LABOR DIGESTS

(FINALS)

II B Group 2
Cosalan, Elijah Roland
Gonayon, Glomarie
Gorospe, Michelle
Ignacio, Delight Grace
Sta. Cruz, Monalie
Villanueva, Irish Ruth
WAGES
Cosue v. Ferritz Integrated Development Corp.
G.R. No. 230664, July 24, 2017

Payment of Back Wages

If there is no abandonment nor dismissal of the employee, reinstatement is proper, however,
with no back wages. In addition, since there is an admission of the employer that the employee
is entitled to pro-rata 13th month pay for 2014, even if not alleged in the complaint of the
employee, it must be awarded in his favor. Thus, the employee must be awarded his salary
differentials, holiday pay, service incentive leave based on employee’s salary. There is also a clear
underpayment of wages if it is established that an employee was paid for the said benefits based
on wage rates below the minimum rate.

Payment of Moral and Exemplary Damages

Moral damages are recoverable where the dismissal of the employee was attended by bad faith
or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals,
good customs or public policy. On the other hand, exemplary damages are proper when the
dismissal was effected in a wanton, oppressive or malevolent manner, and public policy requires
that these acts must be suppressed and discouraged.

Payment of Attorney’s Fees

Ten percent (10%) attorney's fees may be recovered by an employee whose wages have been
unlawfully withheld. There need not even be any showing that the employer acted maliciously or
in bad faith; there need only be a showing that lawful wages were not paid accordingly, as in this
case.

Ampeloquio v. Jaka Distribution, Inc.

G.R. No. 196936, July 2, 2014

Seniority Rights
Seniority rights refer to the creditable years of service in the employment record of the illegally
dismissed employee as if he or she never ceased working for the employer. In other words, the
employee’s years of service is deemed continuous and never interrupted. Such is likewise the
rationale for reinstatement’s twin relief of full backwages.

Attached to the recognition of seniority rights of a reinstated employee who had been illegally
dismissed is the entitlement to wages appurtenant thereto.

Existence of an Independent and Permissible Contractor Relationship

The existence of an independent and permissible contractor relationship is generally established
by considering the following determinants: whether the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to supply the
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

Employer-Employee Relationship
Existence of an employer-employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the
payment of wages by whatever means; and (4) the power to control the worker's conduct, with
the latter assuming primacy in the overall consideration.

Eastern Telecommunications Philippines, Inc. v.

Eastern Telecoms Employees Union
G.R. No. 185665, February 8, 2012

Concept of Bonus
A bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand
as a matter of right. The grant of a bonus is basically a management prerogative which cannot be
forced upon the employer who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employee’s basic salaries or wages.

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the
wage or salary or compensation of the employee.

The Giving of 14th, 15th and 16th Month Bonuses Without Qualification
There were no conditions specified in the CBA Side Agreements for the grant of the benefits
contrary to the claim of ETPI that the same is justified only when there are profits earned by the
company. Terse and clear, the said provision does not state that the subject bonuses shall be
made to depend on the ETPI’s financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no profits, no bonuses are
to be given to the employees. In fine, the payment of these bonuses was not related to the
profitability of business operations.

Moreover, the continuous conferment of bonuses by ETPI to the union members from 1998 to
2002 by virtue of the Side Agreements evidently negates its argument that the giving of the subject
bonuses is a management prerogative.

“Regular Practice”
To be considered a “regular practice,” however, the giving of the bonus should have been done
over a long period of time and must be shown to have been consistent and deliberate. The test
or rationale of this rule on long practice requires an indubitable showing that the employer agreed
to continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.

The considerable length of time ETPI has been giving the special grants to its employees indicates
a unilateral and voluntary act on its part to continue giving said benefits knowing that such act
was not required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by
the employees.

Giving of Bonuses Cannot be Peremptorily Withdrawn without Violating the Labor Code
Art. 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 promulgation of this Code.

The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution
of benefits is founded on the constitutional mandate to protect the rights of workers and to
promote their welfare and to afford labor full protection.

TSPI v. TSPI Employees Union

G.R No. 163419, February 13, 2008

Collective Bargaining Agreement

A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem convenient provided
these are not contrary to law, morals, good customs, public order or public policy. Thus, where
the CBA is clear and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.

Interpretation of CBA
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued.
Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of the
parties. It is the duty of the courts to place a practical and realistic construction upon it, giving
due consideration to the context in which it is negotiated and the purpose which it is intended
to serve. Absurd and illogical interpretations should also be avoided. Considering that the parties
have unequivocally agreed to substitute the benefits granted under the CBA with those granted
under wage orders, the agreement must prevail and be given full effect.

Diminution of benefits
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed
by the employees. There is diminution of benefits when it is shown that: (1) the grant or benefit
is founded on a policy or has ripened into a practice over a long period; (2) the practice is
consistent and deliberate; (3) the practice is not due to error in the construction or application
of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done
unilaterally by the employer.
 Central Azucarera De Tarlac v.
Central Azucarera De Tarlac Labor Union-NLU
G.R. No. 188949, July 26, 2010

13th Month Pay

The term basic salary of an employee for the purpose of computing the 13th-month pay was
interpreted to include all remuneration or earnings paid by the employer for services rendered,
but does not include allowances and monetary benefits which are not integrated as part of the
regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and cost-of-living allowances. However,
these salary-related benefits should be included as part of the basic salary in the computation of
the 13th-month pay if, by individual or collective agreement, company practice or policy, the same
are treated as part of the basic salary of the employees.

Wesleyan University Philippines v.

Wesleyan University- Philippines Faculty and Staff Association
G.R. No. 181806, March 12, 2014

Rule on Non-Diminution of Benefits

The Non-Diminution Rule found in Article 100 of the Labor Code explicitly prohibits employers
from eliminating or reducing the benefits received by their employees. This rule, however, applies
only if the benefit is based on an express policy, a written contract, or has ripened into a practice.
To be considered a practice, it must be consistently and deliberately made by the employer over
a long period of time.

An exception to the rule is when “the practice is due to error in the construction or application
of a doubtful or difficult question of law.” The error, however, must be corrected immediately
after its discovery; otherwise, the rule on Non-Diminution of Benefits would still apply.

Rules not Stated in CBA

Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15
days sick leave and 15 days vacation leave with pay every year and that after the second year of
service, all unused vacation leave shall be converted to cash and paid to the employee at the end
of each school year, not later than August 30 of each year.

However, the Memorandum states that vacation and sick leave credits are not automatic as leave
credits would be earned on a month-to-month basis. This, in effect, limits the available leave
credits of an employee at the start of the school year. For example, for the first four months of
the school year or from June to September, an employee is only entitled to five days vacation
leave and five days sick leave. Considering that the Memorandum imposes a limitation not agreed
upon by the parties nor stated in the CBA, the Court agrees that it must be struck down.
INDEPENDENT CONTRACTOR OR
SUB-CONTRACTOR versus
LABOR-ONLY CONTRACTOR
Valencia v. Classique Vinyl Products Corp.
G.R. No. 206390, January 30, 2017

Labor-Only Contractor v. Legitimate Contractor

In the present case, the Supreme Court discussed that the contractor is a labor-only contractor
unless he may overcome the burden of proving that it has substantial capital, investment, tools
and the like. Thus, the definition is clear that a legitimate contractor must have its capital,
investment, and tools. As opposed to a labor-only contractor, which is presumed to be those
with no capital substantially, and has no investment and the like. In the case at bar, evidences such
as the legitimate contractor’s Certificate of Registration with the DTI and the license was
presented to prove its standing as a legitimate contractor. Even if such documents are not
conclusive enough to substantiate a status as a contract, it prevents the legal presumption of it
being a merely labor-only contractor. The Court also discussed that labor-only contracting
creates an employer-employee relationship to prevent a circumvention of labor laws. The
contractor in this case is considered merely as an agent of the principal employer. On the other
hand, the principal employer is responsible to the employees of the labor-only contractor as such
if such employees had been employed directly by the principal employer.

