civil Service Law,

the Administrative Code, and by their respective charters. If a government-owned or –

controlled corporation has been incorporated, they are governed by the Corporation Code and

are consequently covered by the Labor Code.

2. Managerial Employees and members of the Managerial Staffs

Managerial employees if they meet all of the following conditions:

1. Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof; [formulate policies]

2. They customarily and regularly direct the work of two or more employees therein;
[execute management policies]

3. They have the authority to hire and fire employees of lower rank, or their suggestions and
recommendations to hiring and firing and as to the promotion or any other change of
status of other employees, are given particular weight. [impose disciplinary actions]

REASON: Managerial employees are not usually employed and paid by the hour. Their

compensation is determined by their special training, experience or knowledge, which require

the exercise of discretion and independent judgment; or perform work related to management

policies and general business operations along specialized or technical lines.

Officers or members of the managerial staff if they perform the following duties and

responsibilities:
  74

1. The primary duty consists of the performance of work directly related to management

policies of the employer;

2. Customarily and regularly exercise discretion and independent judgment;

3. They:

i. Regularly and directly assist a proprietor or general managerial employee whose

primary duty consists of the management of the establishment in which he is

employed or a subdivision thereof;

ii. Execute, under general supervision, work along specialized or technical lines

requiring special training, experience or knowledge; or

iii. Execute, under general supervision, special assignments and tasks.

4. They do not devote more than 20% of their hours worked in a workweek to activities,

which are not directly and closely related to the performance of the work prescribed in

the above-mentioned 1, 2 and 3.

REASON: They may be considered managerial employees as well. Thus, it would not be

feasible to provide a fixed hourly rate of pay or maximum hours of work like managerial

employees as previously mentioned.

3. Field Personnels

If they:
(a) Regularly perform their duties away from the principal or branch office or place of

business of the employer; and

(b) Whose actual hours of work in the field cannot be determined with reasonable

certainty.

REASON: These workers perform their jobs away from the employer’s place of business, and

therefore not subject to the personal supervision of their employer. His employer has no way
  75

of knowing the exact number of hours he is working in a day, like medical representatives and

field salesmen. Their hours of work cannot be determined with reasonable certainty.

Union of Filipro Employees vs. Vicar

205 SCRA 200

The labor dispute stems from the exclusion of sales personnel from the holiday pay award.
Respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the NLRC a petition for declaratory
relief seeking a ruling on its rights and obligations respecting claims of its monthly paid employees for
holiday pay in the light of the Court’s decision in Chartered Bank Employees Association vs. Ople, 138
SCRA 273.
Whether or not Nestle’s sales personnel are entitled to holiday pay.
Petitioner insists that respondent’s sales personnel are not field personnel under Article 82 of the
Labor Code. Respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay, said article defines FIELD
PERSONNEL as “non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty.”
It is undisputed that these sales personnel start their field-work at 8 am after having reported to
the office and come back to the office at 4 pm if they are Makati-based.
The petitioner maintains that the period between 8 am to 4 or 4:30 pm comprises the sales
personnel’s working hours which can be determined with reasonable certainty.
The court does not agree.

The law requires that the actual hours of work in the field be reasonably ascertained. The company has not
way of determining whether or not these sales personnel, even if theu report to the office before 8 am prior to
field work and come back at 4:30 pm, rally spend the hours in between in actual field work.

Mercidar Fishing Corp. vs. NLRC

297 SCRA 445
Private respondent had been employed as a “bodegero” or ship’s quartermaster on February 12,
1988. he complained that he has been constructively dismissed by petitioner when the latter refuse
him assignments aboard its boats after he has reported to work on May 28, 1990.
Private respondent alleged that he had been sick and thus allowed to go on leave for 1 month but
when he reported to work at the end of such period with a health clearance, he was told to come
back another time as he could not be reinstated immediately. Thereafter, petitioner refused to give
him work.
Petitioner on the other hand, alleged that it was private respondent who actually abandoned his
work.
Petitioner contends that NLRC palpably erred in ruling and sustaining the view that fishing crew
members, like Fermin Agao, Jr., cannot be classified as field personnel under Article 82 of the Labor
Code.
The petition has not merit.
Petitioner argues essentially that since the work of private respondent is performed away from its
principal place of business, it has not way of verifying his actual hours of work on the vessel. It
contends that the private respondent and other fishermen in its employ should be classified as “field
personnel” who have no statutory right to service incentive leave pay.
This case cited the case of Union of Filipro Employees.
In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen
employed by petitioner have no choice but to remain on board its vessel. Although they perform non-
agricultural work away from petitioner’s business offices, the fact remains that throughout the
duration of their work, they are under the effective control and supervision of petitioner through the
vessel’s patron or master as the NLRC correctly held.

4. Members of the family who are dependent upon him for support

REASON: The employer has already taken care of the sustenance, clothing, medical

attendance or education of the particular members of his family. Note that this category refers

to husband and wife, parents and children, other descendants and ascendants, brothers and

sisters whether in the full or half blood. It does not include in-laws because they do not
  76

pertain to the same family. Also keep in mind that the family must be dependent upon the

employer for support.

5. Household helpers

6. Persons in the personal service of another

Domestic servants and persons in the personal service of another if they perform such

services in the employer’s home which are usually necessary and desirable for the

maintenance and enjoyment thereof, or minister to the personal comfort, convenience or

safety of the employer as well as the members of the employer’s household.

REASON: They are already provided with living quarters, food, and extra clothing

such that all in all, it would exceed the statutory minimum wage. Also because the nature of

the work plus the fact that they are not employed in a business undertaking.

7. Workers paid by results

Including those who are paid by piece-work, takay, pakiao, or task basis, and other

non-time work if their output rates are in accordance with the standards under Section 8 Rule

VII Book III of these Regulations, or where such rates have been fixed by the SOLE in

accordance with the aforesaid section.

REASON: They are not paid on an hourly basis but in their output. Their pay is

dependent upon the work done regardless of the time spent or employed in doing the work.

Moreover, they are governed by specific contracts. Their output should be fixed in

accordance with Section 8 Rule VII Book III of the Omnibus Rules, which provide that they

shall receive not less than the applicable statutory wage rates prescribed by law for the normal

working hours which shall not exceed 8 hours a day, or a proportion thereof for work less than

the normal working hours.

  77

Classification of workers paid by result

1. Piece Rate
2. Job or task base.

Lambo vs. NLRC

GR 111042, October 26, 1999
Where SC gave the correct classification of workers paid by results.

Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents J.C. Tailor

Shop and/or Johnny Co on September 10, 1985 and March 3, 1985, respectively. They worked from 8am to 7pm

daily, including Sundays and holidays. As in the case of the other 100 employees of private respondents, petitioners

were paid on a piece-work basis, according to the style of suits they made. Regardless of the number of pieces they

finished in a day, they were each given a daily pay of at least P64.00.

On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal and sought

recovery of overtime pay, holiday pay, premium pay on holiday and rest day, service incentive leave pay, separation

pay, 13th month pay, and attorney’s fees.

After hearing, Labor Arbiter found private respondents guilty of illegal dismissal.

On appeal by private respondents, the NLRC reversed the decision of the Labor Arbiter. The NLRC held

petitioners guilty of abandonment of work and accordingly dismissed their claims except that for 13 th month pay.

The decision of the NLRC is SET ASIDE and another one is rendered ordering private respondents to pay

petitioners the total amount of P181,102.40.

TWO CATEGORIES OF EMPLOYEES PAID BY RESULTS. – There are 2 categories of employees paid by

results:

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 in 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 and takay 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

difficult to quantify. Petitioners belong to the first category, i.e., supervised employees.

THE MERE FACT THAT PETITIONERS WERE PAID IN A PIECE-RATE BASIS DOES NOT NEGATE

THEIR STATUS AS REGULAR EMPLOYEES OF PRIVATE RESPONDENTS. – In this case, private respondents

exercised control over the work of petitioners. As tailors, petitioners worked in the company’s premises from 8am to
  78

7pam daily, including Sundays and holidays. The mere fact that petitioners were paid in a piece-rate basis does not

negate their status as regular employees of private respondents. The term “WAGE” is broadly defined in Article 97

of the Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or

ascertained on a time, task, piece or commission basis. Payment by the price is just a method of compensation and

does not define the essence of the relations. Nor does the fact that petitioners are not covered by the SSS affect the

employer-employee relationship.

FACTORS THAT SHOW THAT PETITIONERS ALTHOUGH PIECE-RATE WORKERS, WERE

REGULAR EMPLOYEES OF PRIVATE RESPONDENTS. –

(1) Within the contemplation of Article 280 of the Labor Code, their work as tailors was necessary or desirable

in the usual business of private respondents, which is engaged in the tailoring business;

(2) Petitioners worked for private respondents throughout the year, their employment not being dependent on a

specific project or season; and,

(3) Petitioners worked for private respondents for more than 1 year.

NOT ALL QUITCLAIMS ARE PER SE INVALID OR AGAINST PUBLIC POLICY; EXCEPTIONS. –

To be sure, not all quitclaims are per se invalid or against public policy. But those

(1) Where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person or

(2) Where the terms of settlement are unconscionable on their face are invalid.

In these cases, the law will step in to annul the questionable transaction. However, considering
that the Labor Arbiter had given the petitioner Lambo a total award of P94,719.20, the amount of
P10,000 to cover any and all monetary claims is clearly unconscionable. As we have held in another case,
the subordinate position of the individual employee vis-à-vis management renders him especially
vulnerable to its blandishments, importunings, and even intimidations, and results in his improvidently
waiving benefits too which he is clearly entitled. Thus, quitclaims, waivers or releases are looked upon
with disfavor for being contrary to public policy and are ineffective to bar claims for the full measure of
the workers’ legal rights. An employee who is merely constrained to accept the wages paid to him is not
precluded from recovering the difference between the amount he actually received and that amount
which he should have received.

OVERTIME PAY vs. PREMIUM PAY

OVERTIME PAY – Additional compensation required by law for work performed in excess of 8 hours in a day.

PREMIUM PAY – Additional compensation required by law for work performed during non-working days not
exceeding 8 hours such as rest days, holidays.

 Premium Pay is an additional compensation given to a covered employee for working on a

holiday or rest day within the first 8 hours.
  79

 Premium Pay is an additional compensation other than and added to the regular wage or basic
salary. It should not be included or considered in the computation of the 13 th month pay.

 With respect to employees paid on a monthly basis, the first 100% (of the 130%) corresponding to
the regular remuneration, may or may not be included in the monthly salary. If it is, then the
employee is entitled to collect only the premium of 30%. If it is, then the employee has the right to
receive the entire 130%. However, Sunday is a regular workday unless it is his established rest
day.

Premium pay for work within 8 hours on a

- Special or rest day: plus 30% of basic daily rate
- Rest day falling on special day: plus 50% of basic daily rate
- Rest day falling on a regular holiday: plus 30% of 200% of basic daily rate. Mathematically, it is
260% of basic daily rate

Overtime Pay
- Ordinary days: plus 25% of the basic hourly rate
- Special days, rest days and holidays: plus 30% of the regular hourly rate on said days.
  80

HOLIDAY PAY

Article 94. Right to Holiday Pay.

(a) Every worker shall be paid his regular daily wage during regular holidays except in retail and
service establishments regularly employing less than 10 workers;
(b) The employer may require an employee to work on any holiday but such employee shall be
paid a compensation equivalent to twice his regular rate;
(c) As used in this Article, “Holiday” includes:

New Year’s Day 12th of June

Maundy Thursday Last Sunday of August (National Heroes’ Day)
Good Friday 30th of November (Bonifacio Day)
9th of April 25th of December (Christmas Day)
1st of May 30th of December (Rizal Day)

EXECUTIVE ORDER 203

(June 30, 1987 by President Corazon C. Aquino)
“Providing a List of Regular Holidays and Special Days to be
observed throughout the Philippines and for other Purposes”

Regular Holidays (10)

New Year’s Day - January 01

Maundy Thursday - Movable date
Good Friday - Movable date
Araw ng Kagitingan
(or Bataan and Corregidor Day - April 09
Labor Day - May 01
Independence Day - June 12
National Heroes’ Day - Last day of August
Bonifacio Day - November 30
Christmas Day - December 25
Rizal Day - December 30

Nationwide Special Days (2)

All Saints’ Day - November 01

Last day of the year - December 31

“Henceforth, the terms Legal or Regular Holiday and Special Holiday as used in laws, orders, rules and regulations
or other issuance shall now be referred to as Regular Holiday and Special Holiday, respectively.

Is the ER required to pay the EE Holiday pay?

Yes, it is mandated by Article 94. Right to holiday pay. – (a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service establishments regularly employing less than
10 workers

When we speak of Holiday, how many kinds are there?

As per EO 203, there are two kinds of Holidays: Regular and Special Holidays. The employer cannot declare
his own holiday. The Local Government Units may however declare its own holiday. There are 10 Regular
and 2 Special Holidays. In effect, there are 52 Rest Days in a year.

By the term “Holiday Pay”, what is being referred to?

Holiday Pay refers to working on a Regular Holiday. When the employee does not work on a special holiday,
he does not receive compensation. In order for him to be compensated, he has to render service on that
particular special day. His compensation is equivalent to 30% of his regular wage. The principle of “No Work,
No Pay” applies to Special Days.
  81

Holiday pay is a premium given to an employee during regular holidays. The purpose of holiday pay is to
prevent diminution of the monthly income on account of work interruptions. It is primarily aimed to benefit
daily-paid workers, whose income is circumscribed by the “No Work, No Pay” Principle.

Does the law provide what are the Regular Holidays?

Yes, Article 94 (c), Labor Code. This provision has been superceded by Executive Order No. 203
providing for a list of regular holidays and special days to be observed.

Regular Holiday
If unworked, the Labor Code sanctions payment of 100%.
If worked, the premium pay is 200%. This is what is referred to as DOUBLE COMPENSATION.

Special Day
If unworked, the Labor Code does not provide for payment.
This follows the principle of NO WORK NO PAY as lodged in the famous principle of a FAIR DAY’S
WAGE FOR A FAIR DAYS’S LABOR.

Cases: FAIR DAY’S WAGE FOR A FAIR DAYS’S LABOR.

Caltex Refinery vs. Brillantes

279 SCRA 218

The employer granted wage increase but the employees demanded a wage increase equivalent to
that of the increase granted by another employer (Shell) to its employees. They alleged that Caltex is
similarly situated with Shell, therefore, CALTEX should grant an increase equal to what is given by Shell to
its employees.
RULING: The alleged “similarity” in the situation of Caltex and Shell cannot be considered a valid
ground for a demand of wage increase, in the absence of a showing that the 2 companies are also similar
in “substantial aspects”. The wage should be commensurate to the work done. Employees have the right
to demand salary increase; but it is also cogent that they should also be able to justify an increase in
wages.
FAIR DAY’S WAGE FOR A FAIR DAY’S WORK.
The age-old general rule governing relations between labor and capital or management and
employee is “a fair day’s wage for a fair day’s work.” If no work is performed by the employee, there can
be no wage or pay unless of course the laborer was ready, willing and able to work but was locked out,
dismissed or suspended or otherwise illegally prevented from working.

SSS vs. SSS Supervisor’s Union

117 SCRA 749

This petition seeks to review on Certiorari the orders of respondent court of industrial relations on
the issue of whether or not petitioner SSS may be held liable for the payment of wages of members of
respondent union who admittedly did not work during the strike declared in 1968 by the rank-and-file
union.
The age-old rule governing the relation between labor and capital or management and employee is
that of a “fair days wage for a fair day’s labor” if there is no work performed by the employee there
can be no wage or pay, unless of course the laborer was able, willing and ready to work, but was illegally
locked out, dismissed or suspended.
Where the failure of workers to work was not due to the employer’s fault, burden of economic loss
suffered by them should not be shifted to the employer and each party must bear his own loss.
In this case, the failure of work on the part of the member of the respondent’s union was due to
circumstances not attributable to themselves, but neither should the burden of economic loss suffered by
them be shifted to their employers (SSS) which was equally faultless, considering that the situation was
not a direct consequence of the employer’s lockout or unfair labor practice. Under the circumstances,
each party must bear the loss

Aklan Electric Cooperative vs. NLRC

GR 121439 Jan. 25, 2000

The sole issue for determination is whether or not public respondent NLRC committed grave abuse
of discretion amounting to excess or want of jurisdiction when it reversed the findings of the Labor Arbiter
that private respondents-employees refused to work under the lawful orders of the petitioner AKELCO
management (which was to report to work to the new temporary office premises in another location);
  82

hence they are covered by the "no work, no pay" principle and are thus not entitled to the claim for
unpaid wages from June 16, 1992 to March 18, 1993.

The age-old rule governing the relation between labor and capital, or management and employee
of a "fair day’s wage for a fair day’s labor" remains as the basic factor in determining employees’ wages.
If there is no work performed by the employee there can be no wage or pay unless, of course, the
laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed, or
otherwise illegally prevented from working, a situation which we find is not present in the instant case.

It would neither be fair nor just to allow private respondents to recover something they have not
earned and could not have earned because they did not render services at the Kalibo office during the
stated period.

Counterpart principle of Fair Day’s Wage for Fair Day’s Labor

EQUAL PAY FOR EQUAL WORK.

Cases: EQUAL PAY FOR EQUAL WORK.

Prubankers vs. Prudential Bank

302 SCRA 74
"On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V issued
Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private
sector who ha[d] rendered service for at least three (3) months before its effectivity, and for the same
period [t]hereafter, in the following categories: SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in
the cities of Naga and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the municipalities of
Tabaco, Daraga, Pili and the city of Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.
"Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of
Region VII issued Wage Order No. RB VII-03, which directed the integration of the COLA mandated
pursuant to Wage Order No. RO VII-02-A into the basic pay of all workers. It also established an increase
in the minimum wage rates for all workers and employees in the private sector as follows: by Ten Pesos
(P10.00) in the cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the municipalities of
Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo,
Dumaguete, Bais, Canlaon, and Tagbilaran.
"The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only
branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into the basic
pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches, the branches covered
by Wage Order No. RB VII-03.
"On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the
Labor Management Committee be immediately convened to discuss and resolve the alleged wage
distortion created in the salary structure upon the implementation of the said wage orders. Respondent
Association then demanded in the Labor Management Committee meetings that the petitioner extend the
application of the wage orders to its employees outside Regions V and VII, claiming that the regional
implementation of the said orders created a wage distortion in the wage rates of petitioner's employees
nationwide. As the grievance could not be settled in the said meetings, the parties agreed to submit the
matter to voluntary arbitration. The Arbitration Committee formed for that purpose was composed of the
following: public respondent Froilan M. Bacungan as Chairman, with Attys. Domingo T. Anonuevo and
Emerico O. de Guzman as members. The issue presented before the Committee was whether or not the
bank's separate and regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage Order
No. VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the bank
nationwide.
"The Arbitration Committee on June 18, 1996 rendered the questioned decision."
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage Order in only one region violates the equal-pay-for-equal-

work principle. This is not correct. At the risk of being repetitive, we stress that RA 6727 mandates that wages in

every region must be set by the particular wage board of that region, based on the prevailing situation therein.

Necessarily, the wages in different regions will not be uniform. Thus, under RA 6727, the minimum wage in Region

1 may be different from that in Region 13, because the socioeconomic conditions in the two regions are different.

International School Alliance of Educators vs. Quisumbing

GR 128845 June 1, 2000

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle
  83

that rests on fundamental notions of justice. That is the principle we uphold today. Private respondent
International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of foreign diplomatic personnel and other
temporary residents.
To enable the School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the protection
of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying
the same into two: (1) foreign-hires and (2) local-hires.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family
and friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality
after his term: that he will eventually and inevitably return to his home country where he will have to
confront the uncertainty of obtaining suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education.
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members” of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a deadlock between the parties.
The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits
as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race.
Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local
hires.
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find application in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign
hired personnel which system is universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their services in the Philippines and in the
process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment
unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits
would also require parity in other terms and conditions of employment which include the employment
contract.
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution in the Article on Social Justice and Human
Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance
the right of all people to human dignity, reduce social, economic, and political inequalities." The very
broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the
performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good
faith."
International law, which springs from general principles of law, likewise proscribes discrimination.
General principles of law include principles of equity, i.e., the general principles of fairness and justice,
based on the test of what is reasonable.
In the workplace, where the relations between capital and labor are often skewed in favor of
capital, inequality and discrimination by the employer are all the more reprehensible.
The Constitution specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include as
well the manner by which employers treat their employees.
The Constitution also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code provides that the State shall "ensure equal work opportunities regardless of sex,
race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite
of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes to
unequal and discriminatory terms and conditions of employment. Discrimination, particularly in terms
of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes the
payment of lesser compensation to a female employee as against a male employee for work of equal
value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages
in order to encourage or discourage membership in any labor organization.
  84

The School contends that petitioner has not adduced evidence that local-hires perform work equal
to that of foreign-hires. The Court finds this argument a little cavalier. If an employer accords employees
the same position and rank, the presumption is that these employees perform equal work. This
presumption is borne by logic and human experience. If the employer pays one employee less than the
rest, it is not for that employee to explain why he receives less or why the others receive more. That
would be adding insult to injury. The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar
functions and responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid
at regular intervals for the rendering of services." In Songco v. National Labor Relations C ommission,
we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of
the Roman soldier, it carries with it the fundamental idea of compensation for services rendered.
(Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as
an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor"
and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates.
The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," "to
afford labor full protection." The State, therefore, has the right and duty to regulate the relations between
labor and capital. These relations are not merely contractual but are so impressed with public interest that
labor contracts, collective bargaining agreements included, must yield to the common good. Should such
contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down
these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not
deserve the sympathy of this Court.

 If your scheduled rest day is Sunday and you are not required to work, you are not entitled to any pay.
On the principle of No work no pay.

 If your scheduled rest day is Sunday and you are required to work, you would be entitled to pay.

