COVERAGE

The provisions of this Title I [Working Conditions and Rest Periods] , Book III
[Conditions of Employment], Arts. 82-96, shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees (Remember: GOCCs vs. chartered rule), managerial employees, field
personnel, members of the family of the employer who are dependent on him for
support, domestic helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor in appropriate
regulations.

DEFINITION OF MANAGERIAL EMPLOYEE: ART. 82 VS. ART. 212 (M), LC

Article 82 -“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.
- Used only for purposes of Book III (working conditions and rest periods and benefits)
-Supervisors are members of the managerial staff
Article 212 (M)-"Managerial employee"is one who is vested with the powers or prerogatives
to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees.
-Used only for purposes of Book V (forming, joining and assisting of unions, certification
election and collective bargaining)
-Supervisors are not manager employees under Book V

RULE ON DOMESTIC HELPER ASSIGNED TO THE EMPLOYER’S BUSINESS

ESTABLISHMENT

The general criterion that distinguishes domestic or household service is the rendition of
work for the personal comfort and enjoyment of the family of the employer in the home of
said employer.
Thus, if an employer assigns the domestic workers or kasambahay to work, whether in full or
part-time, in a commercial, industrial or agricultural enterprise, the kasambahay ceases to be
one and thus shall be treated as a regular employee of such enterprise and be entitled to all the
labor standards provided in the Labor Code.

SURVEY OF RELEVANT JURISPRUDENCE ON THE ABOVE-MENTIONED RULE

(1) Apex Mining Company, Inc v. NLRC  - In this case, the High Court held that a
househelper in the staff-houses of an industrial company is considered a regular employee
thereof. The mere fact that the house helper is working within the premises of the business of
the employer and in relation to or in connection with its business, as in its staff-houses for its
guest or even for its officers and employees, warrants the conclusion that such house helper is
and should be considered as a regular employee of the employer and not as a mere family
house helper or as contemplated in the law.
(2)  Remington Industrial Sales Corp. V. Castaneda  - The same ruling as in Apex was
made in this case. Respondent worked at the company premises and her duty was to cook and
prepare its employees' lunch and merienda. Clearly, the situs as well as the nature of
respondent's work as a cook, who caters not only to the needs of Mr. Tan (Managing Director
of petitioner) and his family but also to that of the petitioner's employees, made her fall
squarely within the definition of a regular employee under the doctrine enunciated in the
Apex Mining case. That she works within company premises and that she does not cater
exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of
the petitioner's right of control over her functions, which is the primary indicator of the
existence of an employer-employee relationship.
(3)   Barcenas V. NLRC - In this case, private respondent contends that petitioner was not an
employee but a servant at the Manila Buddhist Temple. The Supreme Court, however,
disagreed. It held that petitioner was a regular employee thereof considering that the work
that she performed in the temple could not be categorized as mere domestic work. Petitioner,
being proficient in the Chinese language, attended to the visitors, mostly Chinese, who came
to pray or seek advice before Buddha for personal or business problems ; arranged meetings
between these visitors and the Head Monk and supervised the preparation of the food for the
temple visitors; acted as tourist guide of foreign visitors ; acted as liaison with some
government offices; and made the payment for the temple's Meralco, MWSS and PLDT bills.
Indeed, these tasks may not be deemed activities of a household helper. They were essential
and important to the operation and religious functions of the temple.

2 categories of employees paid by result; distinguished

1. Those whose time and performance are supervised by the employer.

    -there is an essential element of control and supervision over the manner as how to work is
to be performed

2. Those whose time and performance are unsupervised

               -The employer's control is over the result of the work.

Work is measured either:
1) By piece;
2) By task
“By piece” refers to those who are compensated based on the units or pieces of work they
produced and accomplished. The work process involved is usually repetitive and the
compensation is uniform per unit or per piece.
“By task”, on the other hand, refers to those who are compensated based on the completion
or accomplishment of a certain specified task. This is commonly known as pakyao which
simply means wholesale

WORK DAY; WORK WEEK, RECKONING POINT

Work day means 24 consecutive-hour period which commences from the time the employee
regularly starts to work. It does not necessarily mean that it based on the ordinary calendar
day from 12:00 midnight to 12:00 midnight unless the employee starts to work at this unusual
hour.
Work week is a week consisting of 168 consecutive hours or 7 consecutive 24 hour work
days beginning at the same hour and on the same calendar day each calendar week.
The reckoning point on how a work day or work week is from the time the employee
regularly starts to work on a work day or from the time and day the employee regularly starts
to work on a work week.

Compressed Workweek policy

A compressed work week is allowed provided that the employees voluntarily agree thereto,
that there is no diminution in pay, and it is only for a temporary duration.
The employer may compress the work days from 6 days (Monday to Saturday) to five days
(Monday to Friday) under certain conditions imposed by the Department of Labor and
Employment; and
In situation, for instance, where the employees’ workweek was forty five (45) hours
consisting of eight hours daily from Monday to Friday and five (5) hours on Saturday, the
employer may propose to compress or shorten the work week from Monday to Friday with
work for nine (9) hours per day without overtime pay for the excess one (1) hour , provided
the following conditions are met:

1. Employees VOLUNTARILY AGREE to work 9 hours a day from Monday to

Friday;
2. There is no diminution in the take-home pay and fringe benefits of the employees;
3. Value of benefits that will accrue to the Employee under proposed work schedule
is MORE THAN or, at least, COMMENSURATE with, or equal to, the one-hour
overtime pay that is due them during weekdays based on the Employees
quantification;
4. The one-hour overtime pay of the employees will become due and demandable if
ever they permitted or made to work on any Saturday during the effectivity of the
new working time arrangement, since the agreement between the employees and
management is that there will be no Saturday work in exchange for a longer work
day during week-days;
5. The work of the employees DOES NOT involve STRENUOUS PHYSICAL
EXERTION and they are provided with adequate rest periods or coffee breaks in
the morning and afternoon; and
6. The effectivity of the proposed working time arrangement should be of
TEMPORARY duration as determined by the Secretary of Labor

*Maximum working hours per day-12 hours otherwise OT applies

LEADING CASES ON CWW

Bisig Manggagawa sa Tryco vs NLRC GR No. 151309, Oct. 15, 2006

COMPRESSED WORK WEEK
            Private respondent Tryco and the petitioners signed separate Memoranda of
Agreement, providing for a compressed work week schedule to be implemented in the
company effective May 20, 1996. The MOA was entered into pursuant to DOLE Dept. Order
No. 21, Series of 1990 enunciating the Guidelines on the implementation of Compressed
Work Week.
            As provided in the MOA, 8:00 am to 6:12 pm, from Monday to Friday, shall be
considered as the regular working hours, and no overtime pay shall be due and payable to the
employee for work rendered during those hours.
            The MOA specifically stated that the employee waives the right to claim overtime pay
for work rendered after 5:00 pm until 6:12 pm from Monday to Friday considering that the
compressed workweek schedule is adopted in lieu of the regular workweek schedule which
also consists of 46 hours. However, should an employee be permitted or required to work
beyond 6:12 pm, such employee shall be entitled to overtime pay.
            Tryco informed the Bureau of Working Conditions of the DOLE of the
implementation of the said compressed workweek in the company.
            In upholding the validity of the compressed workweek, it was noted that D.O. No. 21
sanctions the waiver of overtime pay in consideration of the benefits that the employees will
derive from the adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for establishments wishing to
save on energy costs, promote greater work efficiency and lower the rate of employee
absenteeism, among others. Workers favor the scheme considering that it would mean
savings on the increasing cost of transportation fares for at least one day a week; savings on
meal and snack expenses; longer weekends, or an additional 52 off-days a year, that can be
devoted to rest, leisure, family responsibilities, studies and other personal matters, and that  it
will spare them for at least another day in a week from certain inconveniences that are the
normal incidents of employment, such as commuting to and from the workplace, travel time
spent, exposure to dust and motor vehicle fumes, dressing up for work, etc. Thus under this
scheme, the generally observed workweek of 6 days is shortened to 5 days but prolonging the
working hours from Monday to Friday without the employer being obliged to pay overtime
premium compensation for work performed in excess of 8 hours on weekdays, in exchange
for the benefits above-cited that will accrue to the employees.
Linton Commercial Co., Inc. vs. Hellera GR No. 163147, Oct 10 2007
In declaring the compressed workweek arrangement as unjustified and illegal and in holding
that the petitioners are guilty of illegal reduction of work hours, the Supreme Court found
specious the petitioners attempt to justify their action by alleging that the company was
suffering from financial losses owing to the Asian currency crisis. Petitioners’ claim of
financial losses was not supported by evidence.
A close examination of petitioners’ financial reports for 1997-1998 shows that while the
company suffered a loss of ₱3,645, 422.00 in 1997, it retained a considerable amount of
earnings and operating income. Clearly then, while Linton suffered from losses for that year,
there remained enough earnings to sufficiently sustain its operation.
In business, sustained operations in the black is the ideal but being in the red is a cruel reality.
However, a year of financial losses would not warrant the immolation of the welfare of the
employees which in this case was done through a reduced workweek that resulted in an
unsettling diminution of the periodic pay for a protracted period.
Permitting reduction of work and pay at the slightest indication of losses would be contrary to
the State’s policy to afford protection to labor and provide full employment. All taken into
account, the compressed workweek arrangement was unjustified and illegal. Thus, petitioners
committed illegal reduction of work hours.
Case synthesis: Bisig Manggagawa sa Tryco vs NLRC Linton Commercial Co., Inc. vs.
Hellera  cases
MOA: employee waives the right to claim overtime pay for work rendered after 5:00 pm until
6:12 pm from Monday to Friday considering that the compressed workweek schedule is
adopted in lieu of the regular workweek schedule which also consists of 46 hours. However,
should an employee be permitted or required to work beyond 6:12 pm, such employee shall
be entitled to overtime pay.           
CWW: 3 days on a rotation basis
-  each worker would be working on a rotation basis for three working days only instead of 6
days a week.
The MOA is enforceable  and binding against petitioners. The CWW was unjustified and
illegal. Thus, petitioners committed illegal reduction of work hours.
Where it is shown that the person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration or the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking.      
Financial losses must be shown before a company can validly opt to reduce the work hours of
its employees.
If the standards set in determining the justifiability of the financial losses under Art. 283 or
Article 286  of the Labor Code were to be considered, petitioners would end up failing to
meet the standards.

Bisig Manggagawa sa Tryco vs NLRC Linton Commercial Co., Inc. vs. Hellera

MOA: employee waives the right to claim

overtime pay for work rendered after 5:00 pm CWW: 3 days on a rotation basis
until 6:12 pm from Monday to Friday
considering that the compressed workweek -       each worker would be working on a
schedule is adopted in lieu of the regular rotation basis for three working days only
workweek schedule which also consists of 46 instead of 6 days a week
hours. However, should an employee be  
permitted or required to work beyond 6:12 pm,
such employee shall be entitled to overtime  
pay.

The CWW was unjustified and illegal. Thus,

The MOA is enforceable  and binding
petitioners committed illegal reduction of work
against petitioners.
hours.

Where it is shown that the person making the Financial losses must be shown before a
 company can validly opt to reduce the work
waiver did so voluntarily, with full hours of its employees.
understanding of what he was doing, and the If the standards set in determining the
consideration or the quitclaim is credible and justifiability of the financial losses under Art.
reasonable, the transaction must be recognized 283 or Article 286  of the Labor Code were to
as a valid and binding undertaking. be considered, petitioners would end up failing
to meet the standards.

COVID-19

Personal case: Historical background of FWA and COVID advisory.

Jan. 29, 2002: Advisory No. 02 with attachment requiring conformity of the union with
reporting to DOLE.
March 4, 2020: Advisory No. 09 which is a reconfigured advisory 02 to address Covid
situation (it appears that Advisory No. 09 has no attachment thus refer to Advisory No. 02
attachment)
March 17, 2020: Advisory No. 209 (CAMP advisory which erroneously referred on sec 1(b)
art IV the use of Advisory No. 09 attachment which is non-existent or referred to Advisory
No. 02)
March 18, 2020: Advisory No. 12 amending sec 1(b) art IV of Advisory No. 209 and
introducing the Establishment Report for CAMP instead of the non-existent or not applicable
09 attachment.
DOLE apparently realized that Advisory No. 09 has no attachment or the attachment being
referred to is the attachment of Advisory No. 02 which is not applicable to Advisory No. 209
thus the amendment in Advisory No. 12.

