TOPIC 6: ART.
112-119 OF THE LABOR CODE  In this case, the employer is authorized
- Under Chapter 4, entitled provisions regarding
Wages.
NON-INTERFEARANCE IN THE DISPOSAL OF
WAGES
- The law recognizes that the wages are property
of the workers. If the person owns the wages, no
person shall limit or interfere on how the workers
will use the wages.
- If the worker is using his wage and decides to
buy, the employer is prohibited from interfering
from the decision of the worker.
- The worker being the holder of his wages.
Prohibition against compulsory patronage
- Employer is prohibited from forcing, compelling,
or obliging his employees to purchase
merchandise, commodities, or other property
from any other person or otherwise make use of
any store or services of such employer or any
other person.
- KEYWORDS: forcing, compelling, obliging
o The presence of these elements would
deshape(?) of the free and lawful
consent of the worker.
o Ex. If the establishment is operating a
fast food restaurant and employs
workers. The establishment cannot
force, compel, or oblige, the workers
to dine in or purchase their own products
against their will.
WAGE DEDUCTION
General rule: Employer is not allowed to deduct
anything from his worker’s wages.
- So when the worker renders labor, he’s entitled
to his wage and the employer must not deduct
anything from the employee’s wages.
Exceptions:
1. By virtue of a contract between the parties.
 Cases: Worker is insured with his consent
by the employer and the purpose of the
deduction for his wage is to recompense
the employer for the amount paid by him
as premium on the insurance.
 Lawful deduction because there is
consent. Free and lawful consent given
by the employer. Afterwards, the worker
will benefit from that insurance coverage.
2. Deduction from union dues.
 Case wherein the establishment is
organized. There is a certified and
recognized bargaining union. In the
collective bargaining unit, there could be
a stipulation on the check-off provision.
 CBA – is valid and binding between the
employer and the certified organized
bargaining union.
ACO TRANSCRIPT
to deduct from the wages of the union
members in a certain amount
corresponding to union dues. The law
says, that if the deduction is recognized
by the employer, as in the case, where
there exists a collective bargaining
agreement.
 In the absence of the check provision or
a CBA, the deduction may also be law
lawful if the worker has given his consent
to such a deduction, authorizing an
employer to deduct in his monthly wages
corresponding to union dues.
RECAP:
Lawful:
1. With agreement in the CBA
2. With the consent of employee to deduct
JMM: You will appreciate this because the policy of the
state is to promote unionism, and in promoting
unionism, the state encourages the workers to exercise
the right to self-organization, and that means they are
encourage to form, join or resist information of a labor
union. By allowing such, it would ensure the
maintenance and continued survival of the union. Just
like any other organization, membership dues is very
common for the survival of the organization.
3. Where it is authorized by the Secretary of Labor
and Employment thru appropriate regulations.
4. DO 195, S. 2018
D.O 195, S. 2018
Amended the omnibus rules of wage deduction. DOLE
added one exception:
- Deduction is authorized by the employee
himself for a payment to the EMPLOYER or
payment to a THIRD PERSON, and employer
agrees to do so, provided, that the employer
does not provide any pecuniary benefit derived
from the transaction whether directly or
indirectly.
Ex#1 If I am an employee and I get an authorization
from my employer to pay my utility bills.
- Utility bills is a third person, and the employer
agrees to do that. And the employer does not
derive any pecuniary benefit from that
arrangement whether directly or indirectly is a
valid deduction of wages.
Ex#2 I obtain a loan from the employer, and authorized
my employer in writing to deduct from my salary a
certain amount.
- Also considered as a valid deduction under this
2018 department order.
SHS PERFERATED MARTERIALS (2010 CASE)
SC said: while the employer has the management
prerogative, it does not have the right to withhold the
wages without the consent of the employee. Any
withholding of wages will only be allowed in a form of
wage deductions under Art. 113 of the Labor Code. As
you all know, wage deductions is not the same as
withholding of the employees wage.
WITHHOLDING OF WAGES
General rule: Withholding of wages – Art. 116 of the
Labor Code – the employer is not allowed to withhold the
employee’s wage.
Exceptions:
1. Among the deductions allowed by law.
2. Consent on the part of the employee
3. Wages that are due and demandable (found in
Civil Code)
ART 114 AND ART 115 – DEPOSITS FOR LOSS AND
DAMAGES
(See: Five day taxi and Jardin Case)
General rule: Employee is not required to make a
deposit, to answer for the loss and damage of the tools
and equipment supplied by the employer to its
employees.
Exception: Employer is engage in trade, occupation or
industry where the practice of making deposit is a
recognized one, or considered as necessary or desirable
by the Secretary of DOLE thru appropriate regulations.
- This was initiated in a 2012 case of Nina Jewelry
Manufacturing of Metal Arts
NINA JEWELRY MANUFACTURING (2012 CASE)
States that the employer’s policy of requiring a deposit to