Article 93. Compensation for rest day and Sunday or Holiday work.
(a) Where an employee is made or permitted to work on his scheduled rest day, he shall be
paid an additional compensation of at least 30% of his regular wage. An employee shall
be entitled to such additional compensation for work performed on Sunday only when it is his
established rest day.
(b) When the nature of the work of the employee is such that he has no regular workdays and
no regular rest days can be scheduled, he shall be paid an additional compensation of at
least 30% of his regular wage for work performed on Sundays and holidays.
(c) Work performed on any special holiday shall be paid an additional compensation of at least
30% of the regular wage of the employee. Where such holiday work falls on the
employee’s scheduled rest day, he shall be entitled to an additional compensation of at least
50% of his regular wage.
(d) Where the collective bargaining agreement or other applicable employment contract
stipulates the payment of a higher premium pay than that prescribed under this Article, the
employer shall pay such higher rate.

What do you call that pay made during the first 8 hours?
Premium Pay.
  85

 If on your scheduled rest day, a regular holiday falls, and you did not work on that day, you are entitled to
compensation.

You are entitled to what?

Holiday pay because the law says that even if you did not work on a holiday, an employee is entitled
to holiday premium pay.

Section 4. Compensation for holiday work. Rule IV, Book III

Any employee who is permitted or suffered to work on any regular holiday, not exceeding 8 hours,
shall be paid at least 200% of his regular daily wage. If the holiday work falls on the scheduled rest day
of the employee, he shall be entitled to an additional premium pay of at least 30% of his regular holiday
rate of 200% based on his regular wage rate.

 If it is your scheduled restday, and it falls on a regular holiday, and you work during said restday, you are
entitled to 100% equivalent to your basic wage for the first 8 hours of work. Since it is a regular holiday,
you will be entitled to another 100%. Since you work during your scheduled restday, you will be entitled
to a 30% premium pay. All in all it will 100% + 100% + 30%. Mathematically, it will be 260%.

Formula:
[ 100% + 100%] x 30% = 260%

basic daily wage Holiday Pay for work on rest day

Section 5. Overtime pay for holiday work. Rule IV, Book III
For work performed in excess of 8 hours on a regular holiday, an employee shall be paid an additional compensation for the overtime
work equivalent to his rate for the first 8 hours on such holiday work plus at least 30% thereof.
Where the regular holiday work exceeding 8 hours falls on the scheduled rest day of the employee, he shall be paid an additional
compensation for the overtime work equivalent to his regular holiday-rest day for the first 8 hours plus 30% thereof. The regular holiday-rest day rate
of an employee shall consist of 200% of his regular daily wage rate plus 30% thereof.

There are 2 regular holidays falling on the same day.

This happened way back in 1993 where April 9 (Araw ng Kagitingan) also fell on Good Friday.

 If you do not render work, you are entitled to compensation of 200%.

 If you render work, you are entitled to compensation of 300% for the first 8 hours.

There are 2 regular holidays falling on a rest day.

300% for work rendered during Regular Holiday

30% for Restday
330% Total.
Mathematically, this translates to 390%.

 Note: Do not think of any other combination, as these are the only possible combination.

Section 9. Regular holiday falling on rest days or Sundays.

(a) A regular holiday falling on the employee’s rest day shall be compensated accordingly.
(b) Where a regular holiday falls on a Sunday, the following day shall be considered a special
holiday for purposes of the Labor Code, unless said day is also a regular holiday.

Section 10. Successive regular holidays.

Where there are 2 successive regular holidays, like Holy Thursday and Good Friday, an employee may
not be paid for both holidays if he absents himself from work on the day immediately preceding the first
holiday, unless he works on the first holiday, in which case he is entitled to his holiday pay on the second
holiday.

Instance when an employee will not be entitled to holiday pay

Section 6. Absences. Rule IV, Book III
(a) All covered employees shall be entitled to the benefit provided herein when they are on leave of
absence with pay. Employees who are on leave of absence without pay immediately preceding a
  86

regular holiday may not be paid the required holiday pay if he has not worked on such regular
holiday;
(b) Employees shall 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 on such benefits;
(c) Where the day immediately preceding the holiday is a non-working day in the establishment or
the scheduled rest day of the employee, he shall not be deemed to be on leave of absence on
that day, in which case, he shall be entitled to the holiday pay if he worked on the day
immediately preceding the non-working day or rest day.

 Employers in retail and service establishments not employing more than 10 employees are exempt from
paying holiday pay.

Section 1. Coverage. Rule IV, Book III

This rule shall apply to all employees except:
(a) Those of the government and any of the political subdivision, including government-owned and –
controlled corporation;
(b) Those of retail and service establishments regularly employing less than 10 workers;
(c) Domestic helpers and persons in the personal service of another;
(d) Managerial employees
(e) Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on
 task or contract basis,
 purely commission basis, or
 those who are paid a fixed amount for performing work irrespective of the time consumed in
the performance thereof.

NIGHT SHIFT DIFFERENTIAL

Article 86. Night Shift Differential.

Every employee shall be paid a night shift differential of not less than 10% of his regular

wage for each hour of work performed between 10 o’clock in the evening and 6 o’clock in the

morning.

NIGHT SHIFT DIFFERENTIAL - 10% OF basic Daily rate in addition to OT whenever applicable.

Section 1. Coverage. Rule II, Book III

This Rule shall apply to all employees, except:

(a) Those employed in the government and any of the political subdivisions including government-owned
and –controlled corporations;
(b) Those of retail and service establishments regularly employing not more than 5 workers;
(c) Domestic helpers and persons in the personal service of another;
  87

(d) Managerial employees;

(e) Field personnel and other employees whose time and performance is unsupervised by the employer
including those who are engaged on
 task or contract basis,
 purely commission basis, or
 those who are paid a fixed amount for performing work irrespective of the time consumed in
the performance thereof.

Section 2. Night shift differential. Rule II, Book III

An employee shall be paid night shift differential of NOT LESS THAN 10% of his regular wage for each hour of work performed
between 10 o’clock in the evening and 6 o’clock in the morning.

Section 3. Additional Compensation. Rule II, Book III

Where an employee is permitted or suffered to work on the period covered

after his work schedule, he shall be entitled to his regular wage plus at least
25% and an additional amount of no less than 10% of such overtime rate
for each hour of work performed betweem 10pm to 6 am.

Regular wage + at least 25% of the regular wage + At least

10% of

such overtime rate for each

hour of work performed

between 10pm to 6am

Section 4. Additional Compensation on Scheduled Rest Day or Special Holiday. Rule II, Book III
An employee who is required or permitted to work on the period covered during rest days

and/or special holidays not falling on regular holidays, shall be paid a compensation equivalent to

his regular wage plus at least 30% and an additional amount of not less than 10% of such premium

pay rate for each hour of work performed.

Regular wage + at least 30% of the regular wage + at least 10% of

such premium pay for each

hour of work performed

Section 5. Additional Compensation on Regular Holidays. Rule II, Book III

For work on the period covered during regular holidays, an employee shall be entitled to his

regular wage during these days plus an additional compensation of no less than 10% of such

premium rate for each hour of work performed.

  88

Regular wage + at least 10% of such premium rate for each hour of work

performed

 Night work generally has many inconveniences on the part of the employee, and it is but just that
he should be properly compensated for working under such inconveniences. Night work deprives
the laborer the complete and uninterrupted sleep that he deserves and moments of leisure and
relaxation for spiritual and cultural expansion. Also, there is danger involved, as when the
employee can only go home in the wee hours of the morning or late at night, as the case may be.

 In arriving at the night shift differential pay, one must know how to compute the hourly rate. It
may happen that the worker need not complete the 8-hour graveyard shift. So if for instance his
shift runs from 10pm to 2am, then only 4 hours should be entitled to a night shift differential pay.

Article 130. NIGHT WORK PROHIBITION

No woman, regardless of age, shall be employed or permitted or suffered to work, with or

without compensation:

1) In any industrial undertaking or branch thereof between 10 at night and 6 in the morning of
the following day; or
2) In any commercial or non-industrial undertaking or branch thereof, other than agricultural,
between midnight and 6 in the morning of the following day; or
3) In any agricultural undertaking at nighttime unless she is given a period of rest of not less
than 9 consecutive hours.

Article 131. EXCEPTIONS

The prohibitions prescribed by the preceding article shall not apply in any of the following

cases:

1. In cases of actual or impending emergencies caused by serious accident, fire, flood, typhoon,
earthquake, epidemic, or other disasters or calamity, to prevent loss of life or property, or in
case of force majeure or imminent danger to public safety;
  89

2. In case of urgent work to be performed on machineries, equipment or installations, to avoid

serious loss which the employer would otherwise suffer;
3. Where the work is necessary to prevent serious loss of perishable goods;
4. Where the woman employee holds a responsible position of managerial or technical nature,
or where the woman employee has been engaged to provide health and welfare service;
5. Where the nature of the work requires the manual skill and dexterity of women workers and
the same cannot be performed with equal efficiency by male workers, or [where the
employment of women is the established practice in the enterprises concerned on the date
these rules become effective]; and
6. Where the women employees are immediate members of the family operating the
establishment or undertaking;
7. Other analogous cases as determined by the Secretary of Labor.

Article 138. CLASSIFICATION OF CERTAIN WOMEN WORKERS

Any woman who is permitted or suffered to work with or without compensation in any night club,
cocktail lounge, massage clinic, bar, or similar establishment under effective control and supervision of the
employer for a substantial period of time as determined by the Secretary of Labor and Employment, shall be
considered an employee in such establishments for purposes of labor and social legislation

SERVICE INCENTIVE LEAVE

Article 95. Right to service incentive leave.

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying the benefit herein provided, those enjoying vacation leave with pay of at least five days and
those employed in establishments regularly employing less than ten employees or in establishments
exempted from granting this benefit by the Secretary of Labor after considering the viability or
financial condition of such establishment.
(c) The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or
any court of administrative action.

Section 1. Coverage. Rule V, Book III

This rule shall apply to all employees except:
(a) Those of the government and any of its political subdivisions, including government-owned or –
controlled corporations;
(b) Domestic helpers and persons in the personal service of another;
(c) Managerial employees;
(d) Field personnel and other employees whose performance is unsupervised by the employer including
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;
(e) Those who are already enjoying the benefit herein provided;
(f) Those enjoying vacation leave with pay of at least 5 days; and
(g) Those employed in establishments regularly employing less than 10 employees.

Section 2. Right to Service Incentive Leave. Rule V, Book III

Every employee who has rendered at least 1 year of service shall be entitled to a yearly service
incentive leave of 5 days with pay.
  90

Section 3. Definition of certain terms. Rule V, Book III

AT LEAST 1 YEAR OF SERVICE – service within 12 months, whether continuous or broken
reckoned from the date the employee started working, including authorized absences and paid regular
holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the
employment contract is less than 12 months, in which case said period shall be considered as 1 year.

 This is similar to Vacation Leave with pay in a sense that during those days an employee is not
required to work but is still paid during such period of absence.

 The Labor Code does not require the employer to provide Vacation leave with pay.

 The Labor Code does not limit an employer from giving a Vacation leave with pay.

 So, it possible that an employer may grant vacation leave with pay to its Employees.

When they so provide, are they still obliged to give the Service Incentive
Leave?
No more, provided that the Vacation Leave with pay given to the employees is equivalent to the
Service Incentive Leave required by law.

 Regarding sick leave with pay, the Labor Code does not require the employer to give such to its
employees. But the employer may give it voluntarily.

When can the Service Incentive Leave be availed of by the employee? What particular month of the year?

Service Incentive Leave can be availed of at anytime in a given year. Availment thereof is lodged with
the employees’ choice subject to the approval by the employer, so as not to interrupt business operation.

Differentiate Service Incentive Leave from Vacation Leave

Service Incentive Leave Vacation Leave

Provided under the law (Article 95, LC). Is not provided under the law.
Matter of right. Not a matter of right.
Convertible to cash if not used. On the other hand, it is upon the employer to decide whether or not
to convert unused vacation leave of his employees to cash. Once
granted, the employer has absolute right to regulate it with respect
to forfeiture or convertibility to cash.
Cannot be waived. It can be waived.
As a requirement, at least 1 year of service is needed to be entitled to On the other hand, the requirements to be entitled to vacation leave
service incentive leave. may differ, depending upon the policy or practice of the company or
the employer. Usually given to employees who have become regular
or permanently employed.
Purposes: Purpose:
(a) For the benefit and welfare of the employee (working is To afford to a laborer a chance to get a much needed rest to
always stressful, hence the provision relieves the worker from replenish his worn out energies and acquire a new vitality to enable
his job for a maximum of 5 days upon the condition that he him to efficiently perform his duties and not merely to give him
has worked for at least 1 year). additional salary or bounty.
(b) A way of showing, on the part of the employer, to his workers
his appreciation for their loyalty to the company (continued
service).

Assuming that Service Incentive Leave is not availed of by the EE, will that be forfeited?
  91

No because the Labor Code provides that it is commutable to its cash equivalent.

 When not availed of during a given year, the Labor Code says that it shall be given at the end of the year.
So if not availed of, the SIL can be commuted to cash. This can be demandable by an employee assuming
that the employer does not provide any vacation leave with pay of 5 days.

Section 5. Treatment of Benefit. Rule V, Book III

The service incentive leave shall be commutable to its money equivalent if not used or exhausted at
the end of the year.

Cases: Service Incentive Leave

Fernandez vs. NLRC

285 SCRA 175

Supreme Court reiterated that the employees may avail service incentive leave after rendering 1
year of service.
Supreme Court emphasized that the Labor Code does not prohibit the commutation of service
incentive leave to cash, unlike a vacation leave with pay. Since this vacation leave is not statutorily given,
this cannot be commutable to cash. When not availed of by the employee at any given year, this
(vacation leave) may be forfeited by the employer unless the same employer provides that the same may
be commutable.
If the employer does not grant service incentive leave, he violates the law. If not availed by the
employee, the service incentive leave may be converted to cash. If unpaid or outstanding, it accumulates
and becomes a money claim.

Sobrepena vs. CA
280 SCRA 476

Upon retirement of the petitioner, he asked for the commutation of his unused vacation leave
credits. Under the company policy only employees who have not used their vacation leave because they
were not allowed by the company to go on vacation due to work requirement, may commute their unused
vacation leave. The petitioner has not shown that he was not allowed to enjoy his vacation leave.
Issue is whether Vacation Leave is commutable to cash or not.
Supreme Court held that commutation of Vacation Leave with pay is a prerogative of the ER and
the ER is given the leeway to impose the conditions thereof because this is not a standard required
imposed by law.
RULING: In the grant of vacation leave privileges to employees, the employer is given the lee-way
to impose conditions on the entitlement to and commutation of the same, as the grant of vacation leave
is not a standard of law, but a prerogative of management.
Is the petitioner in this case upon retirement as president of the respondent Pacific
Memorial Plans, Inc. entitled to cash commutations of unused vacation leave benefits?
In the grant of vacation leaves privileges to employees, the employer is given the leeway to
impose conditions on the entitlement to and commutation of the same, as the grant of vacation leave is
not a standard of law, but a prerogative of management. The purpose of vacation leave is to afford a
laborer a chance to get a much needed rest to replenish his worn out energies and acquire new vitality to
enable him to efficiently perform his duties, and not merely to give him additional salary or bounty. This
privilege must be demanded in its opportune time and if he allows the years go by in silence, he waives it.
It becomes a mere concession or act of grace of the employer. [The company policy in this case was
upheld by the Court. The policy provided for only one instance wherein an employee may be allowed to
have his unused vacation leave commuted into cash and that is when that employee is not allowed by the
company to enjoy his vacation leave, thus giving the employee the option either to encash the unused
leave or to carry it over to the next year.]

SERVICE CHARGES

Article 96. Service charges.

All service charges collected by hotels, restaurants and similar establishments shall be distributed at
the rate of 85% for all covered employees and 15% for management. The share of the employees shall be
equally distributed among them. In case the service charge is abolished, the share of the covered employees
shall be considered integrated in their wages.
  92

Imposed by what kind of establishment?

(a) Hotels,
(b) Restaurants and
(c) Similar establishments

 Service Charges are not similar to the Service Incentive Leave. While both are special labor standards
benefits, service charges are ‘special’ because the grant of service charges applies to purely service
establishments.

Section 1. Coverage. Rule VI, Book III

This rule shall apply only to establishments collecting service charges such as
(a) Hotels,
(b) Restaurants,
(c) Lodging houses,
(d) Night clubs,
(e) Cocktail lounge,
(f) Massage clinics,
(g) Bars
(h) Casinos and gambling houses, and
(i) Similar establishments, including those entities operating primarily as private subsidiaries of the
government.

Section 2. Employees Covered. Rule VI, Book III

This rule shall 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 to managerial employees.

As used herein, a ‘MANAGERIAL EMPLOYEE’ shall mean one who is vested with the

powers or prerogatives to lay down and execute management policies and/or to hire, transfer,

suspend, lay off, recall, discharge, assign, discipline employees or to effectively recommend such

managerial actions. All employees not falling within this definition shall be considered as rank-and-

file employees.

Section 3. Distribution of Service Charges. Rule VI, Book III

All service charges collected by covered employees shall be distributed at the rate of 85% for

the employees and 15% for the management. The 85% shall be distributed equally among the

covered employees. The 15% shall be for disposition by management to answer for losses and

breakages and distribution to managerial employees at the discretion of the management in the latter

case.
  93

Section 4. Frequency of Distribution. Rule VI, Book III

The shares referred to herein shall be distributed and paid to the employees not less than once

every 2 weeks or twice a month at intervals not exceeding 16 days.

Section 5. Permanency of Service Charges. Rule VI, Book III

In case the service charge is abolished. The share of covered employees shall be considered

integrated in their wages. The basis of the amount to be integrated shall be the average monthly

share of each employee for the past 12 months immediately preceding the abolition or withdrawals of

such charges.

Section 6. Relation to Agreements. Rule VI, Book III

Nothing in this Rule shall prevent the employer and his employees from entering into any

agreement with terms more favorable to the employees than those provided herein, or be used to

diminish any benefit granted to the employees under existing laws, agreement, and voluntary

employer practice.

Section 7. Rule VI, Book III

This rule shall be without prejudice to existing and future collective bargaining agreements.

Nothing in this rule shall be construed to justify the reduction or diminution of any benefit being

enjoyed by the employee at the time of effectivity of this Rule.

 The implementing rules provide that in case the service charge is abolished, the share of the covered
employees shall be considered integrated in their wages. The basis of the amount to be integrated shall
be the average monthly share of each employee for the past twelve (12 months) immediately
preceding the abolition or withdrawal of such charges.

Salazar vs. NLRC

256 SCRA 273

Labor standards benefits are not required to those as mentioned in Article 82. If given to those
who are not entitled thereto, it may be taken from them especially if it was not consistent, deliberate, in
disregard what the employer thought what the employee was entitled to.
Petitioner was a construction project engineer. His services were pre-terminated. Is
he entitled to overtime pay for work which he has rendered beyond 8 hours for the period he
worked for the employer?
  94

No, he is not entitled to overtime pay. Petitioner was a managerial employee and therefore
exempt from the payment of overtime pay, premium pay for holidays and rest days and service incentive
leave pay under the law. In his original complaint, petitioner stated that the nature of his work is
“supervisory engineering”. Although petitioner cannot strictly be classified as a managerial employee
under Article 82 of the Labor Code, nonetheless he is still not entitled to payment of the aforestated
benefits because he falls squarely under another exempt category – officers or members of the
managerial staff. Even if petitioner had already been receiving overtime pay, that does not automatically
denote that he is entitled thereto. It is well and good that he is given overtime pay for overtime services,
but that does not translate into a right on his part to demand payment.

National Sugar Refineries Corporation vs. NLRC

220 SCRA 452

Petitioner owns a corporation fully owned by the government which operates 3 sugar
refineries in the country. One day, petitioner implemented a JEP or Job Evaluation Program
affecting all employees from rank-and-file to department heads. All positions were re-
evaluated and all employees including the members of the respondent union were granted
salary adjustments and increases in benefits commensurate to their actual duties and
functions. Before the JEP, the members of the respondent union were treated in the same
manner as rank-and-file employees and entitled to overtime pay, rest day, and holiday pay.
But with the implementation of the JEP, the members of the respondent union were
considered managerial staff for purposes of compensation and benefits, they enjoyed a 50%
increase in their basic pay, an increased COLA and an allowance for holiday or rest day work.
Two years after JEP implementation, the members of the union filed a case against petitioner
for payment of overtime, rest say and holiday pay invoking Article 100 on Non-diminution of
Benefits. Are they correct?
NO. The Supreme Court found creditable merit for the petitioner. The members of the
respondent union are supervisory employees as defined in Article 212(m) of the Labor Code. But for
purposes of determining whether they are entitled to overtime pay, rest day pay and holiday pay, said
employees should be considered as “officers and members of the managerial staff” as defined under
Article 82, Book III of the Labor Code and amplified in Section 2 Rule I Book III of the Rules
Implementing the Labor Code. Perforce, they are not entitled to the mentioned benefits. The distinction
made by the NLRC on the basis of whether or not the union members are managerial employees, to
determine the latter’s entitlement to the questioned benefits, is misplaced and inappropriate. It is
admitted that that these union members are supervisory employees and this is one instance where
nomenclatures or titles of their jobs conform with the nature of their functions. Hence, to distinguish
them from a managerial employee as defined in Article 82 or 212(m) of the Labor Code, is puerile and
inefficacious. The controversy actually involved here seeks a determination of whether or not these
supervisory employees ought to be considered as officers and members of the managerial staff. The
distinction therefore should have been made along that line and its corresponding conceptual criteria.
The payment of the benefits to the employees did not ripen into a contractual obligation. Prior to the
JEP, they could not be categorically classified as officers and members of the managerial staff considering
that they were treated merely on the same level as rank-and-file. Consequently, the payment thereof
could not be constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by
the petitioner. To be considered as such, it should have been practiced over a long period of time, and
must be shown to have been consistent and deliberate. The test requires a showing that the employer
agreed to continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof. In the case at bar, respondent union failed to establish that petitioner has
been motivated or is wont to give these benefits out of pure generosity.