Liability of Principal Employer

The principal employer becomes solidarily liable with the labor-only contractor for all the
rightful claims of the employees.

Garden of Memories Park and Life Plan v. NLRC

GR No. 160278, February 8, 2012

Job Contracting
There is job contracting permissible under the Code if the following conditions are met: (1) The
contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and (2) The contractor has substantial
capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.

Labor-Only Contracting
Any person who undertakes to supply workers to an employer shall be deemed to be engaged
in labor-only contracting where such person: (1) Does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises and other materials; and (2) The
workers recruited and placed by such persons are performing activities which are directly related
to the principal business or operations of the employer in which workers are habitually employed.

Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly employed by him.

Prohibition against Labor-Only Contracting

Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting
shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for a principal, and any of the following
elements are present: i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing activities
related to the main business of the principal, or ii) The contractor does not exercise the right to
control over the performance of the work of the contractual employee.

Existence of an Independent Contractor Relationship v. Labor-Only Contracting

Several factors may be considered, such as, but not necessarily confined to, whether or not the
contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of
specified pieces of work; the control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the contractor's workers; the control of
the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode,
manner and terms of payment.

On the other hand, there is labor-only contracting where: (a) the person supplying workers to
an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others; and (b) the workers recruited and placed by such
person are performing activities which are directly related to the principal business of the
employer.

Burden of Proof Belongs to the Employer

Generally, the presumption is that the contractor is a labor-only contracting unless such
contractor overcomes the burden of proving that it has the substantial capital, investment, tools
and the like. In the present case, though Garden of Memories is not the contractor, it has the
burden of proving that Requiño has sufficient capital or investment since it is claiming the
supposed status of Requiño as independent contractor. Garden of Memories, however, failed to
adduce evidence purporting to show that Requiño had sufficient capitalization. Neither did it
show that she invested in the form of tools, equipment, machineries, work premises and other
materials which are necessary in the completion of the service contract.

Furthermore, Requiño was not a licensed contractor. Her explanation that her business was a
mere livelihood program akin to a cottage industry provided by Garden of Memories as part of
its contribution to the upliftment of the underprivileged residing near the memorial park proves
that her capital investment was not substantial. Substantial capital or investment refers to capital
stocks and subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries, and work premises, actually and directly used by the contractor or subcontractor
in the performance or completion of the job, work or service contracted out. Obviously, Requiño
is a labor-only contractor.

As the employer, Garden of Memories has the burden of proof to show the employee's deliberate
and unjustified refusal to resume his employment without any intention of returning. For
abandonment to exist, two factors must be present: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second element as the more determinative factor being manifested by some
overt acts. It has been said that abandonment of position cannot be lightly inferred, much less
legally presumed from certain equivocal acts. Mere absence is not sufficient.

In this case, no such intention to abandon her work can be discerned from the actuations of
Cruz. Neither were there overt acts which could be considered manifestations of her desire to
truly abandon her work. On the contrary, her reporting to the personnel manager that she had
been replaced and the immediate filing of the complaint before the DOLE demonstrated a desire
on her part to continue her employment with Garden of Memories. As correctly pointed out by
the CA, the filing of the case for illegal dismissal negated the allegation of abandonment.

Babas v. Lorenzo Shipping Corporation

G.R. No. 186091, December 15, 2010

Substantial Capital and Investment

The phrase substantial capital and investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business, in the
Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the
service it is being contracted to render. One who does not have an independent business for
undertaking the job contracted for is just an agent of the employer.

Legitimate Job Contracting or Subcontracting

A person is considered engaged in legitimate job contracting or subcontracting if the following
conditions concur:
a) The contractor carries on a distinct and independent business and undertakes the
contract work on his account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal
in all matters connected with the performance of his work except as to the results
thereof;
b) The contractor has substantial capital or investment; and
c) The agreement between the principal and the contractor or subcontractor assures
the contractual employees' entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social
welfare benefits.
 Nestle Philippines Inc. v. Puedan
G.R. No. 220617, January 30, 2017

Due Process in Investigation

The observance of fairness in the conduct of any investigation is at the very heart of procedural
due process. The essence of due process is to be heard, and, as applied to administrative
proceedings, this means a fair and reasonable opportunity to explain one's side, or an opportunity
to seek a reconsideration of the action or ruling complained of. Administrative due process
cannot be fully equated with due process in its strict judicial sense, for in the former a formal or
trial-type hearing is not always necessary, and technical rules of procedure are not strictly applied.
The Court's disquisition in Ledesma v. CA is instructive on this matter, to wit:

Due process, as a constitutional precept, does not always and in all situations require a
trial-type proceeding. Due process is satisfied when a person is notified of the charge
against him and given an opportunity to explain or defend himself. In administrative
proceedings, the filing of charges and giving reasonable opportunity for the person so
charged to answer the accusations against him constitute the minimum requirements of
due process. The essence of due process is simply to be heard, or as applied to
administrative proceedings, an opportunity to explain one’s side, or an opportunity to
seek a reconsideration of the action or ruling complained of.

Labor-Only Contracting
The NLRC found ODSI to be a labor-only contractor of NPI, considering that: (a) ODSI had no
substantial capitalization or investment; (b) respondents performed activities directly related to
NPI's principal business; and (c) the fact that respondents' employment depended on the
continuous supply of NPI products shows that ODSI had not been carrying an independent
business according to its own manner and method.

Stipulations in the Distributorship Agreement hardly demonstrate control on the part of NPI
over the means and methods by which ODSI performs its business, nor were they intended to
dictate how ODSI shall conduct its business as a distributor. Otherwise stated, the stipulations
in the Distributorship Agreement do not operate to control or fix the methodology on how
ODSI should do its business as a distributor of NPI products, but merely provide rules of conduct
or guidelines towards the achievement of a mutually desired result- which in this case is the sale
of NPI products to the end consumer.

Bernarte v. PBA
673 Phil. 384 (2011)

Employer-Employee Relationship; Independent Contracting

To determine the existence of an employer-employee relationship, case law has consistently
applied the four-fold test, to wit: (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 on the means and methods by which the work is accomplished. The so-called control
test is the most important indicator of the presence or absence of an employer-employee
relationship.

