A.

FUNDAMENTAL PRINCIPLES AND POLICIES

1. Constitutional Provisions

a. Article II - Declaration of Principles and State Policies

The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through
policies that provide adequate social services, promote full employment, a rising standard of
living, and an improved quality of life for all.1

The State shall promote social justice in all phases of national development.2

The State values the dignity of every human person and guarantees full respect for
human/rights.3

The State recognizes the vital role of the youth in nation-building and shall promote
and protect their physical, moral, spiritual, intellectual, and social well-being. It shall
inculcate in the youth patriotism and nationalism, and encourage their involvement in
public and civic affairs.4

The State recognizes the role of women in nation-building, and shall ensure the
fundamental equality before the law of women and men.5

The State affirms labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare.6

The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.7

b. Article III– Bill of Rights

No person shall be deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the laws.8

1
Sec. 9
2
Sec.10
3
Sec.11
4
Sec. 13
5
Sec. 14
6
Sec. 18
7
Sec. 20
8
Sec. 1.

1
 No law shall be passed abridging the freedom of speech, of expression, or of the
press, or the right of the people peaceably to assemble and petition the government for
redress of grievances.9

The right of the people to information on matters of public concern shall be

recognized. Access to official records, and to documents and papers pertaining to official
acts, transactions, or decisions, as well as to government research data used as basis for
policy development, shall be afforded the citizen, subject to such limitations as may be
provided by law.10

The right of the people, including those employed in the public and private sectors,
to form unions, associations, or societies for purposes not contrary to law shall not be
abridged.11

No law impairing the obligation of contracts shall be passed.12

All persons shall have the right to a speedy disposition of their cases before all
judicial, quasi-judicial, or administrative bodies.13

No involuntary servitude in any form shall exist except as a punishment for a crime
whereof the party shall have been duly convicted.14

c. Article XIII –

The Congress shall give highest priority to the enactment of measures that protect
and enhance the right of all the people to human dignity, reduce social, economic, and
political inequalities, and remove cultural inequities by equitably diffusing wealth and
political power for the common good. To this end, the State shall regulate the acquisition,
ownership, use, and disposition of property and its increments.15

The promotion of social justice shall include the commitment to create economic
opportunities based on freedom of initiative and self-reliance.16

The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for
all. It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a

9
Sec. 4.
10
Sec. 7
11
Sec. 8.
12
Sec. 10
13
Sec. 16
14
Sec. 18 (2)
15
Sec. 1.
16
Sec. 2.

2
 living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law. The State shall promote the principle
of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace. The State shall regulate the relations
between workers and employers, recognizing the right of labor to its just share in the fruits
of production and the right of enterprises to reasonable returns to investments, and to
expansion and growth.17

The State shall protect working women by providing safe and healthful working
conditions, taking into account their maternal functions, and such facilities and
opportunities that will enhance their welfare and enable them to realize their full potential
in the service of the nation.18

2. New Civil Code

Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.19

The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.20

In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.21

3. Labor Code

The State shall afford protection to labor, promote full employment, ensure equal
work opportunities regardless of sex, race or creed and regulate the relations between
workers and employers. The State shall assure the rights of workers to self- organization,
collective bargaining, security of tenure, and just and humane conditions of work.22

17
Sec. 3
18
Sec. 14
19
Art. 19
20
Art. 1700
21
Art. 1702
22
Art. 3

3
 All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor. 23

The State shall promote and develop a tax-exempt employees’ compensation

program whereby employees and their dependents, in the event of work-connected disability
or death, may promptly secure adequate income benefit and medical related benefits.24

A. It is the policy of the State:

(a) To promote and emphasize the primacy of free collective bargaining and
negotiations, including voluntary arbitration, mediation and conciliation, as modes of
settling labor or industrial disputes;

(b) To promote free trade unionism as an instrument for the enhancement

of democracy and the promotion of social justice and development;

(c) To foster the free and voluntary organization of a strong and united labor
movement;

(d) To promote the enlightenment of workers concerning their rights and

obligations as union members and as employees;

(e) To provide an adequate administrative machinery for the expeditious

settlement of labor or industrial disputes;

(f) To ensure a stable but dynamic and just industrial peace; and

(g) To ensure the participation of workers indecision and policy-making

processes affecting their rights, duties and welfare.

B. To encourage a truly democratic method of regulating the relations between the

employers and employees by means of agreements freely entered into through collective
bargaining, no court or administrative agency or official shall have the power to set or fix
wages, rates of pay, hours of work or other terms and conditions of employment, except as
otherwise provided under this Code.25

23
Art. 4
24
Art. 166
25
Art. 211

4
 Definitions.

Commission The National Labor Relations Commission or any of its

divisions, as the case may be.

Bureau The Bureau of Labor Relations and/or the Labor Relations

Divisions in the regional offices established under
Presidential Decree No. 1, in the Department of Labor.

Board The National Conciliation and Mediation Board established

under Executive Order No. 126.

Council The Tripartite Voluntary Arbitration Advisory Council

established under Executive Order No. 126, as amended.

Employer Includes any person acting in the interest of an employer,

directly or indirectly. The term shall not include any labor
organization or any of its officers or agents except when
acting as employer.

Employee Includes any person in the employ of an employer. The

term shall not be limited to the employees of a particular
employer, unless the Code so explicitly states. It shall
include any individual whose work has ceased as a result of
or in connection with any current labor dispute or because
of any unfair labor practice if he has not obtained any other
substantially equivalent and regular employment.

Labor organization Any union or association of employees which exists in

whole or in part for the purpose of collective bargaining or
of dealing with employers concerning terms and conditions
of employment.

Legitimate labor organization Any labor organization duly registered with the Department
of Labor and Employment, and includes any branch or
local thereof.

Company union Any labor organization whose formation, function or

administration has been assisted by any act defined as

5
 unfair labor practice by this Code.

Bargaining representative A legitimate labor organization whether or not employed

by the employer.

Unfair labor practice Any unfair labor practice as expressly defined by the Code.

Labor dispute Includes any controversy or matter concerning terms and

conditions of employment or the association or
representation of persons in negotiating, fixing,
maintaining, changing or arranging the terms and
conditions of employment regardless of whether the
disputants stand in the proximate relation of employer and
employee.

Managerial employee 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

Supervisory employees Those who, in the interest of the employer, effectively

recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but
requires the use of independent judgment.

Rank-and-file employees All employees not falling within any of the above
definitions.

Voluntary Arbitrator Any person accredited by the Board as such or any person
named or designated in the Collective Bargaining
Agreement by the parties to act as their Voluntary
Arbitrator, or one chosen with or without the assistance of
the National Conciliation and Mediation Board, pursuant to
a selection procedure agreed upon in the Collective
Bargaining Agreement, or any official that may be
authorized by the Secretary of Labor and Employment to
act as Voluntary Arbitrator upon the written request and
agreement of the parties to a labor dispute.

Strike Any temporary stoppage of work by the concerted action

of employees as a result of an industrial or labor dispute.

6
Lockout Any temporary refusal of an employer to furnish work as a
result of an industrial or labor dispute.

Internal union dispute
Includes all disputes or grievances arising from any
violation of or disagreement over any provision of the
constitution and by-laws of a union, including any violation
of the rights and conditions of union membership provided
for in this Code

Strike-breaker Any person who obstructs, impedes, or interferes with by

force, violence, coercion, threats, or intimidation
any peaceful picketing affecting wages, hours or conditions
of work or in the exercise of the right of self-organization
or collective bargaining.

Strike area The establishment, warehouses, depots, plants or offices,

including the sites or premises used as runaway shops, of
the employer struck against, as well as the immediate
vicinity actually used by picketing strikers in moving to and
fro before all points of entrance to and exit from said
establishment.26

The labor organization designated or selected by the majority of the employees in an

appropriate collective bargaining unit shall be the exclusive representative of the employees
in such unit for the purpose of collective bargaining.

However, an individual employee or group of law to the contrary notwithstanding,

workers shall have the right, subject to such rules and regulations as the Secretary of Labor
and Employment may promulgate, to participate in policy and decision-making processes of
the establishment where they are employed insofar as said processes will directly affect their
rights, benefits and welfare.

For this purpose, workers and employers may form labor-management councils:
Provided, That the representatives of the workers in such labor-management councils shall
be elected by at least the majority of all employees in said establishment.27

Miscellaneous provisions.
a. All unions are authorized to collect reasonable membership fees, union dues,
assessments and fines and other contributions for labor education and research, mutual

26
Art. 212
27
Art. 255

7
death and hospitalization benefits, welfare fund, strike fund and credit and cooperative
undertakings.

b. Subject to the constitutional right of workers to security of tenure and their right
to be protected against dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice containing
a statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires in
accordance with company rules and regulations promulgated pursuant to guidelines set by
the Department of Labor and Employment. Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or legality of his dismissal
by filing a complaint with the regional branch of the National Labor Relations Commission.
The burden of proving that the termination was for a valid or authorized cause shall rest on
the employer. The Secretary of the Department of Labor and Employment may suspend the
effects of the termination pending resolution of the dispute in the event of a prima facie
finding by the appropriate official of the Department of Labor and Employment before
whom such dispute is pending that the termination may cause a serious labor dispute or is in
implementation of a mass lay-off. (As amended by Section 33, Republic Act No. 6715,
March 21, 1989)

c. Any employee, whether employed for a definite period or not, shall, beginning on
his first day of service, be considered as an employee for purposes of membership in any
labor union.

d. No docket fee shall be assessed in labor standards disputes. In all other disputes,
docket fees may be assessed against the filing party, provided that in bargaining deadlock,
such fees shall be shared equally by the negotiating parties.

e. The Minister of Labor and Employment and the Minister of the Budget shall
cause to be created or reclassified in accordance with law such positions as may be necessary
to carry out the objectives of this Code and cause the upgrading of the salaries of the
personnel involved in the Labor Relations System of the Ministry. Funds needed for this
purpose shall be provided out of the Special Activities Fund appropriated by Batas
Pambansa Blg. 80 and from annual appropriations thereafter.

f. A special Voluntary Arbitration Fund is hereby established in the Board to

subsidize the cost of voluntary arbitration in cases involving the interpretation and
implementation of the Collective Bargaining Agreement, including the Arbitrator’s fees, and
for such other related purposes to promote and develop voluntary arbitration. The Board
shall administer the Special Voluntary Arbitration Fund in accordance with the guidelines it
may adopt upon the recommendation of the Council, which guidelines shall be subject to
the approval of the Secretary of Labor and Employment. Continuing funds needed for this
purpose in the initial yearly amount of fifteen million pesos (P15,000,000.00) shall be
provided in the 1989 annual general appropriations acts.

8
 The amount of subsidy in appropriate cases shall be determined by the Board in
accordance with established guidelines issued by it upon the recommendation of the
Council.

The Fund shall also be utilized for the operation of the Council, the training and
education of Voluntary Arbitrators, and the Voluntary Arbitration Program.

g. The Ministry shall help promote and gradually develop, with the agreement of
labor organizations and employers, labor-management cooperation programs at appropriate
levels of the enterprise based on the shared responsibility and mutual respect in order to
ensure industrial peace and improvement in productivity, working conditions and the quality
of working life.

h. In establishments where no legitimate labor organization exists, labor-

management committees may be formed voluntarily by workers and employers for the
purpose of promoting industrial peace. The Department of Labor and Employment shall
endeavor to enlighten and educate the workers and employers on their rights and
responsibilities through labor education with emphasis on the policy thrusts of this Code.

i. To ensure speedy labor justice, the periods provided in this Code within which
decisions or resolutions of labor relations cases or matters should be rendered shall be
mandatory. For this purpose, a case or matter shall be deemed submitted for decision or
resolution upon the filing of the last pleading or memorandum required by the rules of the
Commission or by the Commission itself, or the Labor Arbiter, or the Director of the
Bureau of Labor Relations or Med-Arbiter, or the Regional Director.

Upon expiration of the corresponding period, a certification stating why a decision

or resolution has not been rendered within the said period shall be issued forthwith by the
Chairman of the Commission, the Executive Labor Arbiter, or the Director of the Bureau of
Labor Relations or Med-Arbiter, or the Regional Director, as the case may be, and a copy
thereof served upon the parties.

Despite the expiration of the applicable mandatory period, the aforesaid officials
shall, without prejudice to any liability which may have been incurred as a consequence
thereof, see to it that the case or matter shall be decided or resolved without any further
delay.

9
B. Recruitment and Placement

1. Recruitment of local and migrant workers

a. Illegal recruitment28

Any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or

procuring workers and includes referring, contract services, promising or advertising for
employment abroad, whether for profit or not, when undertaken by non-licensee or non-
holder of authority.29 Any such non-licensee or non-holder30 who, in any manner, offers or
promises for a fee employment abroad to two or more persons shall be deemed so engaged.

It shall likewise include the following acts, whether committed by any person,
whether a non-licensee, non-holder, licensee or holder of authority:

(a) To charge or accept directly or indirectly any amount greater than that specified in
the schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to
make a worker pay or acknowledge any amount greater than that actually received by him as
a loan or advance;

(b) To furnish or publish any false notice or information or document in relation to

recruitment or employment;

(c) To give any false notice, testimony, information or document or commit any act
of misrepresentation for the purpose of securing a license or authority under the Labor
Code, or for the purpose of documenting hired workers with the POEA, which include the
act of reprocessing workers through a job order that pertains to nonexistent work, work
different from the actual overseas work, or work with a different employer whether
registered or not with the POEA;

(d) To include or attempt to induce a worker already employed to quit his

employment in order to offer him another unless the transfer is designed to liberate a worker
from oppressive terms and conditions of employment;

(e) To influence or attempt to influence any person or entity not to employ any
worker who has not applied for employment through his agency or who has formed, joined
or supported, or has contacted or is supported by any union or workers' organization;

(f) To engage in the recruitment or placement of workers in jobs harmful to public

health or morality or to the dignity of the Republic of the Philippines;

28
Sec. 5, R.A. No. 10022
29
under Art. 13 (f)
30
Any person, corporation or entity:
1. Which has not been issued a valid license or authority to engage in recruitment and placement
by the Secretary of Labor and Employment (SLE) or
2. Whose license or authority has been suspended, revoked or cancelled by the POEA or the SLE

10
 (h) To fail to submit reports on the status of employment, placement vacancies,
remittance of foreign exchange earnings, separation from jobs, departures and such other
matters or information as may be required by the Secretary of Labor and Employment;

(i) To substitute or alter to the prejudice of the worker, employment contracts

approved and verified by the Department of Labor and Employment from the time of actual
signing thereof by the parties up to and including the period of the expiration of the same
without the approval of the Department of Labor and Employment;

(j) For an officer or agent of a recruitment or placement agency to become an officer

or member of the Board of any corporation engaged in travel agency or to be engaged
directly or indirectly in the management of travel agency;

(k) To withhold or deny travel documents from applicant workers before departure
for monetary or financial considerations, or for any other reasons, other than those
authorized under the Labor Code and its implementing rules and regulations;

(l) Failure to actually deploy a contracted worker without valid reason as determined
by the Department of Labor and Employment;

(m) Failure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment, in cases where the deployment
does not actually take place without the worker's fault. Illegal recruitment when committed
by a syndicate or in large scale shall be considered an offense involving economic sabotage;
and

(n) To allow a non-Filipino citizen to head or manage a licensed

recruitment/manning agency.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of

three (3) or more persons conspiring or confederating with one another. It is deemed
committed in large scale if committed against three (3) or more persons individually or as a
group.

11
 1) License31 vs. authority

License Authority

A document issued by the Department of A document issued by the Department of

Labor authorizing a person or entity to Labor authorizing a person or association to
operate a private employment agency. engage in recruitment and placement
activities as a private recruitment entity.

2) Essential elements of illegal recruitment

1. Offender is a non‐licensee or non‐holder of authority to lawfully engage in the

recruitment/placement of workers

2. Offender undertakes:

a. Any act of canvassing, enlisting, contracting, transporting, utilizing,

hiring or procuring workers, and includes referrals, contact services, promising or
advertising for employment, locally or abroad, whether for profit or not;32 or

b. To charge or accept, directly or indirectly, any amount greater than that

specified in the schedule of allowable fees prescribed by the Secretary of Labor, or to
make a worker pay any amount greater than that actually received by him as a loan or
advance;

c. To furnish or publish any false notice or information or document in

relation to recruitment or employment;

d. To give any false notice, testimony, information or document or commit

any act of misrepresentation for the purpose of securing a license or authority under
this Code.

e. To induce or attempt to induce a worker already employed to quit his

employment in order to offer him to another unless the transfer is designed to
liberate the worker from oppressive terms and conditions of employment;

f. To influence or to attempt to influence any person or entity not to employ

any worker who has not applied for employment through his agency;

31
No license or authority shall be used directly or indirectly by any person other than the one in whose
favor it was issued or at any other place other than that stated in the license or authority, nor may such
license or authority be transferred, conveyed or assigned to any other person or entity.
Licensees or holders of authority or their duly authorized representatives may, as a rule, undertake
recruitment and placement activities only at their authorized official addresses.
Change of ownership or relationship of single proprietorship licensed to engage in overseas employment
shall cause the automatic revocation of the license.
32
Art. 13[b]

12
 g. To engage in the recruitment or placement of workers in jobs harmful to
public health or morality or to the dignity of the Republic of the Philippines;

h. To obstruct or attempt to obstruct inspection by the Secretary of Labor or

by his duly authorized representatives;

i. To fail to file reports on the status of employment, placement vacancies,

remittance of foreign exchange earnings, separation from jobs, departures and such
other matters or information as may be required by the Secretary of Labor.

j. To substitute or alter employment contracts approved and verified by the

Department of Labor from the time of actual signing thereof by the parties up to
and including the periods of expiration of the same without the approval of the
Secretary of Labor;

k. To become an officer or member of the Board of any corporation engaged

in travel agency or to be engaged directly or indirectly in the management of a travel
agency; and

l. To withhold or deny travel documents from applicant workers before

departure for monetary or financial considerations other than those authorized under
this Code and its implementing rules and regulation.33

3) Simple illegal recruitment

When it involves less than three (3) victims or recruiters.

4) Illegal recruitment in large scale34

5) Illegal recruitment as economic sabotage

When it is committed::

By a syndicate In large scale

If carried out by a group of 3 or more If committed against 3 or more persons

persons conspiring and confederating with individually or as a group
one another;

33
Art. 34
34
see Illegal Recruitment, infra

13
 6) Illegal recruitment vs. estafa35

Illegal recruitment Estafa

Malum prohibitum, thus: Malum in se, thus:

1. Criminal intent is not necessary 1. Criminal intent is necessary

2. A crime which involves moral turpitude 2. A crime which involves moral turpitude

It is not required that it be shown that the Accused defrauded another by abuse of
recruiter wrongfully represented confidence, or by means of deceit.37
36
himself as a licensed recruiter.

Illegal recruitment and estafa cases may be filed simultaneously or separately. The filing of
charges for illegal recruitment does not bar the filing of estafa, and vice versa.

Double jeopardy will not set in

7) Liabilities

(i) Local recruitment agency

(ii) Foreign employer

They are jointly and severally liable for any violation of the recruitment
agreement and the contracts of employment.38

35
under Art. 315, par. 2, RPC
Estafa is committed by any person who defrauds another by using fictitious name, or falsely pretends to
possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or
by means of similar deceits executed prior to or simultaneously with the commission of fraud (People v.
Comila, G.R. No. 171448, February 28, 2007, 517 SCRA 153, 167)
36
It is enough that the victims were deceived as they relied on the misrepresentation and scheme
that caused them to entrust their money in exchange of what they later discovered was a vain hope
of obtaining employment abroad.
37
It is essential that the false statement or fraudulent representation constitutes the very cause or
the only motive which induces the complainant to part with the thing of value.
38
This joint and solidary liability imposed by law against recruitment agencies and foreign employers
is meant to assure the aggrieved worker of immediate and sufficient payment of what is due him.
If the recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the claims and damages. (Becmen Service Exporter and Promotion v. Cuaresma,
G.R. Nos. 182978‐79, April 7, 2009)

14
 (a) Theory of imputed knowledge

Knowledge of the agent is knowledge of the principal.

Ascribes the knowledge of the agent to the principal employer, not the other way
39
around.

A rule in insurance law that any information material to the transaction, either
possessed by the agent at the time of the transaction or acquired by him before its
completion, is deemed to be the knowledge of the principal, at least so far as the
transaction is concerned, even though in fact the knowledge is not communicated to
the principal at all.40

(iii) Solidary liability41

h) Pre-termination of contract of migrant worker

Rules on Repatriation of Overseas Workers:

Without fault of the worker His repatriation shall be borne by the local
agency and/or principal over the

1. worker and his personal belongings;

2. remains of the deceased worker and
his personal belongings.42

Fault of the migrant worker Shall be borne by the migrant worker43

In cases of war, epidemic, disasters, Shall be borne by OWWA, without prejudice

calamities, or other similar events to reimbursement by the principal or local
agency.44

Underage migrant worker Shall be mandatory upon discovery, done by

the responsible officers of the foreign service

39
Rovels Enterprises, Inc. v. Ocampo, G.R. No. 136821, October 17, 2002, 391 SCRA 176; vide Air France v.
Court of Appeals, et al., 211 Phil. 601 (1983).
40
Leonor v. Filipinas Compania, 48 OG 243
41
see Liabilities, supra
42
Sec. 15, par. 1, R.A. 8042
43
Ibid.
44
id. Par. 2

15
 where the underage migrant worker is
found.45

Seafarer POPEA Memo Circular No. 55-96 provides

that a seaman can be repatriated without
cause if the vessel arrives at a convenient
port within three (3) months before the
expiration of his contract, but only upon
payment of

a. all his earned wages;

b. leave pay for the entire contract;
c. termination pay of one (1) month
basic salary, if seaman has at least ten
(10) months original contract.46

b. Direct hiring

General Rule: An employer may only hire Filipino worker for overseas
employment through POEA or entities authorized by DOLE.

Exceptions: Direct hiring by

1. International organizations
2. Members of the diplomatic corps;
3. Name hires; and
4. Such other employers as may be allowed by the Dept. of Labor.