Quebec, Sr. vs. NLRC

301 SCRA 627

Petitioner owns a transportation company. Private respondent [Antonio Quebec],

brother of the petitioner was hired by the company as inspector and liaison officer. He was
thereafter dismissed. Another private respondent [Pamfilo Pombo] was likewise hired by the
company as driver-mechanic and co-manager of Antonio Quebec. He was likewise dismissed.
Are they entitled to 13th month pay, overtime pay and service incentive leave?
No they are not entitled to any of the above-mentioned benefits. Inasmuch as they have
admitted in their affidavits that they exercised managerial or supervisory powers in their jobs, they cannot
avail of those benefits. This case is a reiteration of SALAZAR VS NLRC that although the employees in
this case were not strictly be classified as managerial employees under Article 82 of the Labor Code and
Section 2(b) Rule I Book III of the Omnibus Rules, they are still not entitled because they fall squarely
under another exempt category – “officers and members of the managerial staff” as defined under
Section 2(c) Rule I Book III of the Rules.
  95

DIFFERENT METHODS OF FIXING COMPENSATION

Significance
These methods of fixing employee’s compensation are significant because many labor

standard provisions provide for exceptions or reduces the rate of benefits for employees who are

being paid according to a particular method such as those paid on straight commission, or by the job

or by the results. The foregoing discussion is premised on the fact that an employer-employee

relationship exists and that the only difference lies in the method by which the employee’s

compensation is fixed.

1. Compensation based on Time Spent

a. monthly paid
b. daily paid
2. Payment on a task or job basis
3. Payment based on piece-rate basis
4. Commission basis
5. Boundary System

1. Compensation based on Time Spent

a. monthly paid - are those employees who are paid all the days of the year

Under the Worker’s Statutory Handbook, monthly-paid employees refer to those who

are paid every day of the month, including unworked rest days, special days and regular

holidays. Their salary is for 30 days.

Applicable daily rate x 365

---------------------------------------- = Equivalent monthly rate
12

There are 365 days in the year, and you are paid every day of the year, you are a monthly
paid employee. Short of that, you are a daily paid employee

b. daily paid - are those that are paid only for days actually worked

According to the Workers’ Statutory Handbook, daily paid employees refer to those who are
paid on the days they actually worked, except unworked regular holidays when they are paid their
basic wage, is they are present or on leave with pay on the working day before the regular holiday.

 Daily-paid employees (DPE’S) are paid according to the number of hours worked each day.
They may be paid a monthly sum, yet they are daily-paid, not monthly-paid employees.

Examples of Daily Paid Employees are:

salesladies,
bank tellers,
service crew of fastfood chains.

 The advantages of paying employees daily are:

1. If the employee does not work on a particular day, like on his rest day or on special
days, the employer does not have to pay him. The “Principle of No Work No Pay” so
dictates.
2. If there is a decrease in the demand, the employer may require his employees not to
report for work on certain days, or where there has been a work slowdown. Thus,
one does not have to pay them, on the same working principle of “No Work, No Pay”.
  96

2. Payment on a task or job basis

An employee is considered paid according to job or task basis when a flat or fixed sum is

paid for each particular job or task completed, without regard to the number of hours actually

spent in the performance or completion of the work.

Example: The paving or asphalting of roads per kilometer

In mass housing projects, per house or per unit constructed or completed
Digging of ditches per cubic meter

 Note that the payment of compensation according to job or task basis should not be confused with
independent contractorship. The former is merely a method of fixing compensation and does not assure
the existence of an employment relationship. The fact that an employee is paid in such manner merely
describes the method by which his compensation is paid, and does not describe the existence of an
employer-employee relationship.

At what instances can you pay an employee on a job or task basis?

One cannot just pay his employees according to this method because the workers would

then be considered workers by result, exempting them from certain labor standards benefits.

Whereas, if he would be paid daily (time spent), he would be entitled to such benefits.

Requisites:
1. The work must be susceptible of being segregated into standardized and distinct units, each

known as a “task” or “job”;

o Example, in the paving of roads by kilometer, you spend quite an effort in making a
kilometer of paved roads. The succeeding units by kilometer, can be said as tasks or
jobs.

2. The nature of the job or task is such that the expenditure of time, materials and efforts for each is
substantially the same as for any other;
o Here, there are the same number of workers and materials per unit of work and the employee
is paid depending upon the nature of the work done.

Cases: Payment By Result

Pulp and Paper vs. NLRC

279 SCRA 408

In the absence of wage rates based on time and motion studies determined by the labor secretary
or submitted by the employer to the labor secretary for his approval, wage rates of piece-rate workers
must be based on the applicable daily minimum wage determined by the RTWPB.
To ensure the payment of fair and reasonable wage rates, Article 101 of the Labor Code provides
that “the Secretary of Labor shall regulate the payment of wages by results, including pakyao,
piecework and other non-time work.” The same statutory provision also states that the wage rates
should be based, preferably
o On time and motion studies, or
o Those arrived at in consultation with representatives of workers’ and employees’
organizations.
In the absence of such prescribed wage rates for piece-rate workers, the ordinary minimum
wages rates prescribed by the RTWPB should apply. This is in compliance with Section 8 of the Rules
Implementing Wage Order NCR-02 and NCR-02-A – the prevailing wage order at the time of dismissal
of private respondent.

Labor Congress of The Philippines vs. NLRC

  97

290 SCRA 509

As to holiday pay, premium pay, 13 th month pay and service incentive leave which the
Labor Arbiter failed to rule on but which the petitioners prayed for in their complaint, we hold that
petitioners are so entitled to these benefits.
3 Factors lead us to conclude that petitioners, although piece-rate workers, were
regular employees of private respondents:
1. As to the nature of petitioners’ tasks, their job of repacking snack food was necessary or
desirable in the usual business of private respondents, who were engaged in the
manufacture and selling of such food products;
2. Petitioners worked for private respondents throughout the year, their employment not having
been dependent on a specific project or season; and
3. The length of time that petitioners worked for private respondents.

Thus, while the petitioners’ mode of compensation was on a “per piece basis,” the status and
nature of their employment was that of regular employees.
As to overtime pay, the rules, however, are different. According to Section 2(e), Rule I, Book
III, workers who are paid by results including those who are paid on piece-work, takay, pakiao, or task
basis, if their output rates are in accordance with the standards prescribed under Section 8, Rule VII,
Book III, or where such rates have been fixed by the Secretary of Labor in accordance with the
aforementioned section, are not entitled to receive overtime pay.
Here, private respondents did not allege adherence to the standards set forth in Section 8 nor with
the rates prescribed by the SOLE. As such, petitioners are beyond the ambit of exempted persons and
are therefore entitled to overtime pay.

San Miguel Jeepney Services vs. NLRC

265 SCRA 35

Public respondent had found that the private respondents – drivers, dispatchers and mechanic – to
be regular employees, and, petitioners yielded to said ruling, terming it “tinged with reason and
authority.” But even if they had not conceded thus, it is obvious that public respondent is correct.
The rationale for this ruling is simply that the complainants/private respondents were
unarguably performing work necessary and desirable in the business of SMJS. Without the
services rendered by private respondents, petitioners could not have conducted their business of
providing transportation services within the naval base. This plus the fact that private respondents had
each rendered from 2 to 8 years of service cause them to come squarely within the ambit of Article
280 of the Labor Code; beyond dispute, they were not only employees, but regular employees, as
correctly held by public respondent.
The mere fact that they were paid on commission basis does not affect or change their status as
regular employees. The TEST for determining whether an employee is regular or casual has nothing to
do with the manner of computing or paying an employee’s wages or compensation. Rather, “the
primary standard, x x x, of determining a regular (as against casual) employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual business
or trade of the employer. The TEST is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of the
work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if
the employee has been performing the job for at least 1 year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is also considered regular, but only with respect to such activity and while such activity
exists.”
On the other hand, we should hasten to add that while in this particular case, these “commission-
basis” employees involved were regular employees (by operation of law, plus of course, the fact that
their status as employees had never been challenged at any stage of the present case), it does NOT
follow that every employee paid (whether wholly or partly) on commission can be considered as regular
employee, or an employee at all, for that matter. While this caveat may seem rather elementary, it is
still needful to stress that there are many lines of business legally and legitimately engaging the
services of workers, who are paid on commission basis to perform activities desirable and necessary for
such businesses, without creating any kind of employer-employee relationship at any time.

Villuga vs. NLRC

225 SCRA 537

The respondent Commissioner is in error. The mere fact that petitioners were paid on a piece-rate
basis is no argument that herein petitioners were not employees. The term “wage” has been broadly
defined in Article 97 as remuneration or earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or commission basis x x x.
The facts of this case indicate that payment by the piece is just a method of compensation and
does not define the essence of the relations. That petitioners were allowed to perform their work at
home does not likewise imply absence of control and supervision. The control test calls merely for the
existence of a right to control the manner of doing the work, not the actual exercise of the right.
Tailors and similar workers hired in the tailoring department although paid weekly wages or piece-
work basis are employees not independent contractors.
  98

3. Payment based on piece-rate basis

A worker is said to be paid his compensation according to piece-rate basis when he is 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.

An employer can pay his employees according to piece-rate basis only in the

following circumstances:

1. The finished products are things, articles or commodities that are physically distinct or

fungible such that one unit is much like any other in value and physical qualities;

2. The labor contributed by each employee or worker to a particular process or phase of

production is determinable and separable from that contributed by the others;

3. The value of the labor input in any particular stage is standard. The worth is the same

regardless of which particular employee or worker does it.

 Distinguished from job or task basis, in piecework, each unit or piece is completed or
performed by one worker alone. In job or task basis, two or more workers cooperate and work
together to perform the job or task.

 Distinguished from time spent, the earnings in both are fairly certain, because they are paid
upon completion of the period in time spent, and upon completion of the task or unit in case of
payment by result. In time spent, the effort, regardless of the outcome or result, must be paid or
compensated. In piecework or payment by result, acceptable and completed outputs are
required as a basis of payment. Hence, the payment of wages is geared towards not merely to the
effort, but likewise to the results of such effort. The workers in payment by result are paid
according to the units produced or the resultant output, regardless of the time spent.

 In the case of Pulp and Paper, Inc. vs. NLRC, the Supreme Court said that in the absence of
wage rates based on time-and-motion studies determined by the SOLE or submitted by the
employer to the SOLE for his approval, the wage rates for piece-rate workers must be based on
the applicable daily minimum wage rate determined by the Regional Tripartite Wages and
Productivity Board. Furthermore, the Labor Code provides:

Article 101. Payment by Results

  99

The Secretary of Labor shall regulate the payment of wages by results,

including pakiao, piecework and other non-time work, in order to ensure the payment

of fair and reasonable wage rates, preferable through time-and-motion studies, a

consultation with representatives from workers’ and employers’ organizations.

Also, the Rules clearly state: [Section 8, Rule VII, Book III]

Section 8. Payment by Results

(a) On petition of any interested party, or upon its initiative, the Department of
Labor and Employment shall use all available devices, including the use of
time-and-motion studies and consultations 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 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 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 does not conform with
the standards prescribed herein, or with the rates prescribed by the DOLE in
an appropriate order, the employees shall be entitled to receive under such
prescribed standards or rates and that actually paid them by employer.

4. Commission basis

Workers who are paid on commission basis are those who are paid a percentage of the money

received in a sale or other transaction paid to the agent responsible for the business.

 If you are a worker paid on a commission basis, there may or may not be an employer-
employee relationship. The Four-Fold Test must be used to determine if there really is such
relationship. Remember that the methods of fixing compensation do not automatically imply or
guarantee that there exists an employer-employee relationship between the laborer and the person
who he works for. The Test is the determinant.

 Common examples would be insurance agents or sales agents who are paid a certain
percentage of their gross sales. There are also those who are paid purely on a commission basis.
These workers are not entitled to 13th month pay as they are expressly exempt therefrom, like
barbers and taxicab drivers.
  100

 There are no hard and fast rules in determining whether or not an employee is paid on a
commission basis. Moreover, the regularity or irregularity of an employment does not affect the
method of fixing his compensation. There are different criteria in determining whether or not
they are regular workers.

 Commissions are intended to spur effort and efficiency, since compensation is payable only
on the resultant proceeds.

COMMISSION – is the recompense compensation or reward of an 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 to the principal.

 The mere fact that the employees were paid on commission basis does not mean affect or
change their status are regular employees. The test for determining whether an employee is
regular or casual has nothing to do with the manner of computing or paying an employee’s wages
or compensation but the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. This was what the Supreme
Court said in the case of San Miguel Jeepney Service vs. NLRC. Employees in this case, 23 of
them, worked for SMJS who had a contract with the US Naval Base Facility. They were to
provide transportation services to the personnel of the facility. The contract expired and the
employer refused to renew it. Employees said that they are entitled to security of tenure. The LA
said they weren’t because of the fact that they are paid on purely commission basis. The Supreme
Court ruled in favor of the employees and said that they are entitled to security of tenure and their
services may be terminated only for causes provided by law. Moreover, being regular employees,
they are likewise entitled to the protection of minimum wage statutes.

5. Boundary System

The personnel of public utility vehicles pay a fixed charge per day or a fraction thereof to the
employer and then take, as their earnings, the excess of the gross proceeds for the day over the
“boundary fee” and the expenditures for running the vehicle.
  101

THIRTEENTH MONTH PAY LAW

(PD 851: Requiring All Employers To Pay Their Employees 13th Month Pay)

Whereas:

1. It is necessary to further protect the level of real wages from the ravage of world-wide
inflation;
2. There has been no increase in the legal minimum wage rates since 1970;
3. The Christmas season is an opportune time for society to show its concern for the plight of the
working masses so they may properly celebrate Christmas and New Year.
Before Memorandum Order 28 by President Corazon Aquino:

Section 1.

All employers are hereby required to pay all their employees receiving a basic salary of not more than

P1,000 a month, regardless of the nature of the employment, a 13 th month pay not later than December 24 of every

year.

After Memorandum Order 28:

Section 1.

All employers are hereby required to pay all their rank-and-file employees a 13 th month pay not later than

December 24 of every year.

 The salary ceiling of P1,000 has already been removed by Memorandum Order 28.

 All rank-and-file employees are now entitled to a 13 th month pay regardless of the amount of
the basic salary they receive in a month, if their employers are not otherwise exempted from the
application of PD 851. Such employees are entitled to the benefits regardless of their designation
or employment status, and irrespective of the method by which they are paid, provided that they
have worked for at least one month during a calendar year.

13TH MONTH PAY – shall mean one-twelfth (1/12) of the basic salary of an employee within a calendar
year.

BASIC SALARY – shall include ALL remunerations and earnings paid by an employer to an employee for
services rendered, but may NOT INCLUDE:
 Cost of living allowances granted pursuant to PD 525 or LOI 174
 Profit sharing payments and
 All allowances and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the promulgation of the decree
[on December 16, 1975].

 13th month pay are paid to rank and file employees.

Rank-and-file employees

The Labor Code distinguishes a rank and file employee from a managerial employee. It

provides that a managerial employee is one who is vested with the powers and prerogatives to lay
  102

down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,

assign or discipline employees, or to effectively recommend such managerial actions. All

employees not falling within this definition are considered rank-and-file employees.

Amount and Payment of the 13th month pay

The minimum 13th month pay required by law shall not be less than 1/12 of the total

basic salary earned by an employee within a calendar year. The required 13th month pay shall

be paid not later than December 24 of each year.

An employer however may give to his employees ½ of the 13 th month pay before the

opening of the regular school year and the other ½ not later than December 24 of every year.

The frequency of payment of this monetary benefit may be the subject of agreement

between the employer and the recognized collective bargaining agent of the employees.

Employers covered

PD 851 shall apply to all employers, except to:

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;
2. Employers already paying their employees a 13th month pay or more in a calendar year or “its
equivalent” [at the time of issuance];
 “Its equivalent” shall include Christmas bonus, mid-year bonus, cash
bonuses, and other payments amounting to not less than 1/12 of the basic
salary but shall not include cash and stock dividends, cost of living allowances,
and all other allowances regularly enjoyed by the employee, as well as non-
monetary benefits. Where an employer pays less than the required 1/12 of the
employee’s basic salary, the employer shall pay the difference.
3. Employers of household helpers and persons in the personal service of another in relation to
such workers;
4. Employers of those who are paid on purely commission basis, boundary or task basis, and
those who are paid in a fixed amount for performing specific work, irrespective of the time
consumed in the performance thereof, except where the workers are paid on a piece rate
basis in which case, the employer shall grant 13th month pay to such workers.
 “Workers on a piece-rate basis” are those who are paid a standard amount of
money for every piece or unit of work that is more or less regularly replicated,
without regard to the time spent in producing the same.
 Therefore, workers paid by result are not entitled to 13th month pay.
 Note that when we speak of piece rate basis, it is simply a method with which
an employee’s wages are paid. What is determinative is the existence of an
  103

employer-employee relationship through the four-fold test, especially the

control test. There may be instances when these employees paid on a piece
rate basis may not be employees of the employer. But if their work is
supervised not only with respect to the method but also as to the result, they
shall be classified as employees of the employer.

 In the case of Villuga vs. NLRC the Supreme Court explained, “payment by
the piece is just a method of compensation and does not define the essence of
an employment relationship.” That petitioners were allowed to work at home
does not likewise imply absence or control and/or supervision. The control test
calls merely for the existence of the employer’s right to control the manner of
doing the work, not the actual exercise of the right. They are entitled to 13 th
month pay.

Note that before the amendment, Distressed Employers were excluded from paying their employees

13th month pay.

Quebec, Sr. vs. NLRC, 301SCRA 627

Reiterates that 13th month shall be paid to all rank and file employees

For purposes of 13th month pay, there are only 2 kinds of employees:
1. Managerial
2. Rank and file

 If an employee has rendered at least one month of service during the calendar year, you are entitled to
13th month pay

 Note: Those who are paid on a piece rate basis are an exception to an exception
Therefore, not all employers of those who are PAID BY RESULTS are exempted from 13 th-month pay.
Covered under the law are those that are paid on a piece-rate basis

Kinds of Workers who are paid by results:

(a) Those whose time and performance is supervised by the employer and
(b) Those whose time and performance is unsupervised by the employer.

Villuga vs. NLRC

225 SCRA 537

Are piece-work employers entitled to thirteenth month pay?

The employees are sewers, repairmen and ironers
HELD: employers just like tailors who are paid on a piece-rate basis are entitled to 13 th-month pay
The respondent Commissioner is in error. The mere fact that petitioners were paid on a piece-rate
basis is no argument that herein petitioners were not employees. The term “wage” has been broadly defined
in Article 97 as remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis x x x.
The facts of this case indicate that payment by the piece is just a method of compensation and
does not define the essence of the relations. That petitioners were allowed to perform their work at home
does not likewise imply absence of control and supervision. The control test calls merely for the existence of a
right to control the manner of doing the work, not the actual exercise of the right.
Tailors and similar workers hired in the tailoring department although paid weekly wages or piece-
work basis are employees not independent contractors.

Are barbers and manicurists entitled to 13th-month pay?

Yes. They are not excluded from the coverage. They are employees. They are not independent
contractors or managerial employees especially since the law provides that those who are paid on a piece
rate basis are entitled to 13th-month pay (Case: Corporal Sr. vs. NLRC 341 SCRA 669)
  104

How much is the MIMIMUM 13th month pay?

1/12 of the total basic salary EARNED during the calendar year (it is possible that the employee
had absences)

BASIC SALARY – rate of pay for a standard work period exclusive of other payment such as overtime and
other bonuses (therefore, supplements are not included for purposes of computing the 13 th-month pay)

Boie-Takeda Chemicals vs. Dela Serna

228 SCRA 329

Whether or not the commission should be included in the computation of the 13 th month pay. It
turned out that the commission was more that the fixed salary paid to the employee.
HELD: The commission paid to the medical representatives where more in the nature of productivity
or incentive bonus
There was a finding in one of the inspections of petitioner’s premises that it has not been
including the commissions earned by its medical representatives in the computation of their 13 th
month pay. Employer-petitioner says commissions should not be included in the computation
because the law speaks of regular or basic salary and thus excludes all other remunerations not
part of the regular salary. Is he correct?
Yes, commissions do not form part of the “basic salary”. In remunerative schemes consisting of a
fixed or guaranteed wage is patently the “basic salary” for this is what the employee receives for a standard
work period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which the Supreme Court has made clear do not form part of
the “basic salary”.

Philippine Duplicators vs. NLRC

Whether or not the commission should be included in the computation of the 13 th month pay. It
turned out that the commission was less than the fixed salary paid to the employee.
HELD: The commission is part of basic salary
The order of the Labor Arbiter directed the petitioner to pay 13 th month pay to private
respondents computed on the basis of heir fixed wage plus their sales commissions. The
Supreme Court upheld said decision. Could this decision reversed or abandoned the BOIE-
TAKEDA ruling?
NO. The salesmen’s commissions, comprising a pre-determined percent of the selling price of the
goods sold by each salesman, were properly included in the term “basic salary” for purposes of computing
their 13th month pay. The 3rd division of the Supreme Court correctly held that the sales commissions were
part of the basic salary structure of Philippine Duplicators’ employees-salesmen. These commissions were not
overtime payments nor profit-sharing payments, nor any other fringe benefit. In BOIE-TAKEDA (BT), the so-
called commissions paid to or received by medical representatives of BT were excluded from the term “basic
salary” because these were paid to the employees as “productivity bonuses”. These payments were
characterized as additional monetary benefits not properly included in the term “ basic salary” in computing
their 13th month pay. Productivity bonuses are generally tied to the productivity or capacity for revenue
production of a corporation. Such bonuses have no clear, direct or necessary relation to the amount of work
actually done by each employee. A bonus is an amount granted and paid ex gratia to the employees. 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.