answer for the loss and damage of the tools and
equipment supplied by the employer to its employee, this
policy (1) MUST be authorized by law or regulations
issued by the Sec of DOLE, (2) MUST be proved to be a
recognized practice in the jewelry manufacturing business
or the Sec of DOLE has come up with the appropriate
rules that such policy is necessary or desirable.
In the jewelry manufacturing, the company is into jewelry
business and the employee who is given the task to take
care of this jewelry was required to make a deposit. In
case of loss or damage of the jewelry, the employer can
recover it from the employee. So, was it a valid policy?
The SC in that case said that it is not a valid policy
because there is no proof that in a jewelry business, it is
a recognized practice to require such a deposit to answer
for such loss or damage. There is no existing rules and
regulations allowed by the Sec. of Labor that finds it
necessary and desirable for that type of establishment to
require their workers to make a deposit to answer for loss
or damage to the jewelry.
ACO TRANSCRIPT
This principle in the Linea Jewelry Manufacturing case
was reiterated in the 2014 case of Bluer than Blue
Join Venture Company. In this case, the company was
into a retail business and they wanted to come up with
this practice of deducting from the wages of their sales
clerk the negative variants the company had in their sales.
The issue: was there an existing rule and regulation
where the Sec. allows this kind of arrangement? There
was none. Is there any proof in this retail business
requiring a deposit from the sales clerk to answer for
negative variants is a recognized one? The SC found
none. It disallowed this kind of practice in the company.
What is the importance of that? If it is not allowed, then
that deposit that was required by the company must be
remanded to the employee. If there is any deduction
already made by the employer from such cash deposit,
then the employee has the right to recover it from the
employer and the employer’s obligation to return it to the
employee.
In 2014, the Dept. of Labor came up with Labor
Advisory 11 Series of 2014 reiterating the provisions
of the Labor Code on non-interference of disposal of
wages and allowable deductions. In that advisory, it will
summarize the rule that there should be no interference
by the employer in the disposal of the worker’s wages and
the exception to the rule on non-wage deduction. Under
this Labor Advisory, it expressly recognizes in the Security
industry the right of the Security Agency to require their
security guards to make a deposit to answer for loss or
damage to the tools and equipment supplied by the
agency to their security guards. This is a good example of
a regulation by DOLE that it finds it necessary and
desirable to allow the security agencies to require their
security guards and personnel to make a deposit.
In this particular advisory, it is even a cash deposit. The
Sec. of Labor provided for certain limitations. The amount
of cash deposit that may be required the maximum
amount shall not exceed the 1 month basic salary of the
worker and in case there will be deduction to answer for
loss or damage, the maximum amount of deduction must
not exceed 20% of the employee’s wage rate. In case
the security guard is separated from his employment, the
advisory of the DOLE requires the employer to remand or
return the cash deposit to the employee within 10 days
separation from the service. The DOLE was also quite
emphatic in saying that no other wage deductions, cash
deposit, or cash bond, shall be required without the
express authorization of the Sec. of DOLE to appropriate
advisory or guidelines.
We just have to google whether the DOLE website there
are existing advisories, rules and regulations that the Sec.
of Labor has issued allowing deduction to answer for loss
or damage for these tools, equipment, materials supplied
by the employer. If there is none, then do not allow that
kind of deposit and deduction. In fact, the advisory gives
examples of what are considered deductions which are
not authorized such as deduction for company uniforms,
cash deposit for loss or damage unless it is authorized by
the Sec., for PPE you cannot deduct from the workers’
wages, capital share, capital build-up in service
cooperatives, for training fees, and other deductions not
included or authorized.
Under the occupational safety and health standards
promulgated by the Bureau of Working Conditions with
regard to PPE, in case of loss or damage, there is a
provision there which expressly allows deduction if the
same is due to the negligence or fault of the employee. If
there is such a deduction, it should follow the maximum
amount allowable deduction. You cannot deduct the
whole value of the company property from the employees’
wages. Otherwise, the worker would not take home any
salary at all and that would be detrimental to his interest
and welfare.
It is also very common in some establishments that the
employees have formed their cooperative. If they do so
and this cooperative is specially registered with the
Cooperative Development Authority, you can apply the
Philippine Cooperative Code of 2008 wherein a
member of the cooperative may in an instrument
authorize his employer to deduct his wage and remit to
the cooperative for the payment of his unpaid obligation.