Once in the playing court, the referees exercise their own independent judgment, based on the
rules of the game, as to when and how a call or decision is to be made. The referees decide
whether an infraction was committed, and the PBA cannot overrule them once the decision is
made on the playing court. The referees are the only, absolute, and final authority on the playing
court. Respondents or any of the PBA officers cannot and do not determine which calls to make
or not to make and cannot control the referee when he blows the whistle because such authority
exclusively belongs to the referees. The very nature of petitioners’ job of officiating a professional
basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1)
the referees are required to report for work only when PBA games are scheduled, which is three
times a week spread over an average of only 105 playing days a year, and they officiate games at
an average of two hours per game; and (2) the only deductions from the fees received by the
referees are withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for
five days a week, petitioner is required to report for work only when PBA games are scheduled
or three times a week at two hours per game. In addition, there are no deductions for
contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions
from employees’ salaries. These undisputed circumstances buttress the fact that petitioner is an
independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor,
whose special skills and independent judgment are required specifically for such position and
cannot possibly be controlled by the hiring party.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner
is an employee of the former. For a hired party to be considered an employee, the hiring party
must have control over the means and methods by which the hired party is to perform his work,
which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the
renewal of the contract between PBA and petitioner, and highlights the satisfactory services
rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to
discontinue petitioners’ services at the end of the term fixed in the contract, whether for
unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever
other reason, the same merely results in the non-renewal of the contract, as in the present case.
The non-renewal of the contract between the parties does not constitute illegal dismissal of
petitioner by respondents.
 Phil. Airlines, Inc. v. NLRC
263 SCRA 638

Employer-Employee Relationship; Jurisdiction

The Labor Arbiter was without jurisdiction over the subject matter of NLRC-NCR Case No. 00-
11-06008-90, because no employer-employee relationship existed between PAL and the security
guards provided by USSI under the security service agreement, including the alleged 16 additional
security guards.

We have pronounced in numerous case that in determining the existence of an employer-

employee relationship, the following elements are generally considered: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4) the
power to control the employees conduct.

In the instant case, the security service agreement between PAL and USSI provides the key to
such consideration. A careful perusal thereof, especially the terms and conditions embodied in
paragraphs 4, 6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia, demonstrates beyond doubt
that USSI-and not PAL was the employer of the security guards. It was USSI which (a) selected,
engaged or hired and discharged the security guards; (b) assigned them to PAL according to the
number agreed upon; (c) provided, at its own expense, the security guards with firearms and
ammunitions; (d) discipline and supervised them or controlled their conduct; and (e) determined
their wages, salaries, and compensation; and (f) paid them salaries or wages. Even if we disregard
the explicit covenant in said agreement that there exist no employer-employee relationship
between CONTRACTOR and/or his guards on the one hand, and PAL on the other all other
considerations confirm the fact that PAL was not the security guards employer.

Considering then that no employer-employee relationship existed between PAL and the security
guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No. 00-11-
06008-90. Article 217 of the Labor Code (P.D. No. 442), as amended, vests upon Labor Arbiter
exclusive original jurisdiction only over the following:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from employer-
employee relations;
 5. Cases arising from any violation of Article 264 of this Code, including questions
involving legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or house hold service, involving an amount exceeding five thousand
pesos(P5,000.00) regardless of whether accompanied with a claim for reinstatement.

In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite.

The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption of jurisdiction on
the pretext that PAL was the indirect employer of the security guards under Article 107 in
relation to Articles 106 and 109 of the Labor Code and, therefore, it is solidarily liable with USSI.
We agree with the Solicitor General that these Articles are inapplicable to PAL under the facts
of this case. Article 107 provides:

ART. 107. Indirect employer. -- The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work,
task, job or project.

The preceding Article referred to, which is Article 106, partly reads as follows:

ART. 106. Contractor or subcontractor. -- Whenever an employer enters into a contract

with another person for the performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be paid in accordance with the
provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.

While USSI is an independent contractor under the security service agreement and PAL may be
considered an indirect employer, that status did not make PAL the employer of the security
guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be
considered an indirect employer only for purposes of unpaid wages since Article 106, which is
applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect
employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and
109 simply mean that the party with whom an independent contractor deals is solidarily liable
with the latter for unpaid wages, and only to that extent and for that purpose that the latter is
considered a direct employer. The term wage is defined in Article 97(f) of the Labor Code as the
remuneration of 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 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.

No valid claim for wages or separation pay can arise from the security service agreement in
question by reason of its termination at the instance of PAL. The agreement contains no provision
for separation pay. A breach thereof could only give rise to damages under the Civil Code, which
is cognizable by the appropriate regular court of justice. Besides, there is no substantial proof
that USSI in fact provided 16 additional guards. On the contrary, PAL was able to prove in the
annexes attached to its supplemental motion to dismiss that the 16 guards were actually picked
out from the original group and were just required to render overtime service.

The Labor Arbiters lack of jurisdiction was too obvious from the allegations in the complaint and
its annex (the security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The Labor
Arbiter then should have forthwith resolved the motion to dismiss and the supplemental motion
to dismiss. As correctly pointed out by PAL, under Section 15 of Rule V of the New Rules of
Procedure of the NLRC, any motion to dismiss on the ground of lack of jurisdiction, improper
venue, res judicata, or prescription shall be immediately resolved by the Labor Arbiter by a
written order. Yet, the Labor Arbiter did not, and it was only in his decision that he mentioned
that the resolution of the motion to dismiss was deferred until this case is decided on the merits
because the ground thereof was not indubitable. On this score the Labor Arbiter acted with
grave abuse of discretion for disregarding the rules he was bound to observe.

PCI Automation Center, Inc. v. NLRC

(252 SCRA 493)
Legitimate Job Contracting versus Labor-Only Contracting
Under the law, any person who enters into an agreement with a job contractor, either for the
performance of a specified work or for the supply of manpower, assumes responsibility over the
employees of the latter. However, for the purpose of determining the extent of the principal
employer’s liability, the law makes a distinction between legitimate job contracting and labor-only
contracting.
In legitimate job contracting, no employer-employee relationship exists between the employees
of the job contractor and the principal employer. Even then, the principal employer becomes
jointly and severally liable with the job contractor for the payment of the employees’ wages
whenever the contractor fails to pay the same. In such case, the law creates an employer-
employee relationship between the principal employer and the job contractors’ employees for a
limited purpose, that is, to ensure that the employees are paid their wages. Other than the
payment of wages, the principal employer is not responsible for any claim made by the employees.
On the other hand, in labor-only contracting, an employer-employee relationship is created by
law between the principal employer and the employees of the labor-only contractor. In this case,
the labor-only contractor is considered merely an agent of the principal employer. The principal
employer is responsible to the employees of the labor-only contractor as if such employees had
been directly employed by the principal employer. The principal employer therefore becomes
solidarily liable with the labor-only contractor for all the rightful claims of the employees.
Thus, in legitimate job contracting, the principal employer is considered only an indirect
employer, while in labor-only contracting, the principal employer is considered the direct
employer of the employees.

De Castro v. Court of Appeals

G.R. No. 204261, October 05, 2016

Doctrine of Piercing the Corporate Veil; Employer-Employee Relationship

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat
of public convenience as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect
fraud, or defend a crime; or 3) alter ego cases, where a corporation merely a farce since it is a
mere alter ego or business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit
or adjunct of another corporation.
A settled formulation of the doctrine of piercing the corporate veil is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will,
when necessary to protect the rights of third parties, disregard the legal fiction that these two
entities are distinct and treat them as identical or as one and the same.