2. Regulation and Enforcement

a. Suspension or cancellation of license or authority

The Secretary of Labor shall have the power to suspend or cancel any license or
authority to recruit employees for overseas employment for violation of rules and regulations
issued by the Department of Labor, the POEA, or for violations of this and other applicable
laws, General Orders and Letters of Instructions.47

45
Sec. 16, id.
46
PCL Shipping Pils. vs.NLRC, 511 SCRA 44 (2006)
47
Art. 35, Labor Code

16
 b. Regulatory and visitorial powers of the DOLE secretary

Regulatory powers Visitorial powers

1. Restrict and regulate the recruitment and 1. Access to employer’s records and
placement activities of all agencies. premises at any time of the day or night,
whenever work is being undertaken.
2. Issue orders and promulgate rules and
Regulations. 2. To copy from said records

3. Question any employee and investigate

any fact, condition or matter which may
be necessary to determine violations or
which may aid in the enforcement of the
Labor Code and of any labor law, wage
order, or rules and regulation issued
pursuant thereto.

c. Remittance of foreign exchange earnings

General Rule: It shall be mandatory for all OFWs to remit a portion of their
foreign exchange earnings to their families, dependents, and/or
beneficiaries ranging from 50% ‐ 80% depending on the worker’s kind
of job.48

Exceptions: 1. The worker’s immediate family members, beneficiaries and dependents

are residing with him abroad.

2. Immigrants and Filipino professionals and employees working with

the UN agencies or specialized bodies.

3. Filipino servicemen working in U.S. military installations.49

48
Rule VIII, Book III, POEA Rules
49
Resolution No. 1‐83, Inter‐Agency Committee for Implementation of E.O. 857

17
 d. Prohibited activities50

1. Furnishing or publishing any false notice/information/document related to

recruitment/employment

2. Failure to file reports required by SLE

3. Inducing or attempting to induce a worker already employed to quit his

employment in order to offer him another unless the transfer is designed to liberate a
worker from oppressive terms and conditions

4.Recruitment/placement of workers in/jobs harmful to public health or morality or

to the dignity of the country

5. Engaging directly or indirectly in the management of a travel agency

6. Substituting or altering employment contracts without approval of DOLE

7.Charging or accepting any amount greater than that specified by DOLE or

make a worker pay any amount greater than actually received by him

8. Committing any act of misrepresentation to secure a license or authority

9.Influencing or attempting to influence any person/entity not to employ any

worker who has not applied of employment through his agency

10.Obstructing or attempting to obstruct inspection by SLE or by his represent

atives

11.Withholding or denying travel documents from applicant workers before

departure for monetary considerations other than authorized by law

12. Granting a loan to an OFW, which will be used for payment of legal and
allowable placement fees

13.Refusing to condone or renegotiate a loan incurred by an OFW after his

employment contract has been prematurely terminated through no fault of his or her
Own.

14. For a suspended recruitment/manning agency to engage in any kind of

recruitment activity including the processing of pending workers' applications; and

15. For a recruitment/manning agency or a foreign principal/employer to pass on

the OFW or deduct from his or her salary the payment of the cost of insurance
fee, premium or other insurance related charges, as provided under the compulsory worker's
insurance coverage.
50
Art. 34

18
 16. Imposing a compulsory and exclusive arrangement whereby an OFW is
required to:

a. Avail a loan only from specifically designated institutions, entities or

persons;

b. Undergo health examinations only from specifically designated medical,

entities or persons, except seafarers whose medical examination cost is shouldered
by the shipowner

c. Undergo training of any kind only from designated institutions,

entities or persons, except for recommendatory trainings mandated by principals
/shipowners.51

C. LABOR STANDARDS

1. Hours of Work52

a. Coverage/Exclusions

Coverage Exclusions

Employees in all establishments and 1. Government employees,

undertakings, whether for profit or not.
2. Managerial employees,53
51
Sec. 6, R.A. 10022
52
Work day" means 24 consecutive-hour period which commences from the time the employee regularly
starts to work. It does not necessarily mean 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.
Reduction of eight-hour working day - not prohibited by law provided there is no reduction in pay of
workers.
Hours of work of part-time workers - payment of wage should be in proportion only to the hours
worked.
53
Those whose primary duty consists of the management of the establishment in which they are
employed or a department or subdivision thereof, and other officers or members of the
managerial staff.
They must meet all of the ff. conditions, namely:
1.Primary duty: management of the establishment in which they are employed or of a
department or sub‐division thereof;
2. Customarily or regularly direct the work of 2 or more employees
3.Has the authority to hire or fire other employees
of lower rank; or their suggestions and recommendations as to the hiring and firing and as to the
promotion or any change of status of other employees are given particular weight.
4.Execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge
5. Execute under general supervision special assignment and tasks; and

19
 3. Field personnel,54

4. Members of the family of the employer

who are dependent on him for support,
domestic helpers,

5. Persons in the personal service of another,

and

6. Workers who are paid by results

b. Normal Hours of Work

Eight (8) hours per day in a general working day.

a) Compressed work week55

The normal workweek is reduced to less than 6 days but the total number of
work hours of 48 hours per week shall remain. The normal workday is increased to more
than 8 hours but not to exceed 12 hours, without corresponding overtime premium.
The concept can be adjusted accordingly depending on the normal work week
of the company.56

c. Meal Break

Every employee is entitled to not less than one (1) hour (or 60 minutes) time-off for
regular meals. Being time-off, it is not compensable hours worked and employee is free to
do anything he wants, except to work. If he is required to work while eating, he should be
compensated therefor.

If meal time is shortened to not less than twenty (20) minutes - compensable hours
worked.

If shortened to less than 20 minutes - considered coffee break or rest period of short
duration and, therefore, compensable.

6. Do not devote more than 20% of their hours worked to activities which are not directly and
closely related to performance of the work described. (Art. 82[2])
54
Non-agricultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty
55
See shortening of work week (under 1. Hours of Work), supra
56
Department Advisory Order No. 2, Series of 2009

20
 d. Waiting time

Considered compensable if waiting is an integral part of the employee's work or he is

required or engaged by the employer to wait.

e. Overtime work,57 Overtime Pay

Overtime work Work beyond eight (8) hours of work

within the worker’s 24 hour workday.58

Overtime Pay The additional compensation for work performed beyond eight (8)
hours a day within the worker’s 24-hour workday regardless whether
the work covers 2 calendar days.

57
General Rule: No employee may be compelled to render overtime work against his will.
Exceptions:
a. When the country is at war or when any other national or local emergency has been declared by the
National Assembly or the Chief Executive
b. When overtime work is necessary to prevent loss of life or property or in case of imminent danger to
public safety due to actual or impending emergency in the locality caused by serious accident, fire, floods,
typhoons, earthquake, epidemic or other disasters or calamities;
c. When there is urgent work to be performed on machines, installations or equipment, or in order to
avoid serious loss or damage to the employer or some other causes of similar nature
d. When the work is necessary to prevent loss or damage to perishable goods;
e. When the completion or continuation of work started before the 8th hour is necessary to prevent
serious obstruction or prejudice to the business or operations of the employer; and
f. When overtime work is necessary to avail of favorable weather or environmental conditions where
performance or quality of work is dependent thereon.
When an employee refuses to render emergency overtime work under any of the foregoing conditions, he
may be dismissed on the ground of insubordination or willful disobedience of the lawful order of the
employer.
58
In computing overtime work, "regular wage" or "basic salary" means "cash" wage only without
deduction for facilities provided by the employer.
"Premium pay" means the additional compensation required by law for work performed within 8 hours
on non- working days, such as rest days and special days.
"Overtime pay" means the additional compensation for work performed beyond 8 hours. Every
employee entitled to premium pay is also entitled to the benefit of overtime pay.

21
 f. Night Work, Night shift differential

Night Work Work at night during a period of not less

than seven (7) consecutive hours, including
the interval from midnight to five o’clock in
the morning.59

Night shift differential The additional compensation of ten percent

(10%) of an employee’s regular wage for
each hour of work performed between 10
p.m. and 6 a.m.

g. Part-time work

When a worker is contracted for anything less than the basic full-time hours.

h. Contract for piece work

The contractor binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The contractor may either employ only his
labor or skill, or also furnish the material.60

2. Wages61

59
R.A. No. 10151
60
Art. 1713, CC
61
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 :
A. Payment through automated teller machine (ATM) of banks provided the following conditions are
met:
1. the ATM system of payment is with the written consent of the employees concerned;
2. The employees are given reasonable time to withdraw their wages from the bank facility which time,
if done during working hours, shall be considered compensable hours worked;
3. The system shall allow workers to receive their wages within the period or frequency and in the
amount prescribed under the Labor Code, 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 an additional expenses and no diminution of benefits and privileges as a result of the
ATM system of payment;

22
 a. Wage vs. salary

Wages Salaries

Compensation for manual labor62 Paid to “white collared workers” and denotes
also known as “blue collared workers”, paid a higher degree of employment, or a
at stated times and measured by the day, superior grade of services, and implies a
week, month or season. position in office.

Indicates inconsiderable pay for a lower or Suggests a larger and more permanent or
less responsible character of employment. fixed compensation for more important
services.

General Rule:

Not subject to execution Subject to execution

Exceptions:

Debts incurred for food, shelter,

clothing and medical attendance.

b. Minimum wage defined, Minimum wage setting

Minimum wage - lowest wage rate fixed by law that an employer can pay his
employees.63

In the determination of the regional minimum wages, the Regional Board shall,
among other relevant factors, consider the following:

a) The demand for living wages

b) Wage adjustment vis‐a‐vis the consumer price index
c) The cost of living and changes or increases therein

7. The employer shall assume responsibility in case the wage protection provisions of law and
regulations are not complied with under the arrangement
62
skilled or unskilled
63
The employer cannot exempt himself from liability to pay minimum wages because of poor financial
condition of the company; the payment of minimum wages is not dependent on the employer’s ability to
pay (De Racho v. Municipality of Iligan, G.R. NO. L-23542).
The acceptance by an employee of the wages paid him without objection does not give rise to estoppel
precluding him from suing for the difference between the amount received and the amount he should
have received pursuant to a valid minimum wage law where it does not appear that the employer
changed his position to his own prejudice.

23
 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
j) The equitable distribution of income and wealth along the imperatives of
economic and social development

c. Minimum wage of workers paid by results

1) Workers paid by results

All workers paid by results, including homeworkers and those who are paid on piece
rate, takay, pakyaw or task basis, shall receive not less than the prescribed minimum wage
rates under the Regional Wage Orders for normal working hours which shall not exceed
eight (8) hours a day, or a proportion thereof.

2) Apprentices
3) Learners

Wage of apprentices and learners shall in no case be less than seventy-five (75%)
percent of the applicable minimum wage rates.

4) Persons with disability

A qualified disabled employee shall be subject to the same terms and conditions of
employment and the same compensation, privileges, benefits, fringe benefits or allowances
as a qualified able bodied person.64

d. Commissions

Direct remunerations received by an agent, salesman, executor, broker, or trustee

calculated as a percentage on the amount of his transactions or on the profit to the principal.

64
Sec. 5 of RA 7277 or the Magna Carta for Disabled Person

24
 e. Deductions from wages

General Rule Wage deduction is strictly prohibited.

Exceptions:65 1. With employees’ consent:

a. SSS payments
b. Philhealth payments
c. Contributions to Pag-IBIG Fund
d. value of meals and other facilities
e. payments to third persons with employees consent
f. deduction of absences

2. Without employees’ consent:

a. worker’s insurance acquired by the employer

b. union dues, where the right to check-off has been recognized by
the employer
c. cases where the employer is authorized by law or regulations issued
by the Secretary of Labor
d. debts of the employee to the employer which have become due
and demandable

f. Non-diminution of benefits66

This principle mandates that the reduction or diminution 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.67

The benefits being given to employees cannot be taken back or reduced unilaterally
by the employer because the benefits have become part of the employment contract, written
or unwritten.68

65
allowable deductions
66
The rule is applicable if it is shown that the grant of the benefits is:
Based on an express policy; or
Has ripened into practice over a long period of time,
The practice is consistent and deliberate; and
It is not due to an error in the construction/ application of a doubtful or difficult question of law.
67
See Art. 100
68
Exception:
To correct an error, otherwise, if the error is not corrected for a reasonable time, it ripens into a
company policy and employees can demand it as a matter of right.

25
 7. Facilities vs. supplements

Facilities Supplements

Items of expenses necessary for the Extra remuneration or special privileges or

laborer’s and his family’s existence and
subsistence but does not include tools of the
trade or articles or services primarily for the
benefit of the employer or necessary to the
conduct of the employer’s business.
benefits given to or received by the laborers
over and above their ordinary earnings or
wages.69

Forms part of the wage Independent of wage

Deductible from wage Not wage deductible

For the benefit of the worker and his Granted for the convenience of the
family. employer.

8. Wage Distortion70/Rectification

A wage distortion happens when a wage order increasing the rates of wages removes
or significantly reduces the pay advantage of one position of employees over another. This
change has to be corrected. Correction of a wage distortion must first be done in the
company's grievance machinery provided for in the CBA. If the distortion isn't resolved
there, the next step is voluntary arbitration. In case the company has no CBA or
recognized labor union, the employers and workers have to reach an agreement to correct
the distortion. If they can't agree, they have to bring the problem to the NCMB. If after 10
days in the NCMB there isn't any correction the next place to go is the NLRC.

Wage distortions cannot be the cause of a strike or lockout.71 The correction of

a wage distortion should be done by negotiation or arbitration.

69
Atok Big Wedge Mining Co. v. Atok Big Wedge Mutual Benefit Assoc., G.R. No. L‐7349, July 19, 1955
70
Elements:
1. An existing hierarchy of positions with corresponding salary rates.
2. A significant change or increase in the salary rate of a lower pay class without a corresponding
increase in the salary rate of a higher one;
3. The elimination of the distinction between the 2 groups or classes; and
4. The WD exists in the same region of the country (Alliance Trade Unions v. NLRC, G.R. No. 140689,
Feb. 17, 2004)
71
Ilaw ng Manggagawa vs. NLRC, 198 SCRA 586

26
 9. Divisor to determine daily rate

The divisor is 250, which is arrived at by subtracting the 52 Sundays, 52 Saturdays,

the 10 regular holidays and December 31, or a total of 115 off-days from the 365 days of the
year or a difference of 250 days.72

C. Rest Periods

1. Weekly rest day

Not less than twenty-four (24) consecutive hours after every six (6) consecutive
normal work 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 and Employment may provide.73

2. Emergency rest day work

In the following cases:

1. Actual or impending emergencies caused by serious accident, fire, flood, typhoon,

earthquake, epidemic or other disaster or calamity to prevent loss of life and property, or
imminent danger to public safety;

2. Urgent work to be performed on the machinery, equipment, or installation, to

avoid serious loss which the employer would otherwise suffer;

3. Abnormal pressure of work due to special circumstances, where the employer

cannot ordinarily be expected to resort to other measures;

4. To prevent loss or damage to perishable goods;

5. The nature of the work requires continuous operations and the stoppage of work
may result in irreparable injury or loss to the employer; and

6. Other analogous or similar circumstances as determined by the Secretary of Labor

and Employment.74

72
See CBTC Employees Union vs. Jacobo C. Clave and Commercial Bank & Trust Co., G.R. No. L-49582,
January 7, 1986
73
Art. 91 (a)
74
Art. 92

27
 C. Holiday pay75/ Premium pay76

Coverage Exclusions

Holiday pay Applies to all employees 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. Those of retail and service establishments

regularly employing less than ten (10) workers;

3. Househelpers and persons in the personal

service of another;

4. Managerial employees, if they meet all of the

following conditions:

4.1 Their primary duty is to manage the

establishment in which they are employed or
of a department or subdivision thereof;

4.2 They customarily and regularly direct

the work of two or more employees therein;

4.3. 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.

5. Officers or members of a managerial staff, if

they perform the following duties and
responsibilities:

5.1 Primarily perform work directly related

to management policies of their employer;

75
A day’s pay given by law to an employee even if he does not work on a regular holiday. It is limited to
the eleven (11) regular holidays listed by law. The employee should not have been absent without
pay on the working day preceding the regular holiday.
76
Additional compensation for work performed on a scheduled rest day or holiday

28
 5.2 Customarily and regularly exercise
discretion and independent judgment;

5.3 (a) 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 (b) execute, under general
supervision, work along specialized or
technical lines requiring special training,
experience, or knowledge; or (c) execute, under
general supervision, special assignments and
tasks; and

5.4 Do not devote more than twenty

percent (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 5.1, 5.2, and 5.3
above.

6. 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.

Premium pay Applies to all employees 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. Managerial employees, if they meet all of the

following conditions:

2.1 Their primary duty is to manage the

establishment in which they are employed or
of a department or
subdivision thereof;

29
 2.2 They customarily and regularly direct the
work of two or more employees therein;

2.3 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.

3. Officers or members of a managerial staff, if

they perform the following duties and
responsibilities:

3.1 Primarily perform work directly related

to management policies of their employer;

3.2 Customarily and regularly exercise

discretion and independent judgment;

3.3 (a) 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 (b) execute, under general
supervision, work along specialized or
technical lines requiring special training,
experience, or knowledge; or (c)
execute, under general supervision, special
assignments and tasks; and

3.4 Do not devote more than twenty

percent (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 3.1, 3.2, and 3.3
above.

4. Househelpers and persons in the personal

service of another;

5. Workers who are paid by results, including

those who are paid on piece rate, takay,
pakyaw, or task basis, and other nontime work,
if their output rates are in accordance with the
standards prescribed in the regulations, or

30
 where such rates have been fixed by the
Secretary of Labor and Employment;

6. Field personnel, if they regularly perform

their duties away from the principal or branch
office or place of business of the employer and
whose actual hours of work in the field cannot
be determined with reasonable certainty.

Teachers, piece workers, takay, seasonal workers, seafarer

Employees Rule

Private school teachers77 1. RH during semestral vacations

- Not entitled to HP

2. RH during Christmas vacation

- Shall be paid HP

Paid by: HP shall not be less than his average daily

earnings for the last 7 actual work days preceding
1. results or the RH; Provided: HP shall not be less than the
statutory minimum wage rate.
2. output78

Seasonal Workers May not be paid the required HP during offseason where
they are not at work.

Workers having no Shall be entitled to HP

regular work days

Seafarers Shall be entitled to HP

77
Faculty members of colleges and universities
78
Piece work payment

31
 5. Leaves

a. Service Incentive Leave79

Every employee who has rendered at least one (1) year of service80 shall be entitled to
a yearly service incentive leave of five (5) days with pay.

b. Maternity Leave81

A covered female employee who has paid at least three (3) monthly maternity
contributions in the twelve (12)-month period preceding the semester of her childbirth,
abortion or miscarriage and who is currently employed shall be paid a daily maternity benefit
equivalent to one hundred percent (100%) of her present basic salary, allowances and other
benefits or the cash equivalent of such benefits for 60 days or 78 days in case of caesarian
delivery.

c. Paternity Leave82

Granted to a married male employee in the private and public sector allowing him
not to report for work for seven (7) days but continues to earn the compensation therefor.

79
It is 5 days leave with pay for every employee who has rendered at least 1 yr. of service. It is
commutable to its money equivalent if not used or exhausted at the end of year.
80
Service for not less than 12 months, whether continuous or broken reckoned from the date
the employee started working, including authorized absences and paid regular holidays unless the
working days in the establishment as a matter of practice or policy, or that provided in the
employment contract is less than 12 months, in which case said period shall be considered as one
year. (Sec. 3, Rule V, Book III, IRR)
81

Maternity benefits, like other benefits granted by the SSS, are granted to employees in lieu of wages
and, therefore, may not be included in computing the employee’s 13th-month pay for the calendar year.
Voluntary or self-employed members are not entitled to the maternity benefit because to be entitled
thereto, corresponding maternity contributions should be paid by employers. Voluntary or self-employed
members have no employers so they do not have maternity contributions.
82
Conditions to entitlement:
The male employee is
1. Legally married to, and is cohabiting with the woman who delivers the baby
2. Employee of private or public sector;
3. Only for the first 4 deliveries (include childbirth or any
miscarriage) of legitimate spouse with whom he is cohabiting;
and
4.Notify his employer of the pregnancy of his legitimate spouse and the expected date of such
delivery
The paternity benefits may be enjoyed by the qualified employee before, during or after the delivery
by his wife. However, the total number of days shall not exceed seven (7) working days for each delivery.
This benefit shall be availed of not later than sixty (60) days after the date of said deliver
It is not convertible to cash if not availed of.

32
 d. Parental Leave83

Leave benefits of not more than seven (7) working days every year granted to a solo
84
parent employee to enable him/her to perform parental duties and responsibilities where
physical presence is required.

e. Leaves for victims of violence against women85

A female employee who is a victim of violence86 is entitled to a paid leave of

10 days in addition to other paid leaves, extendible when the necessity arises as specified
in the protection order.87

83
Republic Act No. 8972 (An Act Providing for Benefits and Privileges to Solo Parents and Their Children,
Appropriating Funds Therefor and for Other Purposes), otherwise known as “The Solo Parents’ Welfare
Act of 2000. This leave privilege is an additional leave benefit which is separate and distinct from any
other leave benefits provided under existing laws or agreements.
Conditions to entitlement:
1. He or she must fall among those referred to as solo parent
2. Must have the actual and physical custody of the child or children
3. Must have at least rendered service of one (1) year to his or her employer
4. He or she must remain a solo parent
84
Any individual who falls under any of the ff. categories:
1. A woman who gives birth as a result of rape and other crimes against chastity even without a
final conviction of the offender, provided, That the mother keeps and raises the child;
2. Parent left solo or alone with the responsibility of parenthood due to:
a. Death of spouse;
b. Detention or service of sentence of spouse for a criminal conviction for at least 1 yr;
c. Physical and/or mental incapacity of spouse
d. Legal separation or de facto separation from spouse for at least 1 yr as long as he/she is
entrusted with the custody of the children;
e. Nullity or annulment of marriage as decreed by a court or by a church as long as
he/she is entrusted with the custody of the children;
f. Abandonment of spouse for at least 1 yr;
3. Unmarried mother/father who has preferred to keep and rear his or her child/children
instead of:
a. having others care for them or
b. give them up to a welfare institution;
4. Any other person who solely provides:
a. parental care and
b. support to a child or children;
5. Any family member who assumes the responsibility of head of family as a result of the:
a. death,
b. abandonment,
c. disappearance or
d. prolonged absence of the parents or solo parent.
A change in the status or circumstance of the parent claiming benefits under this Act, such
that he/she is no longer left alone with the responsibility of parenthood, shall terminate his/her eligibility
for these benefits. (Sec.3)
85
under R.A. 9262
86
physical, sexual, or psychological

33
 f. Special Leave Benefit for Women88

Any female employee regardless of age and civil status shall be entitled to a special
leave benefit under such terms and conditions provided herein.