Flexi-work schedule under RA 8972; during economic difficulties and emergencies

FLEXI-WORK SCHEDULE UNDER RA 8972

RA 8972 known as “The Solo Parent’s Welfare Act of 2000” allows SOLO PARENT to
work on Flexible Schedule.
Flexible Work Schedule (Sec 3) is defined by Law as the right granted to a solo parent
employee to vary his/her arrival and departure time without affecting the core work hours as
defined by the employer, provided: (Sec 6)

1. Individual and company productivity is not affected; and

2. Employer may request exemption from above requirements from DOLE for
certain meritorious grounds.

FLEXI-WORK SCHEDULE DURING ECONOMIC DIFFICULTIES AND

EMERGENCIES

1. Specific Guideline - Department Advisory No. 2 Series of 2009

 2. Purpose – Adoption of flexible work arrangements is considered as better
ALTERNATIVE than OUTRIGHT TERMINATION of the services of
employees or the TOTAL CLOSURE of the establishments
3. Concept – “Flexible work arrangements” refers to alternative arrangements or
schedules other than the traditional or standard work hours, workdays and work
week
4. Flexible Work Arrangements

 Compressed Workweek
 Reduction of Workdays – refers to one where the normal workdays per week are
reduced but should not last for more than 6 months
 Rotation of Workers- refers to one where the employees are rotated or
alternately provided work within the workweek
 Forced Leave – refers to one where employees are require to go on leave for
several days or weeks utilizing their leave credits, if there are any
 Broken Time Schedule – refer to one where the work schedule is not continuous
but the work-hours within the day or week remain
 Flexi-holidays Schedule – refers to one where the employees agree to avail of the
holidays at some other days provided there is no diminution of existing benefits as
a result of such agreement.

Administrative Flexible Work Arrangements

1. Primary Responsible for administration – Parties to the flexible work schemes

2. In case of differences, following guidelines are observed:

 Differences are treated as grievances under applicable grievance of the company

 If no grievance mechanism or if it is inadequate, the grievance shall be referred to
the Regional Office which has jurisdiction over the workplace for appropriate
conciliation
 Employees are required to maintain, as part of their records, the documentary
requirements providing that the flexible work arrangement was voluntarily
adopted

Notice Requirement- Employer shall NOTIFY the DOLE through the Regional Office
which has jurisdiction over the workplace.

Rules on power interruptions in the workplace

Policy Instructions No. 36 dated May 22,1978 was issued by the Undersecretary of Labor and
Employment to clarify the effects of power interruptions or brown-outs on productive man-
hours.

1. Brown-outs of short duration but not exceeding 20 minutes shall be treated as

worked or compensable hours whether used productively by the employees or not.
2. Brown-outs running for more than 20 minutes may not be treated as hours worked
provided any of the following conditions are present: a) the employees can leave
their workplace or go elsewhere, whether within or without the work premises; or
b) the employees can use the time effectively for their own interest.
 3. In each case, the employer may extend the working hours of his employees
outside the regular schedules to compensate for the loss of productive man-hours
without being liable for overtime pay.
4. Industrial enterprises with one or two work shifts may adopt any of the workshifts
prescribed for enterprises with 3 workshifts to prevent serious loss or damage to
materials, machineries or equipment that may result in case of power
interruptions.
5. The days when work was not required and no work could be done because of
shutdown due to electrical power interruptions, lack of raw materials and repair of
machines, are not deemed hours worked.

Meal time not less than 20 mins.: a) when compensable; b) when not compensable

Shortening of meal time to not less than 20 minutes; when compensable

A meal period of not less than 20 mins may be given by the employer provided that such
shorter meal period is credited as compensable hours worked of the employee:

1. Where the work is non-manual work in nature or does not involve strenous
physical exertion;
2. Where the establishment regularly operated for not less than 16 hrs a day;
3. In cases of actual or impending emergencies or when there is urgent work to be
performed on machineries, equipment or installations to avoid serious loss which
the employer would otherwise suffer;and
4. Where the work is necessary to prevent serious loss of perishable goods

When not compensable

The law allows a situation where the employees themselves request for the shortening of
meal period to not less than 20 minutes for the purpose of allowing them to leave work earlier
than the lapse of the 8 hours required by law. This shortened period, however, shall not be
considered compensable working time provided the following conditions are complied with:

1. The employees voluntarily agree in writing to a shortened meal period of 30

minutes and are willing to waive the overtime pay for such shortened meal period;
2. There should be no diminution in the benefits of the employees which they
receive prior to the effectivity of the shortened meal period
3. The work of the employees does not involve strenuous physical exertion and they
are provided with adequate coffee breaks in the morning and afternoon;
4. The value of the benefits derived by the employees from the proposed work
arrangement is equal to or commensurate with the compensation due them for the
shortened meal period as well as the overtime pay for 30 mins as determined by
the employees concerned;
5. The overtime pay of the employees will become due and demandable if ever they
are permitted or made to work beyond 4:30 pm;and
6. The effectivity of the proposed working time arrangement shall be for a temporary
duration as determined by the Secretary of Labor and Employment.

*5-20 minutes: considered as coffee break or rest period of short duration thus, compensable.

Waiting time
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.
In Arica vs. NLRC, The 30-minute assembly time practiced by the employees of the
company cannot be considered “waiting time” and should not therefore be compensable.
Although it is clear that employers must compensate employees for time actually spent
working, questions arise as to whether the minimum wage and overtime provisions also apply
to time spent waiting to perform productive work. Under the regulations, whether waiting
time is time worked depends on the particular circumstances.
Time spent waiting for work is compensable if it is spent “primarily for the benefit of the
employer and its business.” Conversely if the time is spent primarily for the benefit of the
employee, the time is not compensable. In determining whether waiting time constitutes
hours worked, the amount of control the employer has over the employee during the waiting
time, and whether the employee can effectively use that time for his own purposes is
material.
Arica vs NLRC GR No. 78210, February 28,1989
Facts: Arica filed by a complaint against STANFILCO for allegedly not paying the workers
for their assembly time which takes place every work day from 5:30am-6:00am.
The assembly time consists of the following activities: (1) roll call of the workers; (2) getting
their assignments from the foreman; (3) getting tools and equipment from the stockroom; and
(4) going to the field to work.
The 30-minute assembly time practiced by the employees of the company cannot be
considered “waiting time” and should not therefore be compensable.

Night Shift Differential sample computation

For regular work in the night shift on an ordinary day, the night shift differential pay is
plus 10% of the basic hourly rate or a total of 110% of the basic hourly rate. Thus using
as basis P382.00 which is the minimum daily wage rate of a private sector non-
agricultural workers and employees in the NCR, the night shift differential pay under
this situation may be computed as follows:
Night shift differential pay for regular night shift work on an ordinary day
            P382 + 10% of P382 = P382 + (0.10 x P382)
                                                = 382 + P38.20
                                                P420.20/day
            Or
            110% of P382 = 1.1 x P382
                                    =P420.20/day
For regular work in the night shift on a rest day, the night shift differential pay is plus
10% of the basic hourly rate on a rest day or a total of 110% of the regular hourly rate.
Thus, using the same P382.00 as basis, the night shift differential pay under this
situation may be computed as follows:
Night shift differential pay for regular night shift work on a rest day:
            (130% of P 382) + 10% of (130% of P382)
            = (1.3 x P382) + 0.10 x (1.3 x P382)
            = P496.60 + P49.66
            = P546.26/day
Or
            110% of (130% of P382)
            =1.1 x (1.3 x P382)
            =P546.26/day
For regular work in the night shift on a special holiday or regular holiday, it is
important to note that since special holidays and regular holidays are calendar days
(i.e., 24-hour period from 12 midnight to 12 midnight of the following day), the night
shift is either cut-off at 12 midnight or starts only at 12 midnight. Hence, the night shift
differential pay for such days may be determined by the hour on the basis of the hourly
rate not the daily rate.
Thus, using the same P382.00 or the equivalent hourly rate of P47.75 (P382/8 hours) as basis,
the night shift differential pay may be computed as follows:
1. On a special day:
Night shift differential pay for regular night shift work on a special holiday:
            (130% of P47.75) + 10% of (130% of P47.75)
            = (1.3 x P47.75) + 0.10 x (1.3 x P47.75)
            =P62.08 + P6.21
            =P68.29/hour
Or
110% of (130%of 47.75)
=1.1 x (1.3 x P47.75)
=P68.29/hour
2. On a regular holiday:
Night shift differential pay for regular night shift work on a regular holiday:
(200% of P47.75) + 10% of (200% of 47.75)
            = (2.0 x P47.75) + 0.10 x (2.0 x P47.75)
            =95.50 + P9.55
            =P105.05/hour
Or
            =110% of (200% of P47.75)
            =1.1 x (2.0 x P47.75)
            =105.05/hour
For overtime night shift work falling on an ordinary day, the overtime night shift
differential pay is plus 100% of 125% of basic hourly rate or a total of 110% of 125% of
basic hourly rate. Thus, using P382.00 or the hourly rate of P47.75 (P382/8 hours) as
basis, the overtime night shift differential pay under this situation may be computed as
follows:
Overtime night shift differential pay for overtime night shift work on an ordinary day:
            (125% of P47.75) + 10% of (125% of P47.75)
            = (1.25 x P47.75) + 0.10 x (1.25 x P47.75)
            =P59.69 + P5.97
            = P65.66/hour
Or
            =110% of (125% of P47.75)
            = 1.1 x (1.25 x P47.75)
            =P65.66/hour
For overtime night shift work falling on rest day, special holiday or regular holiday, the
following illustrations of computation may prove helpful (using the same basis as above,
i.e., P382.00 or P47.75 per hour):
1. On a special holiday or rest day:
Overtime night shift differential pay for overtime night shift work on a special holiday or rest
day:
130% x (130% of P47.75) + 10% of (130% of 130% of P47.75)
=1.3 x (1.3 x P47.75) + 0.10 x (1.3 x 1.3 x P47.75)
=P80.70 + P8.07
=P88.77/hour
Or
169% of P47.75 + 10% of (169% of P47.75)
=80.70 + P8.07
=P88.77/hour
2. On a regular holiday:
Overtime night shift differential pay for overtime night shift work on a regular holiday:
            130% x (200% of P47.75) + 10% of (130% of 200% of P47.75)
            =1.3 x (2.0 x P47.75) + 0.10 x (1.3 x 2.0 x P47.75)
            =P124.15 + P12.42
            =P136.57/hour
Or
            260% of P47.75 + 10% of (260% of P47.75)
            =P124.15 + P12.42
            =P136.57/hour