Phil. Agricultural Commercial And Industrial Workers Union vs. NLRC

247 SCRA 256
This case involved drivers and bus conductors of a bus company who are paid on a commission basis
on top of their guaranteed basic minimum pay
Should the commission be included in the computation of 13th month pay?
HELD: Yes. They are not paid purely on commission and the fixed salary of eight hours of work is
more than the commission
Petitioner instituted a claim against the employer VALLACAR TRANSIT for the payment of the
13th month pay in behalf of the drivers and conductors of the employer. The employer said that
the drivers and conductors are compensated on a purely commission basis so they are not
entitled to 13th month pay pursuant to the exempting provisions of the implementing rules of the
13th Month Pay Law. The CBA also prohibited the drivers and conductors paid purely on
commission from receiving 13th month pay. Who is correct?
The petitioner in this case is correct. Every employee receiving a commission in addition to a fixed or
guaranteed wage or salary is entitled to 13th month pay. For purposes of entitling rank-and-file employees a
13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus
commission or commission with a guaranteed wage inasmuch as the bottom line is that they receive a
guaranteed wage. This is correctly construed by Explanatory Bulletin 86-12 by the then MOLE. What is
controlling is not the label attached to the remuneration but the nature of the remuneration and the purpose
for which the 13th month pay was given: to alleviate the plight of the working masses who are receiving low
wages. In sum, the 13 th month pay of the drivers and conductors who are paid a fixed or guaranteed wage in
case their commissions be less than the statutory minimum, and commissions only in case where the same is
over and above the statutory minimum, must be equivalent to 1/12 of their earnings during the calendar year.
  105

If the employer fails to pay, what is the remedy of the employee?

The employee can sue the employer for non-payment of the 13 th month pay. This is in the nature
of a money claim.

If employee retired or was terminated for cause?

The retired or terminated (for cause) employee is still entitled to 13 th month pay. The employer
cannot forfeit it. There is no forfeiture clause in the law.

The law provides:

An employee who has resigned or whose services are terminated at any time before the time of
payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he
worked during the year, reckoned form the time he started working during the calendar year up to the time of
his resignation or termination from service. Thus, if he worked from January up to September, his
proportionate 13th month pay should be equivalent of 1/12 of his total basic salary he earned during
that period.
The payment of the 13th month pay may be demanded by the employee upon the cessation of
employer-employee relationship.
This is consistent with the principle of equity as the employer can require the employee to clear
himself of all benefits due him from the termination of the relationship.
  106

PATERNITY LEAVE ACT of 1996

(RA 8187, June 11, 1996)

- Refers to the benefits granted to a married male employee allowing him not to report for work for 7
days but continues to earn the compensation therefor, on the condition that his spouse has delivered a child
or suffered a miscarriage for purposes of enabling him to effectively lend support to his wife in her period of
recovery and/or nursing of the newly born child.

Entitlement:

Notwithstanding any law, rules and regulations to the contrary, any married male employee in the

public and private sectors shall be entitled to a paternity leave of 7 days with full pay for the first 4

deliveries of the legitimate spouse with whom he is cohabiting.

What are the male employee’s benefits under RA 8187?

1. 7 calendar days paternity leave.
2. The pay shall consist of his basic salary, all allowances and other monetary benefits.

 Unlike Service incentive leave, Paternity Leave is NOT commutable to cash. In the event that the paternity
leave benefit is not availed of, said leave shall not be convertible to cash. Note that the purpose is to lend
support to his wife during her period of recovery and/or nursing of the newly-born child. The conversion of
the leave into money would defeat the very purpose of the law.

Penal Sanction
Section 5.
Any person, corporation, trust, firm, partnership, association or entity found violating this Act or the
rules and regulations promulgated thereunder shall be punished by a fine not exceeding P25,000 or
imprisonment of not less than 30 days nor more than 6 months.
If the violation is committed by a corporation, trust or firm, partnership, association or

any other entity, the penalty of imprisonment shall be imposed on the entity’s responsible officers,

including but not limited to, the president, vice president, chief executive officer, general

manager, managing director, or partner directly responsible therefore.

Conditions for Entitlement

3. He is employed at the time of delivery of the child;
4. He is cohabiting with his spouse at the time she gives birth or suffers a miscarriage;
5. He has notified the employer of the pregnancy of his wife and her expected date of delivery
subject;
6. His wife has given birth, suffered an abortion [unintentional]

 Note that as of date (November 26, 2001), there is NO JURISPRUDENCE YET regarding paternity leave.

How is notification by the qualified male employee made?

Section 4. Notification.
As soon as the married male employee learns that his spouse is pregnant:

1. He shall inform his employer of such pregnancy and the expected date of delivery within a
reasonable period of time;
  107

2. He shall accomplish a Paternity Notification Form to be provided by the employer and

submit the same to the latter, together with the copy of his marriage contract, or where
not applicable, any proof of marriage. [This notification requirement shall not apply in
cases of miscarriage or abortion.]
3. Any employee who has availed of the paternity leave benefits shall, within a reasonable
period of time, submit a copy of the birth certificate of the newly-born child, death or
medical certificate in case of miscarriage or abortion, duly signed by the attending
physician or midwife, showing the actual date of childbirth, miscarriage or abortion as
the case may be.

Availment of Paternity Leave by a Male (papa) Employee:

Revised Implementing Rules and Regulations (March 13, 1997)

Section 5. Availment
Paternity leave benefits shall be granted to the qualified employee after 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 shall not exceed seven (7) days for each
delivery.

Would it include miscarriage? Intentional abortion?

It includes miscarriage which covers spontaneous abortion but not intentional abortion.

 The 7 days refer to calendar days and not to working days.

Are existing benefits credited to the benefits under RA 8187?

Where a male employee is already enjoying the paternity leave benefits by reason of contract,

company policy or collective bargaining agreement, the following rules shall apply:

1. If the existing paternity leave benefit is greater than the benefit herein provided, the greater
benefit shall prevail;
2. If the existing paternity leave is less than that provided herein, such existing benefit shall be
adjusted to the extent of the difference.

However, when a contract, company policy or collective bargaining agreement provides for an

emergency or contingency leave without specific provisions on paternity leave, the paternity leave

provided by law shall apply.

Employee under RA 8187

Employee refers to any person who performs services for an employer and receives compensation

therefore, provided an employer-employee relationship exists between them.

  108

Delivery – refers to childbirth, miscarriage, or abortion.

Spouse – refers to the lawful wife. For this purpose, ‘lawful wife’ refers to a woman who is legally

married to the male employee concerned.

Cohabiting – refers to the obligation of the husband and wife to live together.
  109

RETIREMENT PAY LAW

(RA 7641)
An amendment of article 287
EFFECTIVITY DATE: JANUARY 7, 1993

It is a social legislation, it has a retroactive effect, if you are qualified under the law.

This was amended by RA 7641 on January 7, 1993 by Senator Ernesto Herrera. Article 287 of the

Labor Code does not purport to impose any obligation on the part of the employer to set up a

retirement scheme over and above those under existing law. Prior to RA 7641, there were no

retirement benefits afforded to a retiring employee if there is none under the Collective Bargaining

Agreement.

The law on retirement pay was again amended by RA 8558. It was an act amending Article 287 of the Labor
Code by reducing the retirement age of underground mine workers from 60 years old to 50 years old.

Article 287. Retirement.

Any employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other agreements.
Provided, however that an employee’s retirement benefits under the collective bargaining and other
agreements shall not be less than those provided therein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of 60 years or more, but not beyond 65 years
which is hereby declared the compulsory retirement age, who has served at least 5 years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half monthly
salary for every year of service; a fraction of at least 6 months being considered as one whole year.
Unless the parties provide for broader inclusions, the term “one-half monthly salary” shall mean 15
days plus one-half of the 13 th month pay and the cash equivalent of not more than 5 days of service
incentive leaves.
An underground mining employee upon reaching the age of 50 years or more, but not beyond 60
years which is hereby declared the compulsory retirement age for underground mine workers who has
served at least 5 years as underground mine worker, may retire and shall be entitled to all the retirement
benefits provided under this Article.
Retail, service and agricultural establishments or operations employing not more than 10 employees
or workers are exempt from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provisions provided
under Article 288 of the Code.
Nothing in this Article shall deprive any employee of benefits to which he may be entitled under
existing laws or company policies and practices.

Requisites:

1. He must be an employee at the time of the effectivity of the law.

2. Compliance with the requirement for eligibility under the law:
optional retirement – 60 years with 5 years of service
compulsory retirement – 65 years with no requirement of years of service

Retirement pay under the law

½ month salary for every year of service
15 days +
5 days SIL +
  110

2.5 days (1/12 of 13th month pay)

----------
22.5 days

Thus, this includes the following:

15 days
1/12 of the 13th month pay
cash equivalent of not more than 5 days service incentive leave

 The retirement pay has a broader inclusion than the usual separation pay.
 Note that the Labor Code does not provide for a forfeiture provision in case an employee at the time of
just dismissal is also qualified to receive retirement law. It is obligatory and mandatory as long as the
employee is qualified. This is a labor standard benefit and it must be construed in favor of the employee,
in the absence of a forfeiture clause. This is on a case to case basis.

Is there a group of employees whose retirement age is below that of 60?

Undeground mining employees. Under Republic Act 8558, approved in 1998.
Optional retirement age: 50 years, 5 years of service
Compulsory retirement – 60 years of age

Exempted under the law

(1) Employees of the National Government and its political subdivisions, including government-
owned and controlled corporations, if they are covered by the Covil Service Law and its
regulations;
(2) Employees of retail, service and agricultural establishments or operations regularly employing
not more than 10 employees.

 Note that domestic helpers and persons in the personal service of another were deleted by Department
Order 20 from the enumeration of those exempted under the law.

Labor Advisory on Retirement Pay Law (October 24, 1996)

A. Coverage
RA 7641 or the retirement pay law shall apply to all employees in the private sector, regardless of their
position, designation, or status and irrespective of the method by which their wages are paid. They shall
include the part-time employees, employees of service and other job contractors and domestic helpers or
persons in the personal service of another.

Penal sanction for violation of Article 287, as amended

Article 288. Penalties
Except as otherwise provided in this Code, or unless the acts complained of hinges on a question of
interpretation or implementation of ambiguous provisions of an existing collective bargaining agreement, any
violation of the provisions of this Code declared to be unlawful or penal in nature shall be punished with a fine
not less P1,000 nor more than P10,000 or imprisonment of not less than 3 months nor more than 3 years, or
both such fine and imprisonment at the discretion of the Court.
In addition to such penalty, any alien found guilty shall be summarily deported upon completion of
service of sentence.
Any provision of law to the contrary notwithstanding, any criminal offense punished in this Code shall
be under the concurrent jurisdiction of the Municipal or City Courts and the Regional Trial Courts.

Upon acceptance of employment, a contractual employment is established. If a retirement package is lower than the retirement pay law, which shall
govern?

The Collective Bargaining Agreement (CBA) will govern, but the employer must pay for the difference.

May the employer stipulate a lower retirement age?

Yes. Article 287 applies only in the absence of a retirement plan or a CBA stipulating a retirement
benefit, such retirement plan should not be less than what is provided for by law
  111

Pantranco North Express vs. NLRC

259 SCRA 161

The CBA provided that the employee could be retired after 25 years of service
Is it valid?
HELD: It is valid because it allows an employee to retire at an early retirement age

Cabcaban vs. NLRC

GR 120256, August 18, 1997

On March 16, 1993, Hermito Cabcaban, then 63 years old, filed a complaint for retirement benefits under

Republic Act 7641 against Hda. Corazon de Jesus and/or Teodora Cabillo de Guia. Complainant alleged that he worked

at the 50-hectare hacienda, owned by Teodora Cabillo de Guia at Bais, Negros Oriental, from 1962 to July 1991, 1

performing such jobs as clearing the plantation, planting, weeding, fertilizing, cutting cane points, canal digging,

harvesting/loading, "depol," "gahit," and gathering coconuts.

Respondents moved to dismiss the complaint on the following grounds: first, that complainant's
cause of action had already prescribed; and second, that complainant is also one of the complainants in
RAB-VII-06-0110-92-D, 2 a case for illegal dismissal and reinstatement against the same respondents
pending before another Labor Arbiter.
Respondents, likewise, argued that assuming complainant's action had not prescribed, he still
would not be entitled to any retirement benefits since he was only 48 years old when he was separated
from employment in 1978, well below the 60-year old retirement age prescribed by the Labor Code.
It does not appear that complainant filed any opposition to respondents' appeal.
On June 30, 1994, the NLRC rendered a Decision dismissing the complaint for lack of merit.
On August 29, 1994, complainant filed a Motion for Reconsideration before the NLRC. He pointed out that

in the same Application for Retirement Benefit adduced by respondents, complainant's employer, Teodora C. de Guia,

certified complainant's exact date of separation to be February 28, 1991.

Prior to its amendment, Article 287 of the Labor Code provided as follows:
ART. 287. Retirement. — Any employee may be retired upon reaching the retirement age
established in the Collective Bargaining Agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining or other agreements.

In Llora Motors, Inc. vs. Drilon, we interpreted the provisions of the above article to mean that:
. . . Article 287 not itself purport to impose any obligation upon employers to set up a retirement scheme for their
employees over and above that already established under existing laws. In other words, Article 287 recognizes that
existing laws already provide for a scheme by which retirement benefits may be earned or accrue [sic] in favor of
employees, as part of a broader social security system that provides not only for retirement benefits but also death and
funeral benefits, permanent disability benefits, sickness and maternity leave benefits.
As a consequence of our ruling in the above case, Congress enacted Republic Act 7641, amending
Article 287 of the Labor Code to read as follows:
ART. 287. Retirement. — Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective agreement and other agreements: Provided, however,
That an employee's retirement benefits under any collective bargaining and other agreements shall not be
less that those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5)
years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered
as one whole year.
Unless the parties provide for broader inclusions, the term 'one-half (1/2) month salary' shall mean
fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than
five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing not more than ten (10)
employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provisions under
Article 288 of this Code.
  112

R.A. 7641 took effect on January 7, 1993. Nevertheless, we did not hesitate to give retroactive effect to said law in Oro

Enterprises, supra, as follows:

RA 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a curative
statute that — absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer — can
respond, in part at least, to the financial well-being of workers during their twilight years soon following their life of
labor. There should be little doubt about the fact that the law can apply to labor contracts still existing at the time the
statute has taken effect, and that its benefits can be reckoned not only from the date of the law's enactment but
retroactively to the time said employment contracts have started. . . .
Republic Act 7641 took effect on 07 January 1993, while the appeal of private respondent was till
pending consideration by the NLRC. Still for determination at the time was, among other things, the issue of
whether or not private respondent has, in fact, been effectively retired.

The case of Oro Enterprises, however, does not find application in the instant petition. In CJC Trading, Inc. vs.

National Labor Relations Commission, we enumerated the requirements for the proper application of Oro Enterprises,

as follows:

. . . We read Oro Enterprises as holding that R.A. No. 7641 may be given effect where (1) the claimant for retirement
benefits was still the employee of the employer at the time the statute took effect; and (2) the claimant was in
compliance with the requirements for eligibility under the statute for such retirement benefits.

The above requisites have not been met in the case at bar.
First, although petitioner's complaint was filed after R.A. 7641 took effect, his application for retirement benefits with

SSS indubitably shows that petitioner was separated from private respondent's employ on December 31, 1978.

Petitioner's bare and — as noted earlier inconsistent allegations that he was employed by private
respondent through the early 1990s cannot prevail over private respondent's evidence showing that he was
separated from employment in 1978 way before R.A. 7641 took effect in 1993.
Second, petitioner has not shown any employment contract or collective bargaining agreement
which entitles him to retirement benefits. Moreover, his application for retirement benefits states that he
was born in 1930, and thus, only forty-eight (48) years of age when he was separated from private
respondent's employ in 1978. The same document shows that petitioner was employed by private
respondent for a mere four and a half (4½) years, from July 1973 to December 31, 1978. Clearly then,
petitioner is not qualified to an award of retirement pay under Article 287, as amended.
Article 287, as amended, therefore cannot be applied retroactively to favor petitioner.
Neither can petitioner avail of retirement benefits under the old Article 287. As stated earlier,
petitioner has not shown the existence of any collective bargaining agreement or employment contract
which entitles him to such benefits.

Producers Bank vs. NLRC

GR 118069, November 16, 1998

Prefatorily, at the time the instant controversy started, petitioner was placed by the then Central
Bank of the Philippines (now Bangko Sentral ng Pilipinas) under a conservator for the purpose of protecting
its assets. It appears that when the private respondents sought the implementation of Section I Article XI of
the CBA regarding the retirement plan and Section 4, Article X thereof, pertaining to uniform allowance, the
acting conservator of the petitioner expressed her objection to such plan, resulting in an impasse between
the petitioner bank and the private respondent union. The deadlock continued for at least six months when
the private respondent, to resolve the issue, decided to file a case against the petitioner for unfair labor
practice and for flagrant violation of the CBA provisions.
As stated earlier, the Labor Arbiter dismissed private respondent's complaint, on this premise:
"Considering that the Bank is under conservatorship program under which the bank is under the
rule of a conservator, the latter is under no compulsion to implement the resolutions issued by the LMRC. If
he finds that the enforcement of the resolutions would not redound for the best interest of the Bank in
accordance with the conservatorship program, he may not be faulted by such inaction or action."
Petitioner asserts since the employees have retired, as a consequence of which no employee-
employer relationship exists anymore between it and the employees, private respondent no longer had the
personality to file the complaint for them.
Petitioner's contention is untenable. Retirement results from a voluntary agreement between the
employer and the employee whereby the latter after reaching a certain age agrees to sever his employment
with the former. The very essence of retirement is the termination of the employer-employee relationship.
Hence, the retirement of an employee does not, in itself, affect his employment status especially
when it involves all rights and benefits due to him, since these must be protected as though there had been
no interruption of service. It must be borne in mind that the retirement scheme was part of the employment
package and the benefits to be derived therefrom constituted, as it were, a continuing consideration for
services rendered, as well as an effective inducement for remaining with the corporation. It is intended to
  113

help the employee enjoy the remaining years of his life, releasing him from the burden of worrying for his
financial support, and are a form of reward for his loyalty.
When the retired employees were requesting that their retirement benefits be granted, they were
not pleading for generosity but were merely demanding that their rights, as embodied in the CBA, be
recognized. Thus, when an employee has retired but his benefits under the law or the CBA have not yet
been given, he still retains, for the purpose of prosecuting his claims, the status of an employee entitled to
the protection of the Labor Code, one of which is the protection of the labor union. In Esso Philippines,
Inc. v. Malayang Manggagawa sa Esso (MME) , we recognized that while the individual complainants
are the real party in interest in issues involving monetary claims and benefits, the union, however, is not
denied its right to sue on behalf of its members, thus:
"We see no legal impediments to considering this particular matter of retirement benefits to be within the

ambit of Our consistent holding that when it comes to individual benefits accruing to members of a union from a

favorable final judgment of any court, the members themselves become the real parties in interest and it is for them,

rather than for the union, to accept or reject individually the fruits of the litigation. In the case at bar, the

representations of the MME which may result in prejudice to the interests of any of its individual members in the final

judgment being sought to be executed should yield to the individual decisions of the said members themselves, who are

free to choose whichever position suits their conscience."

Martinez vs. NLRC

GR 118743, October 12, 1998

The employer and employee agreed to change the date of retirement. In consideration, the
employer gave the employee something in return.
The SC said this is valid.

It appears that on June 10, 1977, respondent GMCR, Inc. employed petitioner as assistant credit
and collection manager. At the inception of petitioner's employment, respondent company made it clear that
employees who were not eligible for membership in the bargaining unit and, therefore, not entitled to the
benefits under the collective bargaining agreement, would be paid benefits which were at least equivalent
to, if not higher than, those provided in the collective bargaining agreement.
On September 22, 1981, respondent company promoted petitioner to credit and collection
manager, a position he held until the day of his retirement.
In the course of his employment, petitioner received annual salary increases based on merit and/or
performance. Although the annual salary increases were not given on the exact due dates, they were
retroactively applied to the start of the evaluation period.
However, much to his surprise, petitioner received no salary increase for the period immediately
prior to his retirement. While two (2) of his subordinates were given salary increases of twenty-two percent
(22%) and twenty-one percent (21%) for the period from September 16, 1990 to September 16, 1991, he
was not given a performance evaluation and consequently not granted any salary increase.
Petitioner was examined by Dr. Florencio A. Chavez, the company physician and a pulmonary and cardiology

specialist, and found to be suffering from a "severe restrictive and obstructive pulmonary defect with no reversible

component." He was advised to rest for 120 days. Petitioner took the physician's advice and went on sick leave from

March 1 until July 15, 1992.

In a letter, dated April 10, 1992, to respondent Mark Anthony Javier, president of respondent company,

petitioner applied for optional retirement benefits under the collective bargaining agreement. He stated that since he

would have been in the service of the company for fifteen years on June 10, 1992, he wished to retire effective July 16,

1992, on which date "the long term sick leave availment as per advice by the company's physician shall have expired."

Petitioner contends that under the collective bargaining agreement, the option to retire is granted to retiring

employees and not to the company and, therefore, private respondents cannot vary the effective date of his retirement.

On the other hand, private respondents deny that petitioner can claim the benefits of the collective bargaining

agreement considering that he is a managerial employee.

Thus, the question is whether petitioner, who is a managerial employee, can claim retirement benefits under

the collective bargaining agreement, Art. XXIX of which provides:

  114

Section 1.An employee shall be entitled to a retirement benefit plan under the following conditions:

(a) an employee may retire at his option any time after such employee shall have attained the age of

Fifty Years (50) and whose term of service is ten (10) years or more; and an employee may retire at his option upon

completing twenty-five (25) years of service.

(b) The employee must retire under this plan at the time such employee attains the age of Sixty-Five

(65).

The Labor Code provides:

Article 245. Ineligibility of managerial employees to join any labor organization; right of supervisory

employees. — Managerial employees are not eligible to join, assist or form any labor organization. Supervisory

employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join,

assist or form separate labor organizations of their own.

As we recently held in United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma:

. . . [T]here is a rational basis for prohibiting managerial employees from forming or joining labor

organizations. As Justice Davide, Jr., himself a constitutional commissioner, said in his ponencia in Philips Industrial

Development, Inc. v. NLRC:

In the first place, all these employees, with the exception of the service engineers and the sales force

personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-FFW; the five (5)

previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential employees. By the very nature

of their functions, they assist and act in a confidential capacity to, or have access to confidential matters of, persons

who exercise managerial functions in the field of labor relations. As such, the rationale behind the ineligibility of

managerial employees to form, assist or join a labor union equally applies to them.