The employee is entitled to special leave benefit of two (2) months with full pay
based on her gross monthly compensation.

6. Service Charge

This is a charge collected by hotels, restaurants and similar establishments

and shall be distributed at the rate of:

Covered Employees Management

85% 15%

Equally distributed among them 1. To answer for losses and breakages and

2. Distributed to employees receiving more than

P2000 a month at the discretion of the
management.

The share of the employee shall be distributed and paid to them

not less than once every 2 weeks or twice a month at intervals not exceeding 16 days.

7. Thirteenth (13th) Month Pay

All rank-and-file employees are entitled to a 13th-month pay89 regardless of the

amount of basic salary that they receive in a month, if their employers are not otherwise
exempted from paying the 13th month pay. Such employees are entitled to the 13th
month pay regardless of their designation or employment status, and irrespective of the

87
Sec. 43, 1st par., ibid
88
R.A. 9710
Conditions for Entitlement:
1. She has rendered at least six (6) months continuous aggregate employment service for the last
twelve (12) months prior to surgery;
2. She has filed an application for special leave with her employer within a reasonable period of time
from the expected date of surgery or within such period as may be provided by company rules and
regulations or collective bargaining agreement; and
3. She has undergone surgery due to gynecological disorders as certified by a competent physician.
89
Forms:
Christmas bonus;
Midyear bonus;
Profit sharing payments; and
Other cash bonuses amounting to not less than1/12 of its basic salary

34
method by which their wages are paid, provided that they have worked for at least one (1)
month during a calendar year.90

6. Separation Pay

Separation pay is given to employees in instances covered by Articles 283 and 284 of
the Labor Code of the Philippines. An employee’s entitlement to separation pay depends on
the reason or ground for the termination of his or her services. An employee may be
terminated for just cause, 91 and other similar causes as enumerated under Article 282 of the
Labor Code and, generally, may not be entitled to separation pay. On the other hand, where
the termination is for authorized causes, separation pay is due.

7. Retirement Pay

1. Eligibility

Employees shall be retired upon reaching the age of sixty (60) years or more but not
beyond sixty-five (65) years old [and have served the establishment for at least five (5) years].

2. Amount

The minimum retirement pay shall be equivalent to one-half (1/2) month salary92
for every year of service, a fraction of at least six (6) months being considered as one (1)
whole year.

3. Retirement benefits of workers paid by results

The basis for the determination of the salary for fifteen (15) days shall be their
average daily salary (ADS). The ADS is derived by dividing the total salary or earnings for
the last twelve months reckoned from the date of retirement by the number of actual

90
Revised Guidelines on the Implementation of the 13 Month Pay Law
It is in the nature of wages. This is a year-end pay established by P.D. 851 which is equivalent to 1/12 of
the total basic salary earned by an employee within the calendar year, which is demandable as a legal
obligation. It may be given anytime but not later than December 24.
Exclusion/Exemptions from coverage:
1. Government employees
2. Household helpers
3. Employees paid purely on commission basis
4. Employees already receiving 13th month pay
91
i.e., gross and habitual neglect of duty, fraud, or commission of a crime
92
For the purpose of computing retirement pay, "one-half month salary" shall include all of the following:
1. Fifteen (15) days salary based on the latest salary rate;
2. Cash equivalent of five (5) days of service incentive leave;
3. One-twelfth (1/12) of the thirteenth-month pay.
(1/12 x 365/12 = .083 x 30.41 = 2.5)
Thus, “one-half month salary” is equivalent to 22.5 days (Capitol Wireless, Inc. vs. Honorable Secretary
Ma. Nieves R. Confesor, G. R. No. 117174, November 13, 1996).

35
working days in that particular period, provided that the determination of rates of payment
by results are in accordance with the established regulations.

4. Retirement benefits of part-time workers

“One month salary” for every year of service under RA 7641 after satisfying the
following conditions precedent for optional retirement:

(a) there is no retirement plan between the employer and the employee and (b) the
employee should have reached the age of sixty (60) years, and should have rendered at least
five (5) years of service with the employer.

Applying the foregoing principle, the components of retirement benefit of part-time

workers may likewise be computed at least in proportion to the salary and related benefits
due them.

5. Taxability

RA No. 8424 extended the income tax exemption of retirement benefits under RA
4917 to those received by officials and employees in the private sector under the provisions
of RA No. 7641. R.A. No. 7641 requires employers, in the absence of retirement plan or
agreement, to pay employees upon reaching the age of sixty years or more, but not beyond
sixty-five years and who have rendered at least five (5) years in the said establishment, a
retirement benefit equivalent to at least one-half month for every year of service. Compared
to RA No. 4917, RA No. 7641 specifies a shorter length of service but longer age
requirement.

The BIR held in various rulings that the tax exemption privilege granted to
retirement benefits under RA No. 7641 can only be invoked when there is no existing
retirement plan, CBA, or other applicable employment contract in the establishment. In the
presence of a retirement plan duly approved by the BIR, CBA, or applicable employment
contract providing for retirement benefits, the same shall be followed provided that it shall
not be less than those provided under RA No. 7641.

8. Women Workers

a. Provisions against discrimination

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

The following are acts of discrimination:

a. Payment of a lesser compensation, including wage, salary or other form of

remuneration and fringe benefits, to a female employees as against a male employee, for
work of equal value; and

36
 b. Favoring a male employee over a female employee with respect to promotion,
training opportunities, study and scholarship grants solely on account of their sexes.
Criminal liability for the willful commission of any unlawful act as provided in this Article or
any violation of the rules and regulations issued pursuant to Section 2 hereof shall be
penalized as provided in Articles 288 and 289 of this Code: Provided, That the institution of
any criminal action under this provision shall not bar the aggrieved employee from filing an
entirely separate and distinct action for money claims, which may include claims for damages
and other affirmative reliefs. The actions hereby authorized shall proceed independently
of each other.93

b. Stipulation against marriage

Whether as a condition of employment or continuation of employment

1. A woman employee shall not get married, or

2. Upon getting married, a woman employee shall be deemed resigned or separated,

or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of her marriage.94

c. Prohibited Acts

1. Denying any woman employee the benefits provided for by law or to discharge
any woman employed by him for the purpose of preventing her from enjoying any of the
benefits provided for by law.

2. Discharging such woman on account of her pregnancy, or while on leave or in

confinement due to her pregnancy;

3. Discharging or refusing the admission of such woman upon returning to her work
for fear that she may again be pregnant.95

93
Art. 135
94
Art. 136
A woman worker may not be dismissed on the ground of dishonesty for having written ‘’single
” on the space for civil status on the application sheet, contrary to the fact that she was married.
(PT&T Co. v. NLRC, G.R. No. 118978, May 23, 1997)
95
Art. 137

37
 d. Anti-Sexual Harassment Act96

The Act punishes sexual harassment if the same is:

1. work-related; or
2. Education-related; or
3. training-related.97
Sexual harassment may be committed by an:

1. Employee
2. Manager
3. Supervisor
4. Agent of the employer
5. Teacher, instructor, professor
6. Coach, trainer, or
7.Any other person who, having authority, influence or moral ascendancy
over another in a work or training or education environment:

a. Demands
b. Requests or
c. Requires any sexual favor from the other, regardless of whether the
demand,request or requirement for submission is accepted by the object of
R.A.8777.98

96
R.A. 7877
- declares sexual harassment unlawful in the employment, education or training environment.
97
Sec. 3, id.
98
ibid.
It is not necessary that the demand, request or requirement of a sexual favor be articulated in a
categorical manner. It may be discerned, with equal certitude, from the acts of the offender.
Likewise, it is not essential that the demand
request or requirement be made as a condition for continued employment or for promotion to a
higher position. It is enough that the respondent’s acts result in creating an intimidating, hostile or
offensive environment for the employee. (Domingo v. Rayala, G.R. No. 155831, Feb. 18, 2008)

38
 9. Employment of Minors99

General Rule Exceptions

1. No person under 18 years of age will A. Below 15 yrs. Old

be allowed to be employed in an undertaking
1. The child100 works directly under the
which is hazardous or deleterious in nature.
sole responsibility of his parents, or
2. No employer shall discriminate against guardians who employ members of
any person in respect to terms and his family, subject to the following
conditions of employment on account of his conditions:
age.
a. Employment does not endanger
the child’s safety, health and morals

b. Employment does not impair the

child’s normal dev’t.

c. Employer‐parent or legal guardian

provides the child with the primary
and/or secondary education prescribed
by the Dept. of Education

2. The child’s employment or

participation in public entertainment
or information through cinema, theater,
radio or television is essential provided:

a. Employment contract is concluded

by the child’s parents or legal guardian,

b. With the express agreement of

the child concerned, if possible, and

c. The approval of DOLE, the

following must be complied
with:

i. The employment does not

involve advertisement or commercials
promoting alcoholic beverages,
intoxicating drinks, tobacco and its by‐
products or exhibiting violence

99
R.A. 7678, R.A. 9231
100
The term "child" shall apply to all persons under eighteen (18) years of age.

39
 ii. there is a written contract
approved by DOLE

iii. the conditions provided in

the first instance are met.

B. Above 15 but below 18 – may be

employed in any non‐hazardous work

C. Above 18 – no prohibition

1. A child below fifteen (15) years of age 101 may be allowed to work for not more
than twenty (20) hours a week: Provided, That the work shall not be more than four (4)
hours at any given day;

2. A child fifteen (15) years of age but below eighteen (18) shall not be allowed to
work for more than eight (8) hours a day, and in no case beyond forty (40) hours a week;

3. No child below fifteen (15) years of age shall be allowed to work between eight
o'clock in the evening and six o'clock in the morning of the following day and no child
fifteen (15) years of age but below eighteen (18) shall be allowed to work between ten
o'clock in the evening and six o'clock in the morning of the following day. 102

101
Children below fifteen (15) years of age shall not be employed except:
(1) When a child works directly under the sole responsibility of his/her parents or legal guardian and
where only members of his/her family are employed: Provided, however, That his/her employment
neither endangers his/her life, safety, health, and morals, nor impairs his/her normal development:
Provided, further, That the parent or legal guardian shall provide the said child with the prescribed
primary and/or secondary education; or
(2) Where a child's employment or participation in public entertainment or information through cinema,
theater, radio, television or other forms of media is essential: Provided, That the employment contract is
concluded by the child's parents or legal guardian, with the express agreement of the child concerned, if
possible, and the approval of the Department of Labor and Employment: Provided, further, That the
following requirements in all instances are strictly complied with:
(a) The employer shall ensure the protection, health, safety, morals and normal development of the
child;
(b) The employer shall institute measures to prevent the child's exploitation or discrimination taking into
account the system and level of remuneration, and the duration and arrangement of working time; and
(c) The employer shall formulate and implement, subject to the approval and supervision of competent
authorities, a continuing program for training and skills acquisition of the child.
In the above exceptional cases where any such child may be employed, the employer shall first secure,
before engaging such child, a work permit from the Department of Labor and Employment which shall
ensure observance of the above requirements. (Section 12, R.A. No. 7610, as amended by R. A. No. 9231,
December 19, 2003).
102
Sec. 12-A, R.A. No. 7610, as amended by R. A. No. 9231, December 19, 2003.

40
 4. No child shall be employed as a model in any advertisement directly or indirectly
promoting alcoholic beverages, intoxicating drinks, tobacco and its byproducts, gambling or
any form of violence or pornography.103

10. Househelpers104

A househelper is synonymous to domestic servant

a. Any person, male or female;

b. Who renders services in and about the employers home and;
c. Services are usually necessary or desirable for the maintenance and
enjoyment thereof, and
d. Ministers exclusively to the personal comfort and enjoyment of
employers’ family.105

Househelpers shall be paid the following minimum wage rates;

(1) Eight hundred pesos (P800.00) a month for househelpers in Manila, Quezon,
Pasay and Caloocan cities and municipalities of Makati, San Juan, Mandaluyong, Muntinlupa,
Navotas, Malabon, Parañaque, Las Piñas, Pasig, Marikina, Valenzuela, Taguig and Pateros in
Metro Manila and in highly urbanized cities;

(2) Six hundred fifty pesos (P650.00) a month for those in other chartered cities and
first class municipalities; and

(3) Five hundred fifty pesos (P550.00) a month for those in other municipalities;

Provided, that the employees shall review the employment contracts of their
househelpers every three (3) years with the end in view of improving the terms and
conditions thereof.

Provided, further, that those househelpers who are receiving at least One thousand
pesos (P1,000.00) shall be covered by the Social Security System (SSS) and be entitled to all
the benefits provided thereunder.106

103
Sec. 14, R.A. No. 7610, as amended by R. A. No. 9231, December 19, 2003.
104
Labor Code as amended by R.A. No. 7655, an Act Increasing the Minimum Wage of Househelpers
105
The children and relatives of a househelper who live under the employers’ roof and who share
the accommodations provided for the househelper by the employer shall not be deemed as
househelpers if/they are not otherwise engaged as such and are not required to perform any
substantial household work. (Sec 3, Rule XII, Book III, IRR)
The definition of a househelper cannot be interpreted to include househelp or laundry women
working in staffhouses of a company. (APEX Mining CO., Inc., v. NLRC, G.R. No. 94951, April 22, 1991)
106
R.A. 7655, Sec. 1, amending Art. 143 of the Labor Code

41
 Household Service under the Civil Code:

Household service shall always be reasonably compensated. Any stipulation

that household service is without compensation shall be void. Such compensation
shall be in addition to the house helper's lodging, food, and medical attendance. 107

The head of the family shall furnish, free of charge, to the house helper,
suitable and sanitary quarters as well as adequate food and medical attendance.108

If the house helper is under the age of eighteen years, the head of the family
shall give an opportunity to the house helper for at least elementary education. The
cost of such education shall be a part of the house helper's compensation, unless
there is a stipulation to the contrary.109

No contract for household service shall last for more than two years.
However, such contract may be renewed from year to year.110

The house helper's clothes shall be subject to stipulation. However, any

contract for household service shall be void if thereby the house helper cannot
afford to acquire suitable clothing.111

The head of the family shall treat the house helper in a just and humane
manner. In no case shall physical violence be used upon the house helper.112

House helpers shall not be required to work more than ten hours a day. Every
house helper shall be allowed four days' vacation each month, with pay.113

In case of death of the house helper, the head of the family shall bear the
funeral expenses if the house helper has no relatives in the place where the head of
the family lives, with sufficient means therefor.114

If the period for household service is fixed neither the head of the family nor
the house helper may terminate the contract before the expiration of the term,
except for a just cause. If the house helper is unjustly dismissed, he shall be paid the
compensation already earned plus that for fifteen days by way of indemnity. If the
house helper leaves without justifiable reason, he shall forfeit any salary due him and
unpaid, for not exceeding fifteen days.115

107
Art. 1689
108
Art. 1690
109
Art. 1691
110
Art. 1692
111
Art. 1693
112
Art. 1694
113
Art. 1695
114
Art. 1696
115
Art. 1697

42
 If the duration of the household service is not determined either by stipulation
or by the nature of the service, the head of the family or the house helper may give
notice to put an end to the service relation, according to the following rules:

(1) If the compensation is paid by the day, notice may be given on any day that
the service shall end at the close of the following day;

(2) If the compensation is paid by the week, notice may be given, at the latest
on the first business day of the week, that the service shall be terminated at the end
of the seventh day from the beginning of the week;

(3) If the compensation is paid by the month, notice may be given, at the latest,
on the fifth day of the month, that the service shall cease at the end of the month.116

Upon the extinguishment of the service relation, the house helper may demand
from the head of the family a written statement on the nature and duration of the
service and the efficiency and conduct of the house helper.117

11. Employment of Homeworkers

Homeworkers refer to workers who perform in or about their homes any processing
of goods or materials in whole or in part which have been furnished directly or indirectly by
an employer or contractor, and thereafter to be returned to the latter. The term does not
include those situated within the premises or compound of an employer or contractor,
where work performed therein is under the active or personal supervision by or for the
latter.

The employer is required to pay the homeworker or the contractor or sub-contractor

for the work performed immediately upon receipt of the finished goods or articles. When
payment is made to a contractor or sub-contractor, the homeworker shall be paid within one
(1) week after the contractor or subcontractor has collected the goods or articles from the
homeworker.118

Whenever an employer contracts with a contractor in this regard, the employer

should provide in such contract that the employees or homeworkers of the contractor and
the latter’s subcontractor shall be paid in accordance with these regulations. In the event that
such contractor or subcontractor fails to pay the wages or earnings of his employees or
homeworkers, such employee shall be jointly and severally liable with the contractor or

116
Art. 1698
117
Art. 1699
Domestic or household service” means service in the employer’s home which is usually necessary or
desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort
and convenience of the members of the employer’s household, including services of family drivers (Art.
141, 2nd par.)
118
Rule XIII, Book III, Secs. 3 & 4, OR

43
subcontractor to the workers of the latter, to the extent that the work is performed under
such contract, in the same manner as if the employees or homeworkers were directly
engaged by the employer.119

No deductions shall me made from the homeworker’s earnings for the value of
materials lost, destroyed, soiled or otherwise damaged unless the following conditions are
met:

a) the homeworker concerned is clearly shown to be responsible for the loss or

damage:

b) the employee is given reasonable opportunity to show cause why deductions

should not be made:

c) the amount of such deductions is fair and reasonable, and shall not exceed the
actual loss or damage; and

d) the deduction is made at such rate that the amount deducted does not exceed 20
percent of the homeworker’s earnings in a week.120

12. Apprentices and Learners

Apprentice - a worker who is covered by a written apprenticeship agreement with an

employer.

Learner - a person hired as a trainee in industrial occupations which are non-

apprenticeable and which may be learned through practical training on the job for a period
not exceeding three (3) months, whether or not such practical training is supplemented by
theoretical instructions.

Learnership Apprenticeship
Nature

Training on the job in semi-skilled and other
industrial occupation or trades which are
non‐apprenticeable and which may be
learned thru practical training on the job in a
relatively short period of time.
Training in trades which are apprenticeable,
that is, practical training on the job
supplemented by related theoretical
instruction for more than 3 months.

Duration of training

With commitment to employ the learner as a

regular employer if he desires upon No commitment to hire
completion of learnership.

119
ibid, Sec. 8, OR.
120
Rule XIII, Sec. 5, OR. This is to ensure the homeworker’s right to due process.

44
 In case of pretermination of contract

Considered a regular employee if pre- Worker not considered as regular employee.

termination occurs after 2 months of training
and the dismissal is without fault of the
learner.

Coverage

Semi‐skilled/Industrial occupations Highly technical industries and only in

industrial occupation

There is a list of learnable trades by TESDA No list

Written agreement

Require Learnership Agreement Requires Apprenticeship Agreement

M. Persons with disability121

1. Definition

One whose earning capacity is impaired by age, physical or mental deficiency; or

injury.

2. Rights of persons with disability

1. Equal opportunity for employment

2. Sheltered employment122
3. Apprenticeship
4. Vocational rehabilitation123
5. Vocational guidance and counseling.

121
R.A. No. 7277, as amended by R.A. No. 9442
122
The gov’t shall endeavor to provide them work if suitable employment for disabled persons cannot
be found through open employment
123
means to develop the skills and potentials of disabled workers and enable them to compete in the
labor market

45
 3. Prohibition on discrimination against persons with disability

No disable person shall be denied access to opportunities for suitable employ

ment. A qualified disabled employee shall be subject to the same terms and conditions
of employment and the same compensation, privileges, benefits, fringe benefits,
incentives or allowances as a qualified able bodied person. Five percent (5%) of all
casual emergency and contractual positions in the Departments of Social Welfare and
Development; Health; Education, Culture and Sports; and other government agencies,
office or corporations engaged in social development shall be reserved for disabled
persons.124

4. Incentives for employers

Entitled to an additional deduction, from their gross income, equivalent to twenty-

five percent (25%) of the total amount paid as salaries and wages to disabled persons:
Provided, however, That such entities present proof as certified by the Department of Labor
and Employment that disabled persons are under their employ: Provided, further, That the
disabled employee is accredited with the Department of Labor and Employment and the
Department of Health as to his disability, skills and qualifications.

Private entities that improve or modify their physical facilities in order to provide
reasonable accommodation for disabled persons shall also be entitled to an additional
deduction from their net taxable income, equivalent to fifty percent (50%) of the direct costs
of the improvements or modifications. This does not apply to improvements or
modifications of facilities required under Batas Pambansa Bilang 344.125

124
The Magna Carta strictly prohibits discrimination against a qualified disabled person, even as the law
gives incentives to employers of disabled persons.
125
Sec. 8, R.A. 7277

46
D. TERMINATION OF EMPLOYMENT

1. Employer-Employee Relationship

a. Four-fold Test

a. Selection and engagement of employee;

b. Payment of wages;
c. Power of dismissal; and
d. Power of control126

b. Kinds of Employment

1. Probationary Employment

Employment where the employee, upon his engagement:

1. Is made to undergo a trial period

2. During which the employer determines his fitness to qualify for regular
employment,

3. Based on reasonable standards made known to the employee at the time of

engagement.127

General Rule Probationary employment shall not exceed six months from the date
the employee started working.

Exceptions 1. when it is covered by an apprenticeship agreement stipulating a

longer period; or

2. when the parties to an employment contract agree otherwise, such

as when the same is established by company policy or when the same
is required by the nature of the work to be performed by the
employee

126
the most important test
127
Sec 6, Rule I, Book VI, IRR
The services of an employee who has been engaged on probationary basis may be terminated
only for just cause, when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.

47
 2. Regular employment128

Where:

i. the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer.

ii. the employee has rendered at least one (1) year of service, whether such service is
continuous or broken, with respect to the activity in which he is employed and his
employment shall continue while such activity exists.

iii. the employee is allowed to work after a probationary period.

(4) Project employment

Where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of
the employee.

(5) Seasonal employment

Where the work or service to be performed by the employee is seasonal in nature

and the employment is for the duration of the season.

(4) Casual employment

Where an employee is engaged to perform a job, work or service which is merely

incidental to the business of the employer, and such job, work or service is for a definite
period made known to the employee at the time of engagement.

(5) Fixed term employment

Not limited to those by nature, seasonal or for specific projects with pre-determined
dates of completion provided under the Labor Code. They also include contracts to which
the parties by free choice, have assigned a specific date of termination

128
Regularization is not a management prerogative; it is the nature of employment that determines it.
It is a mandate of the law. (PAL v. Pascua, G.R. No. 143258, Aug. 15, 2003)
Regular employment does not mean permanent employment. A probationary employee becomes
a regular employee after 6 months. A regular employee may only be terminated for just/authorized
causes.
The practice of entering into employment contracts which would prevent the workers from
becoming regular should be struck down as contrary to public policy and morals. (Universal Robina
Corp. v. Catapang, G.R. No. 164736, Oct. 14, 2005)

48
 c. Job contracting

It refers to an arrangement whereby a principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of whether such job, work or service is
to be performed or completed within or outside the premises of the principal.

a. Article 106 to Article 109 of the Labor Code

Whenever an employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the
event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly employed
by him. The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the employer
for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such
person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent
of the employer who shall be responsible to the workers in the same manner and extent as if
the latter were directly employed by him. 129

The provisions of the immediately preceding article shall likewise apply to any
person, partnership, association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or project.130

An employer or indirect employer may require the contractor or subcontractor to

furnish a bond equal to the cost of labor under contract, on condition that the bond will
answer for the wages due the employees should the contractor or subcontractor, as the case
may be, fail to pay the same. 131

The provisions of existing laws to the contrary notwithstanding, every employer or

indirect employer shall be held responsible with his contractor or subcontractor for any

129
Art. 106
130
Art. 107
131
Art. 108

49
violation of any provision of this Code. For purposes of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers.132

b. Department Order No. 18-A133

c. Department Circular No. 01-12134

d. Effects of Labor-Only Contracting

i. The subcontractor will be treated as the agent or intermediary of the principal.

Since the act of an agent is the act of the principal, representations made by the
subcontractor to the employees will bind the principal.

ii. The principal will become the employer as if it directly employed the workers
engaged to undertake the subcontracted job or service. It will be responsible to them for all
their entitlements and benefits under the labor laws.

iii. The principal and the subcontractor will be solidarily treated as the employer.

iv. The employees will become employees of the principal.135

If the labor-only contracting activity is undertaken by a legitimate labor organization,

a petition for cancellation of union registration may be filed against it.136

e. Trilateral relationship in job contracting

The relationship in a contracting or subcontracting arrangement where there is a

contract for a specific job, work or service between the principal and the contractor, and a
contract of employment between the contractor and its workers. There are three (3)
parties involved in these arrangements: the principal who decides to farm out a job, work
or service to a contractor; the contractor who has the capacity to independently undertake
the performance of the job, work or service; and the contractual workers engaged by the
contractor to accomplish the job, work or service.137

132
Art. 109
133
See Reference
134
Ibid.
135
No. 13, DOLE Primer on Contracting and Subcontracting, Effects of Department Order No. 3, Series of
2001.
136
Ibid.
137
Sec. 3 (m), Department Order No. 18-A

50
2. Dismissal from Employment

(1) Just Causes

(a) Serious misconduct138 or willful disobedience139

(b) Gross140 and habitual neglect141 of duties
(c) Fraud142 or willful breach of trust143
(d) Abandonment of employment144
(e) Termination of employment pursuant to a Union Security
Clause145

138
Transgression of some established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error in judgment.
Grave and aggravated character and not merely trivial or unimportant; Must be in connection with
the work of the employee.
139
Elements:
Assailed conduct must have been willful or intentional, willfulness characterized by a wrongful,
perverse mental attitude
It must be established that the said orders, regulations or instructions are
Reasonable and lawful
Sufficiently known to the employee
In connection with his duties
140
Implies a want or absence of or failure to exercise slight care of diligence or the
entire absence of care. It evinces thoughtless disregard of consequences
without exerting any effort to avoid them. However, such neglect must not only be
gross but habitual in character (Judy Phils. v. NLRC, G.R. No. 111934, April 29, 1998)
141
Implies repeated failure to perform one’s duties over a period of time, depending
upon the circumstance
142
Commission of fraud by an employee against the employer will necessarily result in the latter's loss of
trust and confidence in the former. Proof of loss is not required under this ground.
143
loss of trust and confidence
In order to constitute a just cause for dismissal, the act complained of should be “work-related” and
must show that the employee concerned is unfit to continue to work for the employer.
Requisites
1. The loss of confidence must not be simulated;
2. It should not be used as a subterfuge for causes which are illegal, improper or unjustified;
3. It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary;
4. It must be genuine, not a mere afterthought, to justify earlier action taken in bad faith; and
5. The employee involved holds a position of trust and confidence.
144
The failure to report for work or absence without valid or justifiable reason and a clear intention to
sever the employer-employee relationship
145
In the case of Alabang Country Club, Inc. vs. NLRC, [G.R. No. 170287, Feb. 14, 2008], the Supreme Court
declared that in terminating the employment of an employee by enforcing the union security clause, the
employer needs only to determine and prove that:
(1) the union security clause is applicable;
(2) the union is requesting for the enforcement of the union security provision in the CBA; and
(3) there is sufficient evidence to support the union’s decision to expel the employee from the union.
The foregoing requisites constitute just cause for terminating an employee based on the CBA’s union
security provision.
Employer should still afford due process to the expelled unionists. Although the Supreme Court has
ruled that union security clauses embodied in the CBA may be validly enforced and that dismissals

51
 (f) Totality of infractions doctrine146

(2) Authorized Causes

(a) Redundancy,147 Retrenchment and Closure

Redundancy Retrenchment Closure

Exists where the services of
an employee are in excess of
what would reasonably be
demanded by the actual
requirements of the
enterprise.
A position is redundant
when it is superfluous.
An employer has no legal
obligation to keep on the
payroll employees more than
the number needed for the
operation of the business.
Cutting of expenses and The reversal of fortune
includes the reduction of of the employer whereby
personnel. It is a there is a complete cessation
management prerogative, a of business operations
means to protect and to prevent further financial
preserve the employer’s drain upon an employer
viability and ensure his who cannot pay anymore
survival. To be an his employees since
authorized cause it must be business has already stopped.
affected in good faith and
for the retrenchment,
which is after all a drastic
recourse with serious
consequences for the
livelihood of the
employee’s or otherwise
laid‐off.

(b) Disease or illness148

i. The employee suffers from a disease;

ii. His continued employment is prohibited by law or prejudicial to his health

or to the health of his co‐employees.149

pursuant thereto may likewise be valid, this does not erode the fundamental requirement of due process.
The reason behind the enforcement of union security clauses which is the sanctity and inviolability of
contracts, cannot override one’s right to due process.
146
Cognate offenses rule
Dismissal due to repetition of related offenses, even if already punished with less punitive sanctions.
It is the totality, not the compartmentalization of company infractions that the
employee has committed, which justifies the penalty of dismissal (MERALCO v. NLRC, G.R. No. 114129,
Oct. 24, 1996).
147
A position is redundant when it is superfluous.
An employer has no legal obligation to keep on the payroll employees more than the number needed
for the operation of the business.
148
Burden of proof rests on the employer.
Company physician is not a “competent public health authority.”
Medical certificate issued by company doctor is not sufficient
149
Sec.8, Rule I, Book VI, IRR

52
 iii. With a certification by competent public health authority that the disease is
incurable within 6 months despite due medication and treatment.150

3. Due Process

a) Twin-notice requirement

A written notice should be served to the employee specifying the ground/s

for termination and giving the said employee reasonable opportunity to explain.151

A written notice of termination - If termination is the decision of the

employer, it should be served on the employerindicating that upon due considerations of all
the circumstance, grounds have been established to justify his termination, at least one
month prior to his termination.152

b) Hearing; meaning of opportunity to be heard

A formal hearing or conference becomes mandatory only when requested by the

employee in writing or substantial evidentiary disputes exist or a company rule or practice
requires it, or when similar circumstances justify it

"Ample opportunity to be heard" means any meaningful opportunity 153 given to the
employee to answer the charges against him and submit evidence in support of his defense,
whether in a hearing, conference or some other fair, just and reasonable way.

The "ample opportunity to be heard" standard in the Labor Code prevails over the
"hearing or conference" requirement in the implementing rules and regulations.

c. Reliefs for illegal dismissal

(1) Reinstatement 154

a. Pending appeal

The decision of the Labor Arbiter reinstating a dismissed or separated employee,

insofar as the reinstatement aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the option of the

150
Solis v. NLRC, G.R. No. 116175, Oct. 28,1996
151
This first written notice must apprise the employee that his termination is being considered due
to the acts stated in the notice. (Phil. Pizza Inc. v. Bungabong, G.R. No. 154315, May 9, 2005)
152
Single notice of termination does not comply with the requirements of the law. (Aldeguer & Co.,
Inc. vs. Honeyline Tomboc)
G.R. No. 147633, July 28, 2008)
153
verbal or written
154
restoration to a state from which one has been removed

53
employer, merely reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement.155

b. Separation pay156 in lieu of Reinstatement

May be viewed in 4 ways:

1. In lieu of reinstatement in illegal dismissal cases, where Ee is ordered reinstated

but reinstatement is not feasible.

2. As Er’s statutory obligation in cases of legal termination due to authorized

causes under Art. 283 and 284157 of the LC.

3. As financial assistance, as an act of social justice and even in case of legal

dismissal under Art. 282158 of the LC.

4. As employment benefit granted in CBA or company policy.159

155
Art. 223, 3rd par., LC
156
Reinstatement can no longer be effected in view of the long passage of time or because of the realities
of the situation.
It is the amount that an employee receives at the time of his severance from the service and is
designed to provide the employee with the wherewithal during the period that he is looking for another
employment.
Separation pay is payable to an employee whose services are validly terminated for authorized causes
(Article 283 and 284).
An employee dismissed for a just cause is not entitled to separation pay (Article 282).
Exception:
Where the employee is dismissed for causes other than serious misconduct or those reflecting on his
moral character, separation pay may be allowed as a measure of social justice
157
see Reference
158
Ibid.
159
Poquiz, 2005

54
 (2) Backwages160

a. Computation

Following several decisions of the Supreme Court, the following benefits, in addition
to the basic salary, should be taken into account in the computation of backwages, if
applicable:

1. Fringe benefits or their monetary equivalent.161

2. Increases in compensation and other benefits, including 13th month pay162
3. Transportation and emergency allowances163
4. Holiday pay, vacation and sick leaves and service incentive leaves164
5. Just share in the service charges165
6. Gasoline, car and representation allowances166
7. Any other allowances and benefits or their monetary equivalent. 167

The computation of said benefits should be up to the date of reinstatement as

provided under Article 279168 of the Labor Code.169

b. Limited backwages

An illegally dismissed employee is entitled to reinstatement to his previous position

without loss of seniority rights and backwages for a period of three (3) years without
qualification and deduction.170 If reinstatement is no longer feasible, the employer may be
ordered to pay in addition to backwages, separation pay as provided by law."

There is a resultant strained relations or irretrievable estrangements between the employer and the
employee where the employee concerned occupies a position of trust and confidence and it is likely that
if reinstated an atmosphere of antipathy and antagonism may be generated as to adversely affect the
efficiency and productivity of the employee.
160
A form of relief that restores the income of the employee that was lost by reason of the unlawful
dismissal.
Full Backwages have to be paid by an employer as part of the price or penalty he has to pay for illegally
dismissing his employee. Other benefits must be paid in addition to backwages. The computation should
be based on the wage rate level at the time of the illegal dismissal and not in accordance with the latest,
current wage level of the employee’s position.
161
Acesite Corporation vs. NLRC, G. R. No. 152308, Jan. 26, 200
162
Traders House, Inc. vs. NLRC, G. R. No. 120677, Dec. 21, 1998, 300 SCRA 360
163
Santos vs. NLRC, G. R. No. 76721, Sept. 21, 1987; Soriano vs. NLRC, G. R. No. L-75510, Oct. 27, 1987..
164
St. Louise College of Tuguegarao vs. NLRC, G. R. No. 74214, Aug. 31, 1989; On service incentive leave,
see Fernandez vs. NLRC, G. R. No. 105892, Jan. 28, 1998, 285 SCRA 149..
165
Maranaw Hotels & Resort Corporation vs. NLRC, G. R. No. 123880, Feb. 23, 1999).
166
Consolidated Rural Bank [Cagayan Valley], Inc. vs. NLRC, G. R. No. 123810, Jan. 20, 1999, 301 SCRA
223.
167
Blue DairyCorporation vs. NLRC, G. R. No. 129843, Sept. 14, 1999.
168
See Reference
169
Fernandez vs. NLRC, supra.
170
Mercury Drug Rule

55
 (d) Preventive Suspension171

During pendency of the investigation, if the worker’s continued employment poses a

serious and imminent threat to life and property of employer, or of his co-employees.172
Can be extended provided the employer pays the suspended employee his wages and
other benefits.

(e) Constructive dismissal

An involuntary resignation resorted to when continued employment becomes

impossible, unreasonable, or unlikely; when there is a demotion in rank or a diminution in
pay; or when a clear discrimination, insensibility or disclaim by an employer becomes
unbearable to an employee.173

171
Rule pending appeal:
Preventive suspension is punitive already; hence, if exonerated, the employee must be reinstated and
compensated for the period of his suspension
Suspension beyond 30 days ripens to dismissal
172
Max period: 30 days
173
Leonardo v. NLRC, G.R. No.125303, June 16, 2000
An employee is deemed constructively dismissed where his status is changed from regular to casual.

56
E. MANAGEMENT PREROGATIVE174

1. Discipline175

The employer’s right to conduct the affairs of his business, according to its own
discretion and judgment, includes the prerogative to instill discipline in its employees and to
impose penalties, including dismissal, upon erring employees. This is a management
prerogative where the free will of management to conduct its own affairs to achieve its
purpose takes form. The only criterion to guide the exercise of its management prerogative
is that the policies, rules and regulations on work-related activities of the employees must
always be fair and reasonable and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction.176

Instilling discipline among its employees is a basic management right and

prerogative. Management may lawfully impose reasonable penalties such as dismissal upon
an employee who transgresses the company rules and regulations.177

2. Transfer of employees178

The Supreme Court has recognized and upheld the prerogative of management to
transfer an employee from one office to another within the business establishment, provided
there is no demotion in rank or diminution of salary, benefits, and other privileges; and the
action is not motivated by discrimination, made in bad faith, or effected as a form of

174
Limitations in its exercise
i. Management's prerogatives must be without abuse of discretion (San Miguel Brewery Sales Force
Union (PTGWO) vs. Ople (170 SCRA 25 [1989])
ii. It must be duly established that the prerogative being invoked is clearly a managerial one.
iii. It is circumscribed by limitations found in law, a collective bargaining agreement, or the general
principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]).
So long as a company's management prerogatives are exercised in good faith for the advancement of
the employer's interest and not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold them (San Miguel Brewery Sales
Force Union (PTGWO) vs. Ople case)
175
subject to reasonable regulation by the State in the exercise of its police power. (Associated Labor
Unions-TUCP vs. NLRC, G. R. No. 120450, Feb. 10, 1999; PLDT vs. NLRC, 276 SCRA 1 [1997]).
176
St. Michael’s Institute vs. Santos, G. R. No. 145280, Dec. 4, 2001; Consolidated Food Corporation vs.
NRLC, 315 SCRA 129, 139 [1999]
177
Deles, Jr. vs. NLRC, G. R. No. 121348, March 9, 2000.
178
Jurisprudential guidelines:
(a) a transfer is a movement from one position to another of equivalent rank, level or salary without break
in the service or a lateral movement from one position to another of equivalent rank or salary; 178
(b) the employer has the inherent right to transfer or reassign an employee for legitimate business
purposes;
(c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is effected as a
178
form of punishment or is a demotion without sufficient cause;
(d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial
to the employee

57
punishment or demotion without sufficient cause. This is a privilege inherent in the
employer’s right to control and manage its enterprise effectively.179

3. Productivity standard

The practice of a company in laying off workers because they failed to make the
work quota has been recognized in this jurisdiction.180

Failure to observe prescribed standards of work, or to fulfill reasonable work

assignments due to inefficiency may constitute just cause for dismissal. Such inefficiency is
understood to mean failure to attain work goals or work quotas, either by failing to complete
the same within the allotted reasonable period, or by producing unsatisfactory results. This
management prerogative of requiring standards may be availed of so long as they are
exercised in good faith for the advancement of the employer's interest.181

4. Grant of Bonus

By definition, a "bonus" is a gratuity or act of liberality of the giver which the

recipient has no right to demand as a matter of right182. It is something given in addition to
what is ordinarily received by or strictly due the recipient. The granting of a bonus is
basically a management prerogative which cannot be forced upon the employer who may
not be obliged to assume the onerous burden of granting bonuses or other benefits aside
from the employee's basic salaries or wages,183 especially so if it is incapable of doing so.

5. Change of working hours

Well-settled is the rule that management retains the prerogative, whenever exigencies
of the service so require, to change the working hours of its employees.184

The employer has the prerogative to control all aspects of employment in his
business organization such as hiring, work assignments, working methods, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers.185

179
Mendoza vs. Rural Bank of Lucban, G. R. No. 155421, July 7, 2004; Benguet Electric Cooperative vs.
Fianza, G. R. No. 158606, March 9, 2004.
180
Philippine American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639.
181
Buiser v. Leogardo, Jr., 131 SCRA 151, 158 (1984).
182
Traders Royal Bank v. NLRC, 189 SCRA 274 [1990] citing Aragon v. Cebu Portland Cement Co., 61 O.G.
4567.
183
Kamaya Point Hotel v. NLRC, 177 SCRA 160 (1989).
184
Sime Darby Pilipinas, Inc. vs. NLRC, G.R. No. 119205, 15 April 1998, 289 SCRA 86
185
Consolidated Food Corporation, et al. vs. NLRC, et al., G. R. No. 118647, Sept. 23, 1999.

58
 6. Rules on Marriage between employees of competitor-employers

The rule is that unless the employer can prove that the reasonable demands of the
business require a distinction based on marital status and there is no better available or
acceptable policy which would better accomplish the business purpose, an employer may not
discriminate against an employee based on the identity of the employee’s spouse.186 This is
known as the bona fide occupational qualification exception.

Since the finding of a bona fide occupational qualification justifies an employer’s no-
spouse rule, the exception is interpreted strictly and narrowly by these state courts. There
must be a compelling business necessity for which no alternative exists other than the
discriminatory practice.187 To justify a bona fide occupational qualification, the employer
must prove two factors: (1) that the employment qualification is reasonably related to the
essential operation of the job involved; and, (2) that there is a factual basis for believing that
all or substantially all persons meeting the qualification would be unable to properly perform
the duties of the job.188

The concept of a bona fide occupational qualification is not foreign in our

jurisdiction. The Supreme Court has employed the standard of reasonableness of the
company policy which is parallel to the bona fide occupational qualification requirement. In
the case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome
Philippines, Inc.,189 it passed on the validity of the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any competitor company. It held that
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information from competitors. It considered the
prohibition against personal or marital relationships with employees of competitor
companies upon Glaxo’s employees reasonable under the circumstances because
relationships of that nature might compromise the interests of Glaxo. In laying down the
assailed company policy, it recognized that Glaxo only aims to protect its interests against
the possibility that a competitor company will gain access to its secrets and procedures

7. Post-employment ban

Whether such an agreement would be held valid and binding will depend on its
reasonableness in relation to the parties concerned, as well as to its public policy.

186
see Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783, 73 Fair Empl.Prac.Cas. (BNA) 579, 69
187
A. Giattina, Challenging No-Spouse Employment Policies As Marital Status Discrimination: A Balancing
Approach, 33 Wayne L. Rev. 1111 (Spring, 1987).
188
Richard G. Flood and Kelly A. Cahill, The River Bend Decision and How It Affects Municipalities’
Personnel Rule and Regulations, Illinois Municipal Review, June 1993, p. 7
189
G.R. No. 162994, September 17, 2004

59
F. SOCIAL AND WELFARE LEGISLATION

1. SSS Law190

a. Coverage

i. Compulsory upon all employees not over sixty (60) years of age and their
employers. In the case of domestic helpers, their monthly income shall not be less than One
thousand pesos (P1,000.00) a month.191

ii. Spouses who devote full time to managing the household and family affairs, unless
they are also engaged in other vocation or employment which is subject to mandatory
coverage, may be covered by the SSS on a voluntary basis.

iii. Filipinos recruited by foreign-based employers for employment abroad may be

covered by the SSS on voluntary basis.

b. Exclusions from coverage192

i. Agricultural labor when performed by a share or leasehold tenant or worker who is

not paid any regular daily wage or base pay and who does not work for an uninterrupted
period of at least six months in a year;193

ii. Domestic service in a private home;

iii. Employment purely casual and not for the purposes of occupation or business of
the employer;

iv. Service performed by an individual in the employ of his son, daughter, or spouse,
and service performed by a child under the age of twenty-one years in the employ of his
parents;

v. Service performed on or in connection with an alien vessel by an employee if he is

employed when such vessel is outside the Philippines;

190
R.A. 8282
191
Also compulsory upon such self-employed persons as may be determined by the Commission under
such rules and regulations as it may prescribe, including but not limited to the following:
1.All/self-employed/professionals;
2. Partners and single proprietors of businesses;
3.Actors and actresses, directors, scriptwriters and news correspondents who do not fall within the
definition of the term "employee"
4.Professional/athletes,/coaches,/trainers/and/jockeys;/and
5.Individual farmers and fishermen.
Unless otherwise specified in the law, all provisions of the SSS LAW applicable to covered employees
shall also be
192
Sec. 8(j) of Social Security Act (As amended by Sec. 5, P.D. No. 735, S-1975).
193
As amended by Sec. 4, R.A. 2658

60
 vi. Service performed in the employ of the Philippine Government or an
instrumentality or agency thereof;

vii. Service performed in the employ of a foreign government or international

organization, or their wholly-owned instrumentality: Provided, however, That his exemption
notwithstanding, any foreign government, international organization, or their wholly-owned
instrumentality employing workers in the Philippines or employing Filipinos outside of the
Philippines may enter into an agreement with the Philippine Government for the inclusion
of such employees in the SSS except those already covered by their respective civil service
retirement systems: Provided, further, That the terms of such agreement shall conform with
the provisions of this Act on coverage and amount of payment of contributions and
benefits: Provided, finally, That the provisions of this Act shall be supplementary to any
such agreement194.

viii. Such other services performed by temporary employees who may be excluded by
regulation of the Commission. Employees of bona fide independent contractors shall not be
deemed employees of the employer engaging the services of said contractors195.

c. Benefits

i. Monthly pension;
ii. Dependents’pension ;
iii. Retirement benefits;
iv. Death benefits;
v. Permanent disability benefits;
vi. Funeral benefit;
vii. Sickness benefit;
viii. Maternity leave benefit.

d. Beneficiaries

i. The dependent spouse until he or she remarries

ii. The dependent legitimate, legitimated or legallyadopted, and illegitimate children,

who shall be the primary beneficiaries of the member.

iii. In their absence, the dependent parents who shall be the secondary beneficiaries
of the member.

iv. In the absence of all the foregoing, any other person designated by the member as
his/her secondary beneficiary.

194
As amended by Sec. 1, R.A. 3839; Sec. 3, R.A. 4857; and Sec. 5, P.D. No. 735, S-1975
195
As amended by Sec. 5, P.D. No. 735, S-1975

61
 2. GSIS Law196

a. Coverage

Compulsory for all employees receiving compensation who have not reached the
compulsory retirement age, irrespective of employment status.

b. Exclusions from coverage

i. Members of the Armed Forces of the Philippines and the Philippine National
Police, subject to the condition that they must settle first their financial obligation with the
GSIS, and

ii. Contractuals who have no employer and employee relationship with the agencies
they serve.

c. Benefits

i. Monthly Pension;
ii. Separation Benefits;
iii. Unemployment or Involuntary Separation Benefits;
iv.Retirement_Benefits;
v. Permanent Disability Benefits;
vi. Temporary Total Disability Benefits;
vii. Survivorship Benefits;
viii.Funeral_Benefits;
ix. Compulsory Life Insurance Benefit;
x. Optional Insurance and/or pre-need coverage embracing life, health,
hospitalization, education, memorial plans, and such other plans as may be designed by the
GSIS, for the member and/or his dependents.
d. Beneficiaries

i. Primary beneficiaries- The legal dependent spouse until he/she remarries and the
dependent children;

ii. Secondary beneficiaries- The dependent parents and, subject to the restrictions on
dependent children, the legitimate descendants

196
R.A. 8291

62
 3. Limited Portability Law197

Under this law, an employee who has worked in both the private and public sectors
and has been covered by both the Government Service Insurance System (GSIS) and the
Social Security System (SSS) shall have his creditable services or contributions in both
Systems credited to his service or contribution record in each of the Systems, which shall be
summed up for purposes of old age, disability, survivorship and other benefits in case the
covered member does not qualify for such benefits in either or both Systems without the
totalization.

4. Employee’s Compensation198 – Coverage and when compensable

Coverage in the State Insurance Fund shall be compulsory upon all employers and
their employees not over sixty years of age: Provided, That an employee who is over sixty
years of age and paying contributions to qualify for the retirement or life insurance benefit
administered by the System shall be subject to compulsory coverage: Provided, further, That
in case of an employee who is both covered by the SSS and GSIS, only his employment
under the GSIS shall be considered for purposes of his coverage.

The State Insurance Fund shall be liable for compensation to the employee or his
dependents, except when the disability or death was occasioned by the employee's
intoxication, willful intention to injure or kill himself or another, notorious negligence, or
otherwise provided under this Title.

197
R.A. 7699
198
P.D. No. 626

63
G. LABOR RELATIONS LAW

1. Right to Self-organization199

The right to join, assist or form labor organizations for collective bargaining and to
engage in lawful concerted activities for the same purpose or for their mutual aid and
protection.

Any employee200, whether employed for a definite period or not, shall beginning on
the first day of his/her service, be eligible for membership in any labor organization.201

a. Who may unionize for purposes of collective bargaining

All persons employed in:

Commercial
Industrial ) enterprises
Agricultural ) whether operating for profit or not
Charitable
Religious ) Institutions
Educational

Likewise:

Ambulant workers
Intermittent workers
Rural workers
Workers with no definite employers
Itinerant workers
Self-employed

199
Employees of government corporations established under the Corporation Code (without original
charters) shall have the right to organize and to bargain collectively with their respective employers. All
other employees in the civil service shall have the right to form associations for purposes not contrary to
law.
General rule: All aliens, natural or juridical, as well as foreign organizations are strictly prohibited from
engaging directly or indirectly in all forms of trade union activities without prejudice to normal contacts
between Philippine labor unions and recognized international labor centers.
Exception: Alien employees with valid working permits issued by the DOLE may exercise the right to
self-organization and join or assist labor organizations for purposes of collective bargaining, if they are
nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.
200
Three categories of employees:
a. Managerial;
b. Supervisory; and
c. Rank-and-file.
201
ibid.; See also Art. 277; No. 10, Basic Amendments under R. A. 6715, prepared by Members of the
Senate-House Conference Committee of Congress.

64
 Specific Coverage:

Supervisory employees202
Terminated employees who are contesting their termination
Aliens with valid work permit
Government employees
New employees
Iglesia ni Kristo members
Security guards

(1) Who cannot form, join or assist labor organizations

As a general rule, only top and middle managers are not allowed to join any labor
organization.

First-line managers203 are allowed to join a supervisory union but not the union of
rank-and-file employees or vice-versa. In fact, the law does not allow mixed membership of
both supervisory and rank-and-file employees in one union. A union with such mixed
membership is no union at all. It cannot exercise the rights of a legitimate labor
organization.

2. Bargaining unit

The group or cluster of jobs or positions that supports the labor organization which
is applying for registration, within the employer’s establishment

Refers to a group of employees sharing mutual interests within a given employer

unit, comprised of all or less than all of the entire body of employees in the employer unit or
any specific occupational or geographical grouping within such employer unit.

(a) Test to determine the constituency of an appropriate bargaining unit

Any of the following four (4) modes may be used:

a. Substantial mutual interests principle or community or mutuality of interests rule.

The employees sought to be represented by the collective bargaining agent must

have substantial mutual interests in terms of employment and working conditions as evinced
by the type of work they perform. It is characterized by similarity of employment status,

202
Not eligible for membership in a labor union of the rank-and-file employees but may form, join or
assist separate labor unions of their own.
A union whose membership is a mixture of supervisors and rank-and-file is not and cannot become a
legitimate labor organization
A local supervisor’s union should not be allowed to affiliate with the national federation of union of
rank-and-file employees where that federation actively participates in union activity in the company and
the rank-and-file employees are directly under the authority of the supervisory employees
203
or supervisory employees

65
same duties and responsibilities and substantially similar compensation and working
conditions204.

b. Globe doctrine205

The determining factor is the desire of the workers themselves. Consequently, a

certification election should be held separately to choose which representative union will be
chosen by the workers206.

c. Collective bargaining history.

Enunciates that the prior collective bargaining history and affinity of the employees
should be considered in determining the appropriate bargaining unit. However, the Supreme
Court has categorically ruled that the existence of a prior collective bargaining history is
neither decisive nor conclusive in the determination of what constitutes an appropriate
bargaining unit.207

d. Employment status.

The determination of appropriate bargaining unit based thereon is considered an

acceptable mode.208

(b) Voluntary Recognition209

Voluntary recognition of bargaining agent is the free and voluntary act of the
employer of extending and conferring full recognition to a union as the sole and exclusive
bargaining representative of the employees in an appropriate bargaining unit, for purposes of
collective bargaining. This is allowed when there is only one union operating in the
bargaining unit.

204
San Miguel Corporation Employees Union-PTGWO vs. Confesor, G. R. No. 111262, Sept. 19, 1996, 262
SCRA 81, 98
205
will of the employees
206
See also Mechanical Department Labor Union sa Philippine National Railways vs. CIR, G. R. No. L-
28223, Aug. 30, 1968.
207
San Miguel Corporation vs. Laguesma, G. R. No. 100485, Sept. 21, 1994; National Association of Free
Trade Unions vs. Mainit Lumber Development Company Workers Union, G. R. No. 79526, Dec. 21, 1990)
208
Rothenberg on Labor Relations, pp. 482-510.
209
Effect of voluntary recognition:
From the time of recording, the union shall enjoy the rights, privileges and obligations of an exclusive
bargaining representative
Voluntary acknowledgement can ONLY take place when there is no dispute as to what union counts in
its members a majority of the employees.
Voluntary recognition is possible only in an unorganized establishment. In an organized setting, the
employer cannot voluntarily recognize any new union because Art. 256, LCP requires the employer to
continue recognizing and dealing with the incumbent union if it has not been properly replaced by
another union.

66
 (1) Requirements

1. Submission to DOLE of a joint statement210 attesting to the voluntary

recognition.

2. The joint- statement211 must be published for 15 consecutive days in 2

conspicuous places in the establishment or CBU where the union seeks to
operate

c. Certification election

It refers to the process of determining through secret ballot the sole and exclusive
bargaining representative of the employees in an appropriate bargaining unit, for purposes of
collective bargaining.

(a) In an unorganized establishment

Certification election shall be "automatically" conducted upon the filing of a petition

for certification election by a legitimate labor organization. However, it must be emphasized
that the petitioner-union should have a valid certificate of registration; otherwise, it has no
legal personality to file the petition for certification election.

(b) In an organized establishment

The following are the requisites for certification election in organized

establishments.

1. A petition questioning the majority status of the incumbent bargaining

agent is filed before the DOLE within the 60-day freedom period;

2. Such petition is verified; and

3. The petition is supported by the written consent of at least twenty-five

percent (25%) of all employees in the bargaining unit

d. Run-off election

It refers to an election between the labor unions receiving the two (2) highest
number of votes when a certification election which provides for three (3) or more choices
results in no choice receiving a majority of the valid votes cast; provided, that the total

210
by the employer and union president
211
The joint-statement should state the approximate number of employees in the CBU, accompanied by
the names and signatures of at least a majority of the members of the CBU supporting the voluntary
recognition;
The joint-statement should state that there are no other LLO’s operating within the CBU
The joint-statement must be submitted to the Regional Office within 30 days from date of recognition

67
number of votes for all contending unions is at least fifty percent (50%) of the number of
votes cast.

(a) Requirements

1. A valid election took place because majority of the CBU members voted
2. The election presented at least three choices
3. Not one of the choices obtained the majority of the valid votes
4. The total votes of the unions is at least 50% of the votes cast
5. There is no unresolved challenge of voter or election protest
e. Re-run election

Takes place:

1. If one choice receives a plurality of the vote and the remaining choices results in a
tie; or

2. If all choices received the same number of votes.

In both instances, the no union is also a choice.

f. Consent election212

It refers to the election voluntarily agreed upon by the parties, with or without the
intervention of the Department of Labor and Employment, to determine the issue of
majority representation of all the workers in the appropriate collective bargaining unit.

In hearing a petition for a CE, the Med-Arbiter may persuade the contending unions
to agree to a consent election. If the unions do agree, the Med-Arbiter shall enter in the
minutes of the hearing the fact of the agreement and then cause the immediate scheduling of
the pre-election conference.

212
The holding of a valid consent election, upon the intercession of the med-arbiter, bars the holding of a
CE for one year.
Where no petition for a CE had been filed but the parties themselves have agreed to hold consent
election, the results of the election will NOT bar another CE, UNLESS the winning union had been
extended voluntary recognition by the employer
Consent election is a separate and distinct process and has nothing to do with the import and effect of
a certification election. Neither does it shorten the terms of an existing CBA nor entitle the participants
thereof to immediately renegotiate an existing CBA although it does not preclude the workers from
exercising their right to choose their sole and exclusive bargaining representative after the expiration of
the 60-day freedom period.

68
 g. Affiliation and disaffiliation of the local union from the mother union

(1) Substitutionary doctrine213

This principle states that even during the effectivity of a collective bargaining
agreement executed between employer and employees thru their agent, the employees can
change said agent but the contract continues to bind then up to its expiration date. They may
bargain however for the shortening of said expiration date.

In formulating the "substitutionary" doctrine, the only consideration involved is the

employees' interest in the existing bargaining agreement. The agent's interest never entered
the picture.

In fact, the justification for said doctrine was:

... That the majority of the employees, as an entity under the statute, is the
true party in interest to the contract, holding rights through the agency of the union
representative. Thus, any exclusive interest claimed by the agent is defeasible at the
will of the principal.214

h. Union dues and special assessments

Union dues Special assessments

Regular monthly contributions paid by the
members to the union in exchange for
the benefits given to them by the CBA
and to finance the activities of the union in
representing the union.
These are assessments for any purpose
or object other than those expressly
provided by the labor organization’s
constitution and by‐laws.

Requirements for validity

By obtaining the individual written By written resolution approved by majority

authorization duly signed by the employee of all the members at the meeting called for
which must specify: that purpose.216

1. Amount
2. Purpose
3. Beneficiary215

213
Employees cannot revoke the validity of a validly executed CBA with their employer by the simple
expedient of changing their collective bargaining agent
The new agent must respect the subsisting CBA
Employer cannot renege on the CBA, except to negotiate with the management for the shortening
thereof
Inapplicable to personal undertaking of deposed union; e.g. : no strike stipulation
214
Benguet Consolidated Inc. vs. BCI Employees & W Union-PAFLU, 23 SCRA, 465, 471
215
Ibid.,(o)

69
 i. Agency fees217

(a) Requisites for assessment

i. The employee is part of the bargaining unit

ii. He is not a member of the union
iii. He partook of the benefits of the CBA

2. Right to Collective Bargaining218

a. Duty to bargain collectively

The performance of the mutual obligation of the employer and the sole bargaining
representative to meet promptly, expeditiously, & in good faith & agree on Wages, Hours of
Work & Other terms & conditions of employment (WHO).

1) When there is absence of a CBA

It is the performance of a mutual obligation:

1. To meet and convene promptly and expeditiously in good faith (GF)

2. For the purpose of negotiating an agreement with respect to wages,

hours of work and all other terms and conditions of employment

216
Art.241
217
It is an amount equivalent to union dues, which a non-union member pays to the union because
he benefits from the CBA negotiated by the union.
218
Collective Bargaining Agreement (CBA) refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. The CBA is deemed the law between the parties during its lifetime. Its
provisions are construed liberally.
Legal principles applicable to Collective Bargaining Agreement:
A proposal not embodied in CBA is not part thereof.
Minutes of CBA negotiation - no effect if its contents are not incorporated in the CBA.
Making a promise during the CBA negotiation is not considered bad faith.
Adamant stance resulting in impasse, not bad faith.
The DOLE Secretary cannot order inclusion of terms and conditions in CBA which the law and the
parties did not intend to reflect therein.
Signing bonus, not demandable under the law.
Allegations of bad faith, wiped out with signing of CBA.
Term (lifetime) of a CBA
Representation aspect (sole and exclusive status of certified union): - The term is 5 years which means
that no petition questioning the majority status of the incumbent bargaining agent shall be entertained by
DOLE and no certification election shall be conducted outside of the 60-day freedom period.
All other provisions (which refer to both economic and non-economic provisions except
representation): Shall be renegotiated not later than three (3) years after its execution.

70
 3. Including proposals for adjusting any grievances or questions arising
under such agreement; and

4. To execute a contract incorporating such agreements if requested by either

219
party.

2) When there is a CBA

1. When there is a CBA the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its lifetime.

2. Either party can serve a written notice to terminate or modify the agreement
at least 60 days prior to its expiration date.

3. It shall be the duty of both parties to keep

the status quo and to continue in full force and effect the terms and conditions

b. Collective Bargaining Agreement (CBA)

1) Mandatory provisions of CBA

a. Wages & Hours of Work

b. Other terms & conditions
c. Other modes of compensation
d. Work shifts
e. Vacation & holidays
f. Bonuses
g. Pensions & retirement plans
h. Seniority
i. Transfers
j. Lay-offs
k. Workload
l. Work rules & regulations
m. Rent of company houses
n. Union security agreements

An employer does not commit ULP by insisting to the point of a bargaining impasse,
on the inclusion in a contract of a management prerogative clause, or a union discipline
clause, or a no strike clause.

(1) Grievance Procedure

The internal rules of procedure established by the parties in their CBA with
voluntary arbitration as the terminal step, which are intended to resolve all issues arising
from the implementation and interpretation of their CBA. It refers to the system of
219
Art. 252

71
grievance settlement at the plant level as provided in the collective bargaining agreement. It
usually consists of successive steps starting at the level of the complainant and his immediate
supervisor and ending, when necessary, at the level of the top union and company officials

All grievances submitted to the grievance machinery220 which are not settled within
seven (7) calendar days from the date of their submission shall automatically be referred to
voluntary arbitration prescribed in the CBA.

For this purpose, parties to a CBA shall name and designate in advance a Voluntary
Arbitrator or panel of Voluntary Arbitrators, or include in the agreement a procedure for the
selection of such Voluntary Arbitrator or panel of Voluntary Arbitrators, preferably from the
listing of qualified Voluntary Arbitrators duly accredited by the NCMB. In case the parties
fail to select a Voluntary Arbitrator or panel of Voluntary Arbitrators, the NCMB shall
designate the Voluntary Arbitrator or panel of Voluntary Arbitrators, as may be necessary,
pursuant to the selection procedure agreed upon in the CBA, which shall act with the same
force and effect as if the Arbitrator or panel of Arbitrators has been selected by the parties as
described above.

(2) Voluntary Arbitration

Refers to the mode of settling labor-management disputes by which the parties select
a competent, trained and impartial third person who shall decide on the merits of the case
and whose decision is final and executor.221

(3) No Strike-No Lockout Clause

The “no strike no lockout” clause in the CBA applies only to economic
strikes. It does not apply to ULP strikes.222

Such no-strike provision in the CBA only bars strikes which are economic in nature,
but not strikes grounded on unfair labor practices.223

The Supreme Court consistently ruled in a long line of cases that a strike is illegal if
staged in violation of the “No Strike/No Lockout Clause” in the CBA stating that a strike,
which is in violation of the terms of the CBA, is illegal, especially when such terms provide
for conclusive arbitration clause.224
220
The mechanism for the adjustment and resolution of grievances arising from the interpretation or
implementation of a CBA and those arising from the interpretation or enforcement of company personnel
policies. It is part of the continuing process of collective bargaining.
221
Section 1 [d], Rule II, NCMB Revised Procedural Guidelines in the Conduct of Voluntary Arbitration
Proceedings [Oct. 15, 2004].
222
Hence, if the strike is founded on an unfair labor practice of the employer, a strike declared by the
union cannot be considered a violation of the no strike clause. (Master Iron Labor Union v. NLRC,
G.R. No. 92009, Feb. 17, 1993)
223
MSMG-UWP vs. Ramos, 326 SCRA 428 (2000), citing Master Iron Labor Union vs. NLRC 219 SCRA 47
[1993]).
224
Filcon Manufacturing Corporation vs. Lakas Manggagawa sa Filcon-Lakas Manggagawa Labor Center
[LMF-LMLC], G. R. No. 150166, July 26, 2004.

72
 (4) Labor Management Council

The Department shall promote the formation of labor‐

management councils in organized and unorganized establishments to enable the
workers to participate in policy and decision‐
making processes in the establishment, insofar as said processes will directly affect
their rights, benefits and welfare, except those which are covered by collective
bargaining agreements or are traditional areas of bargaining.

The Department shall promote other labor management cooperation

schemes and, upon its own initiative or upon the request of both parties, may assist in the
formulation and development of programs and projects on productivity, occupational
safety and health, improvement of quality of work life, product quality improvement, and
other similar schemes.225

b) Duration

(1) For economic provisions and Three (3) years after the execution of the
(2) For non-economic provisions CBA.

(3) Freedom period Sixty (60) days

3. Union Security

a) Union security clauses; closed shop, union shop, maintenance of

membership shop, etc.

Closed-shop agreement The employer undertakes not to employ any individual

who is not a member of the contracting union and the said
individual once employed must, for the duration of the
agreement, remain a member of the union in good
standing as a condition for continued employment.226

225
Sec. 1, Rule XXI, Book V, IRR
226
does not have any retroactivity
apply only to new hires
Exceptions:
a. employees belonging to any religious sect which prohibit affiliation of their members with any labor
organization are not covered by such agreement—The free exercise of religious belief is superior to
contract rights (Victoriano vs. Elizalde Rope Workers).
b. members of the rival union are not covered by such arrangement.

73
Semi-closed shop agreement- Has no requirement for the employee to remain as
member of the contracting union in good standing as a
condition for continued employment.

Union shop agreement
Stipulation whereby any person can be employed by the
employer but once employed such employee must, within
a specific period, become a member of the contracting
union and remain as such in good standing for continued
employment for the duration of the CBA.

Maintenance of membership The agreement does not require non-members to join the
clause contracting union but provides that those who are
members thereof at the time of the execution of the CBA
and those who may thereafter on their own volition
become members must for the duration of the agreement
maintain their membership in good standing as a
condition for continued employment in the company for
the duration of the CBA.

Preferential shop agreement
An agreement whereby the employer merely agrees to give
preference to the members of the bargaining union in
hiring, promotion or filing vacancies and retention in case
of lay-off. The employer has the right to hire from the
open market if union members are not available

Agency shop agreement An agreement whereby employees must either join the
union or pay to the union as exclusive bargaining agent a
sum equal to that paid by the members.227

227
This is directed against “FREE RIDER” employees who benefit from union activities without contributing
support to the union, to prevent a situation of non-union members enriching themselves at the expense
of union members.
Employee members of another/rival union are not considered free riders since when the union [agent]
bids to be the bargaining agent, it voluntarily assumed the responsibility of representing all the employees
in the appropriate bargaining unit.

74
 b) Check-off; union dues, agency fees

Union Dues Agency Fees

Is deducted from members for the payment Is deducted from non‐members of the
of union dues bargaining agent (union) for the enjoyment
of the benefits under the CBA

May not be deducted from the salaries of the May be deducted from the salary of the Ees
union members without the written consent without their written consent.
of the workers affected

4. Unfair Labor Practice in Collective Bargaining

(a) Bargaining in bad faith

The good faith or bad faith is an inference to be drawn from the facts and is largely
a matter for the NLRC’s expertise. The charge of bad faith should be raised while the
bargaining is in progress.228

(b) Refusal to bargain

A union violates its duty to bargain collectively by entering negotiations with a fixed
purpose of not reaching an agreement or signing a contract.

(c) Individual bargaining

It is an unfair labor practice for an employer operating under a collective bargaining

agreement to negotiate or to attempt to negotiate with his employees individually in
connection with changes in the agreement.

The basis of the prohibition regarding individual bargaining with the strikers is that
although the union is on strike, the employer is still under obligation to bargain with the
union as the employees' bargaining representative.229

(d) Blue sky bargaining

It means making exaggerated or unreasonable proposals.230

228
Instances:
1. Delay of negotiations
2. Imposing time limit on negotiations
229
Melo Photo Supply Corporation vs. National Labor Relations Board, 321 U.S. 332
230
Arthur A. Sloane and Fred Witney, Labor Relations, 7th Edition 1991, p. 195
Whether or not the union is engaged in blue‐sky bargaining is determined by the evidence presented by

75
 (e) Surface bargaining

It means “going through the motions of negotiating” without any legal intent to
reach an agreement.231

It involves the question of whether or not the employers conduct demonstrates

an unwillingness to bargain in good faith or is merely hard bargaining.232

Occurs when the employer constantly changes its position over the agreement.

5. Unfair Labor Practice

(a) Nature of ULP

i. violate the constitutional right of workers and employees to self-organization;

ii. are inimical to the legitimate interests of both labor and management, including
their right to bargain collectively and otherwise deal with each other in an atmosphere of
freedom and mutual respect

iii. disrupt industrial peace; and hinder the promotion of healthy and stable labor-
management relations and mutual respect.233

(b) ULP of Employers234

i. To interfere with, restrain or coerce employees in the exercise of their right to

self-organization;

ii. To require as a condition of employment that a person or an employee shall not

join a labor organization or shall withdraw from one to which he belongs;235

iii. To contract out services or functions being performed by union members when
such will interfere with, restrain or coerce employees in the exercise of their rights to self-
organization;236

the union as to its economic demands. Thus, if the union requires exaggerated or unreasonable ec
onomic demands, then it is guilty of ULP. (Standard Chartered Bank v. Confessor, G.R. No. 114974,
June 16, 2004)
231
Standard Chartered Bank Employees Union [NUBE] vs. Confesor, G. R. No. 114974, June 16, 2004).
232
Ibid.
233
labor-management relations unstable
234
Only the officers and agents of corporations, associations or partnerships who have actually
participated in, authorized or ratified unfair labor practices shall be held criminally liable.
235
a.k.a. yellow dog contract;
236
The act of an employer in having work or certain services or functions being performed by union
members contracted out is not generally an unfair labor practice act. It is only when the contracting out of
a job, work or service being performed by union members will interfere with, restrain or coerce
employees in the exercise of their right to self-organization that it shall be unlawful and shall constitute

76
 iv. To initiate, dominate, assist or otherwise interfere with the formation or
administration of any labor organization, including the giving of financial or other support to
it or its organizers or supporters;237

v. To discriminate in regard to wages, hours of work and other terms and conditions
of employment in order to encourage or discourage membership in any labor
organization. Nothing in this Code or in any other law shall stop the parties from requiring
membership in a recognized collective bargaining agent as a condition for employment,
except those employees who are already members of another union at the time of the
signing of the collective bargaining agreement. Employees of an appropriate bargaining unit
who are not members of the recognized collective bargaining agent may be assessed a
reasonable fee equivalent to the dues and other fees paid by members of the recognized
collective bargaining agent, if such non-union members accept the benefits under the
collective bargaining agreement: Provided, that the individual authorization required under
Article 242, paragraph (o) of this Code shall not apply to the non-members of the
recognized collective bargaining agent;

vi. To dismiss, discharge or otherwise prejudice or discriminate against an employee

for having given or being about to give testimony under this Code;

vii. To violate the duty to bargain collectively as prescribed by this Code;

viii. To pay negotiation or attorney’s fees to the union or its officers or agents as part
of the settlement of any issue in collective bargaining or any other dispute; or

ix. To violate a collective bargaining agreement.238

(c) ULP of Labor Organizations

i. To restrain or coerce employees in the exercise of their right to self-

organization. However, a labor organization shall have the right to prescribe its own rules
with respect to the acquisition or retention of membership;

ii. To cause or attempt to cause an employer to discriminate against an employee,

including discrimination against an employee with respect to whom membership in such
organization has been denied or to terminate an employee on any ground other than the
usual terms and conditions under which membership or continuation of membership is
made available to other members;

iii. To violate the duty, or refuse to bargain collectively with the employer, provided
it is the representative of the employees;

unfair labor practice (Art. 248 [c], LC; Sec. 6 [f], Department Order No. 18-02, Series of 2002, [Feb. 21,
2002).
237
a.k.a. company union
238
but only if gross in character

77
 ix. To cause or attempt to cause an employer to pay or deliver or agree to pay or
deliver any money or other things of value, in the nature of an exaction, for services which
are not performed or not to be performed, including the demand for fee for union
negotiations;239

v. To ask for or accept negotiation or attorney’s fees from employers as part of the
settlement of any issue in collective bargaining or any other dispute; or

vi. To violate a collective bargaining agreement.

3. Right to Peaceful Concerted Activities

a. Forms of Concerted Activities

Strike240 Lockout241 Picketing242

Any temporary stoppage of Any temporary refusal of an The right of workers to

work by the concerted action
of the employees as a result
of an industrial or labor
dispute. It consists not only
of concerted work stoppages
but also slowdowns, mass
leaves, sit downs, attempts to
employer to furnish work as
a result of an industrial or
labor dispute.
peacefully march to and fro
before an establishment
involved in a labor dispute
generally accompanied by the
carrying and display of signs,
placards and banners
intended to inform the

239
a.k.a. feather-bedding
240
Summary of principles governing strikes:
1. A strike or lockout is illegal if any of the legal requisites (enumerated above) is not complied
with. Procedural requirements are mandatory.
2. A strike or lockout is illegal if it is based on non-strikeable issues (e.g., inter-union or intra-union
disputes or wage distortion).
3. A strike or lockout is illegal if the issues involved are already subject of compulsory or voluntary
arbitration or conciliation or the steps in grievance machinery are not exhausted.
4. A strike or lockout is illegal if unlawful means were employed or prohibited acts or practices were
committed (e.g., Use of force, violence, threats, coercion, etc.; Barricades, blockades and obstructions of
ingress to [entrance] or egress from [exit] the company premises).
5. A strike or lockout is illegal if the notice of strike or notice of lockout is already converted into a
preventive mediation case. (See further discussion below).
6. A strike or lockout is illegal if staged in violation of the “No-Strike, No-Lockout” clause in the
collective bargaining agreement.
7. A strike or lockout is illegal if staged in violation of a temporary restraining order or an injunction or
assumption or certification order.
8. A strike is illegal if staged by a minority union.
9. A strike or lockout is illegal if conducted for unlawful purpose/s (e.g.: Strike to compel dismissal of
employee or to compel the employer to recognize the union or the so-called “Union-Recognition Strike”)
10. The local union and not the federation is liable to pay damages in case of illegal strike.
241
Grounds for Lockout
1. Collective bargaining deadlock
2. ULP act of a union
242
or peaceful picketing

78
damage, destroy or sabotage public about the dispute.
plant equipment and facilities
and similar activities.

b. Who may declare a strike or lockout?

1.Any certified or duly recognized bargaining representative may declare a strike

in cases of bargaining deadlock and unfair labor practice. Likewise, the employer may
declare a lockout in the same cases.

2. In the absence of a certified or duly recognized bargaining representative, any

legitimate labor organization in the establishment may declare a strike but only on the
ground of unfair labor practice.243

c. Requisites for a valid strike

d. Requisites for a valid lockout

1. It must be based on a valid and factual ground;

2. A strike or lockout NOTICE shall be filed with the National Conciliation

and Mediation Board (NCMB) at least 15 days before the intended date of the strike
or lockout if the issues raised are unfair labor practices, or at least 30 days before the
intended date thereof if the issue involves bargaining deadlock.

3. In cases of dismissal from employment of union officers duly elected in

accordance with the union constitution and bylaws, which may constitute union busting
where the existence of the union is threatened, the 15‐day cooling
off period shall not apply and the union may take action immediately after the strike
vote is conducted and the result thereof submitted to the Department of Labor and
Employment.

4. A strike must be approved by a majority vote of the members of the Union

and a lockout must be approved by a majority vote of the members of the Board of
Directors of the Corporation or Association or of the partners in a partnership,
obtained by secret ballot in a meeting called for that purpose.

5. A strike or lockout vote shall be reported to the NCMB DOLE Regional

Branch at least 7 days before the intended strike or lock-out subject to the cooling‐
off period.

6. In the event the result of thestrike/lockout ballot is filed within the cooling-
off period, the 7day requirement shall be counted from the day following the expiration of
the cooling‐off period.244

243
Sec. 2, Rule XIII Book V, Omnibus Rules Implementing The Labor Code, as amended
244
NSFW vs. Ovejera, G.R. No. 59743, May 31, 1982

79
 In case of dismissal from employment of union officers which may constitute
union busting, the time requirement for the filing of the Notice of Strike shall be
dispensed with but the strike vote requirement, being mandatory in character, shall “in
every case” be complied with.

7. The dispute must not be the subject of an assumption of jurisdiction by the

President or the Secretary of Labor and Employment, a certification for compulsory
arbitration, or submission to compulsory or voluntary arbitration nor a subject of a
pending case involving the same grounds for the strike or lockout.

e. Requisites for lawful picketing

No person engaged in picketing shall commit any act of violence, coercion or

intimidation or obstruct the free ingress to or egress from the employer’s premises for lawful
purposes, or obstruct public thoroughfares.245

f. Assumption of jurisdiction by the Secretary of Labor or Certification of the

Labor dispute to the NLRC for compulsory arbitration

1. On intended or impending strike or lockout - automatically enjoined even if a

Motion for Reconsideration is filed.

2. On actual strike or lockout - strikers or locked out employees should immediately

return to work and employer should readmit them back.

3. On cases filed or may be filed - All shall be subsumed/absorbed by the assumed

or certified case except when the order specified otherwise. The parties to the case should
inform the DOLE Secretary of pendency thereof.

g. Nature of Assumption Order or Certification Order

The DOLE Secretary may assume jurisdiction over a labor dispute, or certify it to
the NLRC for compulsory arbitration, if, in his opinion, it may cause or likely to cause a
strike or lockout in an industry indispensable to the national interest.246

h. Effect of defiance of Assumption or Certification Orders

A strike that is undertaken after the issuance by the Secretary of Labor and
Employment of an assumption or certification order becomes a prohibited activity and thus
illegal, pursuant to the second paragraph of Article 264247 of the Labor Code. The union
officers and members, as a result, are deemed to have lost their employment status for
having knowingly participated in an illegal strike. Stated differently, from the moment a
worker defies a return-to-work order, he is deemed to have abandoned his job. The loss of

245
Art. 264 (e), as amended
246
The President may also exercise the power to assume jurisdiction over a labor dispute
247
See Reference

80
employment results from the striking employees’ own act - an act which is illegal, an act in
violation of the law and in defiance of authority.248

i. Illegal Strike

(1) Liability of union officers

Only the union officers during the strike are liable.

The penalty of dismissal could be imposed only on union officers serving and acting
as such during the period of illegal strike249.

As a necessary implication, if employees acted as union officers after said strike, they
may not be held liable and, therefore, could not be terminated.250

(2) Liability of ordinary workers

The mere declaration of the illegality of strike would result in the termination of
employment of union officers. They are deemed to have lost their employment status. This
adverse consequence does not apply to ordinary union members except when they
participated in the commission of illegal acts in the course of the strike, in which case, they
shall be deemed to have also lost their employment status.

(1) Liability of employer

In case of non-compliance by the employer with the return-to-work order issued in

connection with the assumption/certification of the labor dispute, he may be held liable to
pay backwages, damages and other positive or affirmative reliefs, even criminal prosecution
against him.251

Employers who refuse to re-admit returning workers may be liable, upon filing of
proper petition for the payment of wages and other benefits, from the date of actual refusal
until the workers are re-admitted.252

(3) Waiver of illegality of strike

When an employer accedes to the peaceful settlement brokered by the NLRC

by agreeing to accept all employees who had not yet returned to work, it waives the
issue of the illegality of the strike.253

248
Philippine Airlines, Inc. vs. Brillantes, G. R. No. 119360, Oct. 10, 1997
249
Lapanday Workers Union vs. NLRC, 248 SCRA 95, 106.
250
CCBPI Postmix Workers Union vs. NLRC, G. R. No. 114521, Nov. 27, 1998
251
Art. 263[g; Sec. 4, Rule IX, Rules of Procedure of the NLRC, as amended by NLRC Resolution No. 01-02,
Series of 2002).
252
No. 24, Guidelines Governing Labor Relations
253
Reformist Union v. NLRC, G.R. No. 120482,Jan. 27, 1997

81
 j. Injunctions

(1) Requisites for Labor Injunctions

No temporary or permanent injunction or restraining order in any case involving or

growing out of labor disputes shall be issued by any court or other entity.

Exceptions:

1. When prohibited or unlawful acts are being or about to be committed

that will cause grave or irreparable damage to the complaining party.254

2. On the ground of national interest

3. The SLE or the NLRC may seek the assistance of law enforcement agencies
to ensure compliance with this provision as well as with such orders as he may issue
to enforce the same.255

(2) "Innocent Bystander Rule"

The innocent by stander must show:

1. Compliance with the grounds specified in Rule 58 of the Rules of Court, and

2. That it is entirely different from, without any connection whatsoever to,

either party to the dispute and, therefore, its interests are totally foreign to the context
thereof.256

254
Art. 218[e]
255
Art. 263[g]
256
MSF Tire & Rubber v. CA, G.R. 128632, Aug. 5, 1999

82
H. PROCEDURE AND JURISDICTION

1. Labor Arbiter

a. Jurisdiction257

1) versus Regional Director

Labor Arbiter Regional Director

Exclusive and original jurisdiction Has jurisdiction over claims for recovery of
to hear and decide the following cases258 wages, simple money claims and other
involving all workers: benefits, provided that:

1. ULP cases 1. the claim must arise from employer-

2. Termination disputes
3. If accompanied with a claim
for reinstatement, those that workers file
involving wages, rates of pay, hours of
work and other terms and conditions of
employment
employee relationship;
2. the claimant does not seek reinstatement;
and
3. the aggregate money claim of each
employee does not exceed P5,000.00262

4. Claims for actual, moral,

exemplary and other forms of damages
arising from employer‐employee relations

5. Cases arising from any

violation of Art. 264,259 including

257
The jurisdiction is original and exclusive in nature. Labor Arbiters have no appellate jurisdiction.
258
Including the following cases:
1. Wage distortion cases only in unorganized establishments. In organized establishments, jurisdiction
is vested with Voluntary Arbitrators.
2. All monetary claims of Overseas Filipino Workers arising from employer- employee relationship or
by virtue of any law or contract involving Filipino workers for overseas deployment, including claims for
actual, moral, exemplary and other forms of damages.
3. Illegal dismissal cases of employees of cooperatives, but not members of cooperatives because they
are not employees.
4. Cases involving employees of government-owned or controlled corporations without original
charters (organized under the Corporation Code). They have no jurisdiction if entity has original charter.
Labor Arbiters have no jurisdiction over termination of corporate officers and stockholders which,
under the law, is considered intra-corporate dispute.
Labor Arbiters have no jurisdiction over labor cases involving entities immune from suit. Exception:
when said entities perform proprietary activities (as distinguished from governmental functions).
259
See Reference

83
questions involving the legality of strikes
and lockouts;

6. Except claims for Employment

Compensation, Social Security, Philhealth
and maternity benefits, all other claims
arising from employer employee relations,
Including those of persons in domestic or
household service, involving an amount
exceeding P5000 regardless of whether
accompanied with a claim for reinstatement.

7. Monetary claims of overseas

contract workers arising from employer‐
employee relations;260

8. Wage distortion disputes in

unorganized establishments not voluntarily
settled by the parties;261

9. Enforcement of compromise
agreements when there is non-compliance
by any of the parties; and

10. Other cases as may be provided

by law.

262
Art. 129
260
under the Migrant Worker’s Act of 1995, as amended by R.A. 10022
261
pursuant to R.A. 6727

84
 b. Reinstatement pending appeal

The decision of the LA reinstating a dismissed or separated employee, shall be

executory, even pending appeal:263

The employee shall either be:

i. Admitted back to work under the same terms and conditions prevailing prior to
the dismissal or separation; or

ii. At the option of the employer, merely reinstated into the payroll.

c. Requirements to perfect appeal to NLRC264

The appeal is perfected if:

i. Filed within the reglementary period provided in Sec. 1 of this Rules

ii. Verified by the appellant himself in accordance with Sec. 4, Rule 7 of

the Rules of Court, as amended

iii. In the form of a memorandum of appeal which shall state the

grounds relied upon and the arguments in support thereof, the relief prayed for,
and with a statement of the date the appellant received the appealed decision,
resolution or order

iv. In 3 legibly typewritten or printed copies

v. Accompanied by

(1) proof of payment of the required appeal fee;

(2) posting of a cash or surety bond;
(3) a certificate of non‐forum shopping; and
(4) proof of service upon the other parties.

263
The posting of a bond by the employer shall not stay the execution of reinstatement
Even if the order of reinstatement of the LA is reversed on appeal, it is obligatory on the part of
the employer to reinstate and pay the wages of the dismissed employee during the period of appeal
until reversal by the higher court. On the other hand, if the employee has been reinstated during the
appeal period and such reinstatement order is reversed with finality, the employee is not required
to reimburse whatever salary he received for he is entitled to such, more so if he actually
rendered services during the period. (Pfizer v. Velasco, G.R. No. 177467, March 9, 2011)
Unless there is a restraining order, it is ministerial upon the LA to implement the order of
reinstatement and it is mandatory on the employer to comply therewith. (Garcia v. PAL, G.R. No.
164856, Jan. 20, 2009)
264
Appeal from the decision of the Labor Arbiter is brought by ordinary appeal to the NLRC within ten (10)
calendar days from receipt by the party of the decision.

85
 Mere notice of appeal without complying with the other requisites aforestated
shall not stop the running of the period for perfecting an appeal.

2. National Labor Relations Commission (NLRC)

a. Jurisdiction265

Exclusive Original Exclusive Appellate

1. Injunction in ordinary labor disputes to
enjoin or restrain any actual or threatened
commission of any or all prohibited or
unlawful acts or to require the performance
of a particular act in any labor dispute which,
if not restrained or performed forthwith, may
cause grave or irreparable damage to any
party.
2. Injunction in strikes or lockouts under
Article 264 of the Labor Code.
1. All cases decided by the Labor Arbiters
including contempt cases.
2. Cases decided by the DOLE
Regional Directors or his duly
authorized Hearing Officers266 involving
recovery of wages, simple money claims and
other benefits not exceeding P5,000 and not
accompanied by claim for reinstatement.

3. Certified labor disputes causing or likely

to cause a strike or lockout in an industry
indispensable to the national interest,
certified to it by the Secretary of Labor and
Employment for compulsory arbitration.

b. Effect of NLRC reversal of Labor Arbiter’s order of reinstatement

Even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is

obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court.

On the other hand, if the employee has been reinstated during the appeal period and
such reinstatement order is reversed with finality, the employee is not required to reimburse
whatever salary he received for he is entitled to such, more so if he actually rendered services
during the period.

In other words, a dismissed employee whose case was favorably decided by the
Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is

265
Distinction between the jurisdiction of the Labor Arbiters and the NLRC.
The NLRC has exclusive appellate jurisdiction on all cases decided by the Labor Arbiters. The NLRC does
not have original jurisdiction on the cases over which Labor Arbiters have original and exclusive
jurisdiction (see above enumeration). If a claim does not fall within the exclusive original jurisdiction of
the Labor Arbiter, the NLRC cannot have appellate jurisdiction thereover.
266
under Art. 129

86
immediately executory. Unless there is a restraining order, it is ministerial upon the Labor
Arbiter to implement the order of reinstatement and it is mandatory on the employer to
comply therewith.

c. Remedies

The employer is practically left with no effective contra-remedy that may forestall or
stay the execution of a Labor Arbiter’s order for immediate reinstatement pending appeal.
All that the employer has is to avail of any of the following options:

1. actual reinstatement of the employee to his work under the same terms and
conditions prevailing prior to his dismissal or separation; or

2. reinstatement of the employee in the payroll of the company, without requiring

him to report back to his work.267

Failing to exercise any of the options, the employer can be compelled, under pain of
contempt, to pay instead the salary of the employee. The employee should not be left
without any remedy in case the employer unreasonably delays reinstatement. The unjustified
refusal of the employer to reinstate an illegally dismissed employee entitles the employee to
payment of his salaries.268 The entitlement of the dismissed employee to his salaries
occasioned by the unjustified refusal of the employer to reinstate him becomes effective
from the time the employer failed to reinstate him despite the issuance of a writ of
execution.269

If despite several writs of execution, the employer still refuses to reinstate the
employee, the remedy is not the grant of additional backwages to serve as damages but to
file a motion to cite the employer for contempt.270

d. Certified cases

Signifies that the NLRC’s cases are certified by law and any cases which
happened within the proceedings are considered final unless appeals are made.271

267
Art. 223; Zamboanga City Water District vs. Buat, 232 SCRA 587
268
Pioneer Texturizing Corporation vs. NLRC, 280 SCRA 806 [1997
269
Roquero vs. Philippine Air Lines, Inc. case
270
Christian Literature Crusade vs. NLRC, 171 SCRA 712, April 10, 1989; See also Industrial and Transport
Equipment, Inc. vs. NLRC, G. R. No. 113592, Jan. 15, 1998
271
en.wikipedia.org

87
 3. Bureau of Labor Relations (BLR) – Med Arbiters

a. Jurisdiction

The BLR has original and exclusive jurisdiction over the following:

1. “Inter-union disputes” or “representation disputes” which refer to cases involving

petition for certification election filed by a duly registered labor organization which is
seeking to be recognized as the sole and exclusive bargaining agent of the rank-and-file
employees in the appropriate bargaining unit of a company, firm or establishment.

2. “Intra-union disputes” or “internal union disputes” which refer to disputes or

grievances arising from any violation of or disagreement over any provision of the
constitution and by-laws of the union, including any violation of the rights and conditions of
union membership provided for in the Labor Code.

3. All disputes, grievances or problems arising from or affecting labor-management

relations in all workplaces, except those arising from the interpretation or implementation of
the CBA which are subject of grievance procedure and/or voluntary arbitration.

The BLR no longer handles “all labor management disputes;” rather its
functions and jurisdiction are largely confined to:

1. Union matters
2. Collective bargaining registry and
3. Labor education

The BLR has appellate jurisdiction over decisions of the Regional Director in cases
involving cancellations of certificates of registration of labor unions.

88
 4. National Conciliation and Mediation Board (NCMB)

a. Nature of proceedings

Non-litigious in nature. They are not governed by technical rules applicable to

court or judicial proceedings, but they must, at all times, comply with the requirements of
due process

b. Conciliation vs. Mediation

Conciliation Mediation

Conceived of as a mild form of intervention A mild intervention by a neutral third

by a neutral third party party

The conciliator‐Mediator, relying on his The conciliator-mediator, whereby he

persuasive expertise, who takes an active
role in assisting parties by trying to keep
disputants talking, facilitating other
procedural niceties, carrying messages back
and forth between the parties, and generally
being a good fellow who tries to keep things
calm and forward‐looking in a tense
situation.
Starts advising the parties or offering
solutions or alternatives to the problems
with the end in view of assisting them
towards voluntarily reaching their own
mutually acceptable settlement of the
dispute.

It is the process where a disinterested
3rd party meets with management and
labor, at their request or otherwise,
during a labor dispute or in collective
bargaining conferences, and by cooling
tempers, aids in reaching an agreement.
It is when a 3rd party studies each side
of the dispute then makes proposals for
the disputants to consider. The mediator
cannot make an award nor render a
decision.

b. Preventive Mediation
Refer to the potential labor disputes which are the subject of a formal or
informal request for conciliation and mediation assistance sought by either or both
parties or upon the initiative of the NCMB to avoid the occurrence of actual labor disputes.

89
 5. DOLE Regional Directors

a. Jurisdiction272

6. DOLE Secretary

a. Visitorial and Enforcement Powers273

Visitorial Powers Enforcement Powers

1. Access to employer’s records and 1. Issue compliance orders

premises at any time of the day or night,
whenever work is being undertaken therein
2. To copy from said records
3. Question any employee and investigate
any fact, condition or matter which may
be necessary to determine violations or
which may aid in the enforcement of the
Labor Code and of any labor law, wage
order, or rules and regulation issued
pursuant thereto.
2. Issue writs of execution for the
enforcement of their orders, except in
cases where the employer contests the
findings of the labor officer and raise
issues supported by documentary proof
which were not considered in the course
of inspection
3.Order stoppage of work or suspension
of operation when non‐
compliance with the law or implementing
rules and regulations poses grave and immi
nent danger to health and safety of
workers in the workplace

272
see 1. supra
273
Visitorial and enforcement power by Secretary of Labor or duly authorized representative
1. Access to employer's records and premises
2. Right to copy records
3. Right to question any employee
4. Investigate any fact, condition or matter which may be necessary to
5. Order and administer, after due notice and hearing, compliance with the Labor Standards provisions
6. Issue writs of execution to the appropriate authority for enforcement of their orders
7. Order stoppage of work or suspension of operations when non-compliance with law and
implementing regulations poses grave and imminent danger to the health and safety of workers in the
workplace (only Secretary of Labor has this power)
- Hearing within 24 hours
- Employer liable for salaries during suspension of operations if found to have caused the violation
- No TRO or Temporary/Permanent injunction may be issued by an inferior court over any case
involving the enforcement orders issued

90
 b. Power to suspend effects of termination

The Secretary of the Department of Labor may suspend the effects of the
termination pending resolution of the dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and Employment before whom such
dispute is pending that the termination may cause a serious labor dispute or is in
implementation of a mass lay-off.274

c. Assumption of jurisdiction

When, in his opinion, there exists a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same to
the Commission for compulsory arbitration. Such assumption or certification shall have the
effect of automatically enjoining the intended or impending strike or lockout as specified in
the assumption or certification order. If one has already taken place at the time of
assumption or certification, all striking or locked out employees shall immediately return-to-
work and the employer shall immediately resume operations and readmit all workers under
the same terms and conditions prevailing before the strike or lockout. The Secretary of
Labor and Employment or the Commission may seek the assistance of law enforcement
agencies to ensure compliance with this provision as well as with such orders as he may issue
to enforce the same.275

d. Appellate jurisdiction

1. Orders issued by the duly authorized representative of the Secretary of Labor and
Employment under Article 128276 may be appealed to the latter.

2. Denial of application for union registration or cancellation of union registration

originally rendered by the Bureau of Labor Relations (BLR) may be appealed to the
Secretary of Labor and Employment.277

3. Decisions of the Med-Arbiter in certification election cases are appealable to the

DOLE Secretary.278

e. Voluntary arbitration powers

To prevent labor rows from escalating into full-blown strikes and work stoppages,
the DOLE Secretary may refer pending labor disputes to voluntary arbitration as a
mechanism to expeditiously and efficiently dispose the labor cases through its existing corps

274
Art. 277, last sentence
275
Art. 263 (g), 1st par.
276
Visitorial and Enforcement Power
277
If originally rendered by the Regional Office, appeal should be made to the BLR.
278
Art. 259
Decisions of Med-Arbiters in intra-union disputes are appealable to the BLR

91
of accredited voluntary arbitrators (AVAs). Voluntary arbitration as a means of settling
disputes avoids lengthy and expensive litigations that cause delays in the dispensation of
labor justice and is effective as an alternative dispute settlement mechanism.

G. Grievance Machinery and Voluntary Arbitration

1. Subject matter of grievance

A dispute or controversy arises over the implementation or interpretation of a

CBA or from the implementation or enforcement of company personnel policies, and
either the union or the employer invokes the grievance machinery provision for the
adjustment or resolution of such dispute or controversy.

2. Voluntary Arbitrator

a) Jurisdiction

Original and exclusive jurisdiction over:

1. All unresolved grievances arising from the:

a. Implementation or interpretation of the CBA

b. Interpretation or enforcement of company personnel policies

2. Wage distortion issues arising from the application of any wage

orders in organized establishments

3. Those arising from interpretation and implementation of

productivity incentive programs under R.A. 6971

4. Violations of CBA provisions which are not gross in character 279 are
no longer treated as ULP and shall be resolved as grievances under the CBA

5. Any other labor disputes upon agreement by the parties including

ULP and bargaining deadlock.280

b) Procedure

The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have the power to
hold hearings, receive evidences and take whatever action is necessary to resolve the issue or
issues subject of the dispute, including efforts to effect a voluntary settlement between
parties. All parties to the dispute shall be entitled to attend the arbitration proceedings. The
attendance of any third party or the exclusion of any witness from the proceedings shall be
determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing may be

279
Art. 262
280
Art. 261

92
adjourned for cause or upon agreement by the parties. Unless the parties agree otherwise, it
shall be mandatory for the Voluntary Arbitrator or panel of Voluntary Arbitrators to render
an award or decision within twenty (20) calendar days from the date of submission of the
dispute to voluntary arbitration.281

c) Remedies

Awards or decisions of voluntary arbitrator become final and executory after ten (10)
calendar days from receipt of copies of the award or decision by the parties.

Both parties shall comply voluntarily and faithfully with the award. In instances of
noncompliance by either or both parties, a motion to enforce/execute the award may be
filed with the voluntary arbitrator who may issue a writ of execution requiring either the
sheriff of the National Labor Relations Commission or the regular courts or any public
official whom the parties may designate in the submission agreement, to execute the final
decision or award. In the absence of the voluntary arbitrator or in case of his incapacity, the
motion shall be filed with the Labor Arbiter in the region having jurisdiction over the
workplace. The filing of a motion for the issuance of writ of execution is without prejudice
to any other action the aggrieved party may take against the non-complying party such as a
petition for contempt or imposition of fines and penalties.282

8. Court of Appeals

a. Rule 65, Rules of Court

A party may avail itself of the civil action for certiorari, where the tribunal, board or
office exercising juridical functions:

Has acted without or in excess of jurisdiction; and, or

With grave abuse of discretion and praying that judgments be rendered annulling or
modifying the proceedings, as the law requires, of such tribunal, board or officer

It may be filed not later than 60 days from notice of the judgment, order or
resolution. Both SC and CA has jurisdiction over the action; however in line with the
doctrine of minatory of warts, the petition should initially be presented to the lower of the
two courts, that is, the CA.

9. Supreme Court

a. Rule 45, Rules of Court

A party desiring to appeal by certiorari from a judgment or final order or resolution

of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme Court a verified petition for review
281
Art. 262-A
282
Rule VII, Secs. 6 & 7, id.

93
on certiorari. The petition shall raise only questions of law which must be distinctly set
forth.283

10. Prescription of Actions

Offenses penalized 3 years

under the LC

ULP One (1) year from accrual of

such ULP; otherwise forever
barred.284

Money Claims 3 years from the time the cause of

action accrued; otherwise forever
barred

All money claims accruing prior to the Within one (1) year from the date
effectivity of the LC of effectivity, in accordance with
IRR; otherwise, they shall forever
be barred

Workmen’s Compensation claims Dec. 31, 1974 shall be filed not later
accruing prior to the effectivity of the than Mar. 31, 1975 before the
LC and between Nov. 1, 1974‐ appropriate regional offices of the
Dec. 31, 1974 Department of Labor285

Illegal Dismissal Cases 4 years. It commences to run from

the date of formal dismissal.286

Include: Pertinent Supreme Court decisions up to January 31, 2013.

283
Sec. 1
284
Art. 290
285
Art. 291
286
Mendoza v. NLRC, G.R. No. 122481, Mar. 5, 1998

94
 Reference
Article 34. Prohibited practices. It shall be unlawful for any individual, entity, licensee, or holder of
authority:

To charge or accept, directly or indirectly, any amount greater than that specified in the
schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount
greater than that actually received by him as a loan or advance;

To furnish or publish any false notice or information or document in relation to recruitment

or employment;

To give any false notice, testimony, information or document or commit any act of
misrepresentation for the purpose of securing a license or authority under this Code.

To induce or attempt to induce a worker already employed to quit his employment in order
to offer him to another unless the transfer is designed to liberate the worker from oppressive terms
and conditions of employment;

To influence or to attempt to influence any person or entity not to employ any worker who
has not applied for employment through his agency;

To engage in the recruitment or placement of workers in jobs harmful to public health or

morality or to the dignity of the Republic of the Philippines;

To obstruct or attempt to obstruct inspection by the Secretary of Labor or by his duly

authorized representatives;

To fail to file reports on the status of employment, placement vacancies, remittance of

foreign exchange earnings, separation from jobs, departures and such other matters or information as
may be required by the Secretary of Labor.

To substitute or alter employment contracts approved and verified by the Department of

Labor from the time of actual signing thereof by the parties up to and including the periods of
expiration of the same without the approval of the Secretary of Labor;

To become an officer or member of the Board of any corporation engaged in travel agency
or to be engaged directly or indirectly in the management of a travel agency; and

To withhold or deny travel documents from applicant workers before departure for
monetary or financial considerations other than those authorized under this Code and its
implementing rules and regulations.

ARTICLE 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).

95
ARTICLE 129. Recovery of wages, simple money claims and other benefits. - Upon complaint of
any interested party, the Regional Director of the Department of Labor and Employment or any of
the duly authorized hearing officers of the Department is empowered, through summary proceeding
and after due notice, to hear and decide any matter involving the recovery of wages and other
monetary claims and benefits, including legal interest, owing to an employee or person employed in
domestic or household service or househelper under this Code, arising from employer-employee
relations: Provided, That such complaint does not include a claim for reinstatement: Provided
further, That the aggregate money claims of each employee or househelper does not exceed Five
thousand pesos (P5,000.00). The Regional Director or hearing officer shall decide or resolve the
complaint within thirty (30) calendar days from the date of the filing of the same. Any sum thus
recovered on behalf of any employee or househelper pursuant to this Article shall be held in a
special deposit account by, and shall be paid on order of, the Secretary of Labor and Employment
or the Regional Director directly to the employee or househelper concerned. Any such sum not
paid to the employee or househelper because he cannot be located after diligent and reasonable
effort to locate him within a period of three (3) years, shall be held as a special fund of the
Department of Labor and Employment to be used exclusively for the amelioration and benefit of
workers. Any decision or resolution of the Regional Director or hearing officer pursuant to this
provision may be appealed on the same grounds provided in Article 223 of this Code, within
five (5) calendar days from receipt of a copy of said decision or resolution, to the National
Labor Relations Commission which shall resolve the appeal within ten (10) calendar days from
the submission of the last pleading required or allowed under its rules. The Secretary of Labor and
Employment or his duly authorized representative may supervise the payment of unpaid wages and
other monetary claims and benefits, including legal interest, found owing to any employee or
househelper under this Code. (As amended by Section 2, Republic Act No. 6715, March 21, 1989).

ARTICLE 217. Jurisdiction of the Labor Arbiters and the Commission. -

(a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non- agricultural:

1. Unfair labor practice cases;

2. Termination disputes

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

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer- employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and

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

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.

96
(c) Cases arising from the interpretation or implementation of collective bargaining agreement and
those arising from the interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements. (As amended by Section 9, Republic Act No.
6715, March 21, 1989).

ARTICLE 264. Any union officer who knowingly participates in an illegal strike and any worker
or union officer who knowingly participates in the commission of illegal acts during a strike may
be declared to have lost his employment status: Provided, That mere participation of a worker in a
lawful strike shall not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike. (paragraph 2)

ARTICLE 279. Security of tenure. - In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of Any union officer who knowingly participates in an illegal strike and
any worker or union officer who knowingly participates in the commission of illegal acts during a
strike may be declared to have lost his employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground for termination of his employment,
even if a replacement had been hired by the employer during such lawful strike

Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:

a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;

b. Gross and habitual neglect by the employee of his duties;

c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

d. Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and

e. Other causes analogous to the foregoing.

Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations
of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year.

97
Art. 284. Disease as ground for termination. An employer may terminate the services of an employee
who has been found to be suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided,
That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of at least six (6) months being
considered as one (1) whole year.

Department Order No. 18-A

Series of 2011

RULES IMPLEMENTING ARTICLES 106 TO 109 OF THE LABOR CODE, AS AMENDED

Section 1. Guiding principles. Contracting and subcontracting arrangements are expressly allowed by
law and are subject to regulations for the promotion of employment and the observance of the rights
of workers to just and humane conditions of work, security of tenure, self-organization and collective
bargaining. Labor-only contracting as defined herein shall be prohibited.

Section 2. Coverage. These Rules shall apply to all parties of contracting and subcontracting
arrangements where employer-employee relationships exist. It shall also apply to cooperatives
engaging in contracting or subcontracting arrangements.

Contractors and subcontractors referred to in these Rules are prohibited from engaging in
recruitment and placement activities as defined in Article 13(b) of the Labor Code, whether for local
or overseas employment.

Section 3. Definition of terms. The following terms as used in these Rules, shall mean:
(a) “Bond/s” refers to the bond under Article 108 of the Labor Code that the principal may require
from the contractor to be posted equal to the cost of labor under contract. The same may also refer
to the security or guarantee posted by the principal for the payment of the services of the contractors
under the Service Agreement.

(b) “Cabo” refers to a person or group of persons or to a labor group which, in the guise of a labor
organization, cooperative or any entity, supplies workers to an employer, with or without any
monetary or other consideration, whether in the capacity of an agent of the employer or as an
ostensible independent contractor.

(c) “Contracting” or “Subcontracting” refers to an arrangement whereby a principal agrees to put out
or farm out with a contractor the performance or completion of a specific job, work or service within
a definite or predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal.

(d) “Contractor” refers to any person or entity, including a cooperative, engaged in a legitimate
contracting or subcontracting arrangement providing either services, skilled workers, temporary
workers, or a combination of services to a principal under a Service Agreement.

(e) “Contractor’s employee” includes one employed by a contractor to perform or complete a job,
work, or service pursuant to a Service Agreement with a principal. It shall also refer to regular
employees of the contractor whose functions are not dependent on the performance or completion
of a specific job, work or service within a definite period of time, i.e., administrative staff.

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(f) “In-house agency” refers to a contractor which is owned, managed, or controlled directly or
indirectly by the principal or one where the principal owns/represents any share of stock, and which
operates solely or mainly for the principal.

(g) “Net Financial Contracting Capacity (NFCC)1” refers to the formula to determine the financial
capacity of the contractor to carry out the job, work or services sought to be undertaken under a
Service Agreement. NFCC is current assets minus current liabilities multiplied by K, which stands for
contract duration equivalent to: 10 for one year or less; 15 for more than one (1) year up to two (2)
years; and 20 for more than two (2) years, minus the value of all outstanding or ongoing projects
including contracts to be started.

1 Refers to the formula set out in the Implementing Rules and Regulations of Republic Act No.
9184, or An Act Providing for the Modernization, Standardization and Regulation of the
Procurement Activities of the Government and For Other Purposes.

(h) “Principal” refers to any employer, whether a person or entity, including government agencies
and government-owned and controlled-corporations, who/which puts out or farms out a job, service
or work to a contractor.

(i) “Right to control” refers to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.

(j) “Service Agreement” refers to the contract between the principal and contractor containing the
terms and conditions governing the performance or completion of a specific job, work or service
being farmed out for a definite or predetermined period.

(k) “Solidary liability” refers to the liability of the principal, pursuant to the provision of Article 109
of the Labor Code, as direct employer together with the contractor for any violation of any provision
of the Labor Code.

It also refers to the liability of the principal, in the same manner and extent that he/she is liable to
his/her direct employees, to the extent of the work performed under the contract when the
contractor fails to pay the wages of his/her employees, as provided in Article 106 of the Labor Code,
as amended.

(l) "Substantial capital” refers to paid-up capital stocks/shares of at least Three Million Pesos
(P3,000,000.00) in the case of corporations, partnerships and cooperatives; in the case of single
proprietorship, a net worth of at least Three Million Pesos (P3,000,000.00).

(m) “Trilateral Relationship” refers to the relationship in a contracting or subcontracting arrangement

where there is a contract for a specific job, work or service between the principal and the contractor,
and a contract of employment between the contractor and its workers. There are three (3) parties
involved in these arrangements: the principal who decides to farm out a job, work or service to a
contractor; the contractor who has the capacity to independently undertake the performance of the
job, work or service; and the contractual workers engaged by the contractor to accomplish the job,
work or service.
Section 4. Legitimate contracting or subcontracting. Contracting or subcontracting shall be legitimate
if all the following circumstances concur:

(a) The contractor must be registered in accordance with these Rules and carries a distinct and
independent business and undertakes to perform the job, work or service on its own responsibility,

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according to its own manner and method, and free from control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof;

(b) The contractor has substantial capital and/or investment; and

(c) The Service Agreement ensures compliance with all the rights and benefits under Labor Laws.

Section 5. Trilateral relationship in contracting arrangements; Solidary liability. In legitimate

contracting or subcontracting arrangement there exists:

(a) An employer-employee relationship between the contractor and the employees it engaged to
perform the specific job, work or service being contracted; and

(b) A contractual relationship between the principal and the contractor as governed by the provisions
of the Civil Code.

In the event of any violation of any provision of the Labor Code, including the failure to pay wages,
there exists a solidary liability on the part of the principal and the contractor for purposes of
enforcing the provisions of the Labor Code and other social legislation, to the extent of the work
performed under the employment contract.

However, the principal shall be deemed the direct employer of the contractor’s employee in cases
where there is a finding by a competent authority of labor-only contracting, or commission of
prohibited activities as provided in Section 7, or a violation of either Sections 8 or 9 hereof.

Section 6. Prohibition against labor-only contracting. Labor-only contracting is hereby declared

prohibited. For this purpose, labor only contracting shall refer to an arrangement where:

(a) The contractor does not have substantial capital or investments in the form of tools, equipment,
machineries, work premises, among others, and the employees recruited and placed are performing
activities which are usually necessary or desirable to the operation of the company, or directly related
to the main business of the principal within a definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed within or outside the premises of the
principal; or

(b) The contractor does not exercise the right to control over the performance of the work of the
employee.

Section 7. Other Prohibitions. Notwithstanding Section 6 of these Rules, the following are hereby
declared prohibited for being contrary to law or public policy:

A. Contracting out of jobs, works or services when not done in good faith and not justified by the
exigencies of the business such as the following:

(1) Contracting out of jobs, works or services when the same results in the termination or reduction
of regular employees and reduction of work hours or reduction or splitting of the bargaining unit.

(2) Contracting out of work with a “Cabo”.

(3) Taking undue advantage of the economic situation or lack of bargaining strength of the
contractor’s employees, or undermining their security of tenure or basic rights, or circumventing the
provisions of regular employment, in any of the following instances:

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(i) Requiring them to perform functions which are currently being performed by the regular
employees of the principal; and

(ii) Requiring them to sign, as a precondition to employment or continued employment, an antedated

resignation letter; a blank payroll; a waiver of labor standards including minimum wages and social or
welfare benefits; or a quitclaim releasing the principal, contractor or from any liability as to payment
of future claims.
(4) Contracting out of a job, work or service through an in-house agency.

(5) Contracting out of a job, work or service that is necessary or desirable or directly related to the
business or operation of the principal by reason of a strike or lockout whether actual or imminent.

(6) Contracting out of a job, work or service being performed by union members when such will
interfere with, restrain or coerce employees in the exercise of their rights to self-organization as
provided in Art. 248 (c) of the Labor Code, as amended.

(7) Repeated hiring of employees under an employment contract of short duration or under a Service
Agreement of short duration with the same or different contractors, which circumvents the Labor
Code provisions on Security of Tenure.

(8) Requiring employees under a subcontracting arrangement to sign a contract fixing the period of
employment to a term shorter than the term of the Service Agreement, unless the contract is divisible
into phases for which substantially different skills are required and this is made known to the
employee at the time of engagement.

(9) Refusal to provide a copy of the Service Agreement and the employment contracts between the
contractor and the employees deployed to work in the bargaining unit of the principal’s certified
bargaining agent to the sole and exclusive bargaining agent (SEBA).

(10) Engaging or maintaining by the principal of subcontracted employees in excess of those

provided for in the applicable Collective Bargaining Agreement (CBA) or as set by the Industry
Tripartite Council (ITC).
B. Contracting out of jobs, works or services analogous to the above when not done in good faith
and not justified by the exigencies of the business.

Section 8. Rights of contractor’s employees. All contractor’s employees, whether deployed or

assigned as reliever, seasonal, week-ender, temporary, or promo jobbers, shall be entitled to all the
rights and privileges as provided for in the Labor Code, as amended, to include the following:
(a) Safe and healthful working conditions;

(b) Labor standards such as but not limited to service incentive leave, rest days, overtime pay, holiday
pay, 13th month pay, and separation pay as may be provided in the Service Agreement or under the
Labor Code;

(c) Retirement benefits under the SSS or retirement plans of the contractor, if there is any;

(d) Social security and welfare benefits;

(e) Self-organization, collective bargaining and peaceful concerted activities; and

(f) Security of tenure.

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Section 9. Required contracts under these Rules.

(a) Employment contract between the contractor and its employee.

Notwithstanding any oral or written stipulations to the contrary, the contract between the contractor
and its employee shall be governed by the provisions of Articles 279 and 280 of the Labor Code, as
amended. It shall include the following terms and conditions:
i. The specific description of the job, work or service to be performed by the employee;

ii. The place of work and terms and conditions of employment, including a statement of the wage
rate applicable to the individual employee; and

iii. The term or duration of employment that must be co-extensive with the Service Agreement or
with the specific phase of work for which the employee is engaged.
The contractor shall inform the employee of the foregoing terms and conditions of employment in
writing on or before the first day of his/her employment.

(b) Service Agreement between the principal and the contractor. The Service Agreement shall include
the following:
i. The specific description of the job, work or service being subcontracted.

ii. The place of work and terms and conditions governing the contracting arrangement, to include the
agreed amount of the services to be rendered, the standard administrative fee of not less than ten
percent (10%) of the total contract cost.

iii. Provisions ensuring compliance with all the rights and benefits of the employees under the Labor
Code and these Rules on: provision for safe and healthful working conditions; labor standards such
as, service incentive leave, rest days, overtime pay, 13th month pay and separation pay; retirement
benefits; contributions and remittance of SSS, Philhealth, PagIbig Fund, and other welfare benefits;
the right to self-organization, collective bargaining and peaceful concerted action; and the right to
security of tenure.

iv. A provision on the Net Financial Contracting Capacity of the contractor, which must be equal to
the total contract cost.

v. A provision on the issuance of the bond/s as defined in Section 3(m) renewable every year.

vi. The contractor or subcontractor shall directly remit monthly the employers’ share and employees’
contribution to the SSS, ECC, Philhealth and Pagibig.

vii. The term or duration of engagement. The Service Agreement must conform to the DOLE
Standard Computation and Standard Service Agreement, which form part of these Rules as Annexes
“A” and “B”.

Section 10. Duties of the principal. Pursuant to the authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting of labor to protect the rights of the workers and
to ensure compliance with the provisions of the Labor Code, as amended, the principal, as the
indirect employer or the user of the services of the contractor, is hereby required to observe the
provisions of these Rules.

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Section 11. Security of tenure of contractor’s employees. It is understood that all contractor’s
employees enjoy security of tenure regardless of whether the contract of employment is co-terminus
with the service agreement, or for a specific job, work or service, or phase thereof.

Section 12. Observance of required standards of due process; requirements of notice. In all cases of
termination of employment, the standards of due process laid down in Article 277(b) of the Labor
Code, as amended, and settled jurisprudence on the matter2, must be observed. Thus, the following
is hereby set out to clarify the standards of due process that must be observed:

2 King of Kings Transport, Inc., Claire dela Fuente, and Melissa Lim, vs. Santiago O. Mamac, G.R.
No. 166208, (29 June 2007); and Felix B. Perez and Amante G. Doria v. Philippine Telegraph and
Telephone Company and Jose Luis Santiago, G.R. No. 152048, (7 April 2009), (en banc Decision).

I. For termination of employment based on just causes as defined in Article 282 of the Code, the
requirement of two written notices served on the employee shall observe the following:
(A) The first written notice should contain:
(1) The specific causes or grounds for termination;

(2) Detailed narration of the facts and circumstances that will serve as basis for the charge against the
employee. A general description of the charge will not suffice;

(3) The company rule, if any, that is violated and/or the ground under Art. 282 that is being charged
against the employee; and

(4) A directive that the employee is given opportunity to submit a written explanation within a
reasonable period.

“Reasonable period” should be construed as a period of at least five (5) calendar days from receipt of
the notice to give the employee an opportunity to study the accusation, consult a union official or
lawyer, gather data and evidence, and decide on the defenses against the complaint.
(B) After serving the first notice, the employer should afford the employee ample opportunity to be
heard and to defend himself/herself with the assistance of his/her representative if he/she so desires,
as provided in Article 277(b) of the Labor Code, as amended.

“Ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the
employee to answer the charges against him/her and submit evidence in support of his/her defense,
whether in a hearing, conference or some other fair, just and reasonable way. A formal hearing or
conference becomes mandatory only when requested by the employee in writing or substantial
evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances
justify it.

(C) After determining that termination of employment is justified, the employer contractor shall
serve the employee a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) the grounds have been established to
justify the severance of their employment. The foregoing notices shall be served on the employee’s
last known address.

II. For termination of employment based on authorized causes defined in Article 283 of the Labor
Code, the requirement of due process shall be deemed complied with upon service of a written
notice to the employee and the appropriate regional office of the Department of Labor and
Employment at least thirty days before the effectivity of the termination, specifying the ground or
grounds for termination.

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III. If the termination is brought about by the completion of the contract or phase thereof, no prior
notice is required. If the termination is brought about by the failure of a probationary employee to
meet the reasonable standards of the employer, which was made known to the employee at the time
of his/her employment, it shall be sufficient that a written notice is served upon the employee within
a reasonable time prior to the expiration of the probationary period.

Section 13. Effect of termination of employment. The termination of employment of the contractor
employee prior to the expiration of the Service Agreement shall be governed by Articles 282, 283 and
284 of the Labor Code.

In case the termination of employment is caused by the pre-termination of the Service Agreement
not due to authorized causes under Article 283, the right of the contractor employee to unpaid wages
and other unpaid benefits including unremitted legal mandatory contributions, e.g., SSS, Philhealth,
Pag-ibig, ECC, shall be borne by the party at fault, without prejudice to the solidary liability of the
parties to the Service Agreement.

Where the termination results from the expiration of the service agreement, or from the completion
of the phase of the job, work or service for which the employee is engaged, the latter may opt for
payment of separation benefits as may be provided by law or the Service Agreement, without
prejudice to his/her entitlement to the completion bonuses or other emoluments, including
retirement benefits whenever applicable.

Section 14. Mandatory Registration and Registry of Legitimate Contractors. Consistent with the
authority of the Secretary of Labor and Employment to restrict or prohibit the contracting out of
labor to protect the rights of workers, it shall be mandatory for all persons or entities, including
cooperatives, acting as contractors, to register with the Regional Office of the Department of Labor
and Employment (DOLE) where it principally operates.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only
contracting.

Accordingly, the registration system governing contracting arrangements and implemented by the
Regional Offices of the DOLE is hereby established, with the Bureau of Working Conditions (BWC)
as the central registry.

Section 15. Requirements for registration. The application for registration as a contractor shall be
filed at the DOLE Regional Office in the region where it seeks to principally operate. The applicant
shall provide in the application form the following information:
(a) The name and business address of the applicant and the areas where it seeks to operate;

(b) The names and addresses of officers, if the applicant is a corporation, partnership, cooperative or
a labor organization;

(c) The nature of the applicant’s business and the industry or industries where the applicant seeks to
operate;

(d) The number of regular workers and the total workforce;

(e) The list of clients, if any, the number of personnel assigned to each client, if any, and the services
provided to the client;

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(f) The description of the phases of the contract, including the number of employees covered in each
phase, where appropriate; and

(g) Proof of compliance with substantial capital requirement as defined in Section 3(l) of these Rules.
The application shall be supported by:
(a) A certified true copy of a certificate of registration of firm or business name from the Securities
and Exchange Commission (SEC), Department of Trade and Industry (DTI), Cooperative
Development Authority (CDA), or from the DOLE if the applicant is a labor organization;

(b) A certified true copy of the license or business permit issued by the local government unit or
units where the contractor operates;

(c) A certified listing, with proof of ownership or lease contract, of facilities, tools, equipment,
premises implements, machineries and work premises, that are actually and directly used by the
contractor in the performance or completion of the job, work or service contracted out. In addition,
the applicant shall submit a photo of the office building and premises where it holds office;

(d) A copy of audited financial statements if the applicant is a corporation, partnership, cooperative
or a labor organization, or copy of the latest ITR if the applicant is a sole proprietorship; and

(e) A sworn disclosure that the registrant, its officers and owners or principal stockholders or any one
of them, has not been operating or previously operating as a contractor under a different business
name or entity or with pending cases of violations of these Rules and/or labor standards, or with a
cancelled registration. In case any of the foregoing has a pending case, a copy of the complaint and
the latest status of the case shall be attached.

The application shall be verified. It shall include a DOLE certification of attendance to orientation
seminar on these Rules and an undertaking that the contractor shall abide by all applicable labor laws
and regulations.
Section 16. Filing and processing of application. The application with all supporting documents shall
be filed in triplicate in the Regional Office where the applicant principally operates. No application
for registration shall be accepted unless all the requirements in the preceding Section are complied
with.

Section 17. Verification inspection. Within two (2) working days upon receipt of the application with
complete supporting documents, the authorized representative of the Regional Director shall
conduct a verification inspection of the facilities, tools, equipment, and work premises of the
applicant.

Section 18. Approval or denial of the application. The Regional Office shall deny or approve the
application within one (1) working day after the verification inspection.

Applications that fail to meet the requirements set forth in Section 15 of these Rules shall be denied.

Section 19. Registration fee. Payment of registration fee of Twenty-Five Thousand Pesos
(P25,000.00) shall be required upon approval of the application.

Upon registration, the Regional Office shall return one set of the duly-stamped application
documents to the applicant, retain one set for its file, and transmit the remaining set to the Bureau of
Working Conditions (BWC) within five (5) days from registration.

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Section 20. Validity of certificate of registration of contractors. The contractor shall be deemed
registered only on the date of issuance of its Certificate of Registration.

The Certificate of Registration shall be effective for three (3) years, unless cancelled after due
process. The same shall be valid in the region where it is registered.

In case the contractor has Service Agreements or operates outside the region where it is registered, it
shall request a duly authenticated copy of its Certificate of Registration from the registering Regional
Office and submit the same to the DOLE Regional Office where it seeks to operate, together with a
copy of its Service Agreement/s in the area, for purposes of monitoring compliance with these Rules.

Section 21. Renewal of registration. All registered contractors shall apply for renewal of their
Certificates of Registration thirty (30) days before the expiration of their registration to remain in the
roster of legitimate service contractors. The applicant shall pay a registration renewal fee of Twenty-
Five Thousand Pesos (P25,000.00) to the DOLE Regional Office.

Copies of all the updated supporting documents in letters (a) to (e) of Section 15 hereof shall be
attached to the duly accomplished application form, including the following:

(a) Certificate of membership and proof of payment of SSS, Philhealth, BIR, ECC and Pag-Ibig
contributions for the last three (3) years, as well as loan amortizations; and

(b) Certificate of pending or no pending labor standards violation case/s with the National Labor
Relations Commission (NLRC) and Department of Labor and Employment (DOLE). The pendency
of a case will not prejudice the renewal of the registration, unless there is a finding of violation of
labor standards by the DOLE Regional Director.

Section 22. Semi-annual reporting. The contractor shall submit in triplicate its subscribed semi-
annual report using a prescribed form to the appropriate Regional Office. The report shall include:

(a) A list of contracts entered with the principal during the subject reporting period;

(b) The number of workers covered by each contract with the principal;

(c) Proof of payment of remittances to the Social Security System (SSS), the Pag-Ibig Fund,
Philhealth, Employees Compensation Commission (ECC), and Bureau of Internal Revenue (BIR)
due its employees during the subject reporting period and of amortization of declared loans due from
its employees; and

(d) A certified listing of all cases filed against the contractor before the NLRC

The Regional Office shall return one set of the duly-stamped report to the contractor, retain one set
for its file, and transmit the remaining set to the Bureau of Working Conditions (BWC) within five
(5) days from receipt thereof.

Section 23. Grounds for cancellation of registration. The Regional Director shall, upon a verified
complaint, cancel or revoke the registration of a contractor after due process, based on any of the
following grounds:

(a) Misrepresentation of facts in the application;

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(b) Submission of a falsified or tampered application or supporting documents to the application for
registration;

(c) Non-submission of Service Agreement between the principal and the contractor when required to
do so;

(d) Non-submission of the required semi-annual report as provided in Section 22 (Semi-annual

reporting) hereof;

(e) Findings through arbitration that the contractor has engaged in labor-only contracting and/or the
prohibited activities as provided in Section 7 (Other Prohibitions) hereof;

(f) Non-compliance with labor standards and working conditions;

(g) Findings of violation of Section 8 (Rights of contractor’s employees) or Section 9 (Required

contracts) of these Rules;

(h) Non-compliance with SSS, the HDMF, Pag-Ibig, Philhealth, and ECC laws; and

(i) Collecting any fees not authorized by law and other applicable rules and regulations.

Section 24. Due process in cancellation of registration. Complaint/s based on any of the grounds
enumerated in the preceding Section against the contractor shall be filed in writing and under oath
with the Regional Office which issued the Certificate of Registration.

The complaint/s shall state the following:

(a) The name/s and address/es of the complainant/s;

(b) Name and address of the contractor;

(c) The ground/s for cancellation;

(d) When and where the action complained of happened;

(e) The amount of money claim, if any; and

(f) The relief/s sought.

Upon receipt of the complaint, the Regional Director shall direct the contractor, with notice to the
complainant, to file a verified answer/counter affidavit within ten (10) calendar days without
extension, incorporating therein all pertinent documents in support of his/her defenses, with proof
of service of a copy to the complainant. Failure to file an answer/counter affidavit shall constitute a
waiver on the part of the respondent. No motion to dismiss shall be entertained.

The Regional Director or his duly authorized representative may conduct a clarificatory hearing
within the prescribed ten (10) calendar days within which to file a verified answer/counter affidavit.

Within the said ten (10) calendar days period, the contractor shall make the necessary
corrections/rectifications on the violations that are immediately rectifiable upon its own initiative in
order to be fully compliant.

The Regional Director may avail himself of all reasonable means to ascertain the facts of the case,
including conduct of inspection, where appropriate, and examination of informed persons.

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The proceedings before the Regional Office shall be summary in nature.

The conduct of hearings shall be terminated within fifteen (15) calendar days from the first scheduled
clarificatory hearing. The Regional Director shall resolve the case within ten (10) working days from
the date of the last hearing. If there is no necessity to conduct a hearing, the case shall be resolved
within ten (10) working days from receipt of the verified answer/counter affidavit.

Any motion for reconsideration from the Order of the Regional Director shall be treated as an
appeal.

Section 25. Appeal. The Order of the Regional Director is appealable to the Secretary within ten (10)
working days from receipt of the copy of the Order. The appeal shall be filed with the Regional
Office which issued the cancellation Order. The Office of the Secretary shall have thirty (30) working
days from receipt of the records of the case to resolve the appeal. The Decision of the Secretary shall
become final and executory after ten (10) days from receipt thereof by the parties. No motion for
reconsideration of the Decision shall be entertained.

Section 26. Effects of cancellation of registration. A final Order of cancellation shall divest the
contractor of its legitimate status to engage in contracting/subcontracting.

Such Order of cancellation shall be a ground to deny an application for renewal of registration to a
contractor under the Rules.

The cancellation of the registration of the contractor for engaging in labor-only contracting or for
violation of any of the provisions of these Rules involving a particular Service Agreement will not,
however, impair the validity of existing legitimate jobcontracting arrangements the contractor may
have entered into with other principals prior to the cancellation of its registration. Any valid and
subsisting Service Agreement shall be respected until its expiration; thereafter, contracting with a
delisted contractor shall make the principal direct employer of all employees under the Service
Agreement pursuant to Articles 106 and 109 of the Labor Code.

Section 27. Effects of finding of labor-only contracting and/or violation of Sections 7. 8 or 9 of the
Rules. A finding by competent authority of labor-only contracting shall render the principal jointly
and severally liable with the contractor to the latter's employees, in the same manner and extent that
the principal is liable to employees directly hired by him/her, as provided in Article 106 of the Labor
Code, as amended.

A finding of commission of any of the prohibited activities in Section 7, or violation of either

Sections 8 or 9 hereof, shall render the principal the direct employer of the employees of the
contractor or subcontractor, pursuant to Article 109 of the Labor Code, as amended.

Section 28. Retaliatory measures. Pursuant to Article 118 of the Labor Code, as amended, it shall be
unlawful for the principal, contractor, or any party privy to the contract or services provided to
refuse to pay or reduce the wages and benefits, and discharge or in any manner discriminate against
any worker who has filed any complaint or instituted any proceeding on wages (under Title II, Book
III of the Labor Code), labor standards violation, or has testified or is about to testify in such
proceedings.

Section 29. Enforcement of labor standards and working conditions. Consistent with Article 128
(Visitorial and Enforcement Power) of the Labor Code, as amended, the Regional Director through

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his/her duly authorized representatives, shall conduct routine inspection of establishments engaged
in contracting arrangement regardless of the number of employees engaged by the principal or by the
contractor.

They shall have access to employer’s records and premises at any time of the day or night whenever
work is being undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or which
may aid in the enforcement of the Labor Code and of any labor law, wage order, or rules and
regulations issued pursuant thereto.

The findings of the duly authorized representative shall be referred to the Regional Director for
appropriate action as provided for in Article 128, and shall be furnished the collective bargaining
agent, if any.

Based on the visitorial and enforcement power of the Secretary of Labor and Employment in Article
128 (a), (b), (c), and (d), the Regional Director shall issue compliance orders to give effect to the
labor standards provisions of the Labor Code, other labor legislation, and these Rules.

Section 30. Duty to produce copy of contract between the principal and the contractor. The principal
or the contractor shall be under an obligation to produce a copy of the Service Agreement in the
ordinary course of inspection. The contractor shall likewise be under an obligation to produce a copy
of any contract of employment when directed to do so by the Regional Office Director or his/her
authorized representative.

Section 31. Tripartite implementation and monitoring of compliance; Use of registration fees. A
region-based tripartite monitoring team on the observance of labor standards in contracting and
subcontracting arrangements shall be constituted as a subcommittee of the Regional Tripartite
Industrial Peace Council (RTIPC) within fifteen (15) days from the effectivity of these Rules. It shall
submit a quarterly regional monitoring report to the DOLE Secretary and to the National Tripartite
Industrial Peace Council (NTIPC). The Bureau of Working Conditions (BWC) shall ensure the
implementation of this provision, and shall conduct capacity building to the members of the regional
tripartite monitoring team.

For this purpose, a portion of the collected registration fees shall be used in the operation of the
region-based tripartite monitoring team, including in the development of an internet-based
monitoring system and database. It shall likewise be used for transmittal of the monthly report of all
registered contractors to the Bureau of Local Employment (BLE), and in generating labor market
information.

Section 32. Oversight function of the National TIPC. The National Tripartite Industrial Peace
Council (NTIPC) as created under Executive Order No. 49, Series of 1998, as amended, shall serve
as the oversight committee to verify and monitor the following:

(a) Engagement in allowable contracting activities; and

(b) Compliance with administrative reporting requirements.

Section 33. Collective bargaining and/or Industry Tripartite Council (ITC). Nothing herein shall
preclude the parties in collective bargaining agreements (CBAs) to determine the functions that can
or cannot be farmed out or contracted out to a legitimate contractor, including the terms and
conditions of the workers’ engagement under the arrangement, provided the provisions of these
Rules are observed.

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In industries with established Industry Tripartite Councils (ITCs), the tripartite partners may agree,
through a voluntary code of good practices, on the functions or processes that can or cannot be
contracted out to a legitimate contractor.

Section 34. Financial Relief Program; Tripartite Co-Regulation Engagement. A Financial Relief
Program or Unemployment Assistance Fund shall be established for employees under a Service
Agreement or employees in transition from one Service Agreement to the next. For this purpose, the
National Tripartite Industrial Peace Council (NTIPC), upon the effectivity of this issuance, shall
constitute a Local Service Provider Tripartite Working Group (LSP-TWG) composed of
representatives of the stakeholders in the industry. The LSP-TWG shall:

(a) Recommend the mechanics and details in setting up the Financial Relief Program or
Unemployment Assistance Fund with proposed funding sources before end of June 2012; and

(b) Draw-up the terms of a Tripartite Co-Regulation Engagement in ensuring full compliance with
labor laws for approval/endorsement by the NTIPC, including a proposed Table of Progressive Rate
of Increases in the minimum capitalization requirement at reasonable intervals to ensure that only
legitimate contractors can engage in subcontracting arrangement.

Section 35. Enrollment in DOLE programs on improving compliance with labor standards. For
purposes of ensuring compliance with labor standards, the principal and subcontractors covered by
these Rules are encourage to enroll and participate in the DOLE Kapatiran Work Improvement for
Small Enterprise (WISE)-TAV Program (Department Advisory No. 06, dated 07 March 2011)
and/or in the Incentivizing Compliance Program (Department Order No. 115-11).

Section 36. Contracting or subcontracting arrangements in the Construction and Other Industries.
Contracting or subcontracting arrangements in the Construction Industry, under the licensing
coverage of the Philippine Construction Accreditation Board (PCAB), shall be covered by the
applicable provisions of these Rules and shall continue to be governed by Department Order No. 19,
Series of 1993 (Guidelines Governing the Employment of Workers in the Construction Industry);
Department Order No. 13, Series of 1998 (Guidelines Governing the Occupational Safety and
Health in the Construction Industry); and DOLE-DPWH-DILG-DTI and PCAB Memorandum of
Agreement-Joint Administrative Order No. 1, Series of 2011 (on coordination and harmonization of
policies and programs on occupational safety and health in the construction industry).

In industries covered by a separate regulation of the DOLE or other government agency, contracting
or subcontracting therein shall be governed by these Rules unless expressly provided otherwise.

Section 37. Prohibition on DOLE officials or employees. Any official or employee of the DOLE or
its attached agencies is prohibited from engaging or having any interest in any contracting or
subcontracting business.

Section 38. Non-impairment of existing contracts; Non-diminution of benefits. Subject to the

provisions of Articles 106 to 109 of the Labor Code, as amended, the applicable provisions of the
Civil Code and existing jurisprudence, nothing herein shall impair the rights or diminish the benefits
being enjoyed by the parties to existing contracting or subcontracting arrangements.

The effectivity of Certificates of Registration acquired under Department Order No. 18, Series of
2002, issued on 21 February 2002, shall be respected until expiration.

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Section 39. Supersession. All rules and regulations issued by the Secretary of Labor and Employment
inconsistent with the provisions of these Rules are hereby superseded.

Section 40. Separability Clause. If any provision or portion of these Rules are declared void or
unconstitutional, the remaining portions or provisions hereof shall continue to be valid and effective.

Section 41. Effectivity. This Department Order shall be effective fifteen (15) days after completion
of its publication in a newspaper of general circulation.

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