Guide in the computation of Premium and OT pay vis-a-vis NSD

Ordinary day 100& or 1

Sunday or rest day 130 % or 1.3

Special day 130% or 1.3

Special day falling on a rest day 150% or 1.5

Regular Holiday 200% or 2

Regular holiday falling on rest day 260% or 2.6

Ordinary day, night shift 1 x 1.1 = 1.1 or 110%

Rest day, night shift 1.3 x 1.1 =1.43 or 143%

Special day, night shift 1.3 x 1.1 = 1.43 or 143%

Special day, rest day, night shift 1.5 x 1.1 = 1.65 or 165%

Regular holiday, night shift 2 x1.1 = 2.2 or 220%

Regular holiday. Rest day, night shift 2.6 x 1.1 = 2.86 or 286%

Double holiday, night shift 3 x 1.1 = 3.3 or 330%

Double holiday, rest day, night shift 3.9 x 1.1 = 4.29 or 429

Ordinary day, overtime (OT) 1 x 1.25 = 1.25 or 125%

Rest  day, overtime 1.3 x 1.3 = 1.69 or 169%

Special day, rest day, overtime 1.5 x 1.3 = 1.95 or 195%

Regular holiday, overtime 2 x 1.3 = 2.6 or 260%

Regular holiday, rest day. Overtime 2.6 x 1.3 = 3.38 or 338%

Double holiday, overtime 3 x 1.3 = 3.9 or 390%

Double holiday, rest day, overtime 3.9 x 1.3 = 5.07 or 507%

Ordinary day. Night shift, overtime 1 x 1.1 x 1.25 = 1.375 or 137.5%

Rest day, night shift, overtime 1.3 x 1.1 x 1.3 = 1.859 or 185.9%

Special day, night shift, overtime 1.3 x 1.1 x 1.3 = 1.859 or 185.9%

Special day, rest day, night shift, OT 1.5 x 1.1 x 1.3 = 2.145 or 214.5%

Regular holiday, night shift, OT 2 x 1.1 x 1.3 = 286 or 286%

Regular holiday, rest day, night shift, OT 2.6 x 1.1 x 1.3 = 3.718 or 317.8%

Double holiday, night shift, OT 3 x 1.1 x 1.3 = 4.29 or 429%

Double holiday, rest day, night shift, OT 3.9 x 1.1 x 1.3 = 5.577 or 557.7%

*ask your accountant classmate or friend

Validity of stipulated OT on CBA; Built in OT; Seafarer’s OT

Validity of Stipulated OT
Generally, the premium pay for work performed on the employee’s rest days or on special
days or regular holidays is included as part of the regular rate of the employee in the
computation of overtime pay for any overtime work rendered on said days, especially if the
employer pays only the minimum overtime rates prescribed by law. The employees and
employer, however, may stipulate in their CBA the payment of overtime rates higher than
those provided by law and exclude the premium payments in the computation of overtime
pay. Such agreement may be considered valid only if the stipulated overtime pay rates will
yield to the employees not less than the minimum prescribed by law.
Built in OT
In case the employment contract stipulates that the compensation includes built-in overtime
pay and the same is duly approved by the Director of the Bureau of Local Employment, the
non-employment by the employer of any overtime pay for overtime work is justified and
valid.
In PAL Employees Savings and Loan Association, Inc. v. NLRC, where the period of normal
working hours per day was increased to 12 hours, it was held that the employer remains liable
for whatever deficiency in the amount for overtime work in excess of the first 8 hours, after
recomputation shows such deficiency.
Entitlement of Seafarers to OT pay
Actual overtime service necessary to justify claim for overtime pay.
The correct criterion in determining whether or not the sailor are entitled to overtime pay is
not whether they are on board and cannot leave ship beyond the regular 8 working hours a
day, but whether they actually rendered service in excess of said number of hours.
In the case of Stolt-Nielsen, the SC ruled that 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 PCL Shipping, the SC found that the private respondent was not entitled to overtime pay
because he failed to present any evidence to prove that he rendered service in excess of
regular 8 working hours a day. But in Acuña, petitioners’ claims for overtime pay were
allowed despite their failure to substantiate them. It was declared that the claims of OFWs
against foreign employers could not be subjected to the same rules of evidence and procedure
applicable to complainants whose employers are locally based.
Guaranteed overtime pay, not included in the computation of salary for unexpired
portion.
Raised as one of the issues in 2008 case Bahia Shipping Services, Inc v. Chua, whether in the
computation of the monetary award to an illegally dismissed OFW, respondent’s “guaranteed
overtime” pay amounting to 197 USD per month should be included as part of his salary.
Petitioner contends that there is no factual or legal basis for the inclusion of said amount
because, after respondent’s repatriation, he could have not have rendered any overtime work.
The SC ruled in favor of the Petitioner.
In the computation of the monetary award to an illegally dismissed OFW, the “guaranteed
overtime” pay should not be included as part of his salary for the unexpired portion of his
contract. This is so because it is improbable that the OFW has rendered overtime work during
the unexpired term of his contract. Consequently, there is no factual or legal basis therefor.
*will explain more on this
Rule on waiver and laches on OT

Waiver
The right to claim overtime pay is not subject to waiver. Such right is governed by law and
not merely by the agreement of the parties. While rights may be waived, the same must not
be contrary to law, public order, public policy, morals, good customs or prejudicial to a third
person with a right recognized by law.
But if the waiver is done in exchange for and in consideration of certain valuable privileges,
among them that the value of said privileges did not compensate for such work, such waiver
may be considered valid.
Effect of laches or estoppel
The principle of laches or estoppel does not apply to the right of employees to claim past
overtime pay. Mere lapse of time or silence of the employees is not sufficient to defeat and
frustrate the purpose of the law in granting such right by mere indirection.
Laches is the failure or neglect for an unreasonable and unexplained length of time to do that
which, by exercising due diligence, could or should have been done earlier. Stated
differently, laches may also be defined as such neglect or omission to assert a right taken in
conjunction with the lapse of time and other circumstances causing prejudice to an adverse
party as will operate as a bar in equity.
The question of laches is addressed to the sound discretion of the court, and since it is an
equitable doctrine, its application is controlled by equitable considerations. It cannot work to
defeat justice or to perpetrate fraud or injustice. Laches cannot be charged against a worker
when he has not incurred undue delay in the assertion of his rights because he filed his
complaint within the 3-year reglementary period for the filing of monetary claims. Under this
situation, he cannot be said to have slept on his rights for an unreasonable length of time.
When an employee fails to assert his right immediately upon violation thereof, such failure
cannot ipso facto be deemed as a waiver of the oppression. The worker and his employer are
not equally situated. When a worker keeps silent inspite of flagrant violations of his rights, it
may be because he is seriously fearful of losing his job. The dire consequences thereof on his
family and his dependents must have prevented him from complaining. In short his thoughts
of sheer survival weigh heavily  against launching an attack upon his more powerful
employee.

Rationale behind Art. 88 prohibition on undertime & leave of absence offsetting

Undertime work on any particular day shall not be offset by overtime work on any other day.
Permission given to the employee to go on leave on some other day of the week shall not
exempt the employer from paying the additional compensation required by law. (Art. 88 LC)
When undertime is offset against the overtime, the employee is ‘made to pay’ twice for his
undertime hours. This is because the employee’s leave credits are reduced to the extent of the
undertime hours while he is made to pay for the undertime hours with work beyond the
regular working hours.  Clearly, this is not a fair situation for the employee, even when the
undertime is his fault.
The proper approach should be to deduct the undertime hours from the available leave credits
of the employee and to pay the employee overtime for the extended hours of work.
If the employee has consumed his leave credits, his undertime hours may be deducted from
his salary, but he should still be paid his overtime compensation for work performed beyond
his regular working hours. (NATIONAL WATERWORKS and SEWERAGE AUTHORITY,
vs.  NWSA CONSOLIDATED UNIONS, ET AL.

Rule on rest day based on religious grounds

Every employer shall give his employees a rest period of not less than twenty-four
consecutive hours for each period of seven days. 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 prescribe; Provided, however, That the
preference of an employee as to his weekly rest day shall be respected by the employer if the
same is based on religious grounds.
Th employee should make known his preference to the employer in writing at least 7 days
before the desired effectivity of the initial rest day so preferred.
Where, however, the choice of the employee as to their rest day base don religious grounds
will be 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 2
days in a month.

Rest day premium sample computation

For work performed on rest days or on special holidays, the premium pay is plus 30% of
the daily wage rate of 100% or a total of 130%. Thus, using as basis Php.382.00 which is the
minimum daily wage rate of private sector non-agricultural workers and employeesin the
National capital region, as mandated by Wage Order No. NCR-14 effevtive on June 14, 2008:
            For work performed on rest days or on special holidays - plus   30% of the daily
basic rate of 100% or a total of 130%:
30% of P382 = 0.30 x P382.00 = P114.60
P382.00 + P114.60 = P496.60
                                    or       
130% of P382 = 1.3 x P382 = P496.60
For work performed on a rest day which is also a special holiday, the premium pay is
plus 50% of the daily wage rate at 100% or a total of 15%. Thus, using the same P382.00 as
basis.
For work performed on a rest day which is also a special day – plus 50% of the daily
basic rate of 100% or a total of 150%:
 50% of P382.00        = 0.5 x P382.00 = P191.00
P382.00 + P191.00 = P573.00
                                    or
150% of Php.382.00 = 1.5 x Php382.00 = Php 573.00
Special and regular holidays; Holiday pay meaning and purpose

Regular Holidays
New year’s Day-January 1
Maundy Thursday-Movable date
Good Friday-Movable date
Eidul Fitr-Movable date
Araw ng Kagitingan-Monday nearest April 9
Eidul Adha - Movable date
Labor Day-Monday nearest May 1
Independence Day-Monday nearest June 12
National Heroes Day-Last Monday of August
Bonifacio Day-Monday nearest November 30
Christmas Day-December 25
Rizal Day-Monday nearest December 30

Nationwide Special Holidays:

Ninoy Aquino Day-Monday nearest August 21
All Saints Day-November 1
Last Day of the Year-December 31
 
*Holiday pay is a day’s pay given by law to an employee even if he does not work on a
regular holiday, provided that he is present or is in leave with pay on the work day
immediately preceding the holiday. The purpose is to prevent diminution of the monthly
income of workers on account of work interruptions declared by the State. (In other words,
although the worker is forced by law to take a rest, he is not deprived of what he should earn)

Holiday pay sample computation, employee’s regular workday; rest day; over time.

Regular wage per hour = P100

Regular work Hours = 8 hours    
Daily Wage = P800
 
Regular holiday pay on regular workday (200%)
 
If the employee worked = 200% of regular wage
800 X 200% = P1600 Take home pay
 
If the employee did not work (100%)
800 X 100% = P800 Take home pay
 
Regular holiday pay on rest day (200% + 30%)
 
800 X 200% = 1600 Regular holiday pay
1600 x 30 % = 480 Rest day premium
1600 + 480 = P2080 Take home pay
Regular holiday pay with over time (200% + (25% x hours worked))
 
(Let’s say 2 hours OT)
 
800 X 200% = 1600 Regular holiday pay
1600/8 = 200 per hour rate
2hrs (OT) x 200 = 400 OT pay
400 x 25% = 100 OT premium pay
1600 + 400 + 100 = P2100 Take home pay

Distinctions between regular and special holidays

The following are the distinctions between “regular holidays” and “special days”:
 
a. A covered employee who does not work during regular holidays is paid 100% of his
regular daily wage; while a covered employee who does not work during a special day does
not receive any compensation under the principle of “no work, no pay.”
 
b. A covered employee who works during regular holidays is paid 200% of his regular daily
wage; while a covered employee who works during special days is only paid an additional
compensation of not less than 30% of the basic pay or a total of 130% and at least 50% over
and above the basic pay or a total of 150%, if the worker is permitted or suffered to work on
special days which fall on his scheduled rest day.
 
*as I always say, in labor 30% plus 30% is equals to 50%, go figure

Effect of absence on entitlement of holiday pay

The following are the effect of absences on entitlement to regular holiday pay:
 
a. Employees on leave of absence with pay - entitled to regular holiday pay.
b. Employees on leave of absence without pay on the day immediately preceding a regular
holiday - may not be paid the required holiday pay if he has not worked on such regular
holiday.
c. Employees on leave while on SSS or employee's compensation benefits- Employers 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 while on such benefits.
d. When the day preceding regular holiday is a non-working day or scheduled rest day -
Employee shall not be deemed to be on leave of absence on that day, in which case, he shall
be entitled to the regular holiday pay if he worked on the day immediately preceding the non-
working day or rest day.

Successive holiday; holidays falling on the same day

The rule in case of successive regular holidays is as follows:

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.
Holidays falling on the same day
DOLE Explanatory Bulletin on Workers’ Entitlement to Holiday Pay on 9 April 1993, Araw
ng Kagitingan and Good Friday enunciated the following rule in case of two regular
holidays falling on the same day (e.g., Araw ng Kagitingan and Good Friday falling in 1993,
2004 and 2020):

1. If employee did not work: 200% of basic pay;

2. If employee worked: 300% of basic pay.

Holiday pay for private school teachers; workers paid by result; field personnel & seasonal
workers

Rule IV: Holiday pay

Section 1. This rule shall apply to all employees except:

 Those of the government and any of the political subdivision, including

government-owned and controlled corporation;

 Those of retail and service establishments regularly employing less than ten (10)
workers;

 Domestic helpers and persons in the personal service of another;

 Managerial employees as defined in Book Three of the Omnibus Rules to

Implement the Labor Code of the Philippines;
 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.

Holiday pay of certain employees

 Private school teachers, including faculty members of colleges and universities,

may not be paid for the regular holidays during semestral vacations. They shall,
however, be paid for the regular holidays during Christmas vacation;

 Where a covered employee is paid by results or output, such as payment on

piece work, his holiday pay shall not be less than his average daily earnings for
the last seven (7) actual working days preceding the regular holiday; Provided,
however, that in no case shall the holiday pay be less than the applicable statutory
minimum wage rate;

 Seasonal workers may not be paid the required holiday pay during off-season
when they are not at work;
 Workers who have no regular working days shall be entitled to the benefits
provided in this Rule.

Book 3, Rule IV, Section 8, Omnibus Rules to Implement the Labor Code of the
Philippines

Rule on offsetting of holiday pay with regular workday

Offsetting of holiday pay with regular workday is not allowed. Following the prohibition that
overtime cannot be offset by undertime, to allow offsetting would prejudice the worker. He
would be deprived of the additional pay for the holiday work he has rendered and which is
utilized to offset his equivalent time off on regular workdays. To allow employers to do so
would be to circumvent the law on payment of premiums for holiday work.