In Bulletin Publishing Co. Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus:

". . . The rationale for this inhibition has been stated to be, because if these managerial employees would

belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident

conflict of interests. The Union can also become company-dominated with the presence of managerial employees in

Union membership."

To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to organize.

But the same reason for denying them the right to organize justifies even more the ban on managerial employees from

forming unions. After all, those who qualify as top or middle managers are executives who receive from their employers

information that not only is confidential but also is not generally available to the public, or to their competitors, or to

other employees. It is hardly necessary to point out that to say that the first sentence of Art. 245 is unconstitutional

would be to contradict the decision in that case.

  115

Accordingly, managerial employees cannot, in the absence of an agreement to the contrary, be allowed to

share in the concessions obtained by the labor union through collective negotiation. Otherwise, they would be exposed

to the temptation of colluding with the union during the negotiations to the detriment of the employer.

However, there is nothing to prevent the employer from granting benefits to managerial employees equal to

or higher than those afforded to union members There can be no conflict of interest where the employer himself

voluntarily agrees to grant such benefits to managerial employees. In the case at bar, at the beginning of petitioner's

employment, he was told that those who are not covered by me CBA would nevertheless be entitled to benefits which

would be, if not higher, at least equivalent to those provided in the CBA.. That private respondents made such a

promise to petitioner is not denied by them.

Petitioner assented to change the date of his retirement from July 16, 1992 to April 30, 1992 in

consideration of obtaining an advance payment of P100,000.00 on his retirement pay. Such agreement is valid. As

has been held:

Not all waiver and quitclaims are invalid as against public policy. If the agreement was voluntarily entered

into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because

of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible

person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable

transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what

he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as

a valid and binding undertaking.

The fact that respondent company still paid petitioner salaries after July 16, 1992 does not detract from the

fact that petitioner voluntarily agreed to advance the date of his retirement. Neither is petitioner's entitlement to a long

term sick leave which he claims was yet to expire on July 16, 1992 a reason for holding the new date of his retirement

invalid. By changing the date of his retirement from July 16, 1992 to April 30, 1992 in exchange for an advance of

P100,000.00 on his retirement pay, petitioner waived his right to insist on July 16, 1992 as the effective date of his

retirement.

The option in optional retirements rests upon the employee

Capili vs. NLRC

G.R. No. 120802. June 17, 1997

THE OPTION TO RETIRE UPON REACHING THE AGE OF, 60 BECOMES THE EXCLUSIVE
PREROGATIVE OF THE EMPLOYEE; EXCEPTION. — It is clear from Policy Instruction No. 25 promulgated on
1 June 1977 by the Secretary of Labor that in the absence of a collective bargaining agreement or company
policy providing for a retirement plan, the option to retire at age 60 could be exercised by either the
employee or the employer. This power of the employer no longer exists under R.A. No. 7641, which
unequivocally provides that the option to retire upon reaching the age of 60 years or more but not beyond
65 is the exclusive prerogative of the employee if there is no provision on retirement in a collective
bargaining agreement or any other agreement or if the employer has no retirement plan.
WHEN AN EMPLOYEE MAYBE DEEMED TO HAVE OPTED TO RETIRE; CASE AT BAR. — By his
acceptance of retirement benefits the petitioner is deemed to have opted to retire under the third paragraph
of Article 287 of the Labor Code, as amended by R.A. No. 7641. Thereunder he could choose to retire upon
reaching the age of 60 years, provided it is before reaching 65 years, which is the compulsory age of
retirement. Also worth noting is his statement that he "had long and unjustly been denied of his retirement
benefits since August 18, 1993." Elsewise stated, he was entitled to retirement benefits as early as 18
August 1993 but was denied thereof without justifiable reason. This could only mean that he has already
acceded to his retirement, effective on such date — when he reached the age of 60 years.
  116

Requisites of retirement.
CJC Trading vs. NLRC
246 SCRA 724

Private respondents Ricardo Ausan, Jr. and Ernesto Alanan were employed by petitioner since 1983 and 1978,

respectively, as truck drivers and were paid on a "per trip or task basis." They filed separate complaints on 23 August

1992 and 15 September 1992, respectively, against petitioner CJC Trading, Incorporated and/or Ms. Celia J. Carlos for

illegal dismissal and non-payment of premium pay for holiday and rest day, service incentive leave pay and thirteenth

month pay. These cases were consolidated.

The award of separation pay is authorized in the situations dealt with in articles 283 and 284 of the
Labor Code, and as well as in cases where there is illegal dismissal and reinstatement is no longer feasible
under Section 4(b), Rule I, Book VI of the Implementing Rules and Regulations of the Labor Code.
By way of exception, this Court has allowed grants of separation pay to stand as "a measure of
social justice" where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character.
The instant case, however, does not fall under any of the above mentioned instances. The facts, as
found by the NLRC, show that private respondents had informed petitioner that they intended to quit their
jobs and this decision was arrived at by private respondents on their own volition. We find no reason and
petitioner has shown none, for departing from the rule that this Court is bound by the findings of fact of the
NLRC, there being no showing that the latter had gravely abused their discretion or otherwise acted without
or in excess of its jurisdiction. There was no dismissal of private respondents by petitioner here. Neither,
upon the other hand, can this be considered a case of abandonment as petitioner claims because the
elements of abandonment are not present. Rather, we have before us a case of voluntary resignation.
An employee who voluntarily resigns is not entitled to separation pay unless otherwise stipulated in
an employment contract or collective bargaining agreement, or sanctioned by established employer practice
or policy. The Labor Code is devoid of any provision which grants separation pay to employees who
voluntarily resign. Neither was there anything in the record that shows that, in the instant case, there is a
collective bargaining agreement or any other agreement or established company policy concerning the
payment of separation pay to employees who resign.
The Court notes that private respondents, in their motion for reconsideration from the NLRC's 29
November 1993 decision prayed for an award of termination pay. Considering that private respondents were
close to the age of sixty (60) at the time they stopped working for petitioner and that they had been in the
employ of petitioner for several years, the Court, taking the view most favorable to private respondents,
considers that this could be deemed to be in effect a prayer for the grant of retirement benefits.

The above amended law took effect on 7 January 1993 and was applied by the Court in the case of
Oro Enterprises, Inc. vs. National Labor Relations Commission where a sixty-five (65) year old
employee filed a claim for retirement pay with her employer in September 1990. A few days later, a
complaint was filed with the Office of the Labor Arbiter, which complaint was eventually resolved by the
Labor Arbiter with an award of retirement benefits in favor of the employee. During the pendency of the
appeal (which involved determination of the issue whether or not the employer-employee relationship
between petitioner and private respondent had persisted or whether it had terminated by resignation of the
employee) in the NLRC, R.A. No. 7641 took effect. The new statute was used a basis by the NLRC for the
grant of retirement benefits to the employee — i.e., service rendered before the effectivity of the statute
was taken into account — and the decision of the NLRC was upheld by this Court. We read Oro
Enterprises as holding that R.A. No. 7641 may be given effect where
(1) the claimant for retirement benefits was still the employee of the employer at the time the
statute took effect; and
(2) the claimant was in compliance with the requirements for eligibility under the statute for such
retirement benefits.

In the instant case, the complaints of private respondents were still being resolved on the labor
arbiter level when R.A. No. 7641 took effect. However, it was quite clear, and both the Labor Arbiter and
the NLRC so held, that private respondents had ceased to be employees of petitioner, by reason of
voluntary resignation, before the statute went into effect. Moreover, it appears that private respondents did
not qualify for the benefits of R.A. No. 7641 under the terms of this law itself. The Court notes that when
private respondents filed their complaints more than one (1) year after they had been allegedly illegally
dismissed, respondent Ausan, Jr. was fifty-seven (57) years old while respondent Alanan was sixty (60)
years old. That would make Ausan, Jr. fifty-five (55) years old and Alanan fifty-eight (58) years old at the
time their services with petitioner were ended by their resignation. Since the record does not show any
retirement plan or collective bargaining agreement providing for retirement benefits to petitioner's
employees, the applicable retirement benefits to petitioner's employees, the applicable retirement age is the
optional retirement age of sixty (60) years according to Article 287, which would qualify the retiree to
retirement benefits equivalent to one-half (1/2) month's salary for every year of service. Unfortunately, at
the time private respondent stopped working for petitioner, they had not yet reached the age of sixty (60)
years.
We stress, however, that there is nothing to prevent petitioners from voluntarily giving private
respondents some financial assistance on an ex gratia basis.
  117

JV Angeles Construction vs. NLRC

GR 126888, April 14, 1999

Private respondent Pedro Santos was employed in 1969, as a carpenter, by the petitioner, J. V.
Angeles Construction Corporation (Corporation). In 1973, he was promoted to the position of foreman which
he held until his retirement in February 1992 when he was sixty-two (62) years old.
On October 25, 1993, he brought a complaint for retirement benefits and service incentive leave
pay before the NLRC, National Capital Region Arbitration Branch, against the corporation. After the parties
failed to reach an amicable settlement during the conciliatory proceedings of the case, they were required to
submit their respective position papers.
Petitioner's appeal filed with the NLRC on August 14, 1995, assailed the said ruling of the Labor
Arbiter granting retirement benefits to the herein private respondent, by giving Rep. Act. No. 7641
(Retirement Pay Law) a retroactive application although respondent Pedro Santos had retired almost a year
prior to the effectivity of said law on January 7, 1993. It is petitioner's submission that what is applicable is
the ruling laid down in Llora Motors, Inc. v. Drilon wherein the Court held that in the absence of a
collective bargaining agreement or other employment contract, there is no obligation on the part of the
employer to set up a retirement scheme over and above that already established under existing laws. Since
Santos has been receiving his retirement benefits from the Social Security System (SSS), he cannot anymore
ask for additional benefits from his employer in the absence of company practice, policy or contract granting
such benefits.
On May 31, 1996, the Third Division of the NLRC came out with the questioned decision, upholding the Labor

Arbiter's grant of retirement benefits to Pedro Santos.

The petition is impressed with merit.

The pertinent law is Article 287 of the Labor Code, as amended by R. A. 7641.

In Oro Enterprises, Inc. v. NLRC, the court held that R.A. 7641 can be applied retroactively.

"R.A. 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a

curative statute that — absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer

— can respond, in part at least, to the financial well-being of workers during their twilight years soon following their

life of labor. There should be little doubt about the fact that the law can apply to labor contracts still existing at the

time the statute has taken effect, and that its benefits can be reckoned not only from the date of the law's enactment but

retroactively to the time said employment contracts have started. . . " (emphasis supplied)

In CJC Trading, Inc. v. NLRC, the aforecited doctrine was elaborated upon by enumerating the circumstances which

must concur before the law could be given retroactive effect, to wit:

(1) the claimant for retirement benefits was still the employee of the employer at the time the statute took
effect; and
(2) the claimant has complied with the requirements for eligibility under the statute for such retirement
benefits.

In the recent case of Philippine Scout Veterans Security and Investigation Agency, et al. v. NLRC, et al., the Court

had occasion to apply the Oro and CJC rulings. In the said case, private respondent Mariano Federico resigned as a

security guard of the security agency on September 16, 1991. Thereafter, he sought alternative reliefs from his

employer, such as termination pay corresponding to his years of service or retirement benefits. PSVSIA rejected his

claim for termination pay on the ground that he had voluntarily resigned. The alternative claim for retirement benefits

was likewise denied because there was no collective or individual agreement providing for retirement benefits. When

subject claims were formally brought to the Labor Arbiter, the latter sustained the stand of petitioners but directed them
  118

to pay the respondent the previously offered financial assistance in the amount of P10,000.00. The NLRC reversed the

said judgment by giving a retroactive application to the provisions of R.A. 7641.

When it was elevated to this Court on certiorari, the court found that although respondent Federico had reached the

minimum retirement age under the statute, he was no longer an employee of petitioner PSVSIA when the law took

effect. R.A. 7641 could not be applied retroactively in his favor in the absence of the first circumstance. Consequently,

he could not seek the beneficial provisions of the law and must settle for the petitioners' offer of financial assistance.

In the case under scrutiny, private respondent Santos retired and ceased to be an

employee of petitioner on February 1992, eleven (11) months before the effectivity of

R.A. 7641, and he brought his complaint on October 23, 1993, nine (9) months after the

law's effectivity. It is thus decisively clear that the provisions of R.A. 7641 could not be

given retroactive effect in his favor. Consequently, the NLRC erred in upholding the

Labor Arbiter's award of retirement benefits to private respondent.

Oro Enterprise vs. NLRC

238 SCRA 105

In this petition for certiorari, Oro Enterprises, Inc., seeks a reversal of the 22nd March 1993
decision and 29th May 1993 order of respondent National Labor Relations Commission (NLRC) directing
petitioner to pay private respondent Loreto Cecilio retirement pay in the amount of P61,500.00.
Private respondent was first employed by petitioner in August of 1949. After working continuously
with the company for forty one (41) years, private respondent manifested, on 03 September 1990, her
intention to retire from work by filing with petitioner a "Claim for Retirement Pay."
In her claim, private respondent pleaded that "the retirement pay she (was) receiving from the
Social Security System in the total sum of five hundred pesos (P500.00) a month could hardly (suffice to)
meet her daily subsistence. . ."
On 15 September 1990, petitioner wrote private respondent, informing her that it was in no financial position

to give her any retirement benefit apart from the retirement pay she was already receiving from the Social Security

System ("SSS"). Nonetheless, she was offered a house and lot located in San Jose, del Monte, Bulacan, in accordance

with a "plan" which was then still being conceived by the company president for retiring employees. The offer did not

materialize, nor did the proposed company plan come into being, for one reason or another.

During the pendency of the appeal, or on 07 January 1993, Republic Act ("R.A.") No. 7641 took effect.

At the time private respondent supposedly ceased to work with petitioner, Article 287 of the Labor Code, then

in force, provided:

"Art. 287.Retirement — Any employee maybe retired upon reaching the retirement age established in the

collective bargaining agreement or other applicable employment contract.

"In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have

earned under existing laws and any collective bargaining or other agreement."

Rule 1, Book VI, of the Implementing Rules of the Labor Code, in turn, expressed:

"Sec. 13. Retirement. — In the absence of any collective bargaining agreement or other applicable

agreement concerning terms and conditions of employment which provides for retirement at an older age, an employee

maybe retired upon reaching the age of sixty (60) years.

  119

"Sec. 14. Retirement benefits. — (a) An employee who is retired pursuant to a bonafide retirement plan or in

accordance with the applicable individual or collective agreement or established employer policy shall be entitled to

all the retirement benefits provided therein or to termination pay equivalent at least to one-half month salary for every

year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year."

Private respondent, sustained by the Labor Arbiter, posits that there being no collective bargaining agreement

("CBA") that granted retirement benefits, conformably with Section 14 of the Implementing Rules aforequoted, she

should be entitled to a "termination pay equivalent at least to one-half month salary for every year of service . . . ."

This particular issue has long been put to rest. In Llora Motors, Inc., vs. Drilon, 179 SCRA 175, Mr. Justice

Florentino P. Feliciano, speaking for the Court in an eruditely written ponencia, explained:

Section 14 (a) refers to 'termination pay equivalent to at least one-half (1/2) month for every year of service'

while Section 14 (b) mentions 'termination pay to which the employee would have been entitled had there been no such

retirement fund' as well as 'termination pay the employee is entitled to receive.' It should be recalled that Sections 13

and 14 are found in Implementing Rule I which deals with both 'termination of employment' and 'retirement.' It is

important to keep the two (2) concepts of 'termination pay' and 'retirement benefits' separate and distinct from each

other. Termination pay or separation pay is required to be paid by an employer in particular situations identified by the

Labor Code itself or by Implementing Rule I. Termination pay where properly due and payable under some applicable

provision of the Labor Code or under Section 4 (b) of Implementing Rule I, must be paid whether or not an additional

retirement plan has been set up under an agreement with the employer or under an 'established employer policy.'

"What needs to be stressed, however, is that Section 14 of Implementing Rule I, like Article 287 of the Labor

Code, does not purport to require 'termination pay' to be paid to an employee who may want to retire but for whom no

additional retirement plan had been set up prior agreement with the employer. Thus, Section 14 itself speaks of an

employee 'who is retired pursuant to a bona-fide retirement plan or in accordance with the applicable individual or

collective agreement or established employer policy.' What Section 14 of Implementing Rule I may be seen to be saying

is that where termination pay is otherwise payable to an employee under an applicable provision of the Labor Code,

and an additional or consensual retirement plan exists, then payments under such retirement plan may be credited

against the termination pay that is due, subject, however, to certain conditions. These conditions are: (a) that payments

under the additional retirement plan cannot have the effect of reducing the amount of termination pay due and payable

to less than one-half (1/2) month's salary for every year of service and (b) the employee cannot be made to contribute

to the termination pay that he is entitled to receive under some provision of the Labor Code; in other words, the

employee is entitled to the full amount of his termination pay plus at least the return of his own contributions to the

additional retirement plan.

It then goes without saying, applying Llora Motors, that the beneficial provisions of Section 14 of

Implementative Rules cannot properly be invoked by private respondent.

Instead, the pivotal issue, in our view, is whether or not R.A. 7641 can favorably apply to private respondent's

case.

RA 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a

curative statute that — absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer

— can respond, in part at least, to the financial well-being of workers during their twilight years soon following their
  120

life of labor. There should be little doubt about the fact that the law can apply to labor contracts still existing at the time

the statute has taken effect, and that its benefits can be reckoned not only from the date of the law's enactment but

retroactively to the time said employment contracts have started.

Republic Act 7641 took effect on 07 January 1993, while the appeal of private respondent was still pending

consideration by the NLRC. Still for determination at the time was, among other things, the issue of whether or not

private respondent has, in fact, been effectively retired.

Petitioner asserts that private respondent has never reported for work after the rejection of her application for

retirement benefits. This claim is denied by private respondent, who avers that she did report for work again but that

petitioner has refused to accept her on the ground of abandonment of duty.

Philippines Scout Veterans Security and Investigation Agency vs. NLRC

271 SCRA 209

MARIANO FEDERICO, private respondent, had been working with petitioners Philippine Scout
Veterans Security and Investigation Agency and/or Severo Santiago as a security guard for twenty-three
(23) years. On 16 September 1991 Federico, then already sixty (60) years old, tendered his so-called "letter
of resignation" citing as his reasons physical disability to perform his duties and desire to spend the rest of
his life in the province. It seems that the letter did not strictly refer to "resignation" but "withdrawal from
occupation" because thereafter he sought alternative reliefs from petitioners, namely, termination pay
corresponding to his years of service, or retirement benefits.
Petitioners rejected the claim for termination pay contending that respondent Federico voluntarily
resigned. The claim for retirement benefits met the same fate there being no collective or individual
agreement providing therefor.
On 4 December 1991 respondent Federico brought his grievance to the Labor Arbiter. However,
the latter sustained the stand of petitioners. Hence on 25 August 1992 he ruled against Federico.
Nevertheless, the termination of the proceedings did not leave respondent empty-handed. The Labor Arbiter
directed petitioners to pay respondent P10,000.00, the amount they previously offered him, as financial
assistance.
The question to be resolved is whether Art. 287 of the Labor Code as amended by R.A. 7641 may
be applied retroactively to the complaint filed on 4 December 1991 by respondent Mariano Federico.
Petitioners argue that the amendment introduced by R.A. 7641 applies to employees of the private
sector who retired beginning 7 January 1993, the date of its effectivity, and onwards. In the present case
therefore respondent Federico, who filed his complaint two (2) years prior to the effectivity of the law,
cannot seek refuge in the provision. Besides, this Court in Llora Motors, Inc. v. Drilon was faced with the
same controversy. Its ruling thereon is now judicial precedent.
The Office of the Solicitor General contends that the matter of giving retroactive effect to social
legislation has long been settled in the leading case of Allied Investigation Bureau, Inc. v. Ople.
In Allied, private respondent had been an employee of petitioner since 1953. In 1976, having
reached the age of sixty (60) years, he submitted to petitioner an application for retirement benefits which
was subsequently approved although there was then no collective bargaining agreement or employer policy
establishing an additional retirement plan for its employees. Controversy arose with respect to the method
of computing the amount of retirement benefits. Instead of basing the amount upon private respondent's
actual period of employment (from 1953 up to 1976), petitioner computed such amount starting with the
date of the effectivity of the Labor Code (1 November 1974) up to 1976. The Labor Arbiter, the NLRC and
the then Minister of Labor were one in the view that the computation should be on the basis of the length of
service. This Court sustained the computation of public respondents since it found the comment of the
Solicitor General in support thereof persuasive —
. . . in the computation thereof, public respondents acted judiciously in reckoning the retirement pay from the time
private respondent started working with petitioner since respondent employee's application for retirement benefits and
the company's approval of the same make express mention of Sections 13 and 14, Rule 1, Book VI of the Implementing
Rules and Regulations of the Labor Code as the basis for retirement pay. Section 14 (a) of said rule provides that an
employee who is retired pursuant to a bona fide retirement plan or in accordance with the applicable individual or
collective agreement or established employer policy shall be entitled to all the retirement benefits provided therein or to
termination pay equivalent to at least one-half month salary for every year of service, whichever is higher, a fraction of
at least six (6) months being considered as one whole year . . . This position taken by public respondents squares with
the principle that social legislation should be interpreted in favor of workers in the light of the Constitutional mandate
that the State shall afford protection to labor.

Quite differently, in Llora Motors, we set aside the grant of retirement benefits because of the
absence of a collective bargaining agreement or other contractual basis or any established employer policy
that contemplated said grant. Private respondent invoked Allied but we found the reliance thereon
misplaced because —
. . . while Allied had no collective bargaining agreement or similar employment contract establishing a plan under
which employees could retire, its approval of (private respondent's) application, although unilateral and possibly ad
  121

hoc, supplied the necessary consensual basis. In the instant case, (petitioner) consistently resisted the demand for
separation pay or retirement benefits by private respondent . . .