In the interest of justice and equity, that veil of corporate fiction must be pierced. An employer-
employee relationship between the principal and the dismissed employees arises by operation of
law.
In determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit; (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 on the means and methods by which the work is accomplished. The last
element, the so-called control test, is the most important element. Jurisprudentially speaking,
there is no hard and fast rule designed to establish the aforesaid elements. It depends on the
peculiar facts of each case.

Coca-Cola Bottlers Phil., Inc. v Agito

G.R. No. 179546, February 13, 2009
Employer-Employee Relationship in Legitimate Job Contracting
A legitimate job contract, wherein an employer enters into a contract with a job contractor for
the performance of the formers work, is permitted by law. Thus, the employer-employee
relationship between the job contractor and his employees is maintained.

In legitimate job contracting, the law creates an employer-employee relationship between the
employer and the contractor’s employees only for a limited purpose, i.e. to ensure that the
employees are paid their wages. The employer becomes jointly and severally liable with the job
contractor only for the payment of the employees’ wages whenever the contractor fails to pay
the same. Other than that, the employer is not responsible for any claim made by the contractor’s
employees.

Alilin et. al. v. Petron Corporation

G.R. No. 177592, June 09, 2014

Labor-Only Contractor
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial
capital, investment, tools and the like. However, where the principal is the one claiming that the
contractor is a legitimate contractor, the burden of proving the supposed status of the contractor
rests on the principal.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal

agrees to farm out with a contractor or subcontractor the performance of a specific job, work,
or service within a definite or predetermined period, regardless of whether such job, work or,
service is to be performed or completed within or outside the premises of the principal. Under
this arrangement, the following conditions must be met:

(a) the contractor carries on a distinct and independent business and undertakes the
contract work on his account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results thereof;

(b) the contractor has substantial capital or investment; and

(c) the agreement between the principal and contractor or subcontractor assures the
contractual employees’ entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social
welfare benefits.

Labor-only contracting, on the other hand, is a prohibited act, defined as “supplying workers to
an employer who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person
are performing activities which are directly related to the principal business of such employer.”

Generally, the contractor is presumed to be a labor-only contractor, unless such contractor

overcomes the burden of proving that it has the substantial capital, investment, tools and the
like. However, where the principal is the one claiming that the contractor is a legitimate
contractor, as in the present case, said principal has the burden of proving that supposed status.
It is thus incumbent upon Petron, and not upon petitioners as Petron insists, to prove that RDG
is an independent contractor.

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were
paid by them do not detract from the conclusion that there exists an employer-employee
relationship between the parties due to Petron’s power of control over the petitioners.

One manifestation of the power of control is the power to transfer employees from one work
assignment to another. Here, Petron could order petitioners to do work outside of their regular
“maintenance/utility” job. Also, petitioners were required to report for work everyday at the
bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and
safety helmets as prescribed by the safety and security measures being implemented within the
bulk plant. All these imply control. In an industry where safety is of paramount concern, control
and supervision over sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile
and flammable which, if mishandled or not properly attended to, may cause serious injuries and
damage to property and the environment. Naturally, supervision by Petron is essential in every
aspect of its product handling in order not to compromise the integrity, quality and safety of the
products that it distributes to the consuming public. Petron therefore, being the principal
employer and RDG, being the labor-only contractor, are solidarily liable for petitioners’ illegal
dismissal and monetary claims.

Cusap v. Adidas Phils. Inc.

G.R. No. 201494, July 29, 2015

Labor-Only Contractor
One of the criteria the CA cited as a basis of its conclusion that PRIME was a legitimate job
contractor was its possession of "substantial capital to finance its undertakings,"38 yet it was silent
on what these undertakings were. It merely said: "We reached this conclusion based on records
which showed PRIME has fulfilled its obligations towards its employees as regards remittances to
Philhealth, the SSS and Pag-ibig." The CA conclusion, to our mind, fell short of establishing that
PRIME satisfied the substantial-capital requirement for legitimate job contractors under the law
and the rules.
Article 106 of the Labor Code provides that there is 'labor-only' contracting where the person
supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such person are performing activities which are directly related to the principal business
of the employer. In such cases, the person or intermediary shall be considered merely an agent
of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.

Petron Corporation v. Caberte, et al.

G.R. No. 182255, June 15, 2015

Labor-Only Contractor
As defined under Article 106 of the Labor Code, labor-only contracting, a prohibited act, is an
arrangement where the contractor, who does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others, supplies workers to an
employer and the workers recruited are performing activities which are directly related to the
principal business of such employer.

Permissible or legitimate job contracting or subcontracting, on the other hand, "refers to an

arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within a definite
or predetermined period, regardless of whether such job, work, or service is to be performed
or completed within or outside the premises of the principal. A person is considered engaged in
legitimate job contracting or subcontracting if the following conditions concur: (a) the contractor
carries on a distinct and independent business and partakes the contract work on his account
under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of his
work except as to the results thereof; (b) the contractor has substantial capital or investment;
and (c) the agreement between the principal and the contractor or subcontractor assures the
contractual employees' entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social welfare benefits."
WORKER’S PREFERENCE
IN CASE OF BANKRUPTCY
PNB v. Cruz
180 SCRA 206, December 18, 1989

Worker’s Preference
This Court must uphold the preference accorded to the private respondents in view of the
provisions of Article 110 of the Labor Code which are clear and which admit of no other
interpretation. The phrase "any provision of law to the contrary notwithstanding" indicates that
such preference shall prevail despite the order set forth in Articles 2241 to 2245 of the Civil
Code. No exceptions were provided under the said article, henceforth, none shall be considered.
under Article 110 of the Labor Code as amended, the unpaid wages and other monetary claims
of workers should be paid in full before the claims of the Government and other creditors. Thus,
not even tax claims could have preference over the workers' claim.

Equitable Principle
It is but humane and partakes of the divine that labor, as human beings, must be treated over and
above chattels, machineries and other kinds of properties and the interests of the employer who
can afford and survive the hardships of life better than their workers. Universal sense of human
justice, not to speak of our specific social justice and protection to labor constitutional
injunctions, dictate the preferential lien that the above provision accords to labor. In line with
this policy, measures must be undertaken to ensure that such constitutional mandate on
protection to labor is not rendered meaningless by an erroneous interpretation of the applicable
laws.

DBP v. NLRC
218 SCRA 1983, March 1, 1995

Preference of credit vis-à-vis Lien

A distinction should be made between a preference of credit and a lien. A preference applies only
to claims which do not attach to specific properties. A lien creates a charge on a particular
property. The right of first preference as regards unpaid wages recognized by Article 110 does
not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method adopted to
determine and specify the order in which credits should be paid in the final distribution of the
proceeds of the insolvent’s assets. It is a right to a first preference in the discharge of the funds
of the judgment debtor.
Article 110 of the Labor Code does not create a lien in favor of workers or employees for unpaid
wages either upon all of the properties or upon any particular property owned by their employer.
Claims for unpaid wages do not therefore fall at all within the category of specially preferred
claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such
claims for unpaid wages are already covered by Article 2241, (6)- (claims for laborers’ wages, on
the goods manufactured or the work done); or by Article 2242,(3)- (claims of laborers and other
workers engaged in the construction, reconstruction or repair of buildings, canals and other
works, upon said buildings, canals and other work.