Rationale of SIL; exceptions

Rationale:
To afford an employee the chance to get 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. An employee, as a matter of public policy, is entitled to this
leave benefit in order to improve his health and physical well-being.
This benefit applies to all employees except:

1. Government employees, whether employed by the National Government or any of

its political subdivisions, including those employed in government-owned and/or
controlled corporations with original charters or created under special laws;
2. Persons in the personal service of another;
3. Managerial employees, if they meet all the following conditions: Their primary
duty is to manage the establishment in which they are employed or of a
department or subdivision thereof; They customarily and regularly direct the work
of two or more employees therein; and They have the authority to hire or fire
other employees of lower rank; or their suggestions and recommendations as to
 hiring, firing and promotion, or any other change of status of other employees are
given particular weight.
4. Officers or members of a managerial staff, if they perform the following duties
and responsibilities: Primarily perform work directly related to management
policies of their employer; Customarily and regularly exercise discretion and
independent judgment; (i)Regularly and directly assist a proprietor or managerial
employee in the management of the establishment or subdivision thereof in which
he or she is employed; or (ii) execute, under general supervision, work along
specialized or technical lines requiring special training, experience, or knowledge;
or (iii) execute, under general supervision, special assignments and tasks; and 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
described in paragraphs 4.1, 4.2 and 4.3 above;
5. Field personnel and those whose time and performance are 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;
6. Those already enjoying this benefit;
7. Those enjoying vacation leave with pay of at least 5 days; and
8. Those employed in establishments regularly employing less than 10 employees.

Meaning of one-year service

It means service within twelve (12) months, whether continuous or broken, reckoned from
the date the employee started working, including authorized absences and paid regular
holidays, unless the number of working days in the establishment as a matter of practice or
policy, or that provided in the employment contract, is less than twelve (12) months, in which
case, said period shall be considered as one (1) year for the purpose of determining
entitlement to the service incentive leave.

SIL is included as part of the retirement benefits that an employee who is retiring SIL as part
of retirement pay; explain

optionally or compulsorily in entitled to.

However, it bears stressing that the inclusion of the SIL benefit as part of the retirement
benefits presupposes that during the employment of the retiring employee, he was entitled to
such benefit. If not so entitled, then the SIL should not be excluded in the computation of the
retirement benefits.
For instance, a taxi driver, while entitled to retirement benefits, was entitled to SIL during his
employment, he being field personnel. Consequently, the SIL component of his retirement
benefits should not be included in the computation thereof.

New rule on Service charge (RA 11360)

Article 96 of the Labor Code of the Philippines provides that 85% of the total service charge
collected by the establishments would be distributed to covered employees,
while 15% would account for losses and breakages and be given to managerial employees, at
the discretion of management in the latter case.
The enactment of Republic Act No. 11360  — or “An Act Providing that Service Charges
Collected by Hotels, Restaurants and other Similar Establishments be Distributed in Full to
All Covered Employees” — amends Article 96 of the Labor Code of the Philippines. It
provides that rank-and-file employees of restaurants, hotels and similar establishments are
now entitled to 100% of the service charges collected from customers.

Wages: Who are included in the term agriculture? Significance

For purposes of wages, the term “agriculture” includes farming in all its branches and, among
other things, includes:

1. Cultivation and tillage of soil;

2. Dairying;
3. Production, cultivation, growing, and harvesting of any agricultural and
horticultural commodities;
4. Raising of livestock or poultry; and
5. Any practices performed by a farmer on a farm as an incident to or in conjunction
with such farming operations.

The term does not include the manufacturing or processing of sugar, coconuts, abaca,
tobacco, pineapples, or other farm products. Its significance is in the light of the classification
of workers into agricultural and non-agricultural in the grant of minimum wages. It is the
nature of work which determines the classification of workers.
The significance in the distinction lies in the fact that the rates of wages of agricultural
workers are often fixed by law lower than those of non-agricultural workers.

Facilities v. Supplement

Facilities include articles or services for the benefit of the employee or his family, but shall
not include tools of the trade or articles or services for the benefit of the employer or
necessary to the conduct of the employer’s business.
Supplement means extra remuneration or special privileges or benefits given to or received
by the laborers over and above their ordinary earnings or wages.

“EQUAL PAY FOR EQUAL WORK” PRINCIPLE; RELEVANT JURSPRUDENCE

It is a principle requiring an employer to pay its employees, regardless of race, ethnicity, or

gender, equal pay for equal work. It serves as a prohibition against discrimination with
respect to pay.
It enshrines the notion of equal remuneration for the same class of workers doing the same
kind of work.
Doctrine of “equal pay for equal work” G.R. No. 149758 August 25, 2005
PHILEX GOLD PHILIPPINES, INC., GERARDO H. BRIMO, LEONARD P. JOSEF,
and JOSE B. ANIEVAS, Petitioners, vs. PHILEX BULAWAN SUPERVISORS
UNION, represented by its President, JOSE D. PAMPLIEGA, Respondent.
Facts:
Philex Gold (PG) and Philex Bulawan Supervisors Union (Mining site in Negros Occidental)
entered into a CBA.  PG assigned its Padcal, Benguet employees as Supervisors in its mining
site in Negros Occidental. It was discovered that Padcal Supervisors has a higher salaries and
benefits than that of the Bulawan Supervisors.
Issue:
Whether the doctrine of "equal pay for equal work" should not remove management
prerogative to institute difference in salary within the same supervisory level.
Held:
cause petitioners failed to adduce evidence to show that an ex-Padcal supervisor and a locally
hired supervisor of the same rank are initially paid the same basic salary for doing the same
kind of work. They failed to differentiate this basic salary from any kind of salary increase or
additional benefit that may have been given to the ex-Padcal supervisors due to their
seniority, experience and other factors. It is noteworthy to state that an employer is free to
manage and regulate, according to his own discretion and judgment, all phases of
employment, which includes hiring, work assignments, working methods, time, place and
manner of work, supervision of workers, working regulations, transfer of employees, lay-off
of workers, and the discipline, dismissal and recall of work. While the law recognizes and
safeguards this right of an employer to exercise what are clearly management prerogatives,
such right should not be abused and used as a tool of oppression against labor. The
company’s prerogative must be exercised in good faith and with due regard to the rights of
labor. A priori, they are not absolute prerogatives but are subject to legal limits, collective
bargaining agreements and the general principles of fair play and justice
International School Alliance of Educators vs Quisumbing (2000) 333 SCRA 13
Facts:
International School, Inc., pursuant to PD 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.
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 employs four tests to
determine whether a faculty member should be classified as a foreign-hire or a local hire: (a)
What is one's domicile? (b) Where is one's home economy? (c) To which country does one
owe economic allegiance? (d) Was the individual hired abroad specifically to work in the
School and was the School responsible for bringing that individual to the Philippines? Should
the answer to any of these queries point to the Philippines, the faculty member is classified as
a local hire; otherwise, he or she is deemed a foreign-hire.
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 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.
Issue:
WON local hire teachers shall enjoy same salary as foreign hire teachers where they perform
the same work.
Held:
Employees are entitled to same salary for performance of equal work.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in
Article 7 thereof, provides: The States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favorable conditions of work, which ensure, in
particular: ( a) Remuneration which provides all workers, as a minimum, with: (i) Fair wages
and equal remuneration for work of equal value without distinction of any kind, in particular
women being guaranteed conditions of work not inferior to those enjoyed by men, with equal
pay for equal work; The foregoing provisions impregnably institutionalize in this jurisdiction
the long honored legal truism of "equal pay for equal work." Persons who work with
substantially equal qualifications, skill, effort and responsibility, under similar conditions,
should be paid similar salaries. This rule applies to the School.
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 inconsiderate. If an
employer accords employee the same position and rank, the presumption is that these
employees perform equal work. 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. The
employer has discriminated against that employee; it is for the employer to explain why the
employee is treated unfairly.
In this case, the employer 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.

FACTORS/DIVISORS IN THE COMPUTATION OF BENEFITS & WAGES

The use of factors or divisors in the computation of estimated monthly rates of employees
pursuant to Republic Act No. 9492, or an “Act Rationalizing the Celebration of National
Holidays.”
Section 9. Suggested Formulae in Determining the Equivalent Monthly Regional Minimum
Wage Rates. Without prejudice to existing company practices, agreements or policies, the
following computation of the Estimated Equivalent Monthly Rate (EEMR) of employees in
the private sector because of the National Heroes’ Day which is now observed on the Last
Monday of August, shall accordingly use the following formulae in the determining the
EEMR of the employees:
For those who are required to work every day including Sundays or rest days, special days
and regular holidays, the previous factor of 392.8 will now be 392.5, thus:
Applicable Daily Wage Rate (ADR) X 392.5/12 months = EEMR; where 392.5 days/year is
equal to:

299         -Ordinary working days

 22           -Regular holidays
 67.6 52   -rest days X 130%
 3.9 3       -special days X 130%

392.5-Total number of days/year.

For those who do not work and are not considered paid on Sundays or rest days, the previous
factor of 314 will now be 313, thus:
Applicable Daily Wage Rate (ADR) X 313/12 months = EEMR; where 313 days/year is
equal to:

299      ordinary working days

   11      regular holidays
     3       special days

313 Total number of days/year.

For those who do not work and are not considered paid on Saturdays and Sundays or rest
days, the previous factor of 262 will now be
261, thus:
Applicable Daily Wage Rate (ADR) X 261/12 months = EEMR; where 261 days/year is
equal to:

247     ordinary working days

   11    regular holidays
     3    special days

261 Total number of days/year.

As to 365 days/year factor, although there is no effect as to the payment in the monthly salary
of employees as they are paid all days of the year, its breakdown will be modified as follows:
Applicable Daily Wage Rate (ADR) X 365/12 months = EEMR where 365 days/year is
equal to:
299        ordinary working days
  52         Sundays/rest days
  11         regular holidays
    3         special days

365 Total number of days/year.

Significance of divisor

The "divisor" is the factor or number of days used by an employer in determining the daily
rate of monthly-paid employees. Depending on the divisor used, the presumption that the
unworked regular holidays are paid off-days may arise or not. While the holiday pay
provisions are easy to implement as to daily paid employees, questions arise on whether the
compensation of monthly-paid employees already includes payment for holidays occurring
within the month.
For purposes of this study, the term "divisor test" signifies the method of computing the daily
wage rate of monthly-paid employees.
It is well to note that the "divisor" forms an integral element of the "divisor test."
The conversion of the monthly wage into a daily rate is of utmost importance to the
employees considering that the benefits due them are denominated in terms of daily
compensation. A peso difference in the daily rate owing to the use of a different divisor could
add up to a substantial amount depending on the circumstances involved in the case.
More than just an arithmetical process, the very nature of employment is brought to the fore
via the divisor test. Thus, the divisor test is an invaluable tool in resolving the legal issues
with respect to the application of the holiday pay provisions of the law to monthly-paid
employees.
More importantly, only monthly-paid employees are entitled to be paid unworked rest days
and unworked special days. The monthly-paid employee can demand payment for such days
because his nature of employment is such that he is paid for all the days of the month,
whether he worked on those days or not. On the other hand, a daily-paid employee cannot
demand payment for unworked rest days and special days since as to him, the principle of
"no-work, no-pay" applies.
However, by express mandate of the law, all workers are entitled to receive their regular
wage for regular holidays irrespective of whether they worked on those days or not.
The following benefits are computed on the basis of the daily rate:

1. Overtime pay;
2. Night differential pay;
3. Vacation leave;
4. Sick leave pay;
5. Service incentive leave;
6. Holiday premium pay; and
 7. Bonus.

For purposes of computation of the salary deductions due to the absences of the employee,
the daily rate is also relevant.

Wage Rules affecting HEIs

Under PD 451, it prescribes that the 60% of increases in tuition shall be allocated for increase
of salaries and wages of teaching and non-teaching personnel and the balance be allocated to
institutional development, student assistance and extension services.
Under BP 232, each private school shall determine its rate of tuition and other school fees
and charges. The rates and charges adopted by the schools pursuant to this provision shall be
collectible, and their application or use authorized, subject to the rules and regulations
promulgated by DepEd.
RA 6728 allows increase in school tuition fees on the condition that 70% of the increase shall
go to the payment of salaries, wages, allowances and other benefits of teaching and non-
teaching personnel.

Rationale for the 70% chargeability

The law allows increase in school tuition fees on the condition that 70% of the increase shall
go to the payment of salaries, wages, allowances and other benefits of teaching and non-
teaching personnel.