As between Llora which is invoked by petitioners and Allied which is invoked by the Solicitor
General, we could have applied the former because of similarity in factual milieu except that we have to
take into account the amendment of Art. 287 by R.A. 7641 on 7 January 1993 or during the pendency of the
proceedings before the NLRC. As amended, Art. 287 now pertinently provides —
Art. 287. Retirement. — Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other agreements: Provided,
however, that an employee's retirement benefits under any collective bargaining and other agreements shall
not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5)
years in the said establishment, may retire and 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 whole year . . . (emphasis on amendment supplied).

Under the amendment, respondent Federico appears to be entitled to retirement pay. But can he avail himself

of this provision considering that it took effect subsequent to his filing of the complaint? This brings to mind the

principle reiterated in Allied that police power legislation intended to promote public welfare applies to existing

contracts and can therefore be given retroactive effect. Actually, the case at bench no longer presents a novel issue. We

have ruled in Oro Enterprises, Inc. v. NLRC that R.A. 7641 can indeed be applied retroactively. Private respondent in

that case, after working continuously with the company for forty-one (41) years, manifested her intention to retire from

work by filing with petitioner a claim for retirement pay which was however denied. The Labor Arbiter granted her

claim. During the pendency of the appeal, R.A. 7641 took effect and on that basis the NLRC affirmed the subject

decision with modification.

Returning to the present case, although the second circumstance exists, respondent Federico
severed his employment relationship with petitioners when he tendered his "letter of resignation" on 16
September 1991 or prior to the effectivity of R.A. 7641. In fact, the issue before public respondents was not
the existence of employee-employer relationship between the parties; rather, considering the cessation of
his service, whether he was entitled to monetary awards. On the authority of CJC, private respondent
therefore cannot seek the beneficial provision of R.A. 7641 and must settle for the financial assistance of
P10,000.00 offered by petitioners and directed to be released to him by the Labor Arbiter.

Brion vs. South Philippine Union Mission of 7th Day Adventist, 307 SCRA 497

SOLO PARENTS WELFARE ACT of 2000

(RA 8972: An Act Providing for Benefits and Privileges to Solo Parents
and their Children, Appropriating Funds therefore and for other purposes)

No rules yet, so we have to be contented with the salient features of the law.

Parental leave of not more than 7 working days every year to any solo parent who has rendered at
least one year of service. It is in addition to the other benefits under the law.

Solo parent
Examples:
1.A woman who gives birth as a result of rape is considered as a solo parent.
2. Parent left solo because of death of spouse
3. Parent left solo because of conviction or detention for at least one year
4. Parent left solo with the responsibility left of parenthood because of legal separation, abandoned spouses,
left with custody of child
5. Parent left solo because of declaration of nullity or annulment of marriage
  122

Flexible Working Schedule – is 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.

Additional (those regarded as salient -  kaye)

Section 2. Declaration of Policy.

It is the policy of the State to

o promote the family as the foundation of the nation,
o strengthen its solidarity and
o ensure its total development.
Towards this end, it shall develop a comprehensive program of services for solo parents and their children to
be carried out by the
(a) Department of Social Welfare and Development (DSWD)
(b) Department of Heath (DOH)
(c) Department of Education, Culture and Sports (DECS)
(d) Department of Interior and Local Government (DILG)
(e) Commission on Higher Education (CHED)
(f) Technical Education and Skills Development Authority (TESDA)
(g) National Housing Authority (NHA)
(h) Department of Labor and Employment (DOLE)
(i) Other related government and non-government agencies

Section 3. Definition of Terms.

SOLO PARENT – 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 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 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 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 written 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 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.

CHILDREN – refer to those living with and dependent upon the solo parent for support who are:
(a) Unmarried,
(b) Unemployed, and
(c) Not more than 18 years of age, or
(d) Even over 18 years but are incapable of self-support because of mental and/or physical
defect/disability.

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 209, as amended, otherwise known as the “Family
Code of the Philippines.”

PARENTAL LEAVE – leave benefits granted to a solo parent to enable him/her to perform parental duties
and responsibilities where physical presence is required.

FLEXIBLE WORKING SCHEDULE – supra

  123

Section 4. Criteria for Support.

Any solo parent whose income in the place of domicile falls below the poverty threshold as set by the
National Economic and Development (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 this Act.

Section 5. Comprehensive Package of Social Development and Welfare Services.

-- will be developed by the DSWD, DOH, DECS, CHED, TESDA, DOLE, NHA, and DILG, in coordination
with local government units and a nongovernmental organization with proven track record in providing
services for solo parents.
The DSWD shall coordinate with concerned agencies in the implementation of the comprehensive
package of social development and welfare services for solo parents and their families.
(Please see law for enumeration – not at all important)

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 7 working
days every year shall be granted to any solo parent employee who has rendered service of at least 1 year.

Section 9. Educational Benefits.

The DECS, CHED, and TESDA shall provide the following benefits and privileges:
(1) Scholarship programs for qualifies solo parents and their children in institutions of
basic, tertiary and technical/skills education; and
(2) Nonformal 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 project and shall be provided with liberal terms of
payment on said 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).

NLRC RULES OF PROCEDURE

NLRC rules of procedure is relevant in determining which has jurisdiction because under the NLRC rule it will
tell you that lack of jurisdiction is a ground to dismiss. Another important consideration is the provision in the
prescription of money claim. Because if money claim is barred by law then certainly it will not prosper. Unless
you waive your right to question based on the ground of prescription.

Does the labor code provide for the prescriptive period of money claim? When it is reckoned from?
  124

Art. 291 all money claims arising from ER-EE relations accruing during the effectivity of this code shall
be filed within 3 years from the time the cause of action accrued; otherwise they shall be forever barred. It is
reckoned from the time the cause of action accrues.

When does the cause of action accrue?

When there is a violation of a right.

Essential elements of a cause of action:

1. Legal right of the plaintiff,

2. Correlative obligation of the defendant, and
3. Act or omission of the defendant in violation of the plaintiffs legal right.

Example: Service incentive leave and overtime pay is a right provided by law if there is a violation, there is
an injury arising from such violation. (If you have rendered overtime you have to demand, only when ER
denies that the cause of action accrues).
It is important to know when your cause of action accrues in determining the reckoning of the prescriptive
period of 3 years.

If I will file a money claim today Dec. 3, 2001, I can only recover money claim way back as what period?

3 years from now that will be Dec. 3, 1998.

How long is an ER required to keep a payroll?

Under the rules implementing the LC, Rule X, Sec. 12. All employment records required to be kept
and maintained by employers shall be preserved for at least 3 years from the date of the last entry in the
records.
Money claim does not only refer to labor standard provision. It also includes retirement fee and
separation pay for authorized causes.

Guzman vs. CA
G.R. No. 132257. October 12, 1998

Separation pay and retirement pay partakes of money claim and it prescribes in 3 years.
The company because of serious business reverses undertook a partial suspension of operation
resulting in the forced leave for 6 months of complainant. A case was instituted by complainant before the
NLRC for illegal forced leave in violation of CBA with respect to optional retirement and separation pay
grant. Complainant was dismissed from employment on November 16, 1992 without payment of retirement
and separation benefits under the CBA. Complainant filed a case in July 16, 1996.
RULING: Under Article 291 of the Labor Code, money claims specifically recoverable under this
Code should be filed within 3 years from the time their cause of action accrues.
The filing of complaint in the NLRC in December 7 does not interrupt the running of the
prescriptive period because NLRC has no jurisdiction of the case since the Voluntary Arbitrator has
jurisdiction over the case regarding interpretation and implementation of the CBA.
Since the case was filed in July 16, 1996, hence the cause of action has already prescribed.

Motion to dismiss the complaint is a prohibited pleading except:

1. On the ground of lack of jurisdiction over the subject matter.
2. Improper venue,
3. Res judicata or
4. Prescription.

Contents of the complaint

1. Name and address of the complainant.
2. Name and address of the ER.
3. No. Of the workers of the particular company.
4. Causes of action of the complainant.

PROCEDURE
1. Complaint filed with the RAB of the NLRC which has jurisdiction over the workplace of said EE.
Venue vs. Jurisdiction
Venue is only procedural and is provided under the NLRC rules. While jurisdiction is defined by law under art
217.
2. After docketing, it will be forwarded to the executive labor arbiter (ELA) for raffle purposes.
  125

3. Once assigned to the labor arbiter, the la will issue summons where a copy of the complaint will have
to be attached as well as the date, place, and time of initial hearing. All these document must served
to the respondent.

Purpose of summons: For the proper acquisition of jurisdiction over the person of the respondent. Should
the service be improper, the respondent can file a motion to dismiss and the la can dismiss the case based on
that ground. It must be delivered to the respondent or his lawyer. The service of summon will depend upon
the kind of respondent applying the rules of civil procedure.
4. Once the summons has been properly served, the respondent well have to comply by attending the
conference as stated in the notice of hearing.

MANDATORY CONFERENCE – The initial hearing

How many initial conferences are now authorized under the rule?
Before, in the old rules, it was 3 settings. Now, it is only 2.

Purpose: To amicably settle the case upon a fair compromise, or determining the real parties in interest, or
defining and simplifying the issues in the case, entering into admissions and stipulation of facts and threshing
out preliminary matters.

Is the LA authorized to compromise under the labor code?

No. His power to compromise is provided under NLRC rules of procedure.

Can the parties enter into a compromise not in the presence of the LA?
Yes. Under the NLRC rules of procedure, Rule 5, Section 2. A compromise agreement entered into
by the parties not in the presence of the Labor Arbiter before whom the case is pending shall be approved by
him if, after confronting the parties, particularly the complainants, he is satisfied that they understand the
terms and condition of the settlement and that it was entered into freely and voluntarily by them and the
agreement is not contrary to law, morals and public policy.

St. Gothard Disco Pub and Restaurant vs. NLRC

218 SCRA 336

This was a quitclaim involving a compromise agreement not before the labor arbiter whom the
case was assigned but with another Labor Arbiter. The SC held that said compromise agreement was void
because it was in violation of the rules of procedure of the NLRC.
Compromise before the LA is final and executory. It shall be enforced through writ of execution.
FACTS: St. Gothard Disco was hit by Typhoon Ruping. As a result of the stoppage of business, 28
employees filed claims for separation pay and 13th month pay in the NLRC.
NLRC awarded in favor of the employees.
The owners appealed to the NLRC. NLRC dismissed the petitioners’ appeal on the ground that no
cash or security bond was posted.
Owners filed a petition for certiorari.
RULING: The posting of a cash or surety bond equivalent to the monetary award in the judgment
appealed from is a mandatory requirement for perfection of the appeal under Article 223 of the Labor
Code.

NOTE: QUITCLAIM partakes the nature of a compromise, and such a settlement shall be
approved by the Labor Arbiter under the Implementing Rules.

Loyola Security and Detective Agency vs. NLRC

GR 113287, May 9, 1995

In this case, the SC noted that there is no provision regarding compromise agreements before the
Labor Arbiter, the rules of procedure before the NLRC should be applied strictly. Should the parties arrive at
any agreement as to the whole or any part of the dispute, the same shall be reduced to writing and signed
by the parties and their respective counsels if any before the Labor Arbiter. The settlement shall be
approved by the Labor Arbiter after being satisfied that it was voluntarily entered into by the parties and
after explained to them the terms and consequences thereof.

Private respondents Victor Prado, Sr. and Matilde Tuscano filed a complaint against petitioners, the
Loyola Security and Detective Agency and the latter's general manager. Ruperto Acle, Jr., for illegal
dismissal illegal deduction, underpayment of wages, non-payment of overtime pay, legal holiday pay,
premium pay for holiday and rest day, and violation of P.D. No. 851.
  126

COMPROMISE AGREEMENT; FOR VALIDITY THEREOF, REQUIRES THE ASSISTANCE OF COUNSEL

AND APPROVED BY THE LABOR ARBITER. — The Labor Code of the Philippines does not contain any
provision on compromise agreements or quitclaims in cases pending before the Labor Arbiter and the NLRC.
However, the New Rules of Procedure of NLRC in Section 2, Rule V (Proceedings Before Labor Arbiter)
provides that: . . . "Should the parties arrive at any agreement as to the whole or any part of the dispute,
the same shall be reduced to writing and signed by the parties and their respective counsels, if any, before
the Labor Arbiter. The settlement shall be approved by the Labor Arbiter after being satisfied that it was
voluntarily entered into by the parties and after having explained to them the terms and consequences
thereof. "A compromise agreement entered into by the parties not in the presence of the Labor Arbiter
before whom the case is pending shall be approved by him if, after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and conditions of the settlement and that it
was entered into freely, and voluntarily by them and the agreement is not contrary to law, morals and
public policies." In the case at bench, the NLRC found that: ". . .. In the case at bar, the satisfaction of
judgment dated October 19, 1990 was executed by the complainants without the assistance of their counsel
and without the approval of the Labor Arbiter. There is also a great disparity with regards to the monetary
award . . .." We find no grave abuse of discretion committed by NLRC inasmuch as its decision is supported
by the records of the case. Thus, we adopt the findings of NLRC to the effect that the settlement entered
into by the parties was without the assistance of counsel or approval of the Labor Arbiter.
CIVIL LAW; SPECIAL CONTRACTS; AGENCY; SPECIAL POWER OF ATTORNEY; WHEN REQUIRED.
— We also note that respondent Prado executed that compromise agreement not only on his own behalf
but on behalf of respondent Tuscano. There is, however, no showing that respondent Prado was duly
authorized by respondent Tuscano to waive a part of the award given her. Under Article 1878 of the Civil
Code of the Philippines, a special power of attorney is necessary: ". . . (2) To effect novations which put an
end to obligations already in existence at the time the agency was constituted; (3) To compromise, . . . (4)
To waive any obligation gratuitously; . . . (15) Any other act of strict dominion." Hence, being violative of
existing law and jurisprudence, such settlement cannot be given force and effect.

 Mandatory conference is analogous with pre-trial in criminal and civil cases.

Stipulation of facts to be proposed to respondent ER for money claims. (still employed)

1. Existence of ER-EE relationship.
2. That the EE was employed for a particular period of time.
3. EE is receiving this particular salary.
4. That respondent is doing business in this particular name.
5. If no compromise agreement is entered into the parties will then be required to submit their
respective verified position paper within an inextendible period of 10 days.

Contents of position paper:

 SECTION 4 RULE 7, Civil Procedure, as amended by Administrative Matter 00-2-10, May 1,
2000 provides that the affiant has read the pleading and that the allegations therein are true and correct
according to his personal knowledge and based on authentic records.
 Verification is important because the case may be decided based on position papers alone without need
of conducting formal hearings. Violation of this requirement would either mean that such pleading would
be expunged from the records and the party concerned subjected to sanctions.
 Position papers should also be accompanied by affidavit of the witnesses which shall take place of the
latter’s testimony. (RULE V SECTION 3)

Purpose of affidavit
 To take the place of the witnesses’ direct testimony.
 Support allegations in the position paper.

If the LA decides to conduct hearing, there would be no need of direct examination or Q&A because the
position paper would take the place of the direct testimony of the witness. The only requirement would be for
the affiant to identify the affidavit and to offer the testimony of the witness. And thereupon, proceed to the
cross-examination of such witness.

Does the position paper require certification against forum shopping?

Yes. NLRC Rules provide that rules on civil procedure would apply suppletorily. (RULE 1 SECTION
3)
Furthermore, the Rules of Court specifically mentions not only of courts but also “tribunals and
agencies” such as LA and NLRC.

Maricalum vs. NLRC, 298 SCRA 384

Certification against forum-shopping applicable to NLRC.
  127

The Certificate of Non-Forum Shopping as provided by Supreme Court Circular 04-94 is a

mandatory and should accompany pleadings filed before the NLRC. Since the NLRC is a quasi0judicial agency
hence initiatory pleading filed before it should be accompanied by a certificate of non-forum shopping.

 Such certification should be signed not by the lawyer but by the party. Except if you are the in-house
lawyer of such company.

Escorpizo vs. University of Baguio

306 SCRA 503, GR 121962, April 30, 1999

Petitioner Esperanza Escorpizo was initially hired by respondent University of Baguio on June 13,
1989 as a high school classroom teacher. Under the rules of the respondent University, appointment to
teach during the first 2 years at the University is probationary in nature. Attainment of a permanent status
by s faculty member is conditioned upon compliance with certain requirements, such as passing the
professional board examination for teachers (PBET).
On March 18, 1991, respondent University informed petitioner that it was terminating her
employment for her failure to pass the PBET. Petitioner pleaded that she be given another chance since she
had just taken the PBET and hope to pass the same. Unfortunately, she failed again. Undaunted, she took
the examination a third time in November 1991. This time, she passed. Nevertheless, on June 15, 1992, the
University did not renew Escorpizo’s contract of employment on the ground that she failed to qualify as a
regular teacher.
Petitioner filed a complaint for illegal dismissal, payment of backwages and reinstatement. Labor
Arbiter ordered reinstatement but without backwages. Petitioner appealed to the NLRC, which dismissed
said appeal and affirmed Labor Arbiter’s decision.
Instead of filing a motion for reconsideration, petitioner files instant petition for certiorari under
Rule 65.
PETITION DISMISSED. The assailed resolution of the NLRC is AFFIRMED.
CERTIORARI WILL LIE IF THERE IS NO APPEAL OR ANY OTHER PLAIN, SPPEDY AND ADEQUATE
REMEDY IN THE ORDINARY COURSE OF LAW. –In the case at bar, the plain and adequate remedy
expressly provided by law was a motion for reconsideration of the impugned resolution, based on palpable
or patent errors, to be made under oath and filed within 10 days form receipt of the questioned resolution
of the NLRC, a procedure which is jurisdictional. Hence, original action of certiorari, as in this case, will not
prosper. Further, it should be stressed that without a motion for reconsideration seasonably filed within the
10-day reglementary period, the questioned order, resolution or decision of the NLRC becomes final and
executory after 10 calendar days from receipt thereof. Consequently, the merits of the case can no longer
be reviewed to determine if the public respondent has committed any grave abuse of discretion.
CERTIFICATION OF NON-FORUM SHOPPING MUST BE BY PETITIONER OR ANY OF THE
PRINCIPAL PARTY. – As pointed out by the private respondents, the certification in the present petition was
executed by the counsel of petitioners, which is not correct. The certification of non-forum shopping must be by the
plaintiff or any of the principal party and not the attorney. This procedural lapse on the part of petitioners is also a
cause for the dismissal of this action.

Certification of non-forum shopping to be signed by the complainant, not the lawyer.

Damasco vs. NLRC

Dec. 4, 2000

It is now axiomatic that the essence of due process in administrative proceedings is simply an
opportunity to explain one’s side or an opportunity to seek reconsideration of the action or ruling
complained of. A formal or trial-type hearing is not at all times and in all instances essential to due process,
the requirements of which is satisfied where parties are afforded fair and reasonable opportunity to explain
their side of the controversy at hand.

As noted by the Solicitor General and petitioner Damasco, the labor arbiter set the case several
times for preliminary conference but the parties failed to reached an amicable settlement. The labor arbiter
then ordered the parties to submit their position papers. In compliance therewith, the parties submitted
position papers where they set out and argued the factual as well as the legal bases of their position.
Damasco filed her position paper, computation of money claims and affidavit. For his part, Sia filed his
position paper and affidavit. Damasco, in turn, filed her affidavit in reply to the affidavit of Sia. After both
parties had filed their replies, the case was deemed submitted for resolution as the labor arbiter did not find
it necessary to conduct a trial-type hearing. Note that the filing of position papers and supporting
documents fulfills the requirements of due process. Further, it is within the discretion of the labor arbiter to
determine if there is a need for a hearing. Thus, we cannot subscribe to Sia’s posturing that the labor arbiter
gravely abused its discretion when he dispensed with the hearing to receive further evidence.
Moreover, Sia was given additional opportunity to argue his case on appeal before the NLRC in a
memorandum and motion for reconsideration which pleadings were likewise considered by that labor
agency in the course of resolving the case. Sia cannot thereafter interpose lack of due process since he was
  128

given sufficient time and ample chances to be heard in the present case. Consequently, the alleged defect in
the proceedings in the labor arbiter, if there be any, should be deemed cured.

 If other causes of action were not included in the original complaint, remedy is to file an amended
complaint.

Holding of trial is discretionary on the LA, why?

Because if based on the position paper, the facts are not controverted, then the Labor Arbiter can
decide based on the position papers. However, if controverted, then the Labor Arbiter would see the need to
ask clarificatory questions to further elicit facts.

Do the technical rules on evidence apply? Is there a provision in LC?

Article 221, LC - In any proceeding before the commission or any of the Labor Arbiter’s, the rules on
evidence prevailing in courts of law or equity shall not be controlling….

 RULE 5, SECTION 9, NLRC RULES – The proceedings before a Labor Arbiter shall be non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and procedure and the rules
obtaining in the courts of law shall not strictly apply thereto.

 NOTE: It does not mean however that the rules on evidence will not be used. Such will not only be
controlling.

Admissibility of evidence involving money claims. What is the quantum of proof in labor cases?

SUBSTANTIAL EVIDENCE – relevant evidence, which a reasonable mind might accept as adequate
to support a conclusion.

Burden of proof [EX. Complainant alleges that ER did not pay minimum wage, overtime pay.]
Burden rests upon ER to prove correct payment. Based on SC rulings, it is a negative allegation and
does not require proof on the claimant. Also because The ER keeps payroll records.

{Opinion of Marquez} However, it does not dispense on the part of the claimant to prove or specify his
allegations such as the particular date or # of hours of unpaid overtime. EE should share the burden.

How can Employer prove payment?

The employer can prove payment though the payroll. One of the parts of the payroll is the dotted
line where the EE will sign upon receipt of the payment.

 Since the law requires the ER to keep certain records, such as the payroll, then it is easier for the ER to
prove payment than for the EE to prove non-payment.

Admissibility of evidence?
Rules on hearsay evidence would apply. A piece of paper which is not authenticated such as a
payroll, the same being undated and unsigned, would be considered a private document.

How is a private document authenticated?

(Rules on Evidence) Its due execution and authenticity must be proved by either anyone who saw

the document execute or written or by the evidence of the genuineness of the signature and

handwriting of the maker.

Cases: Admissibility of Evidence: Even if it is a Labor Case, the SC applied Rules on Evidence

Daily Time Record which is a mere photocopy.