Republic v. Peralta
150 SCRA 37, May 20, 1987

Lien
Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees
for unpaid wages either upon all of the properties or upon any particular property owned by
their employer. Claims for unpaid wages do not therefore fall at all within the category of specially
preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent
that such claims for unpaid wages are already covered by Article 2241, number 6. "claims for
laborers' wages, on the goods manufactured or the work done;" or by Article 2242, number 3:
"claims of laborers and other workers engaged in the construction, reconstruction or repair of
buildings, canals and other works, upon said buildings, canals or other works." To the extent that
claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3,
they would come within the ambit of the category of ordinary preferred credits under Article
2244.

Applying Article 2241, number 6 to the instant case, the claims of the Unions for separation pay
of their members constitute liens attaching to the processed leaf tobacco, cigars and cigarettes
and other products produced or manufactured by the Insolvent, but not to other assets owned
by the Insolvent. And even in respect of such tobacco and tobacco products produced by the
Insolvent, the claims of the Unions may be given effect only after the Bureau of Internal Revenue's
claim for unpaid tobacco inspection fees shall have been satisfied out of the products so
manufactured by the Insolvent.

Article 2242, number 3, also creates a lien or encumbrance upon a building or other real property
of the Insolvent in favor of workmen who constructed or repaired such building or other real
property. Article 2242, number 3, does not however appear relevant in the instant case, since
the members of the Unions to whom separation pay is due rendered services to the Insolvent
not in the construction or repair of buildings or other real property, but rather, in the regular
course of the manufacturing operations of the Insolvent. The Unions' claims do not therefore
constitute a lien or encumbrance upon any immovable property owned by the Insolvent, but
rather, as already indicated, upon the Insolvent's existing inventory.

Barayoga et. al. v. Assets Privatization Trust

GR No. 160073, October 24, 2005
Mortgage Credit as Special Preferred Credit
Under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit
that enjoys preference with respect to a specific/determinate property of the debtor. On the
other hand, the workers preference under Article 110 of the Labor Code is an ordinary preferred
credit. While this provision raises the workers money claim to first priority in the order of
preference established under Article 2244 of the Civil Code, the claim has no preference over
special preferred credits. Thus, the right of employees to be paid benefits due them from the
properties of their employer cannot have any preference over the latter’s mortgage credit.

ALU v. Court of Appeals

G.R. No. 156882 October 31, 2008

Bankruptcy and Liquidation

A judgment lien over the subject properties has not legally attached and that Art. 110 of the
Labor Code, in relation to Arts. 2242, 2243, and 2244 of the Civil Code on concurrence and
preference of credits, does not cover the subject properties. Art. 110 of the Labor Code applies
only to cases of bankruptcy and liquidation. Likewise, the abovementioned articles of the Civil
Code on concurrence and preference of credits properly come into play only in cases of
insolvency.
PROHIBITION REGARDING WAGES
American Wire and Cable Daily Rated Employees Union v.
American Wire and Cable Co., Inc.
G.R. No. 155059, April 29, 2005

Bonus as an Act of Generosity

The benefits and entitlements mentioned in the instant case are all considered bonuses which
were given by the private respondent out of its generosity and munificence. A bonus is an amount
granted and paid to an employee for his industry and loyalty which contributed to the success of
the employer’s business and made possible the realization of profits. The granting of a bonus is a
management prerogative, something given in addition to what is ordinarily received by or strictly
due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it
is made part of the wage, salary or compensation of the employee.

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed
upon by the parties or it must have had a fixed amount and had been a long and regular practice
on the part of the employer. The assailed benefits were never subjects of any agreement between
the union and the company. It was never incorporated in the CBA. To be considered a “regular
practice,” the giving of the bonus should have been done over a long period of time and must be
shown to have been consistent and deliberate. The downtrend in the grant of these two bonuses
over the years demonstrates that there is nothing consistent about it. To hold that an employer
should be forced to distribute bonuses which it granted out of kindness is to penalize him for his
past generosity.

Milan v. NLRC
G.R. No. 202961, February 4, 2015

Valid Wage Deductions

As a general rule, employers are prohibited from withholding wages from employees. The Labor
Code provides:

Art. 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.

The Labor Code also prohibits the elimination or diminution of benefits. Thus:

Art. 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 promulgation of this Code.
However, our law supports the employers’ institution of clearance procedures before the release
of wages. As an exception to the general rule that wages may not be withheld and benefits may
not be diminished, the Labor Code provides:

Art. 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:

1. 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;

2. 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

3. In cases where the employer is authorized by law or regulations issued by the Secretary
of Labor and Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts due:

Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer.

Royal Plant Workers Union v.

Coca-Cola Bottlers Philippines, Inc.-Cebu Plant
G.R. No. 198783, April 15, 2013

“Benefits” defined
The operators’ chairs cannot be considered as one of the employee benefits covered in Article
100 of the Labor Code. In the Court’s view, the term "benefits" mentioned in the non-diminution
rule refers to monetary benefits or privileges given to the employee with monetary equivalents.
Such benefits or privileges form part of the employees’ wage, salary or compensation making
them enforceable obligations.

The Court has already decided several cases regarding the non-diminution rule where the benefits
or privileges involved in those cases mainly concern monetary considerations or privileges with
monetary equivalents.

The aforequoted article speaks of non-diminution of supplements and other employee benefits.
Supplements arc privileges given to an employee which constitute as extra remuneration besides
his or her basic ordinary earnings and wages. From this definition, the other employee benefits
spoken of by Article 100 pertain only to those which are susceptible of monetary considerations.
Indeed, this could only be the most plausible conclusion because the cases tackling Article 100
involve mainly with monetary considerations or privileges converted to their monetary
equivalents.
Without a doubt, equating the provision of chairs to the bottling operators has something within
the ambit of "benefits'' in the context of Article 100 of the Labor Code is unduly stretching the
coverage of the law. The interpretations of Article 100 of the Labor Code do not show even
with the slightest hint that such provision of chairs for the bottling operators may be sheltered
under its mantle.

ABS-CBN Supervisors Employee Union v.

ABS-CBN Broadcasting Corporation
304 SCRA 489, March 11, 1999

Check-off
A check-off is a process or device whereby the employer, on agreement with the Union,
recognized as the proper bargaining representative, or on prior authorization from its employees,
deducts union dues or agency fees from the latter's wages and remits them directly to the
union." Its desirability in a labor organization is quite evident. It is assured thereby of continuous
funding. As this Court has acknowledged, the system of check-off is primarily for the benefit of
the Union and only indirectly, for the individual employees.
The legal basis of check-off is found in statutes or in contracts. The statutory limitations on check-
offs are found in Article 241, Chapter II, Title IV, Book Five of the Labor Code, which
reads:"Rights and conditions of membership in a labor organization. - The following are the rights
and conditions of membership in a labor organization: (g) No officer, agent, member of a labor
organization shall collect any fees, dues, or other contributions in its behalf or make any
disbursement of its money or funds unless he is duly authorized pursuant to its constitution and
by-laws. (n) No special assessment or other extraordinary fees may be levied upon the members
of a labor organization unless authorized by a written resolution of a majority of all the members
of a general membership meeting duly called for the purpose. The secretary of the organization
shall record the minutes of the meeting including the list of all members present, the votes cast,
the purpose of the special assessment or fees and the recipient of such assessment or fees. The
record shall be attested to by the president. (o) Other than for mandatory activities under the
Code, no special assessments, attorney's fees, negotiation fees or any other extraordinary fees
may be checked off from any amount due to an employee with an individual written
authorization duly signed by the employee. The authorization should specifically state the
amount, purpose and beneficiary of the deductions.
Article 241 of the Labor Code, as amended, must be read in relation to Article 222, paragraph
(b) of the same law, which states:

"No attorney's fees, negotiation fees or similar charges of any kind arising from collective
bargaining negotiations or conclusion of the collective agreement shall be imposed on any
individual member of the contracting union: Provided, however, that attorney's fees may be
charged against union funds in an amount to be agreed upon by the parties. Any contract,
agreement or arrangement of any sort to the contrary shall be null and void.
 Five J Taxi v. NLRC
235 SCRA 556

Deposits for Loss or Damage

Article 114 of the Labor Code provides as follows:

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 of 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
deposits is a recognized one, or is necessary or desirable as determined by the Secretary
of Labor in appropriate rules and regulations.

It can be deduced therefrom that the said article provides the rule on deposits for loss or damage
to tools, materials or equipment supplied by the employer. Clearly, the same does not apply to
or permit deposits to defray any deficiency which the taxi driver may incur in the remittance of
his “boundary.”

Attorney’s Fees or Services Fees for Authorized Representative

The statutory rule that an attorney shall be entitled to have and recover from his client a
reasonable compensation for his services necessarily imports the existence of an attorney-client
relationship as a condition for the recovery of attorney’s fees, and such relationship cannot exist
unless the client’s representative is a lawyer.

PLDT v. Estranero
G.R No. 192518, October 15, 2014

Principle of Free Disposal of Wages

It is clear in Article 113 of the Labor Code that no employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except in cases where the
employer is authorized by law or regulations issued by the Secretary of Labor and Employment,
among others. The Omnibus Rules Implementing the Labor Code, meanwhile, provides that
deductions from the wages of the employees may be made by the employer when such
deductions are authorized by law, or when the deductions are with the written authorization of
the employees for payment to a third person. Thus, any withholding of an employee's wages by
an employer may only be allowed in the form of wage deductions under the circumstances
provided in Article 113 of the Labor Code, as well as the Omnibus Rules implementing it. Further,
Article 116 of the Labor Code clearly provides that it is unlawful for any person, directly or
indirectly, to withhold any amount from the wages of a worker without the worker's consent.
As aptly stated by the CA, the matter would have been different if the deductions refer to the
employee’s contributions for his being a member of SSS, HDMF, or withholding taxes on income,
because if such was the case, the contributions are deductions already sanctioned by existing
laws.

Further, employer cannot offset the outstanding balance of the employee's loan obligation with
his redundancy pay because the balance on the loan does not come within the scope of
jurisdiction of the LA. The demand for payment of the said loans is not a labor, but a civil dispute.
It involves debtor-creditor relations, rather than employee-employer relations. Evidently, the
employee's unpaid balance on his loans cannot be offset against the redundancy pay due to him.
WAGE STUDIES,
WAGE AGREEMENTS AND
WAGE DETERMINATION
Metropolitan Bank and Trust Company
Employees Union – ALU – TUCP v. NLRC, et. al.
G.R No. 102636, September 10, 1993

Wage Distortion
The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

"(p) Wage Distortion means 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 embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation."

The definition of "wage distortion," 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."

In keeping then with the intendment of the law and the agreement of the parties themselves,
along with the often repeated rule that all doubts in the interpretation and implementation of
labor laws should be resolved in favor of labor, we must approximate an acceptable quantitative
difference between and among the CBA agreed work levels. As the Court, through Associate
Justice Florentino Feliciano, also pointed out in Apex Mining Company, Inc. v. NLRC:

". . . To compel employers simply to add on legislated increases in salaries or allowances

without regard to what is already being paid, would be to penalize employers who grant
their workers more than the statutorily prescribed minimum rates of increases. Clearly,
this would be counter-productive so far as securing the interests of labor is concerned . . ."
 Bankard Employees Union- Workers Alliance Trade Unions v. NLRC, et. al.,
G.R No. 140689, February 17, 2004

Wage Distortion
The term wage distortion was explicitly defined as:

...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 embodied in such wage structure based on skills, length of service, or other
logical bases of differentiation.

Prubankers Association v. Prudential Bank and Trust Company laid down the four elements of
wage distortion, to wit:

(1) An existing hierarchy of positions with corresponding salary rates;

(2) A significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one;

(3) The elimination of the distinction between the two levels; and

(4) The existence of the distortion in the same region of the country.

Normally, a company has a wage structure or method of determining the wages of its employees.
In a problem dealing with wage distortion, the basic assumption is that there exists a grouping or
classification of employees that establishes distinctions among them on some relevant or
legitimate bases. Involved in the classification of employees are various factors such as the degrees
of responsibility, the skills and knowledge required, the complexity of the job, or other logical
basis of differentiation. The differing wage rate for each of the existing classes of employees
reflects this classification. To determine the existence of wage distortion, the historical
classification of the employees prior to the wage increase must be established. Likewise, it must
be shown that as between the different classification of employees, there exists a historical gap
or difference.

Whether wage distortion exists being a question of fact that is within the jurisdiction of quasi-
judicial tribunals, and it being a basic rule that findings of facts of quasi-judicial agencies, like the
NLRC, are generally accorded not only respect but at times even finality
if they are supported by substantial evidence. For these agencies have acquired expertise, their
jurisdiction being confined to specific matters.

Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found in Chapter V on
Wage Studies, Wage Agreements and Wage Determination which principally deals with the fixing
of minimum wage. Article 124 should thus be construed and correlated in relation to minimum
wage fixing, the intention of the law being that in the event of an increase in minimum wage, the
distinctions embodied in the wage structure based on skills, length of service, or other logical
bases of differentiation will be preserved. If the compulsory mandate under Article 124 to correct
wage distortion is applied to voluntary and unilateral increases by the employer in fixing hiring
rates which is inherently a business judgment prerogative, then the hands of the employer would
be completely tied even in cases where an increase in wages of a particular group is justified due
to a re-evaluation of the high productivity of a particular group. An employer would be
discouraged from adjusting the salary rates of a particular group of employees for fear that it
would result to a demand by all employees for a similar increase, especially if the financial
conditions of the business cannot address an across-the-board increase.

Supra Multi-Services Inc. et. al., v. Labitigan,

G.R No. 192297, August 3, 2016

Wage Distortion
"Wage distortion" was defined under Rule I, Section 2(w) of the Rules Implementing Wage Order
No. NCR-09 and Rule I, Section 2(x) of the Rules Implementing Wage Order No. NCR-10, as
follows:

"Wage Distortion" refers to a situation where an increase in the 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 embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.

By its definition, wage distortion is quantifiable, and it may be established by presentation of the
employee groups, wage structure, and the computation showing how the application of the
ECOLA eliminated or severely contracted the difference in wage or salary rates among the
groups.