2 Principles enunciated in Art. 100

Principle of Non-diminution and Principle of Non-elimination, the reduction, elimination, or

withdrawal by employers of any benefits, supplements or payments as provided in existing
laws, individual agreements, or collective bargaining agreements between workers and
employers or voluntary employer practice or policy, is not allowed.

Art. 100 application, explained

Article 100 is clear that the principle of non-elimination and non-diminution of benefits apply
only to the benefits being enjoyed “at the time of promulgation” of the Labor Code, although
the SC has consistently cited Article 100 as being applicable even to benefits granted after
said promulgation. It has, in fact, been treated as the legal anchor for the declaration of the
invalidity of so many acts of employers deemed to have eliminated or diminished the benefits
of employees.
Nevertheless, the proper basis for non-elimination or non-diminution is not Art. 100. Strictly
speaking, the proper legal bases for the invocation of the non-elimination or non-diminution
principle, based on Arco Metal case are:

1. Express terms of an employment agreement;

2. Company practice which refers to the implied terms of an employement
agreement which the employer has freely, voluntarily, and consistently extended
to its employees and thus cannot be withdrawn except by mutual consent or
agreement of the contracting parties;
3. The constitution particularly Sec. 18 of Art. II and Sec. 3 of Art. XIII; and
4. Art. 4 of the Labor Code.
Globe Mackay Cable and TSPIC Corp compared to Arco Metal Products

Globe Mackay Cable case and TSPIC Corp case vs. Arco Metal Products case for the
erroneous interpretation of law re Article 100.
            The following criteria may be used to determine whether an act has ripened into a
company practice:

1. The act of the employer has been done for a considerable period of time;
2. The act should be done consistently and intentionally; and
3. The act should not be a product of erroneous interpretation or construction of a
doubtful or difficult question of law or provision in the CBA.

The act should not be a product of erroneous interpretation or construction of a

doubtful or difficult question of law or provision in the CBA
The general rule is that if it is a past error that is being corrected, no vested right may be
said to have arisen therefrom nor any diminution of benefit may have resulted by virtue of the
correction thereof. The error, however, must be corrected immediately after its discovery,
otherwise, the rule on non-diminution of benefits would still apply.
The following are the cases:
GLOBE MACKAY CABLE and RADIO CORPORATION vs NLRC
The Supreme Court ruled on the proper computation of the cost-of-living allowance (COLA)
for monthly paid employees.
The petitioner corporation pursuant to Wage Order No. 6, increase the cola of its monthly
paid employees by multiplying the P3.00 daily COLA by 22 days which is the number of
working days in the company. The union disagreed with the computation claiming that the
daily COLA rate should be multiplied by 30 days which has been the practice of the company
for several years.
The Supreme Court upheld the contention of the petitioner corporation. It held that the grant
by the employer of the benefits through an erroneous application of law due to absence of
clear administrative guidelines is not considered a voluntary act which cannot be
unilaterally discontinued.
TSPIC CORP vs. TSPIC EMPLOYEES UNION
An erroneously granted benefit may be withdrawn without violating the prohibition against
non-diminution of benefits.
No vested right accrued to individual respondents when TSPIC corrected its error by
crediting the salary increase for the year 2001 against the salary increase granted under Wage
Order no. 8, all in accordance with the CBA. Thus, any amount given to the employees in
excess of what they were entitled to, as computed above, may be legally deducted by TSPIC
from the employees’ salaries.
But if the error does not proceed from the interpretation or construction of a law or a
provision in the CBA, the same may ripen into a company practice.
Case example:
Arco Metal Products Inc Vs Samahan Ng Mga Manggawa
Petitioner despite the provision of the law and the CBA that 13th month pay, vacation leave
and sick leave conversion to cash should be computed in amounts proportional to the service
the employees have actually rendered within a year, had not pro-rated the payment of the
same benefits to 7 employees who had not served for the full 12 months in 1992, 1993, 1994,
1996, 1999, 2003, and 2004. It claims that its full payment of benefits regardless of the length
of service to the company does not constitute voluntary employer practice. It points out that
the payments had been erroneously made and they occurred in isolated cases. It was only in
2003 that the accounting department discovered the error when there were already 3
employees involved with prolonged absences and the error was corrected by implementing
the pro rata payment of benefits pursuant to law and their CBA. It adds that 7 earlier cases of
full payment of benefits went unnoticed considering the proportion of one employee
concerned vis a vis the 170 employees of the company. It claimed the situation as a “clear
oversight” and should not be taken against it.
The Supreme Court, in disagreement, pronounced:
 In those said years, the petitioner had adopted a policy of FREELY, VOLUNTARILY, and
CONSISTENTLY GRANTING full benefits to its employees regardless of the length of
service rendered. True, there were only a total of 7 employees who benefited from such a
practice, but it was an established practice nonetheless. Jurisprudence has not laid down
any rule specifying a minimum number of years within which a company practice must be
exercised in order to constitute voluntary company practice. Petitioner  cannot shirk
away  from its responsibility by merely claiming that it was a mistake or an error, supported
only by an affidavit of its manufacturing group head.
 
*Very Important: The  Globe Mackay Cable case is not the Globe doctrine

Elimination or diminution of benefits may constitute constructive dismissal; relevant

jurisprudence from a personal case

Constructive dismissal is an involuntary resignation resorted to when continued

employment becomes impossible, unreasonable, or unlikely, due to any of the following:

1. demotion in rank or a diminution in pay; or

2. when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to an employee.

Constructive dismissal is illegal and usually occurs when an employee resigns as a result of
unfavorable work conditions instigated by the employer. It is typically resorted to by
employers who do not want to undergo the procedural due process involved in legally
terminating an employee.
Jurisprudence
Constructive dismissal occurs not when the employee ceases to report for work, but
when the unwarranted acts of the employer are committed to the end that the
employee’s continued employment shall become so intolerable. In these difficult times,
an employee may be left with no choice but to continue with his employment despite
abuses committed against him by the employer, and even during the pendency of a
labor dispute between them. This should not be taken against the employee. Instead, we
must share the burden of his plight, ever aware of the precept that necessitous men are
not free men.
The burden of proof in constructive dismissal cases is on the employer to establish that
the transfer of an employee is for valid and legitimate grounds xxx.
Mere title or position held by an employee in a company does not determine whether a
transfer constitutes a demotion. Rather, it is the totality of the following circumstances, to
wit: economic significance of the work, the duties and responsibilities conferred, as well
as the same rank and salary of the employee, among others, that establishes whether a
transfer is a demotion.
The admissions of the petitioner are conclusive on it. An employee cannot be promoted, even
if merely as a result of a transfer, without his consent. A transfer that results in promotion or
demotion, advancement or reduction or a transfer that aims to lure the employee away
from his permanent position cannot be done without the employees consent.

Criteria to ascertain the existence of a binding and enforceable company practice

1. The act of employer has been done for a considerable period of time;
2. The act should be done consistently and intentionally;
3. The act should not be a product of erroneous interpretation or construction of a
doubtful or ambiguous question of law or provisions of the CBA;
4. Existence of a company practice should be duly proved by evidence; and
5. The grant of benefit should not be by reason of legal or contractual obligation but
by reason of liberality.

“Done for a considerable period of time” meaning

To be considered a company practice, the giving of the benefits should have been done over a
long period of time, and must be shown to have been consistent and deliberate.
            In the following cases, the act of the employer has been declared as having ripened to
a company practice for having been done for a considerable period of time, thus can no
longer be withdrawn:
            (1) In Davao Fruits Corp. v. ALU, involving the employer’s act for six (6) years of
freely and continuously including in the computation of the 13 th month pay, certain items that
were expressly excluded by law.
            (2) In Sevilla Trading Co. v. Semana, where petitioner kept the practice of including
non-basic benefits such as paid leaves for unused sick leave and vacation leave in the
computation of the employee’s 13thmonth pay for at least two (2) years.
            (3) In Central Azucarera v. Central Azucarera, where petitioner, for thirty (30)
years, granted its workers the mandatory 13th month pa computed in accordance with the
following formula: Total Basic Annual Salary divided by twelve (12). Included in
petitioner’s computation of the Total Basic Annual Salary were the following: basic monthly
salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium
pay; and vacation and sick leaves for each year.

"Consistently and intentionally" meaning

To be considered as a practice, policy or tradition, the giving of the benefits should be shown
to have been consistently and deliberately done. The intention to make a certain act a
company practice may be logically inferred from the peculiar circumstances obtaining in each
case. An example is Tiangco v. Leogardo, Jr., where the discontinuance by the employer
effective February, 1980 of the fixed monthly emergency allowance which it has consistently
granted to the employees since November, 1976, insofar non-working days are concerned
based on the principle of “no work, no pay” was declared violative of the non-diminution
principle in Article 100 of the Labor Code.
In Standard Chartered Bank v. SCBEU, it was held the petitioners employees are entitled to
“outpatient medicine reimbursements” distinct and separate from the “medicine allowances”
granted in the CBA because there is an established company practice of reimbursement of
outpatient services, including medicine reimbursement, despite the absence of a provision in
the group hospitalization insurance plan regarding outpatient benefits.
Another example is Republic Planters Bank v. NLRC, where it was ruled that since
petitioner PNB-RB has consistently and deliberately adopted the practice of granting gratuity
benefits to its retiring officers based on the salary rate of the next higher rank even after the
expiration of the 1971-1973 CBA, although I knew fully well that it was not required to give
the benefits after the expiration of the 1971-1973 CBA, such grant of gratuity pay has already
ripened into a company practice or policy which can no longer be peremptorily withdrawn.

Bonus, general rule; exemption

Bonus, as a general rule, is an amount granted and paid ex gratia to the employee. Its
payment constitutes an act of enlightened generosity and self-interest on the part of the
employer rather than as a demandable or enforceable obligation. (GR100701; GR 110068)
In certain situations, however, the SC, on the basis of equitable considerations, long practice,
and other peculiar circumstances has recognized the demandability and enforceablity of
bonuses although the grant thereof is undoubtedly discretionary and notwithstanding the fact
that they do not form part of the wages or salary of the employee.
Unlike 13th month pay though, bonus may be forfeited in case employee is found guilty of
an administrative charge.

Meaning of basic salary; Honda Philippines case

Basic salary or basic wage means all the remuneration or earnings paid by an employer to a
worker for services rendered on normal working days and hours, which is 8 hours, but does
not include cost of living allowances, profit-sharing payments, premium payments,
13th month pay or other monetary benefits which are not considered as part of or integrated
into the basic salary of the workers.
In the case of Honda Philippines, it has been held that the following should be excluded from
the computation of “basic salary” to wit: payments for sick, vacation and maternity leaves,
night differentials, regular holiday pay and premiums for work done on rest days and special
holidays.

13th month pay law, exemption

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

 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 13th month pay or more in a calendar
year or its equivalent at the time of the issuance of the Revised Guidelines;
3. Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except when the
workers are paid on piece-rate basis, in which case, the employer shall be covered
by the Revised Guidelines insofar as such workers are concerned. Workers paid
on piece-rate basis shall refer to those who are paid a standard amount for every
piece or unit of work produced that is more or less regularly replicated without
regard to the time spent in producing the same.

*Creditability issue- the interpretation of the term "its equivalent" ha sgiven rise to the issue
of creditability of bonuses to 13th month pay. Discuss Marcopper, NFSW, Dole, etc cases (11
cases)

13th month pay as part of retirement; resigned; or separated employee.