  129

Jarcia Machine Shop vs. NLRC

266 SCRA 97

We fail to see any grave abuse of discretion amounting to lack of jurisdiction on the part of public
respondent in upholding the labor arbiter's decision which declared Tolentino's transfer as a constructive
dismissal.
With respect to its first argument, petitioner contends that public respondent committed grave
abuse of discretion in not taking into consideration private respondent' s propensity to absence, tardiness
and work undertime which is allegedly well-established in private respondent's daily time records (DTR). It
is claimed that a perusal of these DTRs would show that private respondent had been absent or had worked
undertime quite a number of times for the year 1992. This had been the case since private respondent got
married. Petitioner claims that private respondent's record of absences, tardiness and undertime work gives
petitioner more than sufficient reason to impose some disciplinary action against private respondent.
However, despite his work attitude, private respondent was not dismissed but merely transferred by
petitioner to another position.
Indeed, the DTRs annexed to the present petition would tend to establish private respondent's
neglectful attitude towards his work duties as shown by repeated and habitual absences and tardiness and
propensity for working undertime for the year 1992. But the problem with these DTRs is that they are
neither originals nor certified true copies. They are plain photocopies of the originals, if the latter do exist.
More importantly, they are not even signed by private respondent nor by any of the employer' s
representatives. In all of the DTRs attached to the present petition, the space provided for the employee's
signature is conspicuously blank. Hence, as pointed out by private respondent in his Comment, these DTRs
have not been established as pertaining to private respondent, thus raising the probability that these
records may have been simulated to justify private respondent's demotion and transfer. At this juncture, it
should be noted that private respondent himself impugns the authenticity of these DTRs.

Notebook which is undated and unsigned. According to the SC there is uncertainty as to the origin and
authenticity of the same.

Jimenez vs. NLRC

256 SCRA 84

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff
must allege non-payment, the general rule is that the burden rests on the defendant to prove payment,
rather than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal
certainty that the obligation h as been discharged by payment.
When the existence of a debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a
defense to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of
going forward with the evidence — as distinct from the general burden of proof — shifts to the creditor,
who is then under a duty of producing some evidence to show non-payment.
In the instant case, the right of respondent Pedro Juanatas to be paid a commission equivalent to
17%, later increased to 20%, of the gross income is not disputed by petitioners. Although private
respondents admit receipt of partial payment, petitioners still have to present proof of full payment. Where
the defendant sued for a debt admits that the debt was originally owed, and pleads payment in whole or in
part, it is incumbent upon him to prove such payment. That a plaintiff admits that some payments have
been made does not change the burden of proof. The defendant still has the burden of establishing
payments beyond those admitted by plaintiff.
The testimony of petitioners which merely denied the claim of private respondents, unsupported by
documentary evidence, is not sufficient to establish payment. Although petitioners submitted a notebook
showing the alleged vales of private respondents for the year 1990, the same is inadmissible and cannot be
given probative value considering that it is not property accomplished, is undated and unsigned, and is thus
uncertain as to its origin and authenticity.

Involves a written summation of accounts which is undated and unsigned.

Callanta vs. NLRC

225 SCRA 526

Anent the claims for refund, petitioner once again failed to convincingly prove the authenticity of
his claim against private respondent company. Petitioner claims that the amounts of P76,893.42 and
P10,000.00 allegedly owed to him by private respondent company were matters proved during the hearings
before the Labor Arbiter. However, the records show that no hearing for the reception of evidence was ever
conducted by the Labor Arbiter. At most, what transpired were preliminary hearings which had to be reset
for five (5) times due to the absence of counsel for private respondent. In fact, because of the absence of
counsel for respondent company, the Labor Arbiter just ordered the parties to submit their respective
  130

position papers in lieu of actual hearings. This having been the case, the Court is not convinced that the
money claims of petitioner have really been proven during the alleged hearings before the Labor Arbiter, if
any, especially in the present case where the money claims are even refuted by private respondent.
In support of its claims for refund, petitioner presented a written summation of accounts reflecting
the amounts allegedly owed by private respondent company to him. However, the aforestated summation is
undated and unsigned, thus inadmissible and uncertain as to its origin and authenticity. Further kindling the
flame of suspicion as to the origin of the summation in question is the context of the November 17, 1987
letter of petitioner to private respondent Limpe. Quite unusual is the fact that in refuting the findings of the
alleged "post audit" conducted by private respondent company, petitioner did not even bother to mention
the source of his conclusion that private respondent company still owes him P76,893.42, while at the same
time complaining that somehow he is being refused access to and disclosure of some of the company
records, particularly the records/audit of E.V. Rodriguez and J. Pong, Jr. These facts are inconsistent with
petitioner's contention that it was the auditor of private respondent company itself who made the written
summation.

Xerox copy is a scrap of paper. It must be a certified true copy if offered as evidence.

Capili vs. NLRC

273 SCRA 589

The validity then of UM's "retirement" of the petitioner upon the latter's 60th birth anniversary on
18 August 1993 could only be based on proof that the petitioner became a member of its Retirement Plan at
any time after his employment in 1982 but before 18 August 1993. The burden to prove such a fact was on
UM, but the record fails to show that UM has discharged that burden.
UM's belated attempt to prove that it is a school policy to retire employees who reach the age of
60, pursuant to UM's Retirement Policies dated 16 December 1990 24 and Updated Retirement Policy dated
3 August 1993, cannot sway this Court in UM's favor. These documents are mere scraps of paper, they
being only xerox copies. They have not been certified to be true copies or offered in evidence before the
Labor Arbiter and the NLRC. Neither have they even been referred to in UM's comment in this case.

Can the LA validly decide based on position papers?

If the issues are not controverted, then such method is practicable and valid. If the facts are
controverted, then hearing must be conducted. Such is usually applied in illegal dismissal cases. In money
claims, you just show your payroll.

 No motion for reconsideration is allowed from a judgment or order of the LA. (RULE V, SECTION 19,
NLRC RULES).
 The remedy is to appeal such decision to the NLRC within 10 calendar days from the receipt of the
decision of the LA. It is 5 calendar days if the decision came from the RD.

Motion for reconsideration in NLRC is a prohibited pleading.

Bombase vs. NLRC

245 SCRA 496

The claim of petitioner that her backwages should be recomputed was correctly denied by public
respondent. The matter was only raised by petitioner when she moved for reconsideration of the Order of
March 19, 1992 of Arbiter del Rosario. Her motion was denied on July 8, 1992 on the ground that under the
rules of public respondent said motion for reconsideration is a prohibited pleading. The denial was appealed
to the NLRC and it was rightly affirmed by public respondent NLRC for section 17, Rule 5 of the Revised
Rules of the NLRC categorically provides that "no motion for reconsideration of any order or decision of the
Labor Arbiter shall be given due course." In connection therewith, Article 223 of the Labor Code, as
amended, provides that "decision, awards or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders." It is thus plain that petitioner can no longer assail the correctness of her
award of backwages as she failed to challenge it by means of appeal to the NLRC and within the ten (10)
day period required by the Labor Code, as amended. In Ramones v. NLRC, we held that this appeal period
is jurisdictional.
We also sustain the award of separation pay given by the public respondent to petitioner.

If the judgment involves a monetary award, how is the appeal perfected?

By posting a cash or surety bond exclusive of damages and attorney’s fees. (Rule VI, Sec. 6)
  131

What are the other requirements to perfect appeal?

1. Proof of payment of appeal fee.
2. Under oath
3. Filed on time
4. File a memorandum of appeal containing:
- Grounds relied upon and arguments in support thereof.
- Relief prayed for.
- Statement of date when decision was received.
- Proof of service to other party.

Appeal fee is jurisdictional.

Luna vs. NLRC

GR 11604, Mar. 20, 1997

Private respondent Grandeur Security Services Corporation also defends the order of the NLRC and
contends that petitioners' appeal was not perfected because the required appeal fees were paid beyond the
reglementary period.
The issue in this case is whether the NLRC committed grave abuse of discretion amounting to lack
or excess of jurisdiction in dismissing the petitioners' appeal. We hold that it did not. Under the rules of the
NLRC, an appeal from the Labor Arbiter's decision to the NLRC may be taken (1) by filing a verified
memorandum of appeal and (2) by paying the appeal fees filed within ten (10) calendar days from receipt
of a decision, award or order of the Labor Arbiter. Both requisites must be satisfied, otherwise the running
of the prescriptive period for perfecting an appeal will not be tolled.

Payment of appeal docketing fee not required for perfection of appeal.

Aba vs. NLRC

311 SCRA 248

Not jurisdictional but merely a technical rule citing Article 277(d) of the LC which states that no
docket fee shall be assessed in labor standards dispute.
Is delay in paying the appeal docketing fee fatal to petitioner’s appeal? The Office of the Solicitor
General opines that the dismissal of petitioner’s appeal for failure to pay the appeal docketing fee on time
was not in consonance with the constitutional mandate to protect labor and settled jurisprudence.
Accordingly, it moves for the setting aside of the decision of the NLRC which dismissed Aba’s appeal and
motion for reconsideration for non-payment of the appeal docketing fee.
The petition is impressed with merit. "Appeal" means the elevation by an aggrieved party of any
decision or award of a lower body to a higher body by means of a pleading which includes the assignment
of errors, arguments in support thereof, and the reliefs prayed for. On the other hand, "perfection of an
appeal" includes the filing, within the prescribed period, of the memorandum of appeal containing, among
others, the assignment of error/s, arguments in support thereof, the relief sought and, in appropriate cases,
posting of the appeal bond. An appeal bond is necessary only in case of a judgment involving a monetary
award, in which case, the appeal may be perfected only upon the posting of a cash or surety bond issued by
a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from.
In the instant case, it is undisputed that the appeal was filed within the reglementary period. The
memorandum of appeal contained an assignment of errors, the arguments in support thereof, and the
reliefs sought. No appeal bond was necessary as the decision being appealed did not contain any monetary
award. Nowhere is it written that payment of appeal docketing fee is necessary for the perfection of the
appeal. Therefore, there is no question that the appeal in the instant case has been perfected and the
failure to pay the appeal docketing fee is not fatal. Besides, it is settled jurisprudence that technical rules of
evidence are not binding in any proceedings before the Commission or any of the labor arbiters.
It has been the policy of this Court to resolve labor disputes with the view of compassionate justice
towards the working class.

 Marquez comments that docket fee and appeal fee are not the same!

Distinction between perfection of appeal and filing of appeal

Teofilo Gensoli and Co. vs. NLRC

289 SCRA 407

In perfecting their appeal, petitioners filed with NLRC a supersedeas bond to cover only the
amount of One Hundred Eighty One Thousand Nine Hundred Sixty Nine and 10/100 (P181,969.10) Pesos,
the excess amount disputed on appeal.
To the appeal of petitioners, private respondents interposed their opposition on the ground that
the supersedeas bond posted by petitioners did not equal the monetary award of Four Hundred Thirty Four
Thousand Seven Hundred Fifty Two and 50/100 (P434,752.50) Pesos and attorney's fees.
  132

As the appeal from subject Decision was not perfected within the 10-day reglementary period; on
August 11, 1993, the NLRC dismissed the appeal, holding, thus —

". . . The Commission (Fourth Division) after due deliberation, RESOLVED to DISMISS

the instant appeal for failure of respondent-appellants to comply with the requirement for the

perfection of an appeal specifically the posting of the required cash or surety bond equivalent to the

monetary award. The monetary award in the judgment appealed from is P434,752.50, whereas the

supersedeas bond posted is only P181,969.10, and therefore, deficient by P252,783.40. The law and

the present Rules of Procedure of the NLRC are very explicit in the matter of posting a cash or

surety bond equivalent to the monetary award in The petition is impressed with merit.”

Salutory and prevailing is the rule that technical rules be not strictly followed and the spirit and
intent of the Labor Code be taken into account.
True it is, Article 223 of the Labor Code, as amended by Republic Act No. 6715, requires a cash or
surety bond in an amount equal to the monetary award in the judgment appealed from. But for the
perfection of the appeal on the merits, to be threshed out by the NLRC, the requirements of the law should
be given a liberal interpretation.
This policy of liberal interpretation was unequivocably ratiocinated and amply settled in the case of
Oriental Mindoro Cooperative, Inc. v. NLRC (246 SCRA 801 [1995]), to wit:

"The intention of the lawmakers to make the bond an indispensable requisite for the

perfection of an appeal by the employer is underscored by the provision that an appeal by the

employer may be perfected 'only upon the posting of a cash or surety bond.' The word 'only' makes

it perfectly clear, that the lawmakers intended the posting of a cash or surety bond by the employer

to be the exclusive means by which an employer's appeal may be perfected. That requirement is

intended to discourage employers from using an appeal to delay, or even evade, their obligation to

satisfy their employees' just and lawful claims.

Considering, however, that the current policy is not to strictly follow technical rules but

rather to take into account the spirit and intention of the Labor Code, it would be prudent for us to

look into the merits of the case, especially since petitioner disputes the allegation that private

respondent was illegally dismissed. . . "

Indeed, well entrenched is the principle of liberal interpretation of the Labor Code, as

amended. order to perfect an appeal by an employer (Article 223 of the Labor Code of the

Philippines, as amended, and Sections 3 (a) and 6, Rule VI of the New Rules of Procedure of the

NLRC, as amended). As held by the Supreme Court, ". . . perfection of an appeal in the manner . . .

prescribed by law is not only mandatory but jurisdictional and failure to perfect an appeal as

required by the Rules has the effect of rendering the judgment final and executory."

Is property bond allowed?

Although RULE VI SECTION 6 doesn’t provide for it, the case of UERM-Memorial Medical Center
vs. NLRC, March 3, 1997, GR 110419, allows the same. Judgment was more than P17M. The property
bond offered was P102M.

UERM-Memorial Medical Center vs. NLRC

March 3, 1997, GR 110419
  133

The question presented in this petition for certiorari under Rule 65 is whether or not in perfecting
an appeal to the National Labor Relations Commission (NLRC) a property bond is excluded by the two forms
of appeal bond — cash or surety — as enumerated in Article 223 of the Labor Code.
Within the reglementary period for appeal, the petitioners filed their Notice and Memorandum of
Appeal with a Real Estate Bond consisting of land and various improvements therein worth P102,345,650.
The private respondents moved to dismiss the appeal on the ground that Article 223 of the Labor Code, as
amended, requires the posting of a cash or surety bond. The NLRC directed petitioners to post a cash or
surety bond of P17,082,448.56 with a warning that failure to do so would cause the dismissal of the appeal.
The petitioners filed a Motion for Reconsideration alleging it is not in a viable financial condition to post a
cash bond nor to pay the annual premium of P700,000.00 for a surety bond. On 6 October 1992, the NLRC
dismissed petitioners' appeal. Petitioners' Motion for Reconsideration was also denied by the NLRC in a
resolution dated 7 June 1993.
Hence, this petition assailing the two resolutions as having been issued with grave abuse of
discretion. On 28 June 1993, we temporarily enjoined the NLRC from implementing the questioned
resolutions and from executing the decision of the Labor Arbiter.
The applicable law is Article 223 of the Labor Code, as amended by Republic Act No. 6715, which
provides:
"In case of a judgment involving a monetary award, an appeal by the employer may be

perfected only upon the posting of a cash or surety bond issued by a reputable bonding company

duly accredited by the Commission in the amount equivalent to the monetary award in the

judgment appealed from."

We have given a liberal interpretation to this provision. In YBL (Your Bus Line) v. NLRC 4 we ruled:

". . . that while Article 223 of the Labor Code, as amended by Republic Act No. 6715,

requiring a cash or surety bond in the amount equivalent to the monetary award in the judgment

appealed from for the appeal to be perfected, may be considered a jurisdictional requirement,

nevertheless, adhering to the principle that substantial justice is better served by allowing the

appeal on the merits threshed out by the NLRC.

Then too, in Oriental Mindoro Electric Cooperative, Inc. v. National Labor Relations Commission we held:

"The intention of the lawmakers to make the bond an indispensable requisite for
the perfection of an appeal by the employer is underscored by the provision that an
appeal by the employer may be perfected "only upon the posting of a cash or surety
bond." The word "only" makes it perfectly clear, that the lawmakers intended the posting
of a cash or surety bond by the employer to be the exclusive means by which an
employer's appeal may be perfected. The requirement is intended to discourage
employers from using an appeal to delay, or even evade, their obligation to satisfy their
employees' just and lawful claims.
Considering, however, that the current policy is not to strictly follow technical
rules but rather to take into account the spirit and intention of the Labor Code, it would
be prudent for us to look into the merits of the case, especially since petitioner disputes
the allegation that private respondent was illegally dismissed."

We reiterate this policy which stresses the importance of deciding cases on the basis of their
substantive merit and not on strict technical rules. In the case at bar, the judgment involved is more than
P17 million and its precipitate execution can adversely affect the existence of petitioner medical center.
Likewise, the issues involved are not insignificant and they deserve a full discourse by our quasi-judicial and
judicial authorities. We are also confident that the real property bond posted by the petitioners sufficiently
protects the interests of private respondents should they finally prevail. It is not disputed that the real
property offered by petitioners is worth P102,345,650. The judgment in favor of private respondent is only a
little more than P17 million. So holds that the foregoing requirement of the law should be given a liberal
interpretation.

Your Bus Line vs. NLRC

190 SCRA 160

Reiterates the UERM case.
  134

Hence, this petition for review, which this Court will treat as a special civil action for certiorari,
whereby petitioners raised the sole issue that the NLRC erred in not giving due course to the appeal for
failure to satisfy a purely technical requirement when issues involving substantial rights were raised in the
appeal.
The petition is impressed with merit.

Article 223 of the Labor Code as amended by Republic Act No. 6715 provides as follows:
"ART. 223. Appeal. . . . — In case of a judgment involving a monetary
award, an appeal by the employer may be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly accredited by the Commission
in the amount equivalent to the monetary award in the judgment appealed from."
(Emphasis supplied.)

The NLRC Interim Rules on Appeals under Republic Act No. 6715, which took effect on September 5, 1989,
provide in Section 5 thereof as follows:
"Section 5. Requisites of Appeal; When Perfected. . . . shall be under oath
with proof of payment of the required appeal fee and the posting of a cash or surety bond
as provided in Section 7 of these rules. . . ." (Emphasis supplied.)

The appeal interposed by petitioners to the NLRC was made on September 11, 1989, or just after
six (6) days from the effectivity of the aforestated Interim Rules. In undertaking the appeal, the counsel of
petitioners relied on the notice of the decision in the case which stated the requirements of an appeal
without any mention that a bond must be filed. Apparently said counsel did not know as yet of said new law
and Interim Rules requiring the posting of a bond on appeal. It also appears that private respondents did
not know about it as no opposition to the appeal was made on this account.
Moreover, in the appealed decision of the labor arbiter the exact total amount due to the private
respondents as separation pay is not stated which would be the basis of the bond that is required to be filed
by petitioners under the said law. Thus even if petitioners may be expected to know the law, then they
allege that they would have to go to the socio-analyst of the NLRC to compute the approximate amount due
the private respondents as the basis of the amount of the bond to be filed so that it is not probable that
they may be able to secure such computation within the non-extendible period of ten (10) days to appeal
provided for by law.
Petitioners also assert that at that time the petitioner corporation was in financial distress. At any
rate they offered to post the bond in compliance with the requirement of the law so that they may be
afforded the relief of an appeal.
The Court finds that while Article 223 of the Labor Code, as amended by Republic Act No. 6715,
requiring a cash or surety bond in the amount equivalent to the monetary award in the judgment appealed
from for the appeal to be perfected, may be considered a jurisdictional requirement, nevertheless, adhering
to the principle that substantial justice is better served by allowing the appeal on the merits threshed out by
the NLRC, the Court finds and so holds that the foregoing requirement of the law should be given a liberal
interpretation.
In Sun Insurance Office, Ltd. vs. Maximiano C. Asuncion, this Court relaxed the rule in
Manchester Development Corporation vs. Court of Appeals, by allowing a liberal interpretation of the
rule that the payment of the docket fees is jurisdictional. More so when the party involved demonstrated his
willingness to abide by the rules to pay the docket fees required. This Court held that the payment of said
fees may be authorized by the Court within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period. The greater interest of justice will be served by giving due course to the
appeal despite the much delayed filing of the appeal bond.
In this case, the circumstances of the non-filing of the bond are understandable and could be
attributed to excusable oversight. The Court holds that petitioners should be given the opportunity to file
the required bond and avail of the remedy of appeal.

Does the exclusion of damages and attorney’s fees in the bond per Sec. 6, Rule VI, NLRC rules
have statutory basis?
Note that Article 223 of the LC provides that the bond should be equivalent to the monetary award
in the judgment appealed from.

Are moral damages included in the computation of "monetary award" for purposes of
determining the amount of the appeal bond?

Fernandez vs. NLRC

Jan. 28, 1998, GR 105892

The SC said there is no conflict because Article 223 provides for the requisites to perfect the appeal
while the NLRC rules, the manner of computing the bond.

Petitioners contend that Respondent NLRC did not acquire jurisdiction over the appeal of private
respondents because the appeal bond was insufficient. Although the total monetary award in their favor was
  135

P1,078,200.55, private respondents posted a cash bond in the amount of P752,183.00 only. In computing
the monetary award for the purpose of posting an appeal bond, private respondents relied on Rule VI,
Section 6 of the 1990 New Rules of Procedure of the NLRC and excluded the award for damages, litigation
expenses and attorney's fees. Petitioners argue however that the said rule cannot prevail over Article 223 of
the Labor Code, which does not provide for such exclusion.
We agree with private respondents. Article 223 of the Labor Code provides:
xxx xxx xxx
In case of a judgment involving a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by
the Commission in the amount equivalent to the monetary award in the judgment appealed from.
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a
bond by the employer shall not stay the execution for reinstatement provided therein. . . ." (Emphasis
supplied.)
On the other hand, Rule VI, Section 6 of the 1990 NLRC New Rules of Procedure, invoked by private respondent,
provides:

"Section 6. Bond. — In case of the decision of a Labor Arbiter involves a

monetary award, an appeal by the employer shall be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly accredited by the
Commission or the Supreme Court in an amount equivalent to the monetary award.
The Commission may, in meritorious cases and upon Motion of the Appellant,
reduce the amount of the bond. However, an appeal is deemed perfected upon the
posting of the bond equivalent to the monetary award exclusive of moral and exemplary
damages as well as attorney's fees.
Nothing herein however, shall be construed as extending the period of appeal."
(Emphasis supplied.)
There is no conflict between the two provisions. Article 223 lays down the requirement that an appeal bond should be
filed. The implementing rule, on the other hand, explains how the appeal bond shall he computed. The rule explicitly
excludes moral and exemplary damages and attorney's fees from the computation of the appeal bond. This exclusion
has been recognized by the Court in a number of cases. Hence, in Erectors vs. NLRC, the Court nullified an NLRC
order requiring the posting of an appeal bond which, among others, "even included in the computation the award of
P400,000.00 for moral and exemplary damages." Indeed, the said implementing rule is a contemporaneous construction
of Article 223 by the NLRC pursuant to the mandate of the Labor Code; hence, it is accorded great respect by this
Court.