National Federation of Labor v. NLRC

234 SCRA 311

Separation Pay
The closure contemplated under Article 283 of the Labor Code is a unilateral and voluntary act
on the part of the employer to close the business establishment as may be gleaned from the
wording of the said legal provision that "The employer may also terminate the employment of
any employee due to...". The use of the word "may," in a statute, denotes that it is directory in
nature and generally permissive only. The "plain meaning rule" or verba legis in statutory
construction is thus applicable in this case. Where the words of a statute are clear, plain and free
from ambiguity, it must be given its literal meaning and applied without attempted interpretation.
In other words, Article 283 of the Labor Code does not contemplate a situation where the
closure of the business establishment is forced upon the employer and ultimately for the benefit
of the employees.

While the Constitution provides that "the State x x x shall protect the rights of workers and
promote their welfare", that constitutional policy of providing full protection to labor is not
intended to oppress or destroy capital and management. Thus, the capital and management
sectors must also be protected under a regime of justice and the rule of law.
WORKING CONDITIONS FOR
SPECIAL GROUPS OF EMPLOYEES
Barsolo v. SSS
G.R No. 187950, January 11, 2017
Employee’s Compensation
The amended Rules on Employee Compensation provide the guidelines before a
beneficiary can claim from the state insurance fund. Rule III, Section l(b) states:

For the sickness and the resulting disability or death to be compensable, the sickness must
be the result of an occupational disease listed under Annex "A" of these Rules with the
conditions set therein satisfied, otherwise, proof must be shown that the risk of
contracting the disease is increased by the working conditions.

For an occupational disease and the resulting disability or death to be compensable, all of the
following conditions must be satisfied:

1. The employee's work must involve the risks described herein;

2. The disease was contracted as a result of the employee's exposure to the described
risks;
3. The disease was contracted within a period of exposure and under such other factors
necessary to contract it;
4. There was no notorious negligence on the part of the employee.

The following diseases are considered as occupational when contracted under working conditions
involving the risks described herein:

18. Cardio-vascular diseases. Any of the following conditions –

a. If the heart disease was known to have been present during employment, there must
be proof that an acute exacerbation was clearly precipitated by the unusual strain by
reasons of the nature of his/her work.

b. The strain of work that brings about an acute attack must be of sufficient severity and
must be followed within 24 hours by the clinical signs of a cardiac assault to constitute
causal relationship.

c. If a person who was apparently asymptomatic before being subjected to strain at work
showed signs and symptoms of cardiac injury during the performance of his work and
such symptoms and signs persisted, it is reasonable to claim a causal relationship.
To emphasize, it is not refuted that myocardial infarction is a compensable occupational illness.
However, it becomes compensable only when it falls under any of the three conditions, which
should be proven by substantial evidence.

Ranises v. ECC
504 Phil. 340 (2005)
Employee’s Compensation
It is the policy of the State to give maximum aid and protection to labor. P.D. No. 626, otherwise
known as the Employees Compensation Act., is a specie of social legislation, the primary purpose
of which is to provide meaningful protection to the ordinary worker against the perils of disability,
the hazards of illness, and hardships of other contingencies which may result in the loss of income.

Section 1(h), Rule III of the ECC Amended Rules on Employees Compensation, now considers
cardio-vascular disease as compensable occupational disease. Included in Annex "A" is cardio-
vascular disease, which cover myocardial infarction. However, it may be considered as
compensable occupational disease only when substantial evidence is adduced to prove any of the
following conditions:

a) If the heart disease was known to have been present during employment there
must be proof that an acute exacerbation clearly precipitated by the unusual strain by
reason of the nature of his work;

b) The strain of work that brings about an acute attack must be of sufficient severity
and must be followed within twenty-four (24) hours by the clinical signs of a cardiac assault
to constitute causal relationship.

c) If a person who was apparently asymptomatic before subjecting himself to strain

of work showed signs and symptoms of cardiac injury during the performance of his work
and such symptoms and signs persisted, it is reasonable to claim a causal relationship.

GSIS v. Tanedo
G.R No. 193500, November 20, 2017

Compensable Sickness
Presidential Decree No. 626, as amended, defines compensable sickness as "any illness
definitely accepted as an occupational disease listed by the Commission, or any illness caused by
employment subject to proof by the employee that the risk of contracting the same is increased
by the working conditions." In order to warrant compensation for an ailment and its resulting
disability or death under Presidential Decree No. 626, as amended, Section l(b), Rule III of the
Amended Rules on Employees' Compensation (AREC) provides:
 SECTION 1. Grounds. - (a) For the injury and the resulting disability or death to be
compensable, the injury must be the result of accident arising out of and in the course of
the employment.

(a) For the sickness and the resulting disability or death to be compensable, the sickness
must be the result of an occupational disease listed under Annex "A" of these Rules with
the conditions set therein satisfied, otherwise, proof must be shown that the risk of
contracting the disease is increased by the working conditions.

Thus, for sickness or death of an employee to be compensable, the claimant must show either:
(1) that it is a result of an occupational disease listed under Annex "A" of the AREC with the
conditions set therein satisfied; or (2) if not so listed, that the risk of contracting the disease was
increased by the working conditions.

GSIS V. Capacite
G.R. No. 199780, September 24, 2014

Compensable Occupational Disease

While item 17, Annex "A" of the Amended Rules of Employee's Compensation considers lung
cancer to be a compensable occupational disease, it likewise provides that the employee should
be employed as a vinyl chloride worker or a plastic worker. In this case, however, Elma did not
work in an environment involving the manufacture of chlorine or plastic, for her lung cancer to
be considered an occupational disease. There was, therefore, no basis for the CA to simply
categorize her illness as an occupational disease without first establishing the nature of Elma's
work. Both the law and the implementing rules clearly state that the given alternative conditions
must be satisfied for a disease to be compensable.

Raro v. ECC
G.R. No. L-58445, April 27, 1989

Increased Risks
The Court saw no arbitrariness in the Commission's allowing vinyl chloride workers or plastic
workers to be compensated for brain cancer. What the law requires for others is proof. The law,
as it now stands requires the claimant to prove a positive thing.

The illness was caused by employment and the risk of contracting the disease is increased by the
working conditions. To say that since the proof is not available, therefore, the trust fund has the
obligation to pay is contrary to the legal requirement that proof must be adduced. The existence
of otherwise non-existent proof cannot be presumed.
 GSIS v. Valenciano
G.R. No. 168821, April 10, 2006

Occupational Disease
Section 1 (b), Rule III of the Rules Implementing PD No. 626, as amended, states that for the
sickness and the resulting disability or death to be compensable, the same must be the result of
an occupational disease listed under Annex "A" with the conditions set therein satisfied;
otherwise, proof must be shown that the risk of contracting the disease is increased by the
working conditions.

Diabetes mellitus, is a non-occupational disease, hence not compensable. Jaime A. Valenciano’s

hypertension is held to be directly connected to his primary ailment, diabetes mellitus, and
therefore non-compensable.

The degree of proof required under P.D. No. 626 is merely substantial evidence, which means,
"such relevant evidence as a reasonable mind might accept as adequate to support a conclusion."
What the law requires is a reasonable work-connection and not a direct causal relation. It is
enough that the hypothesis on which the workmen's claim is based is probable. Medical opinion
to the contrary can be disregarded especially where there is some basis in the facts for inferring
a work-connection. Probability, not certainty, is the touchstone. While claimant must adduce
substantial evidence that the risk of contracting the illness is increased by the working conditions
to which an employee is exposed to, we cannot close our eyes to any reasonable work-related
connection of the worker’s ailment and his employment.