An employee who has resigned or whose services were terminated at any time before the
time for 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 from the time he started working
during the calendar year up to the time of his resignation or termination from service. Thus, if
he worked only from January up to September, his proportionate 13th-month pay should be
the equivalent of 1/12 of his total basic salary which he earned during that period. (No. 6,
Revised Guidelines on the Implementation of the 13th-Month Pay Law; No. X [G], DOLE
Handbook on Workers Statutory Monetary Benefits; International School of Speech vs.
NLRC, et al., G. R. No. 112658, March 18, 1995; Villarama vs. NLRC, et al., G. R. No.
106341, Sept. 2, 1994, 236 SCRA 280).
In the 2005 case of Clarion Printing House, Inc. vs. NLRC, [G. R. No. 148372, June 27,
2005], an employee who was receiving P6,500.00 in monthly salary and who had worked for
at least six (6) months at the time of her retrenchment, was held to be entitled to her
proportionate 13th month pay computed as follows:
(Monthly Salary x 6 ) / 12 = Proportionate 13th month pay
(P6,500.00 x 6) / 12 = P3,250.00
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 that as the
employer can require the employee to clear himself of all liabilities and property
accountability, so can the employee demand the payment of all benefits due him upon the
termination of the relationship. (No. 6, Revised Guidelines on the Implementation of the
13th-Month Pay Law).
Regarding pro-ration of the 13th month pay, the Supreme Court in Honda Phils., Inc. vs.
Samahan ng Malayang Manggagawa sa Honda, [G. R. No. 145561, June 15, 2005], took
cognizance of the fact that the said Revised Guidelines on the Implementation of the 13th
Month Pay Law provided for a pro-ration of this benefit only in cases of resignation or
separation from work. As the rules state, under these circumstances, an employee is entitled
to a pay in proportion to the length of time he worked during the year, reckoned from the
time he started working during the calendar year. (Section 6 thereof). The Court of Appeals
thus held that:
“Considering the foregoing, the computation of the 13th month pay should be based on the
length of service and not on the actual wage earned by the worker. In the present case, there
being no gap in the service of the workers during the calendar year in question, the
computation of the 13th month pay should not be pro-rated but should be given in
full.” (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented any pro-rating of
the 13th month pay before the instant case. Honda did not adduce evidence to show that the
13th month, 14th month and financial assistance benefits were previously subject to
deductions or pro-rating or that these were dependent upon the company’s financial standing.
As held by the Voluntary Arbitrator:
“The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to
adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M
substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is
an implicit acceptance that prior to the strike, a full month basic pay computation was the
“present practice” intended to be maintained in the CBA.”
The memorandum dated November 22, 1999 which Honda issued shows that it was the first
time a pro-rating scheme was to be implemented in the company. It was a convenient
coincidence for the company that the work stoppage held by the employees lasted for thirty-
one (31) days or exactly one month. This enabled them to devise a formula using 11/12 of the
total annual salary as base amount for computation instead of the entire amount for a 12-
month period.
That a full month payment of the 13th month pay is the established practice at Honda is
further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both
attested that when they were absent from work due to motorcycle accidents, and after they
have exhausted all their leave credits and were no longer receiving their monthly salary from
Honda, they still received the full amount of their 13th month, 14th month and financial
assistance pay.
The case of Davao Fruits Corporation vs. Associated Labor Unions, et al. [G.R. No. 85073,
August 24, 1993, 225 SCRA 562] presented an example of a voluntary act of the employer
that has ripened into a company practice. In that case, the employer, from 1975 to 1981,
freely and continuously included in the computation of the 13th month pay those items that
were expressly excluded by the law. It was held that this act, which was favorable to the
employees though not conforming to law, has ripened into a practice and, therefore, can no
longer be withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in
Sevilla Trading Company vs. Semana, [G.R. No. 152456, 28 April 2004, 428 SCRA 239], it
was stated:
“With regard to the length of time the company practice should have been exercised to
constitute voluntary employer practice which cannot be unilaterally withdrawn by the
employer, we hold that jurisprudence has not laid down any rule requiring a specific
minimum number of years. In the above quoted case of Davao Fruits Corporation vs.
Associated Labor Unions, the company practice lasted for six (6) years. In another case,
Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3) years
and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick
leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the
employer carried on the practice of giving a fixed monthly emergency allowance from
November 1976 to February 1980, or three (3) years and four (4) months. In all these cases,
this Court held that the grant of these benefits has ripened into company practice or policy
which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept
the practice of including non-basic benefits such as paid leaves for unused sick leave and
vacation leave in the computation of their 13th-month pay for at least two (2) years. This, we
rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn
by the employer without violating Art. 100 of the Labor Code.” (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the
underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of
workers and to help them cope with the exorbitant increases in the cost of living. To allow the
pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and
the mandate that the workingman’s welfare should be the primordial and paramount
consideration. [Citing Santos vs. Velarde, 450 Phil. 381, 390-391 [2003]). What is more, the
factual milieu of this case is such that to rule otherwise inevitably results to dissuasion, if not
a deterrent, for workers from the free exercise of their constitutional rights to self-
organization and to strike in accordance with law. (Section 3, Article XIII-Social Justice and
Human Rights, Philippine Constitution; Honda Phils., Inc. vs. Samahan ng Malayang
Manggagawa sa Honda, G. R. No. 145561, June 15, 2005). 
But the rule is different if an employee was never paid his 13th month pay during his
employment. A case in point is JPL Marketing Promotions vs. CA, [G. R. No. 151966, July
8, 2005], where the Supreme Court ruled that, in such a case, the computation for the 13th
month pay should properly begin from the first day of employment up to the last day of work
of the employee. This benefit is given by law on the basis of the service actually rendered by
the employee.

Manner & form of payment of wages; exceptions

Forms of payment of wages

Under the Civil Code, it is mandated that the laborer’s wages shall be paid in legal currency.
Under the Labor Code and its implementing rules, as a general rule, wages shall be paid in
legal tender and the use of tokens, promissory notes, vouchers, coupons or any other form
alleged to represent legal tender is prohibited even when expressly requested by the
employee.
Exceptions:

1. Payment through automated teller machine (ATM) of banks provided the

following conditions are met:
2. the ATM system of payment is with the written consent of the employees
concerned;
3. The employees are given reasonable time to withdraw their wages from the bank
facility which time, if done during working hours, shall be considered
compensable hours worked;
4. The system shall allow workers to receive their wages within the period or
frequency and in the amount prescribed under the Labor Code, as amended;
5. There is a bank or ATM facility within a radius of one (1) kilometer to the place
of work;
 6. Upon request of the concerned employee/s, the employer shall issue a record of
payment of wages, benefits and deductions for a particular period;
7. There shall be n additional expenses and no diminution of benefits and privileges
as a result of the ATM system of payment;
8. The employer shall assume responsibility in case the wage protection provisions
of law and regulations are not complied with under the arrangement. (Explanatory
Bulletin issued by DOLE Secretary Leonardo Quisumbing dated November 25,
1996).
9. Payment by check or money order, (the foregoing conditions on existence of bank
facility and other factors should also concur).

Manner as to:
The time of payment of wages

1. Time of payment; exception. - The general rule is, wages shall be paid not less
often than once every two (2) weeks or twice a month at intervals not exceeding
sixteen (16) days. No employer shall make payment with less frequency than once
a month. The exception to above rule is when payment cannot be made with such
regularity due to force majeure or circumstances beyond the employer’s control,
in which case, the employer shall pay the wages immediately after such force
majeure or circumstances have ceased.

  The place of payment of wages

1. As a general rule, the place of payment shall be at or near the place of

undertaking.
2. Exceptions:
3. 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;
4. When the employer provides free transportation to the employees back and forth;
and
5. Under any other analogous circumstances, provided that the time spent by the
employees in collecting their wages shall be considered as compensable hours
worked.
6. Payment of wages in bars, massage clinics or nightclubs is prohibited except in
the case of employees thereof.
7. Payment through banks - allowed in businesses and other entities with twenty five
(25) or more employees and located within one (1) kilometer radius to a
commercial, savings or rural bank.

Whom should wages be paid

1. General rule: payment of wages shall be made directly to the employee entitled
thereto and to nobody else.
2. Exceptions.
3. Where the employer is authorized in writing by the employee to pay his wages to
a member of his family;
 4. 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 
5. In case of death of the employee, in which case, the same shall be paid to his heirs
without necessity of intestate proceedings.

Payment of wages: supervised & unsupervised workers

Supervised Workers
They are those workers whose time and performance are supervised by the employer. There
is an essential element of control and supervision over the manner as how to work is to be
performed
Unsupervised Workers
They are those workers whose time and performance are unsupervised by the employer. The
employer's control is over the result of the work. 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.

Time of payment of wages of workers paid by result

GR: Wages shall be paid not less than once every two (2) weeks or twice a month at intervals
not exceeding sixteen (16) days. No employer shall make payment with less frequency than
once a month.
XPT: When payment cannot be made with such regularity due to force majeure or
circumstances beyond the employer’s control, in which case, the employer shall pay the
wages immediately after such force majeure or circumstances have ceased.
PAID BY RESULT
In case of payment of wages by results involving work which cannot be finished in two (2)
weeks, payment shall be made at intervals not exceeding sixteen (16) days in proportion to
the amount of work completed. Final settlement shall be made immediately upon completion
of the work.

Place of payment; prohibition

GR: Place of payment shall be at or near the place of undertaking.

XPT:

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 free 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.

PROHIBITION: 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
employees thereof.

Payment through banks/ ATM

Payment through banks – allowed in business and other entities with 25 or more
employees. Provided the following conditions are met:

1. The ATM system of payment is with written consent of the employees concerned;
2. The employees are given reasonable time to withdraw their wages from the bank
facility which time, if done during working hours, shall be considered
compensable hours worked;
3. The system allows workers to receive their wages within the period or frequency
and in the amount prescribed under the labor code, as amended;
4. There is a bank or ATM facility within a radius of one (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.

Direct payment of wages, rule & exceptions

Direct payment of wages – payment of wages shall be made direct to the employee entitled
thereto except in the following cases:

1. Where the employer is authorized in writing by the employee to pay his wages to
a member of his family;
2. Where payment to another person of any part of the employee’s wages is
authorized by the 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
3. In case of death of the employee, in which case, the same shall be made to his
heirs without the necessity of intestate proceedings.

Contracting: Trilateral relationship in contracting

Trilateral Relationship 
It refers to the relationship in a contracting arrangement where there is 1) a Service Contract
for a specific job, work or service between the principal and the contractor, and 2) an
Employment Contract between the contractor and its employees. The parties are the
following:

1. “Principal” refers to any employer who puts out or farms out a job, service, or
work to a contractor or subcontractor, whether or not the arrangement is covered
by a written contract.
2. “Contractor" or "subcontractor” refers to any person or entity engaged in a
legitimate contracting or subcontracting arrangement.
3. "Contractual employee” includes one employed by a contractor or subcontractor
to perform or complete a job, work or service pursuant to an arrangement between
the latter and a principal called “contracting” or “subcontracting”.

Elements of permissible contracting

Contracting or subcontracting shall be permissible if the following circumstances concur:

1. The contractor or subcontractor carries on a distinct and independent business and

undertakes to perform a job, work or service on its own account under its own
responsibility, according to its own manner and method, and free from the control
and directions of the principal in all matters connected with the performance of
the work except as to the results thereof;
2. The contractor or subcontractor has substantial capital or investment; and
3. 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 right to self-organization, security of tenure and
social and welfare benefits.

3 tests to determine existence of legitimate contracting

1. The contractor or subcontractor 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 directions of the principal in all matters connected with the
performance of the work except as to the results thereof;
2. The contractor or subcontractor has substantial capital or investment: “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.;
3. 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 and welfare benefits.

Elements of labor-only contracting

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:
(a) The contractor or subcontractor does not have substantial 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 which are directly related to the main
business of the principal, or
(b) The contractor does not exercise the right to control over the performance of the work of
the contractual employee

Bases in prohibiting labor-only contracting

The basis in prohibiting labor-only contracting are:

The Constitution, which mandates that the State shall protect labor and promote its welfare,
and shall guarantee basic labor rights including just and humane terms and conditions of
employment and the right to self-organization.
Article 106 of the Labor Code, which allows the Secretary of Labor to distinguish between
labor-only contracting and job contracting to prevent any violation or

Principal distinctions between permissible contracting & labor-only contracting

Subcontracting (Legitimate Job Contracting) vs. Labor-Only Contracting 

The principal distinctions between legitimate, permissible job contracting, on the one hand,
and the prohibited labor-only contracting, on the other.

1. In the former, no employer-employee relationship exists between the employees

of the job contractor and the principal employer (indirect employer); while in the
latter, an employer-employee relationship is created by law between the principal
employer and the employees of the labor-only contractor.
2. In the former, the principal employer is considered only an “indirect employer”,
as this term is understood under Article 107 of the Labor Code; while in the latter,
the principal employer is considered the “direct employer” of the employees in
accordance with the last paragraph of Article 106 of the Labor Code.
3. In the former, the joint and several obligation of the principal employer and the
legitimate job contractor is only for a limited purpose, that is, to ensure that the
employees are paid their wages. Other than this obligation of paying the wages,
the principal employer is not responsible for any claim made by the employees;
while in the latter, the principal employer becomes solidarily liable with the labor-
only contractor for all the rightful claims of the employees.
4. In the former, the legitimate job contractor provides specific services; while in the
latter, the labor-only contractor provides only manpower.
5. In the former, the legitimate job contractor undertakes to perform a specific job
for the principal employer; while in the latter, the labor-only contractor merely
provides the personnel to work for the principal employer.

Permissible job contracting Labor-only contracting.