If the last day to file an appeal falls on a Saturday, Sunday or Holiday

You can still file it on the next working day. In computing the 10-day period, do not exclude these
days because the law speaks of calendar days.

Under what mode of service can a pleading before the NLRC be filed?
The NLRC Rules do not provide for a more of serving pleadings in general. The Rules of Court
provides however that it can be done through:
- Personal delivery
- Registered Mail

 For purposes of computing the reglementary period, if the filing is done by registered mail, the date of
mailing is the date of filing. If by ordinary mail, the date of actual receipt is the date of filing. See
INDUSTRIAL PAPER VS NLRC [233 SCRA 597].

Industrial Paper vs. NLRC

233 SCRA 597

SERVICE OF PLEADINGS; RULE IF MADE BY ORDINARY MAIL OR BY PRIVATE

MESSENGERIAL SERVICE. — On the issue of the timeless of the petitioners' motion for reconsideration, we find
that the NLRC correctly applied the rule that where a pleading is filed by ordinary mail or by private messengerial
service, it is deemed filed on the day it is actually received by the court, not on the day it was mailed or delivered to
the messengerial service. As this Court held in Benguet Electric Cooperative, Inc. v. NLRC, (209 SCRA 55 [1992]):
The established rule is that the date of delivery of pleadings to a private letter-forwarding agency is not to be
considered as the date of filing thereof in court, and that in such cases, the date of actual receipt by the court, and
not the date of delivery to the private carrier, is deemed the date of filing of that pleading.

Is it possible to file a Motion to Reduce Bond?

Yes, see Rule 6, Section 6. However, you must file it within the reglementary period to appeal and
the act of filing does not stop the running of the period to appeal. Note that the appeal is perfected once a
bond is filed.
  136

See the following cases and do not mistake one from the other because these cases were decided
prior to the amendment:

Star Angel Handicraft vs. NLRC

236 SCRA 580

The appeal bond is required under Paragraph 2 of Article 223 of the Labor Code, which provides:
"In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in
the amount equivalent to the monetary award in the judgment appealed from."

Section 3(a), Article 223, Rule VI of the New Rules of Procedure of the NLRC provides:
"Requisites for Perfection of Appeals. — (a) The appeal shall be filed within the reglementary period as
provided in Section 1 of the this Rule; shall be under oath with proof of payment of the required appeal fee and
the posting of a cash or surety bond as provided in Section 5 of this Rule; . . ."

Under Section 5 of Rule VI, the appellant is required to pay an appeal fee of P100.00 to the
Regional Arbitration Branch, Regional Office, and to attach to the records of the case the official receipt of
such payment.
In Section 6 of Rule VI, it is provided that:
"Bond. — In case the decision of a Labor Arbiter involves a monetary award, an appeal by the employer shall
be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission or the Supreme court in an amount equivalent to the monetary award. The
Commission may, in meritorious cases and upon Motion of the Appellant, reduce the amount of the bond.
(However, an appeal is deemed perfected upon the posting of the bond equivalent to the monetary award
exclusive of moral and exemplary damages as well as attorney's fees [Deleted, effective on January 14, 1992]).
Nothing herein however, shall be construed as extending the period of appeal."

Neither the Labor Code nor its implementing rules specifically provide for a situation where the
appellant moves for a reduction of the appeal bond. Inasmuch as in practice the NLRC allows the reduction
of the appeal bond upon motion of appellant and on meritorious grounds, it follows that a motion to that
effect may be filed within the reglementary period for appealing . Such motion may be filed in lieu of a bond
which amount is being contested.
In the meantime, the appeal is not deemed perfected and the Labor Arbiter retains jurisdiction
over the case until the NLRC has acted on the motion and appellant has filed the bond as fixed by the NLRC.
An analogous procedure is the extension of time to file a record on appeal, provided the motion for
such extension is filed before the expiration of the reglementary period for filing said record on appeal. If
the order of the trial court granting the motion is issued only after the expiration of the original period, the
appeal may still be perfected within the period extended. Likewise, the appeal is deemed perfected only
after the approval of the record on appeal and not upon the filing of said record on appeal.

Coral Point Development Corporation vs. NLRC

GR 129761, February 28, 2000

Article 223, second paragraph, of the Labor Code states that when a judgment involving monetary
award is appealed by the employer, the appeal may be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent
to the monetary award in the judgment.
This is to assure the workers that if they finally prevail in the case the monetary award will be
given to them upon dismissal of the employer’s appeal.
It is further meant to discourage employers from using the appeal to delay or evade payment of
their obligations to the employees.
In Viron Garments Manufacturing Co., Inc. v. NLRC, this Court said:
The intention of the lawmakers to make the bond an indispensable requisite for
the perfection of an appeal by the employer is clearly limned in the provision that the
appeal by the employer may be perfected "only upon the posting of a cash or surety
bond." The word "only" makes it perfectly clear that the lawmakers intended that the
posting of a cash or surety bond by the employer may be the exclusive means by which
an employer’s appeal may be perfected.

In meritorious cases and upon motion of the appellant, the NLRC may reduce the amount of the
bond. Also in some cases the requirement of posting a supersedeas bond for the perfection of an appeal
was relaxed, but the decisions were justified due to substantial compliance with the rule. We recognized in
Star Angel Handicrafts v. NLRC that neither the Labor Code nor its implementing rules specifically
provide for a situation where the appellant moves for a reduction of the appeal bond, and
  137

Inasmuch as in practice the NLRC allows the reduction of the appeal bond upon
motion of appellant and on meritorious grounds, it follows that a motion to that effect
may be filed within the reglementary period for appealing. Such motion may be filed in
lieu of a bond which amount is being contested. In the meantime, the appeal is not
deemed perfected and the Labor Arbiter retains jurisdiction over the case until the NLRC
has acted on the motion and appellant has filed the bond as fixed by the NLRC.

 The prevailing rule now is that the filing of a motion to reduce bond will not stop the reglementary period
to file an appeal.

If the NLRC has the authority to entertain a motion to reduce bind,

then it can also grant extension to file bond.

Alcosero vs. NLRC

288 SCRA 140

APEX appealed to the NLRC on 15 August 1993 assailing the decision of the Labor Arbiter. Instead
of posting an appeal bond, however, APEX filed in lieu thereof a motion for the reduction of the appeal bond
seven (7) days from its receipt of the Labor Arbiter's decision. After due consideration, the NLRC on 4 May
1994 promulgated a resolution providing in part that APEX had already paid all the claims due to
complainants in connection with this case as evidenced by the individual receipts and quitclaims executed by
the latter. There being no allegation that complainants were forced or pressured into signing the receipts
and quitclaims, the NLRC sustained as valid the aforementioned documents. Accordingly, the Labor Arbiter's
decision was ordered vacated and set aside, and the above entitled case dismissed for lack of merit. Hence,
the instant petition for certiorari questioning the resolution of the NLRC.
Petitioners contend that the NLRC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in entertaining the appeal of APEX notwithstanding that the assailed decision of the
Labor Arbiter had long become final and executory for failure of APEX to file the required appeal bond within
the reglementary period of ten (10) days, which bond was an indispensable requirement for the perfection
of the appeal.
Ordinarily, where the losing party desires to appeal from the decision of the Labor Arbiter it must
be done within ten (10) days from receipt of the decision. When the judgment involves a monetary award,
an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the NLRC or the Supreme Court in an amount equivalent to
the monetary award in the judgment appealed from. Compliance with these requirements is both mandatory
and imperative as the perfection of an appeal within the reglementary period is jurisdictional. But in a
growing number of cases, we have relaxed the stringent application of the rule concerning the posting of
appeal bond within the 10-day reglementary period as a requirement for the perfection of an appeal. Thus,
in the leading case of Star Angel Handicraft v. National Labor Relations Commission, we held —
Neither the Labor Code nor its implementing rules specifically provide for a situation where the

appellant moves for a reduction of the appeal bond. Inasmuch as in practice the NLRC allows the

reduction of the appeal bond upon motion of appellant and on meritorious grounds, it follows that a

motion to that effect may be filed within the reglementary period for appealing. Such motion may

be filed in lieu of a bond which amount is being contested. In the meantime, the appeal is deemed

perfected and the Labor Arbiter retains jurisdiction over the case until the NLRC has acted on the

motion and appellant has filed the bond as fixed by the NLRC.

In this case, APEX filed in lieu of an appeal bond a motion for the reduction of the bond together
with the Memorandum of Appeal seven (7) days from receipt of the Labor Arbiter's decision. The NLRC held
that the appeal of APEX was founded on meritorious grounds, hence, it gave due course to the same
despite the fact that no appeal bond was posted at that time. The NLRC could not be faulted for doing so
since it had authority to entertain motions for the reduction of the appeal bond. And when APEX posted the
required bond within the extended period granted by the NLRC, it was deemed to have seasonably
perfected its appeal.

Once the bond has been reduced, the employer cannot file a Motion for Reconsideration as this would
amount to an extension of the period to perfect an appeal.
  138

Mers Shoes vs. NLRC

286 SCRA 647

It has been held in numerous decisions that failure to file an appeal within the reglementary period
deprives the appellate court of jurisdiction to alter the final judgment, much less to entertain the appeal. This
timeworn issue is again before us.

Having received the above decision on February 4, 1994, petitioner perfected its appeal before respondent
NLRC on February 14, 1994. Simultaneous with the filing thereof, petitioner filed a motion to reduce the amount of
the bond which the NLRC partially granted in an order dated May 31, 1995, the dispositive portion of which reads:
"WHEREFORE, premises considered, respondent-movants should be, as it is
hereby ordered to post a cash or surety bond issued by a reputable bonding company
duly accredited by the Commission or the Supreme Court in the amount of P403,126.20
within ten (10) calendar days from receipt hereof.
Should respondents-movants opt to post a surety bond, they shall, in addition,
submit with their counsel a joint declaration under oath attesting that the surety bond to
be posted is genuine and that it shall be in effect until final disposition of the case.
SO ORDERED."

On July 28, 1995, petitioner filed a motion for reconsideration from the above order which the
NLRC treated as a motion for extension of time to perfect an appeal which is a prohibited pleading under
the New Rules of Procedure. Consequently, ruling that the ten-day reglementary period within which to post
the appeal bond having lapsed, NLRC dismissed the instant appeal. Hence, this petition.
We find for the respondents.
Article 223 of the Labor Code requires, inter alia that in case of a judgment involving a monetary
award, an appeal by the employer may be perfected only upon posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the commission in the amount equivalent to the monetary
award in the judgment appealed from. Perfection of an appeal within the period and in the manner
prescribed by law is jurisdictional and non-compliance with such legal requirements is fatal and has the
effect of rendering the judgment final and executory. This requirement is intended to discourage employers
from using the appeal to delay, or even evade, their obligation to satisfy their employee's just and lawful
claims. Such a requirement is jurisdictional and cannot be trifled with.
The intention of the lawmakers to make the bond an indispensable requisite for the perfection of
an appeal by the employer is underscored by the provision that an appeal by the employer may be
perfected only upon the posting of a cash or surety bond. The word "only" makes it perfectly clear, that the
lawmakers intended the posting of a cash or surety bond by the employer to be the exclusive means by
which an employer's appeal may be perfected. It must be noted, however, "that the law does not require its
outright payment, but only the posting of a bond to ensure that the award will be eventually paid should the
appeal fail."
While Section 6(c), Rule VI of the New Rules of Procedure of the NLRC allows the reduction of the
appeal bond upon motion of appellant and on meritorious grounds, the same must be filed within the
reglementary period for appealing. The records reveal that when petitioner sought the reduction of the bond
to P200,000.00, the NLRC partially granted the same by allowing a 50% reduction of the required bond or in
the amount of P403,126.20.
In support of petitioner's contention, it begs the Court to re-examine the following cases, to wit:
YBL v. NLRC; Erectors, Incorporated v. NLRC; and Rada v. NLRC, in relation to the case at bar.
After a careful scrutiny of the above cases and finding that the factual circumstances differ from
each other, we are unconvinced of its application to the instant petition. A distinction, therefore, of said
cases is in order.

In the Erectors case, the labor arbiter rendered a decision which reinstated the respondent
therein to his former position with full backwages, without loss of seniority rights or benefits accruing after
his dismissal, and to pay him P300,000.00 as moral damages, P100,000.00 as exemplary damages and 10%
of all said sums, as attorney's fees. While YBL did not question the reinstatement aspect of the decision, it,
however, sought to dismiss the award of moral and exemplary damages. For allegedly failing to post the
bond within the reglementary period, NLRC dismissed the appeal. On petition before this Court, we ruled
that:
"The equivalence thus expressly prescribed between the amount of the appeal bond and the

monetary award, less moral and exemplary damages, made in the decision sought to be appealed

not only underscores the fact that the obvious and logical purpose of an appeal bond is to insure,

during the period of appeal, against any occurrence that would defeat or diminish recovery under

the judgment if subsequently affirmed; it also validates and justifies, at least prima facie, an

interpretation that would limit the amount of the bond to the aggregate of the sums awarded other

than in the concept of moral and exemplary damages."

  139

In fine, the labor arbiter gravely erred in including moral and exemplary damages in the computation of the appeal
bond when the law clearly provides that moral and exemplary damages shall not be included in fixing the amount of the
bond.

In the YBL case, the NLRC similarly dismissed the appealed decision of the labor arbiter for the non-posting of the
appeal bond within the reglementary period. We ruled, thus:
"Moreover, in the appealed decision of the labor arbiter the exact total amount due to the private
respondents as separation pay is not stated which would be the basis of the bond that is required to
be filed by petitioners under the said law. Thus even if petitioners may be expected to know the law,
then they allege that they would have to go to the socio-analyst of the NLRC to compute the
approximate amount due the private respondents as the basis of the amount of the bond to be filed
so that it is not probable that they may be able to secure such computation within the non-
extendible period of ten (10) days to appeal provided for by law." (Emphasis supplied)

In view of the foregoing circumstance, petitioner therein could not have posted a bond, the same having been omitted
by the labor arbiter.

In Rada, the labor arbiter likewise committed the same infraction as in the YBL case. Thus:
"Said decision did not state the amount awarded as backwages and overtime pay, hence the amount
of the supersedeas bond could not be determined. It was only in the order of the NLRC of February
16, 1990 that the amount of the supersedeas bond was specified and which bond, after an extension
granted by the NLRC, was timely filed by private respondent."

The instant petition, however, presents a different factual milieu. As pertinently observed by the Solicitor General in his
Comment:
"To have the bond reduced is not a matter of right on the part of the movant but lies within the
sound discretion of the NLRC upon showing of meritorious grounds. After the NLRC had exercised
its discretion in fixing the bond, the petitioner should have complied with it. To file a subsequent
motion this time seeking another reconsideration of the already reduced value of the bond, is
indeed to request for an extension of time to perfect the appeal which is prohibited under the NLRC
Rules of Procedure. To rule otherwise will encourage endless motions for reconsideration seeking
reduction of the required bond thereby rendering futile the requirement of the law to make bond an
indispensable requisite for the perfection of appeal by the employer."

We, therefore, rule that for petitioner's failure to post the required bond within the reglementary
period after it has been ordered reduced, the NLRC committed no grave abuse of discretion in dismissing
petitioner's appeal.

The NLRC may grant or dismiss the appeal. Can the aggrieved party file a motion for
reconsideration?
YES. It must be filed within 10 calendar days from receipt of the dismissal of the appeal.

What if the Motion for Reconsideration is denied?

The decision will become final and executory.

If there is no Motion for Reconsideration filed before the NLRC, the decision becomes final and executory
and therefore there is no way by which another government body can review the case; the only remedy is a
motion for reconsideration.

Zapanta vs. NLRC

292 SCRA 586

NLRC; MOTION FOR RECON, A PREREQUISITE BEFORE ANY FURTHER REMEDY MAY BE
PURSUED. — Fatal to this action is petitioner's failure to move for the reconsideration of the assailed
decision on the dubious pretext that it will be a mere rehash of the arguments and issues previously raised
in his position paper, but which stratagem conveniently skirts as a consequence the reglementary period
therefor, especially if the same has already expired. The implementing rules of respondent NLRC are
unequivocal in requiring that a motion for reconsideration of the order, resolution, or decision of respondent
commission should be seasonably filed as a precondition for pursuing any further or subsequent remedy,
otherwise the said order, resolution, or decision shall become final and executory after ten calendar days
from receipt thereof.
RATIONALE. — The rationale therefor is that the law intends to afford the NLRC an opportunity to
rectify such errors or mistakes it may have lapsed into before resort to the courts of justice can be had. This
merely adopts the rule that the function of a motion for reconsideration is to point out to the court the error
  140

that it may have committed and to give it a chance to correct itself. Petitioner cannot, on its bare and self-
serving representation that reconsideration is unnecessary, unilaterally disregard what the law requires and
deny respondent NLRC its right to review its pronouncements before being haled to court to account
therefor. On policy considerations, such prerequisite would provide an expeditious termination to labor
disputes and assist in the decongestion of court dockets by obviating improvident and unnecessary recourse
to judicial proceedings. The present case exemplifies the very contingency sought to be, and which could
have been, avoided by the observance of said rules.

If the decision of the NLRC becomes final and executory due to the denial of the MFR, is there an
appeal of the decision of the NLRC?
NO. There is no appeal from the decision of the NLRC but there is still a remedy under RULE 65 of
the Rules of Court on the ground of grave abuse of discretion. The ground of prima facie evidence of abuse
of discretion is a ground for appealing the decision of the LA to the NLRC.

Will the filing of a Petition for Certiorari stay the decision of the NLRC?
NO. However, to enjoin enforcement of the decision of the NLRC which is final and executory, under
Rule 65, you have to apply for the issuance of a TRO and eventually a writ of injunction. There is no way of
preventing the decision of the NLRC from becoming final and executory except by the filing of MOTION FOR
RECONSIDERATION within the prescribed period of 10 days. Since the motion for reconsideration has been
denied, the decision will have to become final and executory and subject to execution. There is no more
appeal from that decision but there is a Special Civil Action [Certiorari] on the ground of grave abuse of
discretion. To prevent execution of the decision, the aggrieved party can apply for the issuance of a
Temporary Restraining Order.

If you apply for a TRO, for how many days will it be valid?
60 days. If issued by RTC, 20 days.

Can it be extended?
NO.

 Note that a Special Civil Action is an original action and the RTC, CA and SC have concurrent and original
jurisdiction. However, always follow the principle of HIERARCHY OF COURTS. At this stage where the
NLRC decision is the subject of the certiorari, the RTC does not have jurisdiction because the RTC is of the
same level as the NLRC and the LA is of the same level as the lower courts.

 LEGAL FORM 

Before the LA:

JUAN DE LA CRUZ (COMPLAINANT)
VS
SHOEMART (RESPONDENT)

If both parties appeal:

JUAN DE LA CRUZ (COMPLAINANT-APPELLANT)
VS
SHOEMART (RESPONDENT-APPELLANT)

If SM files a Petition for Certiorari:

SHOEMART (PETITIONER)
VS
JUAN DE LA DRUZ (PRIVATE RESPONDENT)
AND NLRC (PUBLIC RESPONDENT)

- In a certiorari case under Rule 65, there is a need to identify or implead the public respondent
because the petitioner imputes grave abuse of discretion.
- The petition will again be docketed by the CA
- From the NLRC, you should file it directly to the CA because it is an original action.
- The petition should be copy-furnished the other party.
- The NLRC is represented by the OFFICE OF THE SOLICITOR-GENERAL located in Amorsolo,
Makati City.
- Once the petition is filed before the CA, it will require the respondent to file a COMMENT.
The OSG will file the comment for NLRC. The private respondent will also file a comment.
- Thereafter the CA will determine if there is a need for the petitioner to file a REPLY TO THE
COMMENT, ordinarily within an extendible period of 10 days.
  141

- If the CA gives due course to the petition, the CA will require BOTH parties to file their
respective MEMORANDA which is akin to a position paper which summarizes their respective
claims and allegations.
- Thereafter, the case shall be submitted for decision by the CA without prejudice to the prayer
for injunctive writ (TRO or WPI). If the CA believes that the case is meritorious, the CA will
make the TRO permanent.

From the CA, is there still a Motion For Reconsideration?

YES. To be filed within 15 days, which the CA may either grant or deny.

From the CA, is there a remedy?

YES. Appeal by Certiorari under Rules 45 of the Rules of Court to be filed within 15 days from
receipt of the decision of the CA on the ground of pure questions of law. If is involves the application of the
rules or the law, it is a “question of law”.

 The SC is not a trier of facts but factual findings of the SC may be reviewed in exceptional cases.

Will the Appeal by Certiorari under Rule 45 prevent the decision of the CA from becoming final
and executory?
It will become final and executory. But if you file an appeal by certiorari under Rule 45 within the
prescribed period, the decision of the CA will be stayed.

 LEGAL FORM 

If the CA reverses NLRC decision, the caption of the appeal by certiorari under Rule 45 to the SC
shall read:

JUAN DE LA CRUZ (PETITIONER)

VS
SHOEMART (RESPONDENT)

 We do not need to implead the CA as respondent. This is found in Rule 45 Section 4.