That is expressly found in the Labor Code because the
purpose of the law is to strengthen the creation and
existence of this cooperatives because they are really
intended to benefit the cooperative members. If there is
such a written authorization from the employee to his
employer to deduct his wage and remit to the cooperative
for the payment of his unpaid obligation, the law says the
obligation of the employer is mandatory. Otherwise, the
employer cannot refuse to effect that kind of deduction.
Another important principle is the non-diminution of
benefits or the principle against the diminution of
benefits and supplements that is found in Art. 100
and 127 of the Labor Code.
The rule is that the employer for benefits and
supplements provided to their workers, the employer is
prohibited from unilaterally withdrawing, eliminating,
reducing, or diminishing, these benefits or supplements.
If you do it unilaterally, without the consent of the worker,
then you violate the principle of non-diminution of
benefits.
As early as the case of Davao Fruits in 1993 involving
the 13th month pay law. Under the 13th month pay law, a
ACO TRANSCRIPT
rank and file employee is entitled to 13th month pay as
soon as he has rendered at least 1 month of service within
the calendar year. Under the law when you speak of 13th
month, it focuses on the basic salary. The basic salary
there is exclusive or excluding the overtime pay, premium
pay, and other allowances which are not an integral part
in a worker’s wage. In that particular case, the company
included in the computation of the 13th month pay the
allowances and wage related benefits. It has been done
for a long period of time consistently and deliberately.
One day the company realized there was a mistake in
interpreting the law. They tried to correct and reduce
benefits by adopting the right way of computing the 13th
month pay. When the issue was raised before the SC, the
principle against diminution of benefits was applied and
the SC disallowed the employer to change the manner of
his computation because the employee already acquired
the vested right. There was no excusable mistake in the
manner of which the employer did.
Manila Bank case in 1997 where it suffered financial
difficulties but historically the bank has been providing
their workers with gas and uniform allowance. When they
tried to take it away unilaterally, the SC applied the
provision against the diminution of benefits.
Same holds true in the 1991 case of Nestle. Nestle has
been giving their workers vacation and sick leave. They
can no longer remove these leave benefits without
violating the principle against diminution of benefits.
In the 2005 case of Honda Philippines, Honda
Philippines is an organized establishment, recognized and
certified by the union. At one time the workers went on
strike, when you go on strike it is a no work no pay
arrangement, there is an occasion for the computation of
the 13th month pay. The employer said that since you
went on strike that the failure to render work, we will not
include that in the computation of the 13th month pay.
However, the SC disputed the claim of the employer
saying that under your existing collective bargaining
agreement of the 13th month pay, you wrote there is
equivalent to your 1 month basic salary. You cannot
change that provision because the employer has acquired
a right to such entitlement. Otherwise, to do would be
violating the principle of non-diminution of benefit.
In the 2007 case of Manila Jockey Club, it is a horse race
club company, originally their work schedule under their
CBA is from 9AM to 5PM, work rendered beyond 5PM
workers are entitled overtime pay. Change in the program
of horse races, the company decided to have another
schedule. Instead of 9AM to 5PM, they made it to 1PM to
8PM. The workers complained, and “you have unjustly
depriving us of entitlement to overtime because that were
your schedule, our overtime will be after 8PM.” The SC
said that overtime is not a benefit. The overtime is
given only if there is rendition of additional services. The
overtime pay was not given consistently,
deliberately and unconditionally but as
compensation for additional services rendered.
There was no violation of the principle of
diminution of benefit.
A similar ruling was rendered in 2007 case of San Miguel
Corporation where the Supreme Court was quite emphatic
that saying that overtime pay is not a benefit. Why? To
be entitled to an overtime pay, the employee has to
render additional service. The overtime pay is not freely
given. The requirement of rendering additional
service differentiates overtime pay form benefits
such as 13th month pay or yearly merit increases.
There’s a funny case in 2011 involving the University of
the East. To illustrate, if the company has been deducting
form the worker’s wage the cost of the uniform and the
company has been doing that for several years. The
company cannot invoke the principle against diminution
of benefit saying that since we have been deducting from
your salary the cost of the uniform, we have the right to
continue with that practice. The SC said that it is a wrong
application of the principle against diminution of benefit.
The principle against diminution of benefit is
applicable only if the grant or benefit is founded on
express policy or has ripened into a practice over