Any doubt on this matter has to be interpreted in favor of the employee, considering that P.D.
No. 626 is a social legislation.

Ambassador Hotel, Inc. v. SSS

G.R. No. 194137, June 21, 2017

Remittance of Contributions,
Under Section 8(c) of R.A. No. 8282, an employer is defined as "any person, natural or juridical,
domestic or foreign, who carries on in the Philippines any trade, business, industry, undertaking,
or activity of any kind and uses the services of another person who is under his orders as regards
the employment, except the Government and any of its political subdivisions, branches or
instrumentalities, including corporations owned or controlled by the Government." Ambassador
Hotel, as a juridical entity, is still bound by the provisions of R.A. No. 8282. Section 22 (a) thereof
states:

(a) The contributions imposed in the preceding section shall be remitted to the SSS within
the first ten (10) days of each calendar month following the month for which they are
applicable or within such time as the Commission may prescribe. Every employer required
 to deduct and to remit such contributions shall be liable for their payment and if any
contribution is not paid to the SSS as herein prescribed, he shall pay besides the
contribution a penalty thereon of three percent (3%) per month from the date the
contribution falls due until paid. If deemed expedient and advisable by the Commission,
the collection and remittance of contributions shall be made quarterly or semi-annually in
advance, the contributions payable by the employees to be advanced by their respective
employers: Provided, that upon separation of an employee, any contribution so paid in
advance but not due shall be credited or refunded to his employer.

Verily, prompt remittance of SSS contributions under the aforesaid provision is mandatory. Any
divergence from this rule subjects the employer not only to monetary sanctions, that is, the
payment of penalty of three percent (3%) per month, but also to criminal prosecution if the
employer fails to: (a) register its employees with the SSS; (b) deduct monthly contributions from
the salaries/wages of its employees; or (c) remit to the SSS its employees' SSS contributions
and/or loan payments after deducting the same from their respective salaries/wages.

Navarra v. People
G.R. No. 224943, March 20, 2017

SSS Contributions
Prompt remittance of SSS contributions under the law is mandatory. Any divergence from this
rule subjects the employer not only to monetary sanctions, i.e. the payment of penalty of three
percent (3%) per month, but also to criminal prosecution if the employer fails to: (a) register its
employees with the SSS; (b) deduct monthly contributions from the salaries/wages of its
employees; or (c) remit to the SSS its employees' SSS contributions and/or loan payments after
deducting the same from their respective salaries/wages. In this regard, Section 28 (f) of RA 8282
explicitly provides that "if the act or omission penalized by this Act be committed by an
association, partnership, corporation or any other institution, its managing head, directors or
partners shall be liable to the penalties provided in this Act for the offense." Notably, the aforesaid
punishable acts are considered mala prohibita and, thus, the defenses of good faith and lack of
criminal intent are rendered immaterial.

Kukan International Corporation v. Reyes

G.R. No. 182729, September 29, 2010

Doctrine of Immutability and Inalterability of Judgment

It is an elementary principle of procedure that the resolution of the court in a given issue as
embodied in the dispositive part of a decision or order is the controlling factor as to settlement
of rights of the parties. Once a decision or order becomes final and executory, it is removed
from the power or jurisdiction of the court which rendered it to further alter or amend it. It
thereby becomes immutable and unalterable and any amendment or alteration which substantially
affects a final and executory judgment is null and void for lack of jurisdiction, including the entire
proceedings held for that purpose. An order of execution which varies the tenor of the judgment
or exceeds the terms thereof is a nullity.

Deeply ingrained in our jurisprudence is the principle that a decision that has acquired finality
becomes immutable and unalterable. As such, it may no longer be modified in any respect even if
the modification is meant to correct erroneous conclusions of fact or law and whether it will be
made by the court that rendered it or by the highest court of the land.

The only exceptions to the general rule are the correction of clerical errors, the so-called nunc
pro tunc entries which cause no prejudice to any party, void judgments, and whenever
circumstances transpire after the finality of the decision which render its execution unjust and
inequitable.

Principle of Piercing the Veil of Corporate Fiction

This principle finds its context on the postulate that a corporation is an artificial being invested
with a personality separate and distinct from those of the stockholders and from other
corporations to which it may be connected or related.

Under the doctrine of "piercing the veil of corporate fiction," the court looks at the corporation
as a mere collection of individuals or an aggregation of persons undertaking business as a group,
disregarding the separate juridical personality of the corporation unifying the group. Another
formulation of this doctrine is that when two business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when necessary to protect the rights of
third parties, disregard the legal fiction that two corporations are distinct entities and treat them
as identical or as one and the same.

Whether the separate personality of the corporation should be pierced hinges on obtaining facts
appropriately pleaded or proved. However, any piercing of the corporate veil has to be done
with caution, albeit the Court will not hesitate to disregard the corporate veil when it is misused
or when necessary in the interest of justice.

Aratea v. Suico
G.R. No. 170284, March 16, 2007

Solidary Liability of Employer

In MAM Realty Development Corporation v. NLRC, the Court stated:

A corporation is a juridical entity with legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it. The general rule
 is that obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities. There are times, however, when solidary liabilities may
be incurred but only when exceptional circumstances warrant such as in the following
cases:
1. When directors and trustees or, in appropriate cases, the officers of a corporation:
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons;
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written
objection thereto;
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the corporation; or
4. When a director, trustee or officer is made, by specific provision of law, personally liable for
his corporate action.
In labor cases, particularly, corporate directors and officers are solidarily liable with the
corporation for the termination of employment of corporate employees done with malice or in
bad faith.

GSIS V. Esteves
G.R. No. 182297, June 21, 2017

Health Assessment
Evidence must be presented to show a history of any trauma to the head at work. There was
never any evidence of this. There was never any mention of any head trauma that the deceased
suffered. There being no evidence of trauma, the connection to the brain hemorrhage cannot be
established. As to his hypertension, the ECC found that he did not have any history and that it
caused impairment of the function of body organs like kidneys, heart, eyes and brain. None of
the medical reports had established the same. Evidently, the death of Emilio cannot be concluded
as compensable.

GSIS V. Calumpiano
G.R. No. 196102, November 26, 2014

Health Assessment
In general, a covered claimant suffering from an occupational disease is automatically paid benefits.
However, although cerebro-vascular accident and essential hypertension are listed occupational
diseases, their compensability requires compliance with all the conditions set forth in the Rules.
In short, both are qualified occupational diseases. For cerebro-vascular accident, the claimant
must prove the following: (1) there must be a history, which should be proved, of trauma at work
(to the head specifically) due to unusual and extraordinary physical or mental strain or event, or
undue exposure to noxious gases in industry; (2) there must be a direct connection between the
trauma or exertion in the course of the employment and the cerebro-vascular attack; and (3) the
trauma or exertion then and there caused a brain hemorrhage. On the other hand, essential
hypertension is compensable only if it causes impairment of function of body organs like kidneys,
heart, eyes and brain, resulting in permanent disability, provided that, the following documents
substantiate it: (a) chest X-ray report; (b) ECG report; (c) blood chemistry report; (d) funduscopy
report; and (e) C-T scan.