Permissible Prohibited by law

no employer-employee relationship exists
an employer-employee relationship is created
between the employees of the job contractor
by law between the principal employer and
and the principal employer (indirect
the employees of the labor-only contractor
employer);

the principal employer is considered only an the principal employer is considered the
“indirect employer “direct employer” of the employees

the joint and several obligation of the

principal employer and the legitimate job
contractor is only for a limited purpose, that the principal employer becomes solidarily
is, to ensure that the employees are paid their liable with the labor-only contractor for all
wages (the principal employer is not the rightful claims of the employees
responsible for any claim made by the
employees)

the legitimate job contractor provides specific the labor-only contractor provides only
services manpower

the legitimate job contractor undertakes to the labor-only contractor merely provides the
perform a specific job for the principal personnel to work for the principal employer. 
employer  

TV Host v. News Anchor/ Columnist v. Reporter

TV Host News Anchor

There is an employer-employee
no employer-employee relationship exists
relationship

As to Hiring  

Independent contractors: possess unique Regular hiring and selection process/

skills, expertise or talent to distinguish regular qualifications are set by the
them from ordinary employees; company

As to Payment of Wages  

All the talent fees and benefits were the All benefits arose from an employer-
result of negotiations / employee relationship.
Agreement/stipulations/contract  
Power of Dismissal  

could not be terminated on grounds other Termination is based on just and

than breach of contract, such as authorized causes as provided in the
retrenchment to prevent losses as provided Labor laws (ie. Retrenchment)
under labor laws  

Power of Control  

The company is not exercising control

over the means and methods of the work The company/management has full
control and supervision over the means
 (TV/Radio Program Lines, appearance and methods of the work (ie. Lines are
and sound on TV/Radio is set by the scripted/prepared/rehearsed)
worker /host himself)

Distinctions: Direct v. indirect employer

Direct Employer Indirect Employer

As a rule, there is no employer-employee

There is an employer-employee
relationship unless there is failure to pay
relationship
wages and other benefits

Hires employees through

It directly hires employees
agencies/subcontractors

As to extent of civil liability for the

The direct employer is responsible/ liable payment of wages and other benefits, the
for all the rightful claims of the employees indirect employer is be considered as
as provided for in the labor laws direct employer. (Article 109, Labor
Code).

Survey of doctrinal cases in contracting

Norkis case on lack of control of contractor

IN RE: DIRECT RELATION TO PRINCIPAL’S BUSINESS TEST
The “Direct Relation to Principal’s Business” test seeks to address the issue of whether the
employees recruited, supplied or placed by a contractor are performing activities which are
directly related to the main business of the principal. If this poser is answered in the
affirmative, the contractor is deemed a labor-only contractor and the employees become
direct employees of the principal.
Norkis vs. Buenavista, where the contractor’s employees worked as welders and machine
operators engaged in the production of steel crates which were sent to Japan for use as
containers of motorcycles that are then sent back to Norkis Trading. Their functions therefore
are directly related and vital to Norkis Trading’s business of manufacturing of Yamaha
motorcycles.
Solidary Liability
EPARWA SECURITY AND JANITORIAL SERVICES VS LICEO DE CAGAYAN
UNIVERSITY
FACTS:
On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a
Contract for Security Services which states that LCDU undertakes to pay P5, 000 per guard,
in consideration of their services.
On 21 December 1998, 11 security guards whom Eparwa assigned to LDCU filed a
complaint before the NLRC against both Eparwa and LDCU for underpayment of salary,
legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential,
overtime pay, and payment for attorney’s fees.       
LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment
to the security guards.         
LA found that the security guards are entitled to wage differentials and premium for holiday
and rest day work.  The Labor Arbiter also held Eparwa and LDCU solidarily liable pursuant
to Article 109 of the Labor Code.  
The NLRC held Eparwa and LDCU solidarily liable for the wage differentials and premium
for holiday and rest day work but did not require Eparwa to reimburse LDCU for its
payments to the security guards. Upon an MR, the NLRC declared that although Eparwa and
LDCU are solidarily liable to the security guards for the monetary award, LDCU alone is
ultimately liable.
The CA reinstated the Labor Arbiter’s decision.  The appellate court also allowed LDCU to
claim reimbursement from Eparwa.  
ISSUE:
Is LDCU alone ultimately liable to the security guards for the wage differentials and premium
for holiday and rest day pay?
HELD:
Yes. For the security guards, the actual source of the payment of their wage
differentials and premium for holiday and rest day work does not matter as long as they
are paid.  This is the import of Eparwa and LDCU’s solidary liability.  Creditors, such
as the security guards, may collect from anyone of
the solidary debtors.  Solidary liability does not mean that, as between themselves,
two solidary debtors are liable for only half of the payment.
LDCU’s ultimate liability comes into play because of the expiration of the Contract for
Security Services.   There is no privity of contract between the security guards and LDCU,
but LDCU’s liability to the security guards remains because of Articles 106, 107 and 109 of
the Labor Code.   Eparwa is already precluded from asking LDCU for an adjustment in the
contract price because of the expiration of the contract, but Eparwa’s liability to the security
guards remains because of their employer-employee relationship.  In lieu of an adjustment in
the contract price, Eparwa may claim reimbursement from LDCU for any payment it may
make to the security guards.   However, LDCU cannot claim any reimbursement
from Eparwa for any payment it may make to the security guards.
Direct Liability
ROSEWOOD PROCESSING, INC. vs. NATIONAL LABOR RELATIONS
COMMISSION, MAMON, GAZZINGAN, VELASCO, BALLON, ALDEZA, and
CABRERA
FACTS:
All private respondents were employed as security guards by Veterans Philippine Scout
Security Agency (security agency). A complaint was filed by private respondents for illegal
dismissal; underpayment of wages; and for nonpayment of overtime pay, legal holiday pay,
premium pay for holiday and rest day, thirteenth month pay, cash bond deposit, unpaid wages
and damages was filed against the security agency.
Thereafter, petitioner was impleaded as a third-party respondent by the security agency.
Labor Arbiter rendered a decision in favor of herein private respondents wherein the total
money claim adjudged was P789, 154.39. An appeal was filed before the NLRC. Respondent
Commission dismissed petitioner’s appeal, because it was allegedly not perfected within the
reglementary ten-day period. 
ISSUE:
WON herein petitioner can be held solidarily liable for the legal wages due to the security
guards beyond the period which the latter have rendered services to them.
HELD:
No. Withal, fairness dictates that the petitioner should not be held liable for wage differentials
incurred while the complainants were assigned to other companies.  Under these cited
provisions of the Labor Code, should the contractor fail to pay the wages of its
employees in accordance with law, the indirect employer (the petitioner in this case), is
jointly and severally liable with the contractor, but such responsibility should be
understood to be limited to the extent of the work performed under the contract, in the
same manner and extent that he is liable to the employees directly employed by
him. This liability of petitioner covers the payment of the workers’ performance of any work,
task, job or project.  So long as the work, task, job or project has been performed for
petitioner’s benefit or on its behalf, the liability accrues for such period even if, later on, the
employees are eventually transferred or reassigned elsewhere. 
We repeat:  The indirect employer’s liability to the contractor’s employees extends only to
the period during which they were working for the petitioner, and the fact that they were
reassigned to another principal necessarily ends such responsibility.  The principal is made
liable to his indirect employees, because it can protect itself from irresponsible contractors by
withholding such sums and paying them directly to the employees or by requiring a bond
from the contractor or subcontractor for this purpose.
The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum
wage, because the workers’ right to such wage is derived from law.  The proposition that
payment of back wages and separation pay should be covered by Article 109, which holds an
indirect employer solidarily responsible with his contractor or subcontractor for “any
violation of any provision of this Code,” would have been tenable if there were proof -- there
was none in this case -- that the principal/employer had conspired with the contractor in the
acts giving rise to the illegal dismissal.

Problem area: Art. 110 of Labor Code with Article 2241 and 2242 of New Civil Code and RA
6715

Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation

of an employer’s business, his workers shall enjoy first preference as regards their wages and
other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid
wages and monetary claims shall be paid in full before claims of the government and other
creditors may be paid. (As amended by Section 1, Republic Act No. 6715, March 21, 1989)
Art. 2241. With reference to specific movable property of the debtor, the following claims or
liens shall be preferred:
(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;
(2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials
committed in the performance of their duties, on the movables, money or securities obtained
by them;
(3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the
possession of the debtor, up to the value of the same; and if the movable has been resold by
the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not
lost by the immobilization of the thing by destination, provided it has not lost its form,
substance and identity; neither is the right lost by the sale of the thing together with other
property for a lump sum, when the price thereof can be determined proportionally;
(4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the
creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up
to the value thereof;
(5) Credits for the making, repair, safekeeping or preservation of personal property, on the
movable thus made, repaired, kept or possessed;
(6) Claims for laborers' wages, on the goods manufactured or the work done;
(7) For expenses of salvage, upon the goods salvaged;
(8) Credits between the landlord and the tenant, arising from the contract of tenancy on
shares, on the share of each in the fruits or harvest;
(9) Credits for transportation, upon the goods carried, for the price of the contract and
incidental expenses, until their delivery and for thirty days thereafter;
(10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the
movables belonging to the guest as long as such movables are in the hotel, but not for money
loaned to the guests;
(11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon
the fruits harvested;
(12) Credits for rent for one year, upon the personal property of the lessee existing on the
immovable leased and on the fruits of the same, but not on money or instruments of credit;
(13) Claims in favor of the depositor if the depositary has wrongfully sold the thing
deposited, upon the price of the sale.
In the foregoing cases, if the movables to which the lien or preference attaches have been
wrongfully taken, the creditor may demand them from any possessor, within thirty days from
the unlawful seizure. (1922a)
Art. 2242. With reference to specific immovable property and real rights of the debtor, the
following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance
on the immovable or real right:
(1) Taxes due upon the land or building;
(2) For the unpaid price of real property sold, upon the immovable sold;
(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects,
engineers and contractors, engaged in the construction, reconstruction or repair of
buildings, canals or other works, upon said buildings, canals or other works;
(4) Claims of furnishers of materials used in the construction, reconstruction, or repair of
buildings, canals or other works, upon said buildings, canals or other works;
(5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged;
(6) Expenses for the preservation or improvement of real property when the law authorizes
reimbursement, upon the immovable preserved or improved;
(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments
or executions, upon the property affected, and only as to later credits;
(8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the
real property thus divided;
(9) Claims of donors or real property for pecuniary charges or other conditions imposed upon
the donee, upon the immovable donated;
(10) Credits of insurers, upon the property insured, for the insurance premium for two years.
(1923a)
Republic Act No. 6715 SECTION 1. Article 110 of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines, is hereby further amended to read as
follows:
“ART. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or
liquidation of an employer’s business, his workers shall enjoy first preference as regards their
unpaid wages and other monetary claims, any provision of law to the contrary
notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid.”
SUMMARY/SUGGESTED SOLUTION:
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 laborer’s 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.
RA No. 6715 covers the unpaid wages and other monetary claims of workers in the event
of bankruptcy or liquidation of an employer’s business. Worker’s shall enjoy first preference
and Such unpaid wages and monetary claims shall be paid in full before the claims of the
Government and other creditors may be paid.

Prohibition regarding wages; permissible(allowable) deductions

As a rule, employers are not allowed to interfere in the disposal of wages of employees,
except:
 
Deductions from the wages of the employees may be made by the employer in any of the
following cases:
 
a. When the deductions are authorized by law, (e.g., SSS, Pag-IBIG), 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;
c. Withholding tax mandated under the National Internal Revenue Code;
d. Withholding of wages because of employee’s debt to the employer which is already due;
e. Deductions made pursuant to a judgment against the worker under circumstances where the
wages may be the subject of attachment or execution but only for debts incurred for food,
clothing, shelter and medical attendance.
f. When deductions from wages are ordered by the court;
g. Deductions made for agency fee from non-union members who accept the benefits under
the CBA negotiated by the bargaining union. This form of deduction does not require the
written authorization of the non-union member.

Permissible deductions for loss or damages; requisites

As a rule, employers are not allowed to interfere in the disposal of wages of employees,
except:
 
Deductions from the wages of the employees may be made by the employer in any of the
following cases:
 
a. When the deductions are authorized by law, (e.g., SSS, Pag-IBIG), 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;
c. Withholding tax mandated under the National Internal Revenue Code;
d. Withholding of wages because of employee’s debt to the employer which is already due;
e. Deductions made pursuant to a judgment against the worker under circumstances where the
wages may be the subject of attachment or execution but only for debts incurred for food,
clothing, shelter and medical attendance.
f. When deductions from wages are ordered by the court;
g. Deductions made for agency fee from non-union members who accept the benefits under
the CBA negotiated by the bargaining union. This form of deduction does not require the
written authorization of the non-union member.