a long period of time which is consistent and
deliberate. The rule in company practice is generally
used with respect to the grant of additional benefits to
employees, not to issues involving diminution of benefits.
PAYMENT OF WAGES
Art 102. Form of payment of wages.
Rule: Wages must be paid in legal tender. You
cannot pay your employees in the form of promissory
notes, vouchers, tokens, chips or any object other than
legal tender even if the employee has expressly requested
the same. Why? Because it is contrary to public policy.
Not all agreement is valid. Under your civil code, a
stipulation to be valid must not be contrary to law, public
policy or public morals. In this case, even if the employee
has agreed to accept payment of wages in the form of
promissory note, that is not allowed by law, it is
considered a void arrangement.
Can employer pay their workers in the form of check?
The implementing rules allow certain instances where
payment of wages in the form of check is allowed. This is
ACO TRANSCRIPT
subject to certain guidelines (take note of these
guidelines). The rule is that a check is not a legal tender.
It only produces payment when it has been encashed or
when through the fault of debtor, it has been impaired.
Art.104. Place of payment
Where? The Labor code says that you have to pay, at or
near the place of undertaking.
If the construction company principal office is in Cebu City
but he project is in Lapu-Lapu where the workers are. The
place of undertaking is in Lapu-Lapu, that is where the
wages must be paid, not elsewhere. However, there are
certain instances under the law where the employer is
allowed to pay the workers in a place other than the place
of undertaking (take note of these instances). Ex. Such as
that there is force majeure, you cannot expect an
employer to go to the flooded area just to pay your
wages.
Art. 103. Time/frequency of payment
Wages shall be paid at least once every two weeks,
or intervals not exceeding 16 days. There may also
be instances where wages will have to be paid at least
once a month.
In USC, they pay their faculty members only once a month
but the payment is already advanced. There is really
nothing wrong with the frequency of payment because
we are paid in advance.
Take note when the worker is paid based on task and if
the task is not yet finished. There’s a specific provision on
how frequent the employer pay the worker. There are
certain guidelines provided under Art. 103.
With regard to the payee, to whom should the employer
pay the worker’s wages? Of course, to the employee
himself. Because he is the one who worked for it, he was
the one who earned it. Of course there are exceptions to
the rule. In case the employee is dead, under the Labor
code, you can pay the wages through his heirs and there
is no need for a testate/intestate proceeding. What is
needed is only an Affidavit of heirship from the surviving
heirs of the employee. You authorize somebody else to
receive payment of your wages and the employer agrees,
this is also a payment to a person other than the
employee himself. The significance of that in the Civil
Code is that payment to a wrong person will not
extinguish the obligation. Ex. You cannot just pay the
girlfriend of the worker, it will not extinguish the
obligation of the employer to the worker, you can be
made to pay again. So just pay to the worker himself.
Take note on DO-18A series of 2001.
There is a provision of the time interval of payment of
wages in a subcontracting or a contracting arrangement.
If the company engages in a security agency, janitorial
agency, maintenance agency in a tri-lateral relationship.
It is very common that the actual workers are not paid at
the right time. DOLE came up with this DO and provides
that in case of contracting or subcontracting
arrangement, the payroll cut-off date should not exceed
15 days from the first day of work and the payroll
processing time must not be more than 10 days form the
cut-off date. And on the day following the lapse of the 10-
day payroll processing time, the wages must be paid in
proportion to the work rendered or completed. As regards
interval of time of payment, it must be done twice a
month or intervals not exceeding 16 days

There is a SC case applying Civil law to a Labor case. Look

at the 2006 case of Business services of the future today.

The SC applied the principle of unjust enrichment.

Where the workers’ advances exceeded their unpaid

salaries. The overpaid amount paid by the employer
should be paid back to the latter to avoid unjust
enrichment. There is an obligation to return to the
employer in case there is an excess payment. It is very
common because some companies change their payroll
system from time to time. In the course of doing that,
there can be overpayment made to the worker. The
common question is that can the employer recover it from
the employees. If the payment obviously was done
by mistake, the employer may recover the amount
form the employee which was paid by mistake.

What caught my interest right now is the question of the

client about the 105 days of maternity leave.

The employer overpaid the maternity leave benefits, can

he recover the overpaid leave benefits? YES. Even though
it involves employment relation, they can also apply the
Civil code provision against unjust enrichment.

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