Prohibition on withholding of wages

Art. 116 of the Labor code categorically prohibits and considers it unlawful for any person,
whether employer or not, directly or indirectly, to withhold any amount from the wages of a
worker.
In article 1706 of the Civil Code, withholding of wages, except for a debt due, is not allowed
to be made by the employer.
In article 1709 of the Civil Code, the employer is not allowed to seize or retain any tool or
other articles belonging to the laborer.
Thus, an employer cannot simply refuse to pay the wages or benefits of its employees
because he has either defaulted in paying a loan guaranteed by his employer; or violated heir
memorandum of agreement; or failed to render an accounting of his employer’s property.

Additional prohibitions: Arts. 117, 118, 119 and 248, LC

Article 117 (Deduction to ensure employment)- prohibits and considers it unlawful for any
person, whether the employer himself or his representative or an intermediary, to require that
a deduction be made or to actually make any deduction from the wages of any employee or
worker, for the benefit of such employer or his representative or an intermediary, as
consideration of a promise of employment or, when already employed, for the continuation of
such employment or retention therein.
Article 118 (Retaliatory measure) – It is unlawful for the employer to:

1. Refuse to pay the wages and benefits of an employer; or

2. Reduce his wages and benefits; or
3. Discharge him from employment; or
4. Discriminate against him in any manner; on account and by reason of said
employee’s: Act of filing any complaint or institution of any proceeding under
Title II (Wages), Book III of LC; or Act of testifying in said proceedings or when
he is about to testify therein.
*** These retaliatory acts are considered unfair labor practice under Art. 248 (f) of the LC
Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to
commit any of the following unfair labor practice:
(f) To dismiss, discharge or otherwise prejudice or discriminate against an employee for
having given or being about to give testimony under this Code
Article 119 (False Reporting)- prohibits and considers it unlawful for any person, whether
employer or not, to make any false statement, report or record required to be filed or kept in
accordance with and pursuant to the provision of Labor Code, knowing such statement,
report, or record to be false in any material respect (Sec. 13, Book III).

Wage studies, agreements and determination

The term “Wage order” refers to the Order promulgated by the Regional Tripartite Wages
and Productivity Board (RTWPB) pursuant to its wage fixing authority.
The minimum wage rates prescribed by law shall be the basic cash wages without deduction
therefrom of whatever benefits, supplements or allowances which the employees enjoy free
of charge aside from the basic pay.
 The term STATUTORY minimum wage refers to the lowest basic wage rate fixed by law that
an employer can pay his workers.
The term REGIONAL minimum wage rates refers to the lowest basic wage rates that an
employer can pay his workers, as fixed by the Regional Tripartite Wages and Productivity
Boards (RTWPB), and which shall not be lower than the applicable statutory minimum wage
rates.
The minimum wage rates for agricultural and non-agricultural employees and workers in
each and every region of the country shall be those prescribed by the RTWBs. These wage
rates may include wages by industry, province, or locality as may be deemed necessary by
the RTWBs.
 The term wage rates include cost-of-living allowances as fixed by the RTWBs, but excludes
other wage-related benefits such as overtime pay, bonuses, night shift differential pay,
holiday pay, premium pay, 13th  month pay, leave benefits, and others.
Standards/ criteria in wage fixing:
In the determination of regional minimum wages, the Regional Board shall, among other
relevant factors, consider the following:
(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 the imperatives of economic and
social development.
 
2 methods of fixing minimum wage order; distinguished
(a) Motu Proprio by the Board.
Whenever conditions in the region, province or industry so warrant, the Board may, motu
proprio or as directed by the Commission mandate action or inquiry to determine whether a
wage order should be issued. The Board shall conduct public hearings/consultations in the
manner prescribed herein.
(b) Wage Fixing by Virtue of a Petition Filed.

1. Form and Content of Petition. Any party may file a verified petition for wage
increase with the appropriate Board in ten (10) typewritten legible copies which
shall contain the following:

(a) name/s, and address/es of petitioner/s and signature/s of authorized official/s;

(b) grounds relied upon to justify the increase being sought;
(c) amount of wage increase being sought;
(d) area and/or industry covered.

2. Board Action.

If the petition conforms with the requirements prescribed in the preceding sub-section b.1, the
Board shall conduct public hearings/consultations in the manner prescribed herein, to
determine whether a wage order should be issued.

3. Publication of Notice of Petition/Public Hearing.

A notice of the petition and/or public hearing shall be published in a newspaper of general
circulation in the region, and/or posted in public places as determined by the Board. The
notice shall include the name/s and address/es of the petitioner/s, the subject of the petition
and the date/s, place/s and time of the hearings. The publication or posting shall be made at
least fifteen (15) days before the date of initial hearing and shall be in accordance with the
suggested form herein attached as Annex "A".

4. Opposition.

Any party may file his opposition to the petition on or before the initial hearing, copy
furnished the petitioner/s. The opposition shall be filed with the appropriate Board in ten (10)
typewritten legible copies which shall contain the following:chanroblesvirtuallawlibrary
(a) name/s and address/es of the oppositor/s and signature/s of authorized official/s;
(b) reasons or grounds for the opposition; and
(c) relief sought.

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/posting requirement.

6. Assistance of Other Government and Private Organizations.

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

What is wage distortion; elements; remedies

Wage distortion as defined – is a situation where an increase 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.
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 and other
logical bases of differentiation (Article 124 of the Labor Code).
It is the disappearance or virtual disappearance of pay differentials between lower and higher
positions in an enterprise because of compliance with a wage order (P.I. Manufacturing v.
P.I. Manufacturing Supervisors and Foreman, G.R. No. 167217, February 4, 2008). In
mandating an adjustment, the law did not require that there be an elimination or total
abrogation of quantitative wage or salary differences; a severe contraction is enough
(Metrobank v. NLRC, G.R. No. 102636, September 10, 1993).
Where a significant change occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the hierarchy of positions, negating as a
result thereof the distinction between one level of position from the next higher level, and
resulting in a parity between the lowest level and the next higher level or rank, between new
entrants and old hires, there exists a wage distortion (Prubankers Association v. Prudential
Bank & Trust Company, 302 SCRA 74).
The issue of whether or not a wage distortion exists is a question of fact that is within the
distinction of the quasi-judicial tribunals.
The four (4) elements of wage distortion are as follows:
(1) An existing hierarchy of positions with corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a concomitant increase
in the salary rate of a higher one;
(3) The elimination of the distinction between the two levels; and
 (4) The existence of the distortion in the same region of the country.
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 the classification.
Remedies:

1. Cases in organized establishments 

In establishments where there are existing collective bargaining agreement or recognized

bargaining unions, RA NO. 6727, vests upon the Voluntary Arbitrator or panel of arbitrators,
the jurisdiction to hear and decide wage distortion cases, after the grievance procedure in the
cba failed to settle the same.

2. Cases in unorganized establishments

In establishments where there are no certified collective bargaining unions or existing

bargaining collective agreements, the Labor Arbiters have jurisdiction to hear and decide
wage distortion cases after the parties and the National Conciliation and Mediation Board
(NCMB) failed to correct the distortion.
  3. Disputes over legislated wage increases and wage distortion made subject of notice
of strike or lockout.
Wage distortion is not a proper ground to be invoked in support of a strike or lockout.
Disputes arising from wage distortion resulting from wage orders issued by the Regional
Tripartite Wages and Productivity Board (RTWPB) which are alleged in the notice of strike
or lockout, should be referred to the Labor Arbiter if not settled within ten (10) calendar days
of conciliation by t NCMB.

Wage Distortion: Prubankers Association vs. Prudential Bank And Trust Company doctrine

DOCTRINE:
A Disparity in wages between employees holding similar positions but in different regions
does not constitute wage distortion as contemplated by law
CASE:
Wage orders by the RTWPB was issued in Naga (Region V) and Cebu (Region VII) which
created different wages for same employee groups in the different regions.
The Court ruled there was no WAGE DISORDER.
Wage distortion presupposes an increase in the compensation of the lower ranks in an office
hierarchy without a corresponding raise for higher-tiered employees in the same region of the
country, resulting in the elimination or the severe diminution of the distinction between the
two groups.  Such distortion does not arise when a wage order gives employees in one branch
of a bank higher compensation than that given to their counterparts in other regions
occupying the same pay scale, who are not covered by said wage order.  In short, the
implementation of wage orders in one region but not in others does not in itself necessarily
result in wage distortion.

Special workers and special group of employees

The three groups considered as “special workers” are apprentices, learners, and handicapped
workers while the “special group of workers” refer to women, minors, househelpers, and
homeworkers. Being “special workers” and “special group of employees”, they are governed
by rules separate and distinct from those applicable to all other workers.

Distinctions between apprenticeship and learnership

Point of Distinctions Apprenticeship Learnership

means practical training on

the job supplemented by refers to any practical
related theoretical training on learnable
1. As to their definition instructions involving occupation which may or
apprenticeable occupations may not be supplemented
and trades as may be by theoretical instructions.
approved by the DOLE  
Secretary.

with compulsory related

theoretical instructions (100
may or may not be
hours of theoretical
2. As to the requirement of instructions for every 2000 supplemented by a
Theoretical Instructions theoretical instruction.
hours of on-the-job
training).  
 

3. Qualifications
An apprentice should be: A learner may be
employed:
a.) at least 15 years of age,
provided those who are at a.) when no experienced
least 15 years of age but less workers are available
than 18 years old may be
eligible for apprenticeship b.) the employment of
only in non-hazardous learner is necessary to
 occupation
b.) physically fit for the
occupation in which he
prevent curtailment of
desires to be trained
employment opportunities
c.) possess vocational
c.) the employment does
aptitude and capacity for the
not create unfair
particular occupation as
competition in terms of
established through
labor costs or impair or
appropriate tests
lower working standards
d.) possess the ability to
 
comprehend and follow oral
and written instructions
 

A participating enterprise is allowed to take in learners

4. As to the no. of or apprentices only up to a maximum of 20% of its
apprentices/learners that regular workforce.
companies may take in
 

it should be more than 3

it shall not be more than 3
5.  As to the period of months but not over 6 months
employment months
 
 

entitled to not less than 75%

6. As to wage rate
of the prevailing statutory
minimum wage rate for the entitled to not less than
6 months. After the first 75% of the applicable
months,  an apprentice adjuated minimum wage
should be paid the full
minimum wage  

it is the option of the

employer to hire the the enterprise is obliged to
apprentice even prior the hire the learner after the
7. As to rules on their rehire completion of the learnership period
apprenticeship period
 
 

8. As to the effect of the apprentice becomes a no learnership training will

 regular employee if program
Apprenticeship/Learnership is not registered. commence until the
Agreement agreement has been forged.
 

PWD: prohibition on discrimination

No entity, whether public or private, shall discriminate against a qualified PWD by reason of
disability in regard to job application procedures, the hiring, promotion, or discharge of
employees, employee compensation, job training, and other terms, conditions and privileges
of employment. The following constitutes  acts of discrimination:
a) Limiting, segregating or classifying a job applicant with disability in such a manner that
adversely affects his work opportunities;
b) Using qualification standards, employment tests or other selection criteria that screen out
or tend to screen out a PWD unless such standards, tests or other selection criteria are shown
to be job-related for the position in question and are consistent with business necessity;
c) Utilizing standards, criteria, or methods of administration that:

 1) have the effect of discrimination on the basis of disability; or

 2) perpetuate the discrimination of others who are subject to common
administrative control.

d) Providing less compensation, such as salary, wage or other forms of remuneration and
fringe benefits, to a qualified employee with disability, by reason of his disability, than the
amount to which a non-disabled person performing the same work is entitled;
e) Favoring a non-disabled employee over a qualified employee with disability with respect
to promotion, training opportunities, study and scholarship grants, solely on account of the
latter's disability;
f) Re-assigning or transferring an employee with disability to a job or position he cannot
perform by reason of his disability;
g) Dismissing or terminating the services of an employee with disability by reason of his
disability unless the employer can prove that he impairs the satisfactory performance of the
work involved to the prejudice of the business entity; provided, however, the employer first
sought to provide reasonable accommodations for PWDs;
h) Failing to select or administer in the most effective manner employment tests which
accurately reflect the skills, aptitud3 or other factor of the applicant or employee with
disability that such tests purports to measure, rather than the impaired sensory, manual or
speaking skills of such applicant or employees, if any; and
i) Excluding PWDs from membership in labor unions or similar